10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2019

Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition Period from              to               

Commission File No. 001-32141 

ASSURED GUARANTY LTD.

(Exact name of registrant as specified in its charter) 

Bermuda	98-0429991
(State or other jurisdiction	(I.R.S. employer
of incorporation)	identification no.)

 

30 Woodbourne Avenue

Hamilton HM 08, Bermuda

(Address of principal executive offices)

(441) 279-5700

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:		Trading Symbol(s)	Name of exchange on which registered
Common Shares	$0.01 per share	AGO	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No  ☐

The number of registrant’s Common Shares ($0.01 par value) outstanding as of November 5, 2019 was 95,390,972 (includes 56,028 unvested restricted shares).

ASSURED GUARANTY LTD.

INDEX TO FORM 10-Q

		Page
PART I	Financial Information	1
Item 1.	Financial Statements:	1
	Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2019 and December 31, 2018	1
	Condensed Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	2
	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	3
	Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the Three and Nine Months Ended September 30, 2019 and 2018	4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2019 and 2018	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
	1. Business and Basis of Presentation	7
	2. Ratings	9
	3. Outstanding Exposure	10
	4. Expected Loss to be Paid	24
	5. Contracts Accounted for as Insurance	35
	6. Fair Value Measurement	42
	7. Investments and Cash	56
	8. Contracts Accounted for as Credit Derivatives	61
	9. Variable Interest Entities	64
	10. Income Taxes	67
	11. Reinsurance	69
	12. Commitments and Contingencies	72
	13. Earnings Per Share	75
	14. Shareholders' Equity	76
	15. Subsidiary Information	80
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	88
	Forward Looking Statements	88
	Available Information	89
	Executive Summary	90
	Results of Operations	100
	Non-GAAP Financial Measures	110
	Insured Portfolio	115
	Liquidity and Capital Resources	121
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	133
Item 4.	Controls and Procedures	134
PART II	Other Information	135
Item 1.	Legal Proceedings	135
Item 1A.	Risk Factors	135
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	137
Item 6.	Exhibits	137

 

PART I.    FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Assured Guaranty Ltd.

Condensed Consolidated Balance Sheets (unaudited)

(dollars in millions except per share and share amounts) 

	As of September 30, 2019		As of December 31, 2018
Assets
Investment portfolio:
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $8,811 and $9,884)	$	9,277	$	10,089
Short-term investments, at fair value	1,142		729
Other invested assets	57		55
Total investment portfolio	10,476		10,873
Cash	229		104
Premiums receivable, net of commissions payable	844		904
Deferred acquisition costs	107		105
Salvage and subrogation recoverable	725		490
Financial guaranty variable interest entities’ assets, at fair value	469		569
Other assets	517		558
Total assets	$	13,367	$	13,603
Liabilities and shareholders’ equity
Unearned premium reserve	$	3,334	$	3,512
Loss and loss adjustment expense reserve	1,007		1,177
Long-term debt	1,234		1,233
Credit derivative liabilities	214		209
Financial guaranty variable interest entities’ liabilities with recourse, at fair value	388		517
Financial guaranty variable interest entities’ liabilities without recourse, at fair value	105		102
Other liabilities	433		298
Total liabilities	6,715		7,048
Commitments and contingencies (see Note 12)
Common stock ($0.01 par value, 500,000,000 shares authorized; 96,495,143 and 103,672,592 shares issued and outstanding)	1		1
Additional paid-in capital	—		86
Retained earnings	6,331		6,374
Accumulated other comprehensive income, net of tax of $77 and $38	319		93
Deferred equity compensation	1		1
Total shareholders’ equity	6,652		6,555
Total liabilities and shareholders’ equity	$	13,367	$	13,603

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

Assured Guaranty Ltd.

Condensed Consolidated Statements of Operations (unaudited)

(dollars in millions except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues
Net earned premiums	$	123		$	142		$	353		$	423
Net investment income	88			99			296			297
Net realized investment gains (losses)	16			(7		)	12			(14		)
Net change in fair value of credit derivatives	5			21			(25		)	103
Fair value gains (losses) on financial guaranty variable interest entities	4			5			42			11
Foreign exchange gain (loss) on remeasurement	(21		)	(9		)	(24		)	(22		)
Fair value gains (losses) on equity investments	—			32			—			29
Loss on extinguishment of debt	—			(9		)	(1		)	(26		)
Other income (loss)	(9		)	1			14			(13		)
Total revenues	206			275			667			788
Expenses
Loss and loss adjustment expenses	30			17			75			43
Amortization of deferred acquisition costs	3			3			13			12
Interest expense	22			23			67			71
Other operating expenses	65			56			189			183
Total expenses	120			99			344			309
Income (loss) before income taxes and equity in net earnings of investees	86			176			323			479
Equity in net earnings of investees	—			(1		)	3			—
Income (loss) before income taxes	86			175			326			479
Provision (benefit) for income taxes	17			14			61			46
Net income (loss)	$	69		$	161		$	265		$	433
Earnings per share:
Basic	$	0.71		$	1.48		$	2.63		$	3.87
Diluted	$	0.70		$	1.47		$	2.61		$	3.83

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

Assured Guaranty Ltd.

Condensed Consolidated Statements of Comprehensive Income (unaudited)

(in millions)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net income (loss)	$	69		$	161		$	265		$	433
Change in net unrealized gains (losses) on:
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $7, $(12), $51 and $(43)	33			(59		)	275			(250		)
Investments with other-than-temporary impairment, net of tax provision (benefit) of $(2), $(2), $(14) and $(2)	(9		)	(9		)	(52		)	(5		)
Change in net unrealized gains (losses) on investments	24			(68		)	223			(255		)
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse resulting from a change in the instrument-specific credit risk, net of tax	—			(3		)	4			(1		)
Other, net of tax provision (benefit)	—			(3		)	(1		)	(6		)
Other comprehensive income (loss)	24			(74		)	226			(262		)
Comprehensive income (loss)	$	93		$	87		$	491		$	171

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Assured Guaranty Ltd.

Condensed Consolidated Statements of Shareholders’ Equity (unaudited)

(dollars in millions, except share data)

For the Three Months Ended September 30, 2019

	Common Shares Outstanding		Common  Stock Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income		Deferred Equity Compensation		Total Shareholders’ Equity
Balance at June 30, 2019	99,801,012		$	1	$	—		$	6,425		$	295	$	1	$	6,722
Net income	—		—		—			69			—		—		69
Dividends ($0.18 per share)	—		—		—			(18		)	—		—		(18		)
Share-based compensation and other	94,808		—		5			—			—		—		5
Common stock repurchases	(3,400,677	)	—		(5		)	(145		)	—		—		(150		)
Other comprehensive income	—		—		—			—			24		—		24
Balance at September 30, 2019	96,495,143		$	1	$	—		$	6,331		$	319	$	1	$	6,652

For the Three Months Ended September 30, 2018

	Common Shares Outstanding		Common  Stock Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Deferred Equity Compensation		Total Shareholders’ Equity
Balance at June 30, 2018	109,614,214		$	1	$	321		$	6,159		$	152		$	1	$	6,634
Net income	—		—		—			161			—			—		161
Dividends ($0.16 per share)	—		—		—			(17		)	—			—		(17		)
Share-based compensation and other	322,536		—		9			—			—			—		9
Common stock repurchases	(3,299,049	)	—		(130		)	—			—			—		(130		)
Other comprehensive loss	—		—		—			—			(74		)	—		(74		)
Balance at September 30, 2018	106,637,701		$	1	$	200		$	6,303		$	78		$	1	$	6,583

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Assured Guaranty Ltd.

Condensed Consolidated Statements of Shareholders’ Equity (unaudited) (continued)

(dollars in millions, except share data)

For the Nine Months Ended September 30, 2019

	Common Shares Outstanding		Common  Stock Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income		Deferred Equity Compensation		Total Shareholders’ Equity
Balance at December 31, 2018	103,672,592		$	1	$	86		$	6,374		$	93	$	1	$	6,555
Net income	—		—		—			265			—		—		265
Dividends ($0.54 per share)	—		—		—			(56		)	—		—		(56		)
Share-based compensation and other	650,963		—		2			—			—		—		2
Common stock repurchases	(7,828,412	)	—		(88		)	(252		)	—		—		(340		)
Other comprehensive income	—		—		—			—			226		—		226
Balance at September 30, 2019	96,495,143		$	1	$	—		$	6,331		$	319	$	1	$	6,652

For the Nine Months Ended September 30, 2018

	Common Shares Outstanding		Common  Stock Par Value		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Deferred Equity Compensation		Total Shareholders’ Equity
Balance at December 31, 2017	116,020,852		$	1	$	573		$	5,892		$	372		$	1	$	6,839
Net income	—		—		—			433			—			—		433
Dividends ($0.48 per share)	—		—		—			(54		)	—			—		(54		)
Share-based compensation and other	867,024		—		7			—			—			—		7
Common stock repurchases	(10,250,175	)	—		(380		)	—			—			—		(380		)
Other comprehensive loss	—		—		—			—			(262		)	—		(262		)
Effect of adoption of ASU 2016-01 (see Note 14)	—		—		—			32			(32		)	—		—
Balance at September 30, 2018	106,637,701		$	1	$	200		$	6,303		$	78		$	1	$	6,583

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Assured Guaranty Ltd.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in millions)

 

	Nine Months Ended September 30,
	2019			2018
Net cash flows provided by (used in) operating activities	$	(365	)	$	352
Investing activities
Fixed-maturity securities:
Purchases	(688		)	(1,478		)
Sales	1,306			908
Maturities and paydowns	664			746
Short-term investments with original maturities of over three months:
Purchases	(216		)	(148		)
Sales	2			1
Maturities and paydowns	206			136
Net sales (purchases) of short-term investments with original maturities of less than three months	(404		)	(80		)
Net proceeds from paydowns on financial guaranty variable interest entities’ assets	119			90
Net proceeds from sales of financial guaranty variable interest entities’ assets	51			—
Other	30			19
Net cash flows provided by (used in) investing activities	1,070			194
Financing activities
Dividends paid	(56		)	(55		)
Repurchases of common stock	(340		)	(380		)
Net paydowns of financial guaranty variable interest entities’ liabilities	(162		)	(90		)
Paydown of long-term debt	(4		)	(73		)
Other	(16		)	(8		)
Net cash flows provided by (used in) financing activities	(578		)	(606		)
Effect of foreign exchange rate changes	(2		)	(2		)
Increase (decrease) in cash and restricted cash	125			(62		)
Cash and restricted cash at beginning of period (see Note 7)	104			144
Cash and restricted cash at end of period (see Note 7)	$	229		$	82
Supplemental cash flow information
Cash paid (received) during the period for:
Income taxes	$	(2	)	$	(5	)
Interest on long-term debt	$	51		$	66

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Assured Guaranty Ltd.

Notes to Condensed Consolidated Financial Statements (unaudited)

September 30, 2019

1. Business and Basis of Presentation

Business

Assured Guaranty Ltd. (AGL and, together with its subsidiaries, Assured Guaranty or the Company) is a Bermuda-based holding company that provides, through its operating subsidiaries, credit protection products to the United States (U.S.) and international public finance (including infrastructure) and structured finance markets and, as of October 1, 2019, asset management services. The Company applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. If an obligor defaults on a scheduled payment due on an obligation, including a scheduled principal or interest payment (debt service), the Company is required under its unconditional and irrevocable financial guaranty to pay the amount of the shortfall to the holder of the obligation. The Company markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities as well as to investors in such obligations. The Company guarantees obligations issued principally in the U.S. and the United Kingdom (U.K.), and also guarantees obligations issued in other countries and regions, including Western Europe, Canada and Australia. The Company also provides non-financial guaranty insurance and reinsurance on transactions with similar risk profiles to its structured finance exposures written in financial guaranty form. In addition, as of October 1, 2019, the Company manages assets across collateralized loan obligations (CLOs) and long-duration opportunity funds that build on its corporate credit, asset-backed finance and healthcare experience as well as certain funds now subject to orderly wind-down.

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). In management's opinion, all material adjustments necessary for a fair statement of the financial condition, results of operations and cash flows of the Company and its consolidated variable interest entities (VIEs) are reflected in the periods presented and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These unaudited interim condensed consolidated financial statements are as of September 30, 2019 and cover the three-month period ended September 30, 2019 (Third Quarter 2019), the three-month period ended September 30, 2018 (Third Quarter 2018), the nine-month period ended September 30, 2019 (Nine Months 2019) and the nine-month period ended September 30, 2018 (Nine Months 2018). Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but is not required for interim reporting purposes, has been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The presentation of cash flow amounts related to short-term investments was changed during the fourth quarter of 2018 to reflect cash flows on a gross, rather than a net, basis. The presentation of equity in net earnings of investees was changed in 2019 to reclassify amounts previously reported in net investment income and other income to a separate line item on the condensed consolidated statements of operations. Certain prior year balances have been reclassified to conform to the current year's presentation.

The unaudited interim condensed consolidated financial statements include the accounts of AGL, its direct and indirect subsidiaries and its consolidated VIEs. Intercompany accounts and transactions between and among all consolidated entities have been eliminated.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in AGL’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission (SEC).

7

The Company's principal insurance company subsidiaries are:

• Assured Guaranty Municipal Corp. (AGM), domiciled in New York;

• Municipal Assurance Corp. (MAC), domiciled in New York;

• Assured Guaranty Corp. (AGC), domiciled in Maryland;

• Assured Guaranty (Europe) plc (AGE), organized in the U.K.;

• Assured Guaranty Re Ltd. (AG Re), domiciled in Bermuda; and

• Assured Guaranty Re Overseas Ltd. (AGRO), domiciled in Bermuda.

The Company’s organizational structure includes various holding companies, two of which - Assured Guaranty US Holdings Inc. (AGUS) and Assured Guaranty Municipal Holdings Inc. (AGMH) - have public debt outstanding. See Note 15, Subsidiary Information.

Acquisition of BlueMountain

On October 1, 2019, AGUS completed the acquisition of all of the outstanding equity interests in BlueMountain Capital Management, LLC (BlueMountain) and its associated entities, for a purchase price of approximately $160 million (BlueMountain Acquisition). As of the date of acquisition, BlueMountain managed $18.3 billion in assets across CLOs and long-duration opportunity funds that build on its corporate credit, asset-backed finance and healthcare experience, as well as certain funds now subject to orderly wind-down. In addition, AGUS contributed $60 million of cash to BlueMountain at closing and intends to contribute an additional $30 million in cash within a year from closing. To fund the BlueMountain Acquisition and the related capital contributions, AGM, AGC and MAC made 10 year, 3.5% interest rate inter-company loans to AGUS totaling $250 million.

The Company is in the process of allocating the purchase price to the assets acquired and liabilities assumed and

conforming accounting policies but has not yet completed the acquisition date balance sheet. The Company intends to include

this information in its Form 10-K for year ended December 31, 2019.

Adopted Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The Company adopted Topic 842 on January 1, 2019 using the optional transition method that allows the Company to initially apply the new requirements at the effective date, with no revision to prior periods. See Note 12, Commitments and Contingencies, for additional information.

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Topic 310-20) - Premium Amortization on Purchased Callable Debt Securities.  This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date.  This ASU was adopted on January 1, 2019, with no effect on the Company's condensed consolidated financial statements.

Future Application of Accounting Standards

Credit Losses on Financial Instruments

                In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The ASU provides a new current expected credit loss model to account for credit losses on certain financial assets (e.g., reinsurance recoverables, premium receivables, and held-to-maturity debt securities) and off-balance sheet exposures (e.g., loan commitments). That model requires an entity to estimate lifetime credit losses related to certain financial assets, based on relevant historical information, adjusted for current conditions and reasonable and supportable forecasts that could affect the collectability of the reported amount. The ASU also makes targeted amendments to the current impairment model for available-for-sale debt securities, which includes requiring the recognition of an allowance rather than a direct write-down of the investment. The allowance may be reversed in the event that the credit of an issuer improves. In addition, the ASU eliminates the existing guidance for purchased credit impaired assets and introduces a new model for purchased financial assets with credit deterioration, such as the Company's loss mitigation securities, which requires the

8

recognition of an initial allowance for credit losses. Under the new guidance, the amortized cost would be the purchase price plus the allowance at the acquisition date.

                The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For reinsurance recoverables, premiums receivable and debt instruments such as loans and held to maturity securities, entities will be required to record a cumulative-effect adjustment to the statement of financial position as of the beginning of the first reporting period in which the guidance is adopted. The changes to the impairment model for available-for-sale securities and purchased financial assets with credit deterioration are to be applied prospectively. Early adoption of the amendments is permitted; however, the Company does not plan to adopt this ASU until January 1, 2020. The Company does not expect ASU 2016-13 to have a material effect on shareholders' equity at the date of adoption.

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.  The amendments in this ASU:

• improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows,

• simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts,

• simplify the amortization of deferred acquisition costs, and

• improve the effectiveness of the required disclosures.

This ASU does not affect the Company’s financial guaranty insurance contracts, but may affect its accounting for certain non-financial guaranty contracts. In October 2019, the FASB affirmed its decision to defer the effective date of the ASU to January 1, 2022. The Company does not plan to adopt this ASU early, and does not expect this ASU to have a material effect on its condensed consolidated financial statements.

2.    Ratings

The financial strength ratings (or similar ratings) for AGL’s insurance subsidiaries, along with the date of the most recent rating action (or confirmation) by the rating agency, are shown in the table below. Ratings are subject to continuous rating agency review and revision or withdrawal at any time. In addition, the Company periodically assesses the value of each rating assigned to each of its companies, and as a result of such assessment may request that a rating agency add or drop a rating from certain of its companies.

	S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC (S&P)	Kroll Bond Rating Agency	Moody’s Investors Service, Inc. (Moody’s)	A.M. Best Company, Inc.
AGM	AA (stable) (11/7/19)	AA+ (stable) (12/21/18)	A2 (stable) (8/13/19)	—
AGC	AA (stable) (11/7/19)	AA (stable) (11/30/18)	(1)	—
MAC	AA (stable) (11/7/19)	AA+ (stable) (7/12/19)	—	—
AG Re	AA (stable) (11/7/19)	—	—	—
AGRO	AA (stable) (11/7/19)	—	—	A+ (stable) (7/12/19)
AGE	AA (stable) (11/7/19)	AA+ (stable) (12/21/18)	A2 (stable) (8/13/19)	—

____________________

(1) AGC requested that Moody’s withdraw its financial strength ratings of AGC in January 2017, but Moody's denied that request. Moody’s continues to rate AGC A3 (stable).

There can be no assurance that any of the rating agencies will not take negative action on the financial strength ratings (or similar ratings) of AGL's insurance subsidiaries in the future or cease to rate one or more of AGL's insurance subsidiaries, either voluntarily or at the request of that subsidiary.

For a discussion of the effects of rating actions on the Company, see Note 5, Contracts Accounted for as Insurance, and Note 11, Reinsurance.

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3. Outstanding Exposure

The Company primarily sells credit protection contracts in financial guaranty insurance form. Until 2009, the Company also sold credit protection by issuing policies that guaranteed payment obligations under credit derivatives, primarily credit default swaps (CDS). The Company's contracts accounted for as credit derivatives 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 has not entered into any new CDS in order to sell credit protection in the U.S. since the beginning of 2009, when regulatory guidelines were issued that limited the terms under which such protection could be sold. The capital and margin requirements applicable under the Dodd-Frank Wall Street Reform and Consumer Protection Act also contributed to the Company not entering into such new CDS in the U.S. since 2009. The Company has, however, acquired or reinsured portfolios both before and after 2009 that include financial guaranty contracts in credit derivative form.

The Company also writes non-financial guaranty insurance that is consistent with its risk profile and benefits from its underwriting experience.

The Company seeks to limit its exposure to losses by underwriting obligations that it views as investment grade at inception, although on occasion it may underwrite new issuances that it views as 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 a portfolio of insurance or reassuming a portfolio of reinsurance it had previously ceded; 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 asset classes and, in the structured finance portfolio, typically 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 also 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. The Company also includes within public finance similar obligations issued by territorial 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 9, Variable Interest Entities. Unless otherwise specified, the outstanding par and debt service amounts presented in this note include outstanding exposures on VIEs whether or not they are consolidated. The Company also provides non-financial guaranty insurance and reinsurance on transactions without special purpose entities but with similar risk profiles to its structured finance exposures written in financial guaranty form.

Second-to-pay insured par outstanding represents transactions the Company has insured that are already insured by another financial guaranty insurer and where the Company's obligation to pay under its insurance of such transactions arises only if both the obligor on the underlying insured obligation and the primary financial guaranty insurer default. The Company underwrites such transactions based on the underlying insured obligation without regard to the primary financial guaranty insurer and internally rates the transaction the higher of the rating of the underlying obligation and the rating of the primary financial guarantor. The second-to-pay insured par outstanding as of September 30, 2019 and December 31, 2018 was $6.4 billion and $6.7 billion, respectively. The par on second-to-pay exposure where the ratings of the primary financial guaranty insurer and underlying insured transaction are both BIG and/or not rated was $106 million and $111 million as of September 30, 2019 and December 31, 2018, respectively.

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Surveillance Categories

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 for 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 are generally reflective of 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, loss potential, volatility and sector. Ratings on exposures in sectors identified as under the most stress or with the most potential volatility are reviewed every quarter, although the Company may also review a rating in response to developments impacting the 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.

Exposures identified as BIG are subjected to further review to determine the probability of a loss. See Note 4, Expected Loss to be Paid, for additional information. Surveillance personnel then assign each BIG transaction to the appropriate BIG surveillance category based upon whether a future loss is expected and whether a claim has been paid. The Company uses a tax-equivalent yield to calculate the present value of projected payments and recoveries and determine whether a future loss is expected in order to assign the appropriate BIG surveillance category to a transaction. For financial statement measurement purposes, the Company uses risk-free rates, which are determined each quarter, to calculate the expected loss.

More extensive monitoring and intervention is employed for all BIG surveillance categories, with internal credit ratings reviewed quarterly. For purposes of determining the appropriate surveillance category, the Company expects “future losses” on a transaction when the Company believes there is at least a 50% chance that, on a present value basis, it will in the future pay claims on that transaction that will not be fully reimbursed. The three BIG categories are:

• BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected.

• BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims, which are claims that the Company expects to be reimbursed within one year) have yet been paid.

• BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid.

Unless otherwise noted, ratings disclosed herein on the Company's insured portfolio reflect its internal ratings. The Company classifies those portions of risks benefiting from reimbursement obligations collateralized by eligible assets held in trust in acceptable reimbursement structures as the higher of 'AA' or their current internal rating.

The Company purchases securities that it has insured, and for which it has 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, which amounts are included in the investment portfolio, because it manages such securities as investments and not insurance exposure. As of September 30, 2019 and December 31, 2018, the Company excluded $1.5 billion and $1.9 billion, respectively, of net par attributable to loss mitigation securities.

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Financial Guaranty Exposure

Financial Guaranty Portfolio

Debt Service Outstanding

	Gross Debt Service Outstanding				Net Debt Service Outstanding
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Public finance	$	343,956	$	361,511	$	342,801	$	358,438
Structured finance	12,324		13,569		11,811		13,148
Total financial guaranty	$	356,280	$	375,080	$	354,612	$	371,586

Financial Guaranty Portfolio

by Internal Rating

As of September 30, 2019

	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	$	384	0.2	%	$	2,429	5.6	%	$	1,345	14.6	%	$	179	23.8	%	$	4,337	1.9	%
AA	20,646		11.7		1,707		4.0		3,740		40.5		37		4.9		26,130		11.4
A	97,366		55.2		12,764		29.8		912		9.9		174		23.1		111,216		48.5
BBB	52,359		29.6		25,119		58.6		1,378		14.9		321		42.7		79,177		34.5
BIG	5,760		3.3		863		2.0		1,851		20.1		41		5.5		8,515		3.7
Total net par outstanding	$	176,515	100.0	%	$	42,882	100.0	%	$	9,226	100.0	%	$	752	100.0	%	$	229,375	100.0	%

Financial Guaranty Portfolio

by Internal Rating

As of December 31, 2018 

	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	$	413	0.2	%	$	2,399	5.4	%	$	1,533	15.4	%	$	273	22.9	%	$	4,618	1.9	%
AA	21,646		11.6		1,711		3.9		3,599		36.2		65		5.4		27,021		11.2
A	105,180		56.4		13,013		29.5		1,016		10.2		206		17.3		119,415		49.4
BBB	52,935		28.4		25,939		58.8		1,164		11.7		550		46.1		80,588		33.3
BIG	6,388		3.4		1,041		2.4		2,632		26.5		99		8.3		10,160		4.2
Total net par outstanding	$	186,562	100.0	%	$	44,103	100.0	%	$	9,944	100.0	%	$	1,193	100.0	%	$	241,802	100.0	%

In addition to amounts shown in the table above, the Company had outstanding commitments to provide guaranties of $983 million of gross par for public finance. These commitments are contingent on the satisfaction of all conditions set forth in them 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. In addition, in Third Quarter 2019 the Company entered into a commitment to issue a financial guaranty policy for $500 million in structured finance gross par.

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Financial Guaranty Portfolio

Components of BIG Net Par Outstanding

As of September 30, 2019

	BIG Net Par Outstanding								Net Par
	BIG 1		BIG 2		BIG 3		Total BIG		Outstanding
					(in millions)
Public finance:
U.S. public finance	$	1,604	$	398	$	3,758	$	5,760	$	176,515
Non-U.S. public finance	819		—		44		863		42,882
Public finance	2,423		398		3,802		6,623		219,397
Structured finance:
U.S. residential mortgage-backed securities (RMBS)	118		88		1,460		1,666		3,687
Life insurance transactions	—		—		40		40		1,223
Other structured finance	71		65		50		186		5,068
Structured finance	189		153		1,550		1,892		9,978
Total	$	2,612	$	551	$	5,352	$	8,515	$	229,375

Financial Guaranty Portfolio

Components of BIG Net Par Outstanding

As of December 31, 2018

	BIG Net Par Outstanding								Net Par
	BIG 1		BIG 2		BIG 3		Total BIG		Outstanding
					(in millions)
Public finance:
U.S. public finance	$	1,767	$	399	$	4,222	$	6,388	$	186,562
Non-U.S. public finance	796		245		—		1,041		44,103
Public finance	2,563		644		4,222		7,429		230,665
Structured finance:
U.S. RMBS	368		214		1,805		2,387		4,270
Life insurance transactions	—		—		85		85		1,184
Other structured finance	127		79		53		259		5,683
Structured finance	495		293		1,943		2,731		11,137
Total	$	3,058	$	937	$	6,165	$	10,160	$	241,802

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Financial Guaranty Portfolio

BIG Net Par Outstanding

and Number of Risks

As of September 30, 2019

	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivative		Total		Financial Guaranty Insurance (1)	Credit Derivative	Total
	(dollars in millions)
BIG:
Category 1	$	2,543	$	69	$	2,612	119	6	125
Category 2	547		4		551		26	1	27
Category 3	5,293		59		5,352		134	7	141
Total BIG	$	8,383	$	132	$	8,515	279	14	293

 Financial Guaranty Portfolio

BIG Net Par Outstanding

and Number of Risks

As of December 31, 2018

	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivative		Total		Financial Guaranty Insurance (1)	Credit Derivative	Total
	(dollars in millions)
BIG:
Category 1	$	2,981	$	77	$	3,058	128	6	134
Category 2	932		5		937		39	1	40
Category 3	6,090		75		6,165		145	8	153
Total BIG	$	10,003	$	157	$	10,160	312	15	327

_____________________

(1)    Includes VIEs.

(2) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.   

Exposure to Puerto Rico

The Company had insured exposure to general obligation bonds of the Commonwealth of Puerto Rico (Puerto Rico or the Commonwealth) and various obligations of its related authorities and public corporations aggregating $4.3 billion net par as of September 30, 2019, all of which was rated BIG. Beginning on January 1, 2016, a number of Puerto Rico exposures have defaulted on bond payments, and the Company has now paid claims on all of its Puerto Rico exposures except for Puerto Rico Aqueduct and Sewer Authority (PRASA), Municipal Finance Agency (MFA) and University of Puerto Rico (U of PR).

On November 30, 2015 and December 8, 2015, the then governor of Puerto Rico issued executive orders (Clawback Orders) directing the Puerto Rico Department of Treasury and the Puerto Rico Tourism Company to "claw back" certain taxes pledged to secure the payment of bonds issued by the Puerto Rico Highways and Transportation Authority (PRHTA), Puerto Rico Infrastructure Financing Authority (PRIFA), and Puerto Rico Convention Center District Authority (PRCCDA). The Puerto Rico exposures insured by the Company subject to clawback are shown in the table “Puerto Rico Net Par Outstanding.”

On June 30, 2016, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) was signed into law. PROMESA established a seven-member financial oversight board (Oversight Board) with authority to require that balanced budgets and fiscal plans be adopted and implemented by Puerto Rico.

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The Company believes that a number of the actions taken by the Commonwealth, the Oversight Board and others with respect to obligations the Company insures are illegal or unconstitutional or both, and has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to these matters. In addition, the Commonwealth, the Oversight Board and others have taken legal action naming the Company as a party. See “Puerto Rico Litigation” below.

The Company also participates in mediation and negotiations relating to its Puerto Rico exposure.

The final form and timing of responses to Puerto Rico’s financial distress and the devastation of Hurricane Maria eventually taken by the federal government or implemented under the auspices of PROMESA and the Oversight Board or otherwise, and the final impact, after resolution of legal challenges, of any such responses on obligations insured by the Company, are uncertain.

The Company groups its Puerto Rico exposure into three categories:

• Constitutionally Guaranteed. The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.

• Public Corporations – Certain Revenues Potentially Subject to Clawback. The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to claw back revenues supporting debt insured by the Company.

• Other Public Corporations. The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.

Constitutionally Guaranteed

General Obligation. As of September 30, 2019, the Company had $1,253 million insured net par outstanding of the general obligations of Puerto Rico, which are supported by the good faith, credit and taxing power of the Commonwealth. Despite the requirements of Article VI of its Constitution, the Commonwealth defaulted on the debt service payment due on July 1, 2016, and the Company has been making claim payments on these bonds since that date. The Oversight Board has filed a petition under Title III of PROMESA with respect to the Commonwealth.

On May 9, 2019, the Oversight Board certified a revised fiscal plan for the Commonwealth. The revised certified Commonwealth fiscal plan indicates an expected primary budget surplus, if fiscal plan reforms are enacted, of $13.7 billion that would be available for debt service over the six-year forecast period ending 2024. The Company believes the available surplus set forth in the Oversight Board's revised certified fiscal plan (which assumes certain fiscal reforms are implemented by the Commonwealth) should be sufficient to cover contractual debt service of Commonwealth general obligation issuances and of authorities and public corporations directly implicated by the Commonwealth’s general fund during the forecast period. However, the revised certified Commonwealth fiscal plan indicates a net cumulative primary budget deficit through 2049, and there can be no assurance that the fiscal reforms will be enacted or, if they are, that the forecasted primary budget surplus will occur or, if it does, that such funds will be used to cover contractual debt service.

On June 16, 2019, the Oversight Board announced it had entered into a general obligation Plan Support Agreement (GO PSA) with certain general obligation and Puerto Rico Public Buildings Authority (PBA) bondholders representing only approximately $3 billion of claims. The GO PSA purports to provide a framework to address approximately $35 billion of claims against the Commonwealth. The Company is not a party to that agreement and does not support it. 

The GO PSA provides for different recoveries for bonds issued before 2012 (Vintage) and bonds issued in 2012 and 2014 (New) based on the Oversight Board’s attempt to invalidate the New general obligation and PBA bonds (see “Puerto Rico Litigation” below), and the proposed recovery varies depending on the outcome of that litigation.  Under the GO PSA:

• Vintage general obligation bondholders generally would receive newly issued Commonwealth bonds and cash equal to 64.3% of their outstanding claims, plus up to approximately 25.1% of their outstanding claims to a cap

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of 89.4% from settlement and litigation savings from the invalidation lawsuit, as well as a share of excess revenues if the Commonwealth outperforms its fiscal plan in the near term.

• If the Oversight Board loses its invalidation lawsuit, holders of New general obligation bonds generally would receive the same treatment as the holders of Vintage general obligation bonds but would not share in the upside if the Commonwealth outperforms its fiscal plan.

• If the Oversight Board wins its invalidation lawsuit, holders of New general obligation bonds would not receive any recovery.  

• In all cases, holders of general obligation bonds supporting the GO PSA are also entitled to certain fees.

On September 27, 2019, the Oversight Board filed with the Title III court a Plan of Adjustment (POA) to restructure approximately $35 billion of debt (including the general obligation bonds) and other claims against the government of Puerto Rico and certain entities and $50 billion in pension obligations. The POA incorporates the terms related to the general obligation bonds proposed under the GO PSA. The Company believes the POA, as currently constituted, does not comply with the laws and constitution of Puerto Rico and the provisions of PROMESA and does not satisfy the statutory requirements for confirmation of a plan of adjustment under Title III of PROMESA.

PBA. As of September 30, 2019, the Company had $140 million insured net par outstanding of PBA bonds, which are supported by a pledge of the rents due under leases of government facilities to departments, agencies, instrumentalities and municipalities of the Commonwealth, and that benefit from a Commonwealth guaranty supported by a pledge of the Commonwealth’s good faith, credit and taxing power. Despite the requirements of Article VI of its Constitution, the PBA defaulted on most of the debt service payment due on July 1, 2016, and the Company has been making claim payments on these bonds since then. On September 27, 2019, the Oversight Board filed a petition under Title III of PROMESA with respect to the PBA to allow the restructuring of the PBA claims through the POA.

            Under the GO PSA (which does not include the Company as a party and which the Company does not support):

• Holders of Vintage PBA bonds generally would receive newly issued Commonwealth bonds and cash equal to 72.6% of their outstanding claims, plus up to approximately 16.8% of their outstanding claims to a cap of 89.4% from settlement and litigation savings from the invalidation lawsuit, as well as a share of excess revenues if the Commonwealth outperforms its fiscal plan in the near term.

• If the Oversight Board loses its invalidation lawsuit, holders of New PBA bonds generally would receive the same treatment as the holders of Vintage PBA bonds but would not share in the upside if the Commonwealth outperforms its fiscal plan.

• If the Oversight Board wins its invalidation lawsuit, holders of New PBA bonds would not receive any recovery.  

• In all cases, holders of PBA bonds supporting the GO PSA are also entitled to certain fees.

As noted above, on September 27, 2019, the Oversight Board filed with the Title III court a POA to restructure approximately $35 billion of debt (including the PBA bonds) and other claims against the government of Puerto Rico and certain entities and $50 billion in pension obligations. The POA incorporates the terms related to the PBA bonds proposed under the GO PSA. The Company believes the POA, as currently constituted, does not comply with the laws and constitution of Puerto Rico and the provisions of PROMESA and does not satisfy the statutory requirements for confirmation of a plan of adjustment under Title III of PROMESA.

Public Corporations - Certain Revenues Potentially Subject to Clawback

PRHTA. As of September 30, 2019, the Company had $811 million insured net par outstanding of PRHTA (transportation revenue) bonds and $454 million insured net par outstanding of PRHTA (highways revenue) bonds. The transportation revenue bonds are secured by a subordinate gross lien on gasoline and gas oil and diesel oil taxes, motor vehicle license fees and certain tolls, plus a first lien on up to $120 million annually of taxes on crude oil, unfinished oil and derivative products. The highways revenue bonds are secured by a gross lien on gasoline and gas oil and diesel oil taxes, motor vehicle license fees and certain tolls. The non-toll revenues consisting of excise taxes and fees collected by the Commonwealth on behalf of PRHTA and its bondholders that are statutorily allocated to PRHTA and its bondholders are potentially subject to clawback. Despite the presence of funds in relevant debt service reserve accounts that the Company believes should have been

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employed to fund debt service, PRHTA defaulted on the full July 1, 2017 insured debt service payment, and the Company has been making claim payments on these bonds since that date. The Oversight Board has filed a petition under Title III of PROMESA with respect to PRHTA.

On June 5, 2019, the Oversight Board certified a revised fiscal plan for PRHTA. The revised certified PRHTA fiscal plan projects very limited capacity to pay debt service over the six-year forecast period.

PRCCDA. As of September 30, 2019, the Company had $152 million insured net par outstanding of PRCCDA bonds, which are secured by certain hotel tax revenues. These revenues are sensitive to the level of economic activity in the area and are potentially subject to clawback. There were sufficient funds in the PRCCDA bond accounts to make only partial payments on the July 1, 2017 PRCCDA bond payments guaranteed by the Company, and the Company has been making claim payments on these bonds since that date.

PRIFA. As of September 30, 2019, the Company had $16 million insured net par outstanding of PRIFA bonds, which are secured primarily by the return to PRIFA and its bondholders of a portion of federal excise taxes paid on rum. These revenues are potentially subject to the clawback. The Company has been making claim payments on the PRIFA bonds since January 2016.

Other Public Corporations

Puerto Rico Electric Power Authority (PREPA). As of September 30, 2019, the Company had $822 million insured net par outstanding of PREPA obligations, which are secured by a lien on the revenues of the electric system. The Company has been making claim payments on these bonds since July 1, 2017. On July 2, 2017, the Oversight Board commenced proceedings for PREPA under Title III of PROMESA. On June 27, 2019, the Oversight Board certified a revised fiscal plan for PREPA.

On May 3, 2019, AGM and AGC entered into a restructuring support agreement with PREPA (PREPA RSA) and other stakeholders, including a group of uninsured PREPA bondholders, the Commonwealth of Puerto Rico, and the Oversight Board, that is intended to, among other things, provide a framework for the consensual resolution of the treatment of the Company’s insured PREPA revenue bonds in PREPA's recovery plan. Upon consummation of the restructuring transaction, PREPA’s revenue bonds will be exchanged into new securitization bonds issued by a special purpose corporation and secured by a segregated transition charge assessed on electricity bills. The revised fiscal plan of PREPA certified by the Oversight Board on June 27, 2019 reflects the relevant terms of the PREPA RSA.

The closing of the restructuring transaction is subject to a number of conditions, including approval by the Title III Court of the PREPA RSA and settlement described therein, a minimum of 67% support of voting bondholders for a plan of adjustment that includes this proposed treatment of PREPA revenue bonds and confirmation of such plan by the Title III court, and execution of acceptable documentation and legal opinions. Under the PREPA RSA, the Company has the option to guarantee its allocated share of the securitization exchange bonds, which may then be offered and sold in the capital markets. The Company believes that the additive value created by attaching its guarantee to the securitization exchange bonds would materially improve its overall recovery under the transaction, as well as generate new insurance premiums; and therefore that its economic results could differ from those reflected in the PREPA RSA.

PRASA. As of September 30, 2019, the Company had $373 million of insured net par outstanding of PRASA bonds, which are secured by a lien on the revenues of the water and sewer system. On June 29, 2019, the Oversight Board certified a revised fiscal plan for PRASA. In July 2019, PRASA entered into a restructuring transaction with the federal government and the Oversight Board to restructure its subordinated loans from federal agencies that had been under forbearance for over three years (the PRASA Agreement). The PRASA Agreement extends the maturity of the loans for up to 40 years and provides for low interest rates and no interest accrual for the first ten years on a portion of the loans, but also places the subordinated loans on a parity with the PRASA bonds the Company guarantees.  The Company was not asked to consent to the PRASA Agreement. The PRASA Agreement reduces the amount of annual debt service owed by PRASA for its current debt. The PRASA bond accounts contained sufficient funds to make the PRASA bond payments due through the date of this filing that were guaranteed by the Company, and those payments were made in full.

MFA. As of September 30, 2019, the Company had $248 million net par outstanding of bonds issued by MFA secured by a lien on local property tax revenues. The MFA bond accounts contained sufficient funds to make the MFA bond payments due through the date of this filing that were guaranteed by the Company, and those payments were made in full.

U of PR. As of September 30, 2019, the Company had $1 million insured net par outstanding of U of PR bonds, which are general obligations of the university and are secured by a subordinate lien on the proceeds, profits and other income of the

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university, subject to a senior pledge and lien for the benefit of outstanding university system revenue bonds. As of the date of this filing, all debt service payments on U of PR bonds insured by the Company have been made in full.

Resolved Commonwealth Credit

Puerto Rico Sales Tax Financing Corporation (COFINA). On February 12, 2019, pursuant to a plan of adjustment approved by the PROMESA Title III Court on February 4, 2019 (COFINA Plan of Adjustment), the Company paid off in full its $273 million net par outstanding of insured COFINA bonds, plus accrued and unpaid interest. Pursuant to the COFINA Plan of Adjustment, the Company received $152 million in initial par of closed lien senior bonds of COFINA validated by the PROMESA Title III Court (COFINA Exchange Senior Bonds), along with cash. The total par recovery (cash and COFINA Exchange Senior Bonds) represented 60% of the Company’s official Title III claim, which related to amounts owed as of the date COFINA entered Title III proceedings. The fair value of the COFINA Exchange Senior Bonds, excluding accrued interest, was $139 million at February 12, 2019, and was recorded as salvage received. During Third Quarter 2019 the Company sold all of its COFINA Exchange Senior Bonds.

Puerto Rico Litigation

The Company believes that a number of the actions taken by the Commonwealth, the Oversight Board and others with respect to obligations it insures are illegal or unconstitutional or both, and has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to these matters. In addition, the Commonwealth, the Oversight Board and others have taken legal action naming the Company as party.

Currently there are numerous legal actions relating to the default by the Commonwealth and certain of its entities on debt service payments, and related matters, and the Company is a party to a number of them. On July 24, 2019, Judge Laura Taylor Swain of the United States District Court for the District of Puerto Rico (Federal District Court for Puerto Rico) held an omnibus hearing on litigation matters relating to the Commonwealth. At that hearing, she imposed a stay through November 30, 2019, on a series of adversary proceedings and contested matters amongst the stakeholders and imposed mandatory mediation on all parties through that date. On October 28, 2019, Judge Swain extended the stay until December 31, 2019. Among the goals of the mediation is to reach an agreed-upon schedule for addressing the resolution of numerous issues, including, among others: (a) issues related to the validity, secured status and priority regarding bonds issued by the Commonwealth and certain of its entities; (b) the validity and impact of the Clawback Orders and other diversion of collateral securing certain bonds; (c) classification of claims; (d) constitutional issues; and (e) identification of essential services. A number of the legal actions in which the Company is involved are covered by the stay and mandatory mediation order.

On January 7, 2016, AGM, AGC and Ambac Assurance Corporation commenced an action for declaratory judgment and injunctive relief in the Federal District Court for Puerto Rico to invalidate the executive orders issued on November 30, 2015 and December 8, 2015 by the then governor of Puerto Rico directing that the Secretary of the Treasury of the Commonwealth of Puerto Rico and the Puerto Rico Tourism Company claw back certain taxes and revenues pledged to secure the payment of bonds issued by the PRHTA, the PRCCDA and PRIFA. The Commonwealth defendants filed a motion to dismiss the action for lack of subject matter jurisdiction, which the court denied on October 4, 2016. On October 14, 2016, the Commonwealth defendants filed a notice of PROMESA automatic stay. While the PROMESA automatic stay expired on May 1, 2017, on May 17, 2017, the court stayed the action under Title III of PROMESA.

On June 3, 2017, AGC and AGM filed an adversary complaint in the Federal District Court for Puerto Rico seeking (i) a judgment declaring that the application of pledged special revenues to the payment of the PRHTA bonds is not subject to the PROMESA Title III automatic stay and that the Commonwealth has violated the special revenue protections provided to the PRHTA bonds under the United States Bankruptcy Code (Bankruptcy Code); (ii) an injunction enjoining the Commonwealth from taking or causing to be taken any action that would further violate the special revenue protections provided to the PRHTA bonds under the Bankruptcy Code; and (iii) an injunction ordering the Commonwealth to remit the pledged special revenues securing the PRHTA bonds in accordance with the terms of the special revenue provisions set forth in the Bankruptcy Code. On January 30, 2018, the court rendered an opinion dismissing the complaint and holding, among other things, that (x) even though the special revenue provisions of the Bankruptcy Code protect a lien on pledged special revenues, those provisions do not mandate the turnover of pledged special revenues to the payment of bonds and (y) actions to enforce liens on pledged special revenues remain stayed. A hearing on AGM and AGC’s appeal of the trial court’s decision to the United States Court of Appeals for the First Circuit (First Circuit) was held on November 5, 2018. On March 26, 2019, the First Circuit issued its opinion affirming the trial court’s decision and held that Sections 928(a) and 922(d) of the Bankruptcy Code permit, but do not require, continued payments during the pendency of the Title III proceedings. The First Circuit agreed with the trial court that (i) Section 928(a) of the Bankruptcy Code does not mandate the turnover of special revenues or require continuity of payments to

18

the PRHTA bonds during the pendency of the Title III proceedings, and (ii) Section 922(d) of the Bankruptcy Code is not an exception to the automatic stay that would compel PRHTA, or third parties holding special revenues, to apply special revenues to outstanding obligations. On April 9, 2019, AGM, AGC and other petitioners filed a petition with the First Circuit seeking a rehearing by the full court; the petition was denied by the First Circuit on July 31, 2019. On September 20, 2019, AGC, AGM and other petitioners filed a petition for review by the U.S. Supreme Court of the First Circuit's holding.

On June 26, 2017, AGM and AGC filed a complaint in the Federal District Court for Puerto Rico seeking (i) a declaratory judgment that the PREPA restructuring support agreement executed in December 2015 (2015 PREPA RSA) is a “Preexisting Voluntary Agreement” under Section 104 of PROMESA and the Oversight Board’s failure to certify the 2015 PREPA RSA is an unlawful application of Section 601 of PROMESA; (ii) an injunction enjoining the Oversight Board from unlawfully applying Section 601 of PROMESA and ordering it to certify the 2015 PREPA RSA; and (iii) a writ of mandamus requiring the Oversight Board to comply with its duties under PROMESA and certify the 2015 PREPA RSA. On July 21, 2017, in light of its PREPA Title III petition on July 2, 2017, the Oversight Board filed a notice of stay under PROMESA.

On July 18, 2017, AGM and AGC filed in the Federal District Court for Puerto Rico a motion for relief from the automatic stay in the PREPA Title III bankruptcy proceeding and a form of complaint seeking the appointment of a receiver for PREPA. The court denied the motion on September 14, 2017, but on August 8, 2018, the First Circuit vacated and remanded the court's decision. On October 3, 2018, AGM and AGC, together with other bond insurers, filed a motion with the court to lift the automatic stay to commence an action against PREPA for the appointment of a receiver. Under the PREPA RSA, AGM and AGC have agreed to withdraw from the lift stay motion upon the Title III Court’s approval of the settlement of claims embodied in the PREPA RSA.

On May 23, 2018, AGM and AGC filed an adversary complaint in the Federal District Court for Puerto Rico seeking a judgment declaring that (i) the Oversight Board lacked authority to develop or approve the new fiscal plan for Puerto Rico which it certified on April 19, 2018 (Revised Fiscal Plan); (ii) the Revised Fiscal Plan and the Fiscal Plan Compliance Law (Compliance Law) enacted by the Commonwealth to implement the original Commonwealth Fiscal Plan violate various sections of PROMESA; (iii) the Revised Fiscal Plan, the Compliance Law and various moratorium laws and executive orders enacted by the Commonwealth to prevent the payment of debt service (a) are unconstitutional and void because they violate the Contracts, Takings and Due Process Clauses of the U.S. Constitution and (b) are preempted by various sections of PROMESA; and (iv) no Title III plan of adjustment based on the Revised Fiscal Plan can be confirmed under PROMESA. On August 13, 2018, the court-appointed magistrate judge granted the Commonwealth's and the Oversight Board's motion to stay this adversary proceeding pending a decision by the First Circuit in an appeal by Ambac Assurance Corporation of an unrelated adversary proceeding decision, which the First Circuit rendered on June 24, 2019. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters through November 30, 2019, with a mandatory mediation element. Pursuant to the request of AGM, AGC and the defendants, Judge Swain ordered on September 6, 2019 that the claims in this complaint be addressed in the Commonwealth plan confirmation process and be subject to her July 24, 2019 stay and mandatory mediation order and be incorporated into the same schedule and mediation process. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On July 23, 2018, AGC and AGM filed an adversary complaint in the Federal District Court for Puerto Rico seeking a judgment (i) declaring the members of the Oversight Board are officers of the U.S. whose appointments were unlawful under the Appointments Clause of the U.S. Constitution; (ii) declaring void from the beginning the unlawful actions taken by the Oversight Board to date, including (x) development of the Commonwealth's Fiscal Plan, (y) development of PRHTA's Fiscal Plan, and (z) filing of the Title III cases on behalf of the Commonwealth and PRHTA; and (iii) enjoining the Oversight Board from taking any further action until the Oversight Board members have been lawfully appointed in conformity with the Appointments Clause of the U.S. Constitution. The Title III court dismissed a similar lawsuit filed by another party in the Commonwealth’s Title III case in July 2018. On August 3, 2018, a stipulated judgment was entered against AGM and AGC at their request based upon the court's July decision in the other Appointments Clause lawsuit and, on the same date, AGM and AGC appealed the stipulated judgment to the First Circuit. On August 15, 2018, the court consolidated, for purposes of briefing and oral argument, AGM and AGC's appeal with the other Appointments Clause lawsuit. The First Circuit consolidated AGM and AGC's appeal with a third Appointments Clause lawsuit on September 7, 2018 and held a hearing on December 3, 2018. On February 15, 2019, the First Circuit issued its ruling on the appeal and held that members of the Oversight Board were not appointed in compliance with the Appointments Clause of the U.S. Constitution but declined to dismiss the Title III petitions citing the (i) de facto officer doctrine and (ii) negative consequences to the many innocent third parties who relied on the Oversight Board’s actions to date, as well as the further delay which would result from a dismissal of the Title III petitions. The case was remanded back to the Federal District Court for Puerto Rico for the appellants’ requested declaratory relief that the appointment of the board members of the Oversight Board is unconstitutional. The First Circuit delayed the effectiveness of its ruling for 90 days so as to allow the President and the Senate to validate the currently defective appointments or reconstitute the Oversight Board in accordance with the Appointments Clause. On April 23, 2019, the Oversight Board filed a petition for a

19

review by the U.S. Supreme Court of the First Circuit's holding that its members were not appointed in compliance with the Appointments Clause and on the following day filed a motion in the First Circuit to further stay the effectiveness of the First Circuit’s February 15, 2019 ruling pending final disposition by the U.S. Supreme Court. On May 24, 2019, AGC and AGM filed a petition for a review by the U.S. Supreme Court of the First Circuit’s holding that the de facto officer doctrine allows courts to deny meaningful relief to successful challengers suffering ongoing injury at the hands of unconstitutionally appointed officers. On July 2, 2019, the First Circuit granted the Oversight Board’s motion to stay the effectiveness of the First Circuit’s February 15, 2019 ruling pending final disposition by the U.S. Supreme Court. On October 15, 2019, the U.S. Supreme Court heard oral arguments on the First Circuit's ruling.

On December 21, 2018, the Oversight Board and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA) filed an adversary complaint in the Federal District Court for Puerto Rico seeking a judgment declaring that (i) the leases to public occupants entered into by the PBA are not “true leases” for purposes of Section 365(d)(3) of the Bankruptcy Code and therefore the Commonwealth has no obligation to make payments to the PBA under the leases or Section 365(d)(3) of the Bankruptcy Code, (ii) the PBA is not entitled to a priority administrative expense claim under the leases pursuant to Sections 503(b)(1) and 507(a)(2) of the Bankruptcy Code, and (iii) any such claims filed or asserted against the Commonwealth are disallowed. On January 28, 2019, the PBA filed an answer to the complaint. On March 12, 2019, the Federal District Court for Puerto Rico granted, with certain limitations, AGM’s and AGC’s motion to intervene. On March 21, 2019, AGM and AGC, together with certain other intervenors, filed a motion for judgment on the pleadings. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters, which include this proceeding, through November 30, 2019, with a mandatory mediation element. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On January 14, 2019, the Oversight Board and the Official Committee of Unsecured Creditors filed an omnibus objection in the Title III Court to claims filed by holders of approximately $6 billion of Commonwealth general obligation bonds issued in 2012 and 2014, asserting among other things that such bonds were issued in violation of the Puerto Rico constitutional debt service limit, such bonds are null and void, and the holders have no equitable remedy against the Commonwealth. Pursuant to procedures established by Judge Swain, on April 10, 2019, AGM filed a notice of participation in these proceedings. As of September 30, 2019, $369 million of the Company’s insured net par outstanding of the general obligation bonds of Puerto Rico were issued on or after March 2012. On May 21, 2019, the Official Committee of Unsecured Creditors filed a claim objection to certain Commonwealth general obligation bonds issued in 2011, approximately $215 million of which are insured by the Company as of September 30, 2019, on substantially the same bases as the January 14, 2019 filing, and which the plaintiffs propose to be subject to the proceedings relating to the 2012 and 2014 bonds. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters, which include this proceeding, through November 30, 2019, with a mandatory mediation element. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On May 2, 2019, the Oversight Board and the Official Committee of Unsecured Creditors filed an adversary complaint in the Federal District Court for Puerto Rico against various Commonwealth general obligation bondholders and bond insurers, including AGC and AGM, that had asserted in their proofs of claim that their bonds are secured. The complaint seeks a judgment declaring that defendants do not hold consensual or statutory liens and are unsecured claimholders to the extent they hold allowed claims. The complaint also asserts that even if Commonwealth law granted statutory liens, such liens are avoidable under Section 545 of the Bankruptcy Code. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters, which include this proceeding, through November 30, 2019, with a mandatory mediation element. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On May 20, 2019, the Oversight Board and the Official Committee of Unsecured Creditors filed an adversary complaint in the Federal District Court for Puerto Rico against the fiscal agent and holders and/or insurers, including AGC and AGM, that have asserted their PRHTA bond claims are entitled to secured status in PRHTA’s Title III case. Plaintiffs are seeking to avoid the PRHTA bondholders’ liens and contend that (i) the scope of any lien only applies to revenues that have been both received by PRHTA and deposited in certain accounts held by the fiscal agent and does not include PRHTA’s right to receive such revenues; (ii) any lien on revenues was not perfected because the fiscal agent does not have “control” of all accounts holding such revenues; (iii) any lien on the excise tax revenues is no longer enforceable because any rights PRHTA had to receive such revenues are preempted by PROMESA; and (iv) even if PRHTA held perfected liens on PRHTA’s revenues and the right to receive such revenues, such liens were terminated by Section 552(a) of the Bankruptcy Code as of the petition date. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters, which include this proceeding, through November 30, 2019, with a mandatory mediation element. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

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On August 23, 2019, AGM and AGC filed in the Federal District Court for Puerto Rico a motion for adequate protection for their property interests in pledged revenues securing PRHTA bonds or, in the alternative, for relief from the automatic stay to permit AGC and AGM to enforce the application of the pledged revenues to the payment of the PRHTA Bonds, including by permitting AGC and AGM to enforce their liens on the pledged revenues. On July 24, 2019, Judge Swain issued an order imposing a stay of a series of adversary proceedings and contested matters through November 30, 2019, with a mandatory mediation element. On August 28, 2019, Judge Swain granted the request of AGC and AGM that her July 24, 2019 stay and mandatory mediation order be extended to this motion, and that this motion be incorporated into the same schedule and mediation process. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On September 30, 2019, certain parties that either had advanced funds to PREPA for the purchase of fuel or had succeeded to such claims (Fuel Line Lenders) filed an amended adversary complaint in the Federal District Court for Puerto Rico against the Oversight Board, PREPA, the Puerto Rico Fiscal Agency and Financial Advisory Authority ("AAFAF"), U.S. Bank National Association, as trustee for PREPA bondholders, and various PREPA bondholders and bond insurers, including AGC and AGM. The complaint seeks, among other things, declarations that the advances made by the Fuel Line Lenders are Current Expenses as defined in the trust agreement pursuant to which the PREPA bonds were issued and there is no valid lien securing the PREPA bonds unless and until the Fuel Line Lenders are paid in full, as well as orders subordinating the PREPA bondholders’ lien and claim to the Fuel Line Lenders’ claims and declaring the PREPA RSA null and void. A hearing on a motion to dismiss is scheduled for January 2020.

On October 30, 2019, the retirement system for PREPA employees (SREAEE) filed an amended adversary complaint in the Federal District Court for Puerto Rico against the Oversight Board, PREPA, AAFAF, the Commonwealth, the Governor, and U.S. Bank National Association, as trustee for  PREPA bondholders. The complaint seeks, among other things, declarations that amounts owed to SREAEE are Current Expenses as defined in the trust agreement pursuant to which the PREPA bonds were issued, that there is no valid lien securing the PREPA bonds other than on amounts in the sinking funds and that SREAEE is a third-party beneficiary of certain trust agreement provisions, as well as orders subordinating the PREPA bondholders’ lien and claim to the SREAEE claims. On November 7, 2019, the court granted a motion to intervene by AGC and AGM. A hearing on the defendants’ motion to dismiss is scheduled for January 2020.

Puerto Rico Par and Debt Service Schedules

All Puerto Rico exposures are internally rated BIG. The following tables show the Company’s insured exposure to general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations.

Puerto Rico

Gross Par and Gross Debt Service Outstanding

	Gross Par Outstanding				Gross Debt Service Outstanding
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Exposure to Puerto Rico	$	4,458	$	4,971	$	6,958	$	8,035

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Puerto Rico

Net Par Outstanding

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds (1)	$	1,253	$	1,340
PBA (1)	140		142
Public Corporations - Certain Revenues Potentially Subject to Clawback
PRHTA (Transportation revenue) (1)	811		844
PRHTA (Highways revenue) (1)	454		475
PRCCDA	152		152
PRIFA	16		16
Other Public Corporations
PREPA (1)	822		848
PRASA	373		373
MFA	248		303
COFINA	—		273
U of PR	1		1
Total net exposure to Puerto Rico	$	4,270	$	4,767

____________________

(1) As of the date of this filing, the Oversight Board has certified a filing under Title III of PROMESA for these exposures.

The following table shows the scheduled amortization of the insured general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations. The Company guarantees payments of interest and principal when those amounts are scheduled to be paid and cannot be required to pay on an accelerated basis. In the event that obligors default on their obligations, the Company would only be required to pay the shortfall between the principal and interest due in any given period and the amount paid by the obligors.

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Amortization Schedule of Puerto Rico Net Par Outstanding

and Net Debt Service Outstanding

As of September 30, 2019

	Scheduled Net Par Amortization		Scheduled Net Debt Service Amortization
	(in millions)
2019 (October 1 - December 31)	$	—	$	3
2020 (January 1 - March 31)	—		106
2020 (April 1 - June 30)	—		3
2020 (July 1 - September 30)	286		392
2020 (October 1 - December 31)	—		3
Subtotal 2020	286		504
2021	149		351
2022	139		332
2023	205		392
2024-2028	1,213		1,977
2029-2033	884		1,392
2034-2038	957		1,184
2039-2043	176		259
2044-2047	261		300
Total	$	4,270	$	6,694

Exposure to the U.S. Virgin Islands

As of September 30, 2019, the Company had $494 million insured net par outstanding to the U.S. Virgin Islands and its related authorities (USVI), of which it rated $220 million BIG. The $274 million USVI net par the Company rated investment grade primarily consisted of bonds secured by a lien on matching fund revenues related to excise taxes on products produced in the USVI and exported to the U.S., primarily rum. The $220 million BIG USVI net par consisted of (a) Public Finance Authority bonds secured by a gross receipts tax and the general obligation, full faith and credit pledge of the USVI and (b) bonds of the Virgin Islands Water and Power Authority secured by a net revenue pledge of the electric system.

Hurricane Irma caused significant damage in St. John and St. Thomas, while Hurricane Maria made landfall on St. Croix as a Category 4 hurricane on the Saffir-Simpson scale, causing loss of life and substantial damage to St. Croix’s businesses and infrastructure, including the power grid. The USVI is benefiting from the federal response to the 2017 hurricanes and has made its debt service payments to date.

Non-Financial Guaranty Insurance Exposure

The Company also provides non-financial guaranty insurance and reinsurance on transactions with similar risk profiles to its structured finance exposures written in financial guaranty form. All non-financial guaranty exposures shown in the table below are rated investment grade internally.

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Non-Financial Guaranty Exposure

	Gross Exposure				Net Exposure
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Life insurance transactions (1)	$	1,014	$	880	$	872	$	763
Aircraft residual value insurance policies	376		340		243		218

____________________

(1) The life insurance transactions net exposure is expected to increase to approximately $1.0 billion prior to September 30, 2036.

4. Expected Loss to be Paid

This note provides information regarding expected claim payments to be made under all contracts in the insured portfolio, regardless of the accounting model (insurance, derivative or VIE). The expected loss to be paid is equal to the present value of expected future cash outflows for claim and loss adjustment expenses (LAE) payments, net of inflows for expected salvage and subrogation (e.g., future payments by obligors pursuant to restructuring agreements, settlements or litigation judgments, excess spread on underlying collateral, and other estimated recoveries, including those from restructuring bonds and for breaches of representations and warranties (R&W)), using current risk-free rates.

Loss Estimation Process

The Company’s loss reserve committees estimate expected loss to be paid for all contracts by reviewing analyses that consider various scenarios with corresponding probabilities assigned to them. Depending upon the nature of the risk, the Company’s view of the potential size of any loss and the information available to the Company, that analysis may be based upon individually developed cash flow models, internal credit rating assessments, sector-driven loss severity assumptions and/or judgmental assessments. In the case of its assumed business, the Company may conduct its own analysis as just described or, depending on the Company’s view of the potential size of any loss and the information available to the Company, the Company may use loss estimates provided by ceding insurers. The Company monitors the performance of its transactions with expected losses and each quarter the Company’s loss reserve committees review and refresh their loss projection assumptions, scenarios and the probabilities they assign to those scenarios based on actual developments during the quarter and their view of future performance.

The financial guaranties issued by the Company insure the credit performance of the guaranteed obligations over an extended period of time, in some cases over 30 years, and in most circumstances the Company has no right to cancel such financial guaranties. As a result, the Company's estimate of ultimate loss on a policy is subject to significant uncertainty over the life of the insured transaction. Credit performance can be adversely affected by economic, fiscal and financial market variability over the life of most contracts.

The Company does not use traditional actuarial approaches to determine its estimates of expected losses. The determination of expected loss to be paid is an inherently subjective process involving numerous estimates, assumptions and judgments by management, using both internal and external data sources with regard to frequency, severity of loss, economic projections, governmental actions, negotiations and other factors that affect credit performance. These estimates, assumptions and judgments, and the factors on which they are based, may change materially over a reporting period, and as a result the Company’s loss estimates may change materially over that same period.

In some instances, the terms of the Company's policy give it the option to pay principal losses that have been recognized in the transaction but which it is not yet required to pay, thereby reducing the amount of guaranteed interest due in the future. The Company has sometimes exercised this option, which uses cash but reduces projected future losses.

The following tables present a roll forward of net expected loss to be paid for all contracts. The Company used risk-free rates for U.S. dollar denominated obligations that ranged from 0.00% to 2.20% with a weighted average of 1.79% as of September 30, 2019 and 0.00% to 3.06% with a weighted average of 2.74% as of December 31, 2018. Expected losses to be paid for transactions denominated in currencies other than the U.S. dollar represented approximately 4.0% and 2.7% of the total as of September 30, 2019 and December 31, 2018, respectively.

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Net Expected Loss to be Paid

Roll Forward

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Net expected loss to be paid, beginning of period	$	960		$	1,432		$	1,183		$	1,303
Net expected loss to be paid on the Syncora Guarantee Inc. (SGI) portfolio as of June 1, 2018 (see Note 11)	—			—			—			131
Economic loss development (benefit) due to:
Accretion of discount	5			10			19			27
Changes in discount rates	1			(9		)	(4		)	(15		)
Changes in timing and assumptions	19			(1		)	(29		)	(17		)
Total economic loss development (benefit)	25			—			(14		)	(5		)
Net (paid) recovered losses	(267		)	(241		)	(451		)	(238		)
Net expected loss to be paid, end of period	$	718		$	1,191		$	718		$	1,191

Net Expected Loss to be Paid

Roll Forward by Sector

Third Quarter 2019

	Net Expected Loss to be Paid (Recovered) as of June 30, 2019		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2019
	(in millions)
Public finance:
U.S. public finance	$	749	$	50		$	(279	)	$	520
Non-U.S. public finance	23		5			—			28
Public finance	772		55			(279		)	548
Structured finance:
U.S. RMBS	162		(40		)	13			135
Other structured finance	26		10			(1		)	35
Structured finance	188		(30		)	12			170
Total	$	960	$	25		$	(267	)	$	718

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Net Expected Loss to be Paid

Roll Forward by Sector

Third Quarter 2018

	Net Expected Loss to be Paid (Recovered) as of June 30, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2018
	(in millions)
Public finance:
U.S. public finance	$	1,041	$	42		$	(251	)	$	832
Non-U.S. public finance	41		(3		)	—			38
Public finance	1,082		39			(251		)	870
Structured finance:
U.S. RMBS	326		(40		)	17			303
Other structured finance	24		1			(7		)	18
Structured finance	350		(39		)	10			321
Total	$	1,432	$	—		$	(241	)	$	1,191

Net Expected Loss to be Paid

Roll Forward by Sector

Nine Months 2019

	Net Expected Loss to be Paid (Recovered) as of December 31, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2019
	(in millions)
Public finance:
U.S. public finance	$	832	$	204		$	(516	)	$	520
Non-U.S. public finance	32		(4		)	—			28
Public finance	864		200			(516		)	548
Structured finance:
U.S. RMBS	293		(223		)	65			135
Other structured finance	26		9			—			35
Structured finance	319		(214		)	65			170
Total	$	1,183	$	(14	)	$	(451	)	$	718

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Net Expected Loss to be Paid

Roll Forward by Sector

Nine Months 2018

	Net Expected Loss to be Paid (Recovered) as of December 31, 2017		Net Expected Loss to be Paid on SGI Portfolio as of June 1, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2018
	(in millions)
Public finance:
U.S. public finance	$	1,157	—		$	59		$	(384	)	$	832
Non-U.S. public finance	46		1		(9		)	—			38
Public finance	1,203		1		50			(384		)	870
Structured finance:
U.S. RMBS	73		130		(52		)	152			303
Other structured finance	27		—		(3		)	(6		)	18
Structured finance	100		130		(55		)	146			321
Total	$	1,303	$	131	$	(5	)	$	(238	)	$	1,191

____________________

(1) Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled 45 days after the end of the reporting period. Such amounts are recorded as reinsurance recoverable on paid losses in other assets. The amounts for Nine Months 2019 are net of the COFINA Exchange Senior Bonds and cash that were received pursuant to the COFINA Plan of Adjustment. See Note 3, Outstanding Exposure, for additional information.

The tables above include (1) LAE paid of $7 million and $6 million for Third Quarter 2019 and 2018, respectively, and $23 million and $17 million for Nine Months 2019 and 2018, respectively, and (2) expected LAE to be paid of $34 million as of September 30, 2019 and $31 million as of December 31, 2018.

Net Expected Loss to be Paid (Recovered) and

Net Economic Loss Development (Benefit)

By Accounting Model

	Net Expected Loss to be Paid (Recovered)						Net Economic Loss Development  (Benefit)
	As of						Third Quarter						Nine Months
	September 30, 2019			December 31, 2018			2019			2018			2019			2018
	(in millions)
Insurance	$	662		$	1,110		17			1			$	5		$	(9	)
Financial guaranty VIEs (FG VIEs) (See Note 9)	61			75			(2		)	(3		)	(26		)	(7		)
Credit derivatives (See Note 8)	(5		)	(2		)	10			2			7			11
Total	$	718		$	1,183		$	25		$	—		$	(14	)	$	(5	)

Selected U.S. Public Finance Transactions

The Company insured general obligation bonds of the Commonwealth of Puerto Rico and various obligations of its related authorities and public corporations aggregating $4.3 billion net par as of September 30, 2019, all of which was BIG. For additional information regarding the Company's Puerto Rico exposure, see "Exposure to Puerto Rico" in Note 3, Outstanding Exposure.

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As of December 31, 2018, the Company had approximately $18 million of net par exposure to bonds issued by Parkway East Public Improvement District (District), which is located in Madison County, Mississippi. The bonds were rated BIG. As part of a settlement with the County, during Third Quarter 2019 the bonds were paid off, reducing the Company's net par exposure to zero, and the Company received new bonds issued by the District, which the Company holds in its investment portfolio.

On February 25, 2015, a plan of adjustment resolving the bankruptcy filing of the City of Stockton, California under chapter 9 of the Bankruptcy Code became effective. As of September 30, 2019, the Company’s net par subject to the plan consisted of $107 million of pension obligation bonds. As part of the plan of adjustment, the City will repay any claims paid on the pension obligation bonds from certain fixed payments and certain variable payments contingent on the City’s revenue growth. 

The Company projects its total net expected loss across its troubled U.S. public finance exposures as of September 30, 2019, including those mentioned above, to be $520 million, compared with a net expected loss of $832 million as of December 31, 2018. The total net expected loss for troubled U.S. public finance exposures is net of a credit for estimated future recoveries of claims already paid. At September 30, 2019 that credit was $842 million compared with $586 million at December 31, 2018. The Company’s net expected losses incorporate management’s probability weighted estimates of possible scenarios. Each quarter, the Company may revise its scenarios, update assumptions and/or shift probability weightings of its scenarios based on public information as well as nonpublic information obtained through its surveillance and loss mitigation activities. Management assesses the possible implications of such information on each insured obligation, considering the unique characteristics of each transaction.

The economic loss development for U.S. public finance transactions was $50 million during Third Quarter 2019 and $204 million during Nine Months 2019, which was primarily attributable to Puerto Rico exposures. The loss development attributable to the Company’s Puerto Rico exposures reflects adjustments the Company made to the assumptions and weightings it uses in its scenarios based on the public information summarized under "Exposure to Puerto Rico" in Note 3, Outstanding Exposure as well as nonpublic information related to its loss mitigation activities during the periods presented.

Selected Non - U.S. Public Finance Transactions

Expected loss to be paid for non-U.S. public finance transactions was $28 million as of September 30, 2019, compared with $32 million as of December 31, 2018, primarily consisting of: (i) an obligation backed by payments from a region in Italy, and for which the Company has been paying claims because of the impact of negative Euro Interbank Offered Rate (Euribor) on the transaction, (ii) transactions with sub-sovereign exposure to various Spanish and Portuguese issuers where a Spanish and Portuguese sovereign default may cause the sub-sovereigns also to default, and (iii) an obligation backed by the availability and toll revenues of a major arterial road into a city in the U.K., which has been underperforming due to higher costs compared with expectations at underwriting.

The economic loss development for non-U.S. public finance transactions, including those mentioned above was approximately $5 million during Third Quarter 2019 due to the impact of negative European interest rates on an interest rate swap in an Italian transaction. The economic benefit was $4 million during Nine Months 2019, which was mainly attributable to the improved internal outlook of certain Spanish sovereigns and sub-sovereigns, and partially offset by the impact of negative European interest rates on an interest rate swap in an Italian transaction.

U.S. RMBS Loss Projections

The Company projects losses on its insured U.S. RMBS on a transaction-by-transaction basis by projecting the performance of the underlying pool of mortgages over time and then applying the structural features (i.e., payment priorities and tranching) of the RMBS and any expected R&W recoveries/payables to the projected performance of the collateral over time. The resulting projected claim payments or reimbursements are then discounted using risk-free rates.

As of September 30, 2019, the Company had a net R&W payable of $60 million to R&W counterparties, compared with a net R&W receivable of $5 million as of December 31, 2018. The Company’s agreements with providers of R&W generally provide for reimbursement to the Company as claim payments are made and, to the extent the Company later receives reimbursements of such claims from excess spread or other sources, for the Company to provide reimbursement to the R&W providers. When the Company projects receiving more reimbursements in the future than it projects to pay in claims on transactions covered by R&W settlement agreements, the Company will have a net R&W payable.

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The Company's RMBS loss projection methodology assumes that the housing and mortgage markets will continue improving. Each period the Company makes a judgment as to whether to change the assumptions it uses to make RMBS loss projections based on its observation during the period of the performance of its insured transactions (including early-stage delinquencies, late-stage delinquencies and loss severity) as well as the residential property market and economy in general, and, to the extent it observes changes, it makes a judgment as to whether those changes are normal fluctuations or part of a trend. The assumptions that the Company uses to project RMBS losses are shown in the sections below.

Net Economic Loss Development (Benefit)

U.S. RMBS

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
First lien U.S. RMBS	$	(27	)	(13	)	$	(77	)	$	4
Second lien U.S. RMBS	(13		)	(27	)	(146		)	(56		)

U.S. First Lien RMBS Loss Projections: Alt-A First Lien, Option ARM, Subprime and Prime

     The majority of projected losses in first lien RMBS transactions are expected to come from non-performing mortgage loans (those that are or in the past twelve months have been two or more payments behind, have been modified, are in foreclosure, or have been foreclosed upon). Changes in the amount of non-performing loans from the amount projected in the previous period are one of the primary drivers of loss development in this portfolio. In order to determine the number of defaults resulting from these delinquent and foreclosed loans, the Company applies a liquidation rate assumption to loans in each of various non-performing categories. The Company arrived at its liquidation rates based on data purchased from a third party provider and assumptions about how delays in the foreclosure process and loan modifications may ultimately affect the rate at which loans are liquidated. Each quarter the Company reviews the most recent twelve months of this data and (if necessary) adjusts its liquidation rates based on its observations. The following table shows liquidation assumptions for various non-performing categories.

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First Lien Liquidation Rates

	As of September 30, 2019	As of June 30, 2019	As of December 31, 2018
Delinquent/Modified in the Previous 12 Months
Alt-A and Prime	20%	20%	20%
Option ARM	20	20	20
Subprime	20	20	20
30 – 59 Days Delinquent
Alt-A and Prime	30	30	30
Option ARM	35	35	35
Subprime	35	40	40
60 – 89 Days Delinquent
Alt-A and Prime	40	40	40
Option ARM	45	45	45
Subprime	45	45	45
90+ Days Delinquent
Alt-A and Prime	55	50	50
Option ARM	55	55	55
Subprime	50	55	50
Bankruptcy
Alt-A and Prime	45	45	45
Option ARM	50	50	50
Subprime	40	40	40
Foreclosure
Alt-A and Prime	65	60	60
Option ARM	65	65	65
Subprime	60	60	60
Real Estate Owned
All	100	100	100

While the Company uses liquidation rates as described above to project defaults of non-performing loans (including current loans modified or delinquent within the last 12 months), it projects defaults on presently current loans by applying a conditional default rate (CDR) trend. The start of that CDR trend is based on the defaults the Company projects will emerge from currently nonperforming, recently nonperforming and modified loans. The total amount of expected defaults from the non-performing loans is translated into a constant CDR (i.e., the CDR plateau), which, if applied for each of the next 36 months, would be sufficient to produce approximately the amount of defaults that were calculated to emerge from the various delinquency categories. The CDR thus calculated individually on the delinquent collateral pool for each RMBS is then used as the starting point for the CDR curve used to project defaults of the presently performing loans.

In the most heavily weighted scenario (the base case), after the initial 36-month CDR plateau period, each transaction’s CDR is projected to improve over 12 months to an intermediate CDR (calculated as 20% of its CDR plateau); that intermediate CDR is held constant for 36 months and then trails off in steps to a final CDR of 5% of the CDR plateau. In the base case, the Company assumes the final CDR will be reached 3.75 years after the initial 36-month CDR plateau period. Under the Company’s methodology, defaults projected to occur in the first 36 months represent defaults that can be attributed to loans that were modified or delinquent in the last 12 months or that are currently delinquent or in foreclosure, while the defaults projected to occur using the projected CDR trend after the first 36-month period represent defaults attributable to borrowers that are currently performing or are projected to reperform.

     Another important driver of loss projections is loss severity, which is the amount of loss the transaction incurs on a loan after the application of net proceeds from the disposal of the underlying property. Loss severities experienced in first lien

30

transactions had reached historically high levels, and the Company is assuming in the base case that the still elevated levels generally will continue for another 18 months. The Company determines its initial loss severity based on actual recent experience. Each quarter the Company reviews available data and (if necessary) adjusts its severities based on its observations. The Company then assumes that loss severities begin returning to levels consistent with underwriting assumptions beginning after the initial 18-month period, declining to 40% in the base case over 2.5 years.

The following table shows the range as well as the average, weighted by outstanding net insured par, for key assumptions used in the calculation of expected loss to be paid for individual transactions for vintage 2004 - 2008 first lien U.S. RMBS.

Key Assumptions in Base Case Expected Loss Estimates

First Lien RMBS

	As of September 30, 2019					As of June 30, 2019					As of December 31, 2018
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Alt-A First Lien
Plateau CDR	0.5	%	-	10.5%	4.1%	0.0	%	-	9.5%	4.0%	1.2	%	-	11.4%	4.6%
Final CDR	0.0	%	-	0.5%	0.2%	0.0	%	-	0.5%	0.2%	0.1	%	-	0.6%	0.2%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	70%					70%					70%
2007+	70%					70%					70%
Option ARM
Plateau CDR	2.0	%	-	8.4%	5.6%	2.4	%	-	7.9%	5.5%	1.8	%	-	8.3%	5.6%
Final CDR	0.1	%	-	0.4%	0.3%	0.1	%	-	0.4%	0.3%	0.1	%	-	0.4%	0.3%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	60%					60%					60%
2007+	70%					70%					70%
Subprime
Plateau CDR	1.5	%	-	20.2%	5.6%	2.5	%	-	22.8%	6.0%	1.8	%	-	23.2%	6.2%
Final CDR	0.1	%	-	1.0%	0.3%	0.1	%	-	1.1%	0.3%	0.1	%	-	1.2%	0.3%
Initial loss severity:
2005 and prior	80%					80%					80%
2006	75%					75%					75%
2007+	85%					95%					95%

The rate at which the principal amount of loans is voluntarily prepaid may impact both the amount of losses projected (since that amount is a function of the CDR, the loss severity and the loan balance over time) as well as the amount of excess spread (the amount by which the interest paid by the borrowers on the underlying loan exceeds the amount of interest owed on the insured obligations). The assumption for the voluntary conditional prepayment rate (CPR) follows a similar pattern to that of the CDR. The current level of voluntary prepayments is assumed to continue for the plateau period before gradually increasing over 12 months to the final CPR, which is assumed to be 15% in the base case. For transactions where the initial CPR is higher than the final CPR, the initial CPR is held constant and the final CPR is not used. These CPR assumptions are the same as those the Company used for June 30, 2019 and December 31, 2018.

In estimating expected losses, the Company modeled and probability weighted sensitivities for first lien transactions by varying its assumptions of how fast a recovery is expected to occur. One of the variables used to model sensitivities was how quickly the CDR returned to its modeled equilibrium, which was defined as 5% of the initial CDR. The Company also

31

stressed CPR and the speed of recovery of loss severity rates. The Company probability weighted a total of five scenarios as of September 30, 2019 and December 31, 2018.

Total expected loss to be paid on all first lien U.S. RMBS was $164 million and $243 million as of September 30, 2019 and December 31, 2018, respectively. The $27 million economic benefit in Third Quarter 2019 and $77 million economic benefit in Nine Months 2019 for first lien U.S. RMBS was primarily attributable to higher excess spread on certain transactions supported by large portions of fixed rate assets (either originally fixed or modified to be fixed) and with insured floating rate debt linked to London Interbank Offered Rate (LIBOR), which decreased in Third Quarter 2019 and Nine Months 2019. The Company used a similar approach to establish its pessimistic and optimistic scenarios as of September 30, 2019 as it used as of December 31, 2018, increasing and decreasing the periods of stress from those used in the base case. LIBOR may be discontinued, and it is not yet clear how this will impact the calculation of the various interest rates in this portfolio referencing LIBOR.

In the Company's most stressful scenario where loss severities were assumed to rise and then recover over nine years and the initial ramp-down of the CDR was assumed to occur over 15 months, expected loss to be paid would increase from current projections by approximately $49 million for all first lien U.S. RMBS transactions.

In the Company's least stressful scenario where the CDR plateau was six months shorter (30 months, effectively assuming that liquidation rates would improve) and the CDR recovery was more pronounced (including an initial ramp-down of the CDR over nine months), expected loss to be paid would decrease from current projections by approximately $44 million for all first lien U.S. RMBS transactions.

U.S. Second Lien RMBS Loss Projections

Second lien RMBS transactions include both home equity lines of credit (HELOC) and closed end second lien mortgages. The Company believes the primary variable affecting its expected losses in second lien RMBS transactions is the amount and timing of future losses in the collateral pool supporting the transactions. Expected losses are also a function of the structure of the transaction, the CPR of the collateral, the interest rate environment and assumptions about loss severity.

In second lien transactions, the projection of near-term defaults from currently delinquent loans is relatively straightforward because loans in second lien transactions are generally “charged off” (treated as defaulted) by the securitization’s servicer once the loan is 180 days past due. The Company estimates the amount of loans that will default over the next six months by calculating current representative liquidation rates. Similar to first liens, the Company then calculates a CDR for six months, which is the period over which the currently delinquent collateral is expected to be liquidated. That CDR is then used as the basis for the plateau CDR period that follows the embedded plateau losses.

For the base case scenario, the CDR (the plateau CDR) was held constant for six months. Once the plateau period has ended, the CDR is assumed to gradually trend down in uniform increments to its final long-term steady state CDR. (The long-term steady state CDR is calculated as the constant CDR that would have yielded the amount of losses originally expected at underwriting.) In the base case scenario, the time over which the CDR trends down to its final CDR is 28 months. Therefore, the total stress period for second lien transactions is 34 months, representing six months of delinquent loan liquidations, followed by 28 months of decrease to the steady state CDR, the same as of December 31, 2018.

HELOC loans generally permit the borrower to pay only interest for an initial period (often ten years) and, after that period, require the borrower to make both the monthly interest payment and a monthly principal payment. This causes the borrower's total monthly payment to increase, sometimes substantially, at the end of the initial interest-only period. In prior periods, as the HELOC loans underlying the Company's insured HELOC transactions reached their principal amortization period, the Company incorporated an assumption that a percentage of loans reaching their principal amortization periods would default around the time of the payment increase.

The HELOC loans underlying the Company's insured HELOC transactions are now past their original interest-only reset date, although a significant number of HELOC loans were modified to extend the original interest-only period for another five years. As a result, the Company does not apply a CDR increase when such loans reach their principal amortization period. In addition, based on the average performance history, the Company applies a CDR floor of 2.5% for the future steady state CDR on all its HELOC transactions.

When a second lien loan defaults, there is generally a low recovery. The Company assumed, as of September 30, 2019 and December 31, 2018, that it will generally recover 2% of future defaulting collateral at the time of charge-off, with additional amounts of post charge-off recoveries projected to come in over time. A second lien on the borrower’s home may be

32

retained in the Company's second lien transactions after the loan is charged off and the loss applied to the transaction, particularly in cases where the holder of the first lien has not foreclosed. If the second lien is retained and the value of the home increases, the servicer may be able to use the second lien to increase recoveries, either by arranging for the borrower to resume payments or by realizing value upon the sale of the underlying real estate. The Company evaluates its assumptions periodically based on actual recoveries of charged-off loans observed from period to period. In instances where the Company is able to obtain information on the lien status of charged-off loans, it assumes there will be a certain level of future recoveries of the balance of the charged-off loans where the second lien is still intact. The Company projected future recoveries on these charged off loans of 20% as of September 30, 2019 and 10% as of December 31, 2018, with such recoveries to be received evenly over the next five years. The increase in recovery assumptions is attributable to the higher actual recovery rates observed in certain transactions during the year. Increasing the recovery rate to 30% would result in an economic benefit of $61 million, while decreasing the recovery rate back to 10% would result in an economic loss of $61 million. 

The rate at which the principal amount of loans is prepaid may impact both the amount of losses projected as well as the amount of excess spread. In the base case, an average CPR (based on experience of the past year) is assumed to continue until the end of the plateau before gradually increasing to the final CPR over the same period the CDR decreases. The final CPR is assumed to be 15% for second lien transactions (in the base case), which is lower than the historical average but reflects the Company’s continued uncertainty about the projected performance of the borrowers in these transactions. For transactions where the initial CPR is higher than the final CPR, the initial CPR is held constant and the final CPR is not used. This pattern is consistent with how the Company modeled the CPR as of June 30, 2019 and December 31, 2018. To the extent that prepayments differ from projected levels it could materially change the Company’s projected excess spread and losses.

In estimating expected losses, the Company modeled and probability weighted five scenarios, each with a different CDR curve applicable to the period preceding the return to the long-term steady state CDR. The Company believes that the level of the elevated CDR and the length of time it will persist and the ultimate prepayment rate are the primary drivers behind the amount of losses the collateral will likely suffer.

The Company continues to evaluate the assumptions affecting its modeling results. The Company believes the most important driver of its projected second lien RMBS losses is the performance of its HELOC transactions. Total expected recovery on all second lien U.S. RMBS was $29 million as of September 30, 2019 and the expected loss to be paid was $50 million as of December 31, 2018. The economic benefit for second lien U.S. RMBS was $13 million in Third Quarter 2019, primarily attributable to improved performance of underlying collateral, and $146 million in Nine Months 2019, primarily attributable to higher projected recoveries for previously charged-off loans and improved performance of underlying collateral.

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The following table shows the range as well as the average, weighted by net par outstanding, for key assumptions used in the calculation of expected loss to be paid for individual transactions for vintage 2004 - 2008 HELOCs.

Key Assumptions in Base Case Expected Loss Estimates

HELOCs

	As of September 30, 2019					As of June 30, 2019					As of December 31, 2018
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Plateau CDR	4.8	%	-	20.7%	9.1%	4.6	%	-	23.5%	9.2%	4.6	%	-	26.8%	10.1%
Final CDR trended down to	2.5	%	-	3.2%	2.5%	2.5	%	-	3.2%	2.5%	2.5	%	-	3.2%	2.5%
Liquidation rates:
Delinquent/Modified in the Previous 12 Months	20%					20%					20%
30 – 59 Days Delinquent	35					30					35
60 – 89 Days Delinquent	45					45					50
90+ Days Delinquent	65					65					70
Bankruptcy	55					55					55
Foreclosure	55					60					65
Real Estate Owned	100					100					100
Loss severity (1)	98%					98%					98%

___________________

(1)    Loss severities on future defaults.

The Company’s base case assumed a six month CDR plateau and a 28 month ramp-down (for a total stress period of 34 months). The Company also modeled a scenario with a longer period of elevated defaults and another with a shorter period of elevated defaults. In the Company's most stressful scenario, increasing the CDR plateau to eight months and increasing the ramp-down by three months to 31 months (for a total stress period of 39 months) would increase the expected loss by approximately $6 million for HELOC transactions. On the other hand, in the Company's least stressful scenario, reducing the CDR plateau to four months and decreasing the length of the CDR ramp-down to 25 months (for a total stress period of 29 months), and lowering the ultimate prepayment rate to 10% would decrease the expected loss by approximately $7 million for HELOC transactions.

Other Structured Finance

The Company projected that its total net expected loss across its troubled other structured finance exposures as of September 30, 2019 was $35 million and is primarily attributable to $87 million in BIG net par of student loan securitizations issued by private issuers that are classified as structured finance. In general, the projected losses of these transactions are due to: (i) the poor credit performance of private student loan collateral and high loss severities, or (ii) high interest rates on auction rate securities with respect to which the auctions have failed.

The Company also had exposure to troubled life insurance transactions. As of September 30, 2019, the Company's BIG net par in these transactions was $40 million, which was lower than the $85 million as of December 31, 2018 because of the settlement of a transaction.

The economic loss development during Third Quarter 2019 and Nine Months 2019 was $10 million and $9 million, which was primarily attributable to higher expected LAE related to certain exposures.

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Recovery Litigation

In the ordinary course of their respective businesses, certain of AGL's subsidiaries assert claims in legal proceedings against third parties to recover losses paid in prior periods or prevent losses in the future.

Public Finance Transactions

The Company has asserted claims in a number of legal proceedings in connection with its exposure to Puerto Rico. See Note 3, Outstanding Exposure, for a discussion of the Company's exposure to Puerto Rico and related recovery litigation being pursued by the Company.

RMBS Transactions

On November 26, 2012, CIFG Assurance North America Inc. (CIFGNA) filed a complaint in the Supreme Court of the State of New York against JP Morgan Securities LLC for material misrepresentation in the inducement of insurance and common law fraud, alleging that JP Morgan Securities LLC fraudulently induced CIFGNA to insure $400 million of securities issued by ACA ABS CDO 2006-2 Ltd. and $325 million of securities issued by Libertas Preferred Funding II, Ltd. On June 26, 2015, the court dismissed with prejudice CIFGNA’s material misrepresentation in the inducement of insurance claim and dismissed without prejudice CIFGNA’s common law fraud claim. On September 24, 2015, the court denied CIFGNA’s motion to amend but allowed CIFGNA to re-plead a cause of action for common law fraud. On November 20, 2015, CIFGNA filed a motion for leave to amend its complaint to re-plead common law fraud. On April 29, 2016, CIFGNA filed an appeal to reverse the court’s decision dismissing CIFGNA’s material misrepresentation in the inducement of insurance claim. On November 29, 2016, the Appellate Division of the Supreme Court of the State of New York ruled that the court’s decision dismissing with prejudice CIFGNA’s material misrepresentation in the inducement of insurance claim should be modified to grant CIFGNA leave to re-plead such claim. On February 27, 2017, AGC (as successor to CIFGNA) filed an amended complaint which included a claim for material misrepresentation in the inducement of insurance. On July 31, 2019, the parties entered into a confidential settlement and, on August 12, 2019, agreed to dismiss, with prejudice, the action and all claims.

5. Contracts Accounted for as Insurance

Premiums

The portfolio of outstanding exposures discussed in Note 3, Outstanding Exposure, and Note 4, Expected Loss to be Paid, includes contracts that are accounted for as insurance contracts, derivatives, and consolidated FG VIEs. Amounts presented in this note relate only to contracts accounted for as insurance. See Note 8, Contracts Accounted for as Credit Derivatives for amounts that relate to CDS and Note 9, Variable Interest Entities for amounts that are accounted for as consolidated FG VIEs.

Net Earned Premiums

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
Financial guaranty:
Scheduled net earned premiums	$	81	$	95	$	253	$	275
Accelerations from refundings and terminations	37		40		83		131
Accretion of discount on net premiums receivable	4		6		13		14
Financial guaranty insurance net earned premiums	122		141		349		420
Non-financial guaranty net earned premiums	1		1		4		3
Net earned premiums (1)	$	123	$	142	$	353	$	423

 ___________________

(1) Excludes $2 million and $3 million for Third Quarter 2019 and 2018, respectively, and $16 million and $9 million for Nine Months 2019 and 2018, respectively, related to consolidated FG VIEs.

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Gross Premium Receivable,

Net of Commissions on Assumed Business

Roll Forward 

	Nine Months
	2019			2018
	(in millions)
Beginning of year	$	904		$	915
Less: Non-financial guaranty insurance premium receivable	1			1
Financial guaranty insurance premiums receivable	903			914
Gross written premiums on new business, net of commissions (1)	164			508
Gross premiums received, net of commissions	(198		)	(477		)
Adjustments:
Changes in the expected term	(10		)	(2		)
Accretion of discount, net of commissions on assumed business	8			5
Foreign exchange translation and remeasurement (2)	(24		)	(23		)
Cancellation of assumed reinsurance	—			(10		)
Financial guaranty insurance premium receivable (3)	843			915
Non-financial guaranty insurance premium receivable	1			1
September 30,	$	844		$	916

____________________

(1) For transactions where one of the Company's financial guaranty contracts is replaced by another of the Company's insurance subsidiary's contracts, gross written premium in this table represents only the incremental amount in excess of the original gross written premiums. Nine Months 2018 included $330 million of gross written premiums assumed from SGI on June 1, 2018, when the Company closed a reinsurance transaction with SGI (SGI Transaction). See Note 11, Reinsurance.

(2) Includes foreign exchange loss on remeasurement recorded in the condensed consolidated statements of operations of $24 million in Nine Months 2019 and $21 million in Nine Months 2018. The remaining foreign exchange translation in Nine Months 2018 was recorded in other comprehensive income (OCI) prior to the combination of the European subsidiaries.

(3) Excludes $7 million and $9 million as of September 30, 2019 and September 30, 2018, respectively, related to consolidated FG VIEs.

Approximately 73% and 72% of installment premiums at September 30, 2019 and December 31, 2018, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro.

The timing and cumulative amount of actual collections may differ from those of expected collections in the table below due to factors such as foreign exchange rate fluctuations, counterparty collectability issues, accelerations, commutations, changes in expected lives and new business.

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Expected Collections of

Financial Guaranty Insurance Gross Premiums Receivable,

Net of Commissions on Assumed Business

(Undiscounted)

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	29
2020	102
2021	77
2022	78
2023	65
2024-2028	275
2029-2033	182
2034-2038	97
After 2038	104
Total (1)	$	1,009

 ____________________

(1) Excludes expected cash collections on consolidated FG VIEs of $9 million.

The timing and cumulative amount of actual net earned premiums may differ from those of expected net earned premiums in the table below due to factors such as accelerations, commutations, changes in expected lives and new business.

Scheduled Financial Guaranty Insurance Net Earned Premiums

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	79
2020	301
2021	275
2022	252
2023	231
2024-2028	908
2029-2033	620
2034-2038	356
After 2038	319
Net deferred premium revenue (1)	3,341
Future accretion	165
Total future net earned premiums	$	3,506

 ____________________

(1) Excludes net earned premiums on consolidated FG VIEs of $48 million.

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Selected Information for Financial Guaranty Insurance

Policies with Premiums Paid in Installments

	As of September 30, 2019			As of December 31, 2018
	(dollars in millions)
Premiums receivable, net of commission payable	$	843		$	903
Gross deferred premium revenue	1,237			1,313
Weighted-average risk-free rate used to discount premiums	2.2		%	2.3		%
Weighted-average period of premiums receivable (in years)	9.1			9.1

Financial Guaranty Insurance Losses

The following table provides information on net reserve (salvage), which includes loss and LAE reserves and salvage and subrogation recoverable, both net of reinsurance. To discount loss reserves, the Company used risk-free rates for U.S. dollar denominated financial guaranty insurance obligations that ranged from 0.00% to 2.20% with a weighted average of 1.80% as of September 30, 2019 and 0.00% to 3.06% with a weighted average of 2.74% as of December 31, 2018.

Net Reserve (Salvage) 

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Public finance:
U.S. public finance	$	326		$	612
Non-U.S. public finance	5			14
Public finance	331			626
Structured finance:
U.S. RMBS (1)	(97		)	21
Other structured finance	38			30
Structured finance	(59		)	51
Subtotal	272			677
Other payable (recoverable)	—			(3		)
Total	$	272		$	674

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(1) Excludes net reserves of $36 million and $47 million as of September 30, 2019 and December 31, 2018, respectively, related to consolidated FG VIEs.

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Components of Net Reserves (Salvage)

 

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Loss and LAE reserve	$	1,007		$	1,177
Reinsurance recoverable on unpaid losses (1)	(36		)	(34		)
Loss and LAE reserve, net	971			1,143
Salvage and subrogation recoverable	(725		)	(490		)
Salvage and subrogation reinsurance payable (2)	26			24
Other payable (recoverable) (1)	—			(3		)
Salvage and subrogation recoverable, net, and other recoverable	(699		)	(469		)
Net reserves (salvage)	$	272		$	674

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(1) Recorded as a component of other assets in the condensed consolidated balance sheets.

(2) Recorded as a component of other liabilities in the condensed consolidated balance sheets.

The table below provides a reconciliation of net expected loss to be paid to net expected loss to be expensed. Expected loss to be paid differs from expected loss to be expensed due to: (i) the contra-paid which represents the claim payments made and recoveries received that have not yet been recognized in the statement of operations, (ii) salvage and subrogation recoverable for transactions that are in a net recovery position where the Company has not yet received recoveries on claims previously paid (and therefore recognized in income but not yet received), and (iii) loss reserves that have already been established (and therefore expensed but not yet paid).

Reconciliation of Net Expected Loss to be Paid and

Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts

	As of September 30, 2019
	(in millions)
Net expected loss to be paid - financial guaranty insurance	$	661
Contra-paid, net	58
Salvage and subrogation recoverable, net, and other recoverable	699
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(970		)
Net expected loss to be expensed (present value) (1)	$	448

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(1)    Excludes $34 million as of September 30, 2019, related to consolidated FG VIEs.

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The following table provides a schedule of the expected timing of net expected losses to be expensed. The amount and timing of actual loss and LAE may differ from the estimates shown below due to factors such as accelerations, commutations, changes in expected lives and updates to loss estimates. This table excludes amounts related to FG VIEs, which are eliminated in consolidation.

Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts 

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	9
2020	37
2021	36
2022	35
2023	31
2024-2028	147
2029-2033	99
2034-2038	45
After 2038	9
Net expected loss to be expensed	448
Future accretion	30
Total expected future loss and LAE	$	478

 

The following table presents the loss and LAE recorded in the condensed consolidated statements of operations by sector for insurance contracts. Amounts presented are net of reinsurance.

Loss and LAE

Reported on the

Condensed Consolidated Statements of Operations

  

	Loss (Benefit)
	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Public finance:
U.S. public finance	$	64		$	42		$	228		$	76
Non-U.S. public finance	1			(3		)	(7		)	(5		)
Public finance	65			39			221			71
Structured finance:
U.S. RMBS (1)	(35		)	(21		)	(150		)	(17		)
Other structured finance	—			(1		)	4			(11		)
Structured finance	(35		)	(22		)	(146		)	(28		)
Loss and LAE	$	30		$	17		$	75		$	43

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(1) Excludes a benefit of $3 million and $3 million for Third Quarter 2019 and 2018, respectively, and a benefit of $18 million and a loss of $0 million for Nine Months 2019 and 2018 respectively, related to consolidated FG VIEs.

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The following tables provide information on financial guaranty insurance contracts categorized as BIG.

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of September 30, 2019

	BIG  Categories
	BIG 1						BIG 2					BIG 3						Total BIG, Net			Effect of Consolidating FG VIEs			Total
	Gross			Ceded			Gross			Ceded		Gross			Ceded
	(dollars in millions)
Number of risks (1)	119			(6		)	26			—		134			(7		)	279			—			279
Remaining weighted-average contract period (in years)	8.2			5.4			17.1			—		9.9			8.5			9.9			—			9.9
Outstanding exposure:
Principal	$	2,596		$	(53	)	$	547		$	—	$	5,463		$	(170	)	$	8,383		$	—		$	8,383
Interest	1,192			(16		)	478			—		2,638			(72		)	4,220			—			4,220
Total (2)	$	3,788		$	(69	)	$	1,025		$	—	$	8,101		$	(242	)	$	12,603		$	—		$	12,603
Expected cash outflows (inflows)	$	110		$	(3	)	$	124		$	—	$	3,550		$	(118	)	$	3,663		$	(267	)	$	3,396
Potential recoveries (3)	(567		)	21			(51		)	—		(2,393		)	95			(2,895		)	190			(2,705		)
Subtotal	(457		)	18			73			—		1,157			(23		)	768			(77		)	691
Discount	69			(4		)	(13		)	—		(92		)	(6		)	(46		)	16			(30		)
Present value of expected cash flows	$	(388	)	$	14		$	60		$	—	$	1,065		$	(29	)	$	722		$	(61	)	$	661
Deferred premium revenue	$	147		$	(1	)	$	25		$	—	$	505		$	(5	)	$	671		$	(49	)	$	622
Reserves (salvage)	$	(418	)	$	15		$	41		$	—	$	694		$	(25	)	$	307		$	(36	)	$	271

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Financial Guaranty Insurance

BIG Transaction Loss Summary

As of December 31, 2018

	BIG Categories
	BIG 1						BIG 2						BIG 3						Total BIG, Net			Effect of Consolidating FG VIEs			Total
	Gross			Ceded			Gross			Ceded			Gross			Ceded
	(dollars in millions)
Number of risks (1)	128			(8		)	39			(1		)	145			(7		)	312			—			312
Remaining weighted-average contract period (in years)	7.9			6.5			13.2			2.1			10.1			9.1			9.8			—			9.8
Outstanding exposure:
Principal	$	3,052		$	(71	)	$	938		$	(6	)	$	6,249		$	(159	)	$	10,003		$	—		$	10,003
Interest	1,319			(29		)	592			(1		)	3,140			(72		)	4,949			—			4,949
Total (2)	$	4,371		$	(100	)	$	1,530		$	(7	)	$	9,389		$	(231	)	$	14,952		$	—		$	14,952
Expected cash outflows (inflows)	$	98		$	(5	)	$	264		$	(1	)	$	4,029		$	(80	)	$	4,305		$	(290	)	$	4,015
Potential recoveries (3)	(465		)	23			(81		)	—			(2,542		)	55			(3,010		)	192			(2,818		)
Subtotal	(367		)	18			183			(1		)	1,487			(25		)	1,295			(98		)	1,197
Discount	83			(5		)	(53		)	—			(134		)	(2		)	(111		)	23			(88		)
Present value of expected cash flows	$	(284	)	$	13		$	130		$	(1	)	$	1,353		$	(27	)	$	1,184		$	(75	)	$	1,109
Deferred premium revenue	$	125		$	(4	)	$	151		$	—		$	518		$	(2	)	$	788		$	(64	)	$	724
Reserves (salvage)	$	(311	)	$	15		$	48		$	(1	)	$	993		$	(24	)	$	720		$	(47	)	$	673

____________________

(1) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. The ceded number of risks represents the number of risks for which the Company ceded a portion of its exposure.

(2) Includes amounts related to FG VIEs.

(3) Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlement or litigation judgments, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past.

Ratings Impact on Financial Guaranty Business

A downgrade of one of AGL’s insurance subsidiaries may result in increased claims under financial guaranties issued by the Company if counterparties exercise contractual rights triggered by the downgrade against insured obligors, and the insured obligors are unable to pay. See Part II, Item 8, Financial Statements and Supplementary Data, Note 6, Contracts Accounted for as Insurance, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

6. Fair Value Measurement

The Company carries a 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

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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 Nine Months 2019, 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 methods for calculating fair value produce a fair value that may not be indicative of net realizable value or reflective of future fair values. The use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a 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 as follows, with Level 1 being the highest and Level 3 the lowest. An asset's or liability’s categorization 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 from Level 2 into Level 3 during Nine Months 2019. There were no other transfers into or from Level 3 during the periods presented.

Carried at Fair Value

Fixed-Maturity Securities and Short-Term Investments

The fair value of bonds in the investment portfolio 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 investments is more subjective when markets are less liquid due to the lack of market based inputs.

Short-term investments that are traded in active markets are classified within Level 1 in the fair value hierarchy and their value is based on quoted market prices. Securities such as discount notes are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their cost approximates fair value.

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As of September 30, 2019, the Company used models to price 133 securities, including securities that were purchased or obtained for loss mitigation or other risk management purposes, with a Level 3 fair value of $1,135 million. Most Level 3 securities were priced with the assistance of an independent third party. 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.

Other Assets

Committed Capital Securities (CCS)

Each of AGC and AGM have entered into put agreements with four separate custodial trusts allowing each of AGC and AGM, respectively, 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. Fair value losses on CCS recorded in other income were $14 million and $4 million in Third Quarter 2019 and Nine Months 2019, respectively, and fair value losses were $1 million and $3 million in Third Quarter 2018 and Nine Months 2018, respectively.

The fair value of CCS 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 recorded in other income in the condensed consolidated statement of operations. The estimated current cost of the Company’s CCS is based on several factors, including AGM's and AGC's CDS spreads, LIBOR curve projections, 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 in the fair value hierarchy.

Supplemental Executive Retirement Plan (SERP)

The fair value of the Company's various SERP assets are based on either (i) the observable published daily values of the underlying mutual fund included in the plans (Level 1) or (ii) the net asset value of the funds if a published daily value is not available (Level 2). The net asset value's are based on observable information. Change in fair value of SERP assets is recorded in other operating expenses in the condensed consolidated statement of operations.

Contracts Accounted for as Credit Derivatives

The Company’s credit derivatives primarily consist of insured CDS contracts, and also include interest rate swaps that qualify as derivatives under GAAP, which requires fair value measurement with changes recorded in the statement of operations. The Company did not enter into CDS 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 are generally terminated for an amount that approximates 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. Management has tracked the historical pricing of the Company’s

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transactions to establish historical price points in the hypothetical market that are used in the fair value calculation. 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 or pay and the estimated present value of premiums that a financial guarantor of comparable credit-worthiness would hypothetically charge or pay 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 September 30, 2019 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 establishment 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 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.

With respect to CDS transactions for which there is an expected claim payment within the next twelve months, the allocation of gross spread reflects a higher allocation to the cost of credit rather than the bank profit component. It is assumed that a bank would be willing to accept a lower profit on distressed transactions in order to remove these transactions from its financial statements.

Market sources determine credit spreads by reviewing new issuance pricing for specific asset classes and receiving price quotes from their trading desks for the specific asset in question. Management validates these quotes by cross-referencing quotes received from one market source against quotes received from another market source to ensure reasonableness. In addition, the Company compares the relative change in price quotes received from one quarter to another, with the relative change experienced by published market indices for a specific asset class. Collateral specific spreads obtained from third-party, independent market sources are un-published spread quotes from market participants or market traders who are not trustees. Management obtains this information as the result of direct communication with these sources as part of the valuation process. The following spread hierarchy is utilized in determining which source of gross spread to use.

• 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 1.50% to 2.13% at September 30, 2019 and 2.47% to 2.89% at December 31, 2018.

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. For credit spreads on the Company’s name the Company obtains the quoted price of CDS

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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. 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.

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 mitigating the amount of unrealized gains that are recognized on certain CDS contracts. Given the current market conditions and the Company’s own credit spreads, approximately 17%, based on fair value, of the Company's CDS contracts were fair valued using this minimum premium as of December 31, 2018. As of September 30, 2019, the corresponding number was de minimis. 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 previously 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 less 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 its CDS contracts and taking the present value of such amounts discounted at the LIBOR 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.

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• 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.

Fair Value Option on FG VIEs’ Assets and Liabilities

The Company elected the fair value option for all the FG VIEs’ assets and liabilities and classifies them as Level 3 in the fair value hierarchy. The prices are generally determined with the assistance of an independent third party, based on a discounted cash flow approach. The net change in the fair value of consolidated FG VIEs’ assets and liabilities is recorded in "fair value gains (losses) on FG VIEs" in the consolidated statements of operations, except for change in fair value of FG VIEs’ liabilities with recourse caused by changes in instrument-specific credit risk (ISCR) which is separately presented in OCI. Interest income and interest expense are derived from the trustee reports and also included in "fair value gains (losses) on FG VIEs." The FG VIEs issued securities collateralized by first lien and second lien RMBS as well as loans and receivables.

The fair value of the Company’s 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 house price depreciation/appreciation rates based on macroeconomic forecasts. Significant changes to some of these inputs could have materially changed the market value of the FG VIEs’ assets and the implied collateral losses within the transaction. 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 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 to price the FG VIEs’ liabilities used, where appropriate, the same inputs used in determining fair value of FG VIEs’ assets and, for those liabilities insured by the Company, the benefit of the Company's insurance policy guaranteeing the timely payment of principal and interest, taking into account the Company's own credit risk.

Significant changes to any of the inputs described above could have materially changed the timing of expected losses within the 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 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.

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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 September 30, 2019

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed-maturity securities
Obligations of state and political subdivisions	$	4,463	$	—	$	4,354	$	109
U.S. government and agencies	155		—		155		—
Corporate securities	2,339		—		2,293		46
Mortgage-backed securities:
RMBS	877		—		561		316
Commercial mortgage-backed securities (CMBS)	469		—		469		—
Asset-backed securities	775		—		111		664
Non-U.S. government securities	199		—		199		—
Total fixed-maturity securities	9,277		—		8,142		1,135
Short-term investments	1,142		888		254		—
Other invested assets (1)	6		—		—		6
FG VIEs’ assets, at fair value	469		—		—		469
Other assets	148		30		42		76
Total assets carried at fair value	$	11,042	$	918	$	8,438	$	1,686
Liabilities:
Credit derivative liabilities	$	214	$	—	$	—	$	214
FG VIEs’ liabilities with recourse, at fair value	388		—		—		388
FG VIEs’ liabilities without recourse, at fair value	105		—		—		105
Total liabilities carried at fair value	$	707	$	—	$	—	$	707

48

Fair Value Hierarchy of Financial Instruments Carried at Fair Value

As of December 31, 2018

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed-maturity securities
Obligations of state and political subdivisions	$	4,911	$	—	$	4,812	$	99
U.S. government and agencies	175		—		175		—
Corporate securities	2,136		—		2,080		56
Mortgage-backed securities:
RMBS	982		—		673		309
CMBS	539		—		539		—
Asset-backed securities	1,068		—		121		947
Non-U.S. government securities	278		—		278		—
Total fixed-maturity securities	10,089		—		8,678		1,411
Short-term investments	729		429		300		—
Other invested assets (1)	7		—		—		7
FG VIEs’ assets, at fair value	569		—		—		569
Other assets	139		25		38		76
Total assets carried at fair value	$	11,533	$	454	$	9,016	$	2,063
Liabilities:
Credit derivative liabilities	$	209	$	—	$	—	$	209
FG VIEs’ liabilities with recourse, at fair value	517		—		—		517
FG VIEs’ liabilities without recourse, at fair value	102		—		—		102
Total liabilities carried at fair value	$	828	$	—	$	—	$	828

____________________

(1) Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.

49

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 Third Quarter 2019 and 2018 and Nine Months 2019 and 2018.

Fair Value Level 3 Rollforward

Recurring Basis

Third Quarter 2019

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of June 30, 2019	$	105				$	48				$	325				$	674				$	526				$	87				$	(216	)			$	(446	)			$	(105	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	3			(1	)	1			(1	)	5			(1	)	7			(1	)	6			(2	)	(14		)	(3	)	5			(5	)	(2		)	(2	)	(2		)	(2	)
Other comprehensive income (loss)	(4		)			(3		)			1					(3		)			—					—					—					1					—
Purchases	6					—					—					1					—					—					—					—					—
Settlements	(1		)			—					(15		)			(15		)			(69		)			—					3					64					3
FG VIE consolidation	—					—					—					—					6					—					—					(5		)			(1		)
Fair value as of September 30, 2019	$	109				$	46				$	316				$	664				$	469				$	73				$	(208	)			$	(388	)			$	(105	)
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of September 30, 2019																					$	6		(2	)	$	(14	)	(3	)	$	8		(5	)	$	(2	)	(2	)	$	(1	)	(2	)
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of September 30, 2019	$	(4	)			$	(3	)			$	1				$	(2	)								$	—									$	1

50

Fair Value Level 3 Rollforward

Recurring Basis

Third Quarter 2018

	Fixed-Maturity Securities																																		FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions				Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of June 30, 2018	$	92			$	63				$	311				$	897				$	627				$	61				$	(257	)			$	(571	)			$	(108	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	1		(1	)	2			(1	)	3			(1	)	14			(1	)	(1		)	(2	)	(1		)	(3	)	21			(5	)	3			(2	)	1			(2	)
Other comprehensive income (loss)	6				(5		)			—					(12		)			—					—					—					(3		)			—
Purchases	—				—					—					64					—					—					—					—					—
Settlements	—				—					(15		)			(10		)			(30		)			—					(1		)			26					3
Fair value as of September 30, 2018	$	99			$	60				$	299				$	953				$	596				$	60				$	(237	)			$	(545	)			$	(104	)
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2018	$	6			$	(5	)			$	1				$	(11	)			$	2		(2	)	$	(1	)	(3	)	$	20		(5	)	$	(1	)	(2	)	$	1		(2	)

Fair Value Level 3 Rollforward

Recurring Basis

Nine Months 2019

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of December 31, 2018	$	99				$	56				$	309				$	947				$	569				$	77				$	(207	)			$	(517	)			$	(102	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	5			(1	)	(9		)	(1	)	16			(1	)	51			(1	)	70			(2	)	(4		)	(3	)	(25		)	(5	)	(33		)	(2	)	(9		)	(2	)
Other comprehensive income (loss)	1					(1		)			21					(97		)			—					—					—					6					—
Purchases	6					—					11					19					—					—					—					—					—
Settlements	(2		)			—					(41		)			(257		)			(170		)			—					24					156					6
FG VIE consolidation	—					—					—					—					6					—					—					(5		)			(1		)
FG VIE deconsolidations	—					—					—					—					(6		)			—					—					5					1
Transfers into Level 3	—					—					—					1					—					—					—					—					—
Fair value as of September 30, 2019	$	109				$	46				$	316				$	664				$	469				$	73				$	(208	)			$	(388	)			$	(105	)
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of September 30, 2019																					$	78		(2	)	$	(4	)	(3	)	$	(19	)	(5	)	$	(32	)	(2	)	$	(16	)	(2	)
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of September 30, 2019	$	1				$	(1	)			$	21				$	8									$	—									$	6

51

Fair Value Level 3 Rollforward

Recurring Basis

Nine Months 2018

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of December 31, 2017	$	76				$	67				$	334				$	787				$	700				$	64				$	(269	)			$	(627	)			$	(130	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	3			(1	)	(2		)	(1	)	16			(1	)	43			(1	)	3			(2	)	(3		)	(3	)	103			(5	)	(1		)	(2	)	3			(2	)
Other comprehensive income (loss)	17					(5		)			(10		)			(3		)			—					—					—					(1		)			—
Purchases	4					—					9					164					—					—					—					—					—
Issuances	—					—					—					—					—					—					(68		)	(7	)	—					—
Settlements	(1		)			—					(50		)			(38		)			(90		)			(1		)			(3		)			83					7
FG VIE deconsolidations	—					—					—					—					(17		)			—					—					1					16
Fair value as of September 30, 2018	$	99				$	60				$	299				$	953				$	596				$	60				$	(237	)			$	(545	)			$	(104	)
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2018	$	17				$	(5	)			$	(7	)			$	(1	)			$	13		(2	)	$	(3	)	(3	)	$	93		(5	)	$	(2	)	(2	)	$	2		(2	)

 ____________________

(1) Included in net realized investment gains (losses) and net investment income.

(2) Included in fair value gains (losses) on FG VIEs.

(3) Recorded in net investment income and other income.

(4) Represents the net position of credit derivatives. Credit derivative assets (recorded 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 sheet based on net exposure by counterparty.

(5) Reported in net change in fair value of credit derivatives.

(6) Includes CCS and other invested assets.

(7) Relates to SGI Transaction. See Note 11, Reinsurance.

52

Level 3 Fair Value Disclosures

Quantitative Information About Level 3 Fair Value Inputs

At September 30, 2019

Financial Instrument Description (1)	Fair Value at September 30, 2019 (in millions)			Significant Unobservable Inputs	Range				Weighted Average as a Percentage of Current Par Outstanding
Assets (liabilities) (2):
Fixed-maturity securities:
Obligations of state and political subdivisions	$	109		Yield	4.5	%	-	32.3%	8.4%
Corporate securities	46			Yield	35.8%
RMBS	316			CPR	1.4	%	-	16.9%	6.0%
				CDR	1.5	%	-	6.9%	4.9%
				Loss severity	40.0	%	-	125.0%	85.7%
				Yield	3.5	%	-	6.1%	4.2%
Asset-backed securities:
Life insurance transactions	339			Yield	5.5%
CLOs /Trust preferred securities (TruPS)	274			Yield	2.5	%	-	5.1%	3.6%
Others	51			Yield	9.9%
FG VIEs’ assets, at fair value	469			CPR	0.7	%	-	18.4%	8.8%
				CDR	1.2	%	-	25.7%	4.7%
				Loss severity	60.0	%	-	100.0%	77.6%
				Yield	3.3	%	-	8.3%	5.0%
Other assets	70			Implied Yield	5.8	%	-	6.5%	6.2%
				Term (years)	10 years
Credit derivative liabilities, net	(208		)	Year 1 loss estimates	0.0	%	-	50.0%	1.2%
				Hedge cost (in basis points (bps))	8.0		-	42.0	17.0
				Bank profit (in bps)	38.0		-	191.0	81.0
				Internal floor (in bps)	30.0
				Internal credit rating	AAA		-	CCC	A+
FG VIEs’ liabilities, at fair value	(493		)	CPR	0.7	%	-	18.4%	8.8%
				CDR	1.2	%	-	25.7%	4.7%
				Loss severity	60.0	%	-	100.0%	77.6%
				Yield	3.3	%	-	8.3%	4.2%

___________________

(1) Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.

(2) Excludes several investments recorded in other invested assets with fair value of $6 million.

53

Quantitative Information About Level 3 Fair Value Inputs

At December 31, 2018

Financial Instrument Description (1)	Fair Value at December 31, 2018 (in millions)			Significant Unobservable Inputs	Range				Weighted Average as a Percentage of Current Par Outstanding
Assets (liabilities) (2):
Fixed-maturity securities:
Obligations of state and political subdivisions	$	99		Yield	4.5	%	-	32.7%	12.0%
Corporate securities	56			Yield	29.5%
RMBS	309			CPR	3.4	%	-	19.4%	6.2%
				CDR	1.5	%	-	6.9%	5.2%
				Loss severity	40.0	%	-	125.0%	82.7%
				Yield	5.3	%	-	8.1%	6.3%
Asset-backed securities:
Life insurance transactions	620			Yield	6.5	%	-	7.1%	6.8%
CLOs/TruPS	274			Yield	3.8	%	-	4.7%	4.3%
Others	53			Yield	11.5%
FG VIEs’ assets, at fair value	569			CPR	0.9	%	-	18.1%	9.3%
				CDR	1.3	%	-	23.7%	5.1%
				Loss severity	60.0	%	-	100.0%	79.8%
				Yield	5.0	%	-	10.2%	7.1%
Other assets	74			Implied Yield	6.6	%	-	7.2%	6.9%
				Term (years)	10 years
Credit derivative liabilities, net	(207		)	Year 1 loss estimates	0.0	%	-	66.0%	2.2%
				Hedge cost (in bps)	5.5		-	82.5	23.3
				Bank profit (in bps)	7.2		-	509.9	77.3
				Internal floor (in bps)	8.8		-	30.0	19.0
				Internal credit rating	AAA		-	CCC	AA-
FG VIEs’ liabilities, at fair value	(619		)	CPR	0.9	%	-	18.1%	9.3%
				CDR	1.3	%	-	23.7%	5.1%
				Loss severity	60.0	%	-	100.0%	79.8%
				Yield	5.0	%	-	10.2%	5.6%

____________________

(1) Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.

(2) Excludes several investments recorded in other invested assets with fair value of $7 million.

54

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, as well as prices observed in the credit derivative market with an adjustment for illiquidity so that the terms would be similar to a financial guaranty insurance contract, 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 AGUS and AGMH 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. The fair value of notes payable was determined by calculating the present value of the expected cash flows, and was classified as Level 3 in the fair value hierarchy.

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 September 30, 2019						As of December 31, 2018
	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(in millions)
Assets (liabilities):
Other invested assets	$	1		$	2		$	1		$	2
Other assets (1)	91			91			130			130
Financial guaranty insurance contracts (2)	(2,731		)	(5,200		)	(3,240		)	(5,932		)
Long-term debt	(1,234		)	(1,549		)	(1,233		)	(1,496		)
Other liabilities (1)	(45		)	(45		)	(12		)	(12		)

____________________

(1) The Company's other assets and other liabilities consist predominantly of accrued interest, receivables for securities sold and payables for securities purchased, for which the carrying value approximates fair value.

(2) 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. 

55

7.    Investments and Cash

Net Investment Income and Realized Gains (Losses)

Net investment income is a function of the yield that the Company earns on invested assets and the size of the 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 invested assets. Accrued investment income, which is recorded in other assets, was $86 million and $91 million as of September 30, 2019 and December 31, 2018, respectively.

Net Investment Income

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Income from fixed-maturity securities managed by third parties	$	66		$	75		$	207		$	224
Income from internally managed securities	24			26			95			80
Gross investment income	90			101			302			304
Investment expenses	(2		)	(2		)	(6		)	(7		)
Net investment income	$	88		$	99		$	296		$	297

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
	2019			2018			2019			2018
	(in millions)
Gross realized gains on available-for-sale securities	$	29		$	5		$	48		$	16
Gross realized losses on available-for-sale securities	(1		)	(3		)	(4		)	(9		)
Net realized gains (losses) on other invested assets	—			—			—			(1		)
Other-than-temporary impairment (OTTI):
Total OTTI	(12		)	(8		)	(29		)	(23		)
Less: portion of OTTI recognized in OCI	—			1			3			(3		)
Net OTTI recognized in net income (loss) (1)	(12		)	(9		)	(32		)	(20		)
Net realized investment gains (losses)	$	16		$	(7	)	$	12		$	(14	)

____________________

(1) Net OTTI recognized in net income was mainly attributable to change in foreign exchange rates in Third Quarter 2019 and Third Quarter 2018. OTTI for Nine Months 2019 and Nine Months 2018 was attributable to change in foreign exchange rates and securities purchased for loss mitigation and other risk management purposes.

The proceeds from sales of fixed-maturity securities available-for-sale were $405 million in Third Quarter 2019, $316 million in Third Quarter 2018, $1,306 million in Nine Months 2019 and $908 million in Nine Months 2018.

In Nine Months 2019 and 2018, the Company received $144 million and $4 million in bonds under financial guaranty contract settlement agreements, primarily the COFINA Exchange Senior Bonds. In Third Quarter 2019, the Company exchanged $44 million in COFINA taxable bonds for COFINA non-taxable bonds. During Third Quarter 2019 the Company sold all of its COFINA Exchange Senior Bonds. These transactions were non-cash and are not shown in the investing cash flows in the condensed consolidated statements of cash flows.

56

The following table presents the roll-forward of the credit losses on fixed-maturity securities for which the Company has recognized an OTTI and for which unrealized loss was recognized in OCI.

Roll Forward of Credit Losses

in the Investment Portfolio

	Third Quarter				Nine Months
	2019		2018		2019			2018
	(in millions)
Balance, beginning of period	$	191	$	170	$	185		$	162
Additions for credit losses on securities for which an OTTI was previously recognized	—		2		13			10
Reductions for securities sold and other settlements	—		—		(7		)	—
Balance, end of period	$	191	$	172	$	191		$	172

See Part II, Item 8, Financial Statements and Supplementary Data, Note 10, Investments and Cash, of the Company's 2018 Annual Report on Form 10-K for a discussion of the accounting policy for evaluating investments for OTTI.

Investment Portfolio

As of September 30, 2019, the majority of the investment portfolio is managed by seven outside managers (including Wasmer, Schroeder & Company LLC, in which the Company has a minority interest). The Company has established detailed guidelines regarding credit quality, exposure to a particular sector and exposure to a particular obligor within a sector. The Company's investment guidelines generally permit its outside managers to purchase only a small amount of securities rated lower than BBB- by S&P or Baa3 by Moody’s, and then only those securities rated no lower than B by S&P or B2 by Moody’s and subject to certain other specific requirements. Additionally, the managed portfolio must maintain a minimum average rating of A+ by S&P or A1 by Moody's.

The investment portfolio tables shown below include assets managed both externally and internally. The internally managed portfolio primarily consists of the Company's investments in securities for (i) loss mitigation purposes, (ii) other risk management purposes and (iii) other alternative investments that the Company believes present an attractive investment opportunity.

One of the Company's strategies for mitigating losses has been to purchase loss mitigation securities at discounted prices. The Company also holds other invested assets that were obtained or purchased as part of negotiated settlements with insured counterparties or under the terms of the financial guaranties (other risk management assets).

Alternative investments include investing in both equity and debt securities as well as investments in investment managers. In February 2017 the Company agreed to purchase up to $100 million of limited partnership interests in a fund that invests in the equity of private equity managers of which $86 million of the commitment was not funded as of September 30, 2019.

57

Investment Portfolio

Carrying Value

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Fixed-maturity securities (1):
Externally managed	$	8,363	$	8,909
Internally managed	914		1,180
Short-term investments	1,142		729
Other invested assets:
Internally managed
Alternative investments	42		39
Other	15		16
Total	$	10,476	$	10,873

____________________

(1) 8.4% and 10.8% of fixed-maturity securities are rated BIG as of September 30, 2019 and December 31, 2018, respectively.

The Company has a de minimis amount of restricted cash as of September 30, 2019 and December 31, 2018.

Fixed-Maturity Securities and Short-Term Investments

by Security Type 

As of September 30, 2019

Security Type	Percent of Total (1)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		AOCI (2) Pre-tax Gain (Loss) on Securities with OTTI			Weighted Average Credit Rating  (3)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	42	%	$	4,132	$	331	$	—		$	4,463	$	42		AA-
U.S. government and agencies	1		144		11		—			155		—			AA+
Corporate securities	24		2,286		80		(27		)	2,339		(4		)	A
Mortgage-backed securities (4):	0
RMBS	8		846		41		(10		)	877		4			A-
CMBS	5		448		21		—			469		—			AAA
Asset-backed securities	7		745		33		(3		)	775		10			BBB-
Non-U.S. government securities	2		210		1		(12		)	199		—			AA
Total fixed-maturity securities	89		8,811		518		(52		)	9,277		52			A+
Short-term investments	11		1,142		—		—			1,142		—			AAA
Total investment portfolio	100	%	$	9,953	$	518	$	(52	)	$	10,419	$	52		A+

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Fixed-Maturity Securities and Short-Term Investments

by Security Type 

As of December 31, 2018 

Security Type	Percent of Total (1)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		AOCI Pre-tax Gain (Loss) on Securities with OTTI			Weighted Average Credit Rating  (3)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	45	%	$	4,761	$	168	$	(18	)	$	4,911	$	40		AA-
U.S. government and agencies	2		167		9		(1		)	175		—			AA+
Corporate securities	20		2,175		13		(52		)	2,136		(4		)	A
Mortgage-backed securities (4):
RMBS	9		999		17		(34		)	982		(15		)	A-
CMBS	5		542		4		(7		)	539		—			AAA
Asset-backed securities	9		942		131		(5		)	1,068		97			BB
Non-U.S. government securities	3		298		2		(22		)	278		—			AA
Total fixed-maturity securities	93		9,884		344		(139		)	10,089		118			A+
Short-term investments	7		729		—		—			729		—			AAA
Total investment portfolio	100	%	$	10,613	$	344	$	(139	)	$	10,818	$	118		A+

____________________

(1) Based on amortized cost.

(2) Accumulated OCI (AOCI).

(3) Ratings represent the lower of the Moody’s and S&P classifications, except for bonds purchased for loss mitigation or risk management strategies, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments.

(4) U.S. government-agency obligations were approximately 44% of mortgage backed securities as of September 30, 2019 and 48% as of December 31, 2018 based on fair value.

The following tables summarize, for all fixed-maturity securities in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time the amounts have continuously been in an unrealized loss position.

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Fixed-Maturity Securities

Gross Unrealized Loss by Length of Time

As of September 30, 2019

	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	5	$	—		$	4	$	—		$	9	$	—
U.S. government and agencies	13		—			4		—			17		—
Corporate securities	349		(8		)	170		(19		)	519		(27		)
Mortgage-backed securities:
RMBS	7		—			193		(10		)	200		(10		)
CMBS	1		—			4		—			5		—
Asset-backed securities	83		(2		)	147		(1		)	230		(3		)
Non-U.S. government securities	53		(2		)	80		(10		)	133		(12		)
Total	$	511	$	(12	)	$	602	$	(40	)	$	1,113	$	(52	)
Number of securities (1)			133					143					256
Number of securities with OTTI			12					9					21

Fixed-Maturity Securities

Gross Unrealized Loss by Length of Time

As of December 31, 2018

	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	195	$	(4	)	$	658	$	(14	)	$	853	$	(18	)
U.S. government and agencies	11		—			24		(1		)	35		(1		)
Corporate securities	836		(19		)	522		(33		)	1,358		(52		)
Mortgage-backed securities:
RMBS	85		(2		)	447		(32		)	532		(34		)
CMBS	111		(1		)	164		(6		)	275		(7		)
Asset-backed securities	322		(4		)	38		(1		)	360		(5		)
Non-U.S. government securities	83		(4		)	99		(18		)	182		(22		)
Total	$	1,643	$	(34	)	$	1,952	$	(105	)	$	3,595	$	(139	)
Number of securities (1)			417					608					997
Number of securities with OTTI (1)			22					22					42

___________________

(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.

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Of the securities in an unrealized loss position for 12 months or more as of September 30, 2019 and December 31, 2018, 27 and 38 securities, respectively, had unrealized losses greater than 10% of book value. The total unrealized loss for these securities was $24 million as of September 30, 2019 and $43 million as of December 31, 2018. 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, 2019 and December 31, 2018 were yield-related and not the result of OTTI.

The amortized cost and estimated fair value of available-for-sale fixed maturity securities by contractual maturity as of September 30, 2019 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 Fixed-Maturity Securities

by Contractual Maturity

As of September 30, 2019

	Amortized Cost		Estimated Fair Value
	(in millions)
Due within one year	$	274	$	275
Due after one year through five years	1,617		1,635
Due after five years through 10 years	2,133		2,242
Due after 10 years	3,493		3,779
Mortgage-backed securities:
RMBS	846		877
CMBS	448		469
Total	$	8,811	$	9,277

Based on fair value, investments and restricted cash 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 $278 million and $266 million, as of September 30, 2019 and December 31, 2018, respectively. The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements in the amount of $1,596 million and $1,855 million, based on fair value as of September 30, 2019 and December 31, 2018, respectively.

8. Contracts Accounted for as Credit Derivatives

The Company has a portfolio of financial guaranty contracts that meet the definition of a derivative in accordance with GAAP (primarily CDS). The credit derivative portfolio also includes interest rate swaps.

Credit derivative transactions are governed by International Swaps and Derivative Association, Inc. documentation and have certain characteristics that differ from financial guaranty insurance contracts. For example, the Company’s control rights with respect to a reference obligation under a credit derivative may be more limited than when the Company issues a financial guaranty insurance contract. In addition, there are more circumstances under which the Company may be obligated to make payments. Similar to a financial guaranty insurance contract, the Company would be obligated to pay if the obligor failed to make a scheduled payment of principal or interest in full. However, the Company may also be required to pay if the obligor becomes bankrupt or if the reference obligation were restructured if, after negotiation, those credit events are specified in the documentation for the credit derivative transactions. Furthermore, the Company may be required to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative. If events of default or termination events specified in the credit derivative documentation were to occur, the non-defaulting or the non-affected party, which may be either the Company or the counterparty, depending upon the circumstances, may decide to terminate a credit derivative prior to maturity. In that case, the Company may be required to make a termination payment to its swap counterparty upon such termination. Absent such an event of default or termination event, the Company may not unilaterally terminate a CDS contract; however, the Company on occasion has mutually agreed with various counterparties to terminate certain CDS transactions.

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Credit Derivative Net Par Outstanding by Sector

The components of the Company’s credit derivative net par outstanding are presented in the table below. The estimated remaining weighted average life of credit derivatives was 11.2 years and 11.6 years as of September 30, 2019 and December 31, 2018, respectively.

Credit Derivatives (1)

	As of September 30, 2019					As of December 31, 2018 (2)
	Net Par Outstanding		Net Fair Value			Net Par Outstanding		Net Fair Value
	(in millions)
U.S. public finance	$	2,067	$	(103	)	$	1,783	$	(65	)
Non-U.S. public finance	2,709		(46		)	2,807		(51		)
U.S. structured finance	1,266		(51		)	1,465		(85		)
Non-U.S. structured finance	123		(8		)	127		(6		)
Total	$	6,165	$	(208	)	$	6,182	$	(207	)

____________________

(1)    Expected recoveries were $5 million as of September 30, 2019 and $2 million as of December 31, 2018.

(2)    Prior year presentation has been conformed to the current year's presentation.

Distribution of Credit Derivative Net Par Outstanding by Internal Rating

	As of September 30, 2019				As of December 31, 2018
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	1,662	27.0	%	$	1,813	29.4	%
AA	1,748		28.4		1,690		27.3
A	1,255		20.3		1,171		18.9
BBB	1,368		22.2		1,351		21.9
BIG (1)	132		2.1		157		2.5
Credit derivative net par outstanding	$	6,165	100.0	%	$	6,182	100.0	%

____________________

(1) All BIG credit derivatives are U.S. RMBS transactions.

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Fair Value of Credit Derivatives

Net Change in Fair Value of Credit Derivative Gain (Loss)

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Realized gains on credit derivatives	$	2		$	2		$	6		$	6
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements	(5		)	(1		)	(30		)	(2		)
Realized gains (losses) and other settlements	(3		)	1			(24		)	4
Net unrealized gains (losses)	8			20			(1		)	99
Net change in fair value of credit derivatives	$	5		$	21		$	(25	)	$	103

     Realized losses and other settlements for Nine Months 2019 were primarily due to a final maturity paydown of a U.S. structured finance transaction, for which there was an offsetting unrealized gain.

During Third Quarter 2019, unrealized fair value gains were generated primarily as a result of price improvements on the underlying collateral of certain of the Company's public finance CDS. The unrealized fair value gains were partially offset by unrealized fair value losses related to certain structured finance CDS transactions and changes in discount rates.

During Nine Months 2019, unrealized fair value losses were generated primarily as a result of wider implied net spreads driven by the decreased market cost to buy protection in AGC’s name during the period. For those CDS transactions that were pricing at or above their floor levels, when the cost of purchasing CDS protection on AGC, which management refers to as the CDS spread on AGC, decreased, the implied spreads that the Company would expect to receive on these transactions increased. These unrealized losses were offset by price improvements and the final maturity paydown of a CDS contract.

During Third Quarter 2018, unrealized fair value gains were generated primarily as a result of price improvements on the underlying collateral of the Company’s CDS. This was the primary driver of the unrealized fair value gains in the U.S. structured finance and U.S. public finance sectors. The unrealized fair value gains were partially offset by unrealized fair value losses related to the decreased cost to buy protection in AGC’s name as the market cost of AGC’s credit protection decreased during the period.

During Nine Months 2018, unrealized fair value gains were generated primarily as a result of the increase in credit given to the primary insurer on one of the Company's second-to-pay CDS policies, CDS terminations, and price improvements on the underlying collateral of the Company’s CDS. The unrealized fair value gains were partially offset by unrealized fair value losses related to the decreased cost to buy protection in AGC’s name as the market cost of AGC’s credit protection decreased during the period.

The impact of changes in credit spreads will vary based upon the volume, tenor, interest rates, and other market conditions at the time these fair values are determined. In addition, since each transaction has unique collateral and structural terms, the underlying change in fair value of each transaction may vary considerably. The fair value of credit derivative contracts also reflects the change in the Company’s own credit cost based on the price to purchase credit protection on AGC. The Company determines its own credit risk based on quoted CDS prices traded on the Company at each balance sheet date.

CDS Spread on AGC

Quoted price of CDS contract (in bps)

 

	As of September 30, 2019	As of June 30, 2019	As of December 31, 2018	As of September 30, 2018	As of June 30, 2018	As of December 31, 2017
Five-year CDS spread	56	56	110	77	105	163
One-year CDS spread	14	13	22	15	22	70

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Fair Value of Credit Derivative Assets (Liabilities)

and Effect of AGC

Credit Spreads

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Fair value of credit derivatives before effect of AGC credit spread	$	(306	)	$	(407	)
Plus: Effect of AGC credit spread	98			200
Net fair value of credit derivatives	$	(208	)	$	(207	)

The fair value of CDS contracts at September 30, 2019, before considering the benefit applicable to AGC’s credit spreads, is a direct result of the relatively wide credit spreads of certain underlying credits generally due to the long tenor of these credits.

Collateral Posting for Certain Credit Derivative Contracts

The transaction documentation with one counterparty for $193 million in CDS net par insured by AGC requires AGC to post collateral, subject to a $193 million cap, to secure its obligation to make payments under such contracts. Eligible collateral is generally cash or U.S. government or agency securities; eligible collateral other than cash is valued at a discount to the face amount. There was no collateral posted as of September 30, 2019.

9. Variable Interest Entities

The Company provides financial guaranties with respect to debt obligations of special purpose entities, including VIEs but does not act as the servicer or collateral manager for any VIE obligations guaranteed by its insurance subsidiaries. The transaction structure generally provides certain financial protections to the Company. This financial protection can take several forms, the most common of which are overcollateralization, first loss protection (or subordination) and excess spread. In the case of overcollateralization (i.e., the principal amount of the securitized assets exceeds the principal amount of the structured finance obligations guaranteed by the Company), the structure allows defaults of the securitized assets before a default is experienced on the structured finance obligation guaranteed by the Company. In the case of first loss, the Company's financial guaranty insurance policy only covers a senior layer of losses experienced by multiple obligations issued by the VIE. The first loss exposure with respect to the assets is either retained by the seller or sold off in the form of equity or mezzanine debt to other investors. In the case of excess spread, the financial assets contributed to VIEs generate interest income that are in excess of the interest payments on the debt issued by the VIE. Such excess spread is typically distributed through the transaction’s cash flow waterfall and may be used to create additional credit enhancement, applied to redeem debt issued by the VIE (thereby, creating additional overcollateralization), or distributed to equity or other investors in the transaction.

Assured Guaranty is not primarily liable for the debt obligations issued by the VIEs it insures and would only be required to make payments on those insured debt obligations in the event that the issuer of such debt obligations defaults on any principal or interest due and only for the amount of the shortfall. AGL’s and its subsidiaries’ creditors do not have any rights with regard to the collateral supporting the debt issued by the FG VIEs. Proceeds from sales, maturities, prepayments and interest from such underlying collateral may only be used to pay debt service on FG VIEs’ liabilities. Net fair value gains and losses on FG VIEs are expected to reverse to zero at maturity of the FG VIEs’ debt, except for net premiums received and net claims paid by Assured Guaranty under the financial guaranty insurance contract. The Company’s estimate of expected loss to be paid for FG VIEs is included in Note 4, Expected Loss to be Paid.

As part of the terms of its financial guaranty contracts, the Company, under its insurance contract, obtains certain protective rights with respect to the VIE that give the Company additional controls over a VIE. These protective rights are triggered by the occurrence of certain events, such as failure to be in compliance with a covenant due to poor deal performance or a deterioration in a servicer or collateral manager's financial condition. At deal inception, the Company typically is not deemed to control a VIE; however, once a trigger event occurs, the Company's control of the VIE typically increases. The Company continuously evaluates its power to direct the activities that most significantly impact the economic performance of VIEs that have debt obligations insured by the Company and, accordingly, where the Company is obligated to absorb VIE losses or receive benefits that could potentially be significant to the VIE. The Company is deemed to be the control party for certain VIEs under GAAP, typically when its protective rights give it the power to both terminate and replace the deal servicer, which are characteristics specific to the Company's financial guaranty contracts. If the protective rights that could make the

64

Company the control party have not been triggered, then the VIE is not consolidated. If the Company is deemed to no longer have those protective rights, the VIE is deconsolidated.

Consolidated FG VIEs

As of September 30, 2019 and December 31, 2018, the Company consolidated 28 and 31 FG VIEs, respectively. During Nine Months 2019, two FG VIEs were deconsolidated, two FG VIEs matured and one FG VIE was consolidated. During Nine Months 2018, one FG VIE was deconsolidated. There were no new consolidations for Nine Months 2018.

The change in the ISCR of the FG VIEs’ assets held as of the end of the reporting period that was recorded in the condensed consolidated statements of operations for Third Quarter 2019 and 2018 were gains of $7 million and $1 million, respectively, and $42 million and $4 million for Nine Months 2019 and 2018, respectively. To calculate ISCR, the change in the fair value of the FG VIEs’ assets is allocated between changes that are due to ISCR and changes due to other factors, including interest rates. The ISCR amount is determined by using expected cash flows at the original date of consolidation discounted at the effective yield less current expected cash flows discounted at that same original effective yield.

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Excess of unpaid principal over fair value of:
FG VIEs’ assets	$	279	$	350
FG VIEs’ liabilities with recourse	21		48
FG VIEs’ liabilities without recourse	19		28
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due	61		71
Unpaid principal for FG VIEs’ liabilities with recourse (1)	409		565

____________________

(1) FG VIEs’ liabilities with recourse will mature at various dates ranging from 2019 to 2038.

The table below shows the carrying value of the consolidated FG VIEs’ assets and liabilities in the condensed consolidated financial statements, segregated by the types of assets that collateralize the respective debt obligations for FG VIEs’ liabilities with recourse.

Consolidated FG VIEs

By Type of Collateral

	As of September 30, 2019				As of December 31, 2018
	Assets		Liabilities		Assets		Liabilities
	(in millions)
With recourse:
U.S. RMBS first lien	$	289	$	314	$	299	$	326
U.S. RMBS second lien	75		74		115		137
Manufactured housing	—		—		53		54
Total with recourse	364		388		467		517
Without recourse	105		105		102		102
Total	$	469	$	493	$	569	$	619

The effect of consolidating FG VIEs includes (i) changes in fair value gains (losses) on FG VIEs’ assets and liabilities, (ii) the elimination of premiums and losses related to the AGC and AGM FG VIEs’ liabilities with recourse and (iii) the elimination of investment balances related to the Company’s purchase of AGC and AGM insured FG VIEs’ debt. Upon consolidation of a FG VIE, the related insurance and, if applicable, the related investment balances, are considered intercompany transactions and therefore eliminated. Such eliminations are included in the table below to present the full effect of consolidating FG VIEs.

65

Effect of Consolidating FG VIEs 

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Net earned premiums	$	(2	)	$	(3	)	$	(16	)	$	(9	)
Net investment income	(1		)	(1		)	(3		)	(3		)
Fair value gains (losses) on FG VIEs (1)	4			5			42			11
Loss and LAE	(3		)	(3		)	(18		)	—
Effect on income before tax	(2		)	(2		)	5			(1		)
Less: Tax provision (benefit)	—			—			1			—
Effect on net income (loss)	$	(2	)	$	(2	)	$	4		$	(1	)
Effect on OCI	$	1		$	(2	)	$	(1	)	$	—
Effect on cash flows from operating activities	$	1		$	1		$	—		$	7

 ____________________

(1) See condensed consolidated statements of comprehensive income and Note 14, Shareholders' Equity, for information on changes in fair value of the FG VIEs’ liabilities with recourse that are attributable to changes in the Company's own credit risk.

The consolidation of FG VIEs increased shareholders' equity by $4 million as of September 30, 2019 and $1 million as of December 31, 2018.

The primary driver of the gain during Third Quarter 2019 is due to price appreciation on FG VIEs assets. The primary driver of the gain during Nine Months 2019 was attributable to higher recoveries on second lien U.S. RMBS FG VIEs' assets. The primary driver of the gain during Third Quarter 2018 and Nine Months 2018 was improvement in the underlying collateral of the FG VIEs' assets.

Other Consolidated VIEs

In certain instances where the Company consolidates a VIE that was established as part of a loss mitigation negotiated settlement that results in the termination of the original insured financial guaranty insurance or credit derivative contract, the Company classifies the assets and liabilities of those VIEs in the line items that most accurately reflect the nature of the items, as opposed to within the FG VIEs’ assets and FG VIEs’ liabilities. The largest of these VIEs had assets of $91 million and liabilities of $9 million as of September 30, 2019, and assets of $87 million and liabilities of $21 million as of December 31, 2018, primarily recorded in the investment portfolio and credit derivative liabilities on the condensed consolidated balance sheets.

Non-Consolidated VIEs

As described in Note 3, Outstanding Exposure, the Company monitors all policies in the insured portfolio. Of the approximately 18 thousand policies monitored as of September 30, 2019, approximately 15 thousand policies are not within the scope of Accounting Standards Codification 810 because these financial guaranties relate to the debt obligations of governmental organizations or financing entities established by a governmental organization. The majority of the remaining policies involve transactions where the Company is not deemed to currently have control over the FG VIEs’ most significant activities. As of September 30, 2019 and December 31, 2018, the Company identified 96 and 110 policies, respectively, that contain provisions and experienced events that may trigger consolidation. Based on management’s assessment of these potential triggers or events, the Company consolidated 28 and 31 FG VIEs as of September 30, 2019 and December 31, 2018, respectively. The Company’s exposure provided through its financial guaranties with respect to debt obligations of FG VIEs is included within net par outstanding in Note 3, Outstanding Exposure.

66

10. Income Taxes

Overview

AGL and its Bermuda subsidiaries AG Re, AGRO, and Cedar Personnel Ltd. (Bermuda Subsidiaries) are not subject to any income, withholding or capital gains taxes under current Bermuda law. The Company has received an assurance from the Minister of Finance in Bermuda that, in the event of any taxes being imposed, AGL and its Bermuda Subsidiaries will be exempt from taxation in Bermuda until March 31, 2035. AGL's U.S. and U.K. subsidiaries are subject to income taxes imposed by U.S. and U.K. authorities, respectively, and file applicable tax returns. In addition, AGRO, a Bermuda domiciled company, has elected under Section 953(d) of the U.S. Internal Revenue Code to be taxed as a U.S. domestic corporation.

In November 2013, AGL became 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. As a U.K. tax resident company, AGL is required to file a corporation tax return with Her Majesty's Revenue & Customs. AGL is subject to U.K. corporation tax in respect of its worldwide profits (both income and capital gains), subject to any applicable exemptions. The corporation tax rate is at 19% for 2019. Assured Guaranty expects that the dividends AGL receives from its direct subsidiaries will be exempt from U.K. corporation tax due to the exemption in section 931D of the U.K. Corporation Tax Act 2009. In addition, any dividends paid by AGL to its shareholders should not be subject to any withholding tax in the U.K. Assured Guaranty does not expect any profits of non-U.K. resident members of the group to be taxed under the U.K. "controlled foreign companies" regime and has obtained a clearance from Her Majesty's Revenue & Customs confirming this on the basis of current facts.

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.

Provision for Income Taxes

The Company's provision for income taxes for interim financial periods is not based on an estimated annual effective rate due, for example, to the variability in loss reserves, fair value of its credit derivatives and VIEs, and foreign exchange gains and losses which prevents the Company from projecting a reliable estimated annual effective tax rate and pretax income for the full year 2019. A discrete calculation of the provision is calculated for each interim period.

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%, U.K. subsidiaries taxed at the U.K. marginal corporate tax rate of 19%, and no taxes for the Company’s Bermuda Subsidiaries unless subject to U.S. tax by election. The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions.

67

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

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Expected tax provision (benefit)	$	17		$	31		$	64		$	80
Tax-exempt interest	(5		)	(6		)	(15		)	(18		)
Change in liability for uncertain tax positions	1			(10		)	1			(16		)
Effect of provision to tax return filing adjustment	(6		)	(1		)	(6		)	(1		)
State tax	—			5			1			6
Foreign taxes	6			1			11			4
Taxes on reinsurance	5			1			9			—
Effect of adjustments to the provisional amounts as a result of 2017 Tax Cuts and Jobs Act	—			(4		)	—			(4		)
Deferred compensation	(1		)	(1		)	(3		)	(2		)
Other	—			(2		)	(1		)	(3		)
Total provision (benefit) for income taxes	$	17		$	14		$	61		$	46
Effective tax rate	19.2		%	8.3		%	18.6		%	9.7		%

The expected tax provision (benefit) is calculated as the sum of pretax income in each jurisdiction multiplied by the statutory tax rate of the jurisdiction by which it will be taxed. Where there is a pretax loss in one jurisdiction and pretax 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 pretax income and revenue by jurisdiction.

Pretax Income (Loss) by Tax Jurisdiction

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
U.S.	$	101		$	128	$	326		$	374
Bermuda	10			24		26			97
U.K. and other	(25		)	23		(26		)	8
Total	$	86		$	175	$	326		$	479

Revenue by Tax Jurisdiction

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
U.S.	$	186		$	192	$	562		$	628
Bermuda	37			47		110			135
U.K. and other	(17		)	36		(5		)	25
Total	$	206		$	275	$	667		$	788

Pretax income by jurisdiction may be disproportionate to revenue by jurisdiction to the extent that insurance losses incurred are disproportionate.

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Tax Assets (Liabilities)

Deferred and Current Tax Assets (Liabilities) (1)

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Deferred tax assets (liabilities)	$	(24	)	$	68
Current tax assets (liabilities)	14			22

____________________

(1) Included in other assets or other liabilities on the condensed consolidated balance sheets.

Valuation Allowance

The Company has $13 million of foreign tax credit (FTC) carryovers from previous acquisitions and $23 million of FTC due to the 2017 Tax Cuts and Jobs Act for use against regular tax in future years. FTCs will begin to expire in 2020 and will fully expire by 2027. In analyzing the future realizability of FTCs, 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 FTC of $36 million will not be utilized, and therefore recorded a valuation allowance with respect to this tax attribute.

The Company came to the conclusion that it is more likely than not that the remaining 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 net deferred tax asset. The Company will continue to analyze the need for a valuation allowance on a quarterly basis.

Audits

As of September 30, 2019, AGUS had open tax years with the U.S. Internal Revenue Service (IRS) for 2016 to present and is currently under audit for the 2016 tax year. In December 2016, the IRS issued a Revenue Agent Report for the 2009 - 2012 audit period, which did not identify any material adjustments that were not already accounted for in prior periods. The 2013 and 2014 tax years closed in 2018. Assured Guaranty Overseas US Holdings Inc. has open tax years of 2016 forward but is not currently under audit with the IRS. The Company's U.K. subsidiaries are not currently under examination and have open tax years of 2017 forward. CIFGNA, which was acquired by AGC during 2016, is not currently under examination and has open tax years of 2016 to the date of acquisition.

Uncertain Tax Positions

The Company's policy is to recognize interest related to uncertain tax positions in income tax expense and has accrued $0.7 million for Nine Months 2019 and $1 million for the full year 2018. As of September 30, 2019 and December 31, 2018, the Company has accrued $1 million and $2 million of interest, respectively.

The total amount of reserves for unrecognized tax positions, including accrued interest, as of both September 30, 2019 and December 31, 2018 that would affect the effective tax rate, if recognized, was $16 million.

11. Reinsurance

The Company assumes exposure (Assumed Business) from third party insurers, primarily other monoline financial guaranty companies that currently are in runoff and no longer actively writing new business (Legacy Monoline Insurers), and may cede portions of exposure it has insured (Ceded Business) in exchange for premiums, net of any ceding commissions. The Company, if required, secures its reinsurance obligations to these Legacy Monoline Insurers, typically by depositing in trust assets with a market value equal to its assumed liabilities calculated on a U.S. statutory basis.

Substantially all of the Company’s Assumed Business and Ceded Business relates to financial guaranty business, except for a modest amount that relates to AGRO's non-financial guaranty business. The Company historically entered into, and

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with respect to new business originated by AGRO continues to enter into, ceded reinsurance contracts in order to obtain greater business diversification and reduce the net potential loss from large risks.

Financial Guaranty Business

The Company’s facultative and treaty assumed agreements with the Legacy Monoline Insurers are generally subject to termination at the option of the ceding company:

• if the Company fails to meet certain financial and regulatory criteria;

• if the Company fails to maintain a specified minimum financial strength rating, or

• upon certain changes of control of the Company.

Upon termination due to one of the above events, the Company typically would be required to return to the ceding company unearned premiums (net of ceding commissions) and loss reserves, calculated on a U.S. statutory basis, attributable to the Assumed Business (plus in certain cases, an additional required amount), after which the Company would be released from liability with respect to such business.

As of September 30, 2019, if each third party company ceding business to AG Re and/or AGC had a right to recapture such business, and chose to exercise such right, the aggregate amounts that AG Re and AGC could be required to pay to all such companies would be approximately $42 million and $291 million, respectively.

The Company has ceded financial guaranty business to non-affiliated companies to limit its exposure to risk. The Company remains primarily liable for all risks it directly underwrites and is required to pay all gross claims. It then seeks reimbursement from the reinsurer for its proportionate share of claims. The Company may be exposed to risk for this exposure if it were required to pay the gross claims and not be able to collect ceded claims from an assuming company experiencing financial distress. The Company’s ceded contracts generally allow the Company to recapture ceded financial guaranty business after certain triggering events, such as reinsurer downgrades.

Non-Financial Guaranty Business

The Company, through AGRO, assumes non-financial guaranty business from third party insurers (Assumed Non-Financial Guaranty Business). It also cedes and retrocedes some of its non-financial guaranty business to third party reinsurers. A downgrade of AGRO’s financial strength rating by S&P below A would require AGRO to post, as of September 30, 2019, an estimated $0.3 million of collateral in respect of certain of its Assumed Non-Financial Guaranty Business. A further downgrade of AGRO’s S&P rating below A- would give the company ceding such business the right to recapture the business for AGRO’s collateral amount, and, if also accompanied by a downgrade of AGRO's financial strength rating by A.M. Best Company, Inc. below A-, would also require AGRO to post, as of September 30, 2019, an estimated $11 million of collateral in respect of a different portion of AGRO’s Assumed Non-Financial Guaranty Business. AGRO’s ceded/retroceded contracts generally have equivalent provisions requiring the assuming reinsurer to post collateral and/or allowing AGRO to recapture the ceded/retroceded business upon certain triggering events, such as reinsurer rating downgrades.

Effect of Reinsurance

The following table presents the components of premiums and losses reported in the condensed consolidated statements of operations and the contribution of the Company's Assumed and Ceded Businesses (both financial guaranty and non-financial guaranty).

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Effect of Reinsurance on Statement of Operations

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Premiums Written:
Direct	$	67		$	57		$	156		$	192
Assumed (1)	2			(7		)	3			324
Ceded (2)	(1		)	1			12			14
Net	$	68		$	51		$	171		$	530
Premiums Earned:
Direct	$	113		$	127		$	317		$	400
Assumed	12			19			42			33
Ceded	(2		)	(4		)	(6		)	(10		)
Net	$	123		$	142		$	353		$	423
Loss and LAE:
Direct	$	28		$	18		$	82		$	53
Assumed	2			1			4			(7		)
Ceded	—			(2		)	(11		)	(3		)
Net	$	30		$	17		$	75		$	43

____________________

(1)    Negative assumed premiums written were due to changes in expected debt service schedules.

(2) Positive ceded premiums written were due to terminations, commutations and changes in expected debt service schedules.

Ceded Reinsurance (1)

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Ceded premium payable, net of commissions	$	19	$	26
Ceded expected loss to be recovered (paid)	14		14
Financial guaranty ceded par outstanding (2)	1,343		2,389
Non-financial guaranty ceded exposure (see Note 3)	275		239

____________________

(1) The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of September 30, 2019 and December 31, 2018 was approximately $69 million and $80 million, respectively. Such collateral is posted (i) in the case of certain reinsurers not authorized or "accredited" in the U.S., in order for the Company to receive credit for the liabilities ceded to such reinsurers in statutory financial statements, and (ii) in the case of certain reinsurers authorized in the U.S., on terms negotiated with the Company.

(2) Of the total par ceded to unrated or BIG rated reinsurers, $224 million and $236 million is rated BIG as of September 30, 2019 and December 31, 2018, respectively.

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Reinsurance of Syncora Guarantee Inc.’s Insured Portfolio

On June 1, 2018, the Company closed the SGI Transaction under which AGC assumed, generally on a 100% quota share basis, substantially all of SGI’s insured portfolio and AGM reassumed a book of business previously ceded to SGI by AGM. As of June 1, 2018, the net par value of exposures reinsured and commuted totaled approximately $12 billion (including credit derivative net par of approximately $1.5 billion). The reinsured portfolio consisted predominantly of public finance and infrastructure obligations that met AGC’s underwriting criteria and generated $330 million of gross written premiums. On June 1, 2018, as consideration, SGI paid $363 million and assigned to Assured Guaranty financial guaranty future insurance installment premiums of $45 million, and future credit derivative installments of approximately $17 million. The assumed portfolio from SGI included BIG contracts which had, as of June 1, 2018, expected losses to be paid of $131 million (present value basis using risk-free rates), which will be expensed over the expected terms of those contracts as unearned premium reserve amortizes. In connection with the SGI Transaction, the Company incurred and expensed $4 million in fees to professional advisors.

Additionally, beginning on June 1, 2018, on behalf of SGI, AGC began providing certain administrative services on the assumed portfolio, including surveillance, risk management and claims processing.

Commutations

Commutations of Ceded Reinsurance Contracts

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
Increase in net unearned premium reserve	$	—	$	4	$	15	$	64
Increase in net par outstanding	—		224		1,069		1,457
Commutation gains (losses)	—		1		1		(16		)

Excess of Loss Reinsurance Facility

     Effective January 1, 2018, AGC, AGM and MAC entered into a $400 million aggregate excess of loss reinsurance facility of which $180 million was placed with an unaffiliated reinsurer. This facility covers losses occurring either from January 1, 2018 through December 31, 2024, or January 1, 2019 through December 31, 2025, at the option of AGC, AGM and MAC. It terminates on January 1, 2020, unless AGC, AGM and MAC choose to extend it. It covers certain U.S. public finance exposures insured or reinsured by AGC, AGM and MAC as of September 30, 2017, excluding exposures that were rated below investment grade as of December 31, 2017 by Moody’s or S&P or internally by AGC, AGM or MAC and is subject to certain per credit limits. Among the exposures excluded are those associated with the Commonwealth of Puerto Rico and its related authorities and public corporations. The facility attaches when AGC’s, AGM’s and MAC’s net losses (net of AGC’s and AGM's reinsurance (including from affiliates) and net of recoveries) exceed $0.8 billion in the aggregate. The facility covers a portion of the next $400 million of losses, with the reinsurer assuming $180 million of the $400 million of losses and AGC, AGM and MAC jointly retaining the remaining $220 million. The reinsurer is required to be rated at least AA- or to post collateral sufficient to provide AGC, AGM and MAC with the same reinsurance credit as reinsurers rated AA-. AGC, AGM and MAC are each obligated to pay the reinsurer its share of recoveries relating to losses during the coverage period in the covered portfolio. AGC, AGM and MAC paid approximately $3.2 million of premiums in 2018 for the term January 1, 2018 through December 31, 2018 and approximately $3.2 million of premiums in 2019 for the term January 1, 2019 through December 31, 2019.

12.    Commitments and Contingencies

Leases

The Company is party to various non-cancelable lease agreements. The largest lease relates to approximately 103,500 square feet of office space in New York City, which expires in 2032. Subject to certain conditions, the Company has an option to renew this lease for an additional five years at a fair market rent. The Company also has leases for additional office and apartment space in several other locations which expire at various dates through 2029.

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Effective January 1, 2019, the Company adopted Topic 842, which requires the establishment of a right-of-use (ROU) asset and a lease liability on the balance sheet for operating leases. All of the Company’s leases are classified as operating leases; however, the Company made an accounting policy election not to apply the recognition requirements of Topic 842 to short-term leases with an initial term of 12 months or less. At the inception of a lease the total payments under a lease agreement are discounted utilizing an incremental borrowing rate that represents the Company’s collateralized borrowing rate. The rate was determined based on the remaining lease term as of the date of adoption. The Company does not include its renewal options in calculating the lease liability.

Operating lease expense is recognized on a straight-line basis over the lease term. Actual costs incurred related to non-lease components (i.e., common area maintenance, real estate taxes, building insurance and other operating expenses) for all the Company’s office leases are recorded as a variable lease expense in the period incurred.

The Company elected the package of practical expedients, which permits organizations not to reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification of expired or existing leases and (iii) initial direct costs for existing leases. The Company also elected the practical expedient to account for all lease components and their associated non-lease components as a single lease component and has allocated all of the contract consideration across lease components.

Upon adoption, the Company recognized lease liabilities of approximately $95 million, recorded in other liabilities, and ROU assets of approximately $69 million, recorded in other assets, and derecognized existing deferred rent and lease incentive liabilities of approximately $26 million, resulting in no cumulative-effect adjustment to retained earnings.

As of September 30, 2019, the ROU assets were $65 million and the lease liabilities were $90 million.

Components of Lease Expense

	Third Quarter 2019		Nine Months 2019
	(in millions)
Lease cost (1)	$	3	$	7
Cash paid for amounts included in the measurement of lease liabilities	3		7

 ____________________

(1) Variable and short-term lease costs are de minimis.

As of September 30, 2019, operating leases had a weighted average remaining lease term of 12.0 years and were discounted at a weighted average rate of 3.0%.

Future Minimum Rental Payments

	As of September 30, 2019
Year	(in millions)
2019 (remaining three months)	$	2
2020	9
2021	8
2022	8
2023	9
Thereafter	72
Total lease payments (1)	108
Less: imputed interest	18
Total operating lease liabilities	$	90

 ____________________

(1) At December 31, 2018, future lease payments were $9 million, $9 million, $8 million, $8 million, and $9 million for 2019 through 2023, respectively, and $72 million in aggregate for all years thereafter.

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Legal Proceedings

Lawsuits arise in the ordinary course of the Company’s business. It is the opinion of the Company’s management, based upon the information available, that the expected outcome of litigation against the Company, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position or liquidity, although an adverse resolution of litigation against the Company in a fiscal quarter or year could have a material adverse effect on the Company’s results of operations in a particular quarter or year.

In addition, in the ordinary course of their respective businesses, certain of AGL's subsidiaries are involved in litigation with third parties to recover losses paid in prior periods or prevent or reduce losses in the future. For example, the Company is involved in a number of legal actions in the Federal District Court for Puerto Rico to enforce or defend its rights with respect to the obligations it insures of Puerto Rico and various of its related authorities and public corporations. See "Exposure to Puerto Rico" section of Note 3, Outstanding Exposure, for a description of such actions. See "Recovery Litigation" section of Note 4, Expected Loss to be Paid, for a description of recovery litigation unrelated to Puerto Rico. The impact, if any, of these and other proceedings on the amount of recoveries the Company receives and losses it pays in the future is uncertain, and the impact of any one or more of these proceedings during any quarter or year could be material to the Company's results of operations in that particular quarter or year.

The Company also receives subpoenas duces tecum and interrogatories from regulators from time to time.

Litigation

On November 28, 2011, Lehman Brothers International (Europe) (in administration) (LBIE) sued AG Financial Products Inc. (AGFP), an affiliate of AGC which in the past had provided credit protection to counterparties under CDS. AGC acts as the credit support provider of AGFP under these CDS. LBIE’s complaint, which was filed in the Supreme Court of the State of New York, asserted a claim for breach of the implied covenant of good faith and fair dealing based on AGFP's termination of nine credit derivative transactions between LBIE and AGFP and asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing based on AGFP's termination of 28 other credit derivative transactions between LBIE and AGFP and AGFP's calculation of the termination payment in connection with those 28 other credit derivative transactions. Following defaults by LBIE, AGFP properly terminated the transactions in question in compliance with the agreement between AGFP and LBIE, and calculated the termination payment properly. AGFP calculated that LBIE owes AGFP approximately $4 million for the claims which were dismissed and approximately $25 million in connection with the termination of the other credit derivative transactions, whereas LBIE asserted in the complaint that AGFP owes LBIE a termination payment of approximately $1.4 billion. AGFP filed a motion to dismiss the claims for breach of the implied covenant of good faith in LBIE's complaint, and on March 15, 2013, the court granted AGFP's motion to dismiss in respect of the count relating to the nine credit derivative transactions and narrowed LBIE's claim with respect to the 28 other credit derivative transactions. LBIE's administrators disclosed in an April 10, 2015 report to LBIE’s unsecured creditors that LBIE's valuation expert has calculated LBIE's claim for damages in aggregate for the 28 transactions to range between a minimum of approximately $200 million and a maximum of approximately $500 million, depending on what adjustment, if any, is made for AGFP's credit risk and excluding any applicable interest. AGFP filed a motion for summary judgment on the remaining causes of action asserted by LBIE and on AGFP's counterclaims, and on July 2, 2018, the court granted in part and denied in part AGFP’s motion. The court dismissed, in its entirety, LBIE’s remaining claim for breach of the implied covenant of good faith and fair dealing and also dismissed LBIE’s claim for breach of contract solely to the extent that it is based upon AGFP’s conduct in connection with the auction. With respect to LBIE’s claim for breach of contract, the court held that there are triable issues of fact regarding whether AGFP calculated its loss reasonably and in good faith. On October 1, 2018, AGFP filed an appeal with the Appellate Division of the Supreme Court of the State of New York, First Judicial Department, seeking reversal of the portions of the lower court's ruling denying AGFP’s motion for summary judgment with respect to LBIE’s sole remaining claim for breach of contract. On January 17, 2019, the Appellate Division affirmed the Supreme Court's decision, holding that the lower court correctly determined that there are triable issues of fact regarding whether AGFP calculated its loss reasonably and in good faith. A trial has been scheduled to take place in March 2020.

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13.    Earnings Per Share

Computation of Earnings Per Share 

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions, except per share amounts)
Basic Earnings Per Share (EPS):
Net income (loss) attributable to AGL	$	69	$	161	$	265	$	433
Less: Distributed and undistributed income (loss) available to nonvested shareholders	—		1		—		1
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$	69	$	160	$	265	$	432
Basic shares	98.2		108.0		100.8		111.6
Basic EPS	$	0.71	$	1.48	$	2.63	$	3.87
Diluted EPS:
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$	69	$	160	$	265	$	432
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries	—		—		—		—
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted	$	69	$	160	$	265	$	432
Basic shares	98.2		108.0		100.8		111.6
Dilutive securities:
Options and restricted stock awards	0.7		1.3		0.8		1.3
Diluted shares	98.9		109.3		101.6		112.9
Diluted EPS	$	0.70	$	1.47	$	2.61	$	3.83
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect	—		—		—		0.1

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14. Shareholders' Equity

Other Comprehensive Income

The following tables present the changes in each component of AOCI and the effect of reclassifications out of AOCI on the respective line items in net income.

Changes in Accumulated Other Comprehensive Income by Component

Third Quarter 2019

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, June 30, 2019	$	301		$	51		$	(27	)	$	(38	)	$	8	295
Other comprehensive income (loss) before reclassifications	57			(21		)	(2		)	—			—		34
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	29			(12		)	—			—			—		17
Fair value gains (losses) on FG VIEs	—			—			(3		)	—			—		(3		)
Total before tax	29			(12		)	(3		)	—			—		14
Tax (provision) benefit	(5		)	—			1			—			—		(4		)
Total amount reclassified from AOCI, net of tax	24			(12		)	(2		)	—			—		10
Net current period other comprehensive income (loss)	33			(9		)	—			—			—		24
Balance, September 30, 2019	$	334		$	42		$	(27	)	$	(38	)	$	8	$	319

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Changes in Accumulated Other Comprehensive Income by Component

Third Quarter 2018

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, June 30, 2018	$	83		$	124		$	(31	)	$	(32	)	$	8	$	152
Other comprehensive income (loss) before reclassifications	(59		)	(16		)	(5		)	(3		)	—		(83		)
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	1			(8		)	—			—			—		(7		)
Fair value gains (losses) on FG VIEs	—			—			(2		)	—			—		(2		)
Total before tax	1			(8		)	(2		)	—			—		(9		)
Tax (provision) benefit	(1		)	1			—			—			—		—
Total amount reclassified from AOCI, net of tax	—			(7		)	(2		)	—			—		(9		)
Net current period other comprehensive income (loss)	(59		)	(9		)	(3		)	(3		)	—		(74		)
Balance, September 30, 2018	$	24		$	115		$	(34	)	$	(35	)	$	8	$	78

Changes in Accumulated Other Comprehensive Income by Component

Nine Months 2019

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, December 31, 2018	$	59		$	94		$	(31	)	$	(37	)	$	8	$	93
Other comprehensive income (loss) before reclassifications	312			(68		)	(6		)	(1		)	—		237
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	43			(30		)	—			—			—		13
Net investment income	2			14			—			—			—		16
Fair value gains (losses) on FG VIEs	—			—			(13		)	—			—		(13		)
Total before tax	45			(16		)	(13		)	—			—		16
Tax (provision) benefit	(8		)	—			3			—			—		(5		)
Total amount reclassified from AOCI, net of tax	37			(16		)	(10		)	—			—		11
Net current period other comprehensive income (loss)	275			(52		)	4			(1		)	—		226
Balance, September 30, 2019	$	334		$	42		$	(27	)	$	(38	)	$	8	$	319

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Changes in Accumulated Other Comprehensive Income by Component

Nine Months 2018

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, December 31, 2017	$	273		$	120		$	—		$	(29	)	$	8	$	372
Effect of adoption of ASU 2016-01 (1)	1			—			(33		)	—			—		(32		)
Other comprehensive income (loss) before reclassifications	(245		)	(21		)	(6		)	(6		)	—		(278		)
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	6			(19		)	—			—			—		(13		)
Fair value gains (losses) on FG VIEs	—			—			(6		)	—			—		(6		)
Total before tax	6			(19		)	(6		)	—			—		(19		)
Tax (provision) benefit	(1		)	3			1			—			—		3
Total amount reclassified from AOCI, net of tax	5			(16		)	(5		)	—			—		(16		)
Net current period other comprehensive income (loss)	(250		)	(5		)	(1		)	(6		)	—		(262		)
Balance, September 30, 2018	$	24		$	115		$	(34	)	$	(35	)	$	8	$	78

____________________

(1) On January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, resulting in a cumulative-effect reclassification of a $32 million loss, net of tax, from retained earnings to AOCI.

Share Repurchases

On February 27, 2019, the Board of Directors authorized the repurchase of $300 million of common shares and on August 7, 2019 authorized the repurchase of another $300 million of common shares. As of November 7, 2019, the Company was authorized to purchase $299 million of its common shares. The Company expects to repurchase shares from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program are at the discretion of management and will depend on a variety of factors, including funds available at the parent company, other potential uses for such funds, market conditions, the Company's capital position, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board of Directors at any time. It does not have an expiration date.

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Share Repurchases

Period	Number of Shares Repurchased	Total Payments (in millions)		Average Price Paid Per Share
2018 (January 1 - March 31)	2,787,936	$	98	$	35.20
2018 (April 1 - June 30)	4,163,190	152		36.48
2018 (July 1 - September 30)	3,299,049	130		39.41
2018 (October 1 - December 31)	2,992,932	120		40.09
Total 2018	13,243,107	$	500	$	37.76
2019 (January 1 - March 31)	1,908,605	79		41.62
2019 (April 1 - June 30)	2,519,130	111		43.89
2019 (July 1 - September 30)	3,400,677	150		44.11
2019 (October 1 - November 7)	1,276,692	59		45.98
Total 2019	9,105,104	$	399	$	43.79

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15. Subsidiary Information

The following tables present the condensed consolidating financial information for AGUS and AGMH, 100%-owned subsidiaries of AGL, which have issued publicly traded debt securities that are fully and unconditionally guaranteed by AGL. The information for AGL, AGUS and AGMH presents their subsidiaries on the equity method of accounting.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)		AGUS (Issuer) (1)		AGMH (Issuer)		Other Entities		Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Assets
Total investment portfolio and cash	$	41	$	416	$	24	$	10,655	$	(431	)	$	10,705
Investment in subsidiaries	6,531		5,898		4,135		204		(16,768		)	—
Premiums receivable, net of commissions payable	—		—		—		997		(153		)	844
Deferred acquisition costs	—		—		—		142		(35		)	107
Intercompany loan receivable	—		—		—		50		(50		)	—
FG VIEs’ assets, at fair value	—		—		—		469		—			469
Dividends receivable from affiliate	70		10		—		—		(80		)	—
Other	25		84		32		2,723		(1,622		)	1,242
Total assets	$	6,667	$	6,408	$	4,191	$	15,240	$	(19,139	)	$	13,367
Liabilities and shareholders' equity
Unearned premium reserves	$	—	$	—	$	—	$	4,228	$	(894	)	$	3,334
Loss and LAE reserve	—		—		—		1,251		(244		)	1,007
Long-term debt	—		844		474		4		(88		)	1,234
Intercompany loan payable	—		50		—		300		(350		)	—
Credit derivative liabilities	—		—		—		249		(35		)	214
FG VIEs’ liabilities, at fair value	—		—		—		493		—			493
Dividends payable to affiliate	—		70		10		—		(80		)	—
Other	15		75		71		894		(622		)	433
Total liabilities	15		1,039		555		7,419		(2,313		)	6,715
Total shareholders' equity attributable to Assured Guaranty Ltd.	6,652		5,369		3,636		7,617		(16,622		)	6,652
Noncontrolling interest	—		—		—		204		(204		)	—
Total shareholders' equity	6,652		5,369		3,636		7,821		(16,826		)	6,652
Total liabilities and shareholders' equity	$	6,667	$	6,408	$	4,191	$	15,240	$	(19,139	)	$	13,367

 ____________________

(1) The fair value of the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $131 million.

80

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)		AGUS (Issuer) (1)		AGMH (Issuer)		Other Entities		Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Assets
Total investment portfolio and cash	$	45	$	334	$	23	$	11,000	$	(425	)	$	10,977
Investment in subsidiaries	6,440		5,835		3,991		226		(16,492		)	—
Premiums receivable, net of commissions payable	—		—		—		1,071		(167		)	904
Deferred acquisition costs	—		—		—		143		(38		)	105
Deferred tax asset, net	—		—		—		162		(94		)	68
Intercompany loan receivable	—		—		—		50		(50		)	—
FG VIEs’ assets, at fair value	—		—		—		569		—			569
Dividends receivable from affiliate	60		—		—		—		(60		)	—
Other	29		66		24		2,437		(1,576		)	980
Total assets	$	6,574	$	6,235	$	4,038	$	15,658	$	(18,902	)	$	13,603
Liabilities and shareholders' equity
Unearned premium reserves	$	—	$	—	$	—	$	4,452	$	(940	)	$	3,512
Loss and LAE reserve	—		—		—		1,467		(290		)	1,177
Long-term debt	—		844		468		5		(84		)	1,233
Intercompany loan payable	—		50		—		300		(350		)	—
Credit derivative liabilities	—		—		—		236		(27		)	209
Deferred tax liabilities, net	—		49		50		—		(99		)	—
FG VIEs’ liabilities, at fair value	—		—		—		619		—			619
Dividends payable to affiliate	—		60		—		—		(60		)	—
Other	19		3		17		763		(504		)	298
Total liabilities	19		1,006		535		7,842		(2,354		)	7,048
Total shareholders' equity attributable to Assured Guaranty Ltd.	6,555		5,229		3,503		7,590		(16,322		)	6,555
Noncontrolling interest	—		—		—		226		(226		)	—
Total shareholders' equity	6,555		5,229		3,503		7,816		(16,548		)	6,555
Total liabilities and shareholders' equity	$	6,574	$	6,235	$	4,038	$	15,658	$	(18,902	)	$	13,603

 ____________________

(1) The fair value of the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $125 million.

81

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	126		$	(3	)	$	123
Net investment income	—			2			—			91			(5		)	88
Net realized investment gains (losses)	—			—			—			16			—			16
Net change in fair value of credit derivatives	—			—			—			5			—			5
Other	3			—			—			20			(49		)	(26		)
Total revenues	3			2			—			258			(57		)	206
Expenses
Loss and LAE	—			—			—			32			(2		)	30
Amortization of deferred acquisition costs	—			—			—			4			(1		)	3
Interest expense	—			12			13			3			(6		)	22
Other operating expenses	10			1			—			103			(49		)	65
Total expenses	10			13			13			142			(58		)	120
Equity in net earnings of investees	—			—			—			—			—			—
Income (loss) before income taxes and equity in net earnings of subsidiaries	(7		)	(11		)	(13		)	116			1			86
Total (provision) benefit for income taxes	—			3			2			(21		)	(1		)	(17		)
Equity in net earnings of subsidiaries	76			71			52			5			(204		)	—
Net income (loss)	$	69		$	63		$	41		$	100		$	(204	)	$	69
Less: noncontrolling interest	—			—			—			5			(5		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	69		$	63		$	41		$	95		$	(199	)	$	69
Comprehensive income (loss)	$	93		$	73		$	38		$	124		$	(235	)	$	93

82

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	146		$	(4	)	$	142
Net investment income	—			2			—			101			(4		)	99
Net realized investment gains (losses)	—			—			—			(7		)	—			(7		)
Net change in fair value of credit derivatives	—			—			—			21			—			21
Other	3			—			—			72			(55		)	20
Total revenues	3			2			—			333			(63		)	275
Expenses
Loss and LAE	—			—			—			18			(1		)	17
Amortization of deferred acquisition costs	—			—			—			5			(2		)	3
Interest expense	—			13			13			2			(5		)	23
Other operating expenses	10			6			(1		)	93			(52		)	56
Total expenses	10			19			12			118			(60		)	99
Equity in net earnings of investees	—			—			—			(1		)	—			(1		)
Income (loss) before income taxes and equity in net earnings of subsidiaries	(7		)	(17		)	(12		)	214			(3		)	175
Total (provision) benefit for income taxes	—			45			3			(58		)	(4		)	(14		)
Equity in net earnings of subsidiaries	168			111			108			7			(394		)	—
Net income (loss)	$	161		$	139		$	99		$	163		$	(401	)	$	161
Less: noncontrolling interest	—			—			—			7			(7		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	161		$	139		$	99		$	156		$	(394	)	$	161
Comprehensive income (loss)	$	87		$	76		$	61		$	92		$	(229	)	$	87

83

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	361		$	(8	)	$	353
Net investment income	—			8			—			302			(14		)	296
Net realized investment gains (losses)	—			—			—			12			—			12
Net change in fair value of credit derivatives	—			—			—			(25		)	—			(25		)
Other	7			—			—			179			(155		)	31
Total revenues	7			8			—			829			(177		)	667
Expenses
Loss and LAE	—			—			—			84			(9		)	75
Amortization of deferred acquisition costs	—			—			—			16			(3		)	13
Interest expense	—			37			40			8			(18		)	67
Other operating expenses	30			3			—			308			(152		)	189
Total expenses	30			40			40			416			(182		)	344
Equity in net earnings of investees	—			—			—			3			—			3
Income (loss) before income taxes and equity in net earnings of subsidiaries	(23		)	(32		)	(40		)	416			5			326
Total (provision) benefit for income taxes	—			7			8			(74		)	(2		)	(61		)
Equity in net earnings of subsidiaries	288			275			215			14			(792		)	—
Net income (loss)	$	265		$	250		$	183		$	356		$	(789	)	$	265
Less: noncontrolling interest	—			—			—			14			(14		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	265		$	250		$	183		$	342		$	(775	)	$	265
Comprehensive income (loss)	$	491		$	388		$	299		$	584		$	(1,271	)	$	491

84

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	434		$	(11	)	$	423
Net investment income	—			6			—			301			(10		)	297
Net realized investment gains (losses)	—			—			—			(14		)	—			(14		)
Net change in fair value of credit derivatives	—			—			—			103			—			103
Other	9			—			—			137			(167		)	(21		)
Total revenues	9			6			—			961			(188		)	788
Expenses
Loss and LAE	—			—			—			48			(5		)	43
Amortization of deferred acquisition costs	—			—			—			16			(4		)	12
Interest expense	—			37			40			7			(13		)	71
Other operating expenses	30			9			—			293			(149		)	183
Total expenses	30			46			40			364			(171		)	309
Equity in net earnings of investees	—			—			—			—			—			—
Income (loss) before income taxes and equity in net earnings of subsidiaries	(21		)	(40		)	(40		)	597			(17		)	479
Total (provision) benefit for income taxes	—			50			9			(103		)	(2		)	(46		)
Equity in net earnings of subsidiaries	454			336			219			20			(1,029		)	—
Net income (loss)	$	433		$	346		$	188		$	514		$	(1,048	)	$	433
Less: noncontrolling interest	—			—			—			20			(20		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	433		$	346		$	188		$	494		$	(1,028	)	$	433
Comprehensive income (loss)	$	171		$	150		$	54		$	255		$	(459	)	$	171

85

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Net cash flows provided by (used in) operating activities	$	408		$	217		$	157		$	(280	)	$	(867	)	$	(365	)
Cash flows from investing activities
Fixed-maturity securities:
Purchases	—			(3		)	—			(688		)	3			(688		)
Sales	—			—			—			1,306			—			1,306
Maturities and paydowns	—			4			7			653			—			664
Short-term investments with maturities of over three months:
Purchases	—			—			—			(216		)	—			(216		)
Sales	—			—			—			2			—			2
Maturities and paydowns	—			12			—			194			—			206
Net sales (purchases) of short-term investments with maturities of less than three months	4			(90		)	(3		)	(315		)	—			(404		)
Net proceeds from paydowns on FG VIEs’ assets	—			—			—			119			—			119
Net proceeds from sales of FG VIEs’ assets	—			—			—			51			—			51
Proceeds from stock redemption and return of capital from subsidiaries	—			100			—			10			(110		)	—
Other	—			—			—			30			—			30
Net cash flows provided by (used in) investing activities	4			23			4			1,146			(107		)	1,070
Cash flows from financing activities
Return of capital	—			—			—			(10		)	10			—
Dividends paid	(56		)	(237		)	(156		)	(474		)	867			(56		)
Repurchases of common stock	(340		)	—			—			(100		)	100			(340		)
Net paydowns of FG VIEs’ liabilities	—			—			—			(162		)	—			(162		)
Paydown of long-term debt	—			—			—			(1		)	(3		)	(4		)
Other	(16		)	—			—			—			—			(16		)
Net cash flows provided by (used in) financing activities	(412		)	(237		)	(156		)	(747		)	974			(578		)
Effect of exchange rate changes	—			—			—			(2		)	—			(2		)
Increase (decrease) in cash and restricted cash	—			3			5			117			—			125
Cash and restricted cash at beginning of period	—			1			—			103			—			104
Cash and restricted cash at end of period	$	—		$	4		$	5		$	220		$	—		$	229

86

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Net cash flows provided by (used in) operating activities	$	454		$	101		$	126		$	448		$	(777	)	$	352
Cash flows from investing activities
Fixed-maturity securities:
Purchases	—			(76		)	(12		)	(1,462		)	72			(1,478		)
Sales	—			31			8			869			—			908
Maturities and paydowns	—			28			—			718			—			746
Short-term investments with maturities of over three months:
Purchases	—			—			—			(148		)	—			(148		)
Sales	—			—			—			1			—			1
Maturities and paydowns	—			—			—			136			—			136
Net sales (purchases) of short-term investments with maturities of less than three months	(11		)	60			(74		)	(55		)	—			(80		)
Net proceeds from paydowns on FG VIEs’ assets	—			—			—			90			—			90
Proceeds from stock redemption and return of capital from subsidiaries	—			200			—			—			(200		)	—
Other	—			(15		)	—			34			—			19
Net cash flows provided by (used in) investing activities	(11		)	228			(78		)	183			(128		)	194
Cash flows from financing activities
Dividends paid	(55		)	(362		)	(50		)	(365		)	777			(55		)
Repurchases of common stock	(380		)	—			—			(200		)	200			(380		)
Net paydowns of FG VIEs’ liabilities	—			—			—			(90		)	—			(90		)
Paydown of long-term debt	—			—			—			(1		)	(72		)	(73		)
Other	(8		)	—			—			—			—			(8		)
Net cash flows provided by (used in) financing activities	(443		)	(362		)	(50		)	(656		)	905			(606		)
Effect of exchange rate changes	—			—			—			(2		)	—			(2		)
Increase (decrease) in cash and restricted cash	—			(33		)	(2		)	(27		)	—			(62		)
Cash and restricted cash at beginning of period	—			33			2			109			—			144
Cash and restricted cash at end of period	$	—		$	—		$	—		$	82		$	—		$	82

87

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Form 10-Q contains information that includes or is based upon forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements give the expectations or forecasts of future events of Assured Guaranty Ltd. (AGL) and its subsidiaries (collectively with AGL, Assured Guaranty or the Company). These statements can be identified by the fact that they do not relate strictly to historical or current facts and relate to future operating or financial performance.

Any or all of Assured Guaranty’s forward looking statements herein are based on current expectations and the current economic environment and may turn out to be incorrect. Assured Guaranty’s actual results may vary materially. Among factors that could cause actual results to differ adversely are:

• reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance;

• rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of AGL or any of its subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s subsidiaries have insured;

• developments in the world’s financial and capital markets that adversely affect obligors’ payment rates or Assured Guaranty’s loss experience;

• the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures;

• the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates;

• increased competition, including from new entrants into the financial guaranty industry;

• rating agency action on obligors, including sovereign debtors, resulting in a reduction in the value of securities in Assured Guaranty's investment portfolio and in collateral posted by and to Assured Guaranty;

• the inability of Assured Guaranty to access external sources of capital on acceptable terms;

• changes in the world’s credit markets, segments thereof, interest rates or general economic conditions;

• the impact of market volatility on the mark-to-market of Assured Guaranty’s assets and liabilities subject to mark-to-market, including certain of its investments, most of its contracts written in credit default swap (CDS) form, and variable interest entities (VIEs);

• changes in applicable accounting policies or practices;

• changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions;

• the impact of changes in the world’s economy and credit and currency markets and in applicable laws or regulations relating to the decision of the United Kingdom (U.K.) to exit the European Union (EU);

• the impact of Assured Guaranty's acquisition (BlueMountain Acquisition) of all of the outstanding equity interests in BlueMountain Capital Management, LLC (BlueMountain) and its associated entities on the Company and its relationships with its investors, regulators, rating agencies, employees and the obligors it insures and on the business of BlueMountain and its relationships with its clients and employees;

• the failure of Assured Guaranty to successfully integrate the business of BlueMountain;

88

• the possibility that acquisitions made by Assured Guaranty, including its BlueMountain Acquisition, do not result in the benefits anticipated or subject Assured Guaranty to unanticipated consequences;

• the possibility that investments made by Assured Guaranty for its investment portfolio, including alternative investments and investments in BlueMountain-managed funds, collateralized loan obligations (CLOs) and separately managed accounts, do not result in the benefits anticipated or subject Assured Guaranty to reduced liquidity at a time it requires liquidity or to unanticipated consequences;

• difficulties with the execution of Assured Guaranty’s business strategy;

• loss of key personnel;

• the effects of mergers, acquisitions and divestitures;

• natural or man-made catastrophes;

• other risk factors identified in AGL’s filings with the United States (U.S.) Securities and Exchange Commission (the SEC);

• other risks and uncertainties that have not been identified at this time; and

• management’s response to these factors.

The foregoing review of important factors should not be construed as exhaustive, and should be read in conjunction with the other cautionary statements that are included in this Form 10-Q, as well as the risk factors included in AGL's 2018 Annual Report on Form 10-K. The Company undertakes no obligation to update publicly or review any forward looking statement, whether as a result of new information, future developments or otherwise, except as required by law. Investors are advised, however, to consult any further disclosures the Company makes on related subjects in the Company’s reports filed with the SEC.

If one or more of these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may vary materially from what the Company projected. Any forward looking statements in this Form 10-Q reflect the Company’s current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to its operations, results of operations, growth strategy and liquidity.

For these statements, the Company claims the protection of the safe harbor for forward looking statements contained in Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act).

Available Information

The Company maintains an Internet web site at www.assuredguaranty.com. The Company makes available, free of charge, on its web site (under www.assuredguaranty.com/sec-filings) the Company's annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13 (a) or 15 (d) of the Exchange Act as soon as reasonably practicable after the Company files such material with, or furnishes it to, the SEC. The Company also makes available, free of charge, through its web site (under www.assuredguaranty.com/governance) links to the Company's Corporate Governance Guidelines, its Code of Conduct, AGL's Bye-Laws and the charters for its Board committees. In addition, the SEC maintains an Internet site (at www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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The Company routinely posts important information for investors on its web site (under www.assuredguaranty.com/company-statements and, more generally, under the Investor Information tab at www.assuredguaranty.com/investor-information and Businesses tab at www.assuredguaranty.com/businesses). The Company uses this web site as a means of disclosing material information and for complying with its disclosure obligations under SEC Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Company Statements, Investor Information and Businesses portions of the Company's web site, in addition to following the Company's press releases, SEC filings, public conference calls, presentations and webcasts.

The information contained on, or that may be accessed through, the Company's web site is not incorporated by reference into, and is not a part of, this report.

Executive Summary

This executive summary of management’s discussion and analysis highlights selected information and may not contain all of the information that is important to readers of this Quarterly Report. For a more detailed description of events, trends and uncertainties, as well as the capital, liquidity, credit, operational and market risks and the critical accounting policies and estimates affecting the Company, this Quarterly Report should be read in its entirety and in addition to AGL's 2018 Annual Report on Form 10-K.

Economic Environment

The positive economic momentum in the U.S. since the beginning of 2016 continued through September 30, 2019. According to the U.S. Bureau of Labor Statistics (BLS), after revisions, job gains averaged 188,000 per month over the three-month period ended September 30, 2019 (Third Quarter 2019). Job growth has averaged 161,000 per month as of September 30, 2019, compared with an average monthly gain of 223,000 in 2018. Additionally, the BLS estimated that, at the end of the quarter, the unemployment rate stood at 3.5%. The Bureau of Economic Analysis (BEA) latest data showed that real gross domestic product (GDP) increased at an annual rate of 2.0% in the second quarter of 2019 and 1.9% in Third Quarter 2019.

At the September 2019 Federal Open Market Committee (FOMC) meeting, the FOMC decided to lower the target range for the federal funds rate to 1.75% - 2.0%. In their press release, the FOMC cited as justification for the rate cut the following: “In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1.75% to 2.0%. At the October 2019 FOMC meeting, the FOMC lowered the target range for the federal funds rate further to 1.5% to 1.75%, pointing to “overall inflation and inflation for items other than food and energy are running below 2.0% [and] market-based measures of inflation compensation remain low.” In both the September and October 2019 FOMC statements, the FOMC justified the cuts as “support[ing] the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2.0% objective are the most likely outcomes, but uncertainties about this outlook remain.”

This quarter, municipal interest rates reached new lows and credit spreads tightened further. The average spread between the “AAA” and “A” 20-year MMD GO during the quarter was 35.8 basis points (bps), compared to 50.1 bps for the full year 2018. The “AAA” 30-year MMD benchmark yields reached 1.83% on August 28, 2019, the lowest yield since the benchmark was first published in June 1981.  See Key Business Strategies, Insurance, Growth of Insurance Portfolio section below for the impact of the low interest rate environment and relatively tight U.S. municipal credit spreads on the demand for bond insurance.

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.2% annual gain in August 2019, the latest data available, while the 20-City Composite posted a 2.0% year-over-year gain. The data released for August 2019 shows that the rate of home price increases across the U.S. has continued to slow. See Item 1, Financial Statements, Note 4, Expected Loss to be Paid, for a discussion of the residential market assumptions used in determining expected losses for U.S. residential mortgage-backed securities (RMBS).

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Financial Performance of Assured Guaranty

Financial Results

 

	Third Quarter						Nine Months
	2019			2018			2019		2018
	(in millions, except per share amounts)
GAAP Highlights
Net income (loss)	$	69		$	161		$	265	$	433
Net income (loss) per diluted share	0.70			1.47			2.61		3.83
Weighted average diluted shares	98.9			109.3			101.6		112.9
Gross written premiums (GWP)	69			50			159		516
Non-GAAP Highlights(1)
Non-GAAP operating income(1)	$	77		$	161		$	304	$	390
Gain (loss) related to the effect of consolidating financial guaranty variable interest entities (FG VIE consolidation) included in non-GAAP operating income	(2		)	(2		)	4		(1		)
Non-GAAP operating income (1) per diluted share	0.79			1.47			3.00		3.45
Gain (loss) related to FG VIE consolidation included in non-GAAP operating income per diluted share	(0.01		)	(0.02		)	0.04		(0.01		)
Present value of new business production (PVP) (1)	81			52			177		567
Gross par written	4,909			3,001			11,799		19,774

	As of September 30, 2019				As of December 31, 2018
	Amount		Per Share		Amount			Per Share
	(in millions, except per share amounts)
Shareholders' equity	$	6,652	$	68.94	$	6,555		$	63.23
Non-GAAP operating shareholders' equity (1)	6,222		64.48		6,342			61.17
Non-GAAP adjusted book value (1)	8,702		90.18		8,922			86.06
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity	12		0.12		3			0.03
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value	—		—		(15		)	(0.15		)
Common shares outstanding (2)	96.5				103.7

____________________

(1) See “—Non-GAAP Financial Measures” for a definition of the financial measures that were not determined in accordance with accounting principles generally accepted in the United States of America (GAAP) and a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP measure, if available.

See “—Non-GAAP Financial Measures” for additional details.

(2) See "Key Business Strategies – Capital Management" below for information on common share repurchases.

Several primary drivers of volatility in net income or loss are not necessarily indicative of credit impairment or improvement, or ultimate economic gains or losses such as: changes in credit spreads of insured credit derivative obligations, changes in fair value of assets and liabilities of financial guaranty variable interest entities (FG VIEs), and committed capital securities (CCS), changes in fair value of credit derivatives related to the Company's own credit spreads, and changes in risk-free rates used to discount expected losses. Changes in the Company's and/or collateral credit spreads generally have the most significant effect on the fair value of credit derivatives and FG VIEs’ assets and liabilities.

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Other factors that drive volatility in net income include: changes in expected claims and recoveries, the amount and timing of the refunding and/or termination of insured obligations, realized gains and losses on the investment portfolio (including other-than-temporary impairments (OTTI)), changes in foreign exchange rates, the effects of large settlements, commutations, acquisitions, the effects of the Company's various loss mitigation strategies, and changes in laws and regulations, among others, may also have a significant effect on reported net income or loss in a given reporting period. 

Third Quarter 2019

Net income for Third Quarter 2019 was $69 million, compared with $161 million for the three-month period ended September 30, 2018 (Third Quarter 2018). Third Quarter 2018 net income included a $31 million pretax gain related to the Company's minority interest in the parent company of TMC Bonds LLC, which it sold in Third Quarter 2018. In addition, Third Quarter 2019 net income was lower than Third Quarter 2018 due to lower net earned premiums, lower fair value gains on credit derivatives, higher loss and loss adjustment expenses (LAE), higher fair value losses on CCS and a higher effective tax rate, as described below.

• Net earned premiums were $123 million in Third Quarter 2019, compared with $142 million in Third Quarter 2018. The decline in net earned premiums was consistent with the Company's reduced insurance portfolio. Accelerations of net earned premiums due to refundings and terminations were $37 million in Third Quarter 2019, compared with $40 million in Third Quarter 2018.

• Fair value gains on credit derivatives were $5 million in Third Quarter 2019, primarily due to price improvements on the underlying collateral of certain public finance transactions, partially offset by losses on certain structured finance transactions. Fair value gains on credit derivatives were $21 million in Third Quarter 2018 which were primarily attributable to price improvements on the underlying collateral. Except for credit impairment, the fair value adjustments on credit derivatives in the insured portfolio are non-economic adjustments that reverse to zero over the remaining term of that portfolio.

• Loss and LAE was $30 million in Third Quarter 2019, compared with $17 million in Third Quarter 2018. In both periods loss and LAE mainly consisted of loss development on Puerto Rico exposures, partially offset by a benefit in U.S. RMBS transactions.

• Fair value losses on CCS recorded in other income of $14 million in Third Quarter 2019 were primarily due to a tightening in market spreads during the quarter. Fair value losses on CCS were $1 million in Third Quarter 2018.

• The effective tax rate in Third Quarter 2019 was 19.2% compared with 8.3% in Third Quarter 2018. The effective tax rate fluctuates from period to period based on the proportion of income in different tax jurisdictions.

These decreases were offset in part by realized gains in Third Quarter 2019, as described below.

• Realized gains on the investment portfolio were $16 million in Third Quarter 2019, primarily attributable to the sale of Puerto Rico Sales Tax Financing Corporation (COFINA) Exchange Senior Bonds, compared with realized losses in Third Quarter 2018 of $7 million, which were mainly attributable to OTTI.

Non-GAAP operating income was $77 million in Third Quarter 2019, compared with $161 million in Third Quarter 2018. Similar to net income results, non-GAAP operating income decreased mainly due to a non-recurring gain in Third Quarter 2018 on its TMC Bonds LLC investment, as well as higher losses, lower net earned premiums and a higher effective tax rate in Third Quarter 2019.

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Nine Months 2019

Net income for the nine-month period ended September 30, 2019 (Nine Months 2019) was $265 million, compared with $433 million for the nine-month period ended September 30, 2018 (Nine Months 2018). Net income decreased mainly due to fair value losses on credit derivatives in Nine Months 2019, compared with gains in Nine Months 2018, lower net earned premiums, higher loss and LAE, a $31 million gain in Third Quarter 2018 related to the Company's sale of its minority interest in the parent company of TMC Bonds LLC and a higher effective tax rate, as described below.

• Fair value losses on credit derivatives were $25 million in Nine Months 2019 and were primarily due to wider implied net spreads driven by the decreased market cost to buy protection in Assured Guaranty Corp.'s (AGC) name during the period. Fair value gains on credit derivatives were $103 million in Nine Months 2018, primarily attributable to the increase in credit given to the primary insurer on one of the Company's second-to-pay CDS policies, CDS terminations, and price improvements on the underlying collateral of the Company’s CDS.

• Net earned premiums were $353 million in Nine Months 2019, compared with $423 million in Nine Months 2018; the decline was primarily due to lower accelerations of net earned premiums from refundings and terminations and the Company's reduced insurance portfolio. Accelerations were $83 million in Nine Months 2019, compared with $131 million in Nine Months 2018.

• Loss and LAE was an expense of $75 million in Nine Months 2019, mainly driven by higher losses on certain Puerto Rico exposures, partially offset by a benefit on U.S. RMBS exposures. Loss and LAE was an expense of $43 million in Nine Months 2018, mainly driven by higher losses on certain Puerto Rico exposures, partially offset by the reduction of loss reserves on the City of Hartford, Connecticut exposure and a benefit on U.S. RMBS exposures.

• The effective tax rate in Nine Months 2019 was 18.6% compared with 9.7% in Nine Months 2018. The effective tax rate fluctuates from period to period based on the proportion of income in different tax jurisdictions.

These decreases were offset in part by higher fair value gains on FG VIEs in Nine Months 2019, net realized gains in Nine Months 2019 compared with losses in Nine Months 2018 and lower debt extinguishment losses in Nine Months 2019 compared with Nine Months 2018.

• FG VIEs gains were $42 million in Nine Months 2019, primarily attributable to higher recoveries on second lien U.S. RMBS FG VIEs' assets, compared with gains of $11 million in Nine Months 2018.

• Net realized investment gains were $12 million in Nine Months 2019, primarily attributable to the sale of COFINA Exchange Senior Bonds. Net realized investment losses were $14 million in Nine Months 2018 mainly attributable to OTTI.

• Loss on extinguishment of debt was $1 million in Nine Months 2019, compared with $26 million in Nine Months 2018. The loss on extinguishment of debt is related to the purchase by Assured Guaranty US Holdings Inc. (AGUS) of a portion of the principal amount outstanding of Junior Subordinated Debentures of Assured Guaranty Municipal Holdings Inc. (AGMH). In Nine Months 2019 and Nine Months 2018, AGUS purchased $3 million and $72 million, respectively, of principal.

Non-GAAP operating income was $304 million in Nine Months 2019, compared with $390 million in Nine Months 2018. Non-GAAP operating income declined mainly due to lower net earned premiums, higher loss expense, a gain in Third Quarter 2018 related to the Company's sale of its minority interest in the parent company of TMC Bonds LLC and a higher effective tax rate, offset in part by higher fair value gains on FG VIEs in Nine Months 2019 and higher commutation and debt extinguishment losses in Nine Months 2018.

Shareholders' equity increased since December 31, 2018 primarily due to unrealized gains on available for sale investment securities and net income, partially offset by share repurchases and dividends. Non-GAAP operating shareholders' equity decreased in Nine Months 2019 as non-GAAP operating income was offset mainly by share repurchases and dividends. Non-GAAP adjusted book value decreased in Nine Months 2019 primarily due to share repurchases and dividends, partially offset by new direct business production.

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Shareholders' equity per share, non-GAAP operating shareholders' equity per share and non-GAAP adjusted book value per share all increased in Nine Months 2019, and benefited from the repurchase of an additional 7.8 million shares in Nine Months 2019 under the share repurchase program that began in 2013. See "Accretive Effect of Cumulative Repurchases" table below.

Key Business Strategies

The Company continually evaluates its business strategies. For example, with the BlueMountain Acquisition the Company has increased its focus on asset management and alternative investments. Currently, the Company is pursuing the following key business strategies in three areas:

• Insurance

• Asset Management and Alternative Investments

• Capital Management

Insurance

The Company seeks to grow the insurance business through new business production, acquisitions of legacy monolines and reinsurance transactions, and to continue to mitigate losses in its current insured portfolio.

Growth of the Insured Portfolio

The Company seeks to grow its insurance portfolio through new business production in each of its three markets: U.S. public finance, international infrastructure and global structured finance. The Company believes high-profile defaults by municipal obligors, such as Puerto Rico, Detroit, Michigan and Stockton, California have led to increased awareness of the value of bond insurance and stimulated demand for the product. The Company believes there will be continued demand for its insurance in this market because, for those exposures that the Company guarantees, it undertakes the tasks of credit selection, analysis, negotiation of terms, surveillance and, if necessary, loss mitigation. The Company believes that its insurance:

• encourages retail investors, who typically have fewer resources than the Company for analyzing municipal bonds, to purchase such bonds;

• enables institutional investors to operate more efficiently; and

• allows smaller, less well-known issuers to gain market access on a more cost-effective basis.

On the other hand, the persistently low interest rate environment and relatively tight U.S. municipal credit spreads have dampened demand for bond insurance, and provisions in legislation known as the 2017 Tax Cuts and Jobs Act, such as the termination of the tax-exempt status of advance refunding bonds and the reduction in corporate tax rates, have resulted in a reduction of supply and made municipal obligations less attractive to certain institutional investors.

In certain segments of the global infrastructure and structured finance markets the Company believes its financial guaranty product is competitive with other financing options. For example, certain investors may receive advantageous capital requirement treatment with the addition of the Company’s guaranty. The Company considers its involvement in both international infrastructure and structured finance transactions to be beneficial because such transactions diversify both the Company's business opportunities and its risk profile beyond U.S. public finance. Quarterly business activity in the international infrastructure and structured finance sectors is influenced by typically long lead times and therefore may vary from quarter to quarter.

The Company also considers opportunities to acquire financial guaranty portfolios, whether by acquiring financial guarantors who are no longer actively writing new business or their insured portfolios. These transactions enable the Company to improve its future earnings and deploy excess capital.

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U.S. Municipal Market Data and Bond Insurance Penetration Rates (1)

Based on Sale Date

 

	Nine Months 2019			Nine Months 2018			Year Ended December 31, 2018
	(dollars in billions, except number of issues and percent)
Par:
New municipal bonds issued	$	267.5		$	239.2		$	320.3
Total insured	$	15.6		$	13.3		$	18.9
Insured by Assured Guaranty	$	8.8		$	7.5		$	10.5
Number of issues:
New municipal bonds issued	7,313			6,398			8,555
Total insured	1,227			928			1,246
Insured by Assured Guaranty	616			442			596
Bond insurance market penetration based on:
Par	5.8		%	5.6		%	5.9		%
Number of issues	16.8		%	14.5		%	14.6		%
Single A par sold	21.6		%	17.4		%	17.8		%
Single A transactions sold	55.8		%	53.0		%	52.8		%
$25 million and under par sold	18.4		%	17.7		%	17.2		%
$25 million and under transactions sold	20.3		%	17.1		%	17.1		%

____________________

(1) Source: The amounts in the table are those reported by Thomson Reuters. The table excludes Corporate-CUSIP healthcare and project finance transactions insured by Assured Guaranty, which the company also considers to be public finance business.

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Gross Written Premiums and

New Business Production

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
GWP
Public Finance—U.S.	$	46	$	24	$	119	$	227
Public Finance—non-U.S.	20		17		34		111
Structured Finance—U.S.	2		9		4		168
Structured Finance—non-U.S.	1		—		2		10
Total GWP	$	69	$	50	$	159	$	516
PVP (1):
Public Finance—U.S.	$	46	$	33	$	122	$	302
Public Finance—non-U.S.	13		12		24		91
Structured Finance—U.S.	19		7		27		165
Structured Finance—non-U.S. (2)	3		—		4		9
Total PVP	$	81	$	52	$	177	$	567
Gross Par Written (1):
Public Finance—U.S.	$	4,212	$	2,338	$	9,885	$	15,017
Public Finance—non-U.S.	237		189		712		3,721
Structured Finance—U.S.	438		473		1,159		877
Structured Finance—non-U.S. (2)	22		1		43		159
Total gross par written	$	4,909	$	3,001	$	11,799	$	19,774
Average rating on new business written	A-		BBB+		A-		A-

____________________

(1) PVP and Gross Par Written in the table above are based on "close date," when the transaction settles. See “– Non-GAAP Financial Measures – PVP or Present Value of New Business Production.”

(2)    Includes aircraft residual value insurance policies.

GWP relates to both financial guaranty insurance and non-financial guaranty insurance contracts. Credit derivatives are accounted for at fair value and therefore not included in GWP. Financial guaranty GWP includes amounts collected upfront on new business written, the present value of future premiums on new business written (discounted at risk-free rates), as well as the effects of changes in the estimated lives of transactions in the inforce book of business. Non-financial guaranty GWP is recorded as premiums are received. Non-GAAP PVP, on the other hand, includes upfront premiums and estimated future installments on new business at the time of issuance, discounted at 6% for all contracts whether in insurance or credit derivative form.

Third Quarter 2019

GWP increased $19 million in Third Quarter 2019, compared with Third Quarter 2018, primarily due to a large U.S. public finance healthcare transaction in Third Quarter 2019. PVP also increased by $29 million in Third Quarter 2019, compared with Third Quarter 2018, primarily due to that large U.S. public finance healthcare transaction as well as a committed insurance reserve financing transaction in the U.S. structured finance sector. In Third Quarter 2019, Assured Guaranty once again guaranteed the majority of the insured U.S. public finance par issued and maintained an average rating on new business of A-, based on par.

In Third Quarter 2019, the Company guaranteed a debt financing for the construction of a university student accommodation in the U.K. This is the sixteenth consecutive quarter, the Company generated non-U.S. GWP and PVP.

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Nine Months 2019

In Nine Months 2019, GWP was $159 million compared with $516 million in Nine Months 2018, and PVP was $177 million compared with $567 million. GWP and PVP for Nine Months 2018 included the assumption of substantially all of the insured portfolio of Syncora Guarantee Inc. (SGI) (SGI Transaction) which was the primary driver of the variance in GWP, PVP and gross par written between Nine Months 2019 and Nine Months 2018. The components of new business production generated by the SGI Transaction in the second quarter of 2018 are presented below.

Assumed SGI Insured Portfolio (1)

	GWP		PVP
	Financial Guaranty		Financial Guaranty		Credit Derivatives		Total		Gross Par Written
	(in millions)
Public Finance—U.S.	$	123	$	118	$	67	$	185	$	7,559
Public Finance—non-U.S.	50		38		12		50		3,345
Structured Finance—U.S.	157		156		—		156		349
Structured Finance—non-U.S.	—		—		—		—		19
Total	$	330	$	312	$	79	$	391	$	11,272

____________________

(1) On a GAAP basis, in the second quarter of 2018, the SGI Transaction included transactions with $131 million in expected losses (discounted at a risk-free rate). On a non-GAAP basis, SGI Transaction included transactions with expected losses of $83 million (discounted at 6%, consistent with the PVP discount rate).

Loss Mitigation

In an effort to avoid, reduce or recover losses and potential losses in its insurance portfolios, the Company employs a number of strategies.

In the public finance area, the Company believes its experience and the resources it is prepared to deploy, as well as its ability to provide bond insurance or other contributions as part of a solution, result in more favorable outcomes in distressed public finance situations than would be the case without its participation. This has been illustrated by the Company's role in the Detroit, Michigan; Stockton, California; and Jefferson County, Alabama financial crises. Currently the Company is actively working to mitigate potential losses in connection with the obligations it insures of the Commonwealth of Puerto Rico and various obligations of its related authorities and public corporations and was an active participant in negotiating the Puerto Rico Electric Power Authority (PREPA) restructuring support agreement and the COFINA plan of adjustment. The Company will also, where appropriate, pursue litigation to enforce its rights, and it has initiated a number of legal actions to enforce its rights in Puerto Rico. For more information about developments in Puerto Rico and related litigation being pursued by the Company, see Item 1, Financial Statements, Note 3, Outstanding Exposure and Insured Portfolio section below.

The Company is currently working with the servicers of some of the RMBS it insures to encourage the servicers to provide alternatives to distressed borrowers that will encourage them to continue making payments on their loans to help improve the performance of the related RMBS.

In some instances, the terms of the Company's policy give it the option to pay principal on an accelerated basis on an obligation on which it has paid a claim, thereby reducing the amount of guaranteed interest due in the future. The Company has at times exercised this option, which uses cash but reduces projected future losses. The Company may also facilitate the issuance of refunding bonds, by either providing insurance on the refunding bonds or purchasing refunding bonds, or both. Refunding bonds may provide the issuer with payment relief.

Asset Management and Alternative Investments

The Company believes that the asset management business complements its financial guaranty business, is consistent with its risk profile and benefits from its core competencies. The Company seeks to increase its assets under management (AUM) and may purchase both controlling and non-controlling interests in investment managers as well as investment management contracts. The Company also aims to maximize returns for its investors and shareholders, acting as a trusted fiduciary to clients.

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On October 1, 2019, AGUS completed the acquisition of all of the outstanding equity interests in BlueMountain and its associated entities, for a purchase price of approximately $160 million. As of the date of acquisition, BlueMountain managed $18.3 billion in assets across CLOs and long-duration opportunity funds that build on its corporate credit, asset-backed finance and healthcare experience, as well as certain funds now subject to orderly wind-down. In addition, AGUS contributed $60 million of cash to BlueMountain at closing and intends to contribute an additional $30 million in cash within a year from closing.

Consistent with its investment strengths, BlueMountain plans to continue to grow its structured finance strategies. Potential strategies may include CLO equity tranches, as well as asset-backed securities focused on private debt investments in specialty finance companies and assets. As of the date of acquisition, BlueMountain managed $15.4 billion in assets in CLOs and long-duration opportunity funds that leverage its extensive experience in corporate credit, asset-backed finance, and healthcare. BlueMountain is the 18th largest global manager of CLOs by AUM, as reported by Creditflux for the second quarter of 2019.

The BlueMountain Acquisition represents a significant increase in the Company's participation in the asset management business. The Company had acquired in September 2017 a minority interest in Wasmer, Schroeder & Company LLC, an independent investment advisory firm specializing in separately managed accounts. Prior to that, in February 2017, the Company agreed to purchase up to $100 million of limited partnership interests in a fund that invests in the equity of private equity managers; as of September 30, 2019, $86 million of the commitment was not funded.

The Company intends to use investment knowledge and experience acquired in the BlueMountain Acquisition to expand the categories and types of investments included in its investment portfolio by both (a) investing $500 million in BlueMountain-managed funds, CLOs and separately-managed accounts and (b) expanding the categories and types of its alternative investments not managed by BlueMountain. Certain of these investments may complement its other businesses; for example, in September 2018 the Company acquired a minority interest in the holding company of Rubicon Infrastructure Advisors, a full-service investment firm based in Dublin that provides investment banking services in the global infrastructure sector.

The Company continues to investigate additional opportunities in the asset management business and in other businesses in line with its risk profile and that would benefit from its core competencies, but there can be no assurance of whether or when the Company will find suitable opportunities on appropriate terms, or whether the Company will realize the benefits it expects from the BlueMountain Acquisition, or the benefits of any of its past or future alternative investments.

Capital Management

The Company employs several strategies to efficiently manage capital within the Assured Guaranty group.

From 2013 through November 7, 2019, the Company has repurchased 103.7 million common shares for approximately $3,115 million, representing 53% of the total shares outstanding at the beginning of the repurchase program in 2013. On August 7, 2019, the Board of Directors authorized an additional $300 million of share repurchases. As of November 7, 2019, the Company had remaining authorization to purchase $299 million of its common shares. Shares may be repurchased from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program are at the discretion of management and will depend on a variety of factors, including free funds available at the parent company, other potential uses for such free funds, market conditions, the Company's capital position, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board of Directors at any time and it does not have an expiration date. See Item 1, Financial Statements, Note 14, Shareholders' Equity, for additional information about the Company's repurchases of its common shares.

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Summary of Share Repurchases

	Amount		Number of Shares	Average price per share
	(in millions, except per share data)
2013 - 2018	$	2,716	94.6	$	28.73
2019 (First Quarter)	79		1.9	41.62
2019 (Second Quarter)	111		2.5	43.89
2019 (Third Quarter)	150		3.4	44.11
2019 (October 1 - November 7)	59		1.3	45.98
Cumulative repurchases since the beginning of 2013	$	3,115	103.7	$	30.05

Accretive Effect of Cumulative Repurchases (1)

	Third Quarter 2019		Nine Months 2019		As of September 30, 2019
	(per share)
Net income	$	0.25	$	1.00
Non-GAAP operating income	0.30		1.19
Shareholders' equity					$	19.93
Non-GAAP operating shareholders' equity					17.69
Non-GAAP adjusted book value					30.86

_________________

(1) Represents estimated accretive effect of cumulative share repurchases since the beginning of 2013.

In March 2019, Municipal Assurance Corp. (MAC) received approval from the New York State Department of Financial Services to dividend to Municipal Assurance Holdings Inc. (MAC Holdings) $100 million in 2019, an amount that exceeds the amount available to dividend without such approval in 2019 under applicable law. MAC distributed $100 million dividend to MAC Holdings during the second quarter of 2019.

In May 2019, the Maryland Insurance Administration approved and in June 2019 AGC implemented the repurchase of $100 million of its shares of common stock from AGUS.

The Company considers the appropriate mix of debt and equity in its capital structure, and may repurchase some of its debt from time to time. For example, in Nine Months 2019, AGUS purchased $3 million of par of AGMH's outstanding Junior Subordinated Debentures, which resulted in a loss on extinguishment of debt of $1 million in Nine Months 2019. To date, AGUS has repurchased $131 million of AGMH's debt. The Company may choose to make additional purchases of this or other Company debt in the future.

Other Events

The Company has evaluated the potential impact on its business of the U.K.’s decision on June 23, 2016 (pursuant to a referendum), and subsequent notice to the EU on March 29, 2017, of its desire to exit the EU, known as “Brexit”.  Negotiations are ongoing between the U.K. and the EU to determine the future terms of the U.K.’s relationship with the EU, including the terms of trade between the U.K. and the EU. The EU announced on October 28, 2019 that the U.K.'s membership in the EU would be extended through January 31, 2020, and the Company believes that the negotiations are likely to last at least until that time. Brexit may impact laws, rules and regulations applicable to the Company’s U.K. subsidiaries and operations and the transactions insured by its U.K. subsidiary. The Company cannot predict the direction Brexit-related developments will take, nor the impact of those developments on its European operations and the economies of the markets the Company serves, but the Company has established and obtained conditional authorization for a new subsidiary in France to facilitate its operations. The current intention of the Company's U.K. subsidiary is to transfer those of its existing policies that are affected by Brexit to the new subsidiary, in order for the new subsidiary to continue to administer them.

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The U.S. Internal Revenue Service and Department of the Treasury issued proposed regulations on July 10, 2019 relating to the tax treatment of passive foreign investment companies. The proposed regulations provide guidance on various passive foreign investment company rules, including changes resulting from the 2017 Tax Cuts and Jobs Act. As these regulations have only been recently issued, management is currently in the process of evaluating the impact to its shareholders and business operations.

Results of Operations

Estimates and Assumptions

The Company’s condensed consolidated financial statements include amounts that are determined using estimates and assumptions. It is possible that actual amounts realized could differ, possibly materially from the amounts currently recorded in the Company’s condensed consolidated financial statements. Management believes the most significant items requiring inherently subjective and complex estimates are expected losses, fair value estimates, OTTI, deferred income taxes, and premium revenue recognition. The following discussion of the results of operations includes information regarding the estimates and assumptions used for these items and should be read in conjunction with the notes to the Company’s condensed consolidated financial statements.

An understanding of the Company’s accounting policies is critical to understanding its condensed consolidated financial statements. See Part II, Item 8, Financial Statements and Supplementary Data, of the Company's 2018 Annual Report on Form 10-K for a discussion of significant accounting policies, the loss estimation process, and fair value methodologies.

The Company carries a portion of its assets and liabilities at fair value, the majority of which are measured at fair value on a recurring basis.  Level 3 assets, primarily consisting of loss mitigation securities and FG VIEs’ assets, represented approximately 15% and 18% of the total assets that are measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, respectively. All of the Company's liabilities that are measured at fair value are Level 3. See Item 1, Financial Statements, Note 6, Fair Value Measurement, for additional information about assets and liabilities classified as Level 3.

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Condensed Consolidated Results of Operations

Condensed Consolidated Results of Operations

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(in millions)
Revenues:
Net earned premiums	$	123		$	142		$	353		$	423
Net investment income	88			99			296			297
Net realized investment gains (losses)	16			(7		)	12			(14		)
Net change in fair value of credit derivatives	5			21			(25		)	103
Fair value gains (losses) on FG VIEs	4			5			42			11
Foreign exchange gain (loss) on remeasurement	(21		)	(9		)	(24		)	(22		)
Fair value gains (losses) on equity investments	—			32			—			29
Loss on extinguishment of debt	—			(9		)	(1		)	(26		)
Other income (loss)	(9		)	1			14			(13		)
Total revenues	206			275			667			788
Expenses:
Loss and LAE	30			17			75			43
Amortization of deferred acquisition costs	3			3			13			12
Interest expense	22			23			67			71
Other operating expenses	65			56			189			183
Total expenses	120			99			344			309
Income (loss) before provision for income taxes and equity in net earnings of investees	86			176			323			479
Equity in net earnings of investees	—			(1		)	3			—
Income (loss) before income taxes	86			175			326			479
Provision (benefit) for income taxes	17			14			61			46
Net income (loss)	$	69		$	161		$	265		$	433

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Net Earned Premiums

Premiums are earned over the contractual lives, or in the case of homogeneous pools of insured obligations, the remaining expected lives, of financial guaranty insurance contracts. The Company estimates remaining expected lives of its insured obligations and makes prospective adjustments for such changes in expected lives. Scheduled net earned premiums decrease each year unless replaced by a higher amount of new business, reassumptions of previously ceded business or books of business acquired in a business combination. See Item 1, Financial Statements, Note 5, Contracts Accounted for as Insurance, Financial Guaranty Insurance Premiums, for additional information.

Net Earned Premiums

 

	Third Quarter				Nine Months
	2019		2018		2019			2018
	(in millions)
Financial guaranty insurance:
Public finance
Scheduled net earned premiums	$	68	$	78	$	211		$	226
Accelerations:
Refundings	27		31		76			112
Terminations	10		7		10			14
Total accelerations	37		38		86			126
Total public finance	105		116		297			352
Structured finance (1)
Scheduled net earned premiums	17		23		55			63
Terminations	—		2		(3		)	5
Total structured finance	17		25		52			68
Non-financial guaranty	1		1		4			3
Total net earned premiums	$	123	$	142	$	353		$	423

____________________

(1) Excludes $2 million and $3 million for Third Quarter 2019 and Third Quarter 2018, respectively, and $16 million and $9 million for Nine Months 2019 and 2018, respectively, related to consolidated FG VIEs.

Net earned premiums decreased in Third Quarter 2019 compared with Third Quarter 2018 and in Nine Months 2019 compared with Nine Months 2018, due primarily to a reduction in accelerations due to refundings and terminations and the scheduled decline in par outstanding. At September 30, 2019, $3.4 billion of net deferred premium revenue remained to be earned over the life of the insurance contracts.

Net earned premiums due to accelerations is attributable to changes in the expected lives of insured obligations driven by (a) refundings of insured obligations or (b) terminations of insured obligations either through negotiated agreements or the exercise of the Company's contractual rights to make claim payments on an accelerated basis.

Refundings occur in the public finance market and had been at historically high levels in recent years primarily due to the low interest rate environment, which has allowed many municipalities and other public finance issuers to refinance their debt obligations at lower rates. The premiums associated with the insured obligations of municipalities and other public finance issuers are generally received upfront when the obligations are issued and insured. When such issuers pay down insured obligations prior to their originally scheduled maturities, the Company is no longer at risk for payment defaults, and therefore accelerates the recognition of the nonrefundable deferred premium revenue remaining. Provisions in the 2017 Tax Cuts and Jobs Act regarding the termination of the tax-exempt status of advance refunding bonds has resulted in fewer refundings.

Terminations are generally negotiated agreements with beneficiaries resulting in the extinguishment of the Company’s insurance obligation. Terminations are more common in the structured finance asset class, but may also occur in the public finance asset class. While each termination may have different terms, they all result in the expiration of the Company’s insurance risk, the acceleration of the recognition of the associated deferred premium revenue and the reduction of any remaining premiums receivable.

102

Net Investment Income

Net investment income is a function of the yield earned and the size of the investment 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 invested assets.

Net Investment Income

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Income from fixed-maturity securities managed by third parties	$	66		$	75		$	207		$	224
Income from internally managed securities	24			26			95			80
Gross investment income	90			101			302			304
Investment expenses	(2		)	(2		)	(6		)	(7		)
Net investment income	$	88		$	99		$	296		$	297

Net investment income for Third Quarter 2019 decreased compared to Third Quarter 2018 primarily due to a decrease in the average asset balances in the investment portfolio. Net investment income for Nine Months 2019 decreased compared to Nine Months 2018 primarily resulting from a decrease in the average asset balances in the investment portfolio, offset partially by the acceleration of income as a result of the settlement of an insured obligation in June 2019 that was held in the loss mitigation portfolio. The overall pre-tax book yield was 3.53% as of September 30, 2019 and 3.74% as of September 30, 2018. Excluding the internally managed portfolio, pre-tax book yield was 3.20% as of both September 30, 2019 and September 30, 2018.

Net Realized Investment Gains (Losses)

The table below presents the components of net realized investment gains (losses).

Net Realized Investment Gains (Losses)

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Gross realized gains on available-for-sale securities	$	29		$	5		$	48		$	16
Gross realized losses on available-for-sale securities	(1		)	(3		)	(4		)	(9		)
Net realized gains (losses) on other invested assets	—			—			—			(1		)
OTTI	(12		)	(9		)	(32		)	(20		)
Net realized investment gains (losses)	$	16		$	(7	)	$	12		$	(14	)

Gross realized gains in Third Quarter 2019 and Nine Months 2019 related primarily to the sale of the COFINA Exchange Senior Bonds. OTTI in Third Quarter 2019 and Third Quarter 2018 was mainly attributable to changes in foreign exchange rates. OTTI for Nine Months 2019 and Nine Months 2018 was attributable to change in foreign exchange rates and securities purchased for loss mitigation and other risk management purposes.

Net Change in Fair Value of Credit Derivatives

Changes in the fair value of credit derivatives occur because of changes in the Company's own credit rating and credit spreads, collateral credit spreads, notional amounts, credit ratings of the referenced entities, expected terms, realized gains (losses) and other settlements, interest rates, and other market factors. Unrealized gains (losses) on credit derivatives may fluctuate significantly in future periods.

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Except for net estimated credit impairments (i.e., net expected payments), the unrealized gains and losses on credit derivatives are expected to reduce to zero as the exposure approaches its maturity date. Changes in the fair value of the Company’s credit derivatives that do not reflect actual or expected claims or credit losses have no impact on the Company’s statutory claims-paying resources, rating agency capital or regulatory capital positions. Changes in expected losses in respect of contracts accounted for as credit derivatives are included in the discussion of “Economic Loss Development” below. In addition, see Item 1, Financial Statements, Note 6, Fair Value Measurement for information on the valuation of the CDS and Note 8, Contracts Accounted for as Credit Derivatives, for information on the components of the change in fair value of CDS.

     Realized losses and other settlements for Nine Months 2019 were primarily due to a final maturity paydown of a U.S. structured finance transaction, for which there was an offsetting unrealized gain.

During Third Quarter 2019, unrealized fair value gains were generated primarily as a result of price improvements on the underlying collateral of certain of the Company's public finance CDS. The unrealized fair value gains were partially offset by unrealized fair value losses related to certain structured finance CDS transactions and changes in discount rates.

During Nine Months 2019, unrealized fair value losses were generated primarily as a result of wider implied net spreads driven by the decreased market cost to buy protection in AGC’s name during the period. For those CDS transactions that were pricing at or above their floor levels, when the cost of purchasing CDS protection on AGC, which management refers to as the CDS spread on AGC, decreased, the implied spreads that the Company would expect to receive on these transactions increased. These unrealized losses were offset by price improvements and the final maturity paydown of a CDS contract.

During Third Quarter 2018, unrealized fair value gains were generated primarily as a result of price improvements on the underlying collateral of the Company’s CDS. This was the primary driver of the unrealized fair value gains in the U.S. structured finance and U.S. public finance sectors. The unrealized fair value gains were partially offset by unrealized fair value losses related to the decreased cost to buy protection in AGC’s name as the market cost of AGC’s credit protection decreased during the period.

During Nine Months 2018, unrealized fair value gains were generated primarily as a result of the increase in credit given to the primary insurer on one of the Company's second-to-pay CDS policies, CDS terminations, and price improvements on the underlying collateral of the Company’s CDS. The unrealized fair value gains were partially offset by unrealized fair value losses related to the decreased cost to buy protection in AGC’s name as the market cost of AGC’s credit protection decreased during the period.

Effect of Changes in the Company’s Credit Spread on

Net Unrealized Gains (Losses) on Credit Derivatives

	Third Quarter					Nine Months
	2019		2018			2019			2018
	(in millions)
Change in unrealized gains (losses) on credit derivatives:			37
Before considering implication of the Company’s credit spreads	$	7	$	37		$	66		$	142
Resulting from changes in the Company’s credit spreads	1		(17		)	(67		)	(43		)
After considering implication of the Company’s credit spreads	$	8	$	20		$	(1	)	$	99

Management believes that the trading level of AGC credit spreads over the past several years has been due to the correlation between AGC’s risk profile and the current risk profile of the broader financial markets.

Sensitivity to Changes in Credit Spread

The following table summarizes the estimated change in fair values on the net balance of the Company’s credit derivative positions assuming an immediate shift in the net spreads assumed by the Company. The net spread is affected by the spread of the underlying collateral and the credit spreads on AGC.

104

Effect of Changes in Credit Spread

	As of September 30, 2019						As of December 31, 2018
Credit Spreads (1)	Estimated Net Fair Value (Pre-Tax)			Estimated Change in Gain/(Loss) (Pre-Tax)			Estimated Net Fair Value (Pre-Tax)			Estimated Change in Gain/(Loss) (Pre-Tax)
	(in millions)
Increase of 25 bps	$	(345	)	$	(137	)	$	(348	)	$	(141	)
Base Scenario	(208		)	—			(207		)	—
Decrease of 25 bps	(130		)	78			(143		)	64
All transactions priced at floor	(80		)	128			(101		)	106

 ____________________

(1) Includes the effects of changes in the net spreads assumed by the Company.

Financial Guaranty Variable Interest Entities

As of September 30, 2019 and December 31, 2018, the Company consolidated 28 and 31 FG VIEs, respectively. The effect of FG VIE consolidation on net income and shareholders' equity includes: changes in fair value gains (losses) on FG VIEs’ assets and liabilities , and premiums and losses related to AGC's and Assured Guaranty Municipal Corp.'s (AGM) insurance of FG VIEs’ liabilities with recourse and any investment balances related to the Company’s purchase of AGC and AGM insured FG VIEs’ debt, that are considered intercompany transactions and are therefore eliminated.

The primary driver of the gain during Third Quarter 2019 is due to price appreciation on FG VIEs assets. The primary driver of the gain during Nine Months 2019 was attributable to higher recoveries on second lien U.S. RMBS FG VIEs' assets. The primary driver of the gain during Third Quarter 2018 and Nine Months 2018 was improvement in the underlying collateral of the FG VIEs' assets.

The effect of consolidation of FG VIEs (including the change in fair value and the effect of eliminating insurance and investment balances) was a loss of $2 million in net income in both Third Quarter 2019 and Third Quarter 2018, and a gain of $4 million and a loss of $1 million in Nine Months 2019 and Nine Months 2018, respectively. See Item 1, Financial Statements, Note 9, Variable Interest Entities, for additional information.

Foreign Exchange Gain (Loss) on Remeasurement

Foreign exchange losses primarily relate to remeasurement of premiums receivable and are mainly due to changes in the exchange rate of the pound sterling relative to the U.S. dollar.

Fair Value Gains (Losses) on Equity Investments

Third Quarter 2018 and Nine Months 2018 included a gain of $31 million related to the Company's minority interest in the parent company of TMC Bonds LLC, which it sold in Third Quarter 2018.

Loss on Extinguishment of Debt

The loss on extinguishment of debt is related to AGUS' purchase of a portion of the principal amount of AGMH's outstanding Junior Subordinated Debentures. The loss represents the difference between the amount paid to purchase AGMH's debt and the carrying value of the debt, which includes the unamortized fair value adjustments that were recorded upon the acquisition of AGMH in 2009. AGUS purchased $25 million in Third Quarter 2018, $3 million in Nine Months 2019 and $72 million in Nine Months 2018. There were no purchases in Third Quarter 2019.

Other Income (Loss)

Other income (loss) consists of recurring items such as those listed in the table below as well as ancillary fees on financial guaranty policies for commitments and consents, and if applicable, other revenue items on financial guaranty insurance and reinsurance contracts such as loss mitigation recoveries and other items.

105

Other Income (Loss)

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Commutation gains (losses)	$	—		$	1		$	1		$	(16	)
Fair value gains (losses) on CCS (1)	(14		)	(1		)	(4		)	(3		)
Other	5			1			17			6
Total other income (loss)	$	(9	)	$	1		$	14		$	(13	)

 ____________________

(1) Fair value losses on CCS recorded in Third Quarter 2019 and Nine Months 2019 were primarily due to tightening of market spreads seen in comparable securities during the periods.

Economic Loss Development

The insured portfolio includes policies accounted for under three separate accounting models depending on the characteristics of the contract and the Company’s control rights. See Item 1, Financial Statements, Note 4, Expected Loss to be Paid, for a discussion of assumptions and methodologies used in calculating the expected loss to be paid for all contracts. For the loss estimation process and the accounting policies for measurement and recognition under GAAP for each type of contract, see Part II, Item 8, Financial Statements and Supplementary Data, of the Company's 2018 Annual Report on Form 10-K:

• Note 5 for expected loss to be paid,

• Note 6 for contracts accounted for as insurance,

• Note 7 for fair value methodologies for credit derivatives and FG VIEs’ assets and liabilities,

• Note 8 for contracts accounted for as credit derivatives, and

• Note 9 for FG VIEs.

In order to efficiently evaluate and manage the economics of the entire insured portfolio, management compiles and analyzes expected loss information for all policies on a consistent basis. The discussion of losses that follows encompasses losses on all contracts in the insured portfolio regardless of accounting model, unless otherwise specified. Net expected loss to be paid primarily consists of the present value of future: expected claim and LAE payments, expected recoveries from issuers or excess spread, cessions to reinsurers, expected recoveries/payables for breaches of representations and warranties, and the effects of other loss mitigation strategies. Current risk-free rates are used to discount expected losses at the end of each reporting period and therefore changes in such rates from period to period affect the expected loss estimates reported. Assumptions used in the determination of the net expected loss to be paid such as delinquency, severity, and discount rates and expected time frames to recovery were consistent by sector regardless of the accounting model used. The primary drivers of economic loss development are discussed below. Changes in risk-free rates used to discount losses affect economic loss development, and loss and LAE; however, the effect of changes in discount rates are not indicative of actual credit impairment or improvement in the period.

Net Expected Loss to be Paid (Recovered) and

Net Economic Loss Development (Benefit)

By Accounting Model

	Net Expected Loss to be Paid (Recovered)						Net Economic Loss Development (Benefit)
	As of						Third Quarter						Nine Months
	September 30, 2019			December 31, 2018			2019			2018			2019			2018
	(in millions)
Insurance	$	662		$	1,110		$	17		$	1		$	5		$	(9	)
FG VIEs	61			75			(2		)	(3		)	(26		)	(7		)
Credit derivatives	(5		)	(2		)	10			2			7			11
Total	$	718		$	1,183		$	25		$	—		$	(14	)	$	(5	)

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Net Expected Loss to be Paid (Recovered) and

Net Economic Loss Development (Benefit)

By Sector

	Net Expected Loss to be Paid (Recovered)				Net Economic Loss Development (Benefit)
	As of				Third Quarter						Nine Months
	September 30, 2019		December 31, 2018		2019			2018			2019			2018
	(in millions)
U.S. public finance	$	520	$	832	$	50		$	42		$	204		$	59
Non-U.S. public finance	28		32		5			(3		)	(4		)	(9		)
Structured finance
U.S. RMBS	135		293		(40		)	(40		)	(223		)	(52		)
Other structured finance	35		26		10			1			9			(3		)
Structured finance	170		319		(30		)	(39		)	(214		)	(55		)
Total	$	718	$	1,183	$	25		$	—		$	(14	)	$	(5	)
Effect of changes in the risk-free rates included in economic loss development (benefit)					$	1		$	(9	)	$	(4	)	$	(15	)

Risk-Free Rates

	Risk-Free Rates used in Expected Loss for U.S. Dollar Denominated Obligations
	Range				Weighted Average
As of September 30, 2019	0.00	%	-	2.20%	1.79%
As of June 30, 2019	0.00		-	2.63	2.10
As of December 31, 2018	0.00		-	3.06	2.74
As of September 30, 2018	0.00		-	3.20	3.03
As of June 30, 2018	0.00		-	3.03	2.85
As of December 31, 2017	0.00		-	2.78	2.38

Third Quarter 2019 Net Economic Loss Development

Public Finance Economic Loss Development: Public finance expected loss to be paid primarily related to U.S. exposures, which had below-investment-grade (BIG) net par outstanding of $5.8 billion as of September 30, 2019 compared with $6.4 billion as of December 31, 2018. The Company projects that its total net expected loss across its troubled U.S. public finance exposures as of September 30, 2019 will be $520 million, compared with $832 million as of December 31, 2018. Economic loss development on U.S. exposures in Third Quarter 2019 was $50 million, which was primarily attributable to Puerto Rico exposures. The economic loss development was approximately $5 million for non-U.S. exposures during Third Quarter 2019 due to the impact of negative European interest rates on an interest rate swap in an Italian transaction.

U.S. RMBS Economic Loss Development: The net benefit attributable to U.S. RMBS was $40 million and was mainly related to an increase in excess spread and improved performance.

Other Structured Finance Economic Loss Development: The economic loss development was approximately $10 million for other structured finance exposures during Third Quarter 2019, which was mainly attributable to higher expected LAE related to certain exposures.

See Item 1, Financial Statements, Note 4, Expected Loss to be Paid for additional information.

107

Third Quarter 2018 Net Economic Loss Development

Public Finance Economic Loss Development: Public finance expected loss to be paid primarily related to U.S. exposures, which had BIG net par outstanding of $6.2 billion as of September 30, 2018 compared with $6.3 billion as of June 30, 2018. The Company projected that its total net expected loss across its troubled U.S. public finance exposures as of September 30, 2018 would be $832 million, compared with $1,041 million as of June 30, 2018. Economic benefit on U.S. exposures in Third Quarter 2018 was $42 million, which was primarily attributable to Puerto Rico exposures.

U.S. RMBS Economic Loss Development: The net benefit attributable to U.S. RMBS was $40 million and was mainly related to improved performance in certain second lien transactions.

Nine Months 2019 Net Economic Loss Development

The total economic benefit of $14 million in Nine Months 2019 was generated by the structured finance sector, partially offset by the economic loss development in the U.S. public finance sector. The economic benefit in the structured finance sector in Nine Months 2019 was $214 million, which was primarily attributable to an increase in excess spread, higher projected recoveries for previously charged-off loans for second lien U.S. RMBS, improved performance, and loss mitigation efforts. This was partially offset by U.S. public finance economic loss development of $204 million, which was primarily attributable to Puerto Rico exposures. The effect of the change in the risk-free rates used to discount expected losses was a benefit of $4 million in Nine Months 2019.

Nine Months 2018 Net Economic Loss Development

The total economic benefit of $5 million in Nine Months 2018 was generated mainly by the structured finance sector, partially offset by the economic loss development in the U.S. public finance sector. The economic benefit in the structured finance sector in Nine Months 2018 was $55 million, which was primarily attributable to improved collateral performance and certain assumption updates. As part of the SGI Transaction, the Company assumed $130 million in expected losses on U.S. RMBS transactions in Nine Months 2018. The benefit in the structured finance sector was partially offset by U.S. public finance economic loss development of $59 million, which was primarily attributable to Puerto Rico exposures, partially offset by the State of Connecticut's agreement to pay the debt service costs of certain bonds of the City of Hartford, including the bonds insured by the Company. The effect of the change in the risk-free rates used to discount expected losses was a benefit of $15 million in Nine Months 2018.

Loss and LAE (Financial Guaranty Insurance Contracts)

The primary differences between net economic loss development and the amount reported as loss and LAE in the condensed consolidated statements of operations are that loss and LAE: (1) considers deferred premium revenue in the calculation of loss reserves and loss and LAE for financial guaranty insurance contracts, (2) eliminates loss and LAE related to consolidated FG VIEs, and (3) does not include estimated losses on credit derivatives.     

Loss and LAE reported in non-GAAP operating income (i.e., operating loss and LAE) includes losses on financial guaranty insurance contracts (other than those eliminated due to consolidation of FG VIEs) and credit derivatives.

For financial guaranty insurance contracts each transaction’s expected loss to be expensed is compared with the deferred premium revenue of that transaction. When the expected loss to be expensed exceeds the deferred premium revenue, a loss is recognized in the condensed consolidated statements of operations for the amount of such excess. Therefore, the timing of loss recognition in income does not necessarily coincide with the timing of the actual credit impairment or improvement reported in net economic loss development. Transactions (particularly BIG transactions) acquired in a business combination or seasoned portfolios assumed from legacy financial guaranty insurers generally have the largest deferred premium revenue balances. Therefore the largest differences between net economic loss development and loss and LAE on financial guaranty insurance contracts generally relate to those policies.

The amount of loss and LAE recognized in the condensed consolidated statements of operations for financial guaranty contracts accounted for as insurance is a function of the amount of economic loss development discussed above and the deferred premium revenue amortization in a given period, on a contract-by-contract basis.

While expected loss to be paid is an important liquidity measure that provides the present value of amounts that the Company expects to pay or recover in future periods on all contracts, expected loss to be expensed is important because it

108

presents the Company’s projection of loss and LAE that will be recognized in future periods as deferred premium revenue amortizes into income for financial guaranty insurance policies.

The following table presents the loss and LAE recorded in the condensed consolidated statements of operations. Amounts presented are net of reinsurance.

Loss and LAE Reported

on the Condensed Consolidated Statements of Operations

	Loss (Benefit)
	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
U.S. public finance	$	64		$	42		$	228		$	76
Non-U.S. public finance	1			(3		)	(7		)	(5		)
Structured finance
U.S. RMBS (1)	(35		)	(21		)	(150		)	(17		)
Other structured finance	—			(1		)	4			(11		)
Structured finance	(35		)	(22		)	(146		)	(28		)
Total loss and LAE	$	30		$	17		$	75		$	43

____________________

(1) Excludes a benefit of $3 million and $3 million for Third Quarter 2019 and 2018, respectively, and a benefit of $18 million and a de minimis loss for Nine Months 2019 and 2018, respectively, related to consolidated FG VIEs.

Loss and LAE in Third Quarter 2019 and Third Quarter 2018 were mainly driven by higher losses on certain Puerto Rico exposures, partially offset by a benefit on U.S. RMBS exposures.

Loss and LAE in Nine Months 2019 was mainly driven by higher losses on certain Puerto Rico exposures, partially offset by a benefit on U.S. RMBS exposures. Loss and LAE in Nine Months 2018 was mainly driven by higher losses on certain Puerto Rico exposures, partially offset by the reduction of loss reserves on the City of Hartford, Connecticut exposure and a benefit related to certain assumed student loan transactions.

For additional information on the expected timing of net expected losses to be expensed see Item 1, Financial Statements, Note 5, Contracts Accounted for as Insurance, Financial Guaranty Insurance Losses.

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Other Operating Expenses and Amortization of Deferred Acquisition Costs (DAC)

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Employee compensation and benefits	$	41		$	39		$	128		$	122
Deferred costs	(3		)	(3		)	(10		)	(10		)
Total employee compensation and benefits net of deferred costs	38			36			118			112
Professional fees	7			5			17			15
Premises and equipment	6			4			15			14
Acquisition related expenses (1)	2			—			2			4
Other	12			11			37			38
Other operating expenses	65			56			189			183
Amortization of DAC	3			3			13			12
Total other operating expenses and amortization of DAC	$	68		$	59		$	202		$	195

____________________

(1)    Expenses related to BlueMountain Acquisition in 2019 and SGI Transaction in 2018.

Provision for Income Tax

The Company’s effective tax rate reflects the proportion of income recognized by each of the Company’s operating subsidiaries, with U.S. subsidiaries generally taxed at the U.S. marginal corporate income tax rate of 21%, U.K. subsidiaries taxed at the U.K. marginal corporate tax rate of 19%, and no taxes for the Company’s Bermuda subsidiaries, which consist of Assured Guaranty Re Ltd. (AG Re), Assured Guaranty Re Overseas Ltd. (AGRO), and Cedar Personnel Ltd., unless subject to U.S. tax by election or as a U.S. controlled foreign corporation. See Item 1, Financial Statements, Note 10, Income Taxes.

Provision for Income Taxes and Effective Tax Rates

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(dollars in millions)
Total provision (benefit) for income taxes	$	17		$	14		$	61		$	46
Effective tax rate	19.2		%	8.3		%	18.6		%	9.7		%

Non-GAAP Financial Measures

To reflect the key financial measures that management analyzes in evaluating the Company’s operations and progress towards long-term goals, the Company discloses both financial measures determined in accordance with GAAP and financial measures not determined in accordance with GAAP (non-GAAP financial measures).

Financial measures identified as non-GAAP should not be considered substitutes for GAAP financial measures. The primary limitation of non-GAAP financial measures is the potential lack of comparability to financial measures of other companies, whose definitions of non-GAAP financial measures may differ from those of the Company.

By disclosing non-GAAP financial measures, the Company gives investors, analysts and financial news reporters access to information that management and the Board of Directors review internally. The Company believes its presentation of non-GAAP financial measures, along with the effect of FG VIE consolidation, provides information that is necessary for analysts to calculate their estimates of Assured Guaranty’s financial results in their research reports on Assured Guaranty and for investors, analysts and the financial news media to evaluate Assured Guaranty’s financial results.

GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company. However, the Company does not own such VIEs and its exposure is limited to its obligation under its financial guaranty

110

insurance contract. Management and the Board of Directors use non-GAAP financial measures adjusted to remove FG VIE consolidation (which the Company refers to as its core financial measures), as well as GAAP financial measures and other factors, to evaluate the Company’s results of operations, financial condition and progress towards long-term goals. The Company uses these core financial measures in its decision making process and in its calculation of certain components of management compensation. Wherever possible, the Company has separately disclosed the effect of FG VIE consolidation.

Many investors, analysts and financial news reporters use non-GAAP operating shareholders’ equity, adjusted to remove the effect of FG VIE consolidation, as the principal financial measure for valuing AGL’s current share price or projected share price and also as the basis of their decision to recommend, buy or sell AGL’s common shares. Many of the Company’s fixed income investors also use this measure to evaluate the Company’s capital adequacy.

Many investors, analysts and financial news reporters also use non-GAAP adjusted book value, adjusted to remove the effect of FG VIE consolidation, to evaluate AGL’s share price and as the basis of their decision to recommend, buy or sell the AGL common shares. Non-GAAP operating income adjusted for the effect of FG VIE consolidation enables investors and analysts to evaluate the Company’s financial results in comparison with the consensus analyst estimates distributed publicly by financial databases.

The core financial measures that the Company uses to help determine compensation are: (1) non-GAAP operating income, adjusted to remove the effect of FG VIE consolidation, (2) non-GAAP operating shareholders' equity, adjusted to remove the effect of FG VIE consolidation, (3) growth in non-GAAP adjusted book value per share, adjusted to remove the effect of FG VIE consolidation, and (4) PVP.

The following paragraphs define each non-GAAP financial measure disclosed by the Company and describe why it is useful. To the extent there is a directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure and the most directly comparable GAAP financial measure is presented below.

Non-GAAP Operating Income

Management believes that non-GAAP operating income is a useful measure because it clarifies the understanding of the underwriting results and financial condition of the Company and presents the results of operations of the Company excluding the fair value adjustments on credit derivatives and CCS that are not expected to result in economic gain or loss, as well as other adjustments described below. Management adjusts non-GAAP operating income further by removing FG VIE consolidation to arrive at its core operating income measure. Non-GAAP operating income is defined as net income (loss) attributable to AGL, as reported under GAAP, adjusted for the following:

1) Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading. The timing of realized gains and losses, which depends largely on market credit cycles, can vary considerably across periods. The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile.

2) Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives that are recognized in net income, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, the Company's credit spreads, and other market factors and are not expected to result in an economic gain or loss.

3) Elimination of fair value gains (losses) on the Company’s CCS that are recognized in net income. Such amounts are affected by changes in market interest rates, the Company's credit spreads, price indications on the Company's publicly traded debt, and other market factors and are not expected to result in an economic gain or loss.

4) Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves that are recognized in net income. Long-dated receivables and loss and LAE reserves represent the present value of future contractual or expected cash flows. Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize.

5) Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.

111

Reconciliation of Net Income (Loss)

to Non-GAAP Operating Income

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Net income (loss)	$	69		$	161		$	265		$	433
Less pre-tax adjustments:
Realized gains (losses) on investments	16			(7		)	12			(14		)
Non-credit impairment unrealized fair value gains (losses) on credit derivatives	11			17			(29		)	91
Fair value gains (losses) on CCS (1)	(14		)	(1		)	(4		)	(3		)
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves	(20		)	(8		)	(23		)	(20		)
Total pre-tax adjustments	(7		)	1			(44		)	54
Less tax effect on pre-tax adjustments	(1		)	(1		)	5			(11		)
Non-GAAP operating income	$	77		$	161		$	304		$	390
Gain (loss) related to FG VIE consolidation (net of tax provision (benefit) of $0, $0, $1 and $0 included in non-GAAP operating income	$	(2	)	$	(2	)	$	4		$	(1	)

____________________

(1) Included in other income (loss) in the condensed consolidated statements of operations.

Non-GAAP Operating Shareholders’ Equity and Non-GAAP Adjusted Book Value

     Management believes that non-GAAP operating shareholders’ equity is a useful measure because it presents the equity of the Company excluding the fair value adjustments on investments, credit derivatives and CCS, that are not expected to result in economic gain or loss, along with other adjustments described below. Management adjusts non-GAAP operating shareholders’ equity further by removing FG VIE consolidation to arrive at its core operating shareholders' equity and core adjusted book value.

Non-GAAP operating shareholders’ equity is the basis of the calculation of non-GAAP adjusted book value (see below). Non-GAAP operating shareholders’ equity is defined as shareholders’ equity attributable to AGL, as reported under GAAP, adjusted for the following:

1) Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.

2) Elimination of fair value gains (losses) on the Company’s CCS. Such amounts are affected by changes in market interest rates, the Company's credit spreads, price indications on the Company's publicly traded debt, and other market factors and are not expected to result in an economic gain or loss.

3) Elimination of unrealized gains (losses) on the Company’s investments that are recorded as a component of accumulated other comprehensive income (AOCI) (excluding foreign exchange remeasurement). The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore should not recognize an economic gain or loss.

4) Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.

112

Management uses non-GAAP adjusted book value, adjusted for FG VIE consolidation, to measure the intrinsic value of the Company, excluding franchise value. Growth in non-GAAP adjusted book value per share, adjusted for FG VIE consolidation (core adjusted book value), is one of the key financial measures used in determining the amount of certain long-term compensation elements to management and employees and used by rating agencies and investors. Management believes that non-GAAP adjusted book value is a useful measure because it enables an evaluation of the Company’s in-force premiums and revenues net of expected losses. Non-GAAP adjusted book value is non-GAAP operating shareholders’ equity, as defined above, further adjusted for the following:

1) Elimination of deferred acquisition costs, net. These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods.

2) Addition of the net present value of estimated net future revenue. See below.

3) Addition of the deferred premium revenue on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance. This amount represents the expected future net earned premiums, net of expected losses to be expensed, which are not reflected in GAAP equity.

4) Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.

The unearned premiums and revenues included in non-GAAP adjusted book value will be earned in future periods, but actual earnings may differ materially from the estimated amounts used in determining current non-GAAP adjusted book value due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults and other factors.

Reconciliation of Shareholders’ Equity

to Non-GAAP Adjusted Book Value

	As of September 30, 2019						As of December 31, 2018
	After-Tax			Per Share			After-Tax			Per Share
	(dollars in millions, except per share amounts)
Shareholders’ equity	$	6,652		$	68.94		$	6,555		$	63.23
Less pre-tax adjustments:
Non-credit impairment unrealized fair value gains (losses) on credit derivatives	(74		)	(0.77		)	(45		)	(0.44		)
Fair value gains (losses) on CCS	70			0.72			74			0.72
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect	529			5.48			247			2.39
Less taxes	(95		)	(0.97		)	(63		)	(0.61		)
Non-GAAP operating shareholders’ equity	6,222			64.48			6,342			61.17
Pre-tax adjustments:
Less: Deferred acquisition costs	107			1.11			105			1.01
Plus: Net present value of estimated net future revenue	195			2.02			204			1.96
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed	2,892			29.98			3,005			28.98
Plus taxes	(500		)	(5.19		)	(524		)	(5.04		)
Non-GAAP adjusted book value	$	8,702		$	90.18		$	8,922		$	86.06
Gain (loss) related to FG VIE consolidation included in non-GAAP operating shareholders' equity (net of tax provision of $3 and $1)	$	12		$	0.12		3			0.03
Gain (loss) related to FG VIE consolidation included in non-GAAP adjusted book value (net of tax benefit of $0 and $4)	$	—		$	—		(15		)	(0.15		)

113

Net Present Value of Estimated Net Future Revenue

Management believes that this amount is a useful measure because it enables an evaluation of the value of future estimated revenue for contracts other than financial guaranty insurance contracts (such as non-financial guaranty insurance contracts and credit derivatives). There is no corresponding GAAP financial measure. This amount represents the present value of estimated future revenue from these contracts, net of reinsurance, ceding commissions and premium taxes, for contracts without expected economic losses, and is discounted at 6%. Estimated net future revenue may change from period to period due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults or other factors that affect par outstanding or the ultimate maturity of an obligation.

PVP or Present Value of New Business Production

Management believes that PVP is a useful measure because it enables the evaluation of the value of new business production for the Company by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as premium supplements and additional installment premium on existing contracts as to which the issuer has the right to call the insured obligation but has not exercised such right, whether in insurance or credit derivative contract form, which management believes GAAP gross written premiums and the net credit derivative premiums received and receivable portion of net realized gains and other settlements on credit derivatives (Credit Derivative Realized Gains (Losses)) do not adequately measure. PVP in respect of contracts written in a specified period is defined as gross upfront and installment premiums received and the present value of gross estimated future installment premiums, discounted, in each case, at 6%. Under GAAP, financial guaranty installment premiums are discounted at a risk-free rate. Additionally, under GAAP, management records future installment premiums on financial guaranty insurance contracts covering non-homogeneous pools of assets based on the contractual term of the transaction, whereas for PVP purposes, management records an estimate of the future installment premiums the Company expects to receive, which may be based upon a shorter period of time than the contractual term of the transaction. Actual future earned or written premiums and Credit Derivative Realized Gains (Losses) may differ from PVP due to factors including, but not limited to, changes in foreign exchange rates, prepayment speeds, terminations, credit defaults, or other factors that affect par outstanding or the ultimate maturity of an obligation. 

114

Reconciliation of GWP to PVP

	Third Quarter 2019											Third Quarter 2018
	Public Finance				Structured Finance							Public Finance					Structured Finance
	U.S.		Non - U.S.		U.S.		Non - U.S.			Total		U.S.			Non - U.S.		U.S.		Non - U.S.		Total
	(in millions)
GWP	$	46	$	20	$	2	$	1		$	69	$	24		$	17	$	9	$	—	$	50
Less: Installment GWP and other GAAP adjustments (1)	—		20		2		(1		)	21		(9		)	17		4		—		12
Upfront GWP	46		—		—		2			48		33			—		5		—		38
Plus: Installment premium PVP (2)	—		13		19		1			33		—			12		2		—		14
PVP	$	46	$	13	$	19	$	3		$	81	$	33		$	12	$	7	$	—	$	52

	Nine Months 2019												Nine Months 2018
	Public Finance					Structured Finance							Public Finance				Structured Finance
	U.S.			Non - U.S.		U.S.		Non - U.S.			Total		U.S.		Non - U.S.		U.S.		Non - U.S.		Total
	(in millions)
GWP	$	119		$	34	$	4	$	2		$	159	$	227	$	111	$	168	$	10	$	516
Less: Installment GWP and other GAAP adjustments (1)	(3		)	34		3		(1		)	33		9		72		10		1		92
Upfront GWP	122			—		1		3			126		218		39		158		9		424
Plus: Installment premium PVP (2)	—			24		26		1			51		84		52		7		—		143
PVP	$	122		$	24	$	27	$	4		$	177	$	302	$	91	$	165	$	9	$	567

___________________

(1) Includes present value of new business on installment policies discounted at the prescribed GAAP discount rates, GWP adjustments on existing installment policies due to changes in assumptions, any cancellations of assumed reinsurance contracts, and other GAAP adjustments.

(2) Includes PVP of credit derivatives assumed in the SGI Transaction in the second quarter of 2018 and a committed insurance reserve financing transaction in Third Quarter 2019.

Insured Portfolio

Financial Guaranty Exposure

The following table presents the insured financial guaranty portfolio by sector net of cessions to reinsurers. It includes all financial guaranty contracts outstanding as of the dates presented, regardless of the form written (i.e., credit derivative form or traditional financial guaranty insurance form) or the applicable accounting model (i.e., insurance, derivative or VIE consolidation). The Company purchases securities that it has insured, and for which it has 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 scheduled principal and interest payments (debt service) outstanding. These amounts are included in the investment portfolio, because the Company manages such securities as investments and not insurance exposure. As of September 30, 2019 and December 31, 2018, the Company excluded $1.5 billion and $1.9 billion of net par attributable to loss mitigation strategies. See Item 1, Financial Statements, Note 3, Outstanding Exposure, for additional information.

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Financial Guaranty Portfolio

Net Par Outstanding and Average Internal Rating by Sector

	As of September 30, 2019			As of December 31, 2018
Sector	Net Par Outstanding		Avg. Rating	Net Par Outstanding		Avg. Rating
	(dollars in millions)
Public finance:
U.S.:
General obligation	$	74,030	A-	$	78,800	A-
Tax backed	37,984		A-	40,616		A-
Municipal utilities	27,143		A-	28,402		A-
Transportation	14,794		A-	15,197		A-
Healthcare	6,925		A-	6,750		A-
Higher education	6,062		A-	6,643		A-
Infrastructure finance	5,432		A-	5,489		A-
Housing revenue	1,364		BBB+	1,435		BBB+
Investor-owned utilities	658		A-	846		A-
Renewable energy	213		A-	215		BBB+
Other public finance—U.S.	1,910		A-	2,169		A-
Total public finance—U.S.	176,515		A-	186,562		A-
Non-U.S.:
Regulated utilities	17,526		BBB+	18,124		BBB+
Infrastructure finance	16,616		BBB	17,166		BBB
Sovereign and sub-sovereign	5,880		A	6,094		A
Renewable energy	1,542		A	1,346		A
Pooled infrastructure	1,318		AAA	1,373		AAA
Total public finance—non-U.S.	42,882		BBB+	44,103		BBB+
Total public finance	219,397		A-	230,665		A-
Structured finance:
U.S.:
RMBS	3,687		BBB-	4,270		BBB-
Life insurance transactions	1,473		AA-	1,435		A+
Pooled corporate obligations	1,441		AA-	1,215		AA-
Financial products	1,020		AA-	1,094		AA-
Consumer receivables	1,018		A-	1,255		A-
Other structured finance—U.S.	587		BBB+	675		A-
Total structured finance—U.S.	9,226		A-	9,944		A-
Non-U.S.:
RMBS	413		A	576		A-
Pooled corporate obligations	55		BB+	126		A
Other structured finance	284		A	491		A
Total structured finance—non-U.S.	752		A	1,193		A
Total structured finance	9,978		A-	11,137		A-
Total net par outstanding	$	229,375	A-	$	241,802	A-

116

The following table sets forth the Company’s net financial guaranty portfolio by internal rating.

Financial Guaranty Portfolio

by Internal Rating

	As of September 30, 2019				As of December 31, 2018
Rating Category	Net Par Outstanding		%		Net Par Outstanding		%
	(dollars in millions)
AAA	$	4,337	1.9	%	$	4,618	1.9	%
AA	26,130		11.4		27,021		11.2
A	111,216		48.5		119,415		49.4
BBB	79,177		34.5		80,588		33.3
BIG	8,515		3.7		10,160		4.2
Total net par outstanding	$	229,375	100.0	%	$	241,802	100.0	%

Exposure to Puerto Rico

The Company had insured exposure to general obligation bonds of the Commonwealth of Puerto Rico (Puerto Rico or the Commonwealth) and various obligations of its related authorities and public corporations aggregating $4.3 billion net par as of September 30, 2019, all of which was rated BIG. Beginning on January 1, 2016, a number of Puerto Rico exposures have defaulted on bond payments, and the Company has now paid claims on all of its Puerto Rico exposures except for Puerto Rico Aqueduct and Sewer Authority (PRASA), Municipal Finance Agency (MFA) and University of Puerto Rico (U of PR).

The Company groups its Puerto Rico exposure into three categories:

• Constitutionally Guaranteed.

• Public Corporations – Certain Revenues Potentially Subject to Clawback.

• Other Public Corporations.

Additional information about recent developments in Puerto Rico and the individual exposures insured by the Company may be found in Item 1, Financial Statements, Note 3, Outstanding Exposure.

117

Exposure to Puerto Rico

As of September 30, 2019

	Net Par Outstanding
	AGM		AGC		AG Re		Eliminations (1)			Total Net Par Outstanding		Gross Par Outstanding
	(in millions)
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds (2)	$	611	$	268	$	375	$	(1	)	$	1,253	$	1,294
Puerto Rico Public Buildings Authority (PBA) (2)	7		139		1		(7		)	140		145
Public Corporations - Certain Revenues Potentially Subject to Clawback
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) (2)	223		481		186		(79		)	811		842
PRHTA (Highway revenue) (2)	345		74		35		—			454		515
Puerto Rico Convention Center District Authority (PRCCDA)	—		152		—		—			152		152
Puerto Rico Infrastructure Financing Authority (PRIFA)	—		15		1		—			16		16
Other Public Corporations
PREPA (2)	525		71		226		—			822		838
PRASA	—		284		89		—			373		373
MFA	153		33		62		—			248		282
U of PR	—		1		—		—			1		1
Total exposure to Puerto Rico	$	1,864	$	1,518	$	975	$	(87	)	$	4,270	$	4,458

 ___________________

(1) Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary.

(2) As of the date of this filing, the seven-member financial oversight board established by the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) has certified a filing under Title III of PROMESA for these exposures.

118

The following tables show the scheduled amortization of the general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations insured by the Company. The Company guarantees payments of interest and principal when those amounts are scheduled to be paid and cannot be required to pay on an accelerated basis. In the event that obligors default on their obligations, the Company would only pay the shortfall between the principal and interest due in any given period and the amount paid by the obligors.     

Amortization Schedule

of Net Par Outstanding of Puerto Rico

As of September 30, 2019

	Scheduled Net Par Amortization
	2019 (4Q)		2020 (1Q)		2020 (2Q)		2020 (3Q)		2020 (4Q)		2021		2022		2023		2024 - 2028		2029 - 2033		2034 - 2038		2039 - 2043		2044 - 2047		Total
	(in millions)
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds	$	—	$	—	$	—	$	141	$	—	$	15	$	37	$	14	$	298	$	341	$	407	$	—	$	—	$	1,253
PBA	—		—		—		5		—		13		—		7		58		37		20		—		—		140
Public Corporations - Certain Revenues Potentially Subject to Clawback
PRHTA (Transportation revenue)	—		—		—		25		—		18		28		33		120		126		296		165		—		811
PRHTA (Highway revenue)	—		—		—		22		—		35		6		32		77		145		137		—		—		454
PRCCDA	—		—		—		—		—		—		—		—		19		50		83		—		—		152
PRIFA	—		—		—		—		—		—		—		2		—		—		3		11		—		16
Other Public Corporations
PREPA	—		—		—		48		—		28		28		95		440		174		9		—		—		822
PRASA	—		—		—		—		—		—		—		—		110		—		2		—		261		373
MFA	—		—		—		45		—		40		40		22		91		10		—		—		—		248
U of PR	—		—		—		—		—		—		—		—		—		1		—		—		—		1
Total	$	—	$	—	$	—	$	286	$	—	$	149	$	139	$	205	$	1,213	$	884	$	957	$	176	$	261	$	4,270

119

Amortization Schedule

of Net Debt Service Outstanding of Puerto Rico

As of September 30, 2019

	Scheduled Net Debt Service Amortization
	2019 (4Q)		2020 (1Q)		2020 (2Q)		2020 (3Q)		2020 (4Q)		2021		2022		2023		2024 - 2028		2029 - 2033		2034 - 2038		2039 - 2043		2044 - 2047		Total
	(in millions)
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds	$	—	$	33	$	—	$	173	$	—	$	74	$	94	$	70	$	539	$	512	$	457	$	—	$	—	$	1,952
PBA	—		4		—		9		—		20		6		13		84		50		23		—		—		209
Public Corporations - Certain Revenues Potentially Subject to Clawback
PRHTA (Transportation revenue)	—		21		—		46		—		59		68		72		294		262		375		180		—		1,377
PRHTA (Highway revenue)	—		12		—		34		—		58		27		52		159		208		152		—		—		702
PRCCDA	—		3		—		3		—		7		7		7		53		79		91		—		—		250
PRIFA	—		—		—		—		—		1		1		3		4		3		7		12		—		31
Other Public Corporations
PREPA	3		17		3		65		3		63		62		128		541		198		9		—		—		1,092
PRASA	—		10		—		10		—		19		19		19		197		68		70		67		300		779
MFA	—		6		—		52		—		50		48		28		106		11		—		—		—		301
U of PR	—		—		—		—		—		—		—		—		—		1		—		—		—		1
Total	$	3	$	106	$	3	$	392	$	3	$	351	$	332	$	392	$	1,977	$	1,392	$	1,184	$	259	$	300	$	6,694

Financial Guaranty Exposure to U.S. RMBS

The table below provides information on certain risk characteristics of the Company’s financial guaranty insurance, FG VIE and credit derivative U.S. RMBS exposures. As of September 30, 2019, U.S. RMBS net par outstanding was $3.7 billion, of which $1.7 billion was rated BIG. U.S. RMBS exposures represent 1.6% of the total net par outstanding, and BIG U.S. RMBS represent 19.6% of total BIG net par outstanding. See Item 1, Financial Statements, Note 4, Expected Loss to be Paid, for a discussion of expected losses to be paid on U.S. RMBS exposures.

Distribution of U.S. RMBS by Year Insured and Type of Exposure as of September 30, 2019

Year insured:	Prime First Lien		Alt-A First Lien		Option ARMs		Subprime First Lien		Second Lien		Total Net Par Outstanding
	(in millions)
2004 and prior	$	24	$	21	$	1	$	609	$	52	$	707
2005	53		225		25		226		141		670
2006	39		44		12		297		228		620
2007	—		344		30		977		295		1,646
2008	—		—		—		44		—		44
Total exposures	$	116	$	634	$	68	$	2,153	$	716	$	3,687

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Non-Financial Guaranty Insurance Exposure

The Company also provides non-financial guaranty insurance and reinsurance on transactions with similar risk profiles to its structured finance exposures written in financial guaranty form. All non-financial guaranty exposures shown in the table below are rated investment grade internally.

Non-Financial Guaranty Exposure

	Gross Exposure				Net Exposure
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Life insurance transactions (1)	$	1,014	$	880	$	872	$	763
Aircraft residual value insurance policies	376		340		243		218

____________________

(1) The life insurance transactions net exposure is expected to increase to approximately $1.0 billion prior to September 30, 2036.

Reinsurer Exposures

The Company has exposure to reinsurers through reinsurance arrangements (both as a ceding company and as an assuming company). Most of the Company's exposure as a ceding company and as an assuming company relates to financial guaranty contracts written before 2009, although the Company has assumed or reassumed (from financial guarantors no longer writing new business) some of those exposures more recently. The Company continues to cede portions of certain non-financial guaranty exposures to reinsurers to mitigate its risk. See Item 1, Financial Statements, Note 11, Reinsurance.

Liquidity and Capital Resources

Liquidity Requirements and Sources

AGL and its Holding Company Subsidiaries

The liquidity of AGL, AGUS and AGMH is largely dependent on dividends from their operating subsidiaries and their access to external financing. The liquidity requirements of these entities include the payment of operating expenses, interest on debt issued by AGUS and AGMH, and dividends on AGL's common shares. AGL and its holding company subsidiaries may also require liquidity to fund acquisitions of new businesses, to make capital investments in their operating subsidiaries, purchase the Company's outstanding debt, or in the case of AGL, to repurchase its common shares pursuant to its share repurchase authorization. In the ordinary course of business, the Company evaluates its liquidity needs and capital resources in light of holding company expenses and dividend policy, as well as rating agency considerations. The Company also subjects its cash flow projections and its assets to a stress test, maintaining a liquid asset balance of one time its stressed operating company net cash flows. Management believes that AGL will have sufficient liquidity to satisfy its needs over the next twelve months. See “—Distributions From Subsidiaries” below for a discussion of the dividend restrictions of its insurance company subsidiaries.

The following table presents significant holding company cash flow activity (other than investment income, expenses and taxes) related to distributions from subsidiaries and outflows for debt service and dividends, dividends to AGL shareholders and other capital management activities.

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AGL and U.S. Holding Company Subsidiaries

Significant Cash Flow Items

	AGL			AGUS			AGMH
	(in millions)
Third Quarter 2019
Intercompany sources	$	180		$	109		$	109
Intercompany (uses)	—			(90		)	(94		)
External sources (uses):
Dividends paid to AGL shareholders	(17		)	—			—
Repurchases of common shares (1)	(150		)	—			—
Interest paid (2)	—			(2		)	(7		)
Purchase of AGMH's debt by AGUS	—			—			—
Third Quarter 2018
Intercompany sources	$	158		$	15		$	92
Intercompany (uses)	—			(140		)	—
External sources (uses):
Dividends paid to AGL shareholders	(18		)	—			—
Repurchases of common shares (1)	(130		)	—			—
Interest paid (2)	—			(2		)	(7		)
Purchase of AGMH's debt by AGUS	—			(49		)	—
Nine Months 2019
Intercompany sources	$	412		$	341		$	187
Intercompany (uses)	—			(237		)	(160		)
External sources (uses):
Dividends paid to AGL shareholders	(56		)	—			—
Repurchases of common shares (1)	(340		)	—			—
Interest paid (2)	—			(25		)	(30		)
Purchase of AGMH's debt by AGUS	—			(3		)	—
Nine Months 2018
Intercompany sources	$	460		$	342		$	165
Intercompany (uses)	—			(362		)	(51		)
External sources (uses):
Dividends paid to AGL shareholders	(55		)	—			—
Repurchases of common shares (1)	(380		)	—			—
Interest paid (2)	—			(37		)	(30		)
Purchase of AGMH's debt by AGUS	—			(72		)	—

____________________

(1) See Item 1, Financial Statements, Note 14, Shareholders' Equity, for additional information about share repurchases and authorizations.

(2) See Long-Term Obligations below for interest paid by subsidiary.

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Distributions From Subsidiaries

The Company anticipates that for the next twelve months, amounts paid by AGL’s direct and indirect insurance company subsidiaries as dividends or other distributions will be a major source of its liquidity. The insurance company subsidiaries’ ability to pay dividends depends upon their financial condition, results of operations, cash requirements, other potential uses for such funds, and compliance with rating agency requirements, and is also subject to restrictions contained in the insurance laws and related regulations of their states of domicile. See Part II, Item 8, Financial Statements and Supplementary Data, Note 11, Insurance Company Regulatory Requirements, of the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for a complete discussion of the Company's dividend restrictions applicable to AGC, AGM, MAC, AG Re and AGRO.

Dividend restrictions by insurance company subsidiary are as follows:

• The maximum amount available during 2019 for AGM to distribute as dividends without regulatory approval is estimated to be approximately $220 million, of which $33 million is estimated to be available for distribution in the fourth quarter of 2019.

• The maximum amount available during 2019 for AGC to distribute as ordinary dividends (subject to notice to the Maryland Insurance Administration) is approximately $123 million, of which approximately $42 million is available for distribution in the fourth quarter of 2019.

• In March 2019, MAC received approval from the New York State Department of Financial Services to dividend to MAC Holdings, which is owned by AGM and AGC, $100 million in 2019, an amount that exceeded the dividend capacity that was available for distribution without regulatory approval. MAC distributed a $100 million dividend to MAC Holdings in the second quarter of 2019. No further dividends are available for MAC to distribute in 2019 without approval from the New York State Department of Financial Services.

• Based on the applicable law and regulations, in 2019 AG Re has the capacity to (i) make capital distributions in an aggregate amount up to $128 million without the prior approval of the Bermuda Monetary Authority (the Authority) and (ii) declare and pay dividends in an aggregate amount up to approximately $312 million as of September 30, 2019. Such dividend capacity is further limited by the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements. As of September 30, 2019, AG Re had unencumbered assets of approximately $339 million.

• Based on the applicable law and regulations, in 2019 AGRO has the capacity to (i) make capital distributions in an aggregate amount up to $21 million without the prior approval of the Authority and (ii) declare and pay dividends in an aggregate amount up to approximately $96 million as of September 30, 2019. Such dividend capacity is further limited by the actual amount of AGRO’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements. As of September 30, 2019, AGRO had unencumbered assets of approximately $366 million.

Distributions from

Insurance Company Subsidiaries

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
Dividends paid by AGC to AGUS	$	15	$	15	$	81	$	91
Repurchase of common stock by AGC from AGUS	—		—		100		200
Dividends paid by AGM to AGMH	109		58		187		131
Dividends paid by AG Re to AGL	90		18		175		98
Dividends paid by MAC to MAC Holdings (1)	—		12		105		27

____________________

(1) MAC Holdings distributed the entire amounts to AGM and AGC, in proportion to their ownership percentages.

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Generally, dividends paid by a U.S. company to a Bermuda holding company are subject to a 30% withholding tax. After AGL became tax resident in the U.K., it became subject to the tax rules applicable to companies resident in the U.K., including the benefits afforded by the U.K.’s tax treaties. The income tax treaty between the U.K. and the U.S. reduces or eliminates the U.S. withholding tax on certain U.S. sourced investment income (to 5% or 0%), including dividends from U.S. subsidiaries to U.K. resident persons entitled to the benefits of the treaty.

External Financing

From time to time, AGL and its subsidiaries have sought external debt or equity financing in order to meet their obligations. External sources of financing may or may not be available to the Company, and if available, the cost of such financing may not be acceptable to the Company.

Intercompany Loans and Guarantees

On October 1, 2019 AGM, AGC and MAC made 10 year, 3.5% interest rate inter-company loans to AGUS totaling $250 million to fund the BlueMountain Acquisition and the related capital contributions. See Item 1, Financial Statements, Note 1, Business and Basis of Presentation, for additional information.

From time to time, AGL and its subsidiaries have entered into intercompany loan facilities. For example, on October 25, 2013, AGL, as borrower, and AGUS, as lender, entered into a revolving credit facility pursuant to which AGL may, from time to time, borrow for general corporate purposes. Under the credit facility, AGUS committed to lend a principal amount not exceeding $225 million in the aggregate. The commitment under the revolving credit facility terminates on October 25, 2023 (the loan commitment termination date). The unpaid principal amount of each loan will bear semi-annual interest at a fixed rate equal to 100% of the then applicable interest rate as determined under Internal Revenue Code Section 1274(d), and interest on all loans will be computed for the actual number of days elapsed on the basis of a year consisting of 360 days. Accrued interest on all loans will be paid on the last day of each June and December and at maturity. AGL must repay the then unpaid principal amounts of the loans, if any, by the third anniversary of the loan commitment termination date. AGL has not drawn upon the credit facility.

In addition, in 2012 AGUS borrowed $90 million from its affiliate AGRO to fund the acquisition of MAC. In 2018, the maturity date was extended to November 2023. During 2018, AGUS repaid $10 million in outstanding principal as well as accrued and unpaid interest. As of September 30, 2019, $50 million remained outstanding.

Furthermore, AGL fully and unconditionally guarantees the payment of the principal of, and interest on, the $1,130 million aggregate principal amount of senior notes issued by AGUS and AGMH, and the $450 million aggregate principal amount of junior subordinated debentures issued by AGUS and AGMH, in each case, as described under "Commitments and Contingencies -- Long-Term Debt Obligations" below.

Cash and Investments

As of September 30, 2019, AGL had $41 million in cash and short-term investments. AGUS and AGMH had a total of $282 million in cash and short-term investments. In addition, AGUS and AGMH have $15 million in fixed-maturity securities (excluding AGUS's investment in AGMH's debt) with weighted average duration of 2.1 years.

Insurance Company Subsidiaries

Liquidity of the insurance company subsidiaries is primarily used to pay for:

• operating expenses,

• claims on the insurance portfolio,

• dividends or other distributions to AGL, AGUS and/or AGMH, as applicable,

• posting of collateral in connection with reinsurance,

• reinsurance premiums,

• principal of and, where applicable, interest on surplus notes, and

• capital investments in their own subsidiaries, where appropriate.

Management believes that the insurance subsidiaries’ liquidity needs for the next twelve months can be met from current cash, short-term investments and operating cash flow, including premium collections and coupon payments as well as scheduled maturities and paydowns from their respective investment portfolios. The Company targets a balance of its most

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liquid assets including cash and short-term securities, Treasuries, agency RMBS and pre-refunded municipal bonds equal to 1.5 times its projected operating company cash flow needs over the next four quarters. The Company intends to hold and has the ability to hold temporarily impaired debt securities until the date of anticipated recovery of amortized cost.

Beyond the next twelve months, the ability of the operating subsidiaries to declare and pay dividends may be influenced by a variety of factors, including market conditions, insurance regulations and rating agency capital requirements and general economic conditions.

Insurance policies issued provide, in general, that payments of principal, interest and other amounts insured may not be accelerated by the holder of the obligation. Amounts paid by the Company therefore are typically in accordance with the obligation’s original payment schedule, unless the Company accelerates such payment schedule, at its sole option.

 Payments made in settlement of the Company’s obligations arising from its insured portfolio may, and often do, vary significantly from year to year, depending primarily on the frequency and severity of payment defaults and whether the Company chooses to accelerate its payment obligations in order to mitigate future losses.

In addition, the Company has net par exposure to the general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations aggregating $4.3 billion, all of which is rated BIG. Beginning in 2016, the Commonwealth and certain related authorities and public corporations have defaulted on obligations to make payments on their debt. Information regarding the Company's exposure to the Commonwealth of Puerto Rico and its related authorities and public corporations is set forth in Item 1, Financial Statements, Note 3, Outstanding Exposure.

Claims (Paid) Recovered

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
U.S. public finance	$	(279	)	$	(251	)	$	(516	)	$	(384	)
Structured finance:
U.S. RMBS	13			17			65			152
Other structured finance	(1		)	(7		)	—			(6		)
Structured finance	12			10			65			146
Claims (paid) recovered, net of reinsurance (1)	$	(267	)	$	(241	)	$	(451	)	$	(238	)

____________________

(1) Includes $0.4 million paid and $1 million paid for consolidated FG VIEs for Third Quarter 2019 and 2018, respectively, and $12 million recovered and $2 million paid for Nine Months 2019 and Nine Months 2018, respectively. The amounts in Nine Months 2019 are net of COFINA Exchange Senior Bonds validated by the PROMESA Title III Court and cash that were received pursuant to the COFINA Plan of Adjustment. See Item 1, Financial Statements, Note 3, Outstanding Exposure, for additional information.

In connection with the acquisition of AGMH, AGM agreed to retain the risks relating to the debt and strip policy portions of the leveraged lease business. In a leveraged lease transaction, a tax-exempt entity (such as a transit agency) transfers tax benefits to a tax-paying entity by transferring ownership of a depreciable asset, such as subway cars. The tax-exempt entity then leases the asset back from its new owner.

If the lease is terminated early, the tax-exempt entity must make an early termination payment to the lessor. A portion of this early termination payment is funded from monies that were pre-funded and invested at the closing of the leveraged lease transaction (along with earnings on those invested funds). The tax-exempt entity is obligated to pay the remaining, unfunded portion of this early termination payment (known as the strip coverage) from its own sources. AGM issued financial guaranty insurance policies (known as strip policies) that guaranteed the payment of these unfunded strip coverage amounts to the lessor, in the event that a tax-exempt entity defaulted on its obligation to pay this portion of its early termination payment. Following such events, AGM can then seek reimbursement of its strip policy payments from the tax-exempt entity, and can also sell the transferred depreciable asset and reimburse itself from the sale proceeds.

Currently, all the leveraged lease transactions in which AGM acts as strip coverage provider are breaching a rating trigger related to AGM and are subject to early termination. However, early termination of a lease does not result in a draw on

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the AGM policy if the tax-exempt entity makes the required termination payment. If all the leases were to terminate early and the tax-exempt entities did not make the required early termination payments, then AGM would be exposed to possible liquidity claims on gross exposure of approximately $704 million as of September 30, 2019. To date, none of the leveraged lease transactions that involve AGM has experienced an early termination due to a lease default and a claim on the AGM policy. As of September 30, 2019, approximately $1.7 billion of cumulative strip par exposure had been terminated since 2008 on a consensual basis. The consensual terminations have resulted in no claims on AGM. 

The terms of the Company’s CDS contracts generally are modified from standard CDS contract forms approved by International Swaps and Derivative Association, Inc. in order to provide for payments on a scheduled "pay-as-you-go" basis and to replicate the terms of a traditional financial guaranty insurance policy. However, the Company may also be required to pay if the obligor becomes bankrupt or if the reference obligation were restructured if, after negotiation, those credit events are specified in the documentation for the credit derivative transactions. Furthermore, the Company may be required to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative. If events of default or termination events specified in the credit derivative documentation were to occur, the Company may be required to make a cash termination payment to its swap counterparty upon such termination. Any such payment would probably occur prior to the maturity of the reference obligation and be in an amount larger than the amount due for that period on on a “pay-as-you-go” basis.

The transaction documentation with one counterparty for $193 million of the CDS net par insured by AGC requires AGC to post collateral, subject to a cap, to secure its obligation to make payments under such contracts. As of September 30, 2019, AGC did not have to post collateral to satisfy these requirements and the maximum posting requirement was $193 million.

Condensed Consolidated Cash Flows

Condensed Consolidated Cash Flow Summary

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Net cash flows provided by (used in) operating activities before effects of FG VIE consolidation	$	(168	)	$	(93	)	$	(365	)	$	345
Effect of FG VIE consolidation	1			1			—			7
Net cash flows provided by (used in) operating activities	(167		)	(92		)	(365		)	352
Net cash flows provided by (used in) investing activities before effects of FG VIE consolidation	373			180			908			111
Effect of FG VIE consolidation	66			28			162			83
Net cash flows provided by (used in) investing activities	439			208			1,070			194
Dividends paid	(17		)	(18		)	(56		)	(55		)
Repurchases of common stock	(150		)	(130		)	(340		)	(380		)
Repurchase of debt	—			(49		)	(3		)	(72		)
Effect of FG VIE consolidation	(67		)	(29		)	(162		)	(90		)
Other	(1		)	4			(17		)	(9		)
Net cash flows provided by (used in) financing activities (1)	(235		)	(222		)	(578		)	(606		)
Effect of exchange rate changes	(2		)	(1		)	(2		)	(2		)
Cash and restricted cash at beginning of period	194			189			104			144
Total cash and restricted cash at the end of the period	$	229		$	82		$	229		$	82

____________________

(1) Claims paid on consolidated FG VIEs are presented in the condensed consolidated cash flow statements as a component of paydowns on FG VIEs' liabilities in financing activities as opposed to operating activities.

The primary reason for the decline in cash flows from operations from Nine Months 2018 to Nine Months 2019 is the receipt of $363 million in cash in connection with the SGI Transaction. In addition, Nine Months 2019 had higher claim payments (including the COFINA settlement) and lower premium collections compared with Nine Months 2018. These declines were partially offset by lower interest payments.

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Investing activities primarily consisted of net sales (purchases) of fixed-maturity and short-term investments, and paydowns on and sales of FG VIEs’ assets. The increase in investing cash inflows was mainly attributable to sales of securities to fund share repurchases, the COFINA claim payment in Nine Months 2019 and anticipated liquidity needs in the fourth quarter of 2019 related to the acquisition of BlueMountain.

Financing activities primarily consisted of share repurchases, dividends, debt extinguishment and paydowns of FG VIEs’ liabilities.

From October 1, 2019 through November 7, 2019, the Company repurchased an additional $59 million of common shares. As of November 7, 2019, the Company was authorized to purchase $299 million of its common shares, including a $300 million authorization that was approved by the Board of Directors on August 7, 2019. For more information about the Company's share repurchases and authorizations, see Item 1, Financial Statements, Note 14, Shareholders' Equity.

Commitments and Contingencies

Leases

AGL and its subsidiaries lease office space and certain other items. Future cash payments associated with contractual obligations pursuant to operating leases for office space have not materially changed since December 31, 2018. See Item 1, Financial Statements, Note 12, Commitments and Contingencies.

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Long-Term Debt Obligations

The outstanding principal and carrying value on long-term debt were as follows:

Principal and Carrying Amounts of Debt 

	As of September 30, 2019						As of December 31, 2018
	Principal			Carrying Value			Principal			Carrying Value
	(in millions)
AGUS:
7% Senior Notes (1)	$	200		$	197		$	200		$	197
5% Senior Notes (1)	500			497			500			497
Series A Enhanced Junior Subordinated Debentures (2)	150			150			150			150
Total AGUS	850			844			850			844
AGMH(3):
6 7/8% QUIBS (1)	100			70			100			70
6.25% Notes (1)	230			144			230			143
5.6% Notes (1)	100			58			100			57
Junior Subordinated Debentures (2)	300			202			300			198
Total AGMH	730			474			730			468
AGM (3):
Notes Payable	4			4			5			5
Total AGM	4			4			5			5
AGMH's debt purchased by AGUS	(131		)	(88		)	(128		)	(84		)
Total	$	1,453		$	1,234		$	1,457		$	1,233

 ____________________

(1) AGL fully and unconditionally guarantees these obligations.

(2) Guaranteed by AGL on a junior subordinated basis.

(3)  Carrying amounts are different than principal amounts primarily due to fair value adjustments at the date of the AGMH acquisition, which are accreted or amortized into interest expense over the remaining terms of these obligations.

The following table presents the principal amounts of AGMH's outstanding Junior Subordinated Debentures that AGUS purchased and the loss on extinguishment of debt recognized by the Company. The Company may choose to make additional purchases of this or other Company debt in the future.

AGUS's Purchase

of AGMH's Junior Subordinated Debentures

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
Principal amount repurchased	$	—	$	25	$	3	$	72
Loss on extinguishment of debt (1)	—		9		1		26

 ____________________

(1) Included in other income in the condensed consolidated statements of operations. The loss represents the difference between the amount paid to purchase AGMH's debt and the carrying value of the debt, which includes the unamortized fair value adjustments that were recorded upon the acquisition of AGMH in 2009.

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Interest Paid on Long-Term Debt

	Third Quarter				Nine Months
	2019		2018		2019			2018
	(in millions)
AGUS	$	2	$	2	$	25		$	37
AGMH	7		7		30			30
AGM	—		—		—			—
AGMH's debt purchased by AGUS (1)	—		—		(4		)	(1		)
Total	$	9	$	9	$	51		$	66

 ____________________

(1) Represents principal amount of Junior Subordinated Debentures issued by AGMH that has been purchased by AGUS.

Issued by AGUS:

7% Senior Notes.  On May 18, 2004, AGUS issued $200 million of 7% Senior Notes due 2034 for net proceeds of $197 million. Although the coupon on the Senior Notes is 7%, the effective rate is approximately 6.4%, taking into account the effect of a cash flow hedge. The notes are redeemable, in whole or in part, at their principal amount plus accrued and unpaid interest at the date of redemption or, if greater, the make-whole redemption price.

5% Senior Notes. On June 20, 2014, AGUS issued $500 million of 5% Senior Notes due 2024 for net proceeds of $495 million. The net proceeds from the sale of the notes were used for general corporate purposes, including the purchase of common shares of AGL. The notes are redeemable, in whole or in part, at their principal amount plus accrued and unpaid interest at the date of redemption or, if greater, the make-whole redemption price.

Series A Enhanced Junior Subordinated Debentures.  On December 20, 2006, AGUS issued $150 million of Debentures due 2066. The Debentures paid a fixed 6.4% rate of interest until December 15, 2016, and thereafter pay a floating rate of interest, reset quarterly, at a rate equal to three month London Interbank Offered Rate (LIBOR) plus a margin equal to 2.38%. LIBOR may be discontinued. See the Risk Factor captioned "The Company may be adversely impacted by the transition from LIBOR as a reference rate" under Risks Related to the Financial, Credit and Financial Guaranty Markets in Part I, Item 1A, Risk Factors in AGL's Annual Report on Form 10-K for the year ended December 31, 2018. AGUS may elect at one or more times to defer payment of interest for one or more consecutive periods for up to ten years. Any unpaid interest bears interest at the then applicable rate. AGUS may not defer interest past the maturity date. The debentures are redeemable, in whole or in part, at their principal amount plus accrued and unpaid interest to the date of redemption.

Issued by AGMH:

6 7/8% QUIBS.  On December 19, 2001, AGMH issued $100 million face amount of 6 7/8% QUIBS due December 15, 2101, which are redeemable without premium or penalty in whole or in part at their principal amount plus accrued and unpaid interest up to but not including the date of redemption.

6.25% Notes.  On November 26, 2002, AGMH issued $230 million face amount of 6.25% Notes due November 1, 2102, which are redeemable without premium or penalty in whole or in part at their principal amount plus accrued and unpaid interest up to but not including the date of redemption.

5.6% Notes.  On July 31, 2003, AGMH issued $100 million face amount of 5.6% Notes due July 15, 2103, which are redeemable without premium or penalty in whole or in part at their principal amount plus accrued and unpaid interest up to but not including the date of redemption.

Junior Subordinated Debentures.  On November 22, 2006, AGMH issued $300 million face amount of Junior Subordinated Debentures with a scheduled maturity date of December 15, 2036 and a final repayment date of December 15, 2066. The final repayment date of December 15, 2066 may be automatically extended up to four times in five-year increments provided certain conditions are met. The debentures are redeemable, in whole or in part, at any time prior to December 15, 2036 at their principal amount plus accrued and unpaid interest to the date of redemption or, if greater, the make-whole redemption price. Interest on the debentures will accrue from November 22, 2006 to December 15, 2036 at the annual rate of 6.4%. If any amount of the debentures remains outstanding after December 15, 2036, then the principal amount of the outstanding debentures will bear interest at a floating interest rate equal to one-month LIBOR plus 2.215% until repaid.

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LIBOR may be discontinued. See the Risk Factor captioned "The Company may be adversely impacted by the transition from LIBOR as a reference rate" under Risks Related to the Financial, Credit and Financial Guaranty Markets in Part I, Item 1A, Risk Factors in AGL's Annual Report on Form 10-K for the year ended December 31, 2018. AGMH may elect at one or more times to defer payment of interest on the debentures for one or more consecutive interest periods that do not exceed ten years. In connection with the completion of this offering, AGMH entered into a replacement capital covenant for the benefit of persons that buy, hold or sell a specified series of AGMH long-term indebtedness ranking senior to the debentures. Under the covenant, the debentures will not be repaid, redeemed, repurchased or defeased by AGMH or any of its subsidiaries on or before the date that is twenty years prior to the final repayment date, except to the extent that AGMH has received proceeds from the sale of replacement capital securities. The proceeds from this offering were used to pay a dividend to the shareholders of AGMH. In Nine Months 2019 and Nine Months 2018, AGUS purchased $3 million and $72 million, respectively, of principal of the debentures, which resulted in a loss on extinguishment of debt on a consolidated basis of $1 million in Nine Months 2019 and $26 million in Nine Months 2018. The Company may choose to make additional purchases of this or other Company debt in the future.

Committed Capital Securities

Each of AGC and AGM have entered into put agreements with four separate custodial trusts allowing each of AGC and AGM, respectively, 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 Company does not consider itself to be the primary beneficiary of the trusts and the trusts are not consolidated in Assured Guaranty's financial statements.

The trusts provide AGC and AGM access to new equity capital at their respective sole discretion through the exercise of the put options. Upon AGC's or AGM's exercise of its put option, the relevant trust will liquidate its portfolio of eligible assets and use the proceeds to purchase the AGC or AGM preferred stock, as applicable. AGC or AGM may use the proceeds from its sale of preferred stock to the trusts for any purpose, including the payment of claims. The put agreements have no scheduled termination date or maturity. However, each put agreement will terminate if (subject to certain grace periods) specified events occur. Both AGC and AGM continue to have the ability to exercise their respective put options and cause the related trusts to purchase their preferred stock.

Prior to 2008 or 2007, the amounts paid on the CCS were established through an auction process. All of those auctions failed in 2008 or 2007, and the rates paid on the CCS increased to their respective maximums. The annualized rate on the AGC CCS is one-month LIBOR plus 250 bps, and the annualized rate on the AGM Committed Preferred Trust Securities is one-month LIBOR plus 200 bps. LIBOR may be discontinued. See the Risk Factor captioned "The Company may be adversely impacted by the transition from LIBOR as a reference rate" under Risks Related to the Financial, Credit and Financial Guaranty Markets in Part I, Item 1A, Risk Factors in AGL's Annual Report on Form 10-K for the year ended December 31, 2018.

Investment Portfolio

The Company’s principal objectives in managing its investment portfolio are to support the highest possible ratings for each operating company, to manage investment risk within the context of the underlying portfolio of insurance risk, to maintain sufficient liquidity to cover unexpected stress in the insurance portfolio, and to maximize after-tax net investment income.

The Company’s fixed-maturity securities and short-term investments had a duration of 4.1 years as of September 30, 2019 and 4.9 years as of December 31, 2018. Generally, the Company’s fixed-maturity securities are designated as available-for-sale. For more information about the Investment Portfolio and a detailed description of the Company’s valuation of investments see Item 1, Financial Statements, Note 7, Investments and Cash.

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Fixed-Maturity Securities and Short-Term Investments

by Security Type 

	As of September 30, 2019				As of December 31, 2018
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	$	4,132	$	4,463	$	4,761	$	4,911
U.S. government and agencies	144		155		167		175
Corporate securities	2,286		2,339		2,175		2,136
Mortgage-backed securities (1):
RMBS	846		877		999		982
Commercial mortgage-backed securities (CMBS)	448		469		542		539
Asset-backed securities	745		775		942		1,068
Non-U.S. government securities	210		199		298		278
Total fixed-maturity securities	8,811		9,277		9,884		10,089
Short-term investments	1,142		1,142		729		729
Total fixed-maturity and short-term investments	$	9,953	$	10,419	$	10,613	$	10,818

 ____________________

(1) U.S. government-agency obligations were approximately 44% of mortgage backed securities as of September 30, 2019 and 48% as of December 31, 2018, based on fair value.

The following tables summarize, for all fixed-maturity securities in an unrealized loss position as of September 30, 2019 and December 31, 2018, the aggregate fair value and gross unrealized loss by length of time the amounts have continuously been in an unrealized loss position.

Fixed-Maturity Securities

Gross Unrealized Loss by Length of Time 

As of September 30, 2019

	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	5	$	—		$	4	$	—		$	9	$	—
U.S. government and agencies	13		—			4		—			17		—
Corporate securities	349		(8		)	170		(19		)	519		(27		)
Mortgage-backed securities:
RMBS	7		—			193		(10		)	200		(10		)
CMBS	1		—			4		—			5		—
Asset-backed securities	83		(2		)	147		(1		)	230		(3		)
Non-U.S. government securities	53		(2		)	80		(10		)	133		(12		)
Total	$	511	$	(12	)	$	602	$	(40	)	$	1,113	$	(52	)
Number of securities (1)			133					143					256
Number of securities with OTTI			12					9					21

131

Fixed-Maturity Securities

Gross Unrealized Loss by Length of Time 

As of December 31, 2018

	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	195	$	(4	)	$	658	$	(14	)	$	853	$	(18	)
U.S. government and agencies	11		—			24		(1		)	35		(1		)
Corporate securities	836		(19		)	522		(33		)	1,358		(52		)
Mortgage-backed securities:
RMBS	85		(2		)	447		(32		)	532		(34		)
CMBS	111		(1		)	164		(6		)	275		(7		)
Asset-backed securities	322		(4		)	38		(1		)	360		(5		)
Non-U.S. government securities	83		(4		)	99		(18		)	182		(22		)
Total	$	1,643	$	(34	)	$	1,952	$	(105	)	$	3,595	$	(139	)
Number of securities (1)			417					608					997
Number of securities with OTTI (1)			22					22					42

___________________

(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.

Of the securities in an unrealized loss position for 12 months or more as of September 30, 2019 and December 31, 2018, 27 and 38 securities, respectively, had unrealized losses greater than 10% of book value. The total unrealized loss for these securities was $24 million as of September 30, 2019 and $43 million as of December 31, 2018. 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, 2019 and December 31, 2018 were yield-related and not the result of OTTI.

Changes in interest rates affect the value of the Company’s fixed-maturity portfolio. As interest rates fall, the fair value of fixed-maturity securities generally increases and as interest rates rise, the fair value of fixed-maturity securities generally decreases. The Company’s portfolio of fixed-maturity securities primarily consists of high-quality, liquid instruments.

The amortized cost and estimated fair value of the Company’s available-for-sale fixed-maturity securities, by contractual maturity, 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.

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Distribution of Fixed-Maturity Securities

by Contractual Maturity

As of September 30, 2019

	Amortized Cost		Estimated Fair Value
	(in millions)
Due within one year	$	274	$	275
Due after one year through five years	1,617		1,635
Due after five years through 10 years	2,133		2,242
Due after 10 years	3,493		3,779
Mortgage-backed securities:
RMBS	846		877
CMBS	448		469
Total	$	8,811	$	9,277

The following table summarizes the ratings distributions of the Company’s investment portfolio as of September 30, 2019 and December 31, 2018. Ratings reflect the lower of the Moody’s Investors Service, Inc. and S&P Global Ratings, a division of Standard & Poor's Financial Services LLC classifications, except for bonds purchased for loss mitigation or other risk management strategies, which use Assured Guaranty’s internal ratings classifications.

Distribution of

Fixed-Maturity Securities by Rating

Rating	As of September 30, 2019		As of December 31, 2018
AAA	16.5	%	15.7	%
AA	45.2		48.2
A	20.9		19.8
BBB	8.3		5.0
BIG (1)	8.4		10.8
Not rated	0.7		0.5
Total	100.0	%	100.0	%

____________________

(1) Includes primarily loss mitigation and other risk management assets. See Item I, Financial Statements, Note 7, Investments and Cash, for additional information.

Based on fair value, investments and restricted cash 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 $278 million and $266 million, as of September 30, 2019 and December 31, 2018, respectively. The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements in the amount of $1,596 million and $1,855 million, based on fair value, as of September 30, 2019 and December 31, 2018, respectively.

The Company has collateral posting obligations with respect to one CDS counterparty. See Item I, Financial Statements, Note 8, Contracts Accounted for as Credit Derivatives, for additional information.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2019, there were no material changes in the market risks that the Company is exposed to since December 31, 2018.

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ITEM 4. CONTROLS AND PROCEDURES

Assured Guaranty’s management, with the participation of AGL’s President and Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are effective in recording, processing, summarizing and reporting, within the time periods specified in the Securities and Exchange Commission’s rules and forms, information required to be disclosed by AGL in the reports that it files or submits under the Exchange Act and ensuring that such information is accumulated and communicated to management, including the President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2019. Based on their evaluation as of September 30, 2019 covered by this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to legal proceedings and claims, as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, in the Company's Quarterly Report on Form 10-Q for the quarters ended March 31, 2019, and June 30, 2019, and in Part I, Item 1, Financial Statements, Note 12, Commitments and Contingencies – Legal Proceedings contained in this Form 10-Q. Material developments to such proceedings during the three months ended September 30, 2019, are described below and in the "Litigation" section of Note 12, Commitments and Contingencies, of the Financial Statements.

On November 28, 2011, Lehman Brothers International (Europe) (in administration) (LBIE) sued AG Financial Products Inc. (AGFP), an affiliate of AGC which in the past had provided credit protection to counterparties under CDS. AGC acts as the credit support provider of AGFP under these CDS. LBIE’s complaint, which was filed in the Supreme Court of the State of New York, asserted a claim for breach of the implied covenant of good faith and fair dealing based on AGFP's termination of nine credit derivative transactions between LBIE and AGFP and asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing based on AGFP's termination of 28 other credit derivative transactions between LBIE and AGFP and AGFP's calculation of the termination payment in connection with those 28 other credit derivative transactions. Following defaults by LBIE, AGFP properly terminated the transactions in question in compliance with the agreement between AGFP and LBIE, and calculated the termination payment properly. AGFP calculated that LBIE owes AGFP approximately $4 million for the claims which were dismissed and approximately $25 million in connection with the termination of the other credit derivative transactions, whereas LBIE asserted in the complaint that AGFP owes LBIE a termination payment of approximately $1.4 billion. AGFP filed a motion to dismiss the claims for breach of the implied covenant of good faith in LBIE's complaint, and on March 15, 2013, the court granted AGFP's motion to dismiss in respect of the count relating to the nine credit derivative transactions and narrowed LBIE's claim with respect to the 28 other credit derivative transactions. LBIE's administrators disclosed in an April 10, 2015 report to LBIE’s unsecured creditors that LBIE's valuation expert has calculated LBIE's claim for damages in aggregate for the 28 transactions to range between a minimum of approximately $200 million and a maximum of approximately $500 million, depending on what adjustment, if any, is made for AGFP's credit risk and excluding any applicable interest. AGFP filed a motion for summary judgment on the remaining causes of action asserted by LBIE and on AGFP's counterclaims, and on July 2, 2018, the court granted in part and denied in part AGFP’s motion. The court dismissed, in its entirety, LBIE’s remaining claim for breach of the implied covenant of good faith and fair dealing and also dismissed LBIE’s claim for breach of contract solely to the extent that it is based upon AGFP’s conduct in connection with the auction. With respect to LBIE’s claim for breach of contract, the court held that there are triable issues of fact regarding whether AGFP calculated its loss reasonably and in good faith. On October 1, 2018, AGFP filed an appeal with the Appellate Division of the Supreme Court of the State of New York, First Judicial Department, seeking reversal of the portions of the lower court's ruling denying AGFP’s motion for summary judgment with respect to LBIE’s sole remaining claim for breach of contract. On January 17, 2019, the Appellate Division affirmed the Supreme Court's decision, holding that the lower court correctly determined that there are triable issues of fact regarding whether AGFP calculated its loss reasonably and in good faith. A trial has been scheduled to take place in March 2020.

ITEM 1A. RISK FACTORS

See the risk factors set forth in Part I, "Item 1A. Risk Factors" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Except as set forth below, there have been no material changes to the risk factors disclosed in such Annual Report on Form 10-K during the nine months ended September 30, 2019. For avoidance of doubt, the risk factors below replace the additional risk factors included under Part II, Item 1A of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.

The recent BlueMountain Acquisition may negatively impact the Company's relationships with its investors, regulators, rating agencies, employees or obligors it insures, or BlueMountain's business or its relationships with its clients and employees.

The BlueMountain Acquisition represents a significant increase in the Company's participation in the asset management business and involves a significant investment by the Company. The Company discussed the BlueMountain Acquisition with its relevant regulators and with the rating agencies prior to closing and does not believe that the BlueMountain Acquisition has had a negative impact on its relationship with those regulators or the rating agencies. There can be no assurance, however, that the BlueMountain Acquisition will not negatively impact the Company's relationships with its investors, regulators, rating agencies, employees or obligors it insures or its business or results of operations.

135

BlueMountain's ability to generate new business and to retain current clients is dependent on the performance of its clients' investments as well as its relationship with its clients. There can be no assurance that the BlueMountain Acquisition will not negatively impact BlueMountain's relationship with any investor or potential investor. Any such negative impact could prevent the Company from realizing the benefits it expects from the BlueMountain Acquisition.

The Company is dependent on the experience and industry knowledge of its management personnel and other key employees, including, in the case of BlueMountain, key investment professionals, to execute its business plans. The Company’s success in asset management will depend in part upon the ability of the Company to attract, motivate and retain key management personnel and other key employees, including key investment professionals. Uncertainties associated with the integration of BlueMountain may result in the departure of management personnel and other key employees, including key investment professionals, at the Company, and the Company may have difficulty attracting and motivating management personnel and other key employees, including key investment professionals, to the same extent it did prior to the BlueMountain Acquisition.

BlueMountain may present risks that could have a negative effect on the Company's business, results of operations or financial condition.

While the Company acquired a minority interest in an investment adviser, Wasmer, Schroeder & Company LLC, in 2017, the BlueMountain Acquisition represents a significant increase in the Company's participation in the asset management business. The expansion of this business line, which the Company believes is in line with its risk profile and benefits from its core competencies, may present new risks that could have a negative effect on the Company's business, results of operations or financial condition.

The BlueMountain Acquisition may also present the risks described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 under Part I, "Item 1A. Risk Factors, Risks Related to the Company's Business -- Acquisitions may not result in the benefits anticipated and may subject the Company to non-monetary consequences" and -- Alternative investments may not result in the benefits anticipated".

Now that the BlueMountain Acquisition has closed, the Company’s business, results of operations and financial condition may be impacted by some of the risks faced by asset managers. Asset management services are primarily a fee-based business, and BlueMountain's asset management and performance fees are based on the amount of its AUM as well as the performance of those assets. Volatility or declines in the markets in which BlueMountain invests, or poor performance of its investments, may negatively affect its AUM and its asset management and performance fees and may deter future investment in BlueMountain’s funds. BlueMountain’s business is also subject to legal, regulatory, compliance, accounting, valuation and political risks that differ from the those involved in the Company’s business of providing credit protection products. In addition, the asset management business is an intensely competitive business, creating competitive risks.

Expansion of the categories and types of investments in the Company’s investment portfolio may expose it to increased credit, interest rate and liquidity risk.

The Company intends to use investment knowledge and experience acquired in the BlueMountain Acquisition to expand the categories and types of investments included in its investment portfolio by both (a) investing $500 million over three years in BlueMountain-managed funds, CLOs and separately managed accounts and (b) expanding the categories and types of its alternative investments not managed by BlueMountain. This expansion may increase the risk in the Company’s investment portfolio described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 under Part I, "Item 1A. Risk Factors, Risks Related to the Financial, Credit and Guaranty Market - The Company’s investment portfolio may be adversely affected by credit, interest rate and other market changes.” In addition, this expansion may result in the Company investing a portion of its portfolio in investments that are less liquid than some of the investments in which it currently invests. While the Company manages its investment portfolio with its liquidity requirements in mind, this expansion may increase the risks described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 under Part I, "Item 1A. Risk Factors, Risks Related to the Company’s Capital and Liquidity Requirements.”

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer’s Purchases of Equity Securities

The following table reflects purchases of AGL common shares made by the Company during Third Quarter 2019.

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program (1)	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Program (2)
July 1 - July 31	1,172,573	$	43.68	1,144,494	$	157,873,299
August 1 - August 31	1,138,821	$	43.93	1,138,265	$	407,873,306
September 1 - September 30	1,122,727	$	44.73	1,117,918	$	357,873,322
Total	3,434,121	$	44.10	3,400,677

____________________

(1) After giving effect to repurchases since the beginning of 2013 through November 7, 2019, the Company has repurchased a total of 103.7 million common shares for approximately $3,115 million, excluding commissions, at an average price of $30.05 per share. The Board of Directors authorized, on August 7, 2019, an additional $300 million of share repurchases. As of November 7, 2019, the remaining authorization the Company was authorized to purchase was $299 million of its common shares, on a settlement basis.

(2) Excludes commissions.

ITEM 6. EXHIBITS.

The following exhibits are filed with this report:

Exhibit Number	Description of Document
31.1	Certification of CEO Pursuant to Exchange Act Rules 13A-14 and 15D-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of CFO Pursuant to Exchange Act Rules 13A-14 and 15D-14, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of CEO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
32.2	Certification of CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002
101.1	The following financial information from Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 formatted in inline XBRL: (i) Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018; (ii) Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2019 and 2018; (iii) Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months ended September 30, 2019 and 2018; (iv) Condensed Consolidated Statements of Shareholders’ Equity for the Three and Nine Months ended September 30, 2019 and 2018; (v) Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2019 and 2018; and (vi) Notes to Condensed Consolidated Financial Statements.
104.1	The Cover Page Interactive DataFile from Assured Guaranty Ltd.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 formatted, in inline XBRL (the cover page XBRL tags are embedded in the inline XBRL document and included in Exhibit 101).

137

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	ASSURED GUARANTY LTD. (Registrant)
Dated November 8, 2019	By:	/s/ ROBERT A. BAILENSON
		Robert A. Bailenson Chief Financial Officer (Principal Financial Officer and Duly Authorized Officer)

138

EX-31.1

EXHIBIT 31.1

Assured Guaranty Ltd.

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dominic J. Frederico, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ DOMINIC J. FREDERICO
	Dominic J. Frederico
	President and Chief Executive Officer

Date: November 8, 2019

EX-31.2

EXHIBIT 31.2

Assured Guaranty Ltd.

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Robert A. Bailenson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Assured Guaranty Ltd.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ ROBERT A. BAILENSON
	Robert A. Bailenson
	Chief Financial Officer

Date: November 8, 2019

EX-32.1

Exhibit 32.1

CERTIFICATION OF CEO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Assured Guaranty Ltd. (the “Company”) for the period ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Dominic J. Frederico, as Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ DOMINIC J. FREDERICO

Name: Dominic J. Frederico

Title: President and Chief Executive Officer

Date: November 8, 2019

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CFO PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Assured Guaranty Ltd. (the “Company”) for the period ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Robert A. Bailenson, as Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ROBERT A. BAILENSON

Name: Robert A. Bailenson

Title: Chief Financial Officer

Date: November 8, 2019

XML

Investments and Cash - Net Realized Investment Gains (Losses) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Investments, Debt and Equity Securities [Abstract]
Gross realized gains on available-for-sale securities	$ 29	$ 5	$ 48	$ 16
Gross realized losses on available-for-sale securities	(1)	(3)	(4)	(9)
Net realized gains (losses) on other invested assets	0	0	0	(1)
Total OTTI	(12)	(8)	(29)	(23)
Less: portion of OTTI recognized in OCI	0	1	3	(3)
Net OTTI recognized in net income (loss)	(12)	(9)	(32)	(20)
Net realized investment gains (losses)	$ 16	$ (7)	$ 12	$ (14)

XML

Contracts Accounted for as Credit Derivatives - CDS Spread and Components of Credit Derivative Assets (Liabilities) (Details) - USD ($) $ in Millions	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Credit Derivatives
Fair value of credit derivatives before effect of AGC credit spread	$ (306)		$ (407)
Plus: Effect of AGC credit spread	98		200
Net fair value of credit derivatives	$ (208)		$ (207)
Credit Risk Contract, 5 Year Spread [Member] | AGC [Member]
Credit Derivatives
Quoted price of CDS contract (as a percent)	0.56%	0.56%	1.10%	0.77%	1.05%	1.63%
Credit Risk Contract, 1 Year Spread [Member] | AGC [Member]
Credit Derivatives
Quoted price of CDS contract (as a percent)	0.14%	0.13%	0.22%	0.15%	0.22%	0.70%

XML

Investments and Cash Investments and Cash - Cash and Restricted Cash (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Investments, Debt and Equity Securities [Abstract]
Cash	$ 229	$ 104
Cash and Restricted Cash	$ 229	$ 104	$ 82	$ 144

XML

Fair Value Measurement - Quantitative Information - Liabilities (Details) - Valuation, Income Approach [Member] - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Credit derivative liabilities, net [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Total liabilities carried at fair value	$ (208)	$ (207)
Internal floor (as a percent)	0.30%
Credit derivative liabilities, net [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Internal floor (as a percent)		0.088%
Bank profit (as a percent)	0.38%	0.072%
Hedge cost (as a percent)	0.08%	0.055%
Credit derivative liabilities, net [Member] | Minimum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Year 1 loss estimates (as a percent)	0.00%	0.00%
Credit derivative liabilities, net [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Internal floor (as a percent)		0.30%
Bank profit (as a percent)	1.91%	5.099%
Hedge cost (as a percent)	0.42%	0.825%
Credit derivative liabilities, net [Member] | Maximum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Year 1 loss estimates (as a percent)	50.00%	66.00%
Credit derivative liabilities, net [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Internal floor (as a percent)		0.19%
Bank profit (as a percent)	0.81%	0.773%
Hedge cost (as a percent)	0.17%	0.233%
Credit derivative liabilities, net [Member] | Weighted Average [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Year 1 loss estimates (as a percent)	1.20%	2.20%
Financial Guaranty Variable Interest Entities [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Total liabilities carried at fair value	$ (493)	$ (619)
Financial Guaranty Variable Interest Entities [Member] | Minimum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	3.30%	5.00%
Financial Guaranty Variable Interest Entities [Member] | Maximum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	8.30%	10.20%
Financial Guaranty Variable Interest Entities [Member] | Weighted Average [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	4.20%	5.60%
Measurement Input, Prepayment Rate [Member] | Financial Guaranty Variable Interest Entities [Member] | Minimum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	0.70%	0.90%
Measurement Input, Prepayment Rate [Member] | Financial Guaranty Variable Interest Entities [Member] | Maximum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	18.40%	18.10%
Measurement Input, Prepayment Rate [Member] | Financial Guaranty Variable Interest Entities [Member] | Weighted Average [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	8.80%	9.30%
Measurement Input, Default Rate [Member] | Financial Guaranty Variable Interest Entities [Member] | Minimum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	1.20%	1.30%
Measurement Input, Default Rate [Member] | Financial Guaranty Variable Interest Entities [Member] | Maximum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	25.70%	23.70%
Measurement Input, Default Rate [Member] | Financial Guaranty Variable Interest Entities [Member] | Weighted Average [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	4.70%	5.10%
Measurement Input, Loss Severity [Member] | Financial Guaranty Variable Interest Entities [Member] | Minimum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	60.00%	60.00%
Measurement Input, Loss Severity [Member] | Financial Guaranty Variable Interest Entities [Member] | Maximum [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	100.00%	100.00%
Measurement Input, Loss Severity [Member] | Financial Guaranty Variable Interest Entities [Member] | Weighted Average [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	77.60%	79.80%

XML

Contracts Accounted for as Insurance - Net Earned Premiums (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Financial Guarantee Insurance Premiums [Line Items]
Scheduled net earned premiums	$ 81	$ 95	$ 253	$ 275
Accelerations from refundings and terminations	37	40	83	131
Accretion of discount on net premiums receivable	4	6	13	14
Financial guaranty insurance net earned premiums	122	141	349	420
Non-financial guaranty net earned premiums	1	1	4	3
Net	123	142	353	423
Variable Interest Entity, Primary Beneficiary [Member]
Financial Guarantee Insurance Premiums [Line Items]
Net	$ 2	$ 3	$ 16	$ 9

XML

Expected Loss to be Paid - Net Expected Loss to be Paid After Net Expected Recoveries for Breaches of R&W Rollforward (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W	$ 960	$ 1,432	$ 1,183	$ 1,303
Economic Loss Development / (Benefit)	25	0	(14)	(5)
Accretion of discount	5	10	19	27
Changes in discount rates	1	(9)	(4)	(15)
Changes in timing and assumptions	19	(1)	(29)	(17)
(Paid) Recovered Losses	(267)	(241)	(451)	(238)
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	718	1,191	$ 718	1,191
Period after the end of the reporting period within which the ceded paid losses are typically settled (in days)			45 days
Loss and LAE Reserve paid	7	6	$ 23	17
Expected LAE to be paid	34		34		$ 31
Public Finance [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W	772	1,082	864	1,203
Economic Loss Development / (Benefit)	55	39	200	50
(Paid) Recovered Losses	(279)	(251)	(516)	(384)
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	548	870	548	870
Public Finance [Member] | United States [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W	749	1,041	832	1,157
Economic Loss Development / (Benefit)	50	42	204	59
(Paid) Recovered Losses	(279)	(251)	(516)	(384)
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	520	832	520	832
Public Finance [Member] | Non United States [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W	23	41	32	46
Economic Loss Development / (Benefit)	5	(3)	(4)	(9)
(Paid) Recovered Losses	0	0	0	0
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	28	38	28	38
RMBS [Member] | United States [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W	162	326	293	73
Economic Loss Development / (Benefit)	(40)	(40)	(223)	(52)
(Paid) Recovered Losses	13	17	65	152
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	135	303	135	303
RMBS [Member] | First Lien [Member] | United States [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W			243
Economic Loss Development / (Benefit)	27	13	77	(4)
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	164		164
RMBS [Member] | Second Lien [Member] | United States [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W			50
Economic Loss Development / (Benefit)	13	27	146	56
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	29		29
Other structured finance [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W	26	24	26	27
Economic Loss Development / (Benefit)	10	1	9	(3)
(Paid) Recovered Losses	(1)	(7)	0	(6)
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	35	18	35	18
Structured Finance [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W	188	350	319	100
Economic Loss Development / (Benefit)	(30)	(39)	(214)	(55)
(Paid) Recovered Losses	12	10	65	146
End of Period, Net Expected Loss to be Paid After Recoveries for R&W	170	321	170	$ 321
Reinsurance of SGI Insured Portfolio [Member]
Present Value of Net Expected Loss and Loss Adjustment Expenses to be Paid [Roll Forward]
Beginning of Period, Net Expected Loss to be Paid After Recoveries for R&W	$ 0	$ 0	$ 0

XML

Expected Loss to be Paid - Key Assumptions in Base Case Expected Loss Second Lien RMBS (Details) - scenario	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Jun. 30, 2019
RMBS [Member] | United States [Member] | Option ARM [Member] | Minimum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	2.00%	1.80%	2.40%
Final CDR	0.10%	0.10%	0.10%
RMBS [Member] | United States [Member] | Option ARM [Member] | Maximum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	8.40%	8.30%	7.90%
Final CDR	0.40%	0.40%	0.40%
RMBS [Member] | United States [Member] | Option ARM [Member] | Weighted Average [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	5.60%	5.60%	5.50%
Final CDR	0.30%	0.30%	0.30%
RMBS [Member] | United States [Member] | Alt-A and Prime [Member] | Minimum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	0.50%	1.20%	0.00%
Final CDR	0.00%	0.10%	0.00%
RMBS [Member] | United States [Member] | Alt-A and Prime [Member] | Maximum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	10.50%	11.40%	9.50%
Final CDR	0.50%	0.60%	0.50%
RMBS [Member] | United States [Member] | Alt-A and Prime [Member] | Weighted Average [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	4.10%	4.60%	4.00%
Final CDR	0.20%	0.20%	0.20%
RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	98.00%	98.00%	98.00%
RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member] | Minimum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Final CPR	2.50%
Plateau CDR	4.80%	4.60%	4.60%
Final CDR	2.50%	2.50%	2.50%
RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member] | Maximum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	20.70%	26.80%	23.50%
Final CDR	3.20%	3.20%	3.20%
RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member] | Weighted Average [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	9.10%	10.10%	9.20%
Final CDR	2.50%	2.50%	2.50%
RMBS [Member] | United States [Member] | Subprime [Member] | Minimum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	1.50%	1.80%	2.50%
Final CDR	0.10%	0.10%	0.10%
RMBS [Member] | United States [Member] | Subprime [Member] | Maximum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	20.20%	23.20%	22.80%
Final CDR	1.00%	1.20%	1.10%
RMBS [Member] | United States [Member] | Subprime [Member] | Weighted Average [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	5.60%	6.20%	6.00%
Final CDR	0.30%	0.30%	0.30%
Financing Receivable, Delinquent/Modified in Previous 12 Months [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	20.00%	20.00%	20.00%
Financing Receivable, Delinquent/Modified in Previous 12 Months [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation rate	20.00%	20.00%	20.00%
Financial Asset, 30 to 59 Days Past Due [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	30.00%	30.00%	30.00%
Financial Asset, 30 to 59 Days Past Due [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation rate	35.00%	35.00%	30.00%
Financial Asset, 60 to 89 Days Past Due [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	40.00%	40.00%	40.00%
Financial Asset, 60 to 89 Days Past Due [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation rate	45.00%	50.00%	45.00%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	55.00%	50.00%	50.00%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation rate	65.00%	70.00%	65.00%
Financing Receivables, Bankruptcy [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	45.00%	45.00%	45.00%
Financing Receivables, Bankruptcy [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation rate	55.00%	55.00%	55.00%
Financing Receivable, Foreclosure [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	65.00%	60.00%	60.00%
Financing Receivable, Foreclosure [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation rate	55.00%	65.00%	60.00%
Financing Receivable, Real Estate Owned [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	100.00%	100.00%	100.00%
Financing Receivable, Real Estate Owned [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation rate	100.00%	100.00%	100.00%
Second Lien [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss recovery assumption (as a percent)	2.00%	2.00%
Number of scenarios weighted in estimating expected losses		5
Second Lien [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit and Closed-end Mortgage [Member]
Schedule of Expected Losses to be Paid [Line Items]
Final CPR	15.00%	15.00%	15.00%
First Lien [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Number of scenarios weighted in estimating expected losses	5	5
Projected loss assumptions, Final CPR, Period for voluntary prepayments to continue	12 months
Base Scenario [Member] | First Lien [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Final CPR	15.00%	15.00%	15.00%
Projected loss assumptions, Final CPR, Period for voluntary prepayments to continue	3 years 9 months
2005 and prior [Member] | RMBS [Member] | United States [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	60.00%	60.00%	60.00%
2005 and prior [Member] | RMBS [Member] | United States [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	60.00%	60.00%	60.00%
2005 and prior [Member] | RMBS [Member] | United States [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	80.00%	80.00%	80.00%
2006 [Member] | RMBS [Member] | United States [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	60.00%	60.00%	60.00%
2006 [Member] | RMBS [Member] | United States [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	70.00%	70.00%	70.00%
2006 [Member] | RMBS [Member] | United States [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	75.00%	75.00%	75.00%
2007 [Member] | RMBS [Member] | United States [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	70.00%	70.00%	70.00%
2007 [Member] | RMBS [Member] | United States [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	70.00%	70.00%	70.00%
2007 [Member] | RMBS [Member] | United States [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Loss severity	85.00%	95.00%	95.00%

XML

Reinsurance (Tables)

9 Months Ended

Sep. 30, 2019

Insurance [Abstract]

Effects of Reinsurance on Statement of Operations

Effect of Reinsurance on Statement of Operations

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Premiums Written:
Direct	$	67		$	57		$	156		$	192
Assumed (1)	2			(7		)	3			324
Ceded (2)	(1		)	1			12			14
Net	$	68		$	51		$	171		$	530
Premiums Earned:
Direct	$	113		$	127		$	317		$	400
Assumed	12			19			42			33
Ceded	(2		)	(4		)	(6		)	(10		)
Net	$	123		$	142		$	353		$	423
Loss and LAE:
Direct	$	28		$	18		$	82		$	53
Assumed	2			1			4			(7		)
Ceded	—			(2		)	(11		)	(3		)
Net	$	30		$	17		$	75		$	43

____________________

(1)    Negative assumed premiums written were due to changes in expected debt service schedules.

(2)

Positive ceded premiums written were due to terminations, commutations and changes in expected debt service schedules.

Exposure by Reinsurer

Ceded Reinsurance (1)

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Ceded premium payable, net of commissions	$	19	$	26
Ceded expected loss to be recovered (paid)	14		14
Financial guaranty ceded par outstanding (2)	1,343		2,389
Non-financial guaranty ceded exposure (see Note 3)	275		239

____________________

(1) The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of September 30, 2019 and December 31, 2018 was approximately $69 million and $80 million, respectively. Such collateral is posted (i) in the case of certain reinsurers not authorized or "accredited" in the U.S., in order for the Company to receive credit for the liabilities ceded to such reinsurers in statutory financial statements, and (ii) in the case of certain reinsurers authorized in the U.S., on terms negotiated with the Company.

(2)

Of the total par ceded to unrated or BIG rated reinsurers, $224 million and $236 million is rated BIG as of September 30, 2019 and December 31, 2018, respectively.

Schedule Of Commutations And Cancellations Of Reinsurance Contracts

Commutations of Ceded Reinsurance Contracts

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
Increase in net unearned premium reserve	$	—	$	4	$	15	$	64
Increase in net par outstanding	—		224		1,069		1,457
Commutation gains (losses)	—		1		1		(16		)

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Investments and Cash (Tables)

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Net Investment Income

Net Investment Income

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Income from fixed-maturity securities managed by third parties	$	66		$	75		$	207		$	224
Income from internally managed securities	24			26			95			80
Gross investment income	90			101			302			304
Investment expenses	(2		)	(2		)	(6		)	(7		)
Net investment income	$	88		$	99		$	296		$	297

Net Realized Investment Gains (Losses)

Net Realized Investment Gains (Losses)

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Gross realized gains on available-for-sale securities	$	29		$	5		$	48		$	16
Gross realized losses on available-for-sale securities	(1		)	(3		)	(4		)	(9		)
Net realized gains (losses) on other invested assets	—			—			—			(1		)
Other-than-temporary impairment (OTTI):
Total OTTI	(12		)	(8		)	(29		)	(23		)
Less: portion of OTTI recognized in OCI	—			1			3			(3		)
Net OTTI recognized in net income (loss) (1)	(12		)	(9		)	(32		)	(20		)
Net realized investment gains (losses)	$	16		$	(7	)	$	12		$	(14	)

____________________

(1) Net OTTI recognized in net income was mainly attributable to change in foreign exchange rates in Third Quarter 2019 and Third Quarter 2018. OTTI for Nine Months 2019 and Nine Months 2018 was attributable to change in foreign exchange rates and securities purchased for loss mitigation and other risk management purposes.

Roll Forward of Credit Losses in the Investment Portfolio

The following table presents the roll-forward of the credit losses on fixed-maturity securities for which the Company has recognized an OTTI and for which unrealized loss was recognized in OCI.

Roll Forward of Credit Losses

in the Investment Portfolio

	Third Quarter				Nine Months
	2019		2018		2019			2018
	(in millions)
Balance, beginning of period	$	191	$	170	$	185		$	162
Additions for credit losses on securities for which an OTTI was previously recognized	—		2		13			10
Reductions for securities sold and other settlements	—		—		(7		)	—
Balance, end of period	$	191	$	172	$	191		$	172

Fixed Maturity Securities and Short Term Investments by Security Type

Fixed-Maturity Securities and Short-Term Investments

by Security Type 

As of September 30, 2019

Security Type	Percent of Total (1)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		AOCI (2) Pre-tax Gain (Loss) on Securities with OTTI			Weighted Average Credit Rating  (3)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	42	%	$	4,132	$	331	$	—		$	4,463	$	42		AA-
U.S. government and agencies	1		144		11		—			155		—			AA+
Corporate securities	24		2,286		80		(27		)	2,339		(4		)	A
Mortgage-backed securities (4):	0
RMBS	8		846		41		(10		)	877		4			A-
CMBS	5		448		21		—			469		—			AAA
Asset-backed securities	7		745		33		(3		)	775		10			BBB-
Non-U.S. government securities	2		210		1		(12		)	199		—			AA
Total fixed-maturity securities	89		8,811		518		(52		)	9,277		52			A+
Short-term investments	11		1,142		—		—			1,142		—			AAA
Total investment portfolio	100	%	$	9,953	$	518	$	(52	)	$	10,419	$	52		A+

Fixed-Maturity Securities and Short-Term Investments

by Security Type 

As of December 31, 2018 

Security Type	Percent of Total (1)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		AOCI Pre-tax Gain (Loss) on Securities with OTTI			Weighted Average Credit Rating  (3)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	45	%	$	4,761	$	168	$	(18	)	$	4,911	$	40		AA-
U.S. government and agencies	2		167		9		(1		)	175		—			AA+
Corporate securities	20		2,175		13		(52		)	2,136		(4		)	A
Mortgage-backed securities (4):
RMBS	9		999		17		(34		)	982		(15		)	A-
CMBS	5		542		4		(7		)	539		—			AAA
Asset-backed securities	9		942		131		(5		)	1,068		97			BB
Non-U.S. government securities	3		298		2		(22		)	278		—			AA
Total fixed-maturity securities	93		9,884		344		(139		)	10,089		118			A+
Short-term investments	7		729		—		—			729		—			AAA
Total investment portfolio	100	%	$	10,613	$	344	$	(139	)	$	10,818	$	118		A+

____________________

(1) Based on amortized cost.

(2) Accumulated OCI (AOCI).

(3) Ratings represent the lower of the Moody’s and S&P classifications, except for bonds purchased for loss mitigation or risk management strategies, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments.

(4) U.S. government-agency obligations were approximately 44% of mortgage backed securities as of September 30, 2019 and 48% as of December 31, 2018 based on fair value.

Fixed Maturity Securities Gross Unrealized Loss by Length of Time

The following tables summarize, for all fixed-maturity securities in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time the amounts have continuously been in an unrealized loss position.

Fixed-Maturity Securities

Gross Unrealized Loss by Length of Time

As of September 30, 2019

	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	5	$	—		$	4	$	—		$	9	$	—
U.S. government and agencies	13		—			4		—			17		—
Corporate securities	349		(8		)	170		(19		)	519		(27		)
Mortgage-backed securities:
RMBS	7		—			193		(10		)	200		(10		)
CMBS	1		—			4		—			5		—
Asset-backed securities	83		(2		)	147		(1		)	230		(3		)
Non-U.S. government securities	53		(2		)	80		(10		)	133		(12		)
Total	$	511	$	(12	)	$	602	$	(40	)	$	1,113	$	(52	)
Number of securities (1)			133					143					256
Number of securities with OTTI			12					9					21

Fixed-Maturity Securities

Gross Unrealized Loss by Length of Time

As of December 31, 2018

	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	195	$	(4	)	$	658	$	(14	)	$	853	$	(18	)
U.S. government and agencies	11		—			24		(1		)	35		(1		)
Corporate securities	836		(19		)	522		(33		)	1,358		(52		)
Mortgage-backed securities:
RMBS	85		(2		)	447		(32		)	532		(34		)
CMBS	111		(1		)	164		(6		)	275		(7		)
Asset-backed securities	322		(4		)	38		(1		)	360		(5		)
Non-U.S. government securities	83		(4		)	99		(18		)	182		(22		)
Total	$	1,643	$	(34	)	$	1,952	$	(105	)	$	3,595	$	(139	)
Number of securities (1)			417					608					997
Number of securities with OTTI (1)			22					22					42

___________________

(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.

Distribution of Fixed Maturity Securities by Contractual Maturity

The amortized cost and estimated fair value of available-for-sale fixed maturity securities by contractual maturity as of September 30, 2019 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 Fixed-Maturity Securities

by Contractual Maturity

As of September 30, 2019

	Amortized Cost		Estimated Fair Value
	(in millions)
Due within one year	$	274	$	275
Due after one year through five years	1,617		1,635
Due after five years through 10 years	2,133		2,242
Due after 10 years	3,493		3,779
Mortgage-backed securities:
RMBS	846		877
CMBS	448		469
Total	$	8,811	$	9,277

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Subsidiary Information (Tables)

9 Months Ended

Sep. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Condensed Consolidating Balance Sheet

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)		AGUS (Issuer) (1)		AGMH (Issuer)		Other Entities		Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Assets
Total investment portfolio and cash	$	41	$	416	$	24	$	10,655	$	(431	)	$	10,705
Investment in subsidiaries	6,531		5,898		4,135		204		(16,768		)	—
Premiums receivable, net of commissions payable	—		—		—		997		(153		)	844
Deferred acquisition costs	—		—		—		142		(35		)	107
Intercompany loan receivable	—		—		—		50		(50		)	—
FG VIEs’ assets, at fair value	—		—		—		469		—			469
Dividends receivable from affiliate	70		10		—		—		(80		)	—
Other	25		84		32		2,723		(1,622		)	1,242
Total assets	$	6,667	$	6,408	$	4,191	$	15,240	$	(19,139	)	$	13,367
Liabilities and shareholders' equity
Unearned premium reserves	$	—	$	—	$	—	$	4,228	$	(894	)	$	3,334
Loss and LAE reserve	—		—		—		1,251		(244		)	1,007
Long-term debt	—		844		474		4		(88		)	1,234
Intercompany loan payable	—		50		—		300		(350		)	—
Credit derivative liabilities	—		—		—		249		(35		)	214
FG VIEs’ liabilities, at fair value	—		—		—		493		—			493
Dividends payable to affiliate	—		70		10		—		(80		)	—
Other	15		75		71		894		(622		)	433
Total liabilities	15		1,039		555		7,419		(2,313		)	6,715
Total shareholders' equity attributable to Assured Guaranty Ltd.	6,652		5,369		3,636		7,617		(16,622		)	6,652
Noncontrolling interest	—		—		—		204		(204		)	—
Total shareholders' equity	6,652		5,369		3,636		7,821		(16,826		)	6,652
Total liabilities and shareholders' equity	$	6,667	$	6,408	$	4,191	$	15,240	$	(19,139	)	$	13,367

 ____________________

(1) The fair value of the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $131 million.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)		AGUS (Issuer) (1)		AGMH (Issuer)		Other Entities		Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Assets
Total investment portfolio and cash	$	45	$	334	$	23	$	11,000	$	(425	)	$	10,977
Investment in subsidiaries	6,440		5,835		3,991		226		(16,492		)	—
Premiums receivable, net of commissions payable	—		—		—		1,071		(167		)	904
Deferred acquisition costs	—		—		—		143		(38		)	105
Deferred tax asset, net	—		—		—		162		(94		)	68
Intercompany loan receivable	—		—		—		50		(50		)	—
FG VIEs’ assets, at fair value	—		—		—		569		—			569
Dividends receivable from affiliate	60		—		—		—		(60		)	—
Other	29		66		24		2,437		(1,576		)	980
Total assets	$	6,574	$	6,235	$	4,038	$	15,658	$	(18,902	)	$	13,603
Liabilities and shareholders' equity
Unearned premium reserves	$	—	$	—	$	—	$	4,452	$	(940	)	$	3,512
Loss and LAE reserve	—		—		—		1,467		(290		)	1,177
Long-term debt	—		844		468		5		(84		)	1,233
Intercompany loan payable	—		50		—		300		(350		)	—
Credit derivative liabilities	—		—		—		236		(27		)	209
Deferred tax liabilities, net	—		49		50		—		(99		)	—
FG VIEs’ liabilities, at fair value	—		—		—		619		—			619
Dividends payable to affiliate	—		60		—		—		(60		)	—
Other	19		3		17		763		(504		)	298
Total liabilities	19		1,006		535		7,842		(2,354		)	7,048
Total shareholders' equity attributable to Assured Guaranty Ltd.	6,555		5,229		3,503		7,590		(16,322		)	6,555
Noncontrolling interest	—		—		—		226		(226		)	—
Total shareholders' equity	6,555		5,229		3,503		7,816		(16,548		)	6,555
Total liabilities and shareholders' equity	$	6,574	$	6,235	$	4,038	$	15,658	$	(18,902	)	$	13,603

 ____________________

(1)

The fair value of the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $125 million.

Condensed Consolidating Statement of Operations and Comprehensive Income

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	126		$	(3	)	$	123
Net investment income	—			2			—			91			(5		)	88
Net realized investment gains (losses)	—			—			—			16			—			16
Net change in fair value of credit derivatives	—			—			—			5			—			5
Other	3			—			—			20			(49		)	(26		)
Total revenues	3			2			—			258			(57		)	206
Expenses
Loss and LAE	—			—			—			32			(2		)	30
Amortization of deferred acquisition costs	—			—			—			4			(1		)	3
Interest expense	—			12			13			3			(6		)	22
Other operating expenses	10			1			—			103			(49		)	65
Total expenses	10			13			13			142			(58		)	120
Equity in net earnings of investees	—			—			—			—			—			—
Income (loss) before income taxes and equity in net earnings of subsidiaries	(7		)	(11		)	(13		)	116			1			86
Total (provision) benefit for income taxes	—			3			2			(21		)	(1		)	(17		)
Equity in net earnings of subsidiaries	76			71			52			5			(204		)	—
Net income (loss)	$	69		$	63		$	41		$	100		$	(204	)	$	69
Less: noncontrolling interest	—			—			—			5			(5		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	69		$	63		$	41		$	95		$	(199	)	$	69
Comprehensive income (loss)	$	93		$	73		$	38		$	124		$	(235	)	$	93

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	146		$	(4	)	$	142
Net investment income	—			2			—			101			(4		)	99
Net realized investment gains (losses)	—			—			—			(7		)	—			(7		)
Net change in fair value of credit derivatives	—			—			—			21			—			21
Other	3			—			—			72			(55		)	20
Total revenues	3			2			—			333			(63		)	275
Expenses
Loss and LAE	—			—			—			18			(1		)	17
Amortization of deferred acquisition costs	—			—			—			5			(2		)	3
Interest expense	—			13			13			2			(5		)	23
Other operating expenses	10			6			(1		)	93			(52		)	56
Total expenses	10			19			12			118			(60		)	99
Equity in net earnings of investees	—			—			—			(1		)	—			(1		)
Income (loss) before income taxes and equity in net earnings of subsidiaries	(7		)	(17		)	(12		)	214			(3		)	175
Total (provision) benefit for income taxes	—			45			3			(58		)	(4		)	(14		)
Equity in net earnings of subsidiaries	168			111			108			7			(394		)	—
Net income (loss)	$	161		$	139		$	99		$	163		$	(401	)	$	161
Less: noncontrolling interest	—			—			—			7			(7		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	161		$	139		$	99		$	156		$	(394	)	$	161
Comprehensive income (loss)	$	87		$	76		$	61		$	92		$	(229	)	$	87

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	361		$	(8	)	$	353
Net investment income	—			8			—			302			(14		)	296
Net realized investment gains (losses)	—			—			—			12			—			12
Net change in fair value of credit derivatives	—			—			—			(25		)	—			(25		)
Other	7			—			—			179			(155		)	31
Total revenues	7			8			—			829			(177		)	667
Expenses
Loss and LAE	—			—			—			84			(9		)	75
Amortization of deferred acquisition costs	—			—			—			16			(3		)	13
Interest expense	—			37			40			8			(18		)	67
Other operating expenses	30			3			—			308			(152		)	189
Total expenses	30			40			40			416			(182		)	344
Equity in net earnings of investees	—			—			—			3			—			3
Income (loss) before income taxes and equity in net earnings of subsidiaries	(23		)	(32		)	(40		)	416			5			326
Total (provision) benefit for income taxes	—			7			8			(74		)	(2		)	(61		)
Equity in net earnings of subsidiaries	288			275			215			14			(792		)	—
Net income (loss)	$	265		$	250		$	183		$	356		$	(789	)	$	265
Less: noncontrolling interest	—			—			—			14			(14		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	265		$	250		$	183		$	342		$	(775	)	$	265
Comprehensive income (loss)	$	491		$	388		$	299		$	584		$	(1,271	)	$	491

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	434		$	(11	)	$	423
Net investment income	—			6			—			301			(10		)	297
Net realized investment gains (losses)	—			—			—			(14		)	—			(14		)
Net change in fair value of credit derivatives	—			—			—			103			—			103
Other	9			—			—			137			(167		)	(21		)
Total revenues	9			6			—			961			(188		)	788
Expenses
Loss and LAE	—			—			—			48			(5		)	43
Amortization of deferred acquisition costs	—			—			—			16			(4		)	12
Interest expense	—			37			40			7			(13		)	71
Other operating expenses	30			9			—			293			(149		)	183
Total expenses	30			46			40			364			(171		)	309
Equity in net earnings of investees	—			—			—			—			—			—
Income (loss) before income taxes and equity in net earnings of subsidiaries	(21		)	(40		)	(40		)	597			(17		)	479
Total (provision) benefit for income taxes	—			50			9			(103		)	(2		)	(46		)
Equity in net earnings of subsidiaries	454			336			219			20			(1,029		)	—
Net income (loss)	$	433		$	346		$	188		$	514		$	(1,048	)	$	433
Less: noncontrolling interest	—			—			—			20			(20		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	433		$	346		$	188		$	494		$	(1,028	)	$	433
Comprehensive income (loss)	$	171		$	150		$	54		$	255		$	(459	)	$	171

Condensed Consolidating Statement of Cash Flows

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Net cash flows provided by (used in) operating activities	$	408		$	217		$	157		$	(280	)	$	(867	)	$	(365	)
Cash flows from investing activities
Fixed-maturity securities:
Purchases	—			(3		)	—			(688		)	3			(688		)
Sales	—			—			—			1,306			—			1,306
Maturities and paydowns	—			4			7			653			—			664
Short-term investments with maturities of over three months:
Purchases	—			—			—			(216		)	—			(216		)
Sales	—			—			—			2			—			2
Maturities and paydowns	—			12			—			194			—			206
Net sales (purchases) of short-term investments with maturities of less than three months	4			(90		)	(3		)	(315		)	—			(404		)
Net proceeds from paydowns on FG VIEs’ assets	—			—			—			119			—			119
Net proceeds from sales of FG VIEs’ assets	—			—			—			51			—			51
Proceeds from stock redemption and return of capital from subsidiaries	—			100			—			10			(110		)	—
Other	—			—			—			30			—			30
Net cash flows provided by (used in) investing activities	4			23			4			1,146			(107		)	1,070
Cash flows from financing activities
Return of capital	—			—			—			(10		)	10			—
Dividends paid	(56		)	(237		)	(156		)	(474		)	867			(56		)
Repurchases of common stock	(340		)	—			—			(100		)	100			(340		)
Net paydowns of FG VIEs’ liabilities	—			—			—			(162		)	—			(162		)
Paydown of long-term debt	—			—			—			(1		)	(3		)	(4		)
Other	(16		)	—			—			—			—			(16		)
Net cash flows provided by (used in) financing activities	(412		)	(237		)	(156		)	(747		)	974			(578		)
Effect of exchange rate changes	—			—			—			(2		)	—			(2		)
Increase (decrease) in cash and restricted cash	—			3			5			117			—			125
Cash and restricted cash at beginning of period	—			1			—			103			—			104
Cash and restricted cash at end of period	$	—		$	4		$	5		$	220		$	—		$	229

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Net cash flows provided by (used in) operating activities	$	454		$	101		$	126		$	448		$	(777	)	$	352
Cash flows from investing activities
Fixed-maturity securities:
Purchases	—			(76		)	(12		)	(1,462		)	72			(1,478		)
Sales	—			31			8			869			—			908
Maturities and paydowns	—			28			—			718			—			746
Short-term investments with maturities of over three months:
Purchases	—			—			—			(148		)	—			(148		)
Sales	—			—			—			1			—			1
Maturities and paydowns	—			—			—			136			—			136
Net sales (purchases) of short-term investments with maturities of less than three months	(11		)	60			(74		)	(55		)	—			(80		)
Net proceeds from paydowns on FG VIEs’ assets	—			—			—			90			—			90
Proceeds from stock redemption and return of capital from subsidiaries	—			200			—			—			(200		)	—
Other	—			(15		)	—			34			—			19
Net cash flows provided by (used in) investing activities	(11		)	228			(78		)	183			(128		)	194
Cash flows from financing activities
Dividends paid	(55		)	(362		)	(50		)	(365		)	777			(55		)
Repurchases of common stock	(380		)	—			—			(200		)	200			(380		)
Net paydowns of FG VIEs’ liabilities	—			—			—			(90		)	—			(90		)
Paydown of long-term debt	—			—			—			(1		)	(72		)	(73		)
Other	(8		)	—			—			—			—			(8		)
Net cash flows provided by (used in) financing activities	(443		)	(362		)	(50		)	(656		)	905			(606		)
Effect of exchange rate changes	—			—			—			(2		)	—			(2		)
Increase (decrease) in cash and restricted cash	—			(33		)	(2		)	(27		)	—			(62		)
Cash and restricted cash at beginning of period	—			33			2			109			—			144
Cash and restricted cash at end of period	$	—		$	—		$	—		$	82		$	—		$	82

XML

Reinsurance Reinsurance - Net Effect of Commutations of Ceded and Cancellations of Assumed Reinsurance Contracts (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Insurance [Abstract]
Increase in net unearned premium reserve	$ 0	$ 4	$ 15	$ 64
Increase in net par outstanding	0	224	1,069	1,457
Commutation gains (losses)	$ 0	$ 1	$ 1	$ (16)

XML

Outstanding Exposure

9 Months Ended

Sep. 30, 2019

Outstanding Exposure Disclosure

Outstanding Exposure

Outstanding Exposure

The Company primarily sells credit protection contracts in financial guaranty insurance form. Until 2009, the Company also sold credit protection by issuing policies that guaranteed payment obligations under credit derivatives, primarily credit default swaps (CDS). The Company's contracts accounted for as credit derivatives 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 has not entered into any new CDS in order to sell credit protection in the U.S. since the beginning of 2009, when regulatory guidelines were issued that limited the terms under which such protection could be sold. The capital and margin requirements applicable under the Dodd-Frank Wall Street Reform and Consumer Protection Act also contributed to the Company not entering into such new CDS in the U.S. since 2009. The Company has, however, acquired or reinsured portfolios both before and after 2009 that include financial guaranty contracts in credit derivative form.

The Company also writes non-financial guaranty insurance that is consistent with its risk profile and benefits from its underwriting experience.

The Company seeks to limit its exposure to losses by underwriting obligations that it views as investment grade at inception, although on occasion it may underwrite new issuances that it views as 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 a portfolio of insurance or reassuming a portfolio of reinsurance it had previously ceded; 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 asset classes and, in the structured finance portfolio, typically 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 also 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. The Company also includes within public finance similar obligations issued by territorial 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 9, Variable Interest Entities. Unless otherwise specified, the outstanding par and debt service amounts presented in this note include outstanding exposures on VIEs whether or not they are consolidated. The Company also provides non-financial guaranty insurance and reinsurance on transactions without special purpose entities but with similar risk profiles to its structured finance exposures written in financial guaranty form.

Second-to-pay insured par outstanding represents transactions the Company has insured that are already insured by another financial guaranty insurer and where the Company's obligation to pay under its insurance of such transactions arises only if both the obligor on the underlying insured obligation and the primary financial guaranty insurer default. The Company underwrites such transactions based on the underlying insured obligation without regard to the primary financial guaranty insurer and internally rates the transaction the higher of the rating of the underlying obligation and the rating of the primary financial guarantor. The second-to-pay insured par outstanding as of September 30, 2019 and December 31, 2018 was $6.4 billion and $6.7 billion, respectively. The par on second-to-pay exposure where the ratings of the primary financial guaranty insurer and underlying insured transaction are both BIG and/or not rated was $106 million and $111 million as of September 30, 2019 and December 31, 2018, respectively.

Surveillance Categories

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 for 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 are generally reflective of 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, loss potential, volatility and sector. Ratings on exposures in sectors identified as under the most stress or with the most potential volatility are reviewed every quarter, although the Company may also review a rating in response to developments impacting the 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.

Exposures identified as BIG are subjected to further review to determine the probability of a loss. See Note 4, Expected Loss to be Paid, for additional information. Surveillance personnel then assign each BIG transaction to the appropriate BIG surveillance category based upon whether a future loss is expected and whether a claim has been paid. The Company uses a tax-equivalent yield to calculate the present value of projected payments and recoveries and determine whether a future loss is expected in order to assign the appropriate BIG surveillance category to a transaction. For financial statement measurement purposes, the Company uses risk-free rates, which are determined each quarter, to calculate the expected loss.

More extensive monitoring and intervention is employed for all BIG surveillance categories, with internal credit ratings reviewed quarterly. For purposes of determining the appropriate surveillance category, the Company expects “future losses” on a transaction when the Company believes there is at least a 50% chance that, on a present value basis, it will in the future pay claims on that transaction that will not be fully reimbursed. The three BIG categories are:

• BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected.

• BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims, which are claims that the Company expects to be reimbursed within one year) have yet been paid.

• BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid.

Unless otherwise noted, ratings disclosed herein on the Company's insured portfolio reflect its internal ratings. The Company classifies those portions of risks benefiting from reimbursement obligations collateralized by eligible assets held in trust in acceptable reimbursement structures as the higher of 'AA' or their current internal rating.

The Company purchases securities that it has insured, and for which it has 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, which amounts are included in the investment portfolio, because it manages such securities as investments and not insurance exposure. As of September 30, 2019 and December 31, 2018, the Company excluded $1.5 billion and $1.9 billion, respectively, of net par attributable to loss mitigation securities.

Financial Guaranty Exposure

Financial Guaranty Portfolio

Debt Service Outstanding

	Gross Debt Service Outstanding				Net Debt Service Outstanding
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Public finance	$	343,956	$	361,511	$	342,801	$	358,438
Structured finance	12,324		13,569		11,811		13,148
Total financial guaranty	$	356,280	$	375,080	$	354,612	$	371,586

Financial Guaranty Portfolio

by Internal Rating

As of September 30, 2019

	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	$	384	0.2	%	$	2,429	5.6	%	$	1,345	14.6	%	$	179	23.8	%	$	4,337	1.9	%
AA	20,646		11.7		1,707		4.0		3,740		40.5		37		4.9		26,130		11.4
A	97,366		55.2		12,764		29.8		912		9.9		174		23.1		111,216		48.5
BBB	52,359		29.6		25,119		58.6		1,378		14.9		321		42.7		79,177		34.5
BIG	5,760		3.3		863		2.0		1,851		20.1		41		5.5		8,515		3.7
Total net par outstanding	$	176,515	100.0	%	$	42,882	100.0	%	$	9,226	100.0	%	$	752	100.0	%	$	229,375	100.0	%

Financial Guaranty Portfolio

by Internal Rating

As of December 31, 2018 

	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	$	413	0.2	%	$	2,399	5.4	%	$	1,533	15.4	%	$	273	22.9	%	$	4,618	1.9	%
AA	21,646		11.6		1,711		3.9		3,599		36.2		65		5.4		27,021		11.2
A	105,180		56.4		13,013		29.5		1,016		10.2		206		17.3		119,415		49.4
BBB	52,935		28.4		25,939		58.8		1,164		11.7		550		46.1		80,588		33.3
BIG	6,388		3.4		1,041		2.4		2,632		26.5		99		8.3		10,160		4.2
Total net par outstanding	$	186,562	100.0	%	$	44,103	100.0	%	$	9,944	100.0	%	$	1,193	100.0	%	$	241,802	100.0	%

In addition to amounts shown in the table above, the Company had outstanding commitments to provide guaranties of $983 million of gross par for public finance. These commitments are contingent on the satisfaction of all conditions set forth in them 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. In addition, in Third Quarter 2019 the Company entered into a commitment to issue a financial guaranty policy for $500 million in structured finance gross par.

Financial Guaranty Portfolio

Components of BIG Net Par Outstanding

As of September 30, 2019

	BIG Net Par Outstanding								Net Par
	BIG 1		BIG 2		BIG 3		Total BIG		Outstanding
					(in millions)
Public finance:
U.S. public finance	$	1,604	$	398	$	3,758	$	5,760	$	176,515
Non-U.S. public finance	819		—		44		863		42,882
Public finance	2,423		398		3,802		6,623		219,397
Structured finance:
U.S. residential mortgage-backed securities (RMBS)	118		88		1,460		1,666		3,687
Life insurance transactions	—		—		40		40		1,223
Other structured finance	71		65		50		186		5,068
Structured finance	189		153		1,550		1,892		9,978
Total	$	2,612	$	551	$	5,352	$	8,515	$	229,375

Financial Guaranty Portfolio

Components of BIG Net Par Outstanding

As of December 31, 2018

	BIG Net Par Outstanding								Net Par
	BIG 1		BIG 2		BIG 3		Total BIG		Outstanding
					(in millions)
Public finance:
U.S. public finance	$	1,767	$	399	$	4,222	$	6,388	$	186,562
Non-U.S. public finance	796		245		—		1,041		44,103
Public finance	2,563		644		4,222		7,429		230,665
Structured finance:
U.S. RMBS	368		214		1,805		2,387		4,270
Life insurance transactions	—		—		85		85		1,184
Other structured finance	127		79		53		259		5,683
Structured finance	495		293		1,943		2,731		11,137
Total	$	3,058	$	937	$	6,165	$	10,160	$	241,802

Financial Guaranty Portfolio

BIG Net Par Outstanding

and Number of Risks

As of September 30, 2019

	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivative		Total		Financial Guaranty Insurance (1)	Credit Derivative	Total
	(dollars in millions)
BIG:
Category 1	$	2,543	$	69	$	2,612	119	6	125
Category 2	547		4		551		26	1	27
Category 3	5,293		59		5,352		134	7	141
Total BIG	$	8,383	$	132	$	8,515	279	14	293

 Financial Guaranty Portfolio

BIG Net Par Outstanding

and Number of Risks

As of December 31, 2018

	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivative		Total		Financial Guaranty Insurance (1)	Credit Derivative	Total
	(dollars in millions)
BIG:
Category 1	$	2,981	$	77	$	3,058	128	6	134
Category 2	932		5		937		39	1	40
Category 3	6,090		75		6,165		145	8	153
Total BIG	$	10,003	$	157	$	10,160	312	15	327

_____________________

(1)    Includes VIEs.

(2) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.   

Exposure to Puerto Rico

The Company had insured exposure to general obligation bonds of the Commonwealth of Puerto Rico (Puerto Rico or the Commonwealth) and various obligations of its related authorities and public corporations aggregating $4.3 billion net par as of September 30, 2019, all of which was rated BIG. Beginning on January 1, 2016, a number of Puerto Rico exposures have defaulted on bond payments, and the Company has now paid claims on all of its Puerto Rico exposures except for Puerto Rico Aqueduct and Sewer Authority (PRASA), Municipal Finance Agency (MFA) and University of Puerto Rico (U of PR).

On November 30, 2015 and December 8, 2015, the then governor of Puerto Rico issued executive orders (Clawback Orders) directing the Puerto Rico Department of Treasury and the Puerto Rico Tourism Company to "claw back" certain taxes pledged to secure the payment of bonds issued by the Puerto Rico Highways and Transportation Authority (PRHTA), Puerto Rico Infrastructure Financing Authority (PRIFA), and Puerto Rico Convention Center District Authority (PRCCDA). The Puerto Rico exposures insured by the Company subject to clawback are shown in the table “Puerto Rico Net Par Outstanding.”

On June 30, 2016, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) was signed into law. PROMESA established a seven-member financial oversight board (Oversight Board) with authority to require that balanced budgets and fiscal plans be adopted and implemented by Puerto Rico.

The Company believes that a number of the actions taken by the Commonwealth, the Oversight Board and others with respect to obligations the Company insures are illegal or unconstitutional or both, and has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to these matters. In addition, the Commonwealth, the Oversight Board and others have taken legal action naming the Company as a party. See “Puerto Rico Litigation” below.

The Company also participates in mediation and negotiations relating to its Puerto Rico exposure.

The final form and timing of responses to Puerto Rico’s financial distress and the devastation of Hurricane Maria eventually taken by the federal government or implemented under the auspices of PROMESA and the Oversight Board or otherwise, and the final impact, after resolution of legal challenges, of any such responses on obligations insured by the Company, are uncertain.

The Company groups its Puerto Rico exposure into three categories:

• Constitutionally Guaranteed. The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made.

• Public Corporations – Certain Revenues Potentially Subject to Clawback. The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to claw back revenues supporting debt insured by the Company.

• Other Public Corporations. The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback.

Constitutionally Guaranteed

General Obligation. As of September 30, 2019, the Company had $1,253 million insured net par outstanding of the general obligations of Puerto Rico, which are supported by the good faith, credit and taxing power of the Commonwealth. Despite the requirements of Article VI of its Constitution, the Commonwealth defaulted on the debt service payment due on July 1, 2016, and the Company has been making claim payments on these bonds since that date. The Oversight Board has filed a petition under Title III of PROMESA with respect to the Commonwealth.

On May 9, 2019, the Oversight Board certified a revised fiscal plan for the Commonwealth. The revised certified Commonwealth fiscal plan indicates an expected primary budget surplus, if fiscal plan reforms are enacted, of $13.7 billion that would be available for debt service over the six-year forecast period ending 2024. The Company believes the available surplus set forth in the Oversight Board's revised certified fiscal plan (which assumes certain fiscal reforms are implemented by the Commonwealth) should be sufficient to cover contractual debt service of Commonwealth general obligation issuances and of authorities and public corporations directly implicated by the Commonwealth’s general fund during the forecast period. However, the revised certified Commonwealth fiscal plan indicates a net cumulative primary budget deficit through 2049, and there can be no assurance that the fiscal reforms will be enacted or, if they are, that the forecasted primary budget surplus will occur or, if it does, that such funds will be used to cover contractual debt service.

On June 16, 2019, the Oversight Board announced it had entered into a general obligation Plan Support Agreement (GO PSA) with certain general obligation and Puerto Rico Public Buildings Authority (PBA) bondholders representing only approximately $3 billion of claims. The GO PSA purports to provide a framework to address approximately $35 billion of claims against the Commonwealth. The Company is not a party to that agreement and does not support it. 

The GO PSA provides for different recoveries for bonds issued before 2012 (Vintage) and bonds issued in 2012 and 2014 (New) based on the Oversight Board’s attempt to invalidate the New general obligation and PBA bonds (see “Puerto Rico Litigation” below), and the proposed recovery varies depending on the outcome of that litigation.  Under the GO PSA:

• Vintage general obligation bondholders generally would receive newly issued Commonwealth bonds and cash equal to 64.3% of their outstanding claims, plus up to approximately 25.1% of their outstanding claims to a cap

of 89.4% from settlement and litigation savings from the invalidation lawsuit, as well as a share of excess revenues if the Commonwealth outperforms its fiscal plan in the near term.

• If the Oversight Board loses its invalidation lawsuit, holders of New general obligation bonds generally would receive the same treatment as the holders of Vintage general obligation bonds but would not share in the upside if the Commonwealth outperforms its fiscal plan.

• If the Oversight Board wins its invalidation lawsuit, holders of New general obligation bonds would not receive any recovery.  

• In all cases, holders of general obligation bonds supporting the GO PSA are also entitled to certain fees.

On September 27, 2019, the Oversight Board filed with the Title III court a Plan of Adjustment (POA) to restructure approximately $35 billion of debt (including the general obligation bonds) and other claims against the government of Puerto Rico and certain entities and $50 billion in pension obligations. The POA incorporates the terms related to the general obligation bonds proposed under the GO PSA. The Company believes the POA, as currently constituted, does not comply with the laws and constitution of Puerto Rico and the provisions of PROMESA and does not satisfy the statutory requirements for confirmation of a plan of adjustment under Title III of PROMESA.

PBA. As of September 30, 2019, the Company had $140 million insured net par outstanding of PBA bonds, which are supported by a pledge of the rents due under leases of government facilities to departments, agencies, instrumentalities and municipalities of the Commonwealth, and that benefit from a Commonwealth guaranty supported by a pledge of the Commonwealth’s good faith, credit and taxing power. Despite the requirements of Article VI of its Constitution, the PBA defaulted on most of the debt service payment due on July 1, 2016, and the Company has been making claim payments on these bonds since then. On September 27, 2019, the Oversight Board filed a petition under Title III of PROMESA with respect to the PBA to allow the restructuring of the PBA claims through the POA.

            Under the GO PSA (which does not include the Company as a party and which the Company does not support):

• Holders of Vintage PBA bonds generally would receive newly issued Commonwealth bonds and cash equal to 72.6% of their outstanding claims, plus up to approximately 16.8% of their outstanding claims to a cap of 89.4% from settlement and litigation savings from the invalidation lawsuit, as well as a share of excess revenues if the Commonwealth outperforms its fiscal plan in the near term.

• If the Oversight Board loses its invalidation lawsuit, holders of New PBA bonds generally would receive the same treatment as the holders of Vintage PBA bonds but would not share in the upside if the Commonwealth outperforms its fiscal plan.

• If the Oversight Board wins its invalidation lawsuit, holders of New PBA bonds would not receive any recovery.  

• In all cases, holders of PBA bonds supporting the GO PSA are also entitled to certain fees.

As noted above, on September 27, 2019, the Oversight Board filed with the Title III court a POA to restructure approximately $35 billion of debt (including the PBA bonds) and other claims against the government of Puerto Rico and certain entities and $50 billion in pension obligations. The POA incorporates the terms related to the PBA bonds proposed under the GO PSA. The Company believes the POA, as currently constituted, does not comply with the laws and constitution of Puerto Rico and the provisions of PROMESA and does not satisfy the statutory requirements for confirmation of a plan of adjustment under Title III of PROMESA.

Public Corporations - Certain Revenues Potentially Subject to Clawback

PRHTA. As of September 30, 2019, the Company had $811 million insured net par outstanding of PRHTA (transportation revenue) bonds and $454 million insured net par outstanding of PRHTA (highways revenue) bonds. The transportation revenue bonds are secured by a subordinate gross lien on gasoline and gas oil and diesel oil taxes, motor vehicle license fees and certain tolls, plus a first lien on up to $120 million annually of taxes on crude oil, unfinished oil and derivative products. The highways revenue bonds are secured by a gross lien on gasoline and gas oil and diesel oil taxes, motor vehicle license fees and certain tolls. The non-toll revenues consisting of excise taxes and fees collected by the Commonwealth on behalf of PRHTA and its bondholders that are statutorily allocated to PRHTA and its bondholders are potentially subject to clawback. Despite the presence of funds in relevant debt service reserve accounts that the Company believes should have been

employed to fund debt service, PRHTA defaulted on the full July 1, 2017 insured debt service payment, and the Company has been making claim payments on these bonds since that date. The Oversight Board has filed a petition under Title III of PROMESA with respect to PRHTA.

On June 5, 2019, the Oversight Board certified a revised fiscal plan for PRHTA. The revised certified PRHTA fiscal plan projects very limited capacity to pay debt service over the six-year forecast period.

PRCCDA. As of September 30, 2019, the Company had $152 million insured net par outstanding of PRCCDA bonds, which are secured by certain hotel tax revenues. These revenues are sensitive to the level of economic activity in the area and are potentially subject to clawback. There were sufficient funds in the PRCCDA bond accounts to make only partial payments on the July 1, 2017 PRCCDA bond payments guaranteed by the Company, and the Company has been making claim payments on these bonds since that date.

PRIFA. As of September 30, 2019, the Company had $16 million insured net par outstanding of PRIFA bonds, which are secured primarily by the return to PRIFA and its bondholders of a portion of federal excise taxes paid on rum. These revenues are potentially subject to the clawback. The Company has been making claim payments on the PRIFA bonds since January 2016.

Other Public Corporations

Puerto Rico Electric Power Authority (PREPA). As of September 30, 2019, the Company had $822 million insured net par outstanding of PREPA obligations, which are secured by a lien on the revenues of the electric system. The Company has been making claim payments on these bonds since July 1, 2017. On July 2, 2017, the Oversight Board commenced proceedings for PREPA under Title III of PROMESA. On June 27, 2019, the Oversight Board certified a revised fiscal plan for PREPA.

On May 3, 2019, AGM and AGC entered into a restructuring support agreement with PREPA (PREPA RSA) and other stakeholders, including a group of uninsured PREPA bondholders, the Commonwealth of Puerto Rico, and the Oversight Board, that is intended to, among other things, provide a framework for the consensual resolution of the treatment of the Company’s insured PREPA revenue bonds in PREPA's recovery plan. Upon consummation of the restructuring transaction, PREPA’s revenue bonds will be exchanged into new securitization bonds issued by a special purpose corporation and secured by a segregated transition charge assessed on electricity bills. The revised fiscal plan of PREPA certified by the Oversight Board on June 27, 2019 reflects the relevant terms of the PREPA RSA.

The closing of the restructuring transaction is subject to a number of conditions, including approval by the Title III Court of the PREPA RSA and settlement described therein, a minimum of 67% support of voting bondholders for a plan of adjustment that includes this proposed treatment of PREPA revenue bonds and confirmation of such plan by the Title III court, and execution of acceptable documentation and legal opinions. Under the PREPA RSA, the Company has the option to guarantee its allocated share of the securitization exchange bonds, which may then be offered and sold in the capital markets. The Company believes that the additive value created by attaching its guarantee to the securitization exchange bonds would materially improve its overall recovery under the transaction, as well as generate new insurance premiums; and therefore that its economic results could differ from those reflected in the PREPA RSA.

PRASA. As of September 30, 2019, the Company had $373 million of insured net par outstanding of PRASA bonds, which are secured by a lien on the revenues of the water and sewer system. On June 29, 2019, the Oversight Board certified a revised fiscal plan for PRASA. In July 2019, PRASA entered into a restructuring transaction with the federal government and the Oversight Board to restructure its subordinated loans from federal agencies that had been under forbearance for over three years (the PRASA Agreement). The PRASA Agreement extends the maturity of the loans for up to 40 years and provides for low interest rates and no interest accrual for the first ten years on a portion of the loans, but also places the subordinated loans on a parity with the PRASA bonds the Company guarantees.  The Company was not asked to consent to the PRASA Agreement. The PRASA Agreement reduces the amount of annual debt service owed by PRASA for its current debt. The PRASA bond accounts contained sufficient funds to make the PRASA bond payments due through the date of this filing that were guaranteed by the Company, and those payments were made in full.

MFA. As of September 30, 2019, the Company had $248 million net par outstanding of bonds issued by MFA secured by a lien on local property tax revenues. The MFA bond accounts contained sufficient funds to make the MFA bond payments due through the date of this filing that were guaranteed by the Company, and those payments were made in full.

U of PR. As of September 30, 2019, the Company had $1 million insured net par outstanding of U of PR bonds, which are general obligations of the university and are secured by a subordinate lien on the proceeds, profits and other income of the

university, subject to a senior pledge and lien for the benefit of outstanding university system revenue bonds. As of the date of this filing, all debt service payments on U of PR bonds insured by the Company have been made in full.

Resolved Commonwealth Credit

Puerto Rico Sales Tax Financing Corporation (COFINA). On February 12, 2019, pursuant to a plan of adjustment approved by the PROMESA Title III Court on February 4, 2019 (COFINA Plan of Adjustment), the Company paid off in full its $273 million net par outstanding of insured COFINA bonds, plus accrued and unpaid interest. Pursuant to the COFINA Plan of Adjustment, the Company received $152 million in initial par of closed lien senior bonds of COFINA validated by the PROMESA Title III Court (COFINA Exchange Senior Bonds), along with cash. The total par recovery (cash and COFINA Exchange Senior Bonds) represented 60% of the Company’s official Title III claim, which related to amounts owed as of the date COFINA entered Title III proceedings. The fair value of the COFINA Exchange Senior Bonds, excluding accrued interest, was $139 million at February 12, 2019, and was recorded as salvage received. During Third Quarter 2019 the Company sold all of its COFINA Exchange Senior Bonds.

Puerto Rico Litigation

The Company believes that a number of the actions taken by the Commonwealth, the Oversight Board and others with respect to obligations it insures are illegal or unconstitutional or both, and has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to these matters. In addition, the Commonwealth, the Oversight Board and others have taken legal action naming the Company as party.

Currently there are numerous legal actions relating to the default by the Commonwealth and certain of its entities on debt service payments, and related matters, and the Company is a party to a number of them. On July 24, 2019, Judge Laura Taylor Swain of the United States District Court for the District of Puerto Rico (Federal District Court for Puerto Rico) held an omnibus hearing on litigation matters relating to the Commonwealth. At that hearing, she imposed a stay through November 30, 2019, on a series of adversary proceedings and contested matters amongst the stakeholders and imposed mandatory mediation on all parties through that date. On October 28, 2019, Judge Swain extended the stay until December 31, 2019. Among the goals of the mediation is to reach an agreed-upon schedule for addressing the resolution of numerous issues, including, among others: (a) issues related to the validity, secured status and priority regarding bonds issued by the Commonwealth and certain of its entities; (b) the validity and impact of the Clawback Orders and other diversion of collateral securing certain bonds; (c) classification of claims; (d) constitutional issues; and (e) identification of essential services. A number of the legal actions in which the Company is involved are covered by the stay and mandatory mediation order.

On January 7, 2016, AGM, AGC and Ambac Assurance Corporation commenced an action for declaratory judgment and injunctive relief in the Federal District Court for Puerto Rico to invalidate the executive orders issued on November 30, 2015 and December 8, 2015 by the then governor of Puerto Rico directing that the Secretary of the Treasury of the Commonwealth of Puerto Rico and the Puerto Rico Tourism Company claw back certain taxes and revenues pledged to secure the payment of bonds issued by the PRHTA, the PRCCDA and PRIFA. The Commonwealth defendants filed a motion to dismiss the action for lack of subject matter jurisdiction, which the court denied on October 4, 2016. On October 14, 2016, the Commonwealth defendants filed a notice of PROMESA automatic stay. While the PROMESA automatic stay expired on May 1, 2017, on May 17, 2017, the court stayed the action under Title III of PROMESA.

On June 3, 2017, AGC and AGM filed an adversary complaint in the Federal District Court for Puerto Rico seeking (i) a judgment declaring that the application of pledged special revenues to the payment of the PRHTA bonds is not subject to the PROMESA Title III automatic stay and that the Commonwealth has violated the special revenue protections provided to the PRHTA bonds under the United States Bankruptcy Code (Bankruptcy Code); (ii) an injunction enjoining the Commonwealth from taking or causing to be taken any action that would further violate the special revenue protections provided to the PRHTA bonds under the Bankruptcy Code; and (iii) an injunction ordering the Commonwealth to remit the pledged special revenues securing the PRHTA bonds in accordance with the terms of the special revenue provisions set forth in the Bankruptcy Code. On January 30, 2018, the court rendered an opinion dismissing the complaint and holding, among other things, that (x) even though the special revenue provisions of the Bankruptcy Code protect a lien on pledged special revenues, those provisions do not mandate the turnover of pledged special revenues to the payment of bonds and (y) actions to enforce liens on pledged special revenues remain stayed. A hearing on AGM and AGC’s appeal of the trial court’s decision to the United States Court of Appeals for the First Circuit (First Circuit) was held on November 5, 2018. On March 26, 2019, the First Circuit issued its opinion affirming the trial court’s decision and held that Sections 928(a) and 922(d) of the Bankruptcy Code permit, but do not require, continued payments during the pendency of the Title III proceedings. The First Circuit agreed with the trial court that (i) Section 928(a) of the Bankruptcy Code does not mandate the turnover of special revenues or require continuity of payments to

the PRHTA bonds during the pendency of the Title III proceedings, and (ii) Section 922(d) of the Bankruptcy Code is not an exception to the automatic stay that would compel PRHTA, or third parties holding special revenues, to apply special revenues to outstanding obligations. On April 9, 2019, AGM, AGC and other petitioners filed a petition with the First Circuit seeking a rehearing by the full court; the petition was denied by the First Circuit on July 31, 2019. On September 20, 2019, AGC, AGM and other petitioners filed a petition for review by the U.S. Supreme Court of the First Circuit's holding.

On June 26, 2017, AGM and AGC filed a complaint in the Federal District Court for Puerto Rico seeking (i) a declaratory judgment that the PREPA restructuring support agreement executed in December 2015 (2015 PREPA RSA) is a “Preexisting Voluntary Agreement” under Section 104 of PROMESA and the Oversight Board’s failure to certify the 2015 PREPA RSA is an unlawful application of Section 601 of PROMESA; (ii) an injunction enjoining the Oversight Board from unlawfully applying Section 601 of PROMESA and ordering it to certify the 2015 PREPA RSA; and (iii) a writ of mandamus requiring the Oversight Board to comply with its duties under PROMESA and certify the 2015 PREPA RSA. On July 21, 2017, in light of its PREPA Title III petition on July 2, 2017, the Oversight Board filed a notice of stay under PROMESA.

On July 18, 2017, AGM and AGC filed in the Federal District Court for Puerto Rico a motion for relief from the automatic stay in the PREPA Title III bankruptcy proceeding and a form of complaint seeking the appointment of a receiver for PREPA. The court denied the motion on September 14, 2017, but on August 8, 2018, the First Circuit vacated and remanded the court's decision. On October 3, 2018, AGM and AGC, together with other bond insurers, filed a motion with the court to lift the automatic stay to commence an action against PREPA for the appointment of a receiver. Under the PREPA RSA, AGM and AGC have agreed to withdraw from the lift stay motion upon the Title III Court’s approval of the settlement of claims embodied in the PREPA RSA.

On May 23, 2018, AGM and AGC filed an adversary complaint in the Federal District Court for Puerto Rico seeking a judgment declaring that (i) the Oversight Board lacked authority to develop or approve the new fiscal plan for Puerto Rico which it certified on April 19, 2018 (Revised Fiscal Plan); (ii) the Revised Fiscal Plan and the Fiscal Plan Compliance Law (Compliance Law) enacted by the Commonwealth to implement the original Commonwealth Fiscal Plan violate various sections of PROMESA; (iii) the Revised Fiscal Plan, the Compliance Law and various moratorium laws and executive orders enacted by the Commonwealth to prevent the payment of debt service (a) are unconstitutional and void because they violate the Contracts, Takings and Due Process Clauses of the U.S. Constitution and (b) are preempted by various sections of PROMESA; and (iv) no Title III plan of adjustment based on the Revised Fiscal Plan can be confirmed under PROMESA. On August 13, 2018, the court-appointed magistrate judge granted the Commonwealth's and the Oversight Board's motion to stay this adversary proceeding pending a decision by the First Circuit in an appeal by Ambac Assurance Corporation of an unrelated adversary proceeding decision, which the First Circuit rendered on June 24, 2019. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters through November 30, 2019, with a mandatory mediation element. Pursuant to the request of AGM, AGC and the defendants, Judge Swain ordered on September 6, 2019 that the claims in this complaint be addressed in the Commonwealth plan confirmation process and be subject to her July 24, 2019 stay and mandatory mediation order and be incorporated into the same schedule and mediation process. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On July 23, 2018, AGC and AGM filed an adversary complaint in the Federal District Court for Puerto Rico seeking a judgment (i) declaring the members of the Oversight Board are officers of the U.S. whose appointments were unlawful under the Appointments Clause of the U.S. Constitution; (ii) declaring void from the beginning the unlawful actions taken by the Oversight Board to date, including (x) development of the Commonwealth's Fiscal Plan, (y) development of PRHTA's Fiscal Plan, and (z) filing of the Title III cases on behalf of the Commonwealth and PRHTA; and (iii) enjoining the Oversight Board from taking any further action until the Oversight Board members have been lawfully appointed in conformity with the Appointments Clause of the U.S. Constitution. The Title III court dismissed a similar lawsuit filed by another party in the Commonwealth’s Title III case in July 2018. On August 3, 2018, a stipulated judgment was entered against AGM and AGC at their request based upon the court's July decision in the other Appointments Clause lawsuit and, on the same date, AGM and AGC appealed the stipulated judgment to the First Circuit. On August 15, 2018, the court consolidated, for purposes of briefing and oral argument, AGM and AGC's appeal with the other Appointments Clause lawsuit. The First Circuit consolidated AGM and AGC's appeal with a third Appointments Clause lawsuit on September 7, 2018 and held a hearing on December 3, 2018. On February 15, 2019, the First Circuit issued its ruling on the appeal and held that members of the Oversight Board were not appointed in compliance with the Appointments Clause of the U.S. Constitution but declined to dismiss the Title III petitions citing the (i) de facto officer doctrine and (ii) negative consequences to the many innocent third parties who relied on the Oversight Board’s actions to date, as well as the further delay which would result from a dismissal of the Title III petitions. The case was remanded back to the Federal District Court for Puerto Rico for the appellants’ requested declaratory relief that the appointment of the board members of the Oversight Board is unconstitutional. The First Circuit delayed the effectiveness of its ruling for 90 days so as to allow the President and the Senate to validate the currently defective appointments or reconstitute the Oversight Board in accordance with the Appointments Clause. On April 23, 2019, the Oversight Board filed a petition for a

review by the U.S. Supreme Court of the First Circuit's holding that its members were not appointed in compliance with the Appointments Clause and on the following day filed a motion in the First Circuit to further stay the effectiveness of the First Circuit’s February 15, 2019 ruling pending final disposition by the U.S. Supreme Court. On May 24, 2019, AGC and AGM filed a petition for a review by the U.S. Supreme Court of the First Circuit’s holding that the de facto officer doctrine allows courts to deny meaningful relief to successful challengers suffering ongoing injury at the hands of unconstitutionally appointed officers. On July 2, 2019, the First Circuit granted the Oversight Board’s motion to stay the effectiveness of the First Circuit’s February 15, 2019 ruling pending final disposition by the U.S. Supreme Court. On October 15, 2019, the U.S. Supreme Court heard oral arguments on the First Circuit's ruling.

On December 21, 2018, the Oversight Board and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA) filed an adversary complaint in the Federal District Court for Puerto Rico seeking a judgment declaring that (i) the leases to public occupants entered into by the PBA are not “true leases” for purposes of Section 365(d)(3) of the Bankruptcy Code and therefore the Commonwealth has no obligation to make payments to the PBA under the leases or Section 365(d)(3) of the Bankruptcy Code, (ii) the PBA is not entitled to a priority administrative expense claim under the leases pursuant to Sections 503(b)(1) and 507(a)(2) of the Bankruptcy Code, and (iii) any such claims filed or asserted against the Commonwealth are disallowed. On January 28, 2019, the PBA filed an answer to the complaint. On March 12, 2019, the Federal District Court for Puerto Rico granted, with certain limitations, AGM’s and AGC’s motion to intervene. On March 21, 2019, AGM and AGC, together with certain other intervenors, filed a motion for judgment on the pleadings. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters, which include this proceeding, through November 30, 2019, with a mandatory mediation element. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On January 14, 2019, the Oversight Board and the Official Committee of Unsecured Creditors filed an omnibus objection in the Title III Court to claims filed by holders of approximately $6 billion of Commonwealth general obligation bonds issued in 2012 and 2014, asserting among other things that such bonds were issued in violation of the Puerto Rico constitutional debt service limit, such bonds are null and void, and the holders have no equitable remedy against the Commonwealth. Pursuant to procedures established by Judge Swain, on April 10, 2019, AGM filed a notice of participation in these proceedings. As of September 30, 2019, $369 million of the Company’s insured net par outstanding of the general obligation bonds of Puerto Rico were issued on or after March 2012. On May 21, 2019, the Official Committee of Unsecured Creditors filed a claim objection to certain Commonwealth general obligation bonds issued in 2011, approximately $215 million of which are insured by the Company as of September 30, 2019, on substantially the same bases as the January 14, 2019 filing, and which the plaintiffs propose to be subject to the proceedings relating to the 2012 and 2014 bonds. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters, which include this proceeding, through November 30, 2019, with a mandatory mediation element. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On May 2, 2019, the Oversight Board and the Official Committee of Unsecured Creditors filed an adversary complaint in the Federal District Court for Puerto Rico against various Commonwealth general obligation bondholders and bond insurers, including AGC and AGM, that had asserted in their proofs of claim that their bonds are secured. The complaint seeks a judgment declaring that defendants do not hold consensual or statutory liens and are unsecured claimholders to the extent they hold allowed claims. The complaint also asserts that even if Commonwealth law granted statutory liens, such liens are avoidable under Section 545 of the Bankruptcy Code. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters, which include this proceeding, through November 30, 2019, with a mandatory mediation element. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On May 20, 2019, the Oversight Board and the Official Committee of Unsecured Creditors filed an adversary complaint in the Federal District Court for Puerto Rico against the fiscal agent and holders and/or insurers, including AGC and AGM, that have asserted their PRHTA bond claims are entitled to secured status in PRHTA’s Title III case. Plaintiffs are seeking to avoid the PRHTA bondholders’ liens and contend that (i) the scope of any lien only applies to revenues that have been both received by PRHTA and deposited in certain accounts held by the fiscal agent and does not include PRHTA’s right to receive such revenues; (ii) any lien on revenues was not perfected because the fiscal agent does not have “control” of all accounts holding such revenues; (iii) any lien on the excise tax revenues is no longer enforceable because any rights PRHTA had to receive such revenues are preempted by PROMESA; and (iv) even if PRHTA held perfected liens on PRHTA’s revenues and the right to receive such revenues, such liens were terminated by Section 552(a) of the Bankruptcy Code as of the petition date. On July 24, 2019, Judge Swain announced a court-imposed stay of a series of adversary proceedings and contested matters, which include this proceeding, through November 30, 2019, with a mandatory mediation element. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On August 23, 2019, AGM and AGC filed in the Federal District Court for Puerto Rico a motion for adequate protection for their property interests in pledged revenues securing PRHTA bonds or, in the alternative, for relief from the automatic stay to permit AGC and AGM to enforce the application of the pledged revenues to the payment of the PRHTA Bonds, including by permitting AGC and AGM to enforce their liens on the pledged revenues. On July 24, 2019, Judge Swain issued an order imposing a stay of a series of adversary proceedings and contested matters through November 30, 2019, with a mandatory mediation element. On August 28, 2019, Judge Swain granted the request of AGC and AGM that her July 24, 2019 stay and mandatory mediation order be extended to this motion, and that this motion be incorporated into the same schedule and mediation process. On October 28, 2019, Judge Swain extended the stay until December 31, 2019.

On September 30, 2019, certain parties that either had advanced funds to PREPA for the purchase of fuel or had succeeded to such claims (Fuel Line Lenders) filed an amended adversary complaint in the Federal District Court for Puerto Rico against the Oversight Board, PREPA, the Puerto Rico Fiscal Agency and Financial Advisory Authority ("AAFAF"), U.S. Bank National Association, as trustee for PREPA bondholders, and various PREPA bondholders and bond insurers, including AGC and AGM. The complaint seeks, among other things, declarations that the advances made by the Fuel Line Lenders are Current Expenses as defined in the trust agreement pursuant to which the PREPA bonds were issued and there is no valid lien securing the PREPA bonds unless and until the Fuel Line Lenders are paid in full, as well as orders subordinating the PREPA bondholders’ lien and claim to the Fuel Line Lenders’ claims and declaring the PREPA RSA null and void. A hearing on a motion to dismiss is scheduled for January 2020.

On October 30, 2019, the retirement system for PREPA employees (SREAEE) filed an amended adversary complaint in the Federal District Court for Puerto Rico against the Oversight Board, PREPA, AAFAF, the Commonwealth, the Governor, and U.S. Bank National Association, as trustee for  PREPA bondholders. The complaint seeks, among other things, declarations that amounts owed to SREAEE are Current Expenses as defined in the trust agreement pursuant to which the PREPA bonds were issued, that there is no valid lien securing the PREPA bonds other than on amounts in the sinking funds and that SREAEE is a third-party beneficiary of certain trust agreement provisions, as well as orders subordinating the PREPA bondholders’ lien and claim to the SREAEE claims. On November 7, 2019, the court granted a motion to intervene by AGC and AGM. A hearing on the defendants’ motion to dismiss is scheduled for January 2020.

Puerto Rico Par and Debt Service Schedules

All Puerto Rico exposures are internally rated BIG. The following tables show the Company’s insured exposure to general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations.

Puerto Rico

Gross Par and Gross Debt Service Outstanding

	Gross Par Outstanding				Gross Debt Service Outstanding
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Exposure to Puerto Rico	$	4,458	$	4,971	$	6,958	$	8,035

Puerto Rico

Net Par Outstanding

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds (1)	$	1,253	$	1,340
PBA (1)	140		142
Public Corporations - Certain Revenues Potentially Subject to Clawback
PRHTA (Transportation revenue) (1)	811		844
PRHTA (Highways revenue) (1)	454		475
PRCCDA	152		152
PRIFA	16		16
Other Public Corporations
PREPA (1)	822		848
PRASA	373		373
MFA	248		303
COFINA	—		273
U of PR	1		1
Total net exposure to Puerto Rico	$	4,270	$	4,767

____________________

(1) As of the date of this filing, the Oversight Board has certified a filing under Title III of PROMESA for these exposures.

The following table shows the scheduled amortization of the insured general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations. The Company guarantees payments of interest and principal when those amounts are scheduled to be paid and cannot be required to pay on an accelerated basis. In the event that obligors default on their obligations, the Company would only be required to pay the shortfall between the principal and interest due in any given period and the amount paid by the obligors.

Amortization Schedule of Puerto Rico Net Par Outstanding

and Net Debt Service Outstanding

As of September 30, 2019

	Scheduled Net Par Amortization		Scheduled Net Debt Service Amortization
	(in millions)
2019 (October 1 - December 31)	$	—	$	3
2020 (January 1 - March 31)	—		106
2020 (April 1 - June 30)	—		3
2020 (July 1 - September 30)	286		392
2020 (October 1 - December 31)	—		3
Subtotal 2020	286		504
2021	149		351
2022	139		332
2023	205		392
2024-2028	1,213		1,977
2029-2033	884		1,392
2034-2038	957		1,184
2039-2043	176		259
2044-2047	261		300
Total	$	4,270	$	6,694

Exposure to the U.S. Virgin Islands

As of September 30, 2019, the Company had $494 million insured net par outstanding to the U.S. Virgin Islands and its related authorities (USVI), of which it rated $220 million BIG. The $274 million USVI net par the Company rated investment grade primarily consisted of bonds secured by a lien on matching fund revenues related to excise taxes on products produced in the USVI and exported to the U.S., primarily rum. The $220 million BIG USVI net par consisted of (a) Public Finance Authority bonds secured by a gross receipts tax and the general obligation, full faith and credit pledge of the USVI and (b) bonds of the Virgin Islands Water and Power Authority secured by a net revenue pledge of the electric system.

Hurricane Irma caused significant damage in St. John and St. Thomas, while Hurricane Maria made landfall on St. Croix as a Category 4 hurricane on the Saffir-Simpson scale, causing loss of life and substantial damage to St. Croix’s businesses and infrastructure, including the power grid. The USVI is benefiting from the federal response to the 2017 hurricanes and has made its debt service payments to date.

Non-Financial Guaranty Insurance Exposure

The Company also provides non-financial guaranty insurance and reinsurance on transactions with similar risk profiles to its structured finance exposures written in financial guaranty form. All non-financial guaranty exposures shown in the table below are rated investment grade internally.

Non-Financial Guaranty Exposure

	Gross Exposure				Net Exposure
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Life insurance transactions (1)	$	1,014	$	880	$	872	$	763
Aircraft residual value insurance policies	376		340		243		218

____________________

(1)

The life insurance transactions net exposure is expected to increase to approximately $1.0 billion prior to September 30, 2036.

XML

Investments and Cash

9 Months Ended

Sep. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investments and Cash

Investments and Cash

Net Investment Income and Realized Gains (Losses)

Net investment income is a function of the yield that the Company earns on invested assets and the size of the 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 invested assets. Accrued investment income, which is recorded in other assets, was $86 million and $91 million as of September 30, 2019 and December 31, 2018, respectively.

Net Investment Income

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Income from fixed-maturity securities managed by third parties	$	66		$	75		$	207		$	224
Income from internally managed securities	24			26			95			80
Gross investment income	90			101			302			304
Investment expenses	(2		)	(2		)	(6		)	(7		)
Net investment income	$	88		$	99		$	296		$	297

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
	2019			2018			2019			2018
	(in millions)
Gross realized gains on available-for-sale securities	$	29		$	5		$	48		$	16
Gross realized losses on available-for-sale securities	(1		)	(3		)	(4		)	(9		)
Net realized gains (losses) on other invested assets	—			—			—			(1		)
Other-than-temporary impairment (OTTI):
Total OTTI	(12		)	(8		)	(29		)	(23		)
Less: portion of OTTI recognized in OCI	—			1			3			(3		)
Net OTTI recognized in net income (loss) (1)	(12		)	(9		)	(32		)	(20		)
Net realized investment gains (losses)	$	16		$	(7	)	$	12		$	(14	)

____________________

(1) Net OTTI recognized in net income was mainly attributable to change in foreign exchange rates in Third Quarter 2019 and Third Quarter 2018. OTTI for Nine Months 2019 and Nine Months 2018 was attributable to change in foreign exchange rates and securities purchased for loss mitigation and other risk management purposes.

The proceeds from sales of fixed-maturity securities available-for-sale were $405 million in Third Quarter 2019, $316 million in Third Quarter 2018, $1,306 million in Nine Months 2019 and $908 million in Nine Months 2018.

In Nine Months 2019 and 2018, the Company received $144 million and $4 million in bonds under financial guaranty contract settlement agreements, primarily the COFINA Exchange Senior Bonds. In Third Quarter 2019, the Company exchanged $44 million in COFINA taxable bonds for COFINA non-taxable bonds. During Third Quarter 2019 the Company sold all of its COFINA Exchange Senior Bonds. These transactions were non-cash and are not shown in the investing cash flows in the condensed consolidated statements of cash flows.

The following table presents the roll-forward of the credit losses on fixed-maturity securities for which the Company has recognized an OTTI and for which unrealized loss was recognized in OCI.

Roll Forward of Credit Losses

in the Investment Portfolio

	Third Quarter				Nine Months
	2019		2018		2019			2018
	(in millions)
Balance, beginning of period	$	191	$	170	$	185		$	162
Additions for credit losses on securities for which an OTTI was previously recognized	—		2		13			10
Reductions for securities sold and other settlements	—		—		(7		)	—
Balance, end of period	$	191	$	172	$	191		$	172

See Part II, Item 8, Financial Statements and Supplementary Data, Note 10, Investments and Cash, of the Company's 2018 Annual Report on Form 10-K for a discussion of the accounting policy for evaluating investments for OTTI.

Investment Portfolio

As of September 30, 2019, the majority of the investment portfolio is managed by seven outside managers (including Wasmer, Schroeder & Company LLC, in which the Company has a minority interest). The Company has established detailed guidelines regarding credit quality, exposure to a particular sector and exposure to a particular obligor within a sector. The Company's investment guidelines generally permit its outside managers to purchase only a small amount of securities rated lower than BBB- by S&P or Baa3 by Moody’s, and then only those securities rated no lower than B by S&P or B2 by Moody’s and subject to certain other specific requirements. Additionally, the managed portfolio must maintain a minimum average rating of A+ by S&P or A1 by Moody's.

The investment portfolio tables shown below include assets managed both externally and internally. The internally managed portfolio primarily consists of the Company's investments in securities for (i) loss mitigation purposes, (ii) other risk management purposes and (iii) other alternative investments that the Company believes present an attractive investment opportunity.

One of the Company's strategies for mitigating losses has been to purchase loss mitigation securities at discounted prices. The Company also holds other invested assets that were obtained or purchased as part of negotiated settlements with insured counterparties or under the terms of the financial guaranties (other risk management assets).

Alternative investments include investing in both equity and debt securities as well as investments in investment managers. In February 2017 the Company agreed to purchase up to $100 million of limited partnership interests in a fund that invests in the equity of private equity managers of which $86 million of the commitment was not funded as of September 30, 2019.

Investment Portfolio

Carrying Value

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Fixed-maturity securities (1):
Externally managed	$	8,363	$	8,909
Internally managed	914		1,180
Short-term investments	1,142		729
Other invested assets:
Internally managed
Alternative investments	42		39
Other	15		16
Total	$	10,476	$	10,873

____________________

(1) 8.4% and 10.8% of fixed-maturity securities are rated BIG as of September 30, 2019 and December 31, 2018, respectively.

The Company has a de minimis amount of restricted cash as of September 30, 2019 and December 31, 2018.

Fixed-Maturity Securities and Short-Term Investments

by Security Type 

As of September 30, 2019

Security Type	Percent of Total (1)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		AOCI (2) Pre-tax Gain (Loss) on Securities with OTTI			Weighted Average Credit Rating  (3)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	42	%	$	4,132	$	331	$	—		$	4,463	$	42		AA-
U.S. government and agencies	1		144		11		—			155		—			AA+
Corporate securities	24		2,286		80		(27		)	2,339		(4		)	A
Mortgage-backed securities (4):	0
RMBS	8		846		41		(10		)	877		4			A-
CMBS	5		448		21		—			469		—			AAA
Asset-backed securities	7		745		33		(3		)	775		10			BBB-
Non-U.S. government securities	2		210		1		(12		)	199		—			AA
Total fixed-maturity securities	89		8,811		518		(52		)	9,277		52			A+
Short-term investments	11		1,142		—		—			1,142		—			AAA
Total investment portfolio	100	%	$	9,953	$	518	$	(52	)	$	10,419	$	52		A+

Fixed-Maturity Securities and Short-Term Investments

by Security Type 

As of December 31, 2018 

Security Type	Percent of Total (1)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		AOCI Pre-tax Gain (Loss) on Securities with OTTI			Weighted Average Credit Rating  (3)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	45	%	$	4,761	$	168	$	(18	)	$	4,911	$	40		AA-
U.S. government and agencies	2		167		9		(1		)	175		—			AA+
Corporate securities	20		2,175		13		(52		)	2,136		(4		)	A
Mortgage-backed securities (4):
RMBS	9		999		17		(34		)	982		(15		)	A-
CMBS	5		542		4		(7		)	539		—			AAA
Asset-backed securities	9		942		131		(5		)	1,068		97			BB
Non-U.S. government securities	3		298		2		(22		)	278		—			AA
Total fixed-maturity securities	93		9,884		344		(139		)	10,089		118			A+
Short-term investments	7		729		—		—			729		—			AAA
Total investment portfolio	100	%	$	10,613	$	344	$	(139	)	$	10,818	$	118		A+

____________________

(1) Based on amortized cost.

(2) Accumulated OCI (AOCI).

(3) Ratings represent the lower of the Moody’s and S&P classifications, except for bonds purchased for loss mitigation or risk management strategies, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments.

(4) U.S. government-agency obligations were approximately 44% of mortgage backed securities as of September 30, 2019 and 48% as of December 31, 2018 based on fair value.

The following tables summarize, for all fixed-maturity securities in an unrealized loss position, the aggregate fair value and gross unrealized loss by length of time the amounts have continuously been in an unrealized loss position.

Fixed-Maturity Securities

Gross Unrealized Loss by Length of Time

As of September 30, 2019

	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	5	$	—		$	4	$	—		$	9	$	—
U.S. government and agencies	13		—			4		—			17		—
Corporate securities	349		(8		)	170		(19		)	519		(27		)
Mortgage-backed securities:
RMBS	7		—			193		(10		)	200		(10		)
CMBS	1		—			4		—			5		—
Asset-backed securities	83		(2		)	147		(1		)	230		(3		)
Non-U.S. government securities	53		(2		)	80		(10		)	133		(12		)
Total	$	511	$	(12	)	$	602	$	(40	)	$	1,113	$	(52	)
Number of securities (1)			133					143					256
Number of securities with OTTI			12					9					21

Fixed-Maturity Securities

Gross Unrealized Loss by Length of Time

As of December 31, 2018

	Less than 12 months					12 months or more					Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	195	$	(4	)	$	658	$	(14	)	$	853	$	(18	)
U.S. government and agencies	11		—			24		(1		)	35		(1		)
Corporate securities	836		(19		)	522		(33		)	1,358		(52		)
Mortgage-backed securities:
RMBS	85		(2		)	447		(32		)	532		(34		)
CMBS	111		(1		)	164		(6		)	275		(7		)
Asset-backed securities	322		(4		)	38		(1		)	360		(5		)
Non-U.S. government securities	83		(4		)	99		(18		)	182		(22		)
Total	$	1,643	$	(34	)	$	1,952	$	(105	)	$	3,595	$	(139	)
Number of securities (1)			417					608					997
Number of securities with OTTI (1)			22					22					42

___________________

(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.

Of the securities in an unrealized loss position for 12 months or more as of September 30, 2019 and December 31, 2018, 27 and 38 securities, respectively, had unrealized losses greater than 10% of book value. The total unrealized loss for these securities was $24 million as of September 30, 2019 and $43 million as of December 31, 2018. 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, 2019 and December 31, 2018 were yield-related and not the result of OTTI.

The amortized cost and estimated fair value of available-for-sale fixed maturity securities by contractual maturity as of September 30, 2019 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 Fixed-Maturity Securities

by Contractual Maturity

As of September 30, 2019

	Amortized Cost		Estimated Fair Value
	(in millions)
Due within one year	$	274	$	275
Due after one year through five years	1,617		1,635
Due after five years through 10 years	2,133		2,242
Due after 10 years	3,493		3,779
Mortgage-backed securities:
RMBS	846		877
CMBS	448		469
Total	$	8,811	$	9,277

Based on fair value, investments and restricted cash 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 $278 million and $266 million, as of September 30, 2019 and December 31, 2018, respectively. The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements in the amount of $1,596 million and $1,855 million, based on fair value as of September 30, 2019 and December 31, 2018, respectively.

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Basic EPS:
Net income (loss) attributable to AGL	$ 69	$ 161	$ 265	$ 433
Less: Distributed and undistributed income (loss) available to nonvested shareholders	0	1	0	1
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$ 69	$ 160	$ 265	$ 432
Basic shares	98.2	108.0	100.8	111.6
Basic EPS (in dollars per share)	$ 0.71	$ 1.48	$ 2.63	$ 3.87
Diluted EPS:
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$ 69	$ 160	$ 265	$ 432
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries	0	0	0	0
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted	$ 69	$ 160	$ 265	$ 432
Basic shares	98.2	108.0	100.8	111.6
Effect of dilutive securities:
Options and restricted stock awards (in shares)	0.7	1.3	0.8	1.3
Diluted shares	98.9	109.3	101.6	112.9
Diluted EPS (in dollars per share)	$ 0.70	$ 1.47	$ 2.61	$ 3.83
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect (in shares)	0.0	0.0	0.0	0.1

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Subsidiary Information - Condensed Consolidating Statement of Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues
Net earned premiums	$ 123	$ 142	$ 353	$ 423
Net investment income	88	99	296	297
Net realized investment gains (losses)	16	(7)	12	(14)
Net change in fair value of credit derivatives	5	21	(25)	103
Other	(26)	20	31	(21)
Total revenues	206	275	667	788
Expenses
Loss and LAE	30	17	75	43
Amortization of deferred acquisition costs	3	3	13	12
Interest expense	22	23	67	71
Other operating expenses	65	56	189	183
Total expenses	120	99	344	309
Equity in net earnings of investees	0	(1)	3	0
Total before tax	86	175	326	479
Total (provision) benefit for income taxes	(17)	(14)	(61)	(46)
Equity in net earnings of subsidiaries	0	0	0	0
Net income (loss)	69	161	265	433
Less: noncontrolling interest	0	0	0	0
Net income (loss) attributable to Assured Guaranty Ltd.	69	161	265	433
Comprehensive income (loss)	93	87	491	171
Reportable Legal Entities [Member] | Assured Guaranty Ltd. (Parent) [Member]
Revenues
Net earned premiums	0	0	0	0
Net investment income	0	0	0	0
Net realized investment gains (losses)	0	0	0	0
Net change in fair value of credit derivatives	0	0	0	0
Other	3	3	7	9
Total revenues	3	3	7	9
Expenses
Loss and LAE	0	0	0	0
Amortization of deferred acquisition costs	0	0	0	0
Interest expense	0	0	0	0
Other operating expenses	10	10	30	30
Total expenses	10	10	30	30
Equity in net earnings of investees	0	0	0	0
Total before tax	(7)	(7)	(23)	(21)
Total (provision) benefit for income taxes	0	0	0	0
Equity in net earnings of subsidiaries	76	168	288	454
Net income (loss)	69	161	265	433
Less: noncontrolling interest	0	0	0	0
Net income (loss) attributable to Assured Guaranty Ltd.	69	161	265	433
Comprehensive income (loss)	93	87	491	171
Reportable Legal Entities [Member] | Issuer Subsidiary [Member] | AGUS [Member]
Revenues
Net earned premiums	0	0	0	0
Net investment income	2	2	8	6
Net realized investment gains (losses)	0	0	0	0
Net change in fair value of credit derivatives	0	0	0	0
Other	0	0	0	0
Total revenues	2	2	8	6
Expenses
Loss and LAE	0	0	0	0
Amortization of deferred acquisition costs	0	0	0	0
Interest expense	12	13	37	37
Other operating expenses	1	6	3	9
Total expenses	13	19	40	46
Equity in net earnings of investees	0	0	0	0
Total before tax	(11)	(17)	(32)	(40)
Total (provision) benefit for income taxes	3	45	7	50
Equity in net earnings of subsidiaries	71	111	275	336
Net income (loss)	63	139	250	346
Less: noncontrolling interest	0	0	0	0
Net income (loss) attributable to Assured Guaranty Ltd.	63	139	250	346
Comprehensive income (loss)	73	76	388	150
Reportable Legal Entities [Member] | Issuer Subsidiary [Member] | AGMH [Member]
Revenues
Net earned premiums	0	0	0	0
Net investment income	0	0	0	0
Net realized investment gains (losses)	0	0	0	0
Net change in fair value of credit derivatives	0	0	0	0
Other	0	0	0	0
Total revenues	0	0	0	0
Expenses
Loss and LAE	0	0	0	0
Amortization of deferred acquisition costs	0	0	0	0
Interest expense	13	13	40	40
Other operating expenses	0	(1)	0	0
Total expenses	13	12	40	40
Equity in net earnings of investees	0	0	0	0
Total before tax	(13)	(12)	(40)	(40)
Total (provision) benefit for income taxes	2	3	8	9
Equity in net earnings of subsidiaries	52	108	215	219
Net income (loss)	41	99	183	188
Less: noncontrolling interest	0	0	0	0
Net income (loss) attributable to Assured Guaranty Ltd.	41	99	183	188
Comprehensive income (loss)	38	61	299	54
Reportable Legal Entities [Member] | Other Entities [Member]
Revenues
Net earned premiums	126	146	361	434
Net investment income	91	101	302	301
Net realized investment gains (losses)	16	(7)	12	(14)
Net change in fair value of credit derivatives	5	21	(25)	103
Other	20	72	179	137
Total revenues	258	333	829	961
Expenses
Loss and LAE	32	18	84	48
Amortization of deferred acquisition costs	4	5	16	16
Interest expense	3	2	8	7
Other operating expenses	103	93	308	293
Total expenses	142	118	416	364
Equity in net earnings of investees	0	(1)	3	0
Total before tax	116	214	416	597
Total (provision) benefit for income taxes	(21)	(58)	(74)	(103)
Equity in net earnings of subsidiaries	5	7	14	20
Net income (loss)	100	163	356	514
Less: noncontrolling interest	5	7	14	20
Net income (loss) attributable to Assured Guaranty Ltd.	95	156	342	494
Comprehensive income (loss)	124	92	584	255
Consolidating Adjustments [Member]
Revenues
Net earned premiums	(3)	(4)	(8)	(11)
Net investment income	(5)	(4)	(14)	(10)
Net realized investment gains (losses)	0	0	0	0
Net change in fair value of credit derivatives	0	0	0	0
Other	(49)	(55)	(155)	(167)
Total revenues	(57)	(63)	(177)	(188)
Expenses
Loss and LAE	(2)	(1)	(9)	(5)
Amortization of deferred acquisition costs	(1)	(2)	(3)	(4)
Interest expense	(6)	(5)	(18)	(13)
Other operating expenses	(49)	(52)	(152)	(149)
Total expenses	(58)	(60)	(182)	(171)
Equity in net earnings of investees	0	0	0	0
Total before tax	1	(3)	5	(17)
Total (provision) benefit for income taxes	(1)	(4)	(2)	(2)
Equity in net earnings of subsidiaries	(204)	(394)	(792)	(1,029)
Net income (loss)	(204)	(401)	(789)	(1,048)
Less: noncontrolling interest	(5)	(7)	(14)	(20)
Net income (loss) attributable to Assured Guaranty Ltd.	(199)	(394)	(775)	(1,028)
Comprehensive income (loss)	$ (235)	$ (229)	$ (1,271)	$ (459)

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Expected Loss to be Paid (Tables)

9 Months Ended

Sep. 30, 2019

Expected Losses [Abstract]

Net Expected Loss to be Paid After Net Expected Recoveries for Breaches of R&W Roll Forward

The following tables present a roll forward of net expected loss to be paid for all contracts. The Company used risk-free rates for U.S. dollar denominated obligations that ranged from 0.00% to 2.20% with a weighted average of 1.79% as of September 30, 2019 and 0.00% to 3.06% with a weighted average of 2.74% as of December 31, 2018. Expected losses to be paid for transactions denominated in currencies other than the U.S. dollar represented approximately 4.0% and 2.7% of the total as of September 30, 2019 and December 31, 2018, respectively.

Net Expected Loss to be Paid

Roll Forward

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Net expected loss to be paid, beginning of period	$	960		$	1,432		$	1,183		$	1,303
Net expected loss to be paid on the Syncora Guarantee Inc. (SGI) portfolio as of June 1, 2018 (see Note 11)	—			—			—			131
Economic loss development (benefit) due to:
Accretion of discount	5			10			19			27
Changes in discount rates	1			(9		)	(4		)	(15		)
Changes in timing and assumptions	19			(1		)	(29		)	(17		)
Total economic loss development (benefit)	25			—			(14		)	(5		)
Net (paid) recovered losses	(267		)	(241		)	(451		)	(238		)
Net expected loss to be paid, end of period	$	718		$	1,191		$	718		$	1,191

Net Expected Loss to be Paid

Roll Forward by Sector

Third Quarter 2019

	Net Expected Loss to be Paid (Recovered) as of June 30, 2019		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2019
	(in millions)
Public finance:
U.S. public finance	$	749	$	50		$	(279	)	$	520
Non-U.S. public finance	23		5			—			28
Public finance	772		55			(279		)	548
Structured finance:
U.S. RMBS	162		(40		)	13			135
Other structured finance	26		10			(1		)	35
Structured finance	188		(30		)	12			170
Total	$	960	$	25		$	(267	)	$	718

Net Expected Loss to be Paid

Roll Forward by Sector

Third Quarter 2018

	Net Expected Loss to be Paid (Recovered) as of June 30, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2018
	(in millions)
Public finance:
U.S. public finance	$	1,041	$	42		$	(251	)	$	832
Non-U.S. public finance	41		(3		)	—			38
Public finance	1,082		39			(251		)	870
Structured finance:
U.S. RMBS	326		(40		)	17			303
Other structured finance	24		1			(7		)	18
Structured finance	350		(39		)	10			321
Total	$	1,432	$	—		$	(241	)	$	1,191

Net Expected Loss to be Paid

Roll Forward by Sector

Nine Months 2019

	Net Expected Loss to be Paid (Recovered) as of December 31, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2019
	(in millions)
Public finance:
U.S. public finance	$	832	$	204		$	(516	)	$	520
Non-U.S. public finance	32		(4		)	—			28
Public finance	864		200			(516		)	548
Structured finance:
U.S. RMBS	293		(223		)	65			135
Other structured finance	26		9			—			35
Structured finance	319		(214		)	65			170
Total	$	1,183	$	(14	)	$	(451	)	$	718

Net Expected Loss to be Paid

Roll Forward by Sector

Nine Months 2018

	Net Expected Loss to be Paid (Recovered) as of December 31, 2017		Net Expected Loss to be Paid on SGI Portfolio as of June 1, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2018
	(in millions)
Public finance:
U.S. public finance	$	1,157	—		$	59		$	(384	)	$	832
Non-U.S. public finance	46		1		(9		)	—			38
Public finance	1,203		1		50			(384		)	870
Structured finance:
U.S. RMBS	73		130		(52		)	152			303
Other structured finance	27		—		(3		)	(6		)	18
Structured finance	100		130		(55		)	146			321
Total	$	1,303	$	131	$	(5	)	$	(238	)	$	1,191

____________________

(1) Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled 45 days after the end of the reporting period. Such amounts are recorded as reinsurance recoverable on paid losses in other assets. The amounts for Nine Months 2019 are net of the COFINA Exchange Senior Bonds and cash that were received pursuant to the COFINA Plan of Adjustment. See Note 3, Outstanding Exposure, for additional information.

The tables above include (1) LAE paid of $7 million and $6 million for Third Quarter 2019 and 2018, respectively, and $23 million and $17 million for Nine Months 2019 and 2018, respectively, and (2) expected LAE to be paid of $34 million as of September 30, 2019 and $31 million as of December 31, 2018.

Schedule Of Net Expected Losses To Be Paid (Recovered) And Net Economic Development (Benefit) Loss

Net Economic Loss Development (Benefit)

U.S. RMBS

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
First lien U.S. RMBS	$	(27	)	(13	)	$	(77	)	$	4
Second lien U.S. RMBS	(13		)	(27	)	(146		)	(56		)

Net Expected Loss to be Paid (Recovered) and

Net Economic Loss Development (Benefit)

By Accounting Model

	Net Expected Loss to be Paid (Recovered)						Net Economic Loss Development  (Benefit)
	As of						Third Quarter						Nine Months
	September 30, 2019			December 31, 2018			2019			2018			2019			2018
	(in millions)
Insurance	$	662		$	1,110		17			1			$	5		$	(9	)
Financial guaranty VIEs (FG VIEs) (See Note 9)	61			75			(2		)	(3		)	(26		)	(7		)
Credit derivatives (See Note 8)	(5		)	(2		)	10			2			7			11
Total	$	718		$	1,183		$	25		$	—		$	(14	)	$	(5	)

Net Expected Loss to be Paid By Accounting Model

Net Expected Loss to be Paid (Recovered) and

Net Economic Loss Development (Benefit)

By Accounting Model

	Net Expected Loss to be Paid (Recovered)						Net Economic Loss Development  (Benefit)
	As of						Third Quarter						Nine Months
	September 30, 2019			December 31, 2018			2019			2018			2019			2018
	(in millions)
Insurance	$	662		$	1,110		17			1			$	5		$	(9	)
Financial guaranty VIEs (FG VIEs) (See Note 9)	61			75			(2		)	(3		)	(26		)	(7		)
Credit derivatives (See Note 8)	(5		)	(2		)	10			2			7			11
Total	$	718		$	1,183		$	25		$	—		$	(14	)	$	(5	)

Liquidation Rates and Key Assumptions in Base Case Expected Loss Estimates First Lien RMBS

Key Assumptions in Base Case Expected Loss Estimates

First Lien RMBS

	As of September 30, 2019					As of June 30, 2019					As of December 31, 2018
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Alt-A First Lien
Plateau CDR	0.5	%	-	10.5%	4.1%	0.0	%	-	9.5%	4.0%	1.2	%	-	11.4%	4.6%
Final CDR	0.0	%	-	0.5%	0.2%	0.0	%	-	0.5%	0.2%	0.1	%	-	0.6%	0.2%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	70%					70%					70%
2007+	70%					70%					70%
Option ARM
Plateau CDR	2.0	%	-	8.4%	5.6%	2.4	%	-	7.9%	5.5%	1.8	%	-	8.3%	5.6%
Final CDR	0.1	%	-	0.4%	0.3%	0.1	%	-	0.4%	0.3%	0.1	%	-	0.4%	0.3%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	60%					60%					60%
2007+	70%					70%					70%
Subprime
Plateau CDR	1.5	%	-	20.2%	5.6%	2.5	%	-	22.8%	6.0%	1.8	%	-	23.2%	6.2%
Final CDR	0.1	%	-	1.0%	0.3%	0.1	%	-	1.1%	0.3%	0.1	%	-	1.2%	0.3%
Initial loss severity:
2005 and prior	80%					80%					80%
2006	75%					75%					75%
2007+	85%					95%					95%

First Lien Liquidation Rates

	As of September 30, 2019	As of June 30, 2019	As of December 31, 2018
Delinquent/Modified in the Previous 12 Months
Alt-A and Prime	20%	20%	20%
Option ARM	20	20	20
Subprime	20	20	20
30 – 59 Days Delinquent
Alt-A and Prime	30	30	30
Option ARM	35	35	35
Subprime	35	40	40
60 – 89 Days Delinquent
Alt-A and Prime	40	40	40
Option ARM	45	45	45
Subprime	45	45	45
90+ Days Delinquent
Alt-A and Prime	55	50	50
Option ARM	55	55	55
Subprime	50	55	50
Bankruptcy
Alt-A and Prime	45	45	45
Option ARM	50	50	50
Subprime	40	40	40
Foreclosure
Alt-A and Prime	65	60	60
Option ARM	65	65	65
Subprime	60	60	60
Real Estate Owned
All	100	100	100

Key Assumptions in Base Case Expected Loss Estimates Second Lien RMBS

Key Assumptions in Base Case Expected Loss Estimates

HELOCs

	As of September 30, 2019					As of June 30, 2019					As of December 31, 2018
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Plateau CDR	4.8	%	-	20.7%	9.1%	4.6	%	-	23.5%	9.2%	4.6	%	-	26.8%	10.1%
Final CDR trended down to	2.5	%	-	3.2%	2.5%	2.5	%	-	3.2%	2.5%	2.5	%	-	3.2%	2.5%
Liquidation rates:
Delinquent/Modified in the Previous 12 Months	20%					20%					20%
30 – 59 Days Delinquent	35					30					35
60 – 89 Days Delinquent	45					45					50
90+ Days Delinquent	65					65					70
Bankruptcy	55					55					55
Foreclosure	55					60					65
Real Estate Owned	100					100					100
Loss severity (1)	98%					98%					98%

___________________

(1)    Loss severities on future defaults.

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Reinsurance

9 Months Ended

Sep. 30, 2019

Insurance [Abstract]

Reinsurance

Reinsurance

The Company assumes exposure (Assumed Business) from third party insurers, primarily other monoline financial guaranty companies that currently are in runoff and no longer actively writing new business (Legacy Monoline Insurers), and may cede portions of exposure it has insured (Ceded Business) in exchange for premiums, net of any ceding commissions. The Company, if required, secures its reinsurance obligations to these Legacy Monoline Insurers, typically by depositing in trust assets with a market value equal to its assumed liabilities calculated on a U.S. statutory basis.

Substantially all of the Company’s Assumed Business and Ceded Business relates to financial guaranty business, except for a modest amount that relates to AGRO's non-financial guaranty business. The Company historically entered into, and

with respect to new business originated by AGRO continues to enter into, ceded reinsurance contracts in order to obtain greater business diversification and reduce the net potential loss from large risks.

Financial Guaranty Business

The Company’s facultative and treaty assumed agreements with the Legacy Monoline Insurers are generally subject to termination at the option of the ceding company:

• if the Company fails to meet certain financial and regulatory criteria;

• if the Company fails to maintain a specified minimum financial strength rating, or

• upon certain changes of control of the Company.

Upon termination due to one of the above events, the Company typically would be required to return to the ceding company unearned premiums (net of ceding commissions) and loss reserves, calculated on a U.S. statutory basis, attributable to the Assumed Business (plus in certain cases, an additional required amount), after which the Company would be released from liability with respect to such business.

As of September 30, 2019, if each third party company ceding business to AG Re and/or AGC had a right to recapture such business, and chose to exercise such right, the aggregate amounts that AG Re and AGC could be required to pay to all such companies would be approximately $42 million and $291 million, respectively.

The Company has ceded financial guaranty business to non-affiliated companies to limit its exposure to risk. The Company remains primarily liable for all risks it directly underwrites and is required to pay all gross claims. It then seeks reimbursement from the reinsurer for its proportionate share of claims. The Company may be exposed to risk for this exposure if it were required to pay the gross claims and not be able to collect ceded claims from an assuming company experiencing financial distress. The Company’s ceded contracts generally allow the Company to recapture ceded financial guaranty business after certain triggering events, such as reinsurer downgrades.

Non-Financial Guaranty Business

The Company, through AGRO, assumes non-financial guaranty business from third party insurers (Assumed Non-Financial Guaranty Business). It also cedes and retrocedes some of its non-financial guaranty business to third party reinsurers. A downgrade of AGRO’s financial strength rating by S&P below A would require AGRO to post, as of September 30, 2019, an estimated $0.3 million of collateral in respect of certain of its Assumed Non-Financial Guaranty Business. A further downgrade of AGRO’s S&P rating below A- would give the company ceding such business the right to recapture the business for AGRO’s collateral amount, and, if also accompanied by a downgrade of AGRO's financial strength rating by A.M. Best Company, Inc. below A-, would also require AGRO to post, as of September 30, 2019, an estimated $11 million of collateral in respect of a different portion of AGRO’s Assumed Non-Financial Guaranty Business. AGRO’s ceded/retroceded contracts generally have equivalent provisions requiring the assuming reinsurer to post collateral and/or allowing AGRO to recapture the ceded/retroceded business upon certain triggering events, such as reinsurer rating downgrades.

Effect of Reinsurance

The following table presents the components of premiums and losses reported in the condensed consolidated statements of operations and the contribution of the Company's Assumed and Ceded Businesses (both financial guaranty and non-financial guaranty).

Effect of Reinsurance on Statement of Operations

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Premiums Written:
Direct	$	67		$	57		$	156		$	192
Assumed (1)	2			(7		)	3			324
Ceded (2)	(1		)	1			12			14
Net	$	68		$	51		$	171		$	530
Premiums Earned:
Direct	$	113		$	127		$	317		$	400
Assumed	12			19			42			33
Ceded	(2		)	(4		)	(6		)	(10		)
Net	$	123		$	142		$	353		$	423
Loss and LAE:
Direct	$	28		$	18		$	82		$	53
Assumed	2			1			4			(7		)
Ceded	—			(2		)	(11		)	(3		)
Net	$	30		$	17		$	75		$	43

____________________

(1)    Negative assumed premiums written were due to changes in expected debt service schedules.

(2) Positive ceded premiums written were due to terminations, commutations and changes in expected debt service schedules.

Ceded Reinsurance (1)

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Ceded premium payable, net of commissions	$	19	$	26
Ceded expected loss to be recovered (paid)	14		14
Financial guaranty ceded par outstanding (2)	1,343		2,389
Non-financial guaranty ceded exposure (see Note 3)	275		239

____________________

(1) The total collateral posted by all non-affiliated reinsurers required to post, or that had agreed to post, collateral as of September 30, 2019 and December 31, 2018 was approximately $69 million and $80 million, respectively. Such collateral is posted (i) in the case of certain reinsurers not authorized or "accredited" in the U.S., in order for the Company to receive credit for the liabilities ceded to such reinsurers in statutory financial statements, and (ii) in the case of certain reinsurers authorized in the U.S., on terms negotiated with the Company.

(2) Of the total par ceded to unrated or BIG rated reinsurers, $224 million and $236 million is rated BIG as of September 30, 2019 and December 31, 2018, respectively.

Reinsurance of Syncora Guarantee Inc.’s Insured Portfolio

On June 1, 2018, the Company closed the SGI Transaction under which AGC assumed, generally on a 100% quota share basis, substantially all of SGI’s insured portfolio and AGM reassumed a book of business previously ceded to SGI by AGM. As of June 1, 2018, the net par value of exposures reinsured and commuted totaled approximately $12 billion (including credit derivative net par of approximately $1.5 billion). The reinsured portfolio consisted predominantly of public finance and infrastructure obligations that met AGC’s underwriting criteria and generated $330 million of gross written premiums. On June 1, 2018, as consideration, SGI paid $363 million and assigned to Assured Guaranty financial guaranty future insurance installment premiums of $45 million, and future credit derivative installments of approximately $17 million. The assumed portfolio from SGI included BIG contracts which had, as of June 1, 2018, expected losses to be paid of $131 million (present value basis using risk-free rates), which will be expensed over the expected terms of those contracts as unearned premium reserve amortizes. In connection with the SGI Transaction, the Company incurred and expensed $4 million in fees to professional advisors.

Additionally, beginning on June 1, 2018, on behalf of SGI, AGC began providing certain administrative services on the assumed portfolio, including surveillance, risk management and claims processing.

Commutations

Commutations of Ceded Reinsurance Contracts

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
Increase in net unearned premium reserve	$	—	$	4	$	15	$	64
Increase in net par outstanding	—		224		1,069		1,457
Commutation gains (losses)	—		1		1		(16		)

Excess of Loss Reinsurance Facility

     Effective January 1, 2018, AGC, AGM and MAC entered into a $400 million aggregate excess of loss reinsurance facility of which $180 million was placed with an unaffiliated reinsurer. This facility covers losses occurring either from January 1, 2018 through December 31, 2024, or January 1, 2019 through December 31, 2025, at the option of AGC, AGM and MAC. It terminates on January 1, 2020, unless AGC, AGM and MAC choose to extend it. It covers certain U.S. public finance exposures insured or reinsured by AGC, AGM and MAC as of September 30, 2017, excluding exposures that were rated below investment grade as of December 31, 2017 by Moody’s or S&P or internally by AGC, AGM or MAC and is subject to certain per credit limits. Among the exposures excluded are those associated with the Commonwealth of Puerto Rico and its related authorities and public corporations. The facility attaches when AGC’s, AGM’s and MAC’s net losses (net of AGC’s and AGM's reinsurance (including from affiliates) and net of recoveries) exceed $0.8 billion in the aggregate. The facility covers a portion of the next $400 million of losses, with the reinsurer assuming $180 million of the $400 million of losses and AGC, AGM and MAC jointly retaining the remaining $220 million. The reinsurer is required to be rated at least AA- or to post collateral sufficient to provide AGC, AGM and MAC with the same reinsurance credit as reinsurers rated AA-. AGC, AGM and MAC are each obligated to pay the reinsurer its share of recoveries relating to losses during the coverage period in the covered portfolio. AGC, AGM and MAC paid approximately $3.2 million of premiums in 2018 for the term January 1, 2018 through December 31, 2018 and approximately $3.2 million of premiums in 2019 for the term January 1, 2019 through December 31, 2019.

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Subsidiary Information

9 Months Ended

Sep. 30, 2019

Condensed Financial Information Disclosure [Abstract]

Subsidiary Information

Subsidiary Information

The following tables present the condensed consolidating financial information for AGUS and AGMH, 100%-owned subsidiaries of AGL, which have issued publicly traded debt securities that are fully and unconditionally guaranteed by AGL. The information for AGL, AGUS and AGMH presents their subsidiaries on the equity method of accounting.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)		AGUS (Issuer) (1)		AGMH (Issuer)		Other Entities		Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Assets
Total investment portfolio and cash	$	41	$	416	$	24	$	10,655	$	(431	)	$	10,705
Investment in subsidiaries	6,531		5,898		4,135		204		(16,768		)	—
Premiums receivable, net of commissions payable	—		—		—		997		(153		)	844
Deferred acquisition costs	—		—		—		142		(35		)	107
Intercompany loan receivable	—		—		—		50		(50		)	—
FG VIEs’ assets, at fair value	—		—		—		469		—			469
Dividends receivable from affiliate	70		10		—		—		(80		)	—
Other	25		84		32		2,723		(1,622		)	1,242
Total assets	$	6,667	$	6,408	$	4,191	$	15,240	$	(19,139	)	$	13,367
Liabilities and shareholders' equity
Unearned premium reserves	$	—	$	—	$	—	$	4,228	$	(894	)	$	3,334
Loss and LAE reserve	—		—		—		1,251		(244		)	1,007
Long-term debt	—		844		474		4		(88		)	1,234
Intercompany loan payable	—		50		—		300		(350		)	—
Credit derivative liabilities	—		—		—		249		(35		)	214
FG VIEs’ liabilities, at fair value	—		—		—		493		—			493
Dividends payable to affiliate	—		70		10		—		(80		)	—
Other	15		75		71		894		(622		)	433
Total liabilities	15		1,039		555		7,419		(2,313		)	6,715
Total shareholders' equity attributable to Assured Guaranty Ltd.	6,652		5,369		3,636		7,617		(16,622		)	6,652
Noncontrolling interest	—		—		—		204		(204		)	—
Total shareholders' equity	6,652		5,369		3,636		7,821		(16,826		)	6,652
Total liabilities and shareholders' equity	$	6,667	$	6,408	$	4,191	$	15,240	$	(19,139	)	$	13,367

 ____________________

(1) The fair value of the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $131 million.

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)		AGUS (Issuer) (1)		AGMH (Issuer)		Other Entities		Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Assets
Total investment portfolio and cash	$	45	$	334	$	23	$	11,000	$	(425	)	$	10,977
Investment in subsidiaries	6,440		5,835		3,991		226		(16,492		)	—
Premiums receivable, net of commissions payable	—		—		—		1,071		(167		)	904
Deferred acquisition costs	—		—		—		143		(38		)	105
Deferred tax asset, net	—		—		—		162		(94		)	68
Intercompany loan receivable	—		—		—		50		(50		)	—
FG VIEs’ assets, at fair value	—		—		—		569		—			569
Dividends receivable from affiliate	60		—		—		—		(60		)	—
Other	29		66		24		2,437		(1,576		)	980
Total assets	$	6,574	$	6,235	$	4,038	$	15,658	$	(18,902	)	$	13,603
Liabilities and shareholders' equity
Unearned premium reserves	$	—	$	—	$	—	$	4,452	$	(940	)	$	3,512
Loss and LAE reserve	—		—		—		1,467		(290		)	1,177
Long-term debt	—		844		468		5		(84		)	1,233
Intercompany loan payable	—		50		—		300		(350		)	—
Credit derivative liabilities	—		—		—		236		(27		)	209
Deferred tax liabilities, net	—		49		50		—		(99		)	—
FG VIEs’ liabilities, at fair value	—		—		—		619		—			619
Dividends payable to affiliate	—		60		—		—		(60		)	—
Other	19		3		17		763		(504		)	298
Total liabilities	19		1,006		535		7,842		(2,354		)	7,048
Total shareholders' equity attributable to Assured Guaranty Ltd.	6,555		5,229		3,503		7,590		(16,322		)	6,555
Noncontrolling interest	—		—		—		226		(226		)	—
Total shareholders' equity	6,555		5,229		3,503		7,816		(16,548		)	6,555
Total liabilities and shareholders' equity	$	6,574	$	6,235	$	4,038	$	15,658	$	(18,902	)	$	13,603

 ____________________

(1) The fair value of the AGMH debt purchased by AGUS, and recorded in the AGUS investment portfolio, was $125 million.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	126		$	(3	)	$	123
Net investment income	—			2			—			91			(5		)	88
Net realized investment gains (losses)	—			—			—			16			—			16
Net change in fair value of credit derivatives	—			—			—			5			—			5
Other	3			—			—			20			(49		)	(26		)
Total revenues	3			2			—			258			(57		)	206
Expenses
Loss and LAE	—			—			—			32			(2		)	30
Amortization of deferred acquisition costs	—			—			—			4			(1		)	3
Interest expense	—			12			13			3			(6		)	22
Other operating expenses	10			1			—			103			(49		)	65
Total expenses	10			13			13			142			(58		)	120
Equity in net earnings of investees	—			—			—			—			—			—
Income (loss) before income taxes and equity in net earnings of subsidiaries	(7		)	(11		)	(13		)	116			1			86
Total (provision) benefit for income taxes	—			3			2			(21		)	(1		)	(17		)
Equity in net earnings of subsidiaries	76			71			52			5			(204		)	—
Net income (loss)	$	69		$	63		$	41		$	100		$	(204	)	$	69
Less: noncontrolling interest	—			—			—			5			(5		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	69		$	63		$	41		$	95		$	(199	)	$	69
Comprehensive income (loss)	$	93		$	73		$	38		$	124		$	(235	)	$	93

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	146		$	(4	)	$	142
Net investment income	—			2			—			101			(4		)	99
Net realized investment gains (losses)	—			—			—			(7		)	—			(7		)
Net change in fair value of credit derivatives	—			—			—			21			—			21
Other	3			—			—			72			(55		)	20
Total revenues	3			2			—			333			(63		)	275
Expenses
Loss and LAE	—			—			—			18			(1		)	17
Amortization of deferred acquisition costs	—			—			—			5			(2		)	3
Interest expense	—			13			13			2			(5		)	23
Other operating expenses	10			6			(1		)	93			(52		)	56
Total expenses	10			19			12			118			(60		)	99
Equity in net earnings of investees	—			—			—			(1		)	—			(1		)
Income (loss) before income taxes and equity in net earnings of subsidiaries	(7		)	(17		)	(12		)	214			(3		)	175
Total (provision) benefit for income taxes	—			45			3			(58		)	(4		)	(14		)
Equity in net earnings of subsidiaries	168			111			108			7			(394		)	—
Net income (loss)	$	161		$	139		$	99		$	163		$	(401	)	$	161
Less: noncontrolling interest	—			—			—			7			(7		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	161		$	139		$	99		$	156		$	(394	)	$	161
Comprehensive income (loss)	$	87		$	76		$	61		$	92		$	(229	)	$	87

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	361		$	(8	)	$	353
Net investment income	—			8			—			302			(14		)	296
Net realized investment gains (losses)	—			—			—			12			—			12
Net change in fair value of credit derivatives	—			—			—			(25		)	—			(25		)
Other	7			—			—			179			(155		)	31
Total revenues	7			8			—			829			(177		)	667
Expenses
Loss and LAE	—			—			—			84			(9		)	75
Amortization of deferred acquisition costs	—			—			—			16			(3		)	13
Interest expense	—			37			40			8			(18		)	67
Other operating expenses	30			3			—			308			(152		)	189
Total expenses	30			40			40			416			(182		)	344
Equity in net earnings of investees	—			—			—			3			—			3
Income (loss) before income taxes and equity in net earnings of subsidiaries	(23		)	(32		)	(40		)	416			5			326
Total (provision) benefit for income taxes	—			7			8			(74		)	(2		)	(61		)
Equity in net earnings of subsidiaries	288			275			215			14			(792		)	—
Net income (loss)	$	265		$	250		$	183		$	356		$	(789	)	$	265
Less: noncontrolling interest	—			—			—			14			(14		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	265		$	250		$	183		$	342		$	(775	)	$	265
Comprehensive income (loss)	$	491		$	388		$	299		$	584		$	(1,271	)	$	491

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

AND COMPREHENSIVE INCOME

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Revenues
Net earned premiums	$	—		$	—		$	—		$	434		$	(11	)	$	423
Net investment income	—			6			—			301			(10		)	297
Net realized investment gains (losses)	—			—			—			(14		)	—			(14		)
Net change in fair value of credit derivatives	—			—			—			103			—			103
Other	9			—			—			137			(167		)	(21		)
Total revenues	9			6			—			961			(188		)	788
Expenses
Loss and LAE	—			—			—			48			(5		)	43
Amortization of deferred acquisition costs	—			—			—			16			(4		)	12
Interest expense	—			37			40			7			(13		)	71
Other operating expenses	30			9			—			293			(149		)	183
Total expenses	30			46			40			364			(171		)	309
Equity in net earnings of investees	—			—			—			—			—			—
Income (loss) before income taxes and equity in net earnings of subsidiaries	(21		)	(40		)	(40		)	597			(17		)	479
Total (provision) benefit for income taxes	—			50			9			(103		)	(2		)	(46		)
Equity in net earnings of subsidiaries	454			336			219			20			(1,029		)	—
Net income (loss)	$	433		$	346		$	188		$	514		$	(1,048	)	$	433
Less: noncontrolling interest	—			—			—			20			(20		)	—
Net income (loss) attributable to Assured Guaranty Ltd.	$	433		$	346		$	188		$	494		$	(1,028	)	$	433
Comprehensive income (loss)	$	171		$	150		$	54		$	255		$	(459	)	$	171

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Net cash flows provided by (used in) operating activities	$	408		$	217		$	157		$	(280	)	$	(867	)	$	(365	)
Cash flows from investing activities
Fixed-maturity securities:
Purchases	—			(3		)	—			(688		)	3			(688		)
Sales	—			—			—			1,306			—			1,306
Maturities and paydowns	—			4			7			653			—			664
Short-term investments with maturities of over three months:
Purchases	—			—			—			(216		)	—			(216		)
Sales	—			—			—			2			—			2
Maturities and paydowns	—			12			—			194			—			206
Net sales (purchases) of short-term investments with maturities of less than three months	4			(90		)	(3		)	(315		)	—			(404		)
Net proceeds from paydowns on FG VIEs’ assets	—			—			—			119			—			119
Net proceeds from sales of FG VIEs’ assets	—			—			—			51			—			51
Proceeds from stock redemption and return of capital from subsidiaries	—			100			—			10			(110		)	—
Other	—			—			—			30			—			30
Net cash flows provided by (used in) investing activities	4			23			4			1,146			(107		)	1,070
Cash flows from financing activities
Return of capital	—			—			—			(10		)	10			—
Dividends paid	(56		)	(237		)	(156		)	(474		)	867			(56		)
Repurchases of common stock	(340		)	—			—			(100		)	100			(340		)
Net paydowns of FG VIEs’ liabilities	—			—			—			(162		)	—			(162		)
Paydown of long-term debt	—			—			—			(1		)	(3		)	(4		)
Other	(16		)	—			—			—			—			(16		)
Net cash flows provided by (used in) financing activities	(412		)	(237		)	(156		)	(747		)	974			(578		)
Effect of exchange rate changes	—			—			—			(2		)	—			(2		)
Increase (decrease) in cash and restricted cash	—			3			5			117			—			125
Cash and restricted cash at beginning of period	—			1			—			103			—			104
Cash and restricted cash at end of period	$	—		$	4		$	5		$	220		$	—		$	229

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(in millions)

	Assured Guaranty Ltd. (Parent)			AGUS (Issuer)			AGMH (Issuer)			Other Entities			Consolidating Adjustments			Assured Guaranty Ltd. (Consolidated)
Net cash flows provided by (used in) operating activities	$	454		$	101		$	126		$	448		$	(777	)	$	352
Cash flows from investing activities
Fixed-maturity securities:
Purchases	—			(76		)	(12		)	(1,462		)	72			(1,478		)
Sales	—			31			8			869			—			908
Maturities and paydowns	—			28			—			718			—			746
Short-term investments with maturities of over three months:
Purchases	—			—			—			(148		)	—			(148		)
Sales	—			—			—			1			—			1
Maturities and paydowns	—			—			—			136			—			136
Net sales (purchases) of short-term investments with maturities of less than three months	(11		)	60			(74		)	(55		)	—			(80		)
Net proceeds from paydowns on FG VIEs’ assets	—			—			—			90			—			90
Proceeds from stock redemption and return of capital from subsidiaries	—			200			—			—			(200		)	—
Other	—			(15		)	—			34			—			19
Net cash flows provided by (used in) investing activities	(11		)	228			(78		)	183			(128		)	194
Cash flows from financing activities
Dividends paid	(55		)	(362		)	(50		)	(365		)	777			(55		)
Repurchases of common stock	(380		)	—			—			(200		)	200			(380		)
Net paydowns of FG VIEs’ liabilities	—			—			—			(90		)	—			(90		)
Paydown of long-term debt	—			—			—			(1		)	(72		)	(73		)
Other	(8		)	—			—			—			—			(8		)
Net cash flows provided by (used in) financing activities	(443		)	(362		)	(50		)	(656		)	905			(606		)
Effect of exchange rate changes	—			—			—			(2		)	—			(2		)
Increase (decrease) in cash and restricted cash	—			(33		)	(2		)	(27		)	—			(62		)
Cash and restricted cash at beginning of period	—			33			2			109			—			144
Cash and restricted cash at end of period	$	—		$	—		$	—		$	82		$	—		$	82

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Contracts Accounted for as Insurance - Selected Information for Policies Paid In Installments (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Dec. 31, 2017
Financial Guarantee Insurance Premiums [Line Items]
Premiums receivable, net of commission payable	$ 844	$ 904	$ 916	$ 915
Financial Guarantee Policies Paid in Installments [Member]
Financial Guarantee Insurance Premiums [Line Items]
Premiums receivable, net of commission payable	843	903
Gross deferred premium revenue	$ 1,237	$ 1,313
Weighted-average risk-free rate used to discount premiums	2.20%	2.30%
Weighted-average period of premiums receivable (in years)	9 years 1 month 6 days	9 years 1 month 6 days

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Variable Interest Entities - Consolidated FG VIE's By Type of Collateral (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Variable Interest Entity [Line Items]
Financial guaranty variable interest entities' assets with recourse, at fair value	$ 364	$ 467
Financial guaranty variable interest entities’ liabilities with recourse, at fair value	388	517
Financial guaranty variable interest entities' assets without recourse, at fair value	105	102
Financial guaranty variable interest entities’ liabilities without recourse, at fair value	105	102
Financial guaranty variable interest entities’ assets, at fair value	469	569
Financial guaranty variable interest entities’ liabilities, at fair value	493	619
Manufactured Housing Loans [Member]
Variable Interest Entity [Line Items]
Financial guaranty variable interest entities' assets with recourse, at fair value	0	53
Financial guaranty variable interest entities’ liabilities with recourse, at fair value	0	54
United States [Member] | First Lien [Member] | RMBS [Member]
Variable Interest Entity [Line Items]
Financial guaranty variable interest entities' assets with recourse, at fair value	289	299
Financial guaranty variable interest entities’ liabilities with recourse, at fair value	314	326
United States [Member] | Second Lien [Member] | RMBS [Member]
Variable Interest Entity [Line Items]
Financial guaranty variable interest entities' assets with recourse, at fair value	75	115
Financial guaranty variable interest entities’ liabilities with recourse, at fair value	$ 74	$ 137

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Income Taxes Income Taxes - Deferred and Current Tax Liabilities (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Deferred tax assets (liabilities)	$ (24)	$ 68
Current tax assets (liabilities)	$ 14	$ 22

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Contracts Accounted for as Insurance - Net Expected Loss to be Expensed Insurance Contracts (Details) $ in Millions	Sep. 30, 2019 USD ($)
Insurance [Abstract]
2019 (October 1 - December 31)	$ 9
2020	37
2021	36
2022	35
2023	31
2024-2028	147
2029-2033	99
2034-2038	45
After 2038	9
Net expected loss to be expensed	448
Future accretion	30
Total expected future loss and LAE	$ 478

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Outstanding Exposure - Puerto Rico Gross Par and Gross Debt Service Outstanding (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Schedule of Insured Financial Obligations [Line Items]
Gross Debt Service Outstanding	$ 356,280	$ 375,080
Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Gross Par Outstanding	4,458	4,971
Gross Debt Service Outstanding	$ 6,958	$ 8,035

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Outstanding Exposure - Debt Service Outstanding (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Schedule of Insured Financial Obligations [Line Items]
Gross Debt Service Outstanding	$ 356,280	$ 375,080
Net Debt Service Outstanding	354,612	371,586
Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Gross Debt Service Outstanding	343,956	361,511
Net Debt Service Outstanding	342,801	358,438
Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Gross Debt Service Outstanding	12,324	13,569
Net Debt Service Outstanding	$ 11,811	$ 13,148

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Condensed Consolidated Balance Sheets (unaudited) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Investment portfolio:
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $8,811 and $9,884)	$ 9,277	$ 10,089
Short-term investments, at fair value	1,142	729
Other invested assets	57	55
Total investment portfolio	10,476	10,873
Cash	229	104
Premiums receivable, net of commissions payable	844	904
Deferred acquisition costs	107	105
Salvage and subrogation recoverable	725	490
Financial guaranty variable interest entities’ assets, at fair value	469	569
Other assets	517	558
Total assets	13,367	13,603
Liabilities and shareholders’ equity
Unearned premium reserve	3,334	3,512
Loss and loss adjustment expense reserve	1,007	1,177
Long-term debt	1,234	1,233
Credit derivative liabilities	214	209
Financial guaranty variable interest entities’ liabilities with recourse, at fair value	388	517
Financial guaranty variable interest entities’ liabilities without recourse, at fair value	105	102
Other liabilities	433	298
Total liabilities	6,715	7,048
Commitments and contingencies (see Note 12)
Common stock ($0.01 par value, 500,000,000 shares authorized; 96,495,143 and 103,672,592 shares issued and outstanding)	1	1
Additional paid-in capital	0	86
Retained earnings	6,331	6,374
Accumulated other comprehensive income, net of tax of $77 and $38	319	93
Deferred equity compensation	1	1
Total shareholders’ equity	6,652	6,555
Total liabilities and shareholders’ equity	$ 13,367	$ 13,603

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Outstanding Exposure Outstanding Exposure - Schedule of Non-Financial Guaranty Exposure (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Life Insurance Transaction [Member]
Schedule of Insured Financial Obligations [Line Items]
Gross Exposure	$ 1,014	$ 880
Net Exposure	872	763
Aircraft residual value insurance policies [Member]
Schedule of Insured Financial Obligations [Line Items]
Gross Exposure	376	340
Net Exposure	$ 243	$ 218

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Condensed Consolidated Statements of Comprehensive Income (unaudited) (Parenthetical) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Comprehensive Income [Abstract]
Investments with no other-than-temporary impairment, tax provision (benefit)	$ 7	$ (12)	$ 51	$ (43)
Investments with other-than-temporary impairment, tax provision (benefit)	$ (2)	$ (2)	$ (14)	$ (2)

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Leases

The Company is party to various non-cancelable lease agreements. The largest lease relates to approximately 103,500 square feet of office space in New York City, which expires in 2032. Subject to certain conditions, the Company has an option to renew this lease for an additional five years at a fair market rent. The Company also has leases for additional office and apartment space in several other locations which expire at various dates through 2029.

Effective January 1, 2019, the Company adopted Topic 842, which requires the establishment of a right-of-use (ROU) asset and a lease liability on the balance sheet for operating leases. All of the Company’s leases are classified as operating leases; however, the Company made an accounting policy election not to apply the recognition requirements of Topic 842 to short-term leases with an initial term of 12 months or less. At the inception of a lease the total payments under a lease agreement are discounted utilizing an incremental borrowing rate that represents the Company’s collateralized borrowing rate. The rate was determined based on the remaining lease term as of the date of adoption. The Company does not include its renewal options in calculating the lease liability.

Operating lease expense is recognized on a straight-line basis over the lease term. Actual costs incurred related to non-lease components (i.e., common area maintenance, real estate taxes, building insurance and other operating expenses) for all the Company’s office leases are recorded as a variable lease expense in the period incurred.

The Company elected the package of practical expedients, which permits organizations not to reassess (i) whether any expired or existing contracts are or contain leases, (ii) the lease classification of expired or existing leases and (iii) initial direct costs for existing leases. The Company also elected the practical expedient to account for all lease components and their associated non-lease components as a single lease component and has allocated all of the contract consideration across lease components.

Upon adoption, the Company recognized lease liabilities of approximately $95 million, recorded in other liabilities, and ROU assets of approximately $69 million, recorded in other assets, and derecognized existing deferred rent and lease incentive liabilities of approximately $26 million, resulting in no cumulative-effect adjustment to retained earnings.

As of September 30, 2019, the ROU assets were $65 million and the lease liabilities were $90 million.

Components of Lease Expense

	Third Quarter 2019		Nine Months 2019
	(in millions)
Lease cost (1)	$	3	$	7
Cash paid for amounts included in the measurement of lease liabilities	3		7

 ____________________

(1) Variable and short-term lease costs are de minimis.

As of September 30, 2019, operating leases had a weighted average remaining lease term of 12.0 years and were discounted at a weighted average rate of 3.0%.

Future Minimum Rental Payments

	As of September 30, 2019
Year	(in millions)
2019 (remaining three months)	$	2
2020	9
2021	8
2022	8
2023	9
Thereafter	72
Total lease payments (1)	108
Less: imputed interest	18
Total operating lease liabilities	$	90

 ____________________

(1) At December 31, 2018, future lease payments were $9 million, $9 million, $8 million, $8 million, and $9 million for 2019 through 2023, respectively, and $72 million in aggregate for all years thereafter.

Legal Proceedings

Lawsuits arise in the ordinary course of the Company’s business. It is the opinion of the Company’s management, based upon the information available, that the expected outcome of litigation against the Company, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position or liquidity, although an adverse resolution of litigation against the Company in a fiscal quarter or year could have a material adverse effect on the Company’s results of operations in a particular quarter or year.

In addition, in the ordinary course of their respective businesses, certain of AGL's subsidiaries are involved in litigation with third parties to recover losses paid in prior periods or prevent or reduce losses in the future. For example, the Company is involved in a number of legal actions in the Federal District Court for Puerto Rico to enforce or defend its rights with respect to the obligations it insures of Puerto Rico and various of its related authorities and public corporations. See "Exposure to Puerto Rico" section of Note 3, Outstanding Exposure, for a description of such actions. See "Recovery Litigation" section of Note 4, Expected Loss to be Paid, for a description of recovery litigation unrelated to Puerto Rico. The impact, if any, of these and other proceedings on the amount of recoveries the Company receives and losses it pays in the future is uncertain, and the impact of any one or more of these proceedings during any quarter or year could be material to the Company's results of operations in that particular quarter or year.

The Company also receives subpoenas duces tecum and interrogatories from regulators from time to time.

Litigation

On November 28, 2011, Lehman Brothers International (Europe) (in administration) (LBIE) sued AG Financial Products Inc. (AGFP), an affiliate of AGC which in the past had provided credit protection to counterparties under CDS. AGC acts as the credit support provider of AGFP under these CDS. LBIE’s complaint, which was filed in the Supreme Court of the State of New York, asserted a claim for breach of the implied covenant of good faith and fair dealing based on AGFP's termination of nine credit derivative transactions between LBIE and AGFP and asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing based on AGFP's termination of 28 other credit derivative transactions between LBIE and AGFP and AGFP's calculation of the termination payment in connection with those 28 other credit derivative transactions. Following defaults by LBIE, AGFP properly terminated the transactions in question in compliance with the agreement between AGFP and LBIE, and calculated the termination payment properly. AGFP calculated that LBIE owes AGFP approximately $4 million for the claims which were dismissed and approximately $25 million in connection with the termination of the other credit derivative transactions, whereas LBIE asserted in the complaint that AGFP owes LBIE a termination payment of approximately $1.4 billion. AGFP filed a motion to dismiss the claims for breach of the implied covenant of good faith in LBIE's complaint, and on March 15, 2013, the court granted AGFP's motion to dismiss in respect of the count relating to the nine credit derivative transactions and narrowed LBIE's claim with respect to the 28 other credit derivative transactions. LBIE's administrators disclosed in an April 10, 2015 report to LBIE’s unsecured creditors that LBIE's valuation expert has calculated LBIE's claim for damages in aggregate for the 28 transactions to range between a minimum of approximately $200 million and a maximum of approximately $500 million, depending on what adjustment, if any, is made for AGFP's credit risk and excluding any applicable interest. AGFP filed a motion for summary judgment on the remaining causes of action asserted by LBIE and on AGFP's counterclaims, and on July 2, 2018, the court granted in part and denied in part AGFP’s motion. The court dismissed, in its entirety, LBIE’s remaining claim for breach of the implied covenant of good faith and fair dealing and also dismissed LBIE’s claim for breach of contract solely to the extent that it is based upon AGFP’s conduct in connection with the auction. With respect to LBIE’s claim for breach of contract, the court held that there are triable issues of fact regarding whether AGFP calculated its loss reasonably and in good faith. On October 1, 2018, AGFP filed an appeal with the Appellate Division of the Supreme Court of the State of New York, First Judicial Department, seeking reversal of the portions of the lower court's ruling denying AGFP’s motion for summary judgment with respect to LBIE’s sole remaining claim for breach of contract. On January 17, 2019, the Appellate Division affirmed the Supreme Court's decision, holding that the lower court correctly determined that there are triable issues of fact regarding whether AGFP calculated its loss reasonably and in good faith. A trial has been scheduled to take place in March 2020.

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Business and Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). In management's opinion, all material adjustments necessary for a fair statement of the financial condition, results of operations and cash flows of the Company and its consolidated variable interest entities (VIEs) are reflected in the periods presented and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These unaudited interim condensed consolidated financial statements are as of September 30, 2019 and cover the three-month period ended September 30, 2019 (Third Quarter 2019), the three-month period ended September 30, 2018 (Third Quarter 2018), the nine-month period ended September 30, 2019 (Nine Months 2019) and the nine-month period ended September 30, 2018 (Nine Months 2018). Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but is not required for interim reporting purposes, has been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The presentation of cash flow amounts related to short-term investments was changed during the fourth quarter of 2018 to reflect cash flows on a gross, rather than a net, basis. The presentation of equity in net earnings of investees was changed in 2019 to reclassify amounts previously reported in net investment income and other income to a separate line item on the condensed consolidated statements of operations. Certain prior year balances have been reclassified to conform to the current year's presentation.

Consolidation

The unaudited interim condensed consolidated financial statements include the accounts of AGL, its direct and indirect subsidiaries and its consolidated VIEs. Intercompany accounts and transactions between and among all consolidated entities have been eliminated.

New Accounting Pronouncements Adopted and Future Application

Adopted Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The Company adopted Topic 842 on January 1, 2019 using the optional transition method that allows the Company to initially apply the new requirements at the effective date, with no revision to prior periods. See Note 12, Commitments and Contingencies, for additional information.

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Topic 310-20) - Premium Amortization on Purchased Callable Debt Securities.  This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date.  This ASU was adopted on January 1, 2019, with no effect on the Company's condensed consolidated financial statements.

Future Application of Accounting Standards

Credit Losses on Financial Instruments

                In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The ASU provides a new current expected credit loss model to account for credit losses on certain financial assets (e.g., reinsurance recoverables, premium receivables, and held-to-maturity debt securities) and off-balance sheet exposures (e.g., loan commitments). That model requires an entity to estimate lifetime credit losses related to certain financial assets, based on relevant historical information, adjusted for current conditions and reasonable and supportable forecasts that could affect the collectability of the reported amount. The ASU also makes targeted amendments to the current impairment model for available-for-sale debt securities, which includes requiring the recognition of an allowance rather than a direct write-down of the investment. The allowance may be reversed in the event that the credit of an issuer improves. In addition, the ASU eliminates the existing guidance for purchased credit impaired assets and introduces a new model for purchased financial assets with credit deterioration, such as the Company's loss mitigation securities, which requires the

recognition of an initial allowance for credit losses. Under the new guidance, the amortized cost would be the purchase price plus the allowance at the acquisition date.

                The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For reinsurance recoverables, premiums receivable and debt instruments such as loans and held to maturity securities, entities will be required to record a cumulative-effect adjustment to the statement of financial position as of the beginning of the first reporting period in which the guidance is adopted. The changes to the impairment model for available-for-sale securities and purchased financial assets with credit deterioration are to be applied prospectively. Early adoption of the amendments is permitted; however, the Company does not plan to adopt this ASU until January 1, 2020. The Company does not expect ASU 2016-13 to have a material effect on shareholders' equity at the date of adoption.

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.  The amendments in this ASU:

• improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows,

• simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts,

• simplify the amortization of deferred acquisition costs, and

• improve the effectiveness of the required disclosures.

This ASU does not affect the Company’s financial guaranty insurance contracts, but may affect its accounting for certain non-financial guaranty contracts. In October 2019, the FASB affirmed its decision to defer the effective date of the ASU to January 1, 2022. The Company does not plan to adopt this ASU early, and does not expect this ASU to have a material effect on its condensed consolidated financial statements.

Fair Value of Financial Instruments

The Company carries a 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 Nine Months 2019, 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 methods for calculating fair value produce a fair value that may not be indicative of net realizable value or reflective of future fair values. The use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a 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 as follows, with Level 1 being the highest and Level 3 the lowest. An asset's or liability’s categorization 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.

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Contracts Accounted for as Insurance (Tables)

9 Months Ended

Sep. 30, 2019

Insurance [Abstract]

Net Earned Premiums

Net Earned Premiums

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
Financial guaranty:
Scheduled net earned premiums	$	81	$	95	$	253	$	275
Accelerations from refundings and terminations	37		40		83		131
Accretion of discount on net premiums receivable	4		6		13		14
Financial guaranty insurance net earned premiums	122		141		349		420
Non-financial guaranty net earned premiums	1		1		4		3
Net earned premiums (1)	$	123	$	142	$	353	$	423

 ___________________

(1)

Excludes $2 million and $3 million for Third Quarter 2019 and 2018, respectively, and $16 million and $9 million for Nine Months 2019 and 2018, respectively, related to consolidated FG VIEs.

Gross Premium Receivable, Net of Commissions on Assumed Business Roll Forward

Expected Collections of

Financial Guaranty Insurance Gross Premiums Receivable,

Net of Commissions on Assumed Business

(Undiscounted)

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	29
2020	102
2021	77
2022	78
2023	65
2024-2028	275
2029-2033	182
2034-2038	97
After 2038	104
Total (1)	$	1,009

 ____________________

(1)

Excludes expected cash collections on consolidated FG VIEs of $9 million.

Gross Premium Receivable,

Net of Commissions on Assumed Business

Roll Forward 

	Nine Months
	2019			2018
	(in millions)
Beginning of year	$	904		$	915
Less: Non-financial guaranty insurance premium receivable	1			1
Financial guaranty insurance premiums receivable	903			914
Gross written premiums on new business, net of commissions (1)	164			508
Gross premiums received, net of commissions	(198		)	(477		)
Adjustments:
Changes in the expected term	(10		)	(2		)
Accretion of discount, net of commissions on assumed business	8			5
Foreign exchange translation and remeasurement (2)	(24		)	(23		)
Cancellation of assumed reinsurance	—			(10		)
Financial guaranty insurance premium receivable (3)	843			915
Non-financial guaranty insurance premium receivable	1			1
September 30,	$	844		$	916

____________________

(1) For transactions where one of the Company's financial guaranty contracts is replaced by another of the Company's insurance subsidiary's contracts, gross written premium in this table represents only the incremental amount in excess of the original gross written premiums. Nine Months 2018 included $330 million of gross written premiums assumed from SGI on June 1, 2018, when the Company closed a reinsurance transaction with SGI (SGI Transaction). See Note 11, Reinsurance.

(2) Includes foreign exchange loss on remeasurement recorded in the condensed consolidated statements of operations of $24 million in Nine Months 2019 and $21 million in Nine Months 2018. The remaining foreign exchange translation in Nine Months 2018 was recorded in other comprehensive income (OCI) prior to the combination of the European subsidiaries.

(3) Excludes $7 million and $9 million as of September 30, 2019 and September 30, 2018, respectively, related to consolidated FG VIEs.

Schedule of Net Earned Premiums

Scheduled Financial Guaranty Insurance Net Earned Premiums

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	79
2020	301
2021	275
2022	252
2023	231
2024-2028	908
2029-2033	620
2034-2038	356
After 2038	319
Net deferred premium revenue (1)	3,341
Future accretion	165
Total future net earned premiums	$	3,506

 ____________________

(1) Excludes net earned premiums on consolidated FG VIEs of $48 million.

Selected Information for Policies Paid in Installments

Selected Information for Financial Guaranty Insurance

Policies with Premiums Paid in Installments

	As of September 30, 2019			As of December 31, 2018
	(dollars in millions)
Premiums receivable, net of commission payable	$	843		$	903
Gross deferred premium revenue	1,237			1,313
Weighted-average risk-free rate used to discount premiums	2.2		%	2.3		%
Weighted-average period of premiums receivable (in years)	9.1			9.1

Loss and LAE Reserve and Salvage and Subrogation Recoverable Net of Reinsurance Insurance Contracts

Net Reserve (Salvage) 

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Public finance:
U.S. public finance	$	326		$	612
Non-U.S. public finance	5			14
Public finance	331			626
Structured finance:
U.S. RMBS (1)	(97		)	21
Other structured finance	38			30
Structured finance	(59		)	51
Subtotal	272			677
Other payable (recoverable)	—			(3		)
Total	$	272		$	674

____________________

(1) Excludes net reserves of $36 million and $47 million as of September 30, 2019 and December 31, 2018, respectively, related to consolidated FG VIEs.

Components of Net Reserves (Salvage) Insurance Contracts

Components of Net Reserves (Salvage)

 

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Loss and LAE reserve	$	1,007		$	1,177
Reinsurance recoverable on unpaid losses (1)	(36		)	(34		)
Loss and LAE reserve, net	971			1,143
Salvage and subrogation recoverable	(725		)	(490		)
Salvage and subrogation reinsurance payable (2)	26			24
Other payable (recoverable) (1)	—			(3		)
Salvage and subrogation recoverable, net, and other recoverable	(699		)	(469		)
Net reserves (salvage)	$	272		$	674

____________________

(1) Recorded as a component of other assets in the condensed consolidated balance sheets.

(2)

Recorded as a component of other liabilities in the condensed consolidated balance sheets.

Reconciliation of Net Expected Loss to be Paid and Net Expected Loss to be Expensed Financial Guaranty Insurance Contracts

Reconciliation of Net Expected Loss to be Paid and

Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts

	As of September 30, 2019
	(in millions)
Net expected loss to be paid - financial guaranty insurance	$	661
Contra-paid, net	58
Salvage and subrogation recoverable, net, and other recoverable	699
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(970		)
Net expected loss to be expensed (present value) (1)	$	448

____________________

(1)    Excludes $34 million as of September 30, 2019, related to consolidated FG VIEs.

Net Expected Loss to be Expensed Insurance Contracts

Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts 

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	9
2020	37
2021	36
2022	35
2023	31
2024-2028	147
2029-2033	99
2034-2038	45
After 2038	9
Net expected loss to be expensed	448
Future accretion	30
Total expected future loss and LAE	$	478

 

Loss and LAE Reported on the Consolidated Statements of Operations

Loss and LAE

Reported on the

Condensed Consolidated Statements of Operations

  

	Loss (Benefit)
	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Public finance:
U.S. public finance	$	64		$	42		$	228		$	76
Non-U.S. public finance	1			(3		)	(7		)	(5		)
Public finance	65			39			221			71
Structured finance:
U.S. RMBS (1)	(35		)	(21		)	(150		)	(17		)
Other structured finance	—			(1		)	4			(11		)
Structured finance	(35		)	(22		)	(146		)	(28		)
Loss and LAE	$	30		$	17		$	75		$	43

____________________

(1)

Excludes a benefit of $3 million and $3 million for Third Quarter 2019 and 2018, respectively, and a benefit of $18 million and a loss of $0 million for Nine Months 2019 and 2018 respectively, related to consolidated FG VIEs.

BIG Net Par Outstanding and Number of Risks

The following tables provide information on financial guaranty insurance contracts categorized as BIG.

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of September 30, 2019

	BIG  Categories
	BIG 1						BIG 2					BIG 3						Total BIG, Net			Effect of Consolidating FG VIEs			Total
	Gross			Ceded			Gross			Ceded		Gross			Ceded
	(dollars in millions)
Number of risks (1)	119			(6		)	26			—		134			(7		)	279			—			279
Remaining weighted-average contract period (in years)	8.2			5.4			17.1			—		9.9			8.5			9.9			—			9.9
Outstanding exposure:
Principal	$	2,596		$	(53	)	$	547		$	—	$	5,463		$	(170	)	$	8,383		$	—		$	8,383
Interest	1,192			(16		)	478			—		2,638			(72		)	4,220			—			4,220
Total (2)	$	3,788		$	(69	)	$	1,025		$	—	$	8,101		$	(242	)	$	12,603		$	—		$	12,603
Expected cash outflows (inflows)	$	110		$	(3	)	$	124		$	—	$	3,550		$	(118	)	$	3,663		$	(267	)	$	3,396
Potential recoveries (3)	(567		)	21			(51		)	—		(2,393		)	95			(2,895		)	190			(2,705		)
Subtotal	(457		)	18			73			—		1,157			(23		)	768			(77		)	691
Discount	69			(4		)	(13		)	—		(92		)	(6		)	(46		)	16			(30		)
Present value of expected cash flows	$	(388	)	$	14		$	60		$	—	$	1,065		$	(29	)	$	722		$	(61	)	$	661
Deferred premium revenue	$	147		$	(1	)	$	25		$	—	$	505		$	(5	)	$	671		$	(49	)	$	622
Reserves (salvage)	$	(418	)	$	15		$	41		$	—	$	694		$	(25	)	$	307		$	(36	)	$	271

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of December 31, 2018

	BIG Categories
	BIG 1						BIG 2						BIG 3						Total BIG, Net			Effect of Consolidating FG VIEs			Total
	Gross			Ceded			Gross			Ceded			Gross			Ceded
	(dollars in millions)
Number of risks (1)	128			(8		)	39			(1		)	145			(7		)	312			—			312
Remaining weighted-average contract period (in years)	7.9			6.5			13.2			2.1			10.1			9.1			9.8			—			9.8
Outstanding exposure:
Principal	$	3,052		$	(71	)	$	938		$	(6	)	$	6,249		$	(159	)	$	10,003		$	—		$	10,003
Interest	1,319			(29		)	592			(1		)	3,140			(72		)	4,949			—			4,949
Total (2)	$	4,371		$	(100	)	$	1,530		$	(7	)	$	9,389		$	(231	)	$	14,952		$	—		$	14,952
Expected cash outflows (inflows)	$	98		$	(5	)	$	264		$	(1	)	$	4,029		$	(80	)	$	4,305		$	(290	)	$	4,015
Potential recoveries (3)	(465		)	23			(81		)	—			(2,542		)	55			(3,010		)	192			(2,818		)
Subtotal	(367		)	18			183			(1		)	1,487			(25		)	1,295			(98		)	1,197
Discount	83			(5		)	(53		)	—			(134		)	(2		)	(111		)	23			(88		)
Present value of expected cash flows	$	(284	)	$	13		$	130		$	(1	)	$	1,353		$	(27	)	$	1,184		$	(75	)	$	1,109
Deferred premium revenue	$	125		$	(4	)	$	151		$	—		$	518		$	(2	)	$	788		$	(64	)	$	724
Reserves (salvage)	$	(311	)	$	15		$	48		$	(1	)	$	993		$	(24	)	$	720		$	(47	)	$	673

____________________

(1) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. The ceded number of risks represents the number of risks for which the Company ceded a portion of its exposure.

(2) Includes amounts related to FG VIEs.

(3) Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlement or litigation judgments, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past.

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Contracts Accounted for as Insurance - Loss and LAE Reserve and Salvage and Subrogation Recoverable Net of Reinsurance (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	$ 272	$ 674
Variable Interest Entity, Primary Beneficiary [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	36	47
Public Finance [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	331	626
Other structured finance [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	38	30
Structured Finance [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	(59)	51
Financial Guarantee [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	272	677
Other [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	0	(3)
United States [Member] | Public Finance [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	326	612
United States [Member] | RMBS [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	(97)	21
Non United States [Member] | Public Finance [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Net Reserve (Recoverable)	$ 5	$ 14

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Variable Interest Entities - Effect of Consolidating FG VIE's on Financial Information (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Variable Interest Entity [Line Items]
Net earned premiums	$ 123	$ 142	$ 353	$ 423
Net investment income	88	99	296	297
Fair value gains (losses) on FG VIEs	4	5	42	11
Loss and LAE	(30)	(17)	(75)	(43)
Income (loss) before income taxes and equity in net earnings of investees	86	176	323	479
Less: Tax provision (benefit)	17	14	61	46
Net income (loss) attributable to Assured Guaranty Ltd.	69	161	265	433
Effect on OCI	24	(74)	226	(262)
Net cash flows provided by (used in) operating activities			(365)	352
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Net earned premiums	(2)	(3)	(16)	(9)
Net investment income	(1)	(1)	(3)	(3)
Fair value gains (losses) on FG VIEs	4	5	42	11
Loss and LAE	(3)	(3)	(18)	0
Income (loss) before income taxes and equity in net earnings of investees	(2)	(2)	5	(1)
Less: Tax provision (benefit)	0	0	1	0
Net income (loss) attributable to Assured Guaranty Ltd.	(2)	(2)	4	(1)
Effect on OCI	1	(2)	(1)	0
Net cash flows provided by (used in) operating activities	$ 1	$ 1	$ 0	$ 7

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Reinsurance - Effect of Reinsurance on Statement of Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Premiums Written:
Direct	$ 67	$ 57	$ 156	$ 192
Assumed (1)	2	(7)	3	324
Ceded	(1)	1	12	14
Net	68	51	171	530
Premiums Earned:
Direct	113	127	317	400
Assumed	12	19	42	33
Ceded	(2)	(4)	(6)	(10)
Net	123	142	353	423
Loss and LAE:
Direct	28	18	82	53
Assumed	2	1	4	(7)
Ceded	0	(2)	(11)	(3)
Net	$ 30	$ 17	$ 75	$ 43

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Contracts Accounted for as Insurance - Loss and LAE Reported on the Statements of Operations (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Loss and LAE	$ 30	$ 17	$ 75	$ 43
Variable Interest Entity, Primary Beneficiary [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Loss and LAE	3	3	18	0
Public Finance [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Loss and LAE	65	39	221	71
Public Finance [Member] | Financial Guarantee Insurance And Other Product Line [Member] | United States [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Loss and LAE	64	42	228	76
Public Finance [Member] | Financial Guarantee Insurance And Other Product Line [Member] | Non United States [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Loss and LAE	1	(3)	(7)	(5)
RMBS [Member] | Financial Guarantee Insurance And Other Product Line [Member] | United States [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Loss and LAE	(35)	(21)	(150)	(17)
Other structured finance [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Loss and LAE	0	(1)	4	(11)
Structured Finance [Member] | Financial Guarantee Insurance And Other Product Line [Member]
Liability for Claims and Claims Adjustment Expense Including Salvage and Subrogation Recoverable [Line Items]
Loss and LAE	$ (35)	$ (22)	$ (146)	$ (28)

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Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Fixed maturity securities, available-for-sale, at fair value	$ 8,811	$ 9,884
Common stock par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	500,000,000	500,000,000
Common stock, shares issued (in shares)	96,495,143	103,672,592
Common stock, shares outstanding (in shares)	96,495,143	103,672,592
Accumulated other comprehensive income, tax provision	$ 77	$ 38

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Outstanding Exposure - Narrative (Details) - USD ($) $ in Millions				9 Months Ended
	Jun. 05, 2019	May 09, 2019	Feb. 12, 2019	Sep. 30, 2019	Sep. 27, 2019	Jun. 27, 2019	Jun. 16, 2019	Feb. 19, 2019	Jan. 14, 2019	Dec. 31, 2018
Schedule of Insured Financial Obligations [Line Items]
Second-to-pay insured par outstanding				$ 6,400						$ 6,700
Loss mitigation securities				1,500						1,900
Total net exposure				229,375						241,802
Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				9,978						11,137
Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				219,397						230,665
Aircraft residual value insurance (RVI) [Member]
Schedule of Insured Financial Obligations [Line Items]
Net Exposure				$ 243						218
BIG [Member]
Schedule of Insured Financial Obligations [Line Items]
Maximum period of liquidity claims (in years)				1 year
Total net exposure				$ 8,515						10,160
BIG [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				1,892						2,731
BIG [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				6,623						7,429
AAA [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				4,337						4,618
United States [Member] | RMBS [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				3,687						4,270
United States [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				9,226						9,944
United States [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				176,515						186,562
United States [Member] | BIG [Member] | RMBS [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				1,666						2,387
United States [Member] | BIG [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				1,851						2,632
United States [Member] | BIG [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				5,760						6,388
United States [Member] | AAA [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				1,345						1,533
United States [Member] | AAA [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				384						413
Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				4,270						4,767
Puerto Rico [Member] | COFINA Exchange Senior Bonds [Member]
Schedule of Insured Financial Obligations [Line Items]
Plan of Adjustment, closed lien senior bonds received, initial par value			$ 152
Plan of adjustment closed lien senior bonds received, fair value			$ 139
Puerto Rico [Member] | BIG [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				4,300
U.S. Virgin Islands [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				494
U.S. Virgin Islands [Member] | BIG [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				220
U.S. Virgin Islands [Member] | Internal Investment Grade [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				274
Commitment to Provide Guarantees [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Outstanding commitments to provide guaranties				500
Commitment to Provide Guarantees [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Outstanding commitments to provide guaranties				$ 983
Minimum [Member]
Schedule of Insured Financial Obligations [Line Items]
Probability of paying more claims than being reimbursed (as a percent)				50.00%
Maximum [Member] | Capital relieve triple-X life insurance [Member]
Schedule of Insured Financial Obligations [Line Items]
Net Exposure				$ 1,000
Commonwealth of Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Certified fiscal plan, commonwealth debt service, period		6 years
PRHTA (Highway revenue) [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Obligations secured by taxes on crude oil, unfinished oil and derivative products				120
PRHTA [Member]
Schedule of Insured Financial Obligations [Line Items]
Certified fiscal plan, commonwealth debt service, period	6 years
Constitutionally Guaranteed [Member] | Commonwealth of Puerto Rico [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				1,253						1,340
Fiscal plan, commonwealth general obligation bonds, litigation amount					$ 35,000		$ 35,000
Vintage GO bondholders, expected receivable of outstanding claims, percent							64.30%
Vintage GO bondholders, additional expected receivable of outstanding claims, percent							25.10%
Expected receivable of outstanding claims, additional amount from Commonwealth if it outperforms fiscal plan, percent							16.80%
Fiscal plan, commonwealth surplus available for debt service		$ 13,700
General Obligation Plan Support Agreement, Outstanding Principal Amount, Net							$ 3,000
Constitutionally Guaranteed [Member] | Commonwealth of Puerto Rico [Member] | General Obligations Bonds Issues On or After March 2012 [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Fiscal plan, commonwealth general obligation bonds, litigation amount									$ 6,000
Fiscal plan, commonwealth surplus available for debt service				369
Constitutionally Guaranteed [Member] | Commonwealth of Puerto Rico [Member] | General Obligations Bonds Issued in or after 2011 [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Fiscal plan, commonwealth surplus available for debt service				215
Constitutionally Guaranteed [Member] | Commonwealth of Puerto Rico [Member] | Maximum [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Vintage GO bondholders, additional expected receivable of outstanding claims, percent							89.40%
Constitutionally Guaranteed [Member] | COFINA (Puerto Rico Sales Tax Financing Corporation) [Member] | Puerto Rico [Member] | Subordinated Bonds [Member]
Schedule of Insured Financial Obligations [Line Items]
Expected repayments of debt, percent			60.00%
Constitutionally Guaranteed [Member] | Puerto Rico Public Buildings Authority [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				140						142
Vintage GO bondholders, expected receivable of outstanding claims, percent							72.60%
Constitutionally Guaranteed [Member] | Puerto Rico Public Buildings Authority [Member] | Maximum [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Vintage GO bondholders, additional expected receivable of outstanding claims, percent							89.40%
Other Public Corporations [Member] | PRASA (Puerto Rico Aqueduct and Sewer Authority) [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				$ 373						373
Minimum period in forbearance				3 years
Debt instrument, term				40 years
Non-interest accrual period				10 years
Other Public Corporations [Member] | MFA [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				$ 248						303
Other Public Corporations [Member] | COFINA (Puerto Rico Sales Tax Financing Corporation) [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				0
Other Public Corporations [Member] | COFINA (Puerto Rico Sales Tax Financing Corporation) [Member] | Puerto Rico [Member] | Closed Lien Senior Bonds [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure								$ 273
Other Public Corporations [Member] | PREPA [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure				822						848
Fiscal plan, commonwealth contractual debt service restructuring, minimum bondholder support threshold, percent						67.00%
Pension Obligations [Member] | Commonwealth of Puerto Rico [Member] | Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Fiscal plan, commonwealth general obligation bonds, litigation amount					$ 50,000
External Credit Rating, Non Investment Grade [Member] | Below Investment Grade, Rating Withdrawn Or Not Rated Reinsurer [Member]
Schedule of Insured Financial Obligations [Line Items]
Second-to-pay insured par outstanding				$ 106						$ 111

XML

Condensed Consolidated Statement of Shareholders' Equity (unaudited) - USD ($) $ in Millions	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income [Member]	Deferred Equity Compensation [Member]
Increase (Decrease) in Shareholders' Equity
Effect of adoption of ASU	$ (32)
Beginning balance (in shares) at Dec. 31, 2017		116,020,852
Beginning balance at Dec. 31, 2017	6,839	$ 1	$ 573	$ 5,892	$ 372	$ 1
Increase (Decrease) in Shareholders' Equity
Net income	433			433
Dividends (in dollars per share)	(54)			(54)
Share-based compensation and other (in shares)		867,024
Share-based compensation and other	7		7
Common stock repurchases (in shares)		(10,250,175)
Common stock repurchases	(380)		(380)
Effect on OCI	(262)				(262)
Ending balance (in shares) at Sep. 30, 2018		106,637,701
Ending balance at Sep. 30, 2018	6,583	$ 1	200	6,303	78	1
Beginning balance (in shares) at Jun. 30, 2018		109,614,214
Beginning balance at Jun. 30, 2018	6,634	$ 1	321	6,159	152	1
Increase (Decrease) in Shareholders' Equity
Net income	161			161
Dividends (in dollars per share)	(17)			(17)
Share-based compensation and other (in shares)		322,536
Share-based compensation and other	9		9
Common stock repurchases (in shares)		(3,299,049)
Common stock repurchases	(130)		(130)
Effect on OCI	(74)				(74)
Ending balance (in shares) at Sep. 30, 2018		106,637,701
Ending balance at Sep. 30, 2018	6,583	$ 1	200	6,303	78	1
Beginning balance (in shares) at Dec. 31, 2018		103,672,592
Beginning balance at Dec. 31, 2018	6,555	$ 1	86	6,374	93	1
Increase (Decrease) in Shareholders' Equity
Net income	265			265
Dividends (in dollars per share)	(56)			(56)
Share-based compensation and other (in shares)		650,963
Share-based compensation and other	2		2
Common stock repurchases (in shares)		(7,828,412)
Common stock repurchases	(340)		(88)	(252)
Effect on OCI	226				226
Ending balance (in shares) at Sep. 30, 2019		96,495,143
Ending balance at Sep. 30, 2019	6,652	$ 1	0	6,331	319	1
Beginning balance (in shares) at Jun. 30, 2019		99,801,012
Beginning balance at Jun. 30, 2019	6,722	$ 1	0	6,425	295	1
Increase (Decrease) in Shareholders' Equity
Net income	69			69
Dividends (in dollars per share)	(18)			(18)
Share-based compensation and other (in shares)		94,808
Share-based compensation and other	5		5
Common stock repurchases (in shares)		(3,400,677)
Common stock repurchases	(150)		(5)	(145)
Effect on OCI	24				24
Ending balance (in shares) at Sep. 30, 2019		96,495,143
Ending balance at Sep. 30, 2019	$ 6,652	$ 1	$ 0	$ 6,331	$ 319	$ 1

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Outstanding Exposure - BIG Net Par Outstanding (Details) $ in Millions	Sep. 30, 2019 USD ($) risk	Dec. 31, 2018 USD ($) risk
Schedule of Insured Financial Obligations [Line Items]
Net Par Outstanding, Credit Derivative	$ 6,165	$ 6,182
Total	229,375	241,802
BIG [Member]
Schedule of Insured Financial Obligations [Line Items]
Net Par Outstanding, Financial Guaranty Insurance	8,383	10,003
Net Par Outstanding, Credit Derivative	132	157
Total	$ 8,515	$ 10,160
Number of Risks, Financial Guaranty Insurance | risk	279	312
Number of Risks, Credit Derivative | risk	14	15
Number of Risks | risk	293	327
BIG [Member] | BIG 1 [Member]
Schedule of Insured Financial Obligations [Line Items]
Net Par Outstanding, Financial Guaranty Insurance	$ 2,543	$ 2,981
Net Par Outstanding, Credit Derivative	69	77
Total	$ 2,612	$ 3,058
Number of Risks, Financial Guaranty Insurance | risk	119	128
Number of Risks, Credit Derivative | risk	6	6
Number of Risks | risk	125	134
BIG [Member] | BIG 2 [Member]
Schedule of Insured Financial Obligations [Line Items]
Net Par Outstanding, Financial Guaranty Insurance	$ 547	$ 932
Net Par Outstanding, Credit Derivative	4	5
Total	$ 551	$ 937
Number of Risks, Financial Guaranty Insurance | risk	26	39
Number of Risks, Credit Derivative | risk	1	1
Number of Risks | risk	27	40
BIG [Member] | BIG 3 [Member]
Schedule of Insured Financial Obligations [Line Items]
Net Par Outstanding, Financial Guaranty Insurance	$ 5,293	$ 6,090
Net Par Outstanding, Credit Derivative	59	75
Total	$ 5,352	$ 6,165
Number of Risks, Financial Guaranty Insurance | risk	134	145
Number of Risks, Credit Derivative | risk	7	8
Number of Risks | risk	141	153

XML

Business and Basis of Presentation Business and Basis of Presentation (Details)	Oct. 01, 2019 USD ($)	Sep. 30, 2019 Company
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of holding companies having outstanding public debt | Company		2
Forecast [Member] | BlueMountain Acquisition [Member]
Business Acquisition [Line Items]
Other payments to acquire businesses	$ 30,000,000
Subsequent Event [Member] | BlueMountain Acquisition [Member]
Business Acquisition [Line Items]
Purchase price	160,000,000
Financial assets recognized	18,300,000,000
Other payments to acquire businesses	$ 60,000,000
Subsequent Event [Member] | BlueMountain Acquisition [Member] | AGM, AGC and MAC [Member]
Business Acquisition [Line Items]
Interest rate, stated percentage	3.50%
Debt instrument, face amount	$ 250,000,000
Debt instrument, term	10 years

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Investments and Cash - Net Investment Income (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Net Investment Income
Gross investment income	$ 90	$ 101	$ 302	$ 304
Investment expenses	(2)	(2)	(6)	(7)
Net investment income	88	99	296	297
Fixed Maturities, Managed Externally [Member]
Net Investment Income
Gross investment income	66	75	207	224
Investments, Managed Internally [Member]
Net Investment Income
Gross investment income	$ 24	$ 26	$ 95	$ 80

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Contracts Accounted for as Credit Derivatives - Net Change in Fair Value of Credit Derivatives Gains (Losses) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Realized gains on credit derivatives	$ 2	$ 2	$ 6	$ 6
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements	(5)	(1)	(30)	(2)
Realized gains (losses) and other settlements	(3)	1	(24)	4
Net change in unrealized gains (losses) on credit derivatives	8	20	(1)	99
Net change in fair value of credit derivatives	$ 5	$ 21	$ (25)	$ 103

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Investments and Cash - Distribution of Fixed-Maturity Securities by Contractual Maturity (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Amortized Cost
Amortized Cost	$ 9,953	$ 10,613
Estimated Fair Value
Estimated Fair Value	10,419	10,818
Fixed Maturities [Member]
Amortized Cost
Due within one year	274
Due after one year through five years	1,617
Due after five years through 10 years	2,133
Due after 10 years	3,493
Amortized Cost	8,811	9,884
Estimated Fair Value
Due within one year	275
Due after one year through five years	1,635
Due after five years through 10 years	2,242
Due after 10 years	3,779
Estimated Fair Value	9,277	10,089
Fixed Maturities [Member] | RMBS [Member]
Amortized Cost
Amortized Cost	846	999
Estimated Fair Value
Estimated Fair Value	877	982
Fixed Maturities [Member] | CMBS [Member]
Amortized Cost
Amortized Cost	448	542
Estimated Fair Value
Estimated Fair Value	$ 469	$ 539

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Fair Value Measurement - Quantitative Information - Assets (Details) - Valuation, Income Approach [Member] - Level 3 [Member] - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Obligations of state and political subdivisions [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 109	$ 99
Obligations of state and political subdivisions [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	4.50%	4.50%
Obligations of state and political subdivisions [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	32.30%	32.70%
Obligations of state and political subdivisions [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	8.40%	12.00%
Corporate securities [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 46	$ 56
Yield (as a percent)	35.80%	29.50%
RMBS [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 316	$ 309
RMBS [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	3.50%	5.30%
RMBS [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	6.10%	8.10%
RMBS [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	4.20%	6.30%
Life Insurance Transaction [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 339	$ 620
Yield (as a percent)	5.50%
Life Insurance Transaction [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)		6.50%
Life Insurance Transaction [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)		7.10%
Life Insurance Transaction [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)		6.80%
Collateralized loan obligations (CLO) /TruPS [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 274	$ 274
Collateralized loan obligations (CLO) /TruPS [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	2.50%	3.80%
Collateralized loan obligations (CLO) /TruPS [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	5.10%	4.70%
Collateralized loan obligations (CLO) /TruPS [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	3.60%	4.30%
Other Asset Backed Securities [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 51	$ 53
Yield (as a percent)	9.90%	11.50%
FG VIEs and other [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 469	$ 569
FG VIEs and other [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	3.30%	5.00%
FG VIEs and other [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	8.30%	10.20%
FG VIEs and other [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	5.00%	7.10%
Other Assets [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 70	$ 74
Fair Value Inputs Term	10 years	10 years
Other Assets [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	5.80%	6.60%
Other Assets [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	6.50%	7.20%
Other Assets [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Yield (as a percent)	6.20%	6.90%
Other invested assets [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Asset, fair value	$ 6	$ 7
Measurement Input, Prepayment Rate [Member] | RMBS [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	1.40%	3.40%
Measurement Input, Prepayment Rate [Member] | RMBS [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	16.90%	19.40%
Measurement Input, Prepayment Rate [Member] | RMBS [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	6.00%	6.20%
Measurement Input, Prepayment Rate [Member] | FG VIEs and other [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	0.70%	0.90%
Measurement Input, Prepayment Rate [Member] | FG VIEs and other [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	18.40%	18.10%
Measurement Input, Prepayment Rate [Member] | FG VIEs and other [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	8.80%	9.30%
Measurement Input, Default Rate [Member] | RMBS [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	1.50%	1.50%
Measurement Input, Default Rate [Member] | RMBS [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	6.90%	6.90%
Measurement Input, Default Rate [Member] | RMBS [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	4.90%	5.20%
Measurement Input, Default Rate [Member] | FG VIEs and other [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	1.20%	1.30%
Measurement Input, Default Rate [Member] | FG VIEs and other [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	25.70%	23.70%
Measurement Input, Default Rate [Member] | FG VIEs and other [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	4.70%	5.10%
Measurement Input, Loss Severity [Member] | RMBS [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	40.00%	40.00%
Measurement Input, Loss Severity [Member] | RMBS [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	125.00%	125.00%
Measurement Input, Loss Severity [Member] | RMBS [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	85.70%	82.70%
Measurement Input, Loss Severity [Member] | FG VIEs and other [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	60.00%	60.00%
Measurement Input, Loss Severity [Member] | FG VIEs and other [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	100.00%	100.00%
Measurement Input, Loss Severity [Member] | FG VIEs and other [Member] | Weighted Average [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed	77.60%	79.80%

XML

Expected Loss to be Paid - Narrative Net Expected Recoveries from Breaches of R&W (Details) - RMBS [Member] - United States [Member] - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Schedule of Expected Losses to be Paid [Line Items]
Future net R&W benefit	$ 60	$ 5
Second Lien [Member]
Schedule of Expected Losses to be Paid [Line Items]
Period from plateau to intermediate conditional default rate (in months)	28 months
Second Lien [Member] | Most Stressful [Member]
Schedule of Expected Losses to be Paid [Line Items]
Period from plateau to intermediate conditional default rate (in months)	31 months

XML

Expected Loss to be Paid - Narrative (Details) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) Curve Payment scenario	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) scenario	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)	Nov. 26, 2012 USD ($)
Schedule of Expected Losses to be Paid [Line Items]
Period of insured credit performance of guaranteed obligations (in some cases over)			30 years
Discount factor (as a percent)			1.79%		2.74%
Total net exposure	$ 229,375		$ 229,375		$ 241,802
Net expected loss to be paid after recoveries for R&W	718	$ 1,191	718	$ 1,191	$ 1,183	$ 960	$ 1,432	$ 1,303
Economic loss development after recoveries for R&W	$ (25)	0	$ 14	5
Additional loss recovery assumption	20.00%		20.00%		10.00%
Additional loss recovery assumption, recovery period			5 years
Loss Recovery Assumption, Additional Increase in Recovery Projection, Percent	30.00%		30.00%
Loss Recovery Assumption, Additional Increase in Recovery Projection, Economic Benefit	$ 61		$ 61
Loss Recovery Assumption, Additional Decrease in Recovery Projection, Percent	10.00%		10.00%
Loss Recovery Assumption, Additional Decrease in Recovery Projection, Economic Loss	$ 61		$ 61
Minimum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Risk free discount rate			0.00%		0.00%
Maximum [Member]
Schedule of Expected Losses to be Paid [Line Items]
Risk free discount rate			2.20%		3.06%
Puerto Rico [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	4,270		$ 4,270		$ 4,767
Non United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for representations and warranties, percent			4.00%		2.70%
RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	3,687		$ 3,687		$ 4,270
Net expected loss to be paid after recoveries for R&W	135	303	135	303	293	162	326	73
Economic loss development after recoveries for R&W	40	40	223	52
Future net R&W benefit	$ 60		$ 60		5
RMBS [Member] | United States [Member] | Minimum [Member] | HELOCs [Member]
Schedule of Expected Losses to be Paid [Line Items]
Final CPR	2.50%		2.50%
HELOCs [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial period for which borrower can pay only interest payments			10 years
Extended period for which borrow can pay only interest payments			5 years
Other structured finance [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	$ 5,068		$ 5,068		5,683
Net expected loss to be paid after recoveries for R&W	35	18	35	18	26	26	24	27
Economic loss development after recoveries for R&W	(10)	(1)	(9)	3
Public Finance [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	219,397		219,397		230,665
Net expected loss to be paid after recoveries for R&W	548	870	548	870	864	772	1,082	1,203
Economic loss development after recoveries for R&W	(55)	(39)	(200)	(50)
Public Finance [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	176,515		176,515		186,562
Net expected loss to be paid after recoveries for R&W	520	832	520	832	832	$ 749	$ 1,041	$ 1,157
Net expected credit for estimated future recoveries of claims paid	842		842		586
Economic loss development after recoveries for R&W	(50)	(42)	(204)	(59)
Public Finance [Member] | Non United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	42,882		42,882		44,103
Net expected loss to be paid after recoveries for R&W	28		28		32
Economic loss development after recoveries for R&W			4
Public Finance Stockton Pension Oblgiation Bonds [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	107		107
BIG [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	8,515		8,515		10,160
BIG [Member] | Puerto Rico [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	4,300		4,300
BIG [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	1,666		1,666		2,387
BIG [Member] | Other structured finance [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	186		186		259
BIG [Member] | Life Insurance Transaction [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	40		40
BIG [Member] | Student Loan [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	87		87
BIG [Member] | Public Finance [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	6,623		6,623		7,429
BIG [Member] | Public Finance [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	5,760		5,760		6,388
BIG [Member] | Public Finance [Member] | Non United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure	863		863		1,041
First Lien [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	164		164		$ 243
Economic loss development after recoveries for R&W	$ (27)	(13)	$ (77)	4
Number of delinquent payments | Payment			2
Projected loss assumptions, CDR, plateau rate, projection period			36 months
Projected loss assumptions, Final CPR, Period for voluntary prepayments to continue			12 months
Intermediate conditional default rate (as a percent)	5.00%		5.00%
Number of scenarios weighted in estimating expected losses | scenario			5		5
First Lien [Member] | Base Scenario [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Projected loss assumptions, CDR, plateau rate, projection period			36 months
Performing or projected to reperform, projection period			36 months
Period from plateau to intermediate conditional default rate (in months)			12 months
Period of constant intermediate conditional default rate (in months)			36 months
Intermediate conditional default rate as a percentage of plateau conditional default rate			20.00%
Final conditional default rate as a percentage of plateau conditional default rate			5.00%
Projected loss assumptions, Final CPR, Period for voluntary prepayments to continue			3 years 9 months
Default from delinquentor rate, term			36 months
Projected loss assumptions, loss severity, subsequent period			18 months
Estimated loss severity rate, one through six months (as a percent)			18 months
Loss severity (as a percent)	40.00%		40.00%
Projected loss assumptions, period to reach final loss severity rate			2 years 6 months
Final CPR	15.00%		15.00%		15.00%	15.00%
First Lien [Member] | More Stressful Environment [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Period from plateau to intermediate conditional default rate (in months)			15 months
Projected loss assumptions, period to reach final loss severity rate			9 years
Projected loss assumptions, increase (decrease) in expected loss to be paid, net			$ 49
First Lien [Member] | Least Stressful Environment [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Projected loss assumptions, CDR, plateau rate, projection period			30 months
Period from plateau to intermediate conditional default rate (in months)			9 months
Projected loss assumptions, increase (decrease) in expected loss to be paid, net			$ 44
Decrease in the plateau period used to calculate potential change in loss estimate (in months)			6 months
Second Lien [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	$ 29		$ 29		$ 50
Economic loss development after recoveries for R&W	$ (13)	(27)	$ (146)	(56)
Period from plateau to intermediate conditional default rate (in months)			28 months
Number of scenarios weighted in estimating expected losses | scenario					5
Period of loan default estimate			6 months
Number of preceding months average liquidation rates used to estimate loan default rate			6 months
Projected loss assumptions, period of consistent conditional default rate			6 months
Stress period (in months)			34 months
Loss recovery assumption (as a percent)	2.00%		2.00%		2.00%
Number of conditional default rate curves modeled in estimating losses | Curve			5
Monthly delinquency threshold			6 months
Second Lien [Member] | RMBS [Member] | United States [Member] | Home Equity Line of Credit and Closed-end Mortgage [Member]
Schedule of Expected Losses to be Paid [Line Items]
Final CPR	15.00%		15.00%		15.00%	15.00%
Second Lien [Member] | Base Scenario [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Stress period (in months)			34 months
Second Lien [Member] | Most Stressful [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Projected loss assumptions, CDR, plateau rate, projection period			8 months
Period from plateau to intermediate conditional default rate (in months)			31 months
Stress period (in months)			39 months
Increase in conditional default rate ramp down period			3 months
Second Lien [Member] | Most Stressful [Member] | RMBS [Member] | United States [Member] | HELOCs [Member]
Schedule of Expected Losses to be Paid [Line Items]
Change in estimate for increased conditional default rate plateau period			$ 6
Second Lien [Member] | Lease Stressful [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Stress period (in months)			29 months
Period of constant conditional default rate (in months)			4 months
Change in estimate for decreased prepayment rate, Percent			10.00%
Decreased conditional default rate ramp down period			25 months
Second Lien [Member] | Lease Stressful [Member] | RMBS [Member] | United States [Member] | HELOCs [Member]
Schedule of Expected Losses to be Paid [Line Items]
Change in estimate for decreased conditional default rate ramp down period			$ 7
Southern District of Mississippi Vs Madison County, Mississippi [Member] | Parkway East [Member] | Public Finance [Member]
Schedule of Expected Losses to be Paid [Line Items]
Total net exposure					$ 18
Second Lien [Member] | RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Period from plateau to intermediate conditional default rate (in months)			28 months
Period of constant conditional default rate (in months)			6 months
Credit derivatives [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	$ (5)		$ (5)		$ (2)
Economic loss development after recoveries for R&W	$ (10)	$ (2)	$ (7)	$ (11)
ACA 2005-2 Collateralized Debt Obligations [Member] | CIFG Holding Inc. [Member] | Total [Member] | Credit derivatives [Member] | CIFG Holdings Inc. vs JP Morgan Securities LLC [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W									$ 400
Libertas II Collateralized Debt Obligations [Member] | CIFG Holding Inc. [Member] | Total [Member] | Credit derivatives [Member] | CIFG Holdings Inc. vs JP Morgan Securities LLC [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W									$ 325

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Contracts Accounted for as Insurance - Gross Premium Receivable Net of Commissions on Assumed Business Roll Forward (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Gross Premium Receivable Net of Ceding Commissions [Roll Forward]
Beginning balance	$ 904	$ 915
Less: Non-financial guaranty insurance premium receivable	1	1
Financial guaranty insurance premiums receivable	903	914
Gross written premiums on new business, net of commissions	164	508
Gross premiums received, net of commissions	(198)	(477)
Adjustments:
Changes in the expected term	(10)	(2)
Accretion of discount, net of commissions on assumed business	8	5
Foreign exchange translation and remeasurement	(24)	(23)
Cancellation of assumed reinsurance	0	(10)
FG insurance premiums receivable	843	915
Non-financial guaranty insurance premium receivable	1	1
Ending balance	844	916
Foreign Currency Gain (Loss) [Member]
Adjustments:
Foreign exchange translation and remeasurement	(24)	(21)
Variable Interest Entity, Primary Beneficiary [Member]
Adjustments:
Ending balance	$ 7	9
Reinsurance of SGI Insured Portfolio [Member]
Gross Premium Receivable Net of Ceding Commissions [Roll Forward]
Gross written premiums on new business, net of commissions		$ 330

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Shareholders' Equity (Tables)

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Changes in Accumulated Other Comprehensive Income by Component

The following tables present the changes in each component of AOCI and the effect of reclassifications out of AOCI on the respective line items in net income.

Changes in Accumulated Other Comprehensive Income by Component

Third Quarter 2019

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, June 30, 2019	$	301		$	51		$	(27	)	$	(38	)	$	8	295
Other comprehensive income (loss) before reclassifications	57			(21		)	(2		)	—			—		34
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	29			(12		)	—			—			—		17
Fair value gains (losses) on FG VIEs	—			—			(3		)	—			—		(3		)
Total before tax	29			(12		)	(3		)	—			—		14
Tax (provision) benefit	(5		)	—			1			—			—		(4		)
Total amount reclassified from AOCI, net of tax	24			(12		)	(2		)	—			—		10
Net current period other comprehensive income (loss)	33			(9		)	—			—			—		24
Balance, September 30, 2019	$	334		$	42		$	(27	)	$	(38	)	$	8	$	319

Changes in Accumulated Other Comprehensive Income by Component

Third Quarter 2018

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, June 30, 2018	$	83		$	124		$	(31	)	$	(32	)	$	8	$	152
Other comprehensive income (loss) before reclassifications	(59		)	(16		)	(5		)	(3		)	—		(83		)
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	1			(8		)	—			—			—		(7		)
Fair value gains (losses) on FG VIEs	—			—			(2		)	—			—		(2		)
Total before tax	1			(8		)	(2		)	—			—		(9		)
Tax (provision) benefit	(1		)	1			—			—			—		—
Total amount reclassified from AOCI, net of tax	—			(7		)	(2		)	—			—		(9		)
Net current period other comprehensive income (loss)	(59		)	(9		)	(3		)	(3		)	—		(74		)
Balance, September 30, 2018	$	24		$	115		$	(34	)	$	(35	)	$	8	$	78

Changes in Accumulated Other Comprehensive Income by Component

Nine Months 2019

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, December 31, 2018	$	59		$	94		$	(31	)	$	(37	)	$	8	$	93
Other comprehensive income (loss) before reclassifications	312			(68		)	(6		)	(1		)	—		237
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	43			(30		)	—			—			—		13
Net investment income	2			14			—			—			—		16
Fair value gains (losses) on FG VIEs	—			—			(13		)	—			—		(13		)
Total before tax	45			(16		)	(13		)	—			—		16
Tax (provision) benefit	(8		)	—			3			—			—		(5		)
Total amount reclassified from AOCI, net of tax	37			(16		)	(10		)	—			—		11
Net current period other comprehensive income (loss)	275			(52		)	4			(1		)	—		226
Balance, September 30, 2019	$	334		$	42		$	(27	)	$	(38	)	$	8	$	319

Changes in Accumulated Other Comprehensive Income by Component

Nine Months 2018

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, December 31, 2017	$	273		$	120		$	—		$	(29	)	$	8	$	372
Effect of adoption of ASU 2016-01 (1)	1			—			(33		)	—			—		(32		)
Other comprehensive income (loss) before reclassifications	(245		)	(21		)	(6		)	(6		)	—		(278		)
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	6			(19		)	—			—			—		(13		)
Fair value gains (losses) on FG VIEs	—			—			(6		)	—			—		(6		)
Total before tax	6			(19		)	(6		)	—			—		(19		)
Tax (provision) benefit	(1		)	3			1			—			—		3
Total amount reclassified from AOCI, net of tax	5			(16		)	(5		)	—			—		(16		)
Net current period other comprehensive income (loss)	(250		)	(5		)	(1		)	(6		)	—		(262		)
Balance, September 30, 2018	$	24		$	115		$	(34	)	$	(35	)	$	8	$	78

____________________

(1)

On January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, resulting in a cumulative-effect reclassification of a $32 million loss, net of tax, from retained earnings to AOCI.

Schedule of Share Repurchases

Period	Number of Shares Repurchased	Total Payments (in millions)		Average Price Paid Per Share
2018 (January 1 - March 31)	2,787,936	$	98	$	35.20
2018 (April 1 - June 30)	4,163,190	152		36.48
2018 (July 1 - September 30)	3,299,049	130		39.41
2018 (October 1 - December 31)	2,992,932	120		40.09
Total 2018	13,243,107	$	500	$	37.76
2019 (January 1 - March 31)	1,908,605	79		41.62
2019 (April 1 - June 30)	2,519,130	111		43.89
2019 (July 1 - September 30)	3,400,677	150		44.11
2019 (October 1 - November 7)	1,276,692	59		45.98
Total 2019	9,105,104	$	399	$	43.79

XML

Income Taxes (Tables)

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Effective Tax Rate Reconciliation

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

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Expected tax provision (benefit)	$	17		$	31		$	64		$	80
Tax-exempt interest	(5		)	(6		)	(15		)	(18		)
Change in liability for uncertain tax positions	1			(10		)	1			(16		)
Effect of provision to tax return filing adjustment	(6		)	(1		)	(6		)	(1		)
State tax	—			5			1			6
Foreign taxes	6			1			11			4
Taxes on reinsurance	5			1			9			—
Effect of adjustments to the provisional amounts as a result of 2017 Tax Cuts and Jobs Act	—			(4		)	—			(4		)
Deferred compensation	(1		)	(1		)	(3		)	(2		)
Other	—			(2		)	(1		)	(3		)
Total provision (benefit) for income taxes	$	17		$	14		$	61		$	46
Effective tax rate	19.2		%	8.3		%	18.6		%	9.7		%

Pretax Income (Loss) by Tax Jurisdiction

 The following tables present pretax income and revenue by jurisdiction.

Pretax Income (Loss) by Tax Jurisdiction

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
U.S.	$	101		$	128	$	326		$	374
Bermuda	10			24		26			97
U.K. and other	(25		)	23		(26		)	8
Total	$	86		$	175	$	326		$	479

Revenue by Tax Jurisdiction

Revenue by Tax Jurisdiction

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
U.S.	$	186		$	192	$	562		$	628
Bermuda	37			47		110			135
U.K. and other	(17		)	36		(5		)	25
Total	$	206		$	275	$	667		$	788

Schedule of Deferred Tax Assets and Liabilities

Tax Assets (Liabilities)

Deferred and Current Tax Assets (Liabilities) (1)

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Deferred tax assets (liabilities)	$	(24	)	$	68
Current tax assets (liabilities)	14			22

____________________

(1)

Included in other assets or other liabilities on the condensed consolidated balance sheets.

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Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Hierarchy of Financial Instruments Carried at Fair Value

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 September 30, 2019

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed-maturity securities
Obligations of state and political subdivisions	$	4,463	$	—	$	4,354	$	109
U.S. government and agencies	155		—		155		—
Corporate securities	2,339		—		2,293		46
Mortgage-backed securities:
RMBS	877		—		561		316
Commercial mortgage-backed securities (CMBS)	469		—		469		—
Asset-backed securities	775		—		111		664
Non-U.S. government securities	199		—		199		—
Total fixed-maturity securities	9,277		—		8,142		1,135
Short-term investments	1,142		888		254		—
Other invested assets (1)	6		—		—		6
FG VIEs’ assets, at fair value	469		—		—		469
Other assets	148		30		42		76
Total assets carried at fair value	$	11,042	$	918	$	8,438	$	1,686
Liabilities:
Credit derivative liabilities	$	214	$	—	$	—	$	214
FG VIEs’ liabilities with recourse, at fair value	388		—		—		388
FG VIEs’ liabilities without recourse, at fair value	105		—		—		105
Total liabilities carried at fair value	$	707	$	—	$	—	$	707

Fair Value Hierarchy of Financial Instruments Carried at Fair Value

As of December 31, 2018

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed-maturity securities
Obligations of state and political subdivisions	$	4,911	$	—	$	4,812	$	99
U.S. government and agencies	175		—		175		—
Corporate securities	2,136		—		2,080		56
Mortgage-backed securities:
RMBS	982		—		673		309
CMBS	539		—		539		—
Asset-backed securities	1,068		—		121		947
Non-U.S. government securities	278		—		278		—
Total fixed-maturity securities	10,089		—		8,678		1,411
Short-term investments	729		429		300		—
Other invested assets (1)	7		—		—		7
FG VIEs’ assets, at fair value	569		—		—		569
Other assets	139		25		38		76
Total assets carried at fair value	$	11,533	$	454	$	9,016	$	2,063
Liabilities:
Credit derivative liabilities	$	209	$	—	$	—	$	209
FG VIEs’ liabilities with recourse, at fair value	517		—		—		517
FG VIEs’ liabilities without recourse, at fair value	102		—		—		102
Total liabilities carried at fair value	$	828	$	—	$	—	$	828

____________________

(1)

Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.

Fair Value Assets Measured on Recurring Basis

The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during Third Quarter 2019 and 2018 and Nine Months 2019 and 2018.

Fair Value Level 3 Rollforward

Recurring Basis

Third Quarter 2019

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of June 30, 2019	$	105				$	48				$	325				$	674				$	526				$	87				$	(216	)			$	(446	)			$	(105	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	3			(1	)	1			(1	)	5			(1	)	7			(1	)	6			(2	)	(14		)	(3	)	5			(5	)	(2		)	(2	)	(2		)	(2	)
Other comprehensive income (loss)	(4		)			(3		)			1					(3		)			—					—					—					1					—
Purchases	6					—					—					1					—					—					—					—					—
Settlements	(1		)			—					(15		)			(15		)			(69		)			—					3					64					3
FG VIE consolidation	—					—					—					—					6					—					—					(5		)			(1		)
Fair value as of September 30, 2019	$	109				$	46				$	316				$	664				$	469				$	73				$	(208	)			$	(388	)			$	(105	)
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of September 30, 2019																					$	6		(2	)	$	(14	)	(3	)	$	8		(5	)	$	(2	)	(2	)	$	(1	)	(2	)
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of September 30, 2019	$	(4	)			$	(3	)			$	1				$	(2	)								$	—									$	1

Fair Value Level 3 Rollforward

Recurring Basis

Third Quarter 2018

	Fixed-Maturity Securities																																		FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions				Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of June 30, 2018	$	92			$	63				$	311				$	897				$	627				$	61				$	(257	)			$	(571	)			$	(108	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	1		(1	)	2			(1	)	3			(1	)	14			(1	)	(1		)	(2	)	(1		)	(3	)	21			(5	)	3			(2	)	1			(2	)
Other comprehensive income (loss)	6				(5		)			—					(12		)			—					—					—					(3		)			—
Purchases	—				—					—					64					—					—					—					—					—
Settlements	—				—					(15		)			(10		)			(30		)			—					(1		)			26					3
Fair value as of September 30, 2018	$	99			$	60				$	299				$	953				$	596				$	60				$	(237	)			$	(545	)			$	(104	)
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2018	$	6			$	(5	)			$	1				$	(11	)			$	2		(2	)	$	(1	)	(3	)	$	20		(5	)	$	(1	)	(2	)	$	1		(2	)

Fair Value Level 3 Rollforward

Recurring Basis

Nine Months 2019

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of December 31, 2018	$	99				$	56				$	309				$	947				$	569				$	77				$	(207	)			$	(517	)			$	(102	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	5			(1	)	(9		)	(1	)	16			(1	)	51			(1	)	70			(2	)	(4		)	(3	)	(25		)	(5	)	(33		)	(2	)	(9		)	(2	)
Other comprehensive income (loss)	1					(1		)			21					(97		)			—					—					—					6					—
Purchases	6					—					11					19					—					—					—					—					—
Settlements	(2		)			—					(41		)			(257		)			(170		)			—					24					156					6
FG VIE consolidation	—					—					—					—					6					—					—					(5		)			(1		)
FG VIE deconsolidations	—					—					—					—					(6		)			—					—					5					1
Transfers into Level 3	—					—					—					1					—					—					—					—					—
Fair value as of September 30, 2019	$	109				$	46				$	316				$	664				$	469				$	73				$	(208	)			$	(388	)			$	(105	)
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of September 30, 2019																					$	78		(2	)	$	(4	)	(3	)	$	(19	)	(5	)	$	(32	)	(2	)	$	(16	)	(2	)
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of September 30, 2019	$	1				$	(1	)			$	21				$	8									$	—									$	6

Fair Value Level 3 Rollforward

Recurring Basis

Nine Months 2018

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of December 31, 2017	$	76				$	67				$	334				$	787				$	700				$	64				$	(269	)			$	(627	)			$	(130	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	3			(1	)	(2		)	(1	)	16			(1	)	43			(1	)	3			(2	)	(3		)	(3	)	103			(5	)	(1		)	(2	)	3			(2	)
Other comprehensive income (loss)	17					(5		)			(10		)			(3		)			—					—					—					(1		)			—
Purchases	4					—					9					164					—					—					—					—					—
Issuances	—					—					—					—					—					—					(68		)	(7	)	—					—
Settlements	(1		)			—					(50		)			(38		)			(90		)			(1		)			(3		)			83					7
FG VIE deconsolidations	—					—					—					—					(17		)			—					—					1					16
Fair value as of September 30, 2018	$	99				$	60				$	299				$	953				$	596				$	60				$	(237	)			$	(545	)			$	(104	)
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2018	$	17				$	(5	)			$	(7	)			$	(1	)			$	13		(2	)	$	(3	)	(3	)	$	93		(5	)	$	(2	)	(2	)	$	2		(2	)

 ____________________

(1) Included in net realized investment gains (losses) and net investment income.

(2) Included in fair value gains (losses) on FG VIEs.

(3) Recorded in net investment income and other income.

(4) Represents the net position of credit derivatives. Credit derivative assets (recorded 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 sheet based on net exposure by counterparty.

(5) Reported in net change in fair value of credit derivatives.

(6) Includes CCS and other invested assets.

(7) Relates to SGI Transaction. See Note 11, Reinsurance.

Fair Value, Liabilities Measured on Recurring Basis

The tables below present a roll forward of the Company’s Level 3 financial instruments carried at fair value on a recurring basis during Third Quarter 2019 and 2018 and Nine Months 2019 and 2018.

Fair Value Level 3 Rollforward

Recurring Basis

Third Quarter 2019

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of June 30, 2019	$	105				$	48				$	325				$	674				$	526				$	87				$	(216	)			$	(446	)			$	(105	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	3			(1	)	1			(1	)	5			(1	)	7			(1	)	6			(2	)	(14		)	(3	)	5			(5	)	(2		)	(2	)	(2		)	(2	)
Other comprehensive income (loss)	(4		)			(3		)			1					(3		)			—					—					—					1					—
Purchases	6					—					—					1					—					—					—					—					—
Settlements	(1		)			—					(15		)			(15		)			(69		)			—					3					64					3
FG VIE consolidation	—					—					—					—					6					—					—					(5		)			(1		)
Fair value as of September 30, 2019	$	109				$	46				$	316				$	664				$	469				$	73				$	(208	)			$	(388	)			$	(105	)
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of September 30, 2019																					$	6		(2	)	$	(14	)	(3	)	$	8		(5	)	$	(2	)	(2	)	$	(1	)	(2	)
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of September 30, 2019	$	(4	)			$	(3	)			$	1				$	(2	)								$	—									$	1

Fair Value Level 3 Rollforward

Recurring Basis

Third Quarter 2018

	Fixed-Maturity Securities																																		FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions				Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of June 30, 2018	$	92			$	63				$	311				$	897				$	627				$	61				$	(257	)			$	(571	)			$	(108	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	1		(1	)	2			(1	)	3			(1	)	14			(1	)	(1		)	(2	)	(1		)	(3	)	21			(5	)	3			(2	)	1			(2	)
Other comprehensive income (loss)	6				(5		)			—					(12		)			—					—					—					(3		)			—
Purchases	—				—					—					64					—					—					—					—					—
Settlements	—				—					(15		)			(10		)			(30		)			—					(1		)			26					3
Fair value as of September 30, 2018	$	99			$	60				$	299				$	953				$	596				$	60				$	(237	)			$	(545	)			$	(104	)
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2018	$	6			$	(5	)			$	1				$	(11	)			$	2		(2	)	$	(1	)	(3	)	$	20		(5	)	$	(1	)	(2	)	$	1		(2	)

Fair Value Level 3 Rollforward

Recurring Basis

Nine Months 2019

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of December 31, 2018	$	99				$	56				$	309				$	947				$	569				$	77				$	(207	)			$	(517	)			$	(102	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	5			(1	)	(9		)	(1	)	16			(1	)	51			(1	)	70			(2	)	(4		)	(3	)	(25		)	(5	)	(33		)	(2	)	(9		)	(2	)
Other comprehensive income (loss)	1					(1		)			21					(97		)			—					—					—					6					—
Purchases	6					—					11					19					—					—					—					—					—
Settlements	(2		)			—					(41		)			(257		)			(170		)			—					24					156					6
FG VIE consolidation	—					—					—					—					6					—					—					(5		)			(1		)
FG VIE deconsolidations	—					—					—					—					(6		)			—					—					5					1
Transfers into Level 3	—					—					—					1					—					—					—					—					—
Fair value as of September 30, 2019	$	109				$	46				$	316				$	664				$	469				$	73				$	(208	)			$	(388	)			$	(105	)
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of September 30, 2019																					$	78		(2	)	$	(4	)	(3	)	$	(19	)	(5	)	$	(32	)	(2	)	$	(16	)	(2	)
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of September 30, 2019	$	1				$	(1	)			$	21				$	8									$	—									$	6

Fair Value Level 3 Rollforward

Recurring Basis

Nine Months 2018

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of December 31, 2017	$	76				$	67				$	334				$	787				$	700				$	64				$	(269	)			$	(627	)			$	(130	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	3			(1	)	(2		)	(1	)	16			(1	)	43			(1	)	3			(2	)	(3		)	(3	)	103			(5	)	(1		)	(2	)	3			(2	)
Other comprehensive income (loss)	17					(5		)			(10		)			(3		)			—					—					—					(1		)			—
Purchases	4					—					9					164					—					—					—					—					—
Issuances	—					—					—					—					—					—					(68		)	(7	)	—					—
Settlements	(1		)			—					(50		)			(38		)			(90		)			(1		)			(3		)			83					7
FG VIE deconsolidations	—					—					—					—					(17		)			—					—					1					16
Fair value as of September 30, 2018	$	99				$	60				$	299				$	953				$	596				$	60				$	(237	)			$	(545	)			$	(104	)
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2018	$	17				$	(5	)			$	(7	)			$	(1	)			$	13		(2	)	$	(3	)	(3	)	$	93		(5	)	$	(2	)	(2	)	$	2		(2	)

 ____________________

(1) Included in net realized investment gains (losses) and net investment income.

(2) Included in fair value gains (losses) on FG VIEs.

(3) Recorded in net investment income and other income.

(4) Represents the net position of credit derivatives. Credit derivative assets (recorded 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 sheet based on net exposure by counterparty.

(5) Reported in net change in fair value of credit derivatives.

(6) Includes CCS and other invested assets.

(7) Relates to SGI Transaction. See Note 11, Reinsurance.

Schedule of Quantitative Information About Level 3 Liabilities, Fair Value Measurements

Quantitative Information About Level 3 Fair Value Inputs

At September 30, 2019

Financial Instrument Description (1)	Fair Value at September 30, 2019 (in millions)			Significant Unobservable Inputs	Range				Weighted Average as a Percentage of Current Par Outstanding
Assets (liabilities) (2):
Fixed-maturity securities:
Obligations of state and political subdivisions	$	109		Yield	4.5	%	-	32.3%	8.4%
Corporate securities	46			Yield	35.8%
RMBS	316			CPR	1.4	%	-	16.9%	6.0%
				CDR	1.5	%	-	6.9%	4.9%
				Loss severity	40.0	%	-	125.0%	85.7%
				Yield	3.5	%	-	6.1%	4.2%
Asset-backed securities:
Life insurance transactions	339			Yield	5.5%
CLOs /Trust preferred securities (TruPS)	274			Yield	2.5	%	-	5.1%	3.6%
Others	51			Yield	9.9%
FG VIEs’ assets, at fair value	469			CPR	0.7	%	-	18.4%	8.8%
				CDR	1.2	%	-	25.7%	4.7%
				Loss severity	60.0	%	-	100.0%	77.6%
				Yield	3.3	%	-	8.3%	5.0%
Other assets	70			Implied Yield	5.8	%	-	6.5%	6.2%
				Term (years)	10 years
Credit derivative liabilities, net	(208		)	Year 1 loss estimates	0.0	%	-	50.0%	1.2%
				Hedge cost (in basis points (bps))	8.0		-	42.0	17.0
				Bank profit (in bps)	38.0		-	191.0	81.0
				Internal floor (in bps)	30.0
				Internal credit rating	AAA		-	CCC	A+
FG VIEs’ liabilities, at fair value	(493		)	CPR	0.7	%	-	18.4%	8.8%
				CDR	1.2	%	-	25.7%	4.7%
				Loss severity	60.0	%	-	100.0%	77.6%
				Yield	3.3	%	-	8.3%	4.2%

___________________

(1) Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.

(2) Excludes several investments recorded in other invested assets with fair value of $6 million.

Quantitative Information About Level 3 Fair Value Inputs

At December 31, 2018

Financial Instrument Description (1)	Fair Value at December 31, 2018 (in millions)			Significant Unobservable Inputs	Range				Weighted Average as a Percentage of Current Par Outstanding
Assets (liabilities) (2):
Fixed-maturity securities:
Obligations of state and political subdivisions	$	99		Yield	4.5	%	-	32.7%	12.0%
Corporate securities	56			Yield	29.5%
RMBS	309			CPR	3.4	%	-	19.4%	6.2%
				CDR	1.5	%	-	6.9%	5.2%
				Loss severity	40.0	%	-	125.0%	82.7%
				Yield	5.3	%	-	8.1%	6.3%
Asset-backed securities:
Life insurance transactions	620			Yield	6.5	%	-	7.1%	6.8%
CLOs/TruPS	274			Yield	3.8	%	-	4.7%	4.3%
Others	53			Yield	11.5%
FG VIEs’ assets, at fair value	569			CPR	0.9	%	-	18.1%	9.3%
				CDR	1.3	%	-	23.7%	5.1%
				Loss severity	60.0	%	-	100.0%	79.8%
				Yield	5.0	%	-	10.2%	7.1%
Other assets	74			Implied Yield	6.6	%	-	7.2%	6.9%
				Term (years)	10 years
Credit derivative liabilities, net	(207		)	Year 1 loss estimates	0.0	%	-	66.0%	2.2%
				Hedge cost (in bps)	5.5		-	82.5	23.3
				Bank profit (in bps)	7.2		-	509.9	77.3
				Internal floor (in bps)	8.8		-	30.0	19.0
				Internal credit rating	AAA		-	CCC	AA-
FG VIEs’ liabilities, at fair value	(619		)	CPR	0.9	%	-	18.1%	9.3%
				CDR	1.3	%	-	23.7%	5.1%
				Loss severity	60.0	%	-	100.0%	79.8%
				Yield	5.0	%	-	10.2%	5.6%

____________________

(1) Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.

(2)

Excludes several investments recorded in other invested assets with fair value of $7 million

Fair Value of Financial Instruments

Fair Value of Financial Instruments Not Carried at Fair Value

	As of September 30, 2019						As of December 31, 2018
	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(in millions)
Assets (liabilities):
Other invested assets	$	1		$	2		$	1		$	2
Other assets (1)	91			91			130			130
Financial guaranty insurance contracts (2)	(2,731		)	(5,200		)	(3,240		)	(5,932		)
Long-term debt	(1,234		)	(1,549		)	(1,233		)	(1,496		)
Other liabilities (1)	(45		)	(45		)	(12		)	(12		)

____________________

(1) The Company's other assets and other liabilities consist predominantly of accrued interest, receivables for securities sold and payables for securities purchased, for which the carrying value approximates fair value.

(2)

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. 

XML

Subsidiary Information - Condensed Consolidating Statement of Cash Flows (Details) - USD ($) $ in Millions	3 Months Ended			9 Months Ended		12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Condensed Cash Flow Statements, Captions [Line Items]
Net cash flows provided by (used in) operating activities				$ (365)	$ 352
Fixed-maturity securities:
Purchases				(688)	(1,478)
Sales	$ 405		$ 316	1,306	908
Maturities and paydowns				664	746
Short-term investments with maturities of over three months:
Purchases				(216)	(148)
Sales				2	1
Maturities and paydowns				206	136
Net sales (purchases) of short-term investments with original maturities of less than three months				(404)	(80)
Net proceeds from paydowns on FG VIEs’ assets				119	90
Net proceeds from sales of FG VIEs’ assets				51	0
Proceeds from stock redemption and return of capital from subsidiaries				0	0
Other				30	19
Net cash flows provided by (used in) investing activities				1,070	194
Cash flows from financing activities
Return of capital				0
Dividends paid				(56)	(55)
Repurchases of common stock				(340)	(380)
Net paydowns of financial guaranty variable interest entities’ liabilities				(162)	(90)
Paydown of long-term debt				(4)	(73)
Other				(16)	(8)
Net cash flows provided by (used in) financing activities				(578)	(606)
Effect of foreign exchange rate changes				(2)	(2)
Increase (decrease) in cash				125	(62)
Cash and restricted cash at beginning of period		$ 82		104	144	$ 144
Cash and restricted cash at end of period	229	104	82	229	82	104
Reportable Legal Entities [Member] | Assured Guaranty Ltd. (Parent) [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash flows provided by (used in) operating activities				408	454
Fixed-maturity securities:
Purchases				0	0
Sales				0	0
Maturities and paydowns				0	0
Short-term investments with maturities of over three months:
Purchases				0	0
Sales				0	0
Maturities and paydowns				0	0
Net sales (purchases) of short-term investments with original maturities of less than three months				4	(11)
Net proceeds from paydowns on FG VIEs’ assets				0	0
Net proceeds from sales of FG VIEs’ assets				0
Proceeds from stock redemption and return of capital from subsidiaries				0	0
Other				0	0
Net cash flows provided by (used in) investing activities				4	(11)
Cash flows from financing activities
Return of capital				0
Dividends paid				(56)	(55)
Repurchases of common stock				(340)	(380)
Net paydowns of financial guaranty variable interest entities’ liabilities				0	0
Paydown of long-term debt				0	0
Other				(16)	(8)
Net cash flows provided by (used in) financing activities				(412)	(443)
Effect of foreign exchange rate changes				0	0
Increase (decrease) in cash				0	0
Cash and restricted cash at beginning of period		0		0	0	0
Cash and restricted cash at end of period	0	0	0	0	0	0
Reportable Legal Entities [Member] | Issuer Subsidiary [Member] | AGUS [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash flows provided by (used in) operating activities				217	101
Fixed-maturity securities:
Purchases				(3)	(76)
Sales				0	31
Maturities and paydowns				4	28
Short-term investments with maturities of over three months:
Purchases				0	0
Sales				0	0
Maturities and paydowns				12	0
Net sales (purchases) of short-term investments with original maturities of less than three months				(90)	60
Net proceeds from paydowns on FG VIEs’ assets				0	0
Net proceeds from sales of FG VIEs’ assets				0
Proceeds from stock redemption and return of capital from subsidiaries				100	200
Other				0	(15)
Net cash flows provided by (used in) investing activities				23	228
Cash flows from financing activities
Return of capital				0
Dividends paid				(237)	(362)
Repurchases of common stock				0	0
Net paydowns of financial guaranty variable interest entities’ liabilities				0	0
Paydown of long-term debt				0	0
Other				0	0
Net cash flows provided by (used in) financing activities				(237)	(362)
Effect of foreign exchange rate changes				0	0
Increase (decrease) in cash				3	(33)
Cash and restricted cash at beginning of period		0		1	33	33
Cash and restricted cash at end of period	4	1	0	4	0	1
Reportable Legal Entities [Member] | Issuer Subsidiary [Member] | AGMH [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash flows provided by (used in) operating activities				157	126
Fixed-maturity securities:
Purchases				0	(12)
Sales				0	8
Maturities and paydowns				7	0
Short-term investments with maturities of over three months:
Purchases				0	0
Sales				0	0
Maturities and paydowns				0	0
Net sales (purchases) of short-term investments with original maturities of less than three months				(3)	(74)
Net proceeds from paydowns on FG VIEs’ assets				0	0
Net proceeds from sales of FG VIEs’ assets				0
Proceeds from stock redemption and return of capital from subsidiaries				0	0
Other				0	0
Net cash flows provided by (used in) investing activities				4	(78)
Cash flows from financing activities
Return of capital				0
Dividends paid				(156)	(50)
Repurchases of common stock				0	0
Net paydowns of financial guaranty variable interest entities’ liabilities				0	0
Paydown of long-term debt				0	0
Other				0	0
Net cash flows provided by (used in) financing activities				(156)	(50)
Effect of foreign exchange rate changes				0	0
Increase (decrease) in cash				5	(2)
Cash and restricted cash at beginning of period		0		0	2	2
Cash and restricted cash at end of period	5	0	0	5	0	0
Reportable Legal Entities [Member] | Other Entities [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash flows provided by (used in) operating activities				(280)	448
Fixed-maturity securities:
Purchases				(688)	(1,462)
Sales				1,306	869
Maturities and paydowns				653	718
Short-term investments with maturities of over three months:
Purchases				(216)	(148)
Sales				2	1
Maturities and paydowns				194	136
Net sales (purchases) of short-term investments with original maturities of less than three months				(315)	(55)
Net proceeds from paydowns on FG VIEs’ assets				119	90
Net proceeds from sales of FG VIEs’ assets				51
Proceeds from stock redemption and return of capital from subsidiaries				10	0
Other				30	34
Net cash flows provided by (used in) investing activities				1,146	183
Cash flows from financing activities
Return of capital				(10)
Dividends paid				(474)	(365)
Repurchases of common stock				(100)	(200)
Net paydowns of financial guaranty variable interest entities’ liabilities				(162)	(90)
Paydown of long-term debt				(1)	(1)
Other				0	0
Net cash flows provided by (used in) financing activities				(747)	(656)
Effect of foreign exchange rate changes				(2)	(2)
Increase (decrease) in cash				117	(27)
Cash and restricted cash at beginning of period		82		103	109	109
Cash and restricted cash at end of period	220	103	82	220	82	103
Consolidating Adjustments [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net cash flows provided by (used in) operating activities				(867)	(777)
Fixed-maturity securities:
Purchases				3	72
Sales				0	0
Maturities and paydowns				0	0
Short-term investments with maturities of over three months:
Purchases				0	0
Sales				0	0
Maturities and paydowns				0	0
Net sales (purchases) of short-term investments with original maturities of less than three months				0	0
Net proceeds from paydowns on FG VIEs’ assets				0	0
Net proceeds from sales of FG VIEs’ assets				0
Proceeds from stock redemption and return of capital from subsidiaries				(110)	(200)
Other				0	0
Net cash flows provided by (used in) investing activities				(107)	(128)
Cash flows from financing activities
Return of capital				10
Dividends paid				867	777
Repurchases of common stock				100	200
Net paydowns of financial guaranty variable interest entities’ liabilities				0	0
Paydown of long-term debt				(3)	(72)
Other				0	0
Net cash flows provided by (used in) financing activities				974	905
Effect of foreign exchange rate changes				0	0
Increase (decrease) in cash				0	0
Cash and restricted cash at beginning of period		0		0	0	0
Cash and restricted cash at end of period	$ 0	$ 0	$ 0	$ 0	$ 0	$ 0

XML

Commitments and Contingencies - Narrative (Details) $ in Millions	9 Months Ended
	Sep. 30, 2019 USD ($) ft²	Jan. 01, 2019 USD ($)	Apr. 10, 2015 USD ($) Transaction	Mar. 15, 2013 Transaction	Nov. 28, 2011 USD ($) Transaction
Commitments and Contingencies Legal Proceedings
Lease, number of square feet | ft²	103,500
Lessee, operating lease, renewal term	5 years
Leases excluded from recognition of Topic 842, initial lease term (or less)	12 months
Weighted average remaining lease term (years)-operating leases	12 years
Weighted average discount rate-operating leases	3.00%
Total operating lease liabilities	$ 90	$ 95
Right-of-use asset	$ 65	69
Deferred rent and lease incentive liabilities		$ 26
LBIE vs. AG Financial Products [Member] | AG Financial Products Inc. [Member] | Guarantee Obligations [Member]
Commitments and Contingencies Legal Proceedings
Number of credit derivative transactions for which termination payment is alleged to be improperly calculated | Transaction				9	9
LBIE vs. AG Financial Products [Member] | Lehman Brothers International (Europe) [Member]
Commitments and Contingencies Legal Proceedings
Gain contingency, number of credit derivative transactions with improperly calculated payments | Transaction			28
Positive Outcome of Litigation [Member] | Pending Litigation [Member] | LBIE vs. AG Financial Products [Member] | AG Financial Products Inc. [Member]
Commitments and Contingencies Legal Proceedings
Termination payments which LBIE owes to AG Financial Products as per calculation of AG Financial Products					$ 4
Other credit derivative transactions which LBIE owes to AG Financial Products as per calculation of AG financial products					25
Positive Outcome of Litigation [Member] | Pending Litigation [Member] | LBIE vs. AG Financial Products [Member] | Lehman Brothers International (Europe) [Member]
Commitments and Contingencies Legal Proceedings
Termination payments which AG Financial Products owes to LBIE as per calculation of LBIE					$ 1,400
Minimum [Member] | Positive Outcome of Litigation [Member] | LBIE vs. AG Financial Products [Member] | Lehman Brothers International (Europe) [Member]
Commitments and Contingencies Legal Proceedings
Gain contingency, unrecorded amount			$ 200
Maximum [Member] | Positive Outcome of Litigation [Member] | LBIE vs. AG Financial Products [Member] | Lehman Brothers International (Europe) [Member]
Commitments and Contingencies Legal Proceedings
Gain contingency, unrecorded amount			$ 500

XML

Expected Loss to be Paid

9 Months Ended

Sep. 30, 2019

Expected Losses [Abstract]

Expected Loss to be Paid

Expected Loss to be Paid

This note provides information regarding expected claim payments to be made under all contracts in the insured portfolio, regardless of the accounting model (insurance, derivative or VIE). The expected loss to be paid is equal to the present value of expected future cash outflows for claim and loss adjustment expenses (LAE) payments, net of inflows for expected salvage and subrogation (e.g., future payments by obligors pursuant to restructuring agreements, settlements or litigation judgments, excess spread on underlying collateral, and other estimated recoveries, including those from restructuring bonds and for breaches of representations and warranties (R&W)), using current risk-free rates.

Loss Estimation Process

The Company’s loss reserve committees estimate expected loss to be paid for all contracts by reviewing analyses that consider various scenarios with corresponding probabilities assigned to them. Depending upon the nature of the risk, the Company’s view of the potential size of any loss and the information available to the Company, that analysis may be based upon individually developed cash flow models, internal credit rating assessments, sector-driven loss severity assumptions and/or judgmental assessments. In the case of its assumed business, the Company may conduct its own analysis as just described or, depending on the Company’s view of the potential size of any loss and the information available to the Company, the Company may use loss estimates provided by ceding insurers. The Company monitors the performance of its transactions with expected losses and each quarter the Company’s loss reserve committees review and refresh their loss projection assumptions, scenarios and the probabilities they assign to those scenarios based on actual developments during the quarter and their view of future performance.

The financial guaranties issued by the Company insure the credit performance of the guaranteed obligations over an extended period of time, in some cases over 30 years, and in most circumstances the Company has no right to cancel such financial guaranties. As a result, the Company's estimate of ultimate loss on a policy is subject to significant uncertainty over the life of the insured transaction. Credit performance can be adversely affected by economic, fiscal and financial market variability over the life of most contracts.

The Company does not use traditional actuarial approaches to determine its estimates of expected losses. The determination of expected loss to be paid is an inherently subjective process involving numerous estimates, assumptions and judgments by management, using both internal and external data sources with regard to frequency, severity of loss, economic projections, governmental actions, negotiations and other factors that affect credit performance. These estimates, assumptions and judgments, and the factors on which they are based, may change materially over a reporting period, and as a result the Company’s loss estimates may change materially over that same period.

In some instances, the terms of the Company's policy give it the option to pay principal losses that have been recognized in the transaction but which it is not yet required to pay, thereby reducing the amount of guaranteed interest due in the future. The Company has sometimes exercised this option, which uses cash but reduces projected future losses.

The following tables present a roll forward of net expected loss to be paid for all contracts. The Company used risk-free rates for U.S. dollar denominated obligations that ranged from 0.00% to 2.20% with a weighted average of 1.79% as of September 30, 2019 and 0.00% to 3.06% with a weighted average of 2.74% as of December 31, 2018. Expected losses to be paid for transactions denominated in currencies other than the U.S. dollar represented approximately 4.0% and 2.7% of the total as of September 30, 2019 and December 31, 2018, respectively.

Net Expected Loss to be Paid

Roll Forward

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Net expected loss to be paid, beginning of period	$	960		$	1,432		$	1,183		$	1,303
Net expected loss to be paid on the Syncora Guarantee Inc. (SGI) portfolio as of June 1, 2018 (see Note 11)	—			—			—			131
Economic loss development (benefit) due to:
Accretion of discount	5			10			19			27
Changes in discount rates	1			(9		)	(4		)	(15		)
Changes in timing and assumptions	19			(1		)	(29		)	(17		)
Total economic loss development (benefit)	25			—			(14		)	(5		)
Net (paid) recovered losses	(267		)	(241		)	(451		)	(238		)
Net expected loss to be paid, end of period	$	718		$	1,191		$	718		$	1,191

Net Expected Loss to be Paid

Roll Forward by Sector

Third Quarter 2019

	Net Expected Loss to be Paid (Recovered) as of June 30, 2019		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2019
	(in millions)
Public finance:
U.S. public finance	$	749	$	50		$	(279	)	$	520
Non-U.S. public finance	23		5			—			28
Public finance	772		55			(279		)	548
Structured finance:
U.S. RMBS	162		(40		)	13			135
Other structured finance	26		10			(1		)	35
Structured finance	188		(30		)	12			170
Total	$	960	$	25		$	(267	)	$	718

Net Expected Loss to be Paid

Roll Forward by Sector

Third Quarter 2018

	Net Expected Loss to be Paid (Recovered) as of June 30, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2018
	(in millions)
Public finance:
U.S. public finance	$	1,041	$	42		$	(251	)	$	832
Non-U.S. public finance	41		(3		)	—			38
Public finance	1,082		39			(251		)	870
Structured finance:
U.S. RMBS	326		(40		)	17			303
Other structured finance	24		1			(7		)	18
Structured finance	350		(39		)	10			321
Total	$	1,432	$	—		$	(241	)	$	1,191

Net Expected Loss to be Paid

Roll Forward by Sector

Nine Months 2019

	Net Expected Loss to be Paid (Recovered) as of December 31, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2019
	(in millions)
Public finance:
U.S. public finance	$	832	$	204		$	(516	)	$	520
Non-U.S. public finance	32		(4		)	—			28
Public finance	864		200			(516		)	548
Structured finance:
U.S. RMBS	293		(223		)	65			135
Other structured finance	26		9			—			35
Structured finance	319		(214		)	65			170
Total	$	1,183	$	(14	)	$	(451	)	$	718

Net Expected Loss to be Paid

Roll Forward by Sector

Nine Months 2018

	Net Expected Loss to be Paid (Recovered) as of December 31, 2017		Net Expected Loss to be Paid on SGI Portfolio as of June 1, 2018		Economic Loss Development / (Benefit)			(Paid) Recovered Losses (1)			Net Expected Loss to be Paid (Recovered) as of September 30, 2018
	(in millions)
Public finance:
U.S. public finance	$	1,157	—		$	59		$	(384	)	$	832
Non-U.S. public finance	46		1		(9		)	—			38
Public finance	1,203		1		50			(384		)	870
Structured finance:
U.S. RMBS	73		130		(52		)	152			303
Other structured finance	27		—		(3		)	(6		)	18
Structured finance	100		130		(55		)	146			321
Total	$	1,303	$	131	$	(5	)	$	(238	)	$	1,191

____________________

(1) Net of ceded paid losses, whether or not such amounts have been settled with reinsurers. Ceded paid losses are typically settled 45 days after the end of the reporting period. Such amounts are recorded as reinsurance recoverable on paid losses in other assets. The amounts for Nine Months 2019 are net of the COFINA Exchange Senior Bonds and cash that were received pursuant to the COFINA Plan of Adjustment. See Note 3, Outstanding Exposure, for additional information.

The tables above include (1) LAE paid of $7 million and $6 million for Third Quarter 2019 and 2018, respectively, and $23 million and $17 million for Nine Months 2019 and 2018, respectively, and (2) expected LAE to be paid of $34 million as of September 30, 2019 and $31 million as of December 31, 2018.

Net Expected Loss to be Paid (Recovered) and

Net Economic Loss Development (Benefit)

By Accounting Model

	Net Expected Loss to be Paid (Recovered)						Net Economic Loss Development  (Benefit)
	As of						Third Quarter						Nine Months
	September 30, 2019			December 31, 2018			2019			2018			2019			2018
	(in millions)
Insurance	$	662		$	1,110		17			1			$	5		$	(9	)
Financial guaranty VIEs (FG VIEs) (See Note 9)	61			75			(2		)	(3		)	(26		)	(7		)
Credit derivatives (See Note 8)	(5		)	(2		)	10			2			7			11
Total	$	718		$	1,183		$	25		$	—		$	(14	)	$	(5	)

Selected U.S. Public Finance Transactions

The Company insured general obligation bonds of the Commonwealth of Puerto Rico and various obligations of its related authorities and public corporations aggregating $4.3 billion net par as of September 30, 2019, all of which was BIG. For additional information regarding the Company's Puerto Rico exposure, see "Exposure to Puerto Rico" in Note 3, Outstanding Exposure.

As of December 31, 2018, the Company had approximately $18 million of net par exposure to bonds issued by Parkway East Public Improvement District (District), which is located in Madison County, Mississippi. The bonds were rated BIG. As part of a settlement with the County, during Third Quarter 2019 the bonds were paid off, reducing the Company's net par exposure to zero, and the Company received new bonds issued by the District, which the Company holds in its investment portfolio.

On February 25, 2015, a plan of adjustment resolving the bankruptcy filing of the City of Stockton, California under chapter 9 of the Bankruptcy Code became effective. As of September 30, 2019, the Company’s net par subject to the plan consisted of $107 million of pension obligation bonds. As part of the plan of adjustment, the City will repay any claims paid on the pension obligation bonds from certain fixed payments and certain variable payments contingent on the City’s revenue growth. 

The Company projects its total net expected loss across its troubled U.S. public finance exposures as of September 30, 2019, including those mentioned above, to be $520 million, compared with a net expected loss of $832 million as of December 31, 2018. The total net expected loss for troubled U.S. public finance exposures is net of a credit for estimated future recoveries of claims already paid. At September 30, 2019 that credit was $842 million compared with $586 million at December 31, 2018. The Company’s net expected losses incorporate management’s probability weighted estimates of possible scenarios. Each quarter, the Company may revise its scenarios, update assumptions and/or shift probability weightings of its scenarios based on public information as well as nonpublic information obtained through its surveillance and loss mitigation activities. Management assesses the possible implications of such information on each insured obligation, considering the unique characteristics of each transaction.

The economic loss development for U.S. public finance transactions was $50 million during Third Quarter 2019 and $204 million during Nine Months 2019, which was primarily attributable to Puerto Rico exposures. The loss development attributable to the Company’s Puerto Rico exposures reflects adjustments the Company made to the assumptions and weightings it uses in its scenarios based on the public information summarized under "Exposure to Puerto Rico" in Note 3, Outstanding Exposure as well as nonpublic information related to its loss mitigation activities during the periods presented.

Selected Non - U.S. Public Finance Transactions

Expected loss to be paid for non-U.S. public finance transactions was $28 million as of September 30, 2019, compared with $32 million as of December 31, 2018, primarily consisting of: (i) an obligation backed by payments from a region in Italy, and for which the Company has been paying claims because of the impact of negative Euro Interbank Offered Rate (Euribor) on the transaction, (ii) transactions with sub-sovereign exposure to various Spanish and Portuguese issuers where a Spanish and Portuguese sovereign default may cause the sub-sovereigns also to default, and (iii) an obligation backed by the availability and toll revenues of a major arterial road into a city in the U.K., which has been underperforming due to higher costs compared with expectations at underwriting.

The economic loss development for non-U.S. public finance transactions, including those mentioned above was approximately $5 million during Third Quarter 2019 due to the impact of negative European interest rates on an interest rate swap in an Italian transaction. The economic benefit was $4 million during Nine Months 2019, which was mainly attributable to the improved internal outlook of certain Spanish sovereigns and sub-sovereigns, and partially offset by the impact of negative European interest rates on an interest rate swap in an Italian transaction.

U.S. RMBS Loss Projections

The Company projects losses on its insured U.S. RMBS on a transaction-by-transaction basis by projecting the performance of the underlying pool of mortgages over time and then applying the structural features (i.e., payment priorities and tranching) of the RMBS and any expected R&W recoveries/payables to the projected performance of the collateral over time. The resulting projected claim payments or reimbursements are then discounted using risk-free rates.

As of September 30, 2019, the Company had a net R&W payable of $60 million to R&W counterparties, compared with a net R&W receivable of $5 million as of December 31, 2018. The Company’s agreements with providers of R&W generally provide for reimbursement to the Company as claim payments are made and, to the extent the Company later receives reimbursements of such claims from excess spread or other sources, for the Company to provide reimbursement to the R&W providers. When the Company projects receiving more reimbursements in the future than it projects to pay in claims on transactions covered by R&W settlement agreements, the Company will have a net R&W payable.

The Company's RMBS loss projection methodology assumes that the housing and mortgage markets will continue improving. Each period the Company makes a judgment as to whether to change the assumptions it uses to make RMBS loss projections based on its observation during the period of the performance of its insured transactions (including early-stage delinquencies, late-stage delinquencies and loss severity) as well as the residential property market and economy in general, and, to the extent it observes changes, it makes a judgment as to whether those changes are normal fluctuations or part of a trend. The assumptions that the Company uses to project RMBS losses are shown in the sections below.

Net Economic Loss Development (Benefit)

U.S. RMBS

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
First lien U.S. RMBS	$	(27	)	(13	)	$	(77	)	$	4
Second lien U.S. RMBS	(13		)	(27	)	(146		)	(56		)

U.S. First Lien RMBS Loss Projections: Alt-A First Lien, Option ARM, Subprime and Prime

     The majority of projected losses in first lien RMBS transactions are expected to come from non-performing mortgage loans (those that are or in the past twelve months have been two or more payments behind, have been modified, are in foreclosure, or have been foreclosed upon). Changes in the amount of non-performing loans from the amount projected in the previous period are one of the primary drivers of loss development in this portfolio. In order to determine the number of defaults resulting from these delinquent and foreclosed loans, the Company applies a liquidation rate assumption to loans in each of various non-performing categories. The Company arrived at its liquidation rates based on data purchased from a third party provider and assumptions about how delays in the foreclosure process and loan modifications may ultimately affect the rate at which loans are liquidated. Each quarter the Company reviews the most recent twelve months of this data and (if necessary) adjusts its liquidation rates based on its observations. The following table shows liquidation assumptions for various non-performing categories.

First Lien Liquidation Rates

	As of September 30, 2019	As of June 30, 2019	As of December 31, 2018
Delinquent/Modified in the Previous 12 Months
Alt-A and Prime	20%	20%	20%
Option ARM	20	20	20
Subprime	20	20	20
30 – 59 Days Delinquent
Alt-A and Prime	30	30	30
Option ARM	35	35	35
Subprime	35	40	40
60 – 89 Days Delinquent
Alt-A and Prime	40	40	40
Option ARM	45	45	45
Subprime	45	45	45
90+ Days Delinquent
Alt-A and Prime	55	50	50
Option ARM	55	55	55
Subprime	50	55	50
Bankruptcy
Alt-A and Prime	45	45	45
Option ARM	50	50	50
Subprime	40	40	40
Foreclosure
Alt-A and Prime	65	60	60
Option ARM	65	65	65
Subprime	60	60	60
Real Estate Owned
All	100	100	100

While the Company uses liquidation rates as described above to project defaults of non-performing loans (including current loans modified or delinquent within the last 12 months), it projects defaults on presently current loans by applying a conditional default rate (CDR) trend. The start of that CDR trend is based on the defaults the Company projects will emerge from currently nonperforming, recently nonperforming and modified loans. The total amount of expected defaults from the non-performing loans is translated into a constant CDR (i.e., the CDR plateau), which, if applied for each of the next 36 months, would be sufficient to produce approximately the amount of defaults that were calculated to emerge from the various delinquency categories. The CDR thus calculated individually on the delinquent collateral pool for each RMBS is then used as the starting point for the CDR curve used to project defaults of the presently performing loans.

In the most heavily weighted scenario (the base case), after the initial 36-month CDR plateau period, each transaction’s CDR is projected to improve over 12 months to an intermediate CDR (calculated as 20% of its CDR plateau); that intermediate CDR is held constant for 36 months and then trails off in steps to a final CDR of 5% of the CDR plateau. In the base case, the Company assumes the final CDR will be reached 3.75 years after the initial 36-month CDR plateau period. Under the Company’s methodology, defaults projected to occur in the first 36 months represent defaults that can be attributed to loans that were modified or delinquent in the last 12 months or that are currently delinquent or in foreclosure, while the defaults projected to occur using the projected CDR trend after the first 36-month period represent defaults attributable to borrowers that are currently performing or are projected to reperform.

     Another important driver of loss projections is loss severity, which is the amount of loss the transaction incurs on a loan after the application of net proceeds from the disposal of the underlying property. Loss severities experienced in first lien

transactions had reached historically high levels, and the Company is assuming in the base case that the still elevated levels generally will continue for another 18 months. The Company determines its initial loss severity based on actual recent experience. Each quarter the Company reviews available data and (if necessary) adjusts its severities based on its observations. The Company then assumes that loss severities begin returning to levels consistent with underwriting assumptions beginning after the initial 18-month period, declining to 40% in the base case over 2.5 years.

The following table shows the range as well as the average, weighted by outstanding net insured par, for key assumptions used in the calculation of expected loss to be paid for individual transactions for vintage 2004 - 2008 first lien U.S. RMBS.

Key Assumptions in Base Case Expected Loss Estimates

First Lien RMBS

	As of September 30, 2019					As of June 30, 2019					As of December 31, 2018
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Alt-A First Lien
Plateau CDR	0.5	%	-	10.5%	4.1%	0.0	%	-	9.5%	4.0%	1.2	%	-	11.4%	4.6%
Final CDR	0.0	%	-	0.5%	0.2%	0.0	%	-	0.5%	0.2%	0.1	%	-	0.6%	0.2%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	70%					70%					70%
2007+	70%					70%					70%
Option ARM
Plateau CDR	2.0	%	-	8.4%	5.6%	2.4	%	-	7.9%	5.5%	1.8	%	-	8.3%	5.6%
Final CDR	0.1	%	-	0.4%	0.3%	0.1	%	-	0.4%	0.3%	0.1	%	-	0.4%	0.3%
Initial loss severity:
2005 and prior	60%					60%					60%
2006	60%					60%					60%
2007+	70%					70%					70%
Subprime
Plateau CDR	1.5	%	-	20.2%	5.6%	2.5	%	-	22.8%	6.0%	1.8	%	-	23.2%	6.2%
Final CDR	0.1	%	-	1.0%	0.3%	0.1	%	-	1.1%	0.3%	0.1	%	-	1.2%	0.3%
Initial loss severity:
2005 and prior	80%					80%					80%
2006	75%					75%					75%
2007+	85%					95%					95%

The rate at which the principal amount of loans is voluntarily prepaid may impact both the amount of losses projected (since that amount is a function of the CDR, the loss severity and the loan balance over time) as well as the amount of excess spread (the amount by which the interest paid by the borrowers on the underlying loan exceeds the amount of interest owed on the insured obligations). The assumption for the voluntary conditional prepayment rate (CPR) follows a similar pattern to that of the CDR. The current level of voluntary prepayments is assumed to continue for the plateau period before gradually increasing over 12 months to the final CPR, which is assumed to be 15% in the base case. For transactions where the initial CPR is higher than the final CPR, the initial CPR is held constant and the final CPR is not used. These CPR assumptions are the same as those the Company used for June 30, 2019 and December 31, 2018.

In estimating expected losses, the Company modeled and probability weighted sensitivities for first lien transactions by varying its assumptions of how fast a recovery is expected to occur. One of the variables used to model sensitivities was how quickly the CDR returned to its modeled equilibrium, which was defined as 5% of the initial CDR. The Company also

stressed CPR and the speed of recovery of loss severity rates. The Company probability weighted a total of five scenarios as of September 30, 2019 and December 31, 2018.

Total expected loss to be paid on all first lien U.S. RMBS was $164 million and $243 million as of September 30, 2019 and December 31, 2018, respectively. The $27 million economic benefit in Third Quarter 2019 and $77 million economic benefit in Nine Months 2019 for first lien U.S. RMBS was primarily attributable to higher excess spread on certain transactions supported by large portions of fixed rate assets (either originally fixed or modified to be fixed) and with insured floating rate debt linked to London Interbank Offered Rate (LIBOR), which decreased in Third Quarter 2019 and Nine Months 2019. The Company used a similar approach to establish its pessimistic and optimistic scenarios as of September 30, 2019 as it used as of December 31, 2018, increasing and decreasing the periods of stress from those used in the base case. LIBOR may be discontinued, and it is not yet clear how this will impact the calculation of the various interest rates in this portfolio referencing LIBOR.

In the Company's most stressful scenario where loss severities were assumed to rise and then recover over nine years and the initial ramp-down of the CDR was assumed to occur over 15 months, expected loss to be paid would increase from current projections by approximately $49 million for all first lien U.S. RMBS transactions.

In the Company's least stressful scenario where the CDR plateau was six months shorter (30 months, effectively assuming that liquidation rates would improve) and the CDR recovery was more pronounced (including an initial ramp-down of the CDR over nine months), expected loss to be paid would decrease from current projections by approximately $44 million for all first lien U.S. RMBS transactions.

U.S. Second Lien RMBS Loss Projections

Second lien RMBS transactions include both home equity lines of credit (HELOC) and closed end second lien mortgages. The Company believes the primary variable affecting its expected losses in second lien RMBS transactions is the amount and timing of future losses in the collateral pool supporting the transactions. Expected losses are also a function of the structure of the transaction, the CPR of the collateral, the interest rate environment and assumptions about loss severity.

In second lien transactions, the projection of near-term defaults from currently delinquent loans is relatively straightforward because loans in second lien transactions are generally “charged off” (treated as defaulted) by the securitization’s servicer once the loan is 180 days past due. The Company estimates the amount of loans that will default over the next six months by calculating current representative liquidation rates. Similar to first liens, the Company then calculates a CDR for six months, which is the period over which the currently delinquent collateral is expected to be liquidated. That CDR is then used as the basis for the plateau CDR period that follows the embedded plateau losses.

For the base case scenario, the CDR (the plateau CDR) was held constant for six months. Once the plateau period has ended, the CDR is assumed to gradually trend down in uniform increments to its final long-term steady state CDR. (The long-term steady state CDR is calculated as the constant CDR that would have yielded the amount of losses originally expected at underwriting.) In the base case scenario, the time over which the CDR trends down to its final CDR is 28 months. Therefore, the total stress period for second lien transactions is 34 months, representing six months of delinquent loan liquidations, followed by 28 months of decrease to the steady state CDR, the same as of December 31, 2018.

HELOC loans generally permit the borrower to pay only interest for an initial period (often ten years) and, after that period, require the borrower to make both the monthly interest payment and a monthly principal payment. This causes the borrower's total monthly payment to increase, sometimes substantially, at the end of the initial interest-only period. In prior periods, as the HELOC loans underlying the Company's insured HELOC transactions reached their principal amortization period, the Company incorporated an assumption that a percentage of loans reaching their principal amortization periods would default around the time of the payment increase.

The HELOC loans underlying the Company's insured HELOC transactions are now past their original interest-only reset date, although a significant number of HELOC loans were modified to extend the original interest-only period for another five years. As a result, the Company does not apply a CDR increase when such loans reach their principal amortization period. In addition, based on the average performance history, the Company applies a CDR floor of 2.5% for the future steady state CDR on all its HELOC transactions.

When a second lien loan defaults, there is generally a low recovery. The Company assumed, as of September 30, 2019 and December 31, 2018, that it will generally recover 2% of future defaulting collateral at the time of charge-off, with additional amounts of post charge-off recoveries projected to come in over time. A second lien on the borrower’s home may be

retained in the Company's second lien transactions after the loan is charged off and the loss applied to the transaction, particularly in cases where the holder of the first lien has not foreclosed. If the second lien is retained and the value of the home increases, the servicer may be able to use the second lien to increase recoveries, either by arranging for the borrower to resume payments or by realizing value upon the sale of the underlying real estate. The Company evaluates its assumptions periodically based on actual recoveries of charged-off loans observed from period to period. In instances where the Company is able to obtain information on the lien status of charged-off loans, it assumes there will be a certain level of future recoveries of the balance of the charged-off loans where the second lien is still intact. The Company projected future recoveries on these charged off loans of 20% as of September 30, 2019 and 10% as of December 31, 2018, with such recoveries to be received evenly over the next five years. The increase in recovery assumptions is attributable to the higher actual recovery rates observed in certain transactions during the year. Increasing the recovery rate to 30% would result in an economic benefit of $61 million, while decreasing the recovery rate back to 10% would result in an economic loss of $61 million. 

The rate at which the principal amount of loans is prepaid may impact both the amount of losses projected as well as the amount of excess spread. In the base case, an average CPR (based on experience of the past year) is assumed to continue until the end of the plateau before gradually increasing to the final CPR over the same period the CDR decreases. The final CPR is assumed to be 15% for second lien transactions (in the base case), which is lower than the historical average but reflects the Company’s continued uncertainty about the projected performance of the borrowers in these transactions. For transactions where the initial CPR is higher than the final CPR, the initial CPR is held constant and the final CPR is not used. This pattern is consistent with how the Company modeled the CPR as of June 30, 2019 and December 31, 2018. To the extent that prepayments differ from projected levels it could materially change the Company’s projected excess spread and losses.

In estimating expected losses, the Company modeled and probability weighted five scenarios, each with a different CDR curve applicable to the period preceding the return to the long-term steady state CDR. The Company believes that the level of the elevated CDR and the length of time it will persist and the ultimate prepayment rate are the primary drivers behind the amount of losses the collateral will likely suffer.

The Company continues to evaluate the assumptions affecting its modeling results. The Company believes the most important driver of its projected second lien RMBS losses is the performance of its HELOC transactions. Total expected recovery on all second lien U.S. RMBS was $29 million as of September 30, 2019 and the expected loss to be paid was $50 million as of December 31, 2018. The economic benefit for second lien U.S. RMBS was $13 million in Third Quarter 2019, primarily attributable to improved performance of underlying collateral, and $146 million in Nine Months 2019, primarily attributable to higher projected recoveries for previously charged-off loans and improved performance of underlying collateral.

The following table shows the range as well as the average, weighted by net par outstanding, for key assumptions used in the calculation of expected loss to be paid for individual transactions for vintage 2004 - 2008 HELOCs.

Key Assumptions in Base Case Expected Loss Estimates

HELOCs

	As of September 30, 2019					As of June 30, 2019					As of December 31, 2018
	Range				Weighted Average	Range				Weighted Average	Range				Weighted Average
Plateau CDR	4.8	%	-	20.7%	9.1%	4.6	%	-	23.5%	9.2%	4.6	%	-	26.8%	10.1%
Final CDR trended down to	2.5	%	-	3.2%	2.5%	2.5	%	-	3.2%	2.5%	2.5	%	-	3.2%	2.5%
Liquidation rates:
Delinquent/Modified in the Previous 12 Months	20%					20%					20%
30 – 59 Days Delinquent	35					30					35
60 – 89 Days Delinquent	45					45					50
90+ Days Delinquent	65					65					70
Bankruptcy	55					55					55
Foreclosure	55					60					65
Real Estate Owned	100					100					100
Loss severity (1)	98%					98%					98%

___________________

(1)    Loss severities on future defaults.

The Company’s base case assumed a six month CDR plateau and a 28 month ramp-down (for a total stress period of 34 months). The Company also modeled a scenario with a longer period of elevated defaults and another with a shorter period of elevated defaults. In the Company's most stressful scenario, increasing the CDR plateau to eight months and increasing the ramp-down by three months to 31 months (for a total stress period of 39 months) would increase the expected loss by approximately $6 million for HELOC transactions. On the other hand, in the Company's least stressful scenario, reducing the CDR plateau to four months and decreasing the length of the CDR ramp-down to 25 months (for a total stress period of 29 months), and lowering the ultimate prepayment rate to 10% would decrease the expected loss by approximately $7 million for HELOC transactions.

Other Structured Finance

The Company projected that its total net expected loss across its troubled other structured finance exposures as of September 30, 2019 was $35 million and is primarily attributable to $87 million in BIG net par of student loan securitizations issued by private issuers that are classified as structured finance. In general, the projected losses of these transactions are due to: (i) the poor credit performance of private student loan collateral and high loss severities, or (ii) high interest rates on auction rate securities with respect to which the auctions have failed.

The Company also had exposure to troubled life insurance transactions. As of September 30, 2019, the Company's BIG net par in these transactions was $40 million, which was lower than the $85 million as of December 31, 2018 because of the settlement of a transaction.

The economic loss development during Third Quarter 2019 and Nine Months 2019 was $10 million and $9 million, which was primarily attributable to higher expected LAE related to certain exposures.

Recovery Litigation

In the ordinary course of their respective businesses, certain of AGL's subsidiaries assert claims in legal proceedings against third parties to recover losses paid in prior periods or prevent losses in the future.

Public Finance Transactions

The Company has asserted claims in a number of legal proceedings in connection with its exposure to Puerto Rico. See Note 3, Outstanding Exposure, for a discussion of the Company's exposure to Puerto Rico and related recovery litigation being pursued by the Company.

RMBS Transactions

On November 26, 2012, CIFG Assurance North America Inc. (CIFGNA) filed a complaint in the Supreme Court of the State of New York against JP Morgan Securities LLC for material misrepresentation in the inducement of insurance and common law fraud, alleging that JP Morgan Securities LLC fraudulently induced CIFGNA to insure $400 million of securities issued by ACA ABS CDO 2006-2 Ltd. and $325 million of securities issued by Libertas Preferred Funding II, Ltd. On June 26, 2015, the court dismissed with prejudice CIFGNA’s material misrepresentation in the inducement of insurance claim and dismissed without prejudice CIFGNA’s common law fraud claim. On September 24, 2015, the court denied CIFGNA’s motion to amend but allowed CIFGNA to re-plead a cause of action for common law fraud. On November 20, 2015, CIFGNA filed a motion for leave to amend its complaint to re-plead common law fraud. On April 29, 2016, CIFGNA filed an appeal to reverse the court’s decision dismissing CIFGNA’s material misrepresentation in the inducement of insurance claim. On November 29, 2016, the Appellate Division of the Supreme Court of the State of New York ruled that the court’s decision dismissing with prejudice CIFGNA’s material misrepresentation in the inducement of insurance claim should be modified to grant CIFGNA leave to re-plead such claim. On February 27, 2017, AGC (as successor to CIFGNA) filed an amended complaint which included a claim for material misrepresentation in the inducement of insurance. On July 31, 2019, the parties entered into a confidential settlement and, on August 12, 2019, agreed to dismiss, with prejudice, the action and all claims.

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Contracts Accounted for as Credit Derivatives

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Contracts Accounted for as Credit Derivatives

Contracts Accounted for as Credit Derivatives

The Company has a portfolio of financial guaranty contracts that meet the definition of a derivative in accordance with GAAP (primarily CDS). The credit derivative portfolio also includes interest rate swaps.

Credit derivative transactions are governed by International Swaps and Derivative Association, Inc. documentation and have certain characteristics that differ from financial guaranty insurance contracts. For example, the Company’s control rights with respect to a reference obligation under a credit derivative may be more limited than when the Company issues a financial guaranty insurance contract. In addition, there are more circumstances under which the Company may be obligated to make payments. Similar to a financial guaranty insurance contract, the Company would be obligated to pay if the obligor failed to make a scheduled payment of principal or interest in full. However, the Company may also be required to pay if the obligor becomes bankrupt or if the reference obligation were restructured if, after negotiation, those credit events are specified in the documentation for the credit derivative transactions. Furthermore, the Company may be required to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative. If events of default or termination events specified in the credit derivative documentation were to occur, the non-defaulting or the non-affected party, which may be either the Company or the counterparty, depending upon the circumstances, may decide to terminate a credit derivative prior to maturity. In that case, the Company may be required to make a termination payment to its swap counterparty upon such termination. Absent such an event of default or termination event, the Company may not unilaterally terminate a CDS contract; however, the Company on occasion has mutually agreed with various counterparties to terminate certain CDS transactions.

Credit Derivative Net Par Outstanding by Sector

The components of the Company’s credit derivative net par outstanding are presented in the table below. The estimated remaining weighted average life of credit derivatives was 11.2 years and 11.6 years as of September 30, 2019 and December 31, 2018, respectively.

Credit Derivatives (1)

	As of September 30, 2019					As of December 31, 2018 (2)
	Net Par Outstanding		Net Fair Value			Net Par Outstanding		Net Fair Value
	(in millions)
U.S. public finance	$	2,067	$	(103	)	$	1,783	$	(65	)
Non-U.S. public finance	2,709		(46		)	2,807		(51		)
U.S. structured finance	1,266		(51		)	1,465		(85		)
Non-U.S. structured finance	123		(8		)	127		(6		)
Total	$	6,165	$	(208	)	$	6,182	$	(207	)

____________________

(1)    Expected recoveries were $5 million as of September 30, 2019 and $2 million as of December 31, 2018.

(2)    Prior year presentation has been conformed to the current year's presentation.

Distribution of Credit Derivative Net Par Outstanding by Internal Rating

	As of September 30, 2019				As of December 31, 2018
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	1,662	27.0	%	$	1,813	29.4	%
AA	1,748		28.4		1,690		27.3
A	1,255		20.3		1,171		18.9
BBB	1,368		22.2		1,351		21.9
BIG (1)	132		2.1		157		2.5
Credit derivative net par outstanding	$	6,165	100.0	%	$	6,182	100.0	%

____________________

(1) All BIG credit derivatives are U.S. RMBS transactions.

Fair Value of Credit Derivatives

Net Change in Fair Value of Credit Derivative Gain (Loss)

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Realized gains on credit derivatives	$	2		$	2		$	6		$	6
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements	(5		)	(1		)	(30		)	(2		)
Realized gains (losses) and other settlements	(3		)	1			(24		)	4
Net unrealized gains (losses)	8			20			(1		)	99
Net change in fair value of credit derivatives	$	5		$	21		$	(25	)	$	103

     Realized losses and other settlements for Nine Months 2019 were primarily due to a final maturity paydown of a U.S. structured finance transaction, for which there was an offsetting unrealized gain.

During Third Quarter 2019, unrealized fair value gains were generated primarily as a result of price improvements on the underlying collateral of certain of the Company's public finance CDS. The unrealized fair value gains were partially offset by unrealized fair value losses related to certain structured finance CDS transactions and changes in discount rates.

During Nine Months 2019, unrealized fair value losses were generated primarily as a result of wider implied net spreads driven by the decreased market cost to buy protection in AGC’s name during the period. For those CDS transactions that were pricing at or above their floor levels, when the cost of purchasing CDS protection on AGC, which management refers to as the CDS spread on AGC, decreased, the implied spreads that the Company would expect to receive on these transactions increased. These unrealized losses were offset by price improvements and the final maturity paydown of a CDS contract.

During Third Quarter 2018, unrealized fair value gains were generated primarily as a result of price improvements on the underlying collateral of the Company’s CDS. This was the primary driver of the unrealized fair value gains in the U.S. structured finance and U.S. public finance sectors. The unrealized fair value gains were partially offset by unrealized fair value losses related to the decreased cost to buy protection in AGC’s name as the market cost of AGC’s credit protection decreased during the period.

During Nine Months 2018, unrealized fair value gains were generated primarily as a result of the increase in credit given to the primary insurer on one of the Company's second-to-pay CDS policies, CDS terminations, and price improvements on the underlying collateral of the Company’s CDS. The unrealized fair value gains were partially offset by unrealized fair value losses related to the decreased cost to buy protection in AGC’s name as the market cost of AGC’s credit protection decreased during the period.

The impact of changes in credit spreads will vary based upon the volume, tenor, interest rates, and other market conditions at the time these fair values are determined. In addition, since each transaction has unique collateral and structural terms, the underlying change in fair value of each transaction may vary considerably. The fair value of credit derivative contracts also reflects the change in the Company’s own credit cost based on the price to purchase credit protection on AGC. The Company determines its own credit risk based on quoted CDS prices traded on the Company at each balance sheet date.

CDS Spread on AGC

Quoted price of CDS contract (in bps)

 

	As of September 30, 2019	As of June 30, 2019	As of December 31, 2018	As of September 30, 2018	As of June 30, 2018	As of December 31, 2017
Five-year CDS spread	56	56	110	77	105	163
One-year CDS spread	14	13	22	15	22	70

Fair Value of Credit Derivative Assets (Liabilities)

and Effect of AGC

Credit Spreads

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Fair value of credit derivatives before effect of AGC credit spread	$	(306	)	$	(407	)
Plus: Effect of AGC credit spread	98			200
Net fair value of credit derivatives	$	(208	)	$	(207	)

The fair value of CDS contracts at September 30, 2019, before considering the benefit applicable to AGC’s credit spreads, is a direct result of the relatively wide credit spreads of certain underlying credits generally due to the long tenor of these credits.

Collateral Posting for Certain Credit Derivative Contracts

The transaction documentation with one counterparty for $193 million in CDS net par insured by AGC requires AGC to post collateral, subject to a $193 million cap, to secure its obligation to make payments under such contracts. Eligible collateral is generally cash or U.S. government or agency securities; eligible collateral other than cash is valued at a discount to the face amount. There was no collateral posted as of September 30, 2019.

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Shareholders' Equity - Changes in AOCI by Component (Details) - USD ($) $ in Millions		3 Months Ended		9 Months Ended
	Jan. 01, 2018	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2017
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance	$ 6,839	$ 6,722	$ 6,634	$ 6,555	$ 6,839
New accounting pronouncement or change in accounting principle, effect of change on net income						$ (32)
Other comprehensive income (loss) before reclassifications		34	(83)	237	(278)
Amounts reclassified from AOCI to:
Net realized investment gains (losses)		16	(7)	12	(14)
Income (loss) before income taxes		86	175	326	479
Tax (provision) benefit		(17)	(14)	(61)	(46)
Net current period other comprehensive income (loss)		24	(74)	226	(262)
Ending balance		6,652	6,583	6,652	6,583
Effect on OCI		0	(3)	4	(1)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Amounts reclassified from AOCI to:
Net realized investment gains (losses)		17	(7)	13	(13)
Net investment income				16
Fair value gains (losses) on FG VIEs		(3)	(2)	(13)	(6)
Income (loss) before income taxes		14	(9)	16	(19)
Tax (provision) benefit		(4)	0	(5)	3
Total amount reclassified from AOCI, net of tax		10	(9)	11	(16)
Total Accumulated Other Comprehensive Income [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance	372	295	152	93	372
Amounts reclassified from AOCI to:
Ending balance		319	78	319	78
Net Unrealized Gains (Losses) on Investments with no OTTI [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance	273	301	83	59	273
New accounting pronouncement or change in accounting principle, effect of change on net income						1
Other comprehensive income (loss) before reclassifications		57	(59)	312	(245)
Amounts reclassified from AOCI to:
Net current period other comprehensive income (loss)		33	(59)	275	(250)
Ending balance		334	24	334	24
Net Unrealized Gains (Losses) on Investments with no OTTI [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Amounts reclassified from AOCI to:
Net realized investment gains (losses)		29	1	43	6
Net investment income				2
Fair value gains (losses) on FG VIEs		0	0	0	0
Income (loss) before income taxes		29	1	45	6
Tax (provision) benefit		(5)	(1)	(8)	(1)
Total amount reclassified from AOCI, net of tax		24	0	37	5
Net Unrealized Gains (Losses) on Investments with OTTI [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance	120	51	124	94	120
New accounting pronouncement or change in accounting principle, effect of change on net income						0
Other comprehensive income (loss) before reclassifications		(21)	(16)	(68)	(21)
Amounts reclassified from AOCI to:
Net current period other comprehensive income (loss)		(9)	(9)	(52)	(5)
Ending balance		42	115	42	115
Net Unrealized Gains (Losses) on Investments with OTTI [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Amounts reclassified from AOCI to:
Net realized investment gains (losses)		(12)	(8)	(30)	(19)
Net investment income				14
Fair value gains (losses) on FG VIEs		0	0	0	0
Income (loss) before income taxes		(12)	(8)	(16)	(19)
Tax (provision) benefit		0	1	0	3
Total amount reclassified from AOCI, net of tax		(12)	(7)	(16)	(16)
Net Unrealized Gains (Losses) on FG VIE Liabilities with Recourse due to Instrument Specific Credit Risk [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance	0	(27)	(31)	(31)	0
New accounting pronouncement or change in accounting principle, effect of change on net income						(33)
Other comprehensive income (loss) before reclassifications		(2)	(5)	(6)	(6)
Amounts reclassified from AOCI to:
Net current period other comprehensive income (loss)		0	(3)	4	(1)
Ending balance		(27)	(34)	(27)	(34)
Net Unrealized Gains (Losses) on FG VIE Liabilities with Recourse due to Instrument Specific Credit Risk [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Amounts reclassified from AOCI to:
Net realized investment gains (losses)		0	0	0	0
Net investment income				0
Fair value gains (losses) on FG VIEs		(3)	(2)	(13)	(6)
Income (loss) before income taxes		(3)	(2)	(13)	(6)
Tax (provision) benefit		1	0	3	1
Total amount reclassified from AOCI, net of tax		(2)	(2)	(10)	(5)
Cumulative Translation Adjustment [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance	(29)	(38)	(32)	(37)	(29)
New accounting pronouncement or change in accounting principle, effect of change on net income						0
Other comprehensive income (loss) before reclassifications		0	(3)	(1)	(6)
Amounts reclassified from AOCI to:
Net current period other comprehensive income (loss)		0	(3)	(1)	(6)
Ending balance		(38)	(35)	(38)	(35)
Cumulative Translation Adjustment [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Amounts reclassified from AOCI to:
Net realized investment gains (losses)		0	0	0	0
Net investment income				0
Fair value gains (losses) on FG VIEs		0	0	0	0
Income (loss) before income taxes		0	0	0	0
Tax (provision) benefit		0	0	0	0
Total amount reclassified from AOCI, net of tax		0	0	0	0
Cash Flow Hedge [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance	8	8	8	8	8
New accounting pronouncement or change in accounting principle, effect of change on net income						$ 0
Other comprehensive income (loss) before reclassifications		0	0	0	0
Amounts reclassified from AOCI to:
Net current period other comprehensive income (loss)		0	0	0	0
Ending balance		8	8	8	8
Cash Flow Hedge [Member] | Reclassification out of Accumulated Other Comprehensive Income [Member]
Amounts reclassified from AOCI to:
Net realized investment gains (losses)		0	0	0	0
Net investment income				0
Fair value gains (losses) on FG VIEs		0	0	0	0
Income (loss) before income taxes		0	0	0	0
Tax (provision) benefit		0	0	0	0
Total amount reclassified from AOCI, net of tax		$ 0	$ 0	$ 0	$ 0
Accounting Standards Update 2016-01 [Member]
Amounts reclassified from AOCI to:
Effect on OCI	32
Accounting Standards Update 2016-01 [Member] | Total Accumulated Other Comprehensive Income [Member]
Changes in Accumulated Other Comprehensive Income [Roll Forward]
New accounting pronouncement or change in accounting principle, effect of change on net income	$ (32)

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Shareholders' Equity

9 Months Ended

Sep. 30, 2019

Equity [Abstract]

Shareholders' Equity

Shareholders' Equity

Other Comprehensive Income

The following tables present the changes in each component of AOCI and the effect of reclassifications out of AOCI on the respective line items in net income.

Changes in Accumulated Other Comprehensive Income by Component

Third Quarter 2019

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, June 30, 2019	$	301		$	51		$	(27	)	$	(38	)	$	8	295
Other comprehensive income (loss) before reclassifications	57			(21		)	(2		)	—			—		34
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	29			(12		)	—			—			—		17
Fair value gains (losses) on FG VIEs	—			—			(3		)	—			—		(3		)
Total before tax	29			(12		)	(3		)	—			—		14
Tax (provision) benefit	(5		)	—			1			—			—		(4		)
Total amount reclassified from AOCI, net of tax	24			(12		)	(2		)	—			—		10
Net current period other comprehensive income (loss)	33			(9		)	—			—			—		24
Balance, September 30, 2019	$	334		$	42		$	(27	)	$	(38	)	$	8	$	319

Changes in Accumulated Other Comprehensive Income by Component

Third Quarter 2018

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, June 30, 2018	$	83		$	124		$	(31	)	$	(32	)	$	8	$	152
Other comprehensive income (loss) before reclassifications	(59		)	(16		)	(5		)	(3		)	—		(83		)
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	1			(8		)	—			—			—		(7		)
Fair value gains (losses) on FG VIEs	—			—			(2		)	—			—		(2		)
Total before tax	1			(8		)	(2		)	—			—		(9		)
Tax (provision) benefit	(1		)	1			—			—			—		—
Total amount reclassified from AOCI, net of tax	—			(7		)	(2		)	—			—		(9		)
Net current period other comprehensive income (loss)	(59		)	(9		)	(3		)	(3		)	—		(74		)
Balance, September 30, 2018	$	24		$	115		$	(34	)	$	(35	)	$	8	$	78

Changes in Accumulated Other Comprehensive Income by Component

Nine Months 2019

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, December 31, 2018	$	59		$	94		$	(31	)	$	(37	)	$	8	$	93
Other comprehensive income (loss) before reclassifications	312			(68		)	(6		)	(1		)	—		237
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	43			(30		)	—			—			—		13
Net investment income	2			14			—			—			—		16
Fair value gains (losses) on FG VIEs	—			—			(13		)	—			—		(13		)
Total before tax	45			(16		)	(13		)	—			—		16
Tax (provision) benefit	(8		)	—			3			—			—		(5		)
Total amount reclassified from AOCI, net of tax	37			(16		)	(10		)	—			—		11
Net current period other comprehensive income (loss)	275			(52		)	4			(1		)	—		226
Balance, September 30, 2019	$	334		$	42		$	(27	)	$	(38	)	$	8	$	319

Changes in Accumulated Other Comprehensive Income by Component

Nine Months 2018

	Net Unrealized Gains (Losses) on Investments with no OTTI			Net Unrealized Gains (Losses) on Investments with OTTI			Net Unrealized Gains (Losses) on FG VIEs’ Liabilities with Recourse due to ISCR			Cumulative Translation Adjustment			Cash Flow  Hedge		Total  AOCI
	(in millions)
Balance, December 31, 2017	$	273		$	120		$	—		$	(29	)	$	8	$	372
Effect of adoption of ASU 2016-01 (1)	1			—			(33		)	—			—		(32		)
Other comprehensive income (loss) before reclassifications	(245		)	(21		)	(6		)	(6		)	—		(278		)
Less: Amounts reclassified from AOCI to:
Net realized investment gains (losses)	6			(19		)	—			—			—		(13		)
Fair value gains (losses) on FG VIEs	—			—			(6		)	—			—		(6		)
Total before tax	6			(19		)	(6		)	—			—		(19		)
Tax (provision) benefit	(1		)	3			1			—			—		3
Total amount reclassified from AOCI, net of tax	5			(16		)	(5		)	—			—		(16		)
Net current period other comprehensive income (loss)	(250		)	(5		)	(1		)	(6		)	—		(262		)
Balance, September 30, 2018	$	24		$	115		$	(34	)	$	(35	)	$	8	$	78

____________________

(1) On January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, resulting in a cumulative-effect reclassification of a $32 million loss, net of tax, from retained earnings to AOCI.

Share Repurchases

On February 27, 2019, the Board of Directors authorized the repurchase of $300 million of common shares and on August 7, 2019 authorized the repurchase of another $300 million of common shares. As of November 7, 2019, the Company was authorized to purchase $299 million of its common shares. The Company expects to repurchase shares from time to time in the open market or in privately negotiated transactions. The timing, form and amount of the share repurchases under the program are at the discretion of management and will depend on a variety of factors, including funds available at the parent company, other potential uses for such funds, market conditions, the Company's capital position, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board of Directors at any time. It does not have an expiration date.

Share Repurchases

Period	Number of Shares Repurchased	Total Payments (in millions)		Average Price Paid Per Share
2018 (January 1 - March 31)	2,787,936	$	98	$	35.20
2018 (April 1 - June 30)	4,163,190	152		36.48
2018 (July 1 - September 30)	3,299,049	130		39.41
2018 (October 1 - December 31)	2,992,932	120		40.09
Total 2018	13,243,107	$	500	$	37.76
2019 (January 1 - March 31)	1,908,605	79		41.62
2019 (April 1 - June 30)	2,519,130	111		43.89
2019 (July 1 - September 30)	3,400,677	150		44.11
2019 (October 1 - November 7)	1,276,692	59		45.98
Total 2019	9,105,104	$	399	$	43.79

XML

Outstanding Exposure (Tables)

9 Months Ended

Sep. 30, 2019

Schedule of Insured Financial Obligations [Line Items]

Debt Service Outstanding

Financial Guaranty Portfolio

Debt Service Outstanding

	Gross Debt Service Outstanding				Net Debt Service Outstanding
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Public finance	$	343,956	$	361,511	$	342,801	$	358,438
Structured finance	12,324		13,569		11,811		13,148
Total financial guaranty	$	356,280	$	375,080	$	354,612	$	371,586

Financial Guaranty Portfolio by Internal Rating

Financial Guaranty Portfolio

by Internal Rating

As of September 30, 2019

	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	$	384	0.2	%	$	2,429	5.6	%	$	1,345	14.6	%	$	179	23.8	%	$	4,337	1.9	%
AA	20,646		11.7		1,707		4.0		3,740		40.5		37		4.9		26,130		11.4
A	97,366		55.2		12,764		29.8		912		9.9		174		23.1		111,216		48.5
BBB	52,359		29.6		25,119		58.6		1,378		14.9		321		42.7		79,177		34.5
BIG	5,760		3.3		863		2.0		1,851		20.1		41		5.5		8,515		3.7
Total net par outstanding	$	176,515	100.0	%	$	42,882	100.0	%	$	9,226	100.0	%	$	752	100.0	%	$	229,375	100.0	%

Financial Guaranty Portfolio

by Internal Rating

As of December 31, 2018 

	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	$	413	0.2	%	$	2,399	5.4	%	$	1,533	15.4	%	$	273	22.9	%	$	4,618	1.9	%
AA	21,646		11.6		1,711		3.9		3,599		36.2		65		5.4		27,021		11.2
A	105,180		56.4		13,013		29.5		1,016		10.2		206		17.3		119,415		49.4
BBB	52,935		28.4		25,939		58.8		1,164		11.7		550		46.1		80,588		33.3
BIG	6,388		3.4		1,041		2.4		2,632		26.5		99		8.3		10,160		4.2
Total net par outstanding	$	186,562	100.0	%	$	44,103	100.0	%	$	9,944	100.0	%	$	1,193	100.0	%	$	241,802	100.0	%

Components of BIG Net Par Outstanding (Insurance and Credit Derivative Form)

Financial Guaranty Portfolio

Components of BIG Net Par Outstanding

As of September 30, 2019

	BIG Net Par Outstanding								Net Par
	BIG 1		BIG 2		BIG 3		Total BIG		Outstanding
					(in millions)
Public finance:
U.S. public finance	$	1,604	$	398	$	3,758	$	5,760	$	176,515
Non-U.S. public finance	819		—		44		863		42,882
Public finance	2,423		398		3,802		6,623		219,397
Structured finance:
U.S. residential mortgage-backed securities (RMBS)	118		88		1,460		1,666		3,687
Life insurance transactions	—		—		40		40		1,223
Other structured finance	71		65		50		186		5,068
Structured finance	189		153		1,550		1,892		9,978
Total	$	2,612	$	551	$	5,352	$	8,515	$	229,375

Financial Guaranty Portfolio

Components of BIG Net Par Outstanding

As of December 31, 2018

	BIG Net Par Outstanding								Net Par
	BIG 1		BIG 2		BIG 3		Total BIG		Outstanding
					(in millions)
Public finance:
U.S. public finance	$	1,767	$	399	$	4,222	$	6,388	$	186,562
Non-U.S. public finance	796		245		—		1,041		44,103
Public finance	2,563		644		4,222		7,429		230,665
Structured finance:
U.S. RMBS	368		214		1,805		2,387		4,270
Life insurance transactions	—		—		85		85		1,184
Other structured finance	127		79		53		259		5,683
Structured finance	495		293		1,943		2,731		11,137
Total	$	3,058	$	937	$	6,165	$	10,160	$	241,802

Schedule of BIG Net Par Outstanding and Number of Risks

Financial Guaranty Portfolio

BIG Net Par Outstanding

and Number of Risks

As of September 30, 2019

	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivative		Total		Financial Guaranty Insurance (1)	Credit Derivative	Total
	(dollars in millions)
BIG:
Category 1	$	2,543	$	69	$	2,612	119	6	125
Category 2	547		4		551		26	1	27
Category 3	5,293		59		5,352		134	7	141
Total BIG	$	8,383	$	132	$	8,515	279	14	293

 Financial Guaranty Portfolio

BIG Net Par Outstanding

and Number of Risks

As of December 31, 2018

	Net Par Outstanding						Number of Risks (2)
Description	Financial Guaranty Insurance (1)		Credit Derivative		Total		Financial Guaranty Insurance (1)	Credit Derivative	Total
	(dollars in millions)
BIG:
Category 1	$	2,981	$	77	$	3,058	128	6	134
Category 2	932		5		937		39	1	40
Category 3	6,090		75		6,165		145	8	153
Total BIG	$	10,003	$	157	$	10,160	312	15	327

_____________________

(1)    Includes VIEs.

(2)

A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments.

BIG Net Par Outstanding and Number of Risks

The following tables provide information on financial guaranty insurance contracts categorized as BIG.

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of September 30, 2019

	BIG  Categories
	BIG 1						BIG 2					BIG 3						Total BIG, Net			Effect of Consolidating FG VIEs			Total
	Gross			Ceded			Gross			Ceded		Gross			Ceded
	(dollars in millions)
Number of risks (1)	119			(6		)	26			—		134			(7		)	279			—			279
Remaining weighted-average contract period (in years)	8.2			5.4			17.1			—		9.9			8.5			9.9			—			9.9
Outstanding exposure:
Principal	$	2,596		$	(53	)	$	547		$	—	$	5,463		$	(170	)	$	8,383		$	—		$	8,383
Interest	1,192			(16		)	478			—		2,638			(72		)	4,220			—			4,220
Total (2)	$	3,788		$	(69	)	$	1,025		$	—	$	8,101		$	(242	)	$	12,603		$	—		$	12,603
Expected cash outflows (inflows)	$	110		$	(3	)	$	124		$	—	$	3,550		$	(118	)	$	3,663		$	(267	)	$	3,396
Potential recoveries (3)	(567		)	21			(51		)	—		(2,393		)	95			(2,895		)	190			(2,705		)
Subtotal	(457		)	18			73			—		1,157			(23		)	768			(77		)	691
Discount	69			(4		)	(13		)	—		(92		)	(6		)	(46		)	16			(30		)
Present value of expected cash flows	$	(388	)	$	14		$	60		$	—	$	1,065		$	(29	)	$	722		$	(61	)	$	661
Deferred premium revenue	$	147		$	(1	)	$	25		$	—	$	505		$	(5	)	$	671		$	(49	)	$	622
Reserves (salvage)	$	(418	)	$	15		$	41		$	—	$	694		$	(25	)	$	307		$	(36	)	$	271

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of December 31, 2018

	BIG Categories
	BIG 1						BIG 2						BIG 3						Total BIG, Net			Effect of Consolidating FG VIEs			Total
	Gross			Ceded			Gross			Ceded			Gross			Ceded
	(dollars in millions)
Number of risks (1)	128			(8		)	39			(1		)	145			(7		)	312			—			312
Remaining weighted-average contract period (in years)	7.9			6.5			13.2			2.1			10.1			9.1			9.8			—			9.8
Outstanding exposure:
Principal	$	3,052		$	(71	)	$	938		$	(6	)	$	6,249		$	(159	)	$	10,003		$	—		$	10,003
Interest	1,319			(29		)	592			(1		)	3,140			(72		)	4,949			—			4,949
Total (2)	$	4,371		$	(100	)	$	1,530		$	(7	)	$	9,389		$	(231	)	$	14,952		$	—		$	14,952
Expected cash outflows (inflows)	$	98		$	(5	)	$	264		$	(1	)	$	4,029		$	(80	)	$	4,305		$	(290	)	$	4,015
Potential recoveries (3)	(465		)	23			(81		)	—			(2,542		)	55			(3,010		)	192			(2,818		)
Subtotal	(367		)	18			183			(1		)	1,487			(25		)	1,295			(98		)	1,197
Discount	83			(5		)	(53		)	—			(134		)	(2		)	(111		)	23			(88		)
Present value of expected cash flows	$	(284	)	$	13		$	130		$	(1	)	$	1,353		$	(27	)	$	1,184		$	(75	)	$	1,109
Deferred premium revenue	$	125		$	(4	)	$	151		$	—		$	518		$	(2	)	$	788		$	(64	)	$	724
Reserves (salvage)	$	(311	)	$	15		$	48		$	(1	)	$	993		$	(24	)	$	720		$	(47	)	$	673

____________________

(1) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. The ceded number of risks represents the number of risks for which the Company ceded a portion of its exposure.

(2) Includes amounts related to FG VIEs.

(3) Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlement or litigation judgments, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past.

Schedule of Non-Financial Guaranty Exposure

The Company also provides non-financial guaranty insurance and reinsurance on transactions with similar risk profiles to its structured finance exposures written in financial guaranty form. All non-financial guaranty exposures shown in the table below are rated investment grade internally.

Non-Financial Guaranty Exposure

	Gross Exposure				Net Exposure
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Life insurance transactions (1)	$	1,014	$	880	$	872	$	763
Aircraft residual value insurance policies	376		340		243		218

____________________

(1)

The life insurance transactions net exposure is expected to increase to approximately $1.0 billion prior to September 30, 2036.

Puerto Rico [Member]

Schedule of Insured Financial Obligations [Line Items]

Gross Par and Gross Debt Service Outstanding

Puerto Rico

Gross Par and Gross Debt Service Outstanding

	Gross Par Outstanding				Gross Debt Service Outstanding
	As of September 30, 2019		As of December 31, 2018		As of September 30, 2019		As of December 31, 2018
	(in millions)
Exposure to Puerto Rico	$	4,458	$	4,971	$	6,958	$	8,035

Schedule of Geographic Exposure of Net Par Outstanding

Puerto Rico

Net Par Outstanding

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Commonwealth Constitutionally Guaranteed
Commonwealth of Puerto Rico - General Obligation Bonds (1)	$	1,253	$	1,340
PBA (1)	140		142
Public Corporations - Certain Revenues Potentially Subject to Clawback
PRHTA (Transportation revenue) (1)	811		844
PRHTA (Highways revenue) (1)	454		475
PRCCDA	152		152
PRIFA	16		16
Other Public Corporations
PREPA (1)	822		848
PRASA	373		373
MFA	248		303
COFINA	—		273
U of PR	1		1
Total net exposure to Puerto Rico	$	4,270	$	4,767

____________________

(1) As of the date of this filing, the Oversight Board has certified a filing under Title III of PROMESA for these exposures.

BIG Net Par Outstanding and Number of Risks

Amortization Schedule of Puerto Rico Net Par Outstanding

and Net Debt Service Outstanding

As of September 30, 2019

	Scheduled Net Par Amortization		Scheduled Net Debt Service Amortization
	(in millions)
2019 (October 1 - December 31)	$	—	$	3
2020 (January 1 - March 31)	—		106
2020 (April 1 - June 30)	—		3
2020 (July 1 - September 30)	286		392
2020 (October 1 - December 31)	—		3
Subtotal 2020	286		504
2021	149		351
2022	139		332
2023	205		392
2024-2028	1,213		1,977
2029-2033	884		1,392
2034-2038	957		1,184
2039-2043	176		259
2044-2047	261		300
Total	$	4,270	$	6,694

XML

Cover Page - shares	9 Months Ended
	Sep. 30, 2019	Nov. 05, 2019
Cover page.
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2019
Entity File Number	001-32141
Entity Registrant Name	ASSURED GUARANTY LTD
Entity Incorporation, State or Country Code	D0
Entity Tax Identification Number	98-0429991
Entity Address, Address Line One	30 Woodbourne Avenue
Entity Address, City or Town	Hamilton
Entity Address, Postal Zip Code	HM 08
Entity Address, Country	BM
City Area Code	441
Local Phone Number	279-5700
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	true
Title of 12(b) Security	Common Shares
Trading Symbol	AGO
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		95,390,972
Entity Central Index Key	0001273813
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3

XML

Condensed Consolidated Statements of Comprehensive Income (unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Comprehensive Income [Abstract]
Net income	$ 69	$ 161	$ 265	$ 433
Change in net unrealized gains (losses) on:
Investments with no other-than-temporary impairment, net of tax provision (benefit) of $7, $(12), $51 and $(43)	33	(59)	275	(250)
Investments with other-than-temporary impairment, net of tax provision (benefit) of $(2), $(2), $(14) and $(2)	(9)	(9)	(52)	(5)
Change in net unrealized gains (losses) on investments	24	(68)	223	(255)
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse resulting from a change in the instrument-specific credit risk, net of tax	0	(3)	4	(1)
Other, net of tax provision (benefit)	0	(3)	(1)	(6)
Other comprehensive income (loss)	24	(74)	226	(262)
Comprehensive income (loss)	$ 93	$ 87	$ 491	$ 171

XML

Outstanding Exposure - Puerto Rico Net Par Outstanding (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 229,375	$ 241,802
Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	4,270	4,767
Constitutionally Guaranteed [Member] | Puerto Rico [Member] | Commonwealth of Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	1,253	1,340
Constitutionally Guaranteed [Member] | Puerto Rico [Member] | Puerto Rico Public Buildings Authority [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	140	142
Public Corporations, Certain Revenue Potentially Subject to Clawback [Member] | Puerto Rico [Member] | PRHTA (Transportation revenue) [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	811	844
Public Corporations, Certain Revenue Potentially Subject to Clawback [Member] | Puerto Rico [Member] | PRHTA (Highway revenue) [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	454	475
Public Corporations, Certain Revenue Potentially Subject to Clawback [Member] | Puerto Rico [Member] | PRCCDA (Puerto Rico Convention Center District Authority) [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	152	152
Public Corporations, Certain Revenue Potentially Subject to Clawback [Member] | Puerto Rico [Member] | PRIFA [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	16	16
Other Public Corporations [Member] | Puerto Rico [Member] | PREPA [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	822	848
Other Public Corporations [Member] | Puerto Rico [Member] | PRASA (Puerto Rico Aqueduct and Sewer Authority) [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	373	373
Other Public Corporations [Member] | Puerto Rico [Member] | MFA [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	248	303
Other Public Corporations [Member] | Puerto Rico [Member] | COFINA (Puerto Rico Sales Tax Financing Corporation) [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	0
Other Public Corporations [Member] | Puerto Rico [Member] | University of Puerto Rico [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 1	$ 1

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Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
Statement of Cash Flows [Abstract]
Net cash flows provided by (used in) operating activities	$ (365)	$ 352
Fixed-maturity securities:
Purchases	(688)	(1,478)
Sales	1,306	908
Maturities and paydowns	664	746
Short-term investments with original maturities of over three months:
Purchases	(216)	(148)
Sales	2	1
Maturities and paydowns	206	136
Net sales (purchases) of short-term investments with original maturities of less than three months	(404)	(80)
Net proceeds from paydowns on financial guaranty variable interest entities’ assets	119	90
Net proceeds from sales of financial guaranty variable interest entities’ assets	51	0
Other	30	19
Net cash flows provided by (used in) investing activities	1,070	194
Financing activities
Dividends paid	(56)	(55)
Repurchases of common stock	(340)	(380)
Net paydowns of financial guaranty variable interest entities’ liabilities	(162)	(90)
Paydown of long-term debt	(4)	(73)
Other	(16)	(8)
Net cash flows provided by (used in) financing activities	(578)	(606)
Effect of foreign exchange rate changes	(2)	(2)
Increase (decrease) in cash and restricted cash	125	(62)
Cash and restricted cash at beginning of period (see Note 7)	104	144
Cash and restricted cash at end of period (see Note 7)	229	82
Supplemental cash flow information
Income taxes	(2)	(5)
Interest on long-term debt	$ 51	$ 66

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Outstanding Exposure - Financial Guaranty Portfolio by Internal Rating (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 229,375	$ 241,802
% of total net par outstanding	100.00%	100.00%
AAA [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 4,337	$ 4,618
% of total net par outstanding	1.90%	1.90%
AA [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 26,130	$ 27,021
% of total net par outstanding	11.40%	11.20%
A [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 111,216	$ 119,415
% of total net par outstanding	48.50%	49.40%
BBB [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 79,177	$ 80,588
% of total net par outstanding	34.50%	33.30%
BIG [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 8,515	$ 10,160
% of total net par outstanding	3.70%	4.20%
Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 219,397	$ 230,665
Public Finance [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 176,515	$ 186,562
% of total net par outstanding	100.00%	100.00%
Public Finance [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 42,882	$ 44,103
% of total net par outstanding	100.00%
Public Finance [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 44,103
% of total net par outstanding		100.00%
Public Finance [Member] | AAA [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 384	$ 413
% of total net par outstanding	0.20%	0.20%
Public Finance [Member] | AAA [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 2,429
% of total net par outstanding	5.60%
Public Finance [Member] | AAA [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 2,399
% of total net par outstanding		5.40%
Public Finance [Member] | AA [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 20,646	$ 21,646
% of total net par outstanding	11.70%	11.60%
Public Finance [Member] | AA [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 1,707
% of total net par outstanding	4.00%
Public Finance [Member] | AA [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 1,711
% of total net par outstanding		3.90%
Public Finance [Member] | A [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 97,366	$ 105,180
% of total net par outstanding	55.20%	56.40%
Public Finance [Member] | A [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 12,764
% of total net par outstanding	29.80%
Public Finance [Member] | A [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 13,013
% of total net par outstanding		29.50%
Public Finance [Member] | BBB [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 52,359	$ 52,935
% of total net par outstanding	29.60%	28.40%
Public Finance [Member] | BBB [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 25,119
% of total net par outstanding	58.60%
Public Finance [Member] | BBB [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 25,939
% of total net par outstanding		58.80%
Public Finance [Member] | BIG [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 6,623	$ 7,429
Public Finance [Member] | BIG [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 5,760	$ 6,388
% of total net par outstanding	3.30%	3.40%
Public Finance [Member] | BIG [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 863	$ 1,041
% of total net par outstanding	2.00%
Public Finance [Member] | BIG [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 1,041
% of total net par outstanding		2.40%
Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 9,978	$ 11,137
Structured Finance [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 9,226	$ 9,944
% of total net par outstanding	100.00%	100.00%
Structured Finance [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 752
% of total net par outstanding	100.00%
Structured Finance [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 1,193
% of total net par outstanding		100.00%
Structured Finance [Member] | AAA [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 1,345	$ 1,533
% of total net par outstanding	14.60%	15.40%
Structured Finance [Member] | AAA [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 179
% of total net par outstanding	23.80%
Structured Finance [Member] | AAA [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 273
% of total net par outstanding		22.90%
Structured Finance [Member] | AA [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 3,740	$ 3,599
% of total net par outstanding	40.50%	36.20%
Structured Finance [Member] | AA [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 37
% of total net par outstanding	4.90%
Structured Finance [Member] | AA [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 65
% of total net par outstanding		5.40%
Structured Finance [Member] | A [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 912	$ 1,016
% of total net par outstanding	9.90%	10.20%
Structured Finance [Member] | A [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 174
% of total net par outstanding	23.10%
Structured Finance [Member] | A [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 206
% of total net par outstanding		17.30%
Structured Finance [Member] | BBB [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 1,378	$ 1,164
% of total net par outstanding	14.90%	11.70%
Structured Finance [Member] | BBB [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 321
% of total net par outstanding	42.70%
Structured Finance [Member] | BBB [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 550
% of total net par outstanding		46.10%
Structured Finance [Member] | BIG [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 1,892	$ 2,731
Structured Finance [Member] | BIG [Member] | United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 1,851	$ 2,632
% of total net par outstanding	20.10%	26.50%
Structured Finance [Member] | BIG [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 41
% of total net par outstanding	5.50%
Structured Finance [Member] | BIG [Member] | Non United States [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure		$ 99
% of total net par outstanding		8.30%

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Fair Value Measurement - Narrative (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2019 USD ($) Security	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) Security	Sep. 30, 2018 USD ($)	Dec. 31, 2018	Apr. 08, 2005 USD ($) Trust
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Percentage of CDS contracts which are fair valued using minimum premium					17.00%
Recurring [Member] | Level 3 [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Number of fixed maturity securities valued using model processes | Security	133		133
Fixed maturity securities	$ 1,135,000,000		$ 1,135,000,000
Measurement Input, Default Rate [Member] | Total [Member] | Recurring [Member] | Level 3 [Member] | Minimum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed			1.50%		2.47%
Measurement Input, Default Rate [Member] | Total [Member] | Recurring [Member] | Level 3 [Member] | Maximum [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Transferor's continuing involvement, servicing assets or liabilities, prepayment speed			2.13%		2.89%
AGC [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Number of custodial trusts | Trust						4
Share value, amount						$ 200,000,000
Maximum amount						$ 50,000,000
Other Income [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair value gains (losses) on Committed Capital Securities	$ (14,000,000)	$ (1,000,000)	$ (4,000,000)	$ (3,000,000)

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Reinsurance - Narrative (Details) - USD ($)		9 Months Ended	12 Months Ended	24 Months Ended
	Jun. 01, 2018	Sep. 30, 2019	Dec. 31, 2018	Dec. 31, 2019	Jun. 30, 2019	Sep. 30, 2018	Jun. 30, 2018	Jan. 01, 2018	Dec. 31, 2017
Ceded Credit Risk [Line Items]
Net expected loss to be paid after recoveries for R&W		$ 718,000,000	$ 1,183,000,000		$ 960,000,000	$ 1,191,000,000	$ 1,432,000,000		$ 1,303,000,000
Assured Guaranty Re [Member]
Ceded Credit Risk [Line Items]
Amounts could be required to pay if third party exercised right to recapture business		42,000,000
AGC [Member]
Ceded Credit Risk [Line Items]
Amounts could be required to pay if third party exercised right to recapture business		291,000,000
Reinsurance of SGI Insured Portfolio [Member]
Ceded Credit Risk [Line Items]
Net expected loss to be paid after recoveries for R&W	$ 131,000,000		0		$ 0		$ 0
Reinsurance of SGI Insured Portfolio [Member] | Assured Guaranty Re [Member]
Ceded Credit Risk [Line Items]
Net expected loss to be paid after recoveries for R&W	$ 131,000,000
Reinsurance of SGI Insured Portfolio [Member] | AGC [Member]
Ceded Credit Risk [Line Items]
Reinsurance retention policy quota share basis percent	100.00%
Reinsurance retention policy, excess retention, amount reinsured	$ 12,000,000,000
Premiums paid during the period	330,000,000
Prepaid reinsurance premiums	363,000,000
Future insurance installment premiums	45,000,000
Professional fees paid to advisors	4,000,000
Excess of Loss Reinsurance Facility [Member] | AGM, AGC and MAC [Member]
Ceded Credit Risk [Line Items]
Premiums paid during the period		3,200,000	$ 3,200,000
Remaining amount of losses covered under the facility								$ 220,000,000
Amount of losses covered under the facility								400,000,000
Minimum net losses required for attachment of excess of loss reinsurance facility								$ 800,000,000
Uncollateralized [Member] | AM Best, A- Rating [Member]
Ceded Credit Risk [Line Items]
Guaranty Liabilities		11,000,000
Uncollateralized [Member] | Standard & Poor's, A Rating [Member]
Ceded Credit Risk [Line Items]
Guaranty Liabilities		$ 300,000
Forecast [Member] | Excess of Loss Reinsurance Facility [Member] | AGM, AGC and MAC [Member]
Ceded Credit Risk [Line Items]
Reinsurance retention policy, excess retention, amount reinsured				$ 180,000,000
Credit derivatives [Member] | Reinsurance of SGI Insured Portfolio [Member] | AGC [Member]
Ceded Credit Risk [Line Items]
Reinsurance retention policy, excess retention, amount reinsured	1,500,000,000
Future insurance installment premiums	$ 17,000,000

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Contracts Accounted for as Insurance - Scheduled Net Earned Premiums Insurance Contracts (Details) $ in Millions	Sep. 30, 2019 USD ($)
Financial Guarantee Insurance Product Line [Member]
Financial Guarantee Insurance Premiums [Line Items]
2019 (October 1 - December 31)	$ 79
2020	301
2021	275
2022	252
2023	231
2024-2028	908
2029-2033	620
2034-2038	356
After 2038	319
Deferred premium revenue, net	3,341
Future accretion	165
Total future net earned premiums	3,506
Variable Interest Entity, Primary Beneficiary [Member]
Financial Guarantee Insurance Premiums [Line Items]
Deferred premium revenue, net	$ 48

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Variable Interest Entities Variable Interest Entities - Unpaid Principal (Details) - Variable Interest Entity, Primary Beneficiary [Member] - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Variable Interest Entity [Line Items]
FG VIEs’ assets	$ 279	$ 350
FG VIEs' liabilities with recourse	21	48
FG VIEs’ liabilities without recourse	19	28
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due	61	71
Unpaid principal for FG VIEs’ liabilities with recourse	$ 409	$ 565

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Income Taxes - Narrative (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Income Taxes [Line Items]
Foreign tax credits acquired	$ 36.0
Tax Cuts and Jobs Act of 2017, incomplete accounting, transition tax for accumulated foreign earnings, tax credit realized	$ 23.0
Realization assessment period	3 years
Interest and penalties related to uncertain tax positions	$ 0.7	$ 1.0
Accrued interest, uncertain tax positions	$ 1.0	2.0
Unrecognized tax benefits that would impact effective tax rate		$ 16.0
United Kingdom [Member]
Income Taxes [Line Items]
Corporate tax rate	19.00%
Radian [Member]
Income Taxes [Line Items]
Foreign tax credits acquired	$ 13.0

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Contracts Accounted for as Insurance - Reconciliation of Net Expected Loss to be Paid and Expensed (Details) - USD ($) $ in Millions	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Guarantor Obligations [Line Items]
Net expected loss to be paid - financial guaranty insurance	$ (718)	$ (960)	$ (1,183)	$ (1,191)	$ (1,432)	$ (1,303)
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(971)		$ (1,143)
Net expected loss to be expensed	448
Variable Interest Entity, Primary Beneficiary [Member]
Guarantor Obligations [Line Items]
Net expected loss to be expensed	34
Financial Guarantee Insurance And Other Product Line [Member]
Guarantor Obligations [Line Items]
Net expected loss to be paid - financial guaranty insurance	661
Contra-paid, net	58
Salvage and subrogation recoverable, net, and other recoverable	699
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(970)
Net expected loss to be expensed	$ 448

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Expected Loss to be Paid - Liquidation Rates and Key Assumptions in Base Case Expected Loss First Lien RMBS (Details) - scenario	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018	Jun. 30, 2019
Financing Receivable, Delinquent/Modified in Previous 12 Months [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	20.00%	20.00%	20.00%
Financing Receivable, Delinquent/Modified in Previous 12 Months [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	20.00%	20.00%	20.00%
Financing Receivable, Delinquent/Modified in Previous 12 Months [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	20.00%	20.00%	20.00%
Financial Asset, 30 to 59 Days Past Due [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	35.00%	40.00%	40.00%
Financial Asset, 30 to 59 Days Past Due [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	30.00%	30.00%	30.00%
Financial Asset, 30 to 59 Days Past Due [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	35.00%	35.00%	35.00%
Financial Asset, 60 to 89 Days Past Due [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	45.00%	45.00%	45.00%
Financial Asset, 60 to 89 Days Past Due [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	40.00%	40.00%	40.00%
Financial Asset, 60 to 89 Days Past Due [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	45.00%	45.00%	45.00%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	50.00%	50.00%	55.00%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	55.00%	50.00%	50.00%
Financial Asset, Equal to or Greater than 90 Days Past Due [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	55.00%	55.00%	55.00%
Financing Receivables, Bankruptcy [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	40.00%	40.00%	40.00%
Financing Receivables, Bankruptcy [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	45.00%	45.00%	45.00%
Financing Receivables, Bankruptcy [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	50.00%	50.00%	50.00%
Financing Receivable, Foreclosure [Member] | Subprime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	60.00%	60.00%	60.00%
Financing Receivable, Foreclosure [Member] | Alt-A and Prime [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	65.00%	60.00%	60.00%
Financing Receivable, Foreclosure [Member] | Option ARM [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	65.00%	65.00%	65.00%
Financing Receivable, Real Estate Owned [Member]
Schedule of Expected Losses to be Paid [Line Items]
Liquidation Rate	100.00%	100.00%	100.00%
United States [Member] | Alt-A and Prime [Member] | 2005 and prior [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	60.00%	60.00%	60.00%
United States [Member] | Alt-A and Prime [Member] | 2006 [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	70.00%	70.00%	70.00%
United States [Member] | Alt-A and Prime [Member] | 2007 [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	70.00%	70.00%	70.00%
United States [Member] | Alt-A and Prime [Member] | Minimum [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	0.50%	1.20%	0.00%
Final CDR	0.00%	0.10%	0.00%
United States [Member] | Alt-A and Prime [Member] | Maximum [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	10.50%	11.40%	9.50%
Final CDR	0.50%	0.60%	0.50%
United States [Member] | Alt-A and Prime [Member] | Weighted Average [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	4.10%	4.60%	4.00%
Final CDR	0.20%	0.20%	0.20%
United States [Member] | Option ARM [Member] | 2005 and prior [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	60.00%	60.00%	60.00%
United States [Member] | Option ARM [Member] | 2006 [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	60.00%	60.00%	60.00%
United States [Member] | Option ARM [Member] | 2007 [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	70.00%	70.00%	70.00%
United States [Member] | Option ARM [Member] | Minimum [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	2.00%	1.80%	2.40%
Final CDR	0.10%	0.10%	0.10%
United States [Member] | Option ARM [Member] | Maximum [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	8.40%	8.30%	7.90%
Final CDR	0.40%	0.40%	0.40%
United States [Member] | Option ARM [Member] | Weighted Average [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	5.60%	5.60%	5.50%
Final CDR	0.30%	0.30%	0.30%
United States [Member] | Subprime [Member] | 2005 and prior [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	80.00%	80.00%	80.00%
United States [Member] | Subprime [Member] | 2006 [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	75.00%	75.00%	75.00%
United States [Member] | Subprime [Member] | 2007 [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Initial loss severity	85.00%	95.00%	95.00%
United States [Member] | Subprime [Member] | Minimum [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	1.50%	1.80%	2.50%
Final CDR	0.10%	0.10%	0.10%
United States [Member] | Subprime [Member] | Maximum [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	20.20%	23.20%	22.80%
Final CDR	1.00%	1.20%	1.10%
United States [Member] | Subprime [Member] | Weighted Average [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Plateau CDR	5.60%	6.20%	6.00%
Final CDR	0.30%	0.30%	0.30%
First Lien [Member] | United States [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Projected loss assumptions, Final CPR, Period for voluntary prepayments to continue	12 months
Number of scenarios weighted in estimating expected losses	5	5
Base Scenario [Member] | First Lien [Member] | United States [Member] | RMBS [Member]
Schedule of Expected Losses to be Paid [Line Items]
Projected loss assumptions, Final CPR, Period for voluntary prepayments to continue	3 years 9 months
Final CPR	15.00%	15.00%	15.00%

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Contracts Accounted for as Insurance - Narrative (Details)	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Guarantor Obligations [Line Items]
Weighted average risk-free rates for U.S. dollar denominated financial guaranty insurance obligations	1.80%	2.74%
Minimum [Member]
Guarantor Obligations [Line Items]
Weighted average risk-free rates for U.S. dollar denominated financial guaranty insurance obligations	0.00%	0.00%
Maximum [Member]
Guarantor Obligations [Line Items]
Weighted average risk-free rates for U.S. dollar denominated financial guaranty insurance obligations	2.20%	3.06%
Foreign Currency Concentration Risk [Member] | Premiums Receivable [Member]
Guarantor Obligations [Line Items]
Percentage of installment premiums denominated in currencies other than the U.S. dollar	73.00%	72.00%

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Fair Value Measurement - Fair Value of Financial Instruments Not Carried at Fair Value (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Assets:
Other invested assets	$ 57	$ 55
Carrying Amount [Member]
Assets:
Other invested assets	1	1
Other assets	91	130
Liabilities:
Financial guaranty insurance contracts	(2,731)	(3,240)
Long-term debt	(1,234)	(1,233)
Other liabilities	(45)	(12)
Estimated Fair Value [Member]
Assets:
Other invested assets	2	2
Other assets	91	130
Liabilities:
Financial guaranty insurance contracts	(5,200)	(5,932)
Long-term debt	(1,549)	(1,496)
Other liabilities	$ (45)	$ (12)

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Contracts Accounted for as Credit Derivatives - Credit Derivatives Subordination and Ratings (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Net Par Outstanding on Credit Derivatives
Net Par Outstanding	$ 6,165	$ 6,182
Credit risk derivatives, at fair value, net	(208)	(207)
Expected loss to be recovered	5	2
Public Finance [Member] | Non United States [Member]
Net Par Outstanding on Credit Derivatives
Net Par Outstanding	2,709	2,807
Credit risk derivatives, at fair value, net	(46)	(51)
Public Finance [Member] | United States [Member]
Net Par Outstanding on Credit Derivatives
Net Par Outstanding	2,067	1,783
Credit risk derivatives, at fair value, net	(103)	(65)
Structured Finance [Member] | Non United States [Member]
Net Par Outstanding on Credit Derivatives
Net Par Outstanding	123	127
Credit risk derivatives, at fair value, net	(8)	(6)
Structured Finance [Member] | United States [Member]
Net Par Outstanding on Credit Derivatives
Net Par Outstanding	1,266	1,465
Credit risk derivatives, at fair value, net	$ (51)	$ (85)

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Investments and Cash - Fixed Maturity Securities and Short Term Investments (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Investments
Percent of Total	100.00%	100.00%
Amortized Cost	$ 9,953	$ 10,613
Gross Unrealized Gains	518	344
Gross Unrealized Losses	(52)	(139)
Estimated Fair Value	10,419	10,818
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 52	$ 118
Government agency obligations as a percentage of total mortgage backed securities	44.00%	48.00%
Fixed Maturities [Member]
Investments
Percent of Total	89.00%	93.00%
Amortized Cost	$ 8,811	$ 9,884
Gross Unrealized Gains	518	344
Gross Unrealized Losses	(52)	(139)
Estimated Fair Value	9,277	10,089
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 52	$ 118
Short-term Investments [Member]
Investments
Percent of Total	11.00%	7.00%
Amortized Cost	$ 1,142	$ 729
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Estimated Fair Value	1,142	729
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 0	$ 0
Obligations of state and political subdivisions [Member] | Fixed Maturities [Member]
Investments
Percent of Total	42.00%	45.00%
Amortized Cost	$ 4,132	$ 4,761
Gross Unrealized Gains	331	168
Gross Unrealized Losses	0	(18)
Estimated Fair Value	4,463	4,911
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 42	$ 40
US government and agencies [Member] | Fixed Maturities [Member]
Investments
Percent of Total	1.00%	2.00%
Amortized Cost	$ 144	$ 167
Gross Unrealized Gains	11	9
Gross Unrealized Losses	0	(1)
Estimated Fair Value	155	175
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 0	$ 0
Corporate securities [Member] | Fixed Maturities [Member]
Investments
Percent of Total	24.00%	20.00%
Amortized Cost	$ 2,286	$ 2,175
Gross Unrealized Gains	80	13
Gross Unrealized Losses	(27)	(52)
Estimated Fair Value	2,339	2,136
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ (4)	$ (4)
RMBS [Member] | Fixed Maturities [Member]
Investments
Percent of Total	8.00%	9.00%
Amortized Cost	$ 846	$ 999
Gross Unrealized Gains	41	17
Gross Unrealized Losses	(10)	(34)
Estimated Fair Value	877	982
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 4	$ (15)
CMBS [Member] | Fixed Maturities [Member]
Investments
Percent of Total	5.00%	5.00%
Amortized Cost	$ 448	$ 542
Gross Unrealized Gains	21	4
Gross Unrealized Losses	0	(7)
Estimated Fair Value	469	539
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 0	$ 0
Asset-backed Securities [Member] | Fixed Maturities [Member]
Investments
Percent of Total	7.00%	9.00%
Amortized Cost	$ 745	$ 942
Gross Unrealized Gains	33	131
Gross Unrealized Losses	(3)	(5)
Estimated Fair Value	775	1,068
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 10	$ 97
Foreign government securities [Member] | Fixed Maturities [Member]
Investments
Percent of Total	2.00%	3.00%
Amortized Cost	$ 210	$ 298
Gross Unrealized Gains	1	2
Gross Unrealized Losses	(12)	(22)
Estimated Fair Value	199	278
AOCI Gain (Loss) on Securities with Other-Than-Temporary Impairment	$ 0	$ 0

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Fair Value Measurement - Financial Instruments Carried at Fair Value (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Assets:
Fixed-maturity securities	$ 10,419	$ 10,818
Other invested assets	57	55
Liabilities:
Credit derivative liabilities	214	209
Recurring [Member]
Assets:
Other invested assets	6	7
FG VIEs’ assets, at fair value	469	569
Other assets	148	139
Total assets carried at fair value	11,042	11,533
Liabilities:
Credit derivative liabilities	214	209
FG VIEs’ liabilities with recourse, at fair value	388	517
FG VIEs’ liabilities without recourse, at fair value	105	102
Total liabilities carried at fair value	707	828
Recurring [Member] | Level 1 [Member]
Assets:
Other invested assets	0	0
FG VIEs’ assets, at fair value	0	0
Other assets	30	25
Total assets carried at fair value	918	454
Liabilities:
Credit derivative liabilities	0	0
FG VIEs’ liabilities with recourse, at fair value	0	0
FG VIEs’ liabilities without recourse, at fair value	0	0
Total liabilities carried at fair value	0	0
Recurring [Member] | Level 2 [Member]
Assets:
Other invested assets	0	0
FG VIEs’ assets, at fair value	0	0
Other assets	42	38
Total assets carried at fair value	8,438	9,016
Liabilities:
Credit derivative liabilities	0	0
FG VIEs’ liabilities with recourse, at fair value	0	0
FG VIEs’ liabilities without recourse, at fair value	0	0
Total liabilities carried at fair value	0	0
Recurring [Member] | Level 3 [Member]
Assets:
Other invested assets	6	7
FG VIEs’ assets, at fair value	469	569
Other assets	76	76
Total assets carried at fair value	1,686	2,063
Liabilities:
Credit derivative liabilities	214	209
FG VIEs’ liabilities with recourse, at fair value	388	517
FG VIEs’ liabilities without recourse, at fair value	105	102
Total liabilities carried at fair value	707	828
Fixed Maturities [Member]
Assets:
Fixed-maturity securities	9,277	10,089
Fixed Maturities [Member] | Obligations of state and political subdivisions [Member]
Assets:
Fixed-maturity securities	4,463	4,911
Fixed Maturities [Member] | US government and agencies [Member]
Assets:
Fixed-maturity securities	155	175
Fixed Maturities [Member] | Corporate securities [Member]
Assets:
Fixed-maturity securities	2,339	2,136
Fixed Maturities [Member] | RMBS [Member]
Assets:
Fixed-maturity securities	877	982
Fixed Maturities [Member] | CMBS [Member]
Assets:
Fixed-maturity securities	469	539
Fixed Maturities [Member] | Asset-backed Securities [Member]
Assets:
Fixed-maturity securities	775	1,068
Fixed Maturities [Member] | Foreign government securities [Member]
Assets:
Fixed-maturity securities	199	278
Fixed Maturities [Member] | Recurring [Member]
Assets:
Fixed-maturity securities	9,277	10,089
Fixed Maturities [Member] | Recurring [Member] | Obligations of state and political subdivisions [Member]
Assets:
Fixed-maturity securities	4,463	4,911
Fixed Maturities [Member] | Recurring [Member] | US government and agencies [Member]
Assets:
Fixed-maturity securities	155	175
Fixed Maturities [Member] | Recurring [Member] | Corporate securities [Member]
Assets:
Fixed-maturity securities	2,339	2,136
Fixed Maturities [Member] | Recurring [Member] | RMBS [Member]
Assets:
Fixed-maturity securities	877	982
Fixed Maturities [Member] | Recurring [Member] | CMBS [Member]
Assets:
Fixed-maturity securities	469	539
Fixed Maturities [Member] | Recurring [Member] | Asset-backed Securities [Member]
Assets:
Fixed-maturity securities	775	1,068
Fixed Maturities [Member] | Recurring [Member] | Foreign government securities [Member]
Assets:
Fixed-maturity securities	199	278
Fixed Maturities [Member] | Recurring [Member] | Level 1 [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 1 [Member] | Obligations of state and political subdivisions [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 1 [Member] | US government and agencies [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 1 [Member] | Corporate securities [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 1 [Member] | RMBS [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 1 [Member] | CMBS [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 1 [Member] | Asset-backed Securities [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 1 [Member] | Foreign government securities [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 2 [Member]
Assets:
Fixed-maturity securities	8,142	8,678
Fixed Maturities [Member] | Recurring [Member] | Level 2 [Member] | Obligations of state and political subdivisions [Member]
Assets:
Fixed-maturity securities	4,354	4,812
Fixed Maturities [Member] | Recurring [Member] | Level 2 [Member] | US government and agencies [Member]
Assets:
Fixed-maturity securities	155	175
Fixed Maturities [Member] | Recurring [Member] | Level 2 [Member] | Corporate securities [Member]
Assets:
Fixed-maturity securities	2,293	2,080
Fixed Maturities [Member] | Recurring [Member] | Level 2 [Member] | RMBS [Member]
Assets:
Fixed-maturity securities	561	673
Fixed Maturities [Member] | Recurring [Member] | Level 2 [Member] | CMBS [Member]
Assets:
Fixed-maturity securities	469	539
Fixed Maturities [Member] | Recurring [Member] | Level 2 [Member] | Asset-backed Securities [Member]
Assets:
Fixed-maturity securities	111	121
Fixed Maturities [Member] | Recurring [Member] | Level 2 [Member] | Foreign government securities [Member]
Assets:
Fixed-maturity securities	199	278
Fixed Maturities [Member] | Recurring [Member] | Level 3 [Member]
Assets:
Fixed-maturity securities	1,135	1,411
Fixed Maturities [Member] | Recurring [Member] | Level 3 [Member] | Obligations of state and political subdivisions [Member]
Assets:
Fixed-maturity securities	109	99
Fixed Maturities [Member] | Recurring [Member] | Level 3 [Member] | US government and agencies [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 3 [Member] | Corporate securities [Member]
Assets:
Fixed-maturity securities	46	56
Fixed Maturities [Member] | Recurring [Member] | Level 3 [Member] | RMBS [Member]
Assets:
Fixed-maturity securities	316	309
Fixed Maturities [Member] | Recurring [Member] | Level 3 [Member] | CMBS [Member]
Assets:
Fixed-maturity securities	0	0
Fixed Maturities [Member] | Recurring [Member] | Level 3 [Member] | Asset-backed Securities [Member]
Assets:
Fixed-maturity securities	664	947
Fixed Maturities [Member] | Recurring [Member] | Level 3 [Member] | Foreign government securities [Member]
Assets:
Fixed-maturity securities	0	0
Short-term Investments [Member]
Assets:
Fixed-maturity securities	1,142	729
Short-term Investments [Member] | Recurring [Member]
Assets:
Fixed-maturity securities	1,142	729
Short-term Investments [Member] | Recurring [Member] | Level 1 [Member]
Assets:
Fixed-maturity securities	888	429
Short-term Investments [Member] | Recurring [Member] | Level 2 [Member]
Assets:
Fixed-maturity securities	254	300
Short-term Investments [Member] | Recurring [Member] | Level 3 [Member]
Assets:
Fixed-maturity securities	$ 0	$ 0

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Contracts Accounted for as Credit Derivatives - Collateral Posting Requirements on Credit Derivatives (Details) $ in Millions	Sep. 30, 2019 USD ($)
Gross par of CDS with collateral posting requirement [Member]
Credit Derivatives
Collateral posting requirement	$ 193
Maximum posting requirement [Member]
Credit Derivatives
Collateral posting requirement	193
Collateral posted [Member]
Credit Derivatives
Collateral posted	$ 0

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Investments and Cash - Roll Forward of Credit Losses in the Investment Portfolio (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Roll Forward of Credit Losses in the Investment Portfolio
Balance, beginning of period	$ 191	$ 170	$ 185	$ 162
Additions for credit losses on securities for which an OTTI was previously recognized	0	2	13	10
Reductions for securities sold and other settlements	0	0	(7)	0
Balance, end of period	$ 191	$ 172	$ 191	$ 172

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Income Taxes

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Overview

AGL and its Bermuda subsidiaries AG Re, AGRO, and Cedar Personnel Ltd. (Bermuda Subsidiaries) are not subject to any income, withholding or capital gains taxes under current Bermuda law. The Company has received an assurance from the Minister of Finance in Bermuda that, in the event of any taxes being imposed, AGL and its Bermuda Subsidiaries will be exempt from taxation in Bermuda until March 31, 2035. AGL's U.S. and U.K. subsidiaries are subject to income taxes imposed by U.S. and U.K. authorities, respectively, and file applicable tax returns. In addition, AGRO, a Bermuda domiciled company, has elected under Section 953(d) of the U.S. Internal Revenue Code to be taxed as a U.S. domestic corporation.

In November 2013, AGL became 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. As a U.K. tax resident company, AGL is required to file a corporation tax return with Her Majesty's Revenue & Customs. AGL is subject to U.K. corporation tax in respect of its worldwide profits (both income and capital gains), subject to any applicable exemptions. The corporation tax rate is at 19% for 2019. Assured Guaranty expects that the dividends AGL receives from its direct subsidiaries will be exempt from U.K. corporation tax due to the exemption in section 931D of the U.K. Corporation Tax Act 2009. In addition, any dividends paid by AGL to its shareholders should not be subject to any withholding tax in the U.K. Assured Guaranty does not expect any profits of non-U.K. resident members of the group to be taxed under the U.K. "controlled foreign companies" regime and has obtained a clearance from Her Majesty's Revenue & Customs confirming this on the basis of current facts.

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.

Provision for Income Taxes

The Company's provision for income taxes for interim financial periods is not based on an estimated annual effective rate due, for example, to the variability in loss reserves, fair value of its credit derivatives and VIEs, and foreign exchange gains and losses which prevents the Company from projecting a reliable estimated annual effective tax rate and pretax income for the full year 2019. A discrete calculation of the provision is calculated for each interim period.

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%, U.K. subsidiaries taxed at the U.K. marginal corporate tax rate of 19%, and no taxes for the Company’s Bermuda Subsidiaries unless subject to U.S. tax by election. The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions.

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

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Expected tax provision (benefit)	$	17		$	31		$	64		$	80
Tax-exempt interest	(5		)	(6		)	(15		)	(18		)
Change in liability for uncertain tax positions	1			(10		)	1			(16		)
Effect of provision to tax return filing adjustment	(6		)	(1		)	(6		)	(1		)
State tax	—			5			1			6
Foreign taxes	6			1			11			4
Taxes on reinsurance	5			1			9			—
Effect of adjustments to the provisional amounts as a result of 2017 Tax Cuts and Jobs Act	—			(4		)	—			(4		)
Deferred compensation	(1		)	(1		)	(3		)	(2		)
Other	—			(2		)	(1		)	(3		)
Total provision (benefit) for income taxes	$	17		$	14		$	61		$	46
Effective tax rate	19.2		%	8.3		%	18.6		%	9.7		%

The expected tax provision (benefit) is calculated as the sum of pretax income in each jurisdiction multiplied by the statutory tax rate of the jurisdiction by which it will be taxed. Where there is a pretax loss in one jurisdiction and pretax 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 pretax income and revenue by jurisdiction.

Pretax Income (Loss) by Tax Jurisdiction

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
U.S.	$	101		$	128	$	326		$	374
Bermuda	10			24		26			97
U.K. and other	(25		)	23		(26		)	8
Total	$	86		$	175	$	326		$	479

Revenue by Tax Jurisdiction

	Third Quarter					Nine Months
	2019			2018		2019			2018
	(in millions)
U.S.	$	186		$	192	$	562		$	628
Bermuda	37			47		110			135
U.K. and other	(17		)	36		(5		)	25
Total	$	206		$	275	$	667		$	788

Pretax income by jurisdiction may be disproportionate to revenue by jurisdiction to the extent that insurance losses incurred are disproportionate.

Tax Assets (Liabilities)

Deferred and Current Tax Assets (Liabilities) (1)

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Deferred tax assets (liabilities)	$	(24	)	$	68
Current tax assets (liabilities)	14			22

____________________

(1) Included in other assets or other liabilities on the condensed consolidated balance sheets.

Valuation Allowance

The Company has $13 million of foreign tax credit (FTC) carryovers from previous acquisitions and $23 million of FTC due to the 2017 Tax Cuts and Jobs Act for use against regular tax in future years. FTCs will begin to expire in 2020 and will fully expire by 2027. In analyzing the future realizability of FTCs, 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 FTC of $36 million will not be utilized, and therefore recorded a valuation allowance with respect to this tax attribute.

The Company came to the conclusion that it is more likely than not that the remaining 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 net deferred tax asset. The Company will continue to analyze the need for a valuation allowance on a quarterly basis.

Audits

As of September 30, 2019, AGUS had open tax years with the U.S. Internal Revenue Service (IRS) for 2016 to present and is currently under audit for the 2016 tax year. In December 2016, the IRS issued a Revenue Agent Report for the 2009 - 2012 audit period, which did not identify any material adjustments that were not already accounted for in prior periods. The 2013 and 2014 tax years closed in 2018. Assured Guaranty Overseas US Holdings Inc. has open tax years of 2016 forward but is not currently under audit with the IRS. The Company's U.K. subsidiaries are not currently under examination and have open tax years of 2017 forward. CIFGNA, which was acquired by AGC during 2016, is not currently under examination and has open tax years of 2016 to the date of acquisition.

Uncertain Tax Positions

The Company's policy is to recognize interest related to uncertain tax positions in income tax expense and has accrued $0.7 million for Nine Months 2019 and $1 million for the full year 2018. As of September 30, 2019 and December 31, 2018, the Company has accrued $1 million and $2 million of interest, respectively.

The total amount of reserves for unrecognized tax positions, including accrued interest, as of both September 30, 2019 and December 31, 2018 that would affect the effective tax rate, if recognized, was $16 million.

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Commitments and Contingencies Commitments and Contingencies - Lease Maturity Schedule (Details) - USD ($) $ in Millions	Sep. 30, 2019	Jan. 01, 2019	Dec. 31, 2018
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
2019 (remaining three months)	$ 2
2020	9
2021	8
2022	8
2023	9
Thereafter	72
Total lease payments	108
Less: imputed interest	18
Total operating lease liabilities	$ 90	$ 95
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2019			$ 9
2020			9
2021			8
2022			8
2023			9
Thereafter			$ 72

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Ratings

9 Months Ended

Sep. 30, 2019

Rating Actions [Abstract]

Ratings

Ratings

The financial strength ratings (or similar ratings) for AGL’s insurance subsidiaries, along with the date of the most recent rating action (or confirmation) by the rating agency, are shown in the table below. Ratings are subject to continuous rating agency review and revision or withdrawal at any time. In addition, the Company periodically assesses the value of each rating assigned to each of its companies, and as a result of such assessment may request that a rating agency add or drop a rating from certain of its companies.

	S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC (S&P)	Kroll Bond Rating Agency	Moody’s Investors Service, Inc. (Moody’s)	A.M. Best Company, Inc.
AGM	AA (stable) (11/7/19)	AA+ (stable) (12/21/18)	A2 (stable) (8/13/19)	—
AGC	AA (stable) (11/7/19)	AA (stable) (11/30/18)	(1)	—
MAC	AA (stable) (11/7/19)	AA+ (stable) (7/12/19)	—	—
AG Re	AA (stable) (11/7/19)	—	—	—
AGRO	AA (stable) (11/7/19)	—	—	A+ (stable) (7/12/19)
AGE	AA (stable) (11/7/19)	AA+ (stable) (12/21/18)	A2 (stable) (8/13/19)	—

____________________

(1) AGC requested that Moody’s withdraw its financial strength ratings of AGC in January 2017, but Moody's denied that request. Moody’s continues to rate AGC A3 (stable).

There can be no assurance that any of the rating agencies will not take negative action on the financial strength ratings (or similar ratings) of AGL's insurance subsidiaries in the future or cease to rate one or more of AGL's insurance subsidiaries, either voluntarily or at the request of that subsidiary.

For a discussion of the effects of rating actions on the Company, see Note 5, Contracts Accounted for as Insurance, and Note 11, Reinsurance.

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Fair Value Measurement

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurement

Fair Value Measurement

The Company carries a 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 Nine Months 2019, 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 methods for calculating fair value produce a fair value that may not be indicative of net realizable value or reflective of future fair values. The use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a 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 as follows, with Level 1 being the highest and Level 3 the lowest. An asset's or liability’s categorization 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 from Level 2 into Level 3 during Nine Months 2019. There were no other transfers into or from Level 3 during the periods presented.

Carried at Fair Value

Fixed-Maturity Securities and Short-Term Investments

The fair value of bonds in the investment portfolio 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 investments is more subjective when markets are less liquid due to the lack of market based inputs.

Short-term investments that are traded in active markets are classified within Level 1 in the fair value hierarchy and their value is based on quoted market prices. Securities such as discount notes are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their cost approximates fair value.

As of September 30, 2019, the Company used models to price 133 securities, including securities that were purchased or obtained for loss mitigation or other risk management purposes, with a Level 3 fair value of $1,135 million. Most Level 3 securities were priced with the assistance of an independent third party. 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.

Other Assets

Committed Capital Securities (CCS)

Each of AGC and AGM have entered into put agreements with four separate custodial trusts allowing each of AGC and AGM, respectively, 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. Fair value losses on CCS recorded in other income were $14 million and $4 million in Third Quarter 2019 and Nine Months 2019, respectively, and fair value losses were $1 million and $3 million in Third Quarter 2018 and Nine Months 2018, respectively.

The fair value of CCS 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 recorded in other income in the condensed consolidated statement of operations. The estimated current cost of the Company’s CCS is based on several factors, including AGM's and AGC's CDS spreads, LIBOR curve projections, 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 in the fair value hierarchy.

Supplemental Executive Retirement Plan (SERP)

The fair value of the Company's various SERP assets are based on either (i) the observable published daily values of the underlying mutual fund included in the plans (Level 1) or (ii) the net asset value of the funds if a published daily value is not available (Level 2). The net asset value's are based on observable information. Change in fair value of SERP assets is recorded in other operating expenses in the condensed consolidated statement of operations.

Contracts Accounted for as Credit Derivatives

The Company’s credit derivatives primarily consist of insured CDS contracts, and also include interest rate swaps that qualify as derivatives under GAAP, which requires fair value measurement with changes recorded in the statement of operations. The Company did not enter into CDS 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 are generally terminated for an amount that approximates 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. Management has tracked the historical pricing of the Company’s

transactions to establish historical price points in the hypothetical market that are used in the fair value calculation. 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 or pay and the estimated present value of premiums that a financial guarantor of comparable credit-worthiness would hypothetically charge or pay 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 September 30, 2019 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 establishment 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 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.

With respect to CDS transactions for which there is an expected claim payment within the next twelve months, the allocation of gross spread reflects a higher allocation to the cost of credit rather than the bank profit component. It is assumed that a bank would be willing to accept a lower profit on distressed transactions in order to remove these transactions from its financial statements.

Market sources determine credit spreads by reviewing new issuance pricing for specific asset classes and receiving price quotes from their trading desks for the specific asset in question. Management validates these quotes by cross-referencing quotes received from one market source against quotes received from another market source to ensure reasonableness. In addition, the Company compares the relative change in price quotes received from one quarter to another, with the relative change experienced by published market indices for a specific asset class. Collateral specific spreads obtained from third-party, independent market sources are un-published spread quotes from market participants or market traders who are not trustees. Management obtains this information as the result of direct communication with these sources as part of the valuation process. The following spread hierarchy is utilized in determining which source of gross spread to use.

• 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 1.50% to 2.13% at September 30, 2019 and 2.47% to 2.89% at December 31, 2018.

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. For credit spreads on the Company’s name 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. 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.

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 mitigating the amount of unrealized gains that are recognized on certain CDS contracts. Given the current market conditions and the Company’s own credit spreads, approximately 17%, based on fair value, of the Company's CDS contracts were fair valued using this minimum premium as of December 31, 2018. As of September 30, 2019, the corresponding number was de minimis. 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 previously 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 less 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 its CDS contracts and taking the present value of such amounts discounted at the LIBOR 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.

Fair Value Option on FG VIEs’ Assets and Liabilities

The Company elected the fair value option for all the FG VIEs’ assets and liabilities and classifies them as Level 3 in the fair value hierarchy. The prices are generally determined with the assistance of an independent third party, based on a discounted cash flow approach. The net change in the fair value of consolidated FG VIEs’ assets and liabilities is recorded in "fair value gains (losses) on FG VIEs" in the consolidated statements of operations, except for change in fair value of FG VIEs’ liabilities with recourse caused by changes in instrument-specific credit risk (ISCR) which is separately presented in OCI. Interest income and interest expense are derived from the trustee reports and also included in "fair value gains (losses) on FG VIEs." The FG VIEs issued securities collateralized by first lien and second lien RMBS as well as loans and receivables.

The fair value of the Company’s 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 house price depreciation/appreciation rates based on macroeconomic forecasts. Significant changes to some of these inputs could have materially changed the market value of the FG VIEs’ assets and the implied collateral losses within the transaction. 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 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 to price the FG VIEs’ liabilities used, where appropriate, the same inputs used in determining fair value of FG VIEs’ assets and, for those liabilities insured by the Company, the benefit of the Company's insurance policy guaranteeing the timely payment of principal and interest, taking into account the Company's own credit risk.

Significant changes to any of the inputs described above could have materially changed the timing of expected losses within the 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 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.

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 September 30, 2019

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed-maturity securities
Obligations of state and political subdivisions	$	4,463	$	—	$	4,354	$	109
U.S. government and agencies	155		—		155		—
Corporate securities	2,339		—		2,293		46
Mortgage-backed securities:
RMBS	877		—		561		316
Commercial mortgage-backed securities (CMBS)	469		—		469		—
Asset-backed securities	775		—		111		664
Non-U.S. government securities	199		—		199		—
Total fixed-maturity securities	9,277		—		8,142		1,135
Short-term investments	1,142		888		254		—
Other invested assets (1)	6		—		—		6
FG VIEs’ assets, at fair value	469		—		—		469
Other assets	148		30		42		76
Total assets carried at fair value	$	11,042	$	918	$	8,438	$	1,686
Liabilities:
Credit derivative liabilities	$	214	$	—	$	—	$	214
FG VIEs’ liabilities with recourse, at fair value	388		—		—		388
FG VIEs’ liabilities without recourse, at fair value	105		—		—		105
Total liabilities carried at fair value	$	707	$	—	$	—	$	707

Fair Value Hierarchy of Financial Instruments Carried at Fair Value

As of December 31, 2018

			Fair Value Hierarchy
	Fair Value		Level 1		Level 2		Level 3
	(in millions)
Assets:
Investment portfolio, available-for-sale:
Fixed-maturity securities
Obligations of state and political subdivisions	$	4,911	$	—	$	4,812	$	99
U.S. government and agencies	175		—		175		—
Corporate securities	2,136		—		2,080		56
Mortgage-backed securities:
RMBS	982		—		673		309
CMBS	539		—		539		—
Asset-backed securities	1,068		—		121		947
Non-U.S. government securities	278		—		278		—
Total fixed-maturity securities	10,089		—		8,678		1,411
Short-term investments	729		429		300		—
Other invested assets (1)	7		—		—		7
FG VIEs’ assets, at fair value	569		—		—		569
Other assets	139		25		38		76
Total assets carried at fair value	$	11,533	$	454	$	9,016	$	2,063
Liabilities:
Credit derivative liabilities	$	209	$	—	$	—	$	209
FG VIEs’ liabilities with recourse, at fair value	517		—		—		517
FG VIEs’ liabilities without recourse, at fair value	102		—		—		102
Total liabilities carried at fair value	$	828	$	—	$	—	$	828

____________________

(1) Includes Level 3 mortgage loans that are recorded at fair value on a non-recurring basis.

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 Third Quarter 2019 and 2018 and Nine Months 2019 and 2018.

Fair Value Level 3 Rollforward

Recurring Basis

Third Quarter 2019

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of June 30, 2019	$	105				$	48				$	325				$	674				$	526				$	87				$	(216	)			$	(446	)			$	(105	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	3			(1	)	1			(1	)	5			(1	)	7			(1	)	6			(2	)	(14		)	(3	)	5			(5	)	(2		)	(2	)	(2		)	(2	)
Other comprehensive income (loss)	(4		)			(3		)			1					(3		)			—					—					—					1					—
Purchases	6					—					—					1					—					—					—					—					—
Settlements	(1		)			—					(15		)			(15		)			(69		)			—					3					64					3
FG VIE consolidation	—					—					—					—					6					—					—					(5		)			(1		)
Fair value as of September 30, 2019	$	109				$	46				$	316				$	664				$	469				$	73				$	(208	)			$	(388	)			$	(105	)
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of September 30, 2019																					$	6		(2	)	$	(14	)	(3	)	$	8		(5	)	$	(2	)	(2	)	$	(1	)	(2	)
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of September 30, 2019	$	(4	)			$	(3	)			$	1				$	(2	)								$	—									$	1

Fair Value Level 3 Rollforward

Recurring Basis

Third Quarter 2018

	Fixed-Maturity Securities																																		FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions				Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of June 30, 2018	$	92			$	63				$	311				$	897				$	627				$	61				$	(257	)			$	(571	)			$	(108	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	1		(1	)	2			(1	)	3			(1	)	14			(1	)	(1		)	(2	)	(1		)	(3	)	21			(5	)	3			(2	)	1			(2	)
Other comprehensive income (loss)	6				(5		)			—					(12		)			—					—					—					(3		)			—
Purchases	—				—					—					64					—					—					—					—					—
Settlements	—				—					(15		)			(10		)			(30		)			—					(1		)			26					3
Fair value as of September 30, 2018	$	99			$	60				$	299				$	953				$	596				$	60				$	(237	)			$	(545	)			$	(104	)
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2018	$	6			$	(5	)			$	1				$	(11	)			$	2		(2	)	$	(1	)	(3	)	$	20		(5	)	$	(1	)	(2	)	$	1		(2	)

Fair Value Level 3 Rollforward

Recurring Basis

Nine Months 2019

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of December 31, 2018	$	99				$	56				$	309				$	947				$	569				$	77				$	(207	)			$	(517	)			$	(102	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	5			(1	)	(9		)	(1	)	16			(1	)	51			(1	)	70			(2	)	(4		)	(3	)	(25		)	(5	)	(33		)	(2	)	(9		)	(2	)
Other comprehensive income (loss)	1					(1		)			21					(97		)			—					—					—					6					—
Purchases	6					—					11					19					—					—					—					—					—
Settlements	(2		)			—					(41		)			(257		)			(170		)			—					24					156					6
FG VIE consolidation	—					—					—					—					6					—					—					(5		)			(1		)
FG VIE deconsolidations	—					—					—					—					(6		)			—					—					5					1
Transfers into Level 3	—					—					—					1					—					—					—					—					—
Fair value as of September 30, 2019	$	109				$	46				$	316				$	664				$	469				$	73				$	(208	)			$	(388	)			$	(105	)
Change in unrealized gains/(losses) included in earnings related to financial instruments held as of September 30, 2019																					$	78		(2	)	$	(4	)	(3	)	$	(19	)	(5	)	$	(32	)	(2	)	$	(16	)	(2	)
Change in unrealized gains/(losses) included in OCI related to financial instruments held as of September 30, 2019	$	1				$	(1	)			$	21				$	8									$	—									$	6

Fair Value Level 3 Rollforward

Recurring Basis

Nine Months 2018

	Fixed-Maturity Securities																																			FG VIEs’ Liabilities, at Fair Value
	Obligations of State and Political Subdivisions					Corporate Securities					RMBS					Asset- Backed Securities					FG VIEs’ Assets at Fair Value					Other (6)					Credit Derivative Asset (Liability), net (4)					With Recourse					Without Recourse
	(in millions)
Fair value as of December 31, 2017	$	76				$	67				$	334				$	787				$	700				$	64				$	(269	)			$	(627	)			$	(130	)
Total pretax realized and unrealized gains/(losses) recorded in:
Net income (loss)	3			(1	)	(2		)	(1	)	16			(1	)	43			(1	)	3			(2	)	(3		)	(3	)	103			(5	)	(1		)	(2	)	3			(2	)
Other comprehensive income (loss)	17					(5		)			(10		)			(3		)			—					—					—					(1		)			—
Purchases	4					—					9					164					—					—					—					—					—
Issuances	—					—					—					—					—					—					(68		)	(7	)	—					—
Settlements	(1		)			—					(50		)			(38		)			(90		)			(1		)			(3		)			83					7
FG VIE deconsolidations	—					—					—					—					(17		)			—					—					1					16
Fair value as of September 30, 2018	$	99				$	60				$	299				$	953				$	596				$	60				$	(237	)			$	(545	)			$	(104	)
Change in unrealized gains/(losses) related to financial instruments held as of September 30, 2018	$	17				$	(5	)			$	(7	)			$	(1	)			$	13		(2	)	$	(3	)	(3	)	$	93		(5	)	$	(2	)	(2	)	$	2		(2	)

 ____________________

(1) Included in net realized investment gains (losses) and net investment income.

(2) Included in fair value gains (losses) on FG VIEs.

(3) Recorded in net investment income and other income.

(4) Represents the net position of credit derivatives. Credit derivative assets (recorded 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 sheet based on net exposure by counterparty.

(5) Reported in net change in fair value of credit derivatives.

(6) Includes CCS and other invested assets.

(7) Relates to SGI Transaction. See Note 11, Reinsurance.

Level 3 Fair Value Disclosures

Quantitative Information About Level 3 Fair Value Inputs

At September 30, 2019

Financial Instrument Description (1)	Fair Value at September 30, 2019 (in millions)			Significant Unobservable Inputs	Range				Weighted Average as a Percentage of Current Par Outstanding
Assets (liabilities) (2):
Fixed-maturity securities:
Obligations of state and political subdivisions	$	109		Yield	4.5	%	-	32.3%	8.4%
Corporate securities	46			Yield	35.8%
RMBS	316			CPR	1.4	%	-	16.9%	6.0%
				CDR	1.5	%	-	6.9%	4.9%
				Loss severity	40.0	%	-	125.0%	85.7%
				Yield	3.5	%	-	6.1%	4.2%
Asset-backed securities:
Life insurance transactions	339			Yield	5.5%
CLOs /Trust preferred securities (TruPS)	274			Yield	2.5	%	-	5.1%	3.6%
Others	51			Yield	9.9%
FG VIEs’ assets, at fair value	469			CPR	0.7	%	-	18.4%	8.8%
				CDR	1.2	%	-	25.7%	4.7%
				Loss severity	60.0	%	-	100.0%	77.6%
				Yield	3.3	%	-	8.3%	5.0%
Other assets	70			Implied Yield	5.8	%	-	6.5%	6.2%
				Term (years)	10 years
Credit derivative liabilities, net	(208		)	Year 1 loss estimates	0.0	%	-	50.0%	1.2%
				Hedge cost (in basis points (bps))	8.0		-	42.0	17.0
				Bank profit (in bps)	38.0		-	191.0	81.0
				Internal floor (in bps)	30.0
				Internal credit rating	AAA		-	CCC	A+
FG VIEs’ liabilities, at fair value	(493		)	CPR	0.7	%	-	18.4%	8.8%
				CDR	1.2	%	-	25.7%	4.7%
				Loss severity	60.0	%	-	100.0%	77.6%
				Yield	3.3	%	-	8.3%	4.2%

___________________

(1) Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.

(2) Excludes several investments recorded in other invested assets with fair value of $6 million.

Quantitative Information About Level 3 Fair Value Inputs

At December 31, 2018

Financial Instrument Description (1)	Fair Value at December 31, 2018 (in millions)			Significant Unobservable Inputs	Range				Weighted Average as a Percentage of Current Par Outstanding
Assets (liabilities) (2):
Fixed-maturity securities:
Obligations of state and political subdivisions	$	99		Yield	4.5	%	-	32.7%	12.0%
Corporate securities	56			Yield	29.5%
RMBS	309			CPR	3.4	%	-	19.4%	6.2%
				CDR	1.5	%	-	6.9%	5.2%
				Loss severity	40.0	%	-	125.0%	82.7%
				Yield	5.3	%	-	8.1%	6.3%
Asset-backed securities:
Life insurance transactions	620			Yield	6.5	%	-	7.1%	6.8%
CLOs/TruPS	274			Yield	3.8	%	-	4.7%	4.3%
Others	53			Yield	11.5%
FG VIEs’ assets, at fair value	569			CPR	0.9	%	-	18.1%	9.3%
				CDR	1.3	%	-	23.7%	5.1%
				Loss severity	60.0	%	-	100.0%	79.8%
				Yield	5.0	%	-	10.2%	7.1%
Other assets	74			Implied Yield	6.6	%	-	7.2%	6.9%
				Term (years)	10 years
Credit derivative liabilities, net	(207		)	Year 1 loss estimates	0.0	%	-	66.0%	2.2%
				Hedge cost (in bps)	5.5		-	82.5	23.3
				Bank profit (in bps)	7.2		-	509.9	77.3
				Internal floor (in bps)	8.8		-	30.0	19.0
				Internal credit rating	AAA		-	CCC	AA-
FG VIEs’ liabilities, at fair value	(619		)	CPR	0.9	%	-	18.1%	9.3%
				CDR	1.3	%	-	23.7%	5.1%
				Loss severity	60.0	%	-	100.0%	79.8%
				Yield	5.0	%	-	10.2%	5.6%

____________________

(1) Discounted cash flow is used as the primary valuation technique for all financial instruments listed in this table.

(2) Excludes several investments recorded in other invested assets with fair value of $7 million.

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, as well as prices observed in the credit derivative market with an adjustment for illiquidity so that the terms would be similar to a financial guaranty insurance contract, 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 AGUS and AGMH 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. The fair value of notes payable was determined by calculating the present value of the expected cash flows, and was classified as Level 3 in the fair value hierarchy.

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 September 30, 2019						As of December 31, 2018
	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(in millions)
Assets (liabilities):
Other invested assets	$	1		$	2		$	1		$	2
Other assets (1)	91			91			130			130
Financial guaranty insurance contracts (2)	(2,731		)	(5,200		)	(3,240		)	(5,932		)
Long-term debt	(1,234		)	(1,549		)	(1,233		)	(1,496		)
Other liabilities (1)	(45		)	(45		)	(12		)	(12		)

____________________

(1) The Company's other assets and other liabilities consist predominantly of accrued interest, receivables for securities sold and payables for securities purchased, for which the carrying value approximates fair value.

(2)

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.

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Subsidiary Information - Condensed Consolidating Balance Sheet (Details) - USD ($) $ in Millions	9 Months Ended
	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Condensed Financial Information Disclosure [Abstract]
Ownership interest	100.00%
Assets
Total investment portfolio and cash	$ 10,705		$ 10,977
Investment in subsidiaries	0		0
Premiums receivable, net of commissions payable	844		904
Deferred acquisition costs	107		105
Deferred tax asset, net			68
Intercompany loan receivable	0		0
Financial guaranty variable interest entities’ assets, at fair value	469		569
Dividends receivable from affiliate	0		0
Other	1,242		980
Total assets	13,367		13,603
Liabilities and shareholders’ equity
Unearned premium reserve	3,334		3,512
Loss and loss adjustment expense reserve	1,007		1,177
Long-term debt	1,234		1,233
Intercompany loan payable	0		0
Credit derivative liabilities	214		209
Deferred tax liabilities, net			0
FG VIEs’ liabilities, at fair value	493		619
Dividends payable to affiliate	0		0
Other	433		298
Total liabilities	6,715		7,048
Effect on shareholders' equity (decrease) increase	6,652	$ 6,722	6,555	$ 6,583	$ 6,634	$ 6,839
Noncontrolling interest	0		0
Total shareholders' equity	6,652		6,555
Total liabilities and shareholders’ equity	13,367		13,603
Reportable Legal Entities [Member] | Assured Guaranty Ltd. (Parent) [Member]
Assets
Total investment portfolio and cash	41		45
Investment in subsidiaries	6,531		6,440
Premiums receivable, net of commissions payable	0		0
Deferred acquisition costs	0		0
Deferred tax asset, net			0
Intercompany loan receivable	0		0
Financial guaranty variable interest entities’ assets, at fair value	0		0
Dividends receivable from affiliate	70		60
Other	25		29
Total assets	6,667		6,574
Liabilities and shareholders’ equity
Unearned premium reserve	0		0
Loss and loss adjustment expense reserve	0		0
Long-term debt	0		0
Intercompany loan payable	0		0
Credit derivative liabilities	0		0
Deferred tax liabilities, net			0
FG VIEs’ liabilities, at fair value	0		0
Dividends payable to affiliate	0		0
Other	15		19
Total liabilities	15		19
Effect on shareholders' equity (decrease) increase	6,652		6,555
Noncontrolling interest	0		0
Total shareholders' equity	6,652		6,555
Total liabilities and shareholders’ equity	6,667		6,574
Reportable Legal Entities [Member] | Issuer Subsidiary [Member] | AGUS [Member]
Assets
Total investment portfolio and cash	416		334
Investment in subsidiaries	5,898		5,835
Premiums receivable, net of commissions payable	0		0
Deferred acquisition costs	0		0
Deferred tax asset, net			0
Intercompany loan receivable	0		0
Financial guaranty variable interest entities’ assets, at fair value	0		0
Dividends receivable from affiliate	10		0
Other	84		66
Total assets	6,408		6,235
Liabilities and shareholders’ equity
Unearned premium reserve	0		0
Loss and loss adjustment expense reserve	0		0
Long-term debt	844		844
Intercompany loan payable	50		50
Credit derivative liabilities	0		0
Deferred tax liabilities, net			49
FG VIEs’ liabilities, at fair value	0		0
Dividends payable to affiliate	70		60
Other	75		3
Total liabilities	1,039		1,006
Effect on shareholders' equity (decrease) increase	5,369		5,229
Noncontrolling interest	0		0
Total shareholders' equity	5,369		5,229
Total liabilities and shareholders’ equity	6,408		6,235
Reportable Legal Entities [Member] | Issuer Subsidiary [Member] | AGMH [Member]
Assets
Total investment portfolio and cash	24		23
Investment in subsidiaries	4,135		3,991
Premiums receivable, net of commissions payable	0		0
Deferred acquisition costs	0		0
Deferred tax asset, net			0
Intercompany loan receivable	0		0
Financial guaranty variable interest entities’ assets, at fair value	0		0
Dividends receivable from affiliate	0		0
Other	32		24
Total assets	4,191		4,038
Liabilities and shareholders’ equity
Unearned premium reserve	0		0
Loss and loss adjustment expense reserve	0		0
Long-term debt	474		468
Intercompany loan payable	0		0
Credit derivative liabilities	0		0
Deferred tax liabilities, net			50
FG VIEs’ liabilities, at fair value	0		0
Dividends payable to affiliate	10		0
Other	71		17
Total liabilities	555		535
Effect on shareholders' equity (decrease) increase	3,636		3,503
Noncontrolling interest	0		0
Total shareholders' equity	3,636		3,503
Total liabilities and shareholders’ equity	4,191		4,038
Reportable Legal Entities [Member] | Other Entities [Member]
Assets
Total investment portfolio and cash	10,655		11,000
Investment in subsidiaries	204		226
Premiums receivable, net of commissions payable	997		1,071
Deferred acquisition costs	142		143
Deferred tax asset, net			162
Intercompany loan receivable	50		50
Financial guaranty variable interest entities’ assets, at fair value	469		569
Dividends receivable from affiliate	0		0
Other	2,723		2,437
Total assets	15,240		15,658
Liabilities and shareholders’ equity
Unearned premium reserve	4,228		4,452
Loss and loss adjustment expense reserve	1,251		1,467
Long-term debt	4		5
Intercompany loan payable	300		300
Credit derivative liabilities	249		236
Deferred tax liabilities, net			0
FG VIEs’ liabilities, at fair value	493		619
Dividends payable to affiliate	0		0
Other	894		763
Total liabilities	7,419		7,842
Effect on shareholders' equity (decrease) increase	7,617		7,590
Noncontrolling interest	204		226
Total shareholders' equity	7,821		7,816
Total liabilities and shareholders’ equity	15,240		15,658
Consolidating Adjustments [Member]
Assets
Total investment portfolio and cash	(431)		(425)
Investment in subsidiaries	(16,768)		(16,492)
Premiums receivable, net of commissions payable	(153)		(167)
Deferred acquisition costs	(35)		(38)
Deferred tax asset, net			(94)
Intercompany loan receivable	(50)		(50)
Financial guaranty variable interest entities’ assets, at fair value	0		0
Dividends receivable from affiliate	(80)		(60)
Other	(1,622)		(1,576)
Total assets	(19,139)		(18,902)
Liabilities and shareholders’ equity
Unearned premium reserve	(894)		(940)
Loss and loss adjustment expense reserve	(244)		(290)
Long-term debt	(88)		(84)
Intercompany loan payable	(350)		(350)
Credit derivative liabilities	(35)		(27)
Deferred tax liabilities, net			(99)
FG VIEs’ liabilities, at fair value	0		0
Dividends payable to affiliate	(80)		(60)
Other	(622)		(504)
Total liabilities	(2,313)		(2,354)
Effect on shareholders' equity (decrease) increase	(16,622)		(16,322)
Noncontrolling interest	(204)		(226)
Total shareholders' equity	(16,826)		(16,548)
Total liabilities and shareholders’ equity	(19,139)		(18,902)
AGMH [Member] | Issuer Subsidiary [Member]
Liabilities and shareholders’ equity
Debt instrument, fair value	$ 131		$ 125

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Lease, Cost

Components of Lease Expense

	Third Quarter 2019		Nine Months 2019
	(in millions)
Lease cost (1)	$	3	$	7
Cash paid for amounts included in the measurement of lease liabilities	3		7

 ____________________

(1)

Variable and short-term lease costs are de minimis.

Lessee, Operating Lease, Liability, Maturity

Future Minimum Rental Payments

	As of September 30, 2019
Year	(in millions)
2019 (remaining three months)	$	2
2020	9
2021	8
2022	8
2023	9
Thereafter	72
Total lease payments (1)	108
Less: imputed interest	18
Total operating lease liabilities	$	90

 ____________________

(1)

At December 31, 2018, future lease payments were $9 million, $9 million, $8 million, $8 million, and $9 million for 2019 through 2023, respectively, and $72 million in aggregate for all years thereafter.

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Contracts Accounted for as Credit Derivatives (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Credit Derivatives Subordination and Ratings and Net Par Outstanding by Internal Rating

Credit Derivatives (1)

	As of September 30, 2019					As of December 31, 2018 (2)
	Net Par Outstanding		Net Fair Value			Net Par Outstanding		Net Fair Value
	(in millions)
U.S. public finance	$	2,067	$	(103	)	$	1,783	$	(65	)
Non-U.S. public finance	2,709		(46		)	2,807		(51		)
U.S. structured finance	1,266		(51		)	1,465		(85		)
Non-U.S. structured finance	123		(8		)	127		(6		)
Total	$	6,165	$	(208	)	$	6,182	$	(207	)

____________________

(1)    Expected recoveries were $5 million as of September 30, 2019 and $2 million as of December 31, 2018.

(2)    Prior year presentation has been conformed to the current year's presentation.

Distribution of Credit Derivative Net Par Outstanding by Internal Rating

	As of September 30, 2019				As of December 31, 2018
Ratings	Net Par Outstanding		% of Total		Net Par Outstanding		% of Total
	(dollars in millions)
AAA	$	1,662	27.0	%	$	1,813	29.4	%
AA	1,748		28.4		1,690		27.3
A	1,255		20.3		1,171		18.9
BBB	1,368		22.2		1,351		21.9
BIG (1)	132		2.1		157		2.5
Credit derivative net par outstanding	$	6,165	100.0	%	$	6,182	100.0	%

____________________

(1) All BIG credit derivatives are U.S. RMBS transactions.

Net Change in Fair Value of Credit Derivatives

Net Change in Fair Value of Credit Derivative Gain (Loss)

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Realized gains on credit derivatives	$	2		$	2		$	6		$	6
Net credit derivative losses (paid and payable) recovered and recoverable and other settlements	(5		)	(1		)	(30		)	(2		)
Realized gains (losses) and other settlements	(3		)	1			(24		)	4
Net unrealized gains (losses)	8			20			(1		)	99
Net change in fair value of credit derivatives	$	5		$	21		$	(25	)	$	103

CDS Spread on AGC and AGM

CDS Spread on AGC

Quoted price of CDS contract (in bps)

 

	As of September 30, 2019	As of June 30, 2019	As of December 31, 2018	As of September 30, 2018	As of June 30, 2018	As of December 31, 2017
Five-year CDS spread	56	56	110	77	105	163
One-year CDS spread	14	13	22	15	22	70

Fair Value of Credit Derivatives and Effect of AGC and AGM Credit Spreads

Fair Value of Credit Derivative Assets (Liabilities)

and Effect of AGC

Credit Spreads

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Fair value of credit derivatives before effect of AGC credit spread	$	(306	)	$	(407	)
Plus: Effect of AGC credit spread	98			200
Net fair value of credit derivatives	$	(208	)	$	(207	)

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Expected Loss to be Paid - Net Expected Loss to be Paid (Recovered) and Net Economic Loss Development (Benefit) by Accounting Model (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	$ 718	$ 1,191	$ 718	$ 1,191	$ 960	$ 1,183	$ 1,432	$ 1,303
Economic loss development after recoveries for R&W	25	0	(14)	(5)
Public Finance [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	548	870	548	870	772	864	1,082	1,203
Economic loss development after recoveries for R&W	55	39	200	50
Public Finance [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	520	832	520	832	749	832	1,041	1,157
Economic loss development after recoveries for R&W	50	42	204	59
Public Finance [Member] | Non United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	28		28			32
Economic loss development after recoveries for R&W			(4)
RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	135	303	135	303	162	293	326	73
Economic loss development after recoveries for R&W	(40)	(40)	(223)	(52)
RMBS [Member] | First Lien [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	164		164			243
Economic loss development after recoveries for R&W	27	13	77	(4)
RMBS [Member] | Second Lien [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	29		29			50
Economic loss development after recoveries for R&W	13	27	146	56
Other structured finance [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	35	18	35	18	26	26	24	27
Economic loss development after recoveries for R&W	10	1	9	(3)
Structured Finance [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	170	321	170	321	$ 188	319	$ 350	$ 100
Economic loss development after recoveries for R&W	(30)	(39)	(214)	(55)
Insurance Contracts [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	662		662			1,110
Economic loss development after recoveries for R&W	17	1	5	(9)
FG VIEs and other [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	61		61			75
Economic loss development after recoveries for R&W	(2)	(3)	(26)	(7)
Credit derivatives [Member]
Schedule of Expected Losses to be Paid [Line Items]
Net expected loss to be paid after recoveries for R&W	(5)		(5)			$ (2)
Economic loss development after recoveries for R&W	$ 10	$ 2	$ 7	$ 11

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Expected Loss to be Paid Expected Loss to be Paid - Net Economic Loss Development (Benefit) (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Schedule of Expected Losses to be Paid [Line Items]
Economic loss development after recoveries for R&W	$ 25	$ 0	$ (14)	$ (5)
RMBS [Member] | United States [Member]
Schedule of Expected Losses to be Paid [Line Items]
Economic loss development after recoveries for R&W	(40)	(40)	(223)	(52)
RMBS [Member] | United States [Member] | First Lien [Member]
Schedule of Expected Losses to be Paid [Line Items]
Economic loss development after recoveries for R&W	27	13	77	(4)
RMBS [Member] | United States [Member] | Second Lien [Member]
Schedule of Expected Losses to be Paid [Line Items]
Economic loss development after recoveries for R&W	$ 13	$ 27	$ 146	$ 56

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Contracts Accounted for as Credit Derivatives - Narrative (Details) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2019 USD ($) Counterparty	Dec. 31, 2018 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Credit Derivatives
Net Par Outstanding	$ 6,165	$ 6,182
Credit risk derivatives, at fair value, net	(208)	(207)
Net expected loss to be paid after recoveries	$ 718	$ 1,183	$ 960	$ 1,191	$ 1,432	$ 1,303
Estimated remaining weighted average life of credit derivatives (in years)	11 years 2 months 12 days	11 years 7 months 6 days
Gross par of CDS with collateral posting requirement [Member]
Credit Derivatives
Collateral posting requirement	$ 193
Number of counterparties | Counterparty	1
Collateral posted [Member]
Credit Derivatives
Collateral posted	$ 0

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Investments and Cash - Internally Managed Investment Portfolio (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Debt and Equity Securities, FV-NI [Line Items]
Fixed-maturity securities	$ 10,419	$ 10,818
Short-term investments, at fair value	1,142	729
Other invested assets	57	55
Total investment portfolio	10,476	10,873
Fixed Maturities, Managed Externally [Member]
Debt and Equity Securities, FV-NI [Line Items]
Fixed-maturity securities	8,363	8,909
Investments, Managed Internally [Member]
Debt and Equity Securities, FV-NI [Line Items]
Fixed-maturity securities	914	1,180
Alternative Investments [Member]
Debt and Equity Securities, FV-NI [Line Items]
Other invested assets	42	39
Other Investments, Internally Managed [Member]
Debt and Equity Securities, FV-NI [Line Items]
Other invested assets	$ 15	$ 16
BIG [Member]
Debt and Equity Securities, FV-NI [Line Items]
Fixed-Maturity Investments, Non-Investment Grade, Percent	8.40%	10.80%

XML

Investments and Cash - Narrative (Details) $ in Millions	1 Months Ended	3 Months Ended		9 Months Ended
	Feb. 28, 2017 USD ($)	Sep. 30, 2019 USD ($) Security	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) Security manager	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($) Security
Investment [Line Items]
Accrued investment income		$ 86		$ 86		$ 91
Proceeds from sale of fixed-maturity securities available-for-sale		$ 405	$ 316	1,306	$ 908
Non-cash payments to acquire fixed-maturity securities				$ 144	$ 4
Number of outside managers managing investment portfolio | manager				7
Number of securities with unrealized losses greater than 10% of book value for 12 months or more | Security		27		27		38
Total unrealized losses for securities having losses greater than 10% of book value for 12 months or more		$ 24		$ 24		$ 43
Assets held-in-trust		278		278		266
Future Equity Investments [Member]
Investment [Line Items]
Long-term purchase commitment, amount	$ 100
Remaining minimum amount committed		86		86
AGL Subsidiaries [Member]
Investment [Line Items]
Assets held-in-trust		$ 1,596		1,596		$ 1,855
COFINA Taxable Bonds [Member]
Investment [Line Items]
Non-cash proceeds from sale of fixed-maturity securities				$ 44

XML

Contracts Accounted for as Credit Derivatives - Distribution of Credit Derivative Net Par Outstanding by Internal Rating (Details) - USD ($) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Credit Derivatives
Net Par Outstanding	$ 6,165	$ 6,182
BIG [Member]
Credit Derivatives
Net Par Outstanding	132	157
Credit Concentration Risk [Member] | Derivative, Aggregate Notional Amount [Member]
Credit Derivatives
Net Par Outstanding	$ 6,165	$ 6,182
Percentage of installment premiums denominated in currencies other than the U.S. dollar	100.00%	100.00%
Credit Concentration Risk [Member] | Derivative, Aggregate Notional Amount [Member] | Internal Credit Rating, AAA [Member]
Credit Derivatives
Net Par Outstanding	$ 1,662	$ 1,813
Percentage of installment premiums denominated in currencies other than the U.S. dollar	27.00%	29.40%
Credit Concentration Risk [Member] | Derivative, Aggregate Notional Amount [Member] | Internal Credit Rating, AA [Member]
Credit Derivatives
Net Par Outstanding	$ 1,748	$ 1,690
Percentage of installment premiums denominated in currencies other than the U.S. dollar	28.40%	27.30%
Credit Concentration Risk [Member] | Derivative, Aggregate Notional Amount [Member] | Internal Credit Rating, A [Member]
Credit Derivatives
Net Par Outstanding	$ 1,255	$ 1,171
Percentage of installment premiums denominated in currencies other than the U.S. dollar	20.30%	18.90%
Credit Concentration Risk [Member] | Derivative, Aggregate Notional Amount [Member] | Internal Credit Rating, BBB [Member]
Credit Derivatives
Net Par Outstanding	$ 1,368	$ 1,351
Percentage of installment premiums denominated in currencies other than the U.S. dollar	22.20%	21.90%
Credit Concentration Risk [Member] | Derivative, Aggregate Notional Amount [Member] | BIG [Member]
Credit Derivatives
Net Par Outstanding	$ 132	$ 157
Percentage of installment premiums denominated in currencies other than the U.S. dollar	2.10%	2.50%

XML

Investments and Cash - Gross Unrealized Loss by Length of Time (Details) $ in Millions	Sep. 30, 2019 USD ($) Security	Dec. 31, 2018 USD ($) Security
Less than 12 months
Fair value	$ 511	$ 1,643
Unrealized loss	(12)	(34)
12 months or more
Fair Value	602	1,952
Unrealized loss	(40)	(105)
Total
Fair value	1,113	3,595
Unrealized loss	$ (52)	$ (139)
Number of securities
Less than 12 months (in securities) | Security	133	417
12 months or more (in securities) | Security	143	608
Total (in securities) | Security	256	997
Number of securities with OTTI
Less than 12 months (in securities) | Security	12	22
12 months or more (in securities) | Security	9	22
Total (in securities) | Security	21	42
Obligations of state and political subdivisions [Member]
Less than 12 months
Fair value	$ 5	$ 195
Unrealized loss	0	(4)
12 months or more
Fair Value	4	658
Unrealized loss	0	(14)
Total
Fair value	9	853
Unrealized loss	0	(18)
US government and agencies [Member]
Less than 12 months
Fair value	13	11
Unrealized loss	0	0
12 months or more
Fair Value	4	24
Unrealized loss	0	(1)
Total
Fair value	17	35
Unrealized loss	0	(1)
Corporate securities [Member]
Less than 12 months
Fair value	349	836
Unrealized loss	(8)	(19)
12 months or more
Fair Value	170	522
Unrealized loss	(19)	(33)
Total
Fair value	519	1,358
Unrealized loss	(27)	(52)
RMBS [Member]
Less than 12 months
Fair value	7	85
Unrealized loss	0	(2)
12 months or more
Fair Value	193	447
Unrealized loss	(10)	(32)
Total
Fair value	200	532
Unrealized loss	(10)	(34)
CMBS [Member]
Less than 12 months
Fair value	1	111
Unrealized loss	0	(1)
12 months or more
Fair Value	4	164
Unrealized loss	0	(6)
Total
Fair value	5	275
Unrealized loss	0	(7)
Asset-backed Securities [Member]
Less than 12 months
Fair value	83	322
Unrealized loss	(2)	(4)
12 months or more
Fair Value	147	38
Unrealized loss	(1)	(1)
Total
Fair value	230	360
Unrealized loss	(3)	(5)
Foreign government securities [Member]
Less than 12 months
Fair value	53	83
Unrealized loss	(2)	(4)
12 months or more
Fair Value	80	99
Unrealized loss	(10)	(18)
Total
Fair value	133	182
Unrealized loss	$ (12)	$ (22)

XML

Fair Value Measurement - Fair Value Level 3 Rollforward Recurring Basis (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
FG VIEs' assets, at fair value [Member]
Fair Value Level 3 Rollforward
Fair value at beginning of period	$ 526	$ 627	$ 569	$ 700
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Net Income (loss)	6	(1)	70	3
Other comprehensive income (loss)	0	0	0	0
Purchases	0	0	0	0
Issuances				0
Settlements	(69)	(30)	(170)	(90)
FG VIE consolidation	6		6
FG VIE deconsolidations			(6)	(17)
Transfers Into Level 3			0
Fair value at end of period	469	596	469	596
Change in unrealized gains/(losses) related to financial instruments held	6	2	78	13
Other Assets and Other Invested Assets [Member]
Fair Value Level 3 Rollforward
Fair value at beginning of period	87	61	77	64
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Net Income (loss)	(14)	(1)	(4)	(3)
Other comprehensive income (loss)	0	0	0	0
Purchases	0	0	0	0
Issuances				0
Settlements	0	0	0	(1)
FG VIE consolidation	0		0
FG VIE deconsolidations			0	0
Transfers Into Level 3			0
Fair value at end of period	73	60	73	60
Change in unrealized gains/(losses) related to financial instruments held	(14)	(1)	(4)	(3)
Obligations of state and political subdivisions [Member] | Fixed Maturities [Member]
Fair Value Level 3 Rollforward
Fair value at beginning of period	105	92	99	76
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Net Income (loss)	3	1	5	3
Other comprehensive income (loss)	(4)	6	1	17
Purchases	6	0	6	4
Issuances				0
Settlements	(1)	0	(2)	(1)
FG VIE consolidation	0		0
FG VIE deconsolidations			0	0
Transfers Into Level 3			0
Fair value at end of period	109	99	109	99
Change in unrealized gains/(losses) related to financial instruments held		6		17
Corporate securities [Member] | Fixed Maturities [Member]
Fair Value Level 3 Rollforward
Fair value at beginning of period	48	63	56	67
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Net Income (loss)	1	2	(9)	(2)
Other comprehensive income (loss)	(3)	(5)	(1)	(5)
Purchases	0	0	0	0
Issuances				0
Settlements	0	0	0	0
FG VIE consolidation	0		0
FG VIE deconsolidations			0	0
Transfers Into Level 3			0
Fair value at end of period	46	60	46	60
Change in unrealized gains/(losses) related to financial instruments held		(5)		(5)
RMBS [Member] | Fixed Maturities [Member]
Fair Value Level 3 Rollforward
Fair value at beginning of period	325	311	309	334
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Net Income (loss)	5	3	16	16
Other comprehensive income (loss)	1	0	21	(10)
Purchases	0	0	11	9
Issuances				0
Settlements	(15)	(15)	(41)	(50)
FG VIE consolidation	0		0
FG VIE deconsolidations			0	0
Transfers Into Level 3			0
Fair value at end of period	316	299	316	299
Change in unrealized gains/(losses) related to financial instruments held		1		(7)
Asset-backed Securities [Member] | Fixed Maturities [Member]
Fair Value Level 3 Rollforward
Fair value at beginning of period	674	897	947	787
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Net Income (loss)	7	14	51	43
Other comprehensive income (loss)	(3)	(12)	(97)	(3)
Purchases	1	64	19	164
Issuances				0
Settlements	(15)	(10)	(257)	(38)
FG VIE consolidation	0		0
FG VIE deconsolidations			0	0
Transfers Into Level 3			1
Fair value at end of period	664	953	664	953
Change in unrealized gains/(losses) related to financial instruments held		(11)		(1)
Other Comprehensive Income (Loss) [Member] | Other Assets and Other Invested Assets [Member]
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Change in unrealized gains/(losses) related to financial instruments held	0		0
Other Comprehensive Income (Loss) [Member] | Obligations of state and political subdivisions [Member] | Fixed Maturities [Member]
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Change in unrealized gains/(losses) related to financial instruments held	(4)		1
Other Comprehensive Income (Loss) [Member] | Corporate securities [Member] | Fixed Maturities [Member]
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Change in unrealized gains/(losses) related to financial instruments held	(3)		(1)
Other Comprehensive Income (Loss) [Member] | RMBS [Member] | Fixed Maturities [Member]
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Change in unrealized gains/(losses) related to financial instruments held	1		21
Other Comprehensive Income (Loss) [Member] | Asset-backed Securities [Member] | Fixed Maturities [Member]
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Assets [Abstract]
Change in unrealized gains/(losses) related to financial instruments held	(2)		8
FG VIEs' liabilities with recourse, at fair value [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair value at beginning of period	(446)	(571)	(517)	(627)
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Liabilities [Abstract]
Net income (loss)	(2)	3	(33)	(1)
Other comprehensive income (loss)	1	(3)	6	(1)
Purchases	0	0	0	0
Issuances				0
Settlements	64	26	156	83
FG VIE consolidation	(5)		(5)
FG VIE deconsolidations			5	1
Transfers Into Level 3			0
Fair value at end of period	(388)	(545)	(388)	(545)
Change in unrealized gains/(losses) included in earnings related to financial instruments	(2)	(1)	(32)	(2)
FG VIEs' liabilities with recourse, at fair value [Member] | Other Comprehensive Income (Loss) [Member]
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Liabilities [Abstract]
Change in unrealized gains/(losses) included in earnings related to financial instruments	1		6
Financial Guaranty Variable Interest Liabilities without Recourse [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Fair value at beginning of period	(105)	(108)	(102)	(130)
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Liabilities [Abstract]
Net income (loss)	(2)	1	(9)	3
Other comprehensive income (loss)	0	0	0	0
Purchases	0	0	0	0
Issuances				0
Settlements	3	3	6	7
FG VIE consolidation	(1)		(1)
FG VIE deconsolidations			1	16
Transfers Into Level 3			0
Fair value at end of period	(105)	(104)	(105)	(104)
Change in unrealized gains/(losses) included in earnings related to financial instruments	(1)	1	(16)	2
Credit Risk Contract [Member]
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Fair value at start of period	(216)	(257)	(207)	(269)
Total Pretax Realized And Unrealized Gains (Losses) Recorded As Net Derivative Asset (Liability) [Abstract]
Net income (loss)	5	21	(25)	103
Other comprehensive income (loss)	0	0	0	0
Purchases	0	0	0	0
Issuances				(68)
Settlements	3	(1)	24	(3)
FG VIE consolidation	0		0
FG VIE deconsolidations			0	0
Transfers into Level 3			0
Fair value at end of period	(208)	(237)	(208)	(237)
Change in unrealized gains/(losses) related to financial instruments held as of end of year	$ 8	$ 20	$ (19)	$ 93

XML

Commitments and Contingencies Commitments and Contingencies - Components of Lease Expense (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Lease cost	$ 3	$ 7
Cash paid for amounts included in the measurement of lease liabilities	$ 3	$ 7

XML

Business and Basis of Presentation

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Business and Basis of Presentation

Business and Basis of Presentation

Business

Assured Guaranty Ltd. (AGL and, together with its subsidiaries, Assured Guaranty or the Company) is a Bermuda-based holding company that provides, through its operating subsidiaries, credit protection products to the United States (U.S.) and international public finance (including infrastructure) and structured finance markets and, as of October 1, 2019, asset management services. The Company applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. If an obligor defaults on a scheduled payment due on an obligation, including a scheduled principal or interest payment (debt service), the Company is required under its unconditional and irrevocable financial guaranty to pay the amount of the shortfall to the holder of the obligation. The Company markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities as well as to investors in such obligations. The Company guarantees obligations issued principally in the U.S. and the United Kingdom (U.K.), and also guarantees obligations issued in other countries and regions, including Western Europe, Canada and Australia. The Company also provides non-financial guaranty insurance and reinsurance on transactions with similar risk profiles to its structured finance exposures written in financial guaranty form. In addition, as of October 1, 2019, the Company manages assets across collateralized loan obligations (CLOs) and long-duration opportunity funds that build on its corporate credit, asset-backed finance and healthcare experience as well as certain funds now subject to orderly wind-down.

Basis of Presentation

The unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). In management's opinion, all material adjustments necessary for a fair statement of the financial condition, results of operations and cash flows of the Company and its consolidated variable interest entities (VIEs) are reflected in the periods presented and are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These unaudited interim condensed consolidated financial statements are as of September 30, 2019 and cover the three-month period ended September 30, 2019 (Third Quarter 2019), the three-month period ended September 30, 2018 (Third Quarter 2018), the nine-month period ended September 30, 2019 (Nine Months 2019) and the nine-month period ended September 30, 2018 (Nine Months 2018). Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, but is not required for interim reporting purposes, has been condensed or omitted. The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The presentation of cash flow amounts related to short-term investments was changed during the fourth quarter of 2018 to reflect cash flows on a gross, rather than a net, basis. The presentation of equity in net earnings of investees was changed in 2019 to reclassify amounts previously reported in net investment income and other income to a separate line item on the condensed consolidated statements of operations. Certain prior year balances have been reclassified to conform to the current year's presentation.

The unaudited interim condensed consolidated financial statements include the accounts of AGL, its direct and indirect subsidiaries and its consolidated VIEs. Intercompany accounts and transactions between and among all consolidated entities have been eliminated.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in AGL’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the U.S. Securities and Exchange Commission (SEC).

The Company's principal insurance company subsidiaries are:

• Assured Guaranty Municipal Corp. (AGM), domiciled in New York;

• Municipal Assurance Corp. (MAC), domiciled in New York;

• Assured Guaranty Corp. (AGC), domiciled in Maryland;

• Assured Guaranty (Europe) plc (AGE), organized in the U.K.;

• Assured Guaranty Re Ltd. (AG Re), domiciled in Bermuda; and

• Assured Guaranty Re Overseas Ltd. (AGRO), domiciled in Bermuda.

The Company’s organizational structure includes various holding companies, two of which - Assured Guaranty US Holdings Inc. (AGUS) and Assured Guaranty Municipal Holdings Inc. (AGMH) - have public debt outstanding. See Note 15, Subsidiary Information.

Acquisition of BlueMountain

On October 1, 2019, AGUS completed the acquisition of all of the outstanding equity interests in BlueMountain Capital Management, LLC (BlueMountain) and its associated entities, for a purchase price of approximately $160 million (BlueMountain Acquisition). As of the date of acquisition, BlueMountain managed $18.3 billion in assets across CLOs and long-duration opportunity funds that build on its corporate credit, asset-backed finance and healthcare experience, as well as certain funds now subject to orderly wind-down. In addition, AGUS contributed $60 million of cash to BlueMountain at closing and intends to contribute an additional $30 million in cash within a year from closing. To fund the BlueMountain Acquisition and the related capital contributions, AGM, AGC and MAC made 10 year, 3.5% interest rate inter-company loans to AGUS totaling $250 million.

The Company is in the process of allocating the purchase price to the assets acquired and liabilities assumed and

conforming accounting policies but has not yet completed the acquisition date balance sheet. The Company intends to include

this information in its Form 10-K for year ended December 31, 2019.

Adopted Accounting Standards

Leases

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). The Company adopted Topic 842 on January 1, 2019 using the optional transition method that allows the Company to initially apply the new requirements at the effective date, with no revision to prior periods. See Note 12, Commitments and Contingencies, for additional information.

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU 2017-08, Receivables-Nonrefundable Fees and Other Costs (Topic 310-20) - Premium Amortization on Purchased Callable Debt Securities.  This ASU shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date.  This ASU was adopted on January 1, 2019, with no effect on the Company's condensed consolidated financial statements.

Future Application of Accounting Standards

Credit Losses on Financial Instruments

                In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The ASU provides a new current expected credit loss model to account for credit losses on certain financial assets (e.g., reinsurance recoverables, premium receivables, and held-to-maturity debt securities) and off-balance sheet exposures (e.g., loan commitments). That model requires an entity to estimate lifetime credit losses related to certain financial assets, based on relevant historical information, adjusted for current conditions and reasonable and supportable forecasts that could affect the collectability of the reported amount. The ASU also makes targeted amendments to the current impairment model for available-for-sale debt securities, which includes requiring the recognition of an allowance rather than a direct write-down of the investment. The allowance may be reversed in the event that the credit of an issuer improves. In addition, the ASU eliminates the existing guidance for purchased credit impaired assets and introduces a new model for purchased financial assets with credit deterioration, such as the Company's loss mitigation securities, which requires the

recognition of an initial allowance for credit losses. Under the new guidance, the amortized cost would be the purchase price plus the allowance at the acquisition date.

                The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. For reinsurance recoverables, premiums receivable and debt instruments such as loans and held to maturity securities, entities will be required to record a cumulative-effect adjustment to the statement of financial position as of the beginning of the first reporting period in which the guidance is adopted. The changes to the impairment model for available-for-sale securities and purchased financial assets with credit deterioration are to be applied prospectively. Early adoption of the amendments is permitted; however, the Company does not plan to adopt this ASU until January 1, 2020. The Company does not expect ASU 2016-13 to have a material effect on shareholders' equity at the date of adoption.

Targeted Improvements to the Accounting for Long-Duration Contracts

In August 2018, the FASB issued ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.  The amendments in this ASU:

• improve the timeliness of recognizing changes in the liability for future policy benefits and modify the rate used to discount future cash flows,

• simplify and improve the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts,

• simplify the amortization of deferred acquisition costs, and

• improve the effectiveness of the required disclosures.

This ASU does not affect the Company’s financial guaranty insurance contracts, but may affect its accounting for certain non-financial guaranty contracts. In October 2019, the FASB affirmed its decision to defer the effective date of the ASU to January 1, 2022. The Company does not plan to adopt this ASU early, and does not expect this ASU to have a material effect on its condensed consolidated financial statements.

XML

Contracts Accounted for as Insurance

9 Months Ended

Sep. 30, 2019

Insurance [Abstract]

Contracts Accounted for as Insurance

Contracts Accounted for as Insurance

Premiums

The portfolio of outstanding exposures discussed in Note 3, Outstanding Exposure, and Note 4, Expected Loss to be Paid, includes contracts that are accounted for as insurance contracts, derivatives, and consolidated FG VIEs. Amounts presented in this note relate only to contracts accounted for as insurance. See Note 8, Contracts Accounted for as Credit Derivatives for amounts that relate to CDS and Note 9, Variable Interest Entities for amounts that are accounted for as consolidated FG VIEs.

Net Earned Premiums

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions)
Financial guaranty:
Scheduled net earned premiums	$	81	$	95	$	253	$	275
Accelerations from refundings and terminations	37		40		83		131
Accretion of discount on net premiums receivable	4		6		13		14
Financial guaranty insurance net earned premiums	122		141		349		420
Non-financial guaranty net earned premiums	1		1		4		3
Net earned premiums (1)	$	123	$	142	$	353	$	423

 ___________________

(1) Excludes $2 million and $3 million for Third Quarter 2019 and 2018, respectively, and $16 million and $9 million for Nine Months 2019 and 2018, respectively, related to consolidated FG VIEs.

Gross Premium Receivable,

Net of Commissions on Assumed Business

Roll Forward 

	Nine Months
	2019			2018
	(in millions)
Beginning of year	$	904		$	915
Less: Non-financial guaranty insurance premium receivable	1			1
Financial guaranty insurance premiums receivable	903			914
Gross written premiums on new business, net of commissions (1)	164			508
Gross premiums received, net of commissions	(198		)	(477		)
Adjustments:
Changes in the expected term	(10		)	(2		)
Accretion of discount, net of commissions on assumed business	8			5
Foreign exchange translation and remeasurement (2)	(24		)	(23		)
Cancellation of assumed reinsurance	—			(10		)
Financial guaranty insurance premium receivable (3)	843			915
Non-financial guaranty insurance premium receivable	1			1
September 30,	$	844		$	916

____________________

(1) For transactions where one of the Company's financial guaranty contracts is replaced by another of the Company's insurance subsidiary's contracts, gross written premium in this table represents only the incremental amount in excess of the original gross written premiums. Nine Months 2018 included $330 million of gross written premiums assumed from SGI on June 1, 2018, when the Company closed a reinsurance transaction with SGI (SGI Transaction). See Note 11, Reinsurance.

(2) Includes foreign exchange loss on remeasurement recorded in the condensed consolidated statements of operations of $24 million in Nine Months 2019 and $21 million in Nine Months 2018. The remaining foreign exchange translation in Nine Months 2018 was recorded in other comprehensive income (OCI) prior to the combination of the European subsidiaries.

(3) Excludes $7 million and $9 million as of September 30, 2019 and September 30, 2018, respectively, related to consolidated FG VIEs.

Approximately 73% and 72% of installment premiums at September 30, 2019 and December 31, 2018, respectively, are denominated in currencies other than the U.S. dollar, primarily the pound sterling and euro.

The timing and cumulative amount of actual collections may differ from those of expected collections in the table below due to factors such as foreign exchange rate fluctuations, counterparty collectability issues, accelerations, commutations, changes in expected lives and new business.

Expected Collections of

Financial Guaranty Insurance Gross Premiums Receivable,

Net of Commissions on Assumed Business

(Undiscounted)

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	29
2020	102
2021	77
2022	78
2023	65
2024-2028	275
2029-2033	182
2034-2038	97
After 2038	104
Total (1)	$	1,009

 ____________________

(1) Excludes expected cash collections on consolidated FG VIEs of $9 million.

The timing and cumulative amount of actual net earned premiums may differ from those of expected net earned premiums in the table below due to factors such as accelerations, commutations, changes in expected lives and new business.

Scheduled Financial Guaranty Insurance Net Earned Premiums

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	79
2020	301
2021	275
2022	252
2023	231
2024-2028	908
2029-2033	620
2034-2038	356
After 2038	319
Net deferred premium revenue (1)	3,341
Future accretion	165
Total future net earned premiums	$	3,506

 ____________________

(1) Excludes net earned premiums on consolidated FG VIEs of $48 million.

Selected Information for Financial Guaranty Insurance

Policies with Premiums Paid in Installments

	As of September 30, 2019			As of December 31, 2018
	(dollars in millions)
Premiums receivable, net of commission payable	$	843		$	903
Gross deferred premium revenue	1,237			1,313
Weighted-average risk-free rate used to discount premiums	2.2		%	2.3		%
Weighted-average period of premiums receivable (in years)	9.1			9.1

Financial Guaranty Insurance Losses

The following table provides information on net reserve (salvage), which includes loss and LAE reserves and salvage and subrogation recoverable, both net of reinsurance. To discount loss reserves, the Company used risk-free rates for U.S. dollar denominated financial guaranty insurance obligations that ranged from 0.00% to 2.20% with a weighted average of 1.80% as of September 30, 2019 and 0.00% to 3.06% with a weighted average of 2.74% as of December 31, 2018.

Net Reserve (Salvage) 

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Public finance:
U.S. public finance	$	326		$	612
Non-U.S. public finance	5			14
Public finance	331			626
Structured finance:
U.S. RMBS (1)	(97		)	21
Other structured finance	38			30
Structured finance	(59		)	51
Subtotal	272			677
Other payable (recoverable)	—			(3		)
Total	$	272		$	674

____________________

(1) Excludes net reserves of $36 million and $47 million as of September 30, 2019 and December 31, 2018, respectively, related to consolidated FG VIEs.

Components of Net Reserves (Salvage)

 

	As of September 30, 2019			As of December 31, 2018
	(in millions)
Loss and LAE reserve	$	1,007		$	1,177
Reinsurance recoverable on unpaid losses (1)	(36		)	(34		)
Loss and LAE reserve, net	971			1,143
Salvage and subrogation recoverable	(725		)	(490		)
Salvage and subrogation reinsurance payable (2)	26			24
Other payable (recoverable) (1)	—			(3		)
Salvage and subrogation recoverable, net, and other recoverable	(699		)	(469		)
Net reserves (salvage)	$	272		$	674

____________________

(1) Recorded as a component of other assets in the condensed consolidated balance sheets.

(2) Recorded as a component of other liabilities in the condensed consolidated balance sheets.

The table below provides a reconciliation of net expected loss to be paid to net expected loss to be expensed. Expected loss to be paid differs from expected loss to be expensed due to: (i) the contra-paid which represents the claim payments made and recoveries received that have not yet been recognized in the statement of operations, (ii) salvage and subrogation recoverable for transactions that are in a net recovery position where the Company has not yet received recoveries on claims previously paid (and therefore recognized in income but not yet received), and (iii) loss reserves that have already been established (and therefore expensed but not yet paid).

Reconciliation of Net Expected Loss to be Paid and

Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts

	As of September 30, 2019
	(in millions)
Net expected loss to be paid - financial guaranty insurance	$	661
Contra-paid, net	58
Salvage and subrogation recoverable, net, and other recoverable	699
Loss and LAE reserve - financial guaranty insurance contracts, net of reinsurance	(970		)
Net expected loss to be expensed (present value) (1)	$	448

____________________

(1)    Excludes $34 million as of September 30, 2019, related to consolidated FG VIEs.

The following table provides a schedule of the expected timing of net expected losses to be expensed. The amount and timing of actual loss and LAE may differ from the estimates shown below due to factors such as accelerations, commutations, changes in expected lives and updates to loss estimates. This table excludes amounts related to FG VIEs, which are eliminated in consolidation.

Net Expected Loss to be Expensed

Financial Guaranty Insurance Contracts 

	As of September 30, 2019
	(in millions)
2019 (October 1 - December 31)	$	9
2020	37
2021	36
2022	35
2023	31
2024-2028	147
2029-2033	99
2034-2038	45
After 2038	9
Net expected loss to be expensed	448
Future accretion	30
Total expected future loss and LAE	$	478

 

The following table presents the loss and LAE recorded in the condensed consolidated statements of operations by sector for insurance contracts. Amounts presented are net of reinsurance.

Loss and LAE

Reported on the

Condensed Consolidated Statements of Operations

  

	Loss (Benefit)
	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Public finance:
U.S. public finance	$	64		$	42		$	228		$	76
Non-U.S. public finance	1			(3		)	(7		)	(5		)
Public finance	65			39			221			71
Structured finance:
U.S. RMBS (1)	(35		)	(21		)	(150		)	(17		)
Other structured finance	—			(1		)	4			(11		)
Structured finance	(35		)	(22		)	(146		)	(28		)
Loss and LAE	$	30		$	17		$	75		$	43

____________________

(1) Excludes a benefit of $3 million and $3 million for Third Quarter 2019 and 2018, respectively, and a benefit of $18 million and a loss of $0 million for Nine Months 2019 and 2018 respectively, related to consolidated FG VIEs.

The following tables provide information on financial guaranty insurance contracts categorized as BIG.

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of September 30, 2019

	BIG  Categories
	BIG 1						BIG 2					BIG 3						Total BIG, Net			Effect of Consolidating FG VIEs			Total
	Gross			Ceded			Gross			Ceded		Gross			Ceded
	(dollars in millions)
Number of risks (1)	119			(6		)	26			—		134			(7		)	279			—			279
Remaining weighted-average contract period (in years)	8.2			5.4			17.1			—		9.9			8.5			9.9			—			9.9
Outstanding exposure:
Principal	$	2,596		$	(53	)	$	547		$	—	$	5,463		$	(170	)	$	8,383		$	—		$	8,383
Interest	1,192			(16		)	478			—		2,638			(72		)	4,220			—			4,220
Total (2)	$	3,788		$	(69	)	$	1,025		$	—	$	8,101		$	(242	)	$	12,603		$	—		$	12,603
Expected cash outflows (inflows)	$	110		$	(3	)	$	124		$	—	$	3,550		$	(118	)	$	3,663		$	(267	)	$	3,396
Potential recoveries (3)	(567		)	21			(51		)	—		(2,393		)	95			(2,895		)	190			(2,705		)
Subtotal	(457		)	18			73			—		1,157			(23		)	768			(77		)	691
Discount	69			(4		)	(13		)	—		(92		)	(6		)	(46		)	16			(30		)
Present value of expected cash flows	$	(388	)	$	14		$	60		$	—	$	1,065		$	(29	)	$	722		$	(61	)	$	661
Deferred premium revenue	$	147		$	(1	)	$	25		$	—	$	505		$	(5	)	$	671		$	(49	)	$	622
Reserves (salvage)	$	(418	)	$	15		$	41		$	—	$	694		$	(25	)	$	307		$	(36	)	$	271

Financial Guaranty Insurance

BIG Transaction Loss Summary

As of December 31, 2018

	BIG Categories
	BIG 1						BIG 2						BIG 3						Total BIG, Net			Effect of Consolidating FG VIEs			Total
	Gross			Ceded			Gross			Ceded			Gross			Ceded
	(dollars in millions)
Number of risks (1)	128			(8		)	39			(1		)	145			(7		)	312			—			312
Remaining weighted-average contract period (in years)	7.9			6.5			13.2			2.1			10.1			9.1			9.8			—			9.8
Outstanding exposure:
Principal	$	3,052		$	(71	)	$	938		$	(6	)	$	6,249		$	(159	)	$	10,003		$	—		$	10,003
Interest	1,319			(29		)	592			(1		)	3,140			(72		)	4,949			—			4,949
Total (2)	$	4,371		$	(100	)	$	1,530		$	(7	)	$	9,389		$	(231	)	$	14,952		$	—		$	14,952
Expected cash outflows (inflows)	$	98		$	(5	)	$	264		$	(1	)	$	4,029		$	(80	)	$	4,305		$	(290	)	$	4,015
Potential recoveries (3)	(465		)	23			(81		)	—			(2,542		)	55			(3,010		)	192			(2,818		)
Subtotal	(367		)	18			183			(1		)	1,487			(25		)	1,295			(98		)	1,197
Discount	83			(5		)	(53		)	—			(134		)	(2		)	(111		)	23			(88		)
Present value of expected cash flows	$	(284	)	$	13		$	130		$	(1	)	$	1,353		$	(27	)	$	1,184		$	(75	)	$	1,109
Deferred premium revenue	$	125		$	(4	)	$	151		$	—		$	518		$	(2	)	$	788		$	(64	)	$	724
Reserves (salvage)	$	(311	)	$	15		$	48		$	(1	)	$	993		$	(24	)	$	720		$	(47	)	$	673

____________________

(1) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. The ceded number of risks represents the number of risks for which the Company ceded a portion of its exposure.

(2) Includes amounts related to FG VIEs.

(3) Represents expected inflows for future payments by obligors pursuant to restructuring agreements, settlement or litigation judgments, excess spread on any underlying collateral and other estimated recoveries. Potential recoveries also include recoveries on certain investment grade credits, related mainly to exposures that were previously BIG and for which claims have been paid in the past.

Ratings Impact on Financial Guaranty Business

A downgrade of one of AGL’s insurance subsidiaries may result in increased claims under financial guaranties issued by the Company if counterparties exercise contractual rights triggered by the downgrade against insured obligors, and the insured obligors are unable to pay. See Part II, Item 8, Financial Statements and Supplementary Data, Note 6, Contracts Accounted for as Insurance, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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Shareholders' Equity - Shares Repurchased (Details) - USD ($)	1 Months Ended	3 Months Ended							9 Months Ended		10 Months Ended	12 Months Ended
	Nov. 07, 2019	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Sep. 30, 2019	Sep. 30, 2018	Nov. 07, 2019	Dec. 31, 2018	Aug. 07, 2019	Feb. 27, 2019
Equity, Class of Treasury Stock [Line Items]
Repurchases of common stock									$ 340,000,000	$ 380,000,000
Common Stock [Member]
Equity, Class of Treasury Stock [Line Items]
Shares repurchased (in shares)		3,400,677	2,519,130	1,908,605	2,992,932	3,299,049	4,163,190	2,787,936				13,243,107
Repurchases of common stock		$ 150,000,000	$ 111,000,000	$ 79,000,000	$ 120,000,000	$ 130,000,000	$ 152,000,000	$ 98,000,000				$ 500,000,000
Average price paid per share (in dollars per share)		$ 44.11	$ 43.89	$ 41.62	$ 40.09	$ 39.41	$ 36.48	$ 35.20				$ 37.76
Repurchase authorized amount													$ 300,000,000	$ 300,000,000
Subsequent Event [Member] | Common Stock [Member]
Equity, Class of Treasury Stock [Line Items]
Shares repurchased (in shares)	1,276,692										9,105,104
Repurchases of common stock	$ 59,000,000										$ 399,000,000
Average price paid per share (in dollars per share)	$ 45.98										$ 43.79
Remaining capacity of shares repurchase program	$ 299,000,000										$ 299,000,000

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Variable Interest Entities

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Variable Interest Entities

Variable Interest Entities

The Company provides financial guaranties with respect to debt obligations of special purpose entities, including VIEs but does not act as the servicer or collateral manager for any VIE obligations guaranteed by its insurance subsidiaries. The transaction structure generally provides certain financial protections to the Company. This financial protection can take several forms, the most common of which are overcollateralization, first loss protection (or subordination) and excess spread. In the case of overcollateralization (i.e., the principal amount of the securitized assets exceeds the principal amount of the structured finance obligations guaranteed by the Company), the structure allows defaults of the securitized assets before a default is experienced on the structured finance obligation guaranteed by the Company. In the case of first loss, the Company's financial guaranty insurance policy only covers a senior layer of losses experienced by multiple obligations issued by the VIE. The first loss exposure with respect to the assets is either retained by the seller or sold off in the form of equity or mezzanine debt to other investors. In the case of excess spread, the financial assets contributed to VIEs generate interest income that are in excess of the interest payments on the debt issued by the VIE. Such excess spread is typically distributed through the transaction’s cash flow waterfall and may be used to create additional credit enhancement, applied to redeem debt issued by the VIE (thereby, creating additional overcollateralization), or distributed to equity or other investors in the transaction.

Assured Guaranty is not primarily liable for the debt obligations issued by the VIEs it insures and would only be required to make payments on those insured debt obligations in the event that the issuer of such debt obligations defaults on any principal or interest due and only for the amount of the shortfall. AGL’s and its subsidiaries’ creditors do not have any rights with regard to the collateral supporting the debt issued by the FG VIEs. Proceeds from sales, maturities, prepayments and interest from such underlying collateral may only be used to pay debt service on FG VIEs’ liabilities. Net fair value gains and losses on FG VIEs are expected to reverse to zero at maturity of the FG VIEs’ debt, except for net premiums received and net claims paid by Assured Guaranty under the financial guaranty insurance contract. The Company’s estimate of expected loss to be paid for FG VIEs is included in Note 4, Expected Loss to be Paid.

As part of the terms of its financial guaranty contracts, the Company, under its insurance contract, obtains certain protective rights with respect to the VIE that give the Company additional controls over a VIE. These protective rights are triggered by the occurrence of certain events, such as failure to be in compliance with a covenant due to poor deal performance or a deterioration in a servicer or collateral manager's financial condition. At deal inception, the Company typically is not deemed to control a VIE; however, once a trigger event occurs, the Company's control of the VIE typically increases. The Company continuously evaluates its power to direct the activities that most significantly impact the economic performance of VIEs that have debt obligations insured by the Company and, accordingly, where the Company is obligated to absorb VIE losses or receive benefits that could potentially be significant to the VIE. The Company is deemed to be the control party for certain VIEs under GAAP, typically when its protective rights give it the power to both terminate and replace the deal servicer, which are characteristics specific to the Company's financial guaranty contracts. If the protective rights that could make the

Company the control party have not been triggered, then the VIE is not consolidated. If the Company is deemed to no longer have those protective rights, the VIE is deconsolidated.

Consolidated FG VIEs

As of September 30, 2019 and December 31, 2018, the Company consolidated 28 and 31 FG VIEs, respectively. During Nine Months 2019, two FG VIEs were deconsolidated, two FG VIEs matured and one FG VIE was consolidated. During Nine Months 2018, one FG VIE was deconsolidated. There were no new consolidations for Nine Months 2018.

The change in the ISCR of the FG VIEs’ assets held as of the end of the reporting period that was recorded in the condensed consolidated statements of operations for Third Quarter 2019 and 2018 were gains of $7 million and $1 million, respectively, and $42 million and $4 million for Nine Months 2019 and 2018, respectively. To calculate ISCR, the change in the fair value of the FG VIEs’ assets is allocated between changes that are due to ISCR and changes due to other factors, including interest rates. The ISCR amount is determined by using expected cash flows at the original date of consolidation discounted at the effective yield less current expected cash flows discounted at that same original effective yield.

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Excess of unpaid principal over fair value of:
FG VIEs’ assets	$	279	$	350
FG VIEs’ liabilities with recourse	21		48
FG VIEs’ liabilities without recourse	19		28
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due	61		71
Unpaid principal for FG VIEs’ liabilities with recourse (1)	409		565

____________________

(1) FG VIEs’ liabilities with recourse will mature at various dates ranging from 2019 to 2038.

The table below shows the carrying value of the consolidated FG VIEs’ assets and liabilities in the condensed consolidated financial statements, segregated by the types of assets that collateralize the respective debt obligations for FG VIEs’ liabilities with recourse.

Consolidated FG VIEs

By Type of Collateral

	As of September 30, 2019				As of December 31, 2018
	Assets		Liabilities		Assets		Liabilities
	(in millions)
With recourse:
U.S. RMBS first lien	$	289	$	314	$	299	$	326
U.S. RMBS second lien	75		74		115		137
Manufactured housing	—		—		53		54
Total with recourse	364		388		467		517
Without recourse	105		105		102		102
Total	$	469	$	493	$	569	$	619

The effect of consolidating FG VIEs includes (i) changes in fair value gains (losses) on FG VIEs’ assets and liabilities, (ii) the elimination of premiums and losses related to the AGC and AGM FG VIEs’ liabilities with recourse and (iii) the elimination of investment balances related to the Company’s purchase of AGC and AGM insured FG VIEs’ debt. Upon consolidation of a FG VIE, the related insurance and, if applicable, the related investment balances, are considered intercompany transactions and therefore eliminated. Such eliminations are included in the table below to present the full effect of consolidating FG VIEs.

Effect of Consolidating FG VIEs 

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Net earned premiums	$	(2	)	$	(3	)	$	(16	)	$	(9	)
Net investment income	(1		)	(1		)	(3		)	(3		)
Fair value gains (losses) on FG VIEs (1)	4			5			42			11
Loss and LAE	(3		)	(3		)	(18		)	—
Effect on income before tax	(2		)	(2		)	5			(1		)
Less: Tax provision (benefit)	—			—			1			—
Effect on net income (loss)	$	(2	)	$	(2	)	$	4		$	(1	)
Effect on OCI	$	1		$	(2	)	$	(1	)	$	—
Effect on cash flows from operating activities	$	1		$	1		$	—		$	7

 ____________________

(1) See condensed consolidated statements of comprehensive income and Note 14, Shareholders' Equity, for information on changes in fair value of the FG VIEs’ liabilities with recourse that are attributable to changes in the Company's own credit risk.

The consolidation of FG VIEs increased shareholders' equity by $4 million as of September 30, 2019 and $1 million as of December 31, 2018.

The primary driver of the gain during Third Quarter 2019 is due to price appreciation on FG VIEs assets. The primary driver of the gain during Nine Months 2019 was attributable to higher recoveries on second lien U.S. RMBS FG VIEs' assets. The primary driver of the gain during Third Quarter 2018 and Nine Months 2018 was improvement in the underlying collateral of the FG VIEs' assets.

Other Consolidated VIEs

In certain instances where the Company consolidates a VIE that was established as part of a loss mitigation negotiated settlement that results in the termination of the original insured financial guaranty insurance or credit derivative contract, the Company classifies the assets and liabilities of those VIEs in the line items that most accurately reflect the nature of the items, as opposed to within the FG VIEs’ assets and FG VIEs’ liabilities. The largest of these VIEs had assets of $91 million and liabilities of $9 million as of September 30, 2019, and assets of $87 million and liabilities of $21 million as of December 31, 2018, primarily recorded in the investment portfolio and credit derivative liabilities on the condensed consolidated balance sheets.

Non-Consolidated VIEs

As described in Note 3, Outstanding Exposure, the Company monitors all policies in the insured portfolio. Of the approximately 18 thousand policies monitored as of September 30, 2019, approximately 15 thousand policies are not within the scope of Accounting Standards Codification 810 because these financial guaranties relate to the debt obligations of governmental organizations or financing entities established by a governmental organization. The majority of the remaining policies involve transactions where the Company is not deemed to currently have control over the FG VIEs’ most significant activities. As of September 30, 2019 and December 31, 2018, the Company identified 96 and 110 policies, respectively, that contain provisions and experienced events that may trigger consolidation. Based on management’s assessment of these potential triggers or events, the Company consolidated 28 and 31 FG VIEs as of September 30, 2019 and December 31, 2018, respectively. The Company’s exposure provided through its financial guaranties with respect to debt obligations of FG VIEs is included within net par outstanding in Note 3, Outstanding Exposure.

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Schedule of computation of basic and diluted earnings per share

Computation of Earnings Per Share 

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions, except per share amounts)
Basic Earnings Per Share (EPS):
Net income (loss) attributable to AGL	$	69	$	161	$	265	$	433
Less: Distributed and undistributed income (loss) available to nonvested shareholders	—		1		—		1
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$	69	$	160	$	265	$	432
Basic shares	98.2		108.0		100.8		111.6
Basic EPS	$	0.71	$	1.48	$	2.63	$	3.87
Diluted EPS:
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$	69	$	160	$	265	$	432
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries	—		—		—		—
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted	$	69	$	160	$	265	$	432
Basic shares	98.2		108.0		100.8		111.6
Dilutive securities:
Options and restricted stock awards	0.7		1.3		0.8		1.3
Diluted shares	98.9		109.3		101.6		112.9
Diluted EPS	$	0.70	$	1.47	$	2.61	$	3.83
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect	—		—		—		0.1

Schedule of antidilutive securities excluded from computation of earnings per share

Computation of Earnings Per Share 

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions, except per share amounts)
Basic Earnings Per Share (EPS):
Net income (loss) attributable to AGL	$	69	$	161	$	265	$	433
Less: Distributed and undistributed income (loss) available to nonvested shareholders	—		1		—		1
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$	69	$	160	$	265	$	432
Basic shares	98.2		108.0		100.8		111.6
Basic EPS	$	0.71	$	1.48	$	2.63	$	3.87
Diluted EPS:
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$	69	$	160	$	265	$	432
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries	—		—		—		—
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted	$	69	$	160	$	265	$	432
Basic shares	98.2		108.0		100.8		111.6
Dilutive securities:
Options and restricted stock awards	0.7		1.3		0.8		1.3
Diluted shares	98.9		109.3		101.6		112.9
Diluted EPS	$	0.70	$	1.47	$	2.61	$	3.83
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect	—		—		—		0.1

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Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Consolidated FG VIE's

Effect of Consolidating FG VIEs 

	Third Quarter						Nine Months
	2019			2018			2019			2018
	(in millions)
Net earned premiums	$	(2	)	$	(3	)	$	(16	)	$	(9	)
Net investment income	(1		)	(1		)	(3		)	(3		)
Fair value gains (losses) on FG VIEs (1)	4			5			42			11
Loss and LAE	(3		)	(3		)	(18		)	—
Effect on income before tax	(2		)	(2		)	5			(1		)
Less: Tax provision (benefit)	—			—			1			—
Effect on net income (loss)	$	(2	)	$	(2	)	$	4		$	(1	)
Effect on OCI	$	1		$	(2	)	$	(1	)	$	—
Effect on cash flows from operating activities	$	1		$	1		$	—		$	7

 ____________________

(1) See condensed consolidated statements of comprehensive income and Note 14, Shareholders' Equity, for information on changes in fair value of the FG VIEs’ liabilities with recourse that are attributable to changes in the Company's own credit risk.

The consolidation of FG VIEs increased shareholders' equity by $4 million as of September 30, 2019 and $1 million as of December 31, 2018.

	As of September 30, 2019		As of December 31, 2018
	(in millions)
Excess of unpaid principal over fair value of:
FG VIEs’ assets	$	279	$	350
FG VIEs’ liabilities with recourse	21		48
FG VIEs’ liabilities without recourse	19		28
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due	61		71
Unpaid principal for FG VIEs’ liabilities with recourse (1)	409		565

____________________

(1)

FG VIEs’ liabilities with recourse will mature at various dates ranging from 2019 to 2038.

	As of September 30, 2019				As of December 31, 2018
	Assets		Liabilities		Assets		Liabilities
	(in millions)
With recourse:
U.S. RMBS first lien	$	289	$	314	$	299	$	326
U.S. RMBS second lien	75		74		115		137
Manufactured housing	—		—		53		54
Total with recourse	364		388		467		517
Without recourse	105		105		102		102
Total	$	469	$	493	$	569	$	619

XML

Label	Element	Value
Reinsurance of SGI Insured Portfolio [Member] | Structured Finance [Member]
Guarantor Obligations, Net Expected Loss to be Paid After Recoveries for Representations and Warranties	ago_GuarantorObligationsNetExpectedLosstobePaidAfterRecoveriesforRepresentationsandWarranties	$ 130,000,000
Reinsurance of SGI Insured Portfolio [Member] | Other Structured Finance [Member]
Guarantor Obligations, Net Expected Loss to be Paid After Recoveries for Representations and Warranties	ago_GuarantorObligationsNetExpectedLosstobePaidAfterRecoveriesforRepresentationsandWarranties	0
Reinsurance of SGI Insured Portfolio [Member] | Public Finance [Member]
Guarantor Obligations, Net Expected Loss to be Paid After Recoveries for Representations and Warranties	ago_GuarantorObligationsNetExpectedLosstobePaidAfterRecoveriesforRepresentationsandWarranties	1,000,000
Non-US [Member] | Reinsurance of SGI Insured Portfolio [Member] | Public Finance [Member]
Guarantor Obligations, Net Expected Loss to be Paid After Recoveries for Representations and Warranties	ago_GuarantorObligationsNetExpectedLosstobePaidAfterRecoveriesforRepresentationsandWarranties	1,000,000
UNITED STATES | Reinsurance of SGI Insured Portfolio [Member] | Residential Mortgage Backed Securities [Member]
Guarantor Obligations, Net Expected Loss to be Paid After Recoveries for Representations and Warranties	ago_GuarantorObligationsNetExpectedLosstobePaidAfterRecoveriesforRepresentationsandWarranties	130,000,000
UNITED STATES | Reinsurance of SGI Insured Portfolio [Member] | Public Finance [Member]
Guarantor Obligations, Net Expected Loss to be Paid After Recoveries for Representations and Warranties	ago_GuarantorObligationsNetExpectedLosstobePaidAfterRecoveriesforRepresentationsandWarranties	0
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 32,000,000

XML

Earnings Per Share

9 Months Ended

Sep. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

Computation of Earnings Per Share 

	Third Quarter				Nine Months
	2019		2018		2019		2018
	(in millions, except per share amounts)
Basic Earnings Per Share (EPS):
Net income (loss) attributable to AGL	$	69	$	161	$	265	$	433
Less: Distributed and undistributed income (loss) available to nonvested shareholders	—		1		—		1
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$	69	$	160	$	265	$	432
Basic shares	98.2		108.0		100.8		111.6
Basic EPS	$	0.71	$	1.48	$	2.63	$	3.87
Diluted EPS:
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, basic	$	69	$	160	$	265	$	432
Plus: Re-allocation of undistributed income (loss) available to nonvested shareholders of AGL and subsidiaries	—		—		—		—
Distributed and undistributed income (loss) available to common shareholders of AGL and subsidiaries, diluted	$	69	$	160	$	265	$	432
Basic shares	98.2		108.0		100.8		111.6
Dilutive securities:
Options and restricted stock awards	0.7		1.3		0.8		1.3
Diluted shares	98.9		109.3		101.6		112.9
Diluted EPS	$	0.70	$	1.47	$	2.61	$	3.83
Potentially dilutive securities excluded from computation of EPS because of antidilutive effect	—		—		—		0.1

XML

Ratings (Tables)

9 Months Ended

Sep. 30, 2019

Rating Actions [Abstract]

Schedule of Credit Agency Ratings

The financial strength ratings (or similar ratings) for AGL’s insurance subsidiaries, along with the date of the most recent rating action (or confirmation) by the rating agency, are shown in the table below. Ratings are subject to continuous rating agency review and revision or withdrawal at any time. In addition, the Company periodically assesses the value of each rating assigned to each of its companies, and as a result of such assessment may request that a rating agency add or drop a rating from certain of its companies.

	S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC (S&P)	Kroll Bond Rating Agency	Moody’s Investors Service, Inc. (Moody’s)	A.M. Best Company, Inc.
AGM	AA (stable) (11/7/19)	AA+ (stable) (12/21/18)	A2 (stable) (8/13/19)	—
AGC	AA (stable) (11/7/19)	AA (stable) (11/30/18)	(1)	—
MAC	AA (stable) (11/7/19)	AA+ (stable) (7/12/19)	—	—
AG Re	AA (stable) (11/7/19)	—	—	—
AGRO	AA (stable) (11/7/19)	—	—	A+ (stable) (7/12/19)
AGE	AA (stable) (11/7/19)	AA+ (stable) (12/21/18)	A2 (stable) (8/13/19)	—

____________________

(1) AGC requested that Moody’s withdraw its financial strength ratings of AGC in January 2017, but Moody's denied that request. Moody’s continues to rate AGC A3 (stable).

XML

Outstanding Exposure - Amortization Schedule of Puerto Rico Net Par Outstanding and Net Debt Service Outstanding (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Estimated Net Par Amortization [Abstract]
Total	$ 229,375	$ 241,802
Estimated Net Debt Service Amortization [Abstract]
Total	354,612	371,586
Puerto Rico [Member]
Estimated Net Par Amortization [Abstract]
2019 (October 1 - December 31)	0
2020 (January 1 - March 31)	0
2020 (April 1 - June 30)	0
2020 (July 1 - September 30)	286
2020 (October 1 - December 31)	0
Subtotal 2020	286
2021	149
2022	139
2023	205
2024-2028	1,213
2029-2033	884
2034-2038	957
2039-2043	176
2044-2047	261
Total	4,270	$ 4,767
Estimated Net Debt Service Amortization [Abstract]
2019 (October 1 - December 31)	3
2020 (January 1 - March 31)	106
2020 (April 1 - June 30)	3
2020 (July 1 - September 30)	392
2020 (October 1 - December 31)	3
Subtotal 2020	504
2021	351
2022	332
2023	392
2024-2028	1,977
2029-2033	1,392
2034-2038	1,184
2039-2043	259
2044-2047	300
Total	$ 6,694

XML

Condensed Consolidated Statement of Shareholders' Equity (unaudited) (Parenthetical) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Statement of Stockholders' Equity [Abstract]
Dividends, per share (in dollars per share)	$ 0.18	$ 0.16	$ 0.54	$ 0.48

XML

Outstanding Exposure - Components of BIG Net Par Outstanding (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 229,375	$ 241,802
Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	219,397	230,665
Life Insurance Transaction [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	1,223	1,184
Other structured finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	5,068	5,683
Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	9,978	11,137
BIG [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	8,515	10,160
BIG [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	6,623	7,429
BIG [Member] | Life Insurance Transaction [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	40	85
BIG [Member] | Other structured finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	186	259
BIG [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	1,892	2,731
BIG [Member] | BIG 1 [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	2,612	3,058
BIG [Member] | BIG 1 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	2,423	2,563
BIG [Member] | BIG 1 [Member] | Life Insurance Transaction [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	0	0
BIG [Member] | BIG 1 [Member] | Other structured finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	71	127
BIG [Member] | BIG 1 [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	189	495
BIG [Member] | BIG 2 [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	551	937
BIG [Member] | BIG 2 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	398	644
BIG [Member] | BIG 2 [Member] | Life Insurance Transaction [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	0	0
BIG [Member] | BIG 2 [Member] | Other structured finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	65	79
BIG [Member] | BIG 2 [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	153	293
BIG [Member] | BIG 3 [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	5,352	6,165
BIG [Member] | BIG 3 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	3,802	4,222
BIG [Member] | BIG 3 [Member] | Life Insurance Transaction [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	40	85
BIG [Member] | BIG 3 [Member] | Other structured finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	50	53
BIG [Member] | BIG 3 [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	1,550	1,943
United States [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	176,515	186,562
United States [Member] | RMBS [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	3,687	4,270
United States [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	9,226	9,944
United States [Member] | BIG [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	5,760	6,388
United States [Member] | BIG [Member] | RMBS [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	1,666	2,387
United States [Member] | BIG [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	1,851	2,632
United States [Member] | BIG [Member] | BIG 1 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	1,604	1,767
United States [Member] | BIG [Member] | BIG 1 [Member] | RMBS [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	118	368
United States [Member] | BIG [Member] | BIG 2 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	398	399
United States [Member] | BIG [Member] | BIG 2 [Member] | RMBS [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	88	214
United States [Member] | BIG [Member] | BIG 3 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	3,758	4,222
United States [Member] | BIG [Member] | BIG 3 [Member] | RMBS [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	1,460	1,805
Non United States [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	42,882	44,103
Non United States [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	752
Non United States [Member] | BIG [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	863	1,041
Non United States [Member] | BIG [Member] | Structured Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	41
Non United States [Member] | BIG [Member] | BIG 1 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	819	796
Non United States [Member] | BIG [Member] | BIG 2 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	0	245
Non United States [Member] | BIG [Member] | BIG 3 [Member] | Public Finance [Member]
Schedule of Insured Financial Obligations [Line Items]
Total net exposure	$ 44	$ 0

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Revenues
Net earned premiums	$ 123	$ 142	$ 353	$ 423
Net investment income	88	99	296	297
Net realized investment gains (losses)	16	(7)	12	(14)
Net change in fair value of credit derivatives	5	21	(25)	103
Fair value gains (losses) on financial guaranty variable interest entities	4	5	42	11
Foreign exchange gain (loss) on remeasurement	(21)	(9)	(24)	(22)
Fair value gains (losses) on equity investments	0	32	0	29
Loss on extinguishment of debt	0	(9)	(1)	(26)
Other income (loss)	(9)	1	14	(13)
Total revenues	206	275	667	788
Expenses
Loss and loss adjustment expenses	30	17	75	43
Amortization of deferred acquisition costs	3	3	13	12
Interest expense	22	23	67	71
Other operating expenses	65	56	189	183
Total expenses	120	99	344	309
Income (loss) before income taxes and equity in net earnings of investees	86	176	323	479
Equity in net earnings of investees	0	(1)	3	0
Income (loss) before income taxes	86	175	326	479
Provision (benefit) for income taxes	17	14	61	46
Net income (loss) attributable to Assured Guaranty Ltd.	$ 69	$ 161	$ 265	$ 433
Earnings per share:
Basic (in dollars per share)	$ 0.71	$ 1.48	$ 2.63	$ 3.87
Diluted (in dollars per share)	$ 0.70	$ 1.47	$ 2.61	$ 3.83

XML

Contracts Accounted for as Insurance - Expected Collections of Gross Premiums Receivable Net of Commissions on Assumed Business (Details) $ in Millions	Sep. 30, 2019 USD ($)
Financial Guarantee Insurance Product Line [Member]
Financial Guarantee Insurance Premiums [Line Items]
2019 (October 1 - December 31)	$ 29
2020	102
2021	77
2022	78
2023	65
2024-2028	275
2029-2033	182
2034-2038	97
After 2038	104
Total	1,009
Variable Interest Entity, Primary Beneficiary [Member]
Financial Guarantee Insurance Premiums [Line Items]
Cash collections on FG VIEs	$ 9

XML

Variable Interest Entities - Narrative (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($) policy Entity	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) policy Entity	Sep. 30, 2018 USD ($) Entity	Jun. 30, 2019 USD ($)	Dec. 31, 2018 USD ($) policy Entity	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)
Variable Interest Entity [Line Items]
Effect on shareholders' equity (decrease) increase	$ 6,652,000,000	$ 6,583,000,000	$ 6,652,000,000	$ 6,583,000,000	$ 6,722,000,000	$ 6,555,000,000	$ 6,634,000,000	$ 6,839,000,000
Net fair value gains and losses on FG VIEs are expected to reverse to zero at maturity of the VIE debt	0		0
Fair value gains (losses) on FG VIEs	4,000,000	5,000,000	42,000,000	11,000,000
Variable Interest Entity, Other Consolidated [Abstract]
Other consolidated VIE assets	91,000,000		91,000,000			87,000,000
Other consolidated VIE liabilities	$ 9,000,000		$ 9,000,000			$ 21,000,000
Number of Policies Monitored | policy	18,000		18,000
Number of Policies Monitored, Not Within the Scope of ASC 810 | policy	15,000		15,000
Number of Policies that Contain Provisions for Consolidation | policy	96		96			110
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Effect on shareholders' equity (decrease) increase	$ 4,000,000		$ 4,000,000			$ 1,000,000
Fair value gains (losses) on FG VIEs	$ 4,000,000	5,000,000	$ 42,000,000	$ 11,000,000
Variable Interest Entity, Other Consolidated [Abstract]
Number of Entities Consolidated | Entity	28		28			31
Number of Entities Deconsolidated | Entity			2	1
FG VIE matured, number | Entity			2
FG VIE consolidated, number | Entity			1
Residential Mortgage Backed Securities and Other Insurance Products [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Change in the instrument specific credit risk of the VIEs' assets	$ 7,000,000	$ 1,000,000	$ 42,000,000	$ 4,000,000

XML

Income Taxes - Effective Tax Rate Reconciliation and Pretax Income (Loss) and Revenue by Tax Jurisdiction (Details) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Pre-tax Income Taxes and Revenue [Line Items]
Expected tax provision (benefit)	$ 17	$ 31	$ 64	$ 80
Tax-exempt interest	(5)	(6)	(15)	(18)
Change in liability for uncertain tax positions	1	(10)	1	(16)
Effect of provision to tax return filing adjustment	(6)	(1)	(6)	(1)
State tax	0	5	1	6
Foreign taxes	6	1	11	4
Taxes on reinsurance	5	1	9	0
Effect of adjustments to the provisional amounts as a result of 2017 Tax Cuts and Jobs Act	0	(4)	0	(4)
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Deferred Compensation, Amount	(1)	(1)	(3)	(2)
Other	0	(2)	(1)	(3)
Provision (benefit) for income taxes	$ 17	$ 14	$ 61	$ 46
Effective tax rate (as a percent)	19.20%	8.30%	18.60%	9.70%
Income (loss) before income taxes	$ 86	$ 176	$ 323	$ 479
Total before tax	86	175	326	479
Revenue	206	275	667	788
United States [Member]
Pre-tax Income Taxes and Revenue [Line Items]
Income (loss) before income taxes	101	128	326	374
Revenue	186	192	562	628
Bermuda [Member]
Pre-tax Income Taxes and Revenue [Line Items]
Income (loss) before income taxes	10	24	26	97
Revenue	37	47	110	135
U.K and Other [Member]
Pre-tax Income Taxes and Revenue [Line Items]
Income (loss) before income taxes	(25)	23	(26)	8
Revenue	$ (17)	$ 36	$ (5)	$ 25

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Contracts Accounted for as Insurance - Components of Net Reserves (Salvage) Insurance Contracts (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Insurance [Abstract]
Loss and LAE reserve	$ 1,007	$ 1,177
Reinsurance recoverable on unpaid losses	(36)	(34)
Loss and LAE reserve, net	971	1,143
Salvage and subrogation recoverable	(725)	(490)
Salvage and subrogation payable	26	24
Other payable (recoverable)	0	(3)
Salvage and subrogation recoverable, net, and other recoverable	(699)	(469)
Net reserves (salvage)	$ 272	$ 674

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Contracts Accounted for as Insurance - BIG Transaction Loss Summary (Details) $ in Millions	9 Months Ended	12 Months Ended
	Sep. 30, 2019 USD ($) risk	Dec. 31, 2018 USD ($) risk
Discount
Total	$ (30)
Reserves (salvage)
Total	$ 272	$ 674
BIG [Member]
Number of risks
Total (in contracts) | risk	279	312
Remaining weighted average contract period
Total (in years)	9 years 10 months 24 days	9 years 9 months 18 days
Principal
Total	$ 8,383	$ 10,003
Interest
Total	4,220	4,949
Total net outstanding exposure
Total	12,603	14,952
Expected cash outflows (inflows)
Total	3,396	4,015
Potential recoveries
Total	(2,705)	(2,818)
Subtotal
Total	691	1,197
Discount
Total	(30)	(88)
Present value of expected cash flows
Net expected loss to be paid	661	1,109
Deferred premium revenue
Total	622	724
Reserves (salvage)
Total	$ 271	$ 673
BIG [Member] | BIG 1 [Member]
Number of risks
Total (in contracts) | risk	119	128
Principal
Total	$ 2,543	$ 2,981
BIG [Member] | BIG 2 [Member]
Number of risks
Total (in contracts) | risk	26	39
Principal
Total	$ 547	$ 932
BIG [Member] | BIG 3 [Member]
Number of risks
Total (in contracts) | risk	134	145
Principal
Total	$ 5,293	$ 6,090
BIG [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Number of risks
Total (in contracts) | risk	279	312
Remaining weighted average contract period
Total (in years)	9 years 10 months 24 days	9 years 9 months 18 days
Principal
Total	$ 8,383	$ 10,003
Interest
Total	4,220	4,949
Total net outstanding exposure
Total	12,603	14,952
Expected cash outflows (inflows)
Total	3,663	4,305
Potential recoveries
Total	(2,895)	(3,010)
Subtotal
Total	768	1,295
Discount
Total	(46)	(111)
Present value of expected cash flows
Net expected loss to be paid	722	1,184
Deferred premium revenue
Total	671	788
Reserves (salvage)
Total	$ 307	$ 720
BIG [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member] | BIG 1 [Member]
Number of risks
Total (in contracts) | risk	119	128
Ceded (in contracts) | risk	(6)	(8)
Remaining weighted average contract period
Gross (in years)	8 years 2 months 12 days	7 years 10 months 24 days
Ceded (in years)	5 years 4 months 24 days	6 years 6 months
Principal
Gross	$ 2,596	$ 3,052
Ceded	(53)	(71)
Interest
Gross	1,192	1,319
Ceded	(16)	(29)
Total net outstanding exposure
Gross	3,788	4,371
Ceded	(69)	(100)
Expected cash outflows (inflows)
Gross	110	98
Ceded	(3)	(5)
Potential recoveries
Gross	(567)	(465)
Ceded	21	23
Subtotal
Gross	(457)	(367)
Ceded	18	18
Discount
Gross	69	83
Ceded	(4)	(5)
Present value of expected cash flows
Gross	(388)	(284)
Ceded	14	13
Deferred premium revenue
Gross	147	125
Ceded	(1)	(4)
Reserves (salvage)
Gross	(418)	(311)
Ceded	$ 15	$ 15
BIG [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member] | BIG 2 [Member]
Number of risks
Total (in contracts) | risk	26	39
Ceded (in contracts) | risk	0	(1)
Remaining weighted average contract period
Gross (in years)	17 years 1 month 6 days	13 years 2 months 12 days
Ceded (in years)		2 years 1 month 6 days
Principal
Gross	$ 547	$ 938
Ceded	0	(6)
Interest
Gross	478	592
Ceded	0	(1)
Total net outstanding exposure
Gross	1,025	1,530
Ceded	0	(7)
Expected cash outflows (inflows)
Gross	124	264
Ceded	0	(1)
Potential recoveries
Gross	(51)	(81)
Ceded	0	0
Subtotal
Gross	73	183
Ceded	0	(1)
Discount
Gross	(13)	(53)
Ceded	0	0
Present value of expected cash flows
Gross	60	130
Ceded	0	(1)
Deferred premium revenue
Gross	25	151
Ceded	0	0
Reserves (salvage)
Gross	41	48
Ceded	$ 0	$ (1)
BIG [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member] | BIG 3 [Member]
Number of risks
Total (in contracts) | risk	134	145
Ceded (in contracts) | risk	(7)	(7)
Remaining weighted average contract period
Gross (in years)	9 years 10 months 24 days	10 years 1 month 6 days
Ceded (in years)	8 years 6 months	9 years 1 month 6 days
Principal
Gross	$ 5,463	$ 6,249
Ceded	(170)	(159)
Interest
Gross	2,638	3,140
Ceded	(72)	(72)
Total net outstanding exposure
Gross	8,101	9,389
Ceded	(242)	(231)
Expected cash outflows (inflows)
Gross	3,550	4,029
Ceded	(118)	(80)
Potential recoveries
Gross	(2,393)	(2,542)
Ceded	95	55
Subtotal
Gross	1,157	1,487
Ceded	(23)	(25)
Discount
Gross	(92)	(134)
Ceded	(6)	(2)
Present value of expected cash flows
Gross	1,065	1,353
Ceded	(29)	(27)
Deferred premium revenue
Gross	505	518
Ceded	(5)	(2)
Reserves (salvage)
Gross	694	993
Ceded	(25)	(24)
BIG [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Expected cash outflows (inflows)
Total	(267)	(290)
Potential recoveries
Total	190	192
Subtotal
Total	(77)	(98)
Discount
Total	16	23
Present value of expected cash flows
Net expected loss to be paid	(61)	(75)
Deferred premium revenue
Total	(49)	(64)
Reserves (salvage)
Total	$ (36)	$ (47)

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Reinsurance - Ceded Reinsurers (Details) - USD ($) $ in Millions	Sep. 30, 2019	Dec. 31, 2018
Ceded Credit Risk [Line Items]
Ceded Premium, net of Commissions	$ 19	$ 26
Ceded expected loss to be recovered (paid)	14	14
Ceded par outstanding	1,343	2,389
Non-financial guaranty ceded exposure (see Note 3)	275	239
External Credit Rating, Non Investment Grade [Member] | Below Investment Grade, Rating Withdrawn Or Not Rated Reinsurer [Member]
Ceded Credit Risk [Line Items]
Ceded Par Outstanding	224	236
Non-affiliated Reinsurers [Member]
Ceded Credit Risk [Line Items]
Funds held under reinsurance agreements	$ 69	$ 80