Segment Information

12 Months Ended

Dec. 31, 2019

The Company reports its results of operations consistent with the manner in which the Company's chief operating decision maker (CODM) reviews the business to assess performance and allocate resources. Prior to the BlueMountain Acquisition Date, the Company's operating subsidiaries were all insurance companies, and results of operations were viewed by the CODM as one segment. Beginning in fourth quarter 2019, with the BlueMountain Acquisition and expansion into the asset management business, the Company established the Assured Investment Management platform and now operates in two distinct segments, Insurance and Asset Management. The following describes the components of each segment, along with the Corporate division and Other categories. The Insurance and Asset Management segments are presented without giving effect to the consolidation of the FG VIEs and investment vehicles. See Note 14, Variable Interest Entities.

The Insurance segment primarily consists of the Company's domestic and foreign insurance subsidiaries and their wholly-owned subsidiaries that provide credit protection products to the U.S. and international public finance (including infrastructure) and structured finance markets. The Insurance segment also includes the income (loss) from its proportionate equity investments in funds managed by Assured Investment Management (Assured Investment Management funds).

The Asset Management segment consists of the Company's Assured Investment Management subsidiaries, which provide asset management services to outside investors as well as to the Company's Insurance segment.

The Corporate division consists primarily of interest expense on the debt of AGUS and AGMH, as well as other operating expenses attributed to holding company activities, including administrative services performed by operating subsidiaries for the holding companies.

Other items consist of intersegment eliminations, reclassifications, and consolidation adjustments, including the effect of consolidating FG VIEs and certain Assured Investment Management investment vehicles in which Insurance segment invests. See Note 14. Variable Interest Entities.

The Company does not report assets by reportable segment as the CODM does not use assets to assess performance and allocate resources and only reviews assets at a consolidated level.

Total adjusted operating income includes the effect of consolidating both FG VIEs and investment vehicles; however the effect of consolidating such entities, including the related eliminations, is included in the "other" column in the tables below, which represents the CODM's view, consistent with the management approach guidance for presentation of segment metrics.

The Company analyzes the operating performance of each segment using "adjusted operating income." Results for each segment include specifically identifiable expenses as well as allocations of expenses between legal entities based on time studies and other cost allocation methodologies based on headcount or other metrics. Adjusted 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.


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.


3)	Elimination of fair value gains (losses) on the Company’s committed capital securities (CCS) that are recognized in net income.


4)	Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves that are recognized in net income.


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.

The following tables present the Company's operations by operating segment. The information for prior years has been conformed to the new segment presentation.

Segment Information (1)



	Year Ended December 31, 2019
	Insurance		Asset Management			Corporate			Other			Total
	(in millions)
Net investment income	$	383	$	—		$	4		$	(9	)	$	378
Interest expense	—		—			94			(5		)	89
Non-cash compensation and operating expenses (1)	39		3			6			—			48

Intersegment revenues	$	5	$	—		$	—		$	(5	)	$	—
Third-party revenues	912		22			3			27			964
Total revenues	917		22			3			22			964
Total expenses	324		34			133			25			516
Income (loss) before income taxes and equity in net earnings of investees	593		(12		)	(130		)	(3		)	448
Equity in net earnings of investees	2		—			—			2			4
Adjusted operating income (loss) before income taxes	595		(12		)	(130		)	(1		)	452
Provision (benefit) for income taxes	83		(2		)	(19		)	—			62
Noncontrolling interests	—		—			—			(1		)	(1		)
Adjusted operating income (loss)	512		(10		)	(111		)	—			391
Reconciling items from adjusted operating income (loss) to net income (loss) attributable to AGL:
Plus pre-tax adjustments:
Realized gains (losses) on investments												22
Non-credit impairment unrealized fair value gains (losses) on credit derivatives												(10		)
Fair value gains (losses) on CCS												(22		)
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves												22
Total pre-tax adjustments												12
Plus tax effect on pre-tax adjustments												(1		)
Net income (loss) attributable to AGL												$	402



	Year Ended December 31, 2018
	Insurance		Asset Management		Corporate			Other			Total
	(in millions)
Net investment income	$	396	$	—	$	6		$	(7	)	$	395
Interest expense	—		—		97			(3		)	94
Non-cash compensation and operating expenses (1)	35		—		6			—			41

Intersegment revenues	$	3	$	—	$	—		$	(3	)	$	—
Third-party revenues	989		—		(28		)	(2		)	959
Total revenues	992		—		(28		)	(5		)	959
Total expenses	302		—		129			—			431
Income (loss) before income taxes and equity in net earnings of investees	690		—		(157		)	(5		)	528
Equity in net earnings of investees	1		—		—			—			1
Adjusted operating income (loss) before income taxes	691		—		(157		)	(5		)	529
Provision (benefit) for income taxes	109		—		(61		)	(1		)	47
Noncontrolling interests	—		—		—			—			—
Adjusted operating income (loss)	582		—		(96		)	(4		)	482
Reconciling items from adjusted operating income (loss) to net income (loss) attributable to AGL:
Plus pre-tax adjustments:
Realized gains (losses) on investments											(32		)
Non-credit impairment unrealized fair value gains (losses) on credit derivatives											101
Fair value gains (losses) on CCS											14
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves											(32		)
Total pre-tax adjustments											51
Plus tax effect on pre-tax adjustments											(12		)
Net income (loss) attributable to AGL											$	521



	Year Ended December 31, 2017
	Insurance		Asset Management		Corporate			Other			Total
	(in millions)
Net investment income	$	423	$	—	$	2		$	(8	)	$	417
Interest expense	—		—		100			(3		)	97
Non-cash compensation and operating expenses (1)	36		—		5			—			41

Intersegment revenues	$	3	$	—	$	—		$	(3	)	$	—
Third-party revenues	1,556		—		(8		)	10			1,558
Total revenues	1,559		—		(8		)	7			1,558
Total expenses	586		—		129			(10		)	705
Income (loss) before income taxes and equity in net earnings of investees	973		—		(137		)	17			853
Equity in net earnings of investees	—		—		—			—			—
Adjusted operating income (loss) before income taxes	973		—		(137		)	17			853
Provision (benefit) for income taxes	241		—		(54		)	5			192
Noncontrolling interests	—		—		—			—			—
Adjusted operating income (loss)	732		—		(83		)	12			661
Reconciling items from adjusted operating income (loss) to net income (loss) attributable to AGL:
Plus pre-tax adjustments:
Realized gains (losses) on investments											40
Non-credit impairment unrealized fair value gains (losses) on credit derivatives											43
Fair value gains (losses) on CCS											(2		)
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves											57
Total pre-tax adjustments											138
Plus tax effect on pre-tax adjustments											(69		)
Net income (loss) attributable to AGL											$	730

_____________________


(1)	Consists of amortization of DAC and intangible assets, depreciation and share-based compensation.

Revenue by Country of Domicile



	Year Ended December 31,
	2019		2018		2017
	(in millions)
U.S.	$	761	$	732	$	1,193
Bermuda	161		203		224
U.K. and other	42		24		141
Total	$	964	$	959	$	1,558

The following table reconciles the Company's total GAAP revenues to segment revenues:

Reconciliation of Total GAAP Revenues to Segment Revenues



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Total GAAP revenues	$	963		$	1,001		$	1,739
Less: Realized gains (losses) on investments	22			(32		)	40
Less: Non-credit impairment unrealized fair value gains (losses) on credit derivatives	(10		)	101			43
Less: Fair value gains (losses) on CCS	(22		)	14			(2		)
Less: Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves	22			(32		)	57
Plus: Credit derivative impairment (recoveries) (1)	13			9			(43		)
Total segment revenues	$	964		$	959		$	1,558

_____________________


(1)	Credit derivative impairment (recoveries) are included in "Net change in fair value of credit derivatives" in the Company's consolidated statements of operations.

The following table reconciles the Company's total GAAP expenses to segment expenses:

Reconciliation of Total GAAP Expenses to Segment Expenses



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Total GAAP expenses	$	503	$	422	$	748
Plus: Credit derivative impairment (recoveries) (1)	13		9		(43		)
Total segment expenses	$	516	$	431	$	705

_____________________

(1)

Credit derivative impairment (recoveries) are included in "Net change in fair value of credit derivatives" in the Company's consolidated statements of operations.