As of September 30, 2020, the majority of the investment portfolio is managed by three outside managers and AssuredIM. The Company has established detailed guidelines regarding credit quality, exposure to a particular sector and exposure to a particular obligor within a sector. The externally managed portfolio must maintain a minimum average rating of A+ by S&P or A1 by Moody’s Investors Service, Inc. (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 (i) securities acquired for loss mitigation purposes or other risk management purposes, (ii) securities managed under an Investment Management Agreement (IMA) with AssuredIM, and (iii) other alternative investments, including both equity and debt securities other than AssuredIM funds, that the Company believes present an attractive investment opportunity. AssuredIM funds in which the insurance and other operating subsidiaries invest are accounted for as consolidated investment vehicles; such amounts are not included in this note, instead, see Note 11, Variable Interest Entities.

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).

In the second quarter of 2020, AGM, AGC and MAC (the insurance subsidiaries) entered into an IMA with AssuredIM for the management of a portfolio of municipal obligations and a portfolio of CLOs. As of September 30, 2020, they have together allocated $250 million to municipal obligation strategies and $263 million to CLO strategies, with authorization to allocate an additional $37 million to CLOs strategies.

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 $84 million of the commitment was not funded as of September 30, 2020. The Company has also invested in a limited liability company that owns fuel cells with a fair value of $58 million as of September 30, 2020.


	As of
	September 30, 2020		December 31, 2019
	(in millions)
Fixed-maturity securities (1):
Externally managed	$	7,237	$	7,978
Internally managed:
AssuredIM	520		—
Loss mitigation and other securities	799		876
Short-term investments	858		1,268
Other invested assets
Equity method investments	97		111
Other	16		7
Total	$	9,527	$	10,240

(1) 8.1% and 8.6% of fixed-maturity securities, related primarily to loss mitigation and other risk management strategies, are rated BIG as of September 30, 2020 and December 31, 2019, respectively.

The insurance subsidiaries have allocated $500 million to be invested in AssuredIM funds through their jointly owned investment subsidiary, AG Asset Strategies LLC (AGAS). As of September 30, 2020, the Company had invested approximately $352 million, net of distributions, of the $500 million it intends to invest in AssuredIM funds. AGAS's remaining commitment to AssuredIM funds was $106 million as of September 30, 2020. The total undrawn committed capital and uncommitted AGAS investments totaled $148 million as of September 30, 2020 and are included in short-term investments in the table above. As of September 30, 2020, the fair value of AGAS's investments across four Assured IM funds was $379 million. All of AssuredIM funds in which AGAS invests were consolidated as of September 30, 2020 and December 31, 2019, and therefore the investment in the funds is not shown in the table above. See Note 11 Variable Interest Entities.

Accrued investment income, which is recorded in other assets, was $79 million as of both September 30, 2020 and December 31, 2019. In Nine Months 2020, the Company did not write off any accrued investment income.


Security Type	Percent of Total (1)		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		AOCI (2) Pre-tax Gain (Loss) on Securities with Credit Loss		Weighted Average Credit Rating (3)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	41	%	$	3,665	$	(11)	$	347	$	(2)	$	3,999	$	—	AA-
U.S. government and agencies	2		179		—		13		—		192		—		AA+
Corporate securities	24		2,179		(39)		159		(26)		2,273		(17)		A
Mortgage-backed securities (4):	0
RMBS	7		612		(20)		37		(23)		606		(22)		A-
CMBS	4		367		—		29		—		396		—		AAA
Asset-backed securities	10		932		(6)		25		(4)		947		(3)		BBB
Non-U.S. government securities	2		146		—		4		(7)		143		—		AA
Total fixed-maturity securities	90		8,080		(76)		614		(62)		8,556		(42)		A+
Short-term investments	10		858		—		—		—		858		—		AAA
Total	100	%	$	8,938	$	(76)	$	614	$	(62)	$	9,414	$	(42)	A+


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	42	%	$	4,036	$	305	$	(1)	$	4,340	$	40	AA-
U.S. government and agencies	1		137		10		—		147		—		AA+
Corporate securities	23		2,137		103		(19)		2,221		(8)		A
Mortgage-backed securities (4):
RMBS	8		745		37		(7)		775		8		A-
CMBS	4		402		17		—		419		—		AAA
Asset-backed securities	7		684		38		(2)		720		16		BB+
Non-U.S. government securities	2		230		7		(5)		232		3		AA
Total fixed-maturity securities	87		8,371		517		(34)		8,854		59		A+
Short-term investments	13		1,268		—		—		1,268		—		AAA
Total	100	%	$	9,639	$	517	$	(34)	$	10,122	$	59	AA-

(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.


	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	$	89	$	(2)	$	—	$	—	$	89	$	(2)
U.S. government and agencies	20		—		—		—		20		—
Corporate securities	39		(1)		57		(8)		96		(9)
Mortgage-backed securities:
RMBS	20		(1)		1		—		21		(1)
CMBS	—		—		1		—		1		—
Asset-backed securities	122		—		94		(1)		216		(1)
Non-U.S. government securities	10		—		41		(7)		51		(7)
Total	$	300	$	(4)	$	194	$	(16)	$	494	$	(20)
Number of securities (1)			93				55				147


	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	$	45	$	(1)	$	—	$	—	$	45	$	(1)
U.S. government and agencies	5		—		5		—		10		—
Corporate securities	61		—		119		(19)		180		(19)
Mortgage-backed securities:
RMBS	10		—		75		(7)		85		(7)
CMBS	—		—		4		—		4		—
Asset-backed securities	24		—		183		(2)		207		(2)
Non-U.S. government securities	—		—		56		(5)		56		(5)
Total	$	145	$	(1)	$	442	$	(33)	$	587	$	(34)
Number of securities			57				119				176
Number of securities with OTTI			1				7				8

(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 which an allowance for credit loss was not recorded, 22 securities had unrealized losses in excess of 10% of their carrying value as of September 30, 2020. The total unrealized loss for these securities was $13 million as of September 30, 2020. 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, 2020 were not related to credit

Of the securities in an unrealized loss position for 12 months or more as of December 31, 2019, 19 securities had unrealized losses greater than 10% of book value. The total unrealized loss for these securities was $25 million as of December 31, 2019. 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 determined that the unrealized losses recorded as of December 31, 2019 were not related to credit quality.

The amortized cost and estimated fair value of available-for-sale fixed maturity securities by contractual maturity as of September 30, 2020 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Estimated Fair Value
	(in millions)
Due within one year	$	333	$	329
Due after one year through five years	1,599		1,686
Due after five years through 10 years	1,913		2,014
Due after 10 years	3,256		3,525
Mortgage-backed securities:
RMBS	612		606
CMBS	367		396
Total	$	8,080	$	8,556

Based on fair value, investments and restricted assets that are either held in trust for the benefit of third party ceding insurers in accordance with statutory requirements, placed on deposit to fulfill state licensing requirements, or otherwise pledged or restricted totaled $290 million and $280 million, as of September 30, 2020 and December 31, 2019, 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 $1,457 million and $1,502 million, based on fair value as of September 30, 2020 and December 31, 2019, respectively.

Net investment income is a function of the yield that the Company earns on invested assets and the size of the portfolio. Net investment income includes the income earned on fixed-maturity securities, short-term investments and other invested assets (excluding investments accounted for under the equity method, which are recorded in equity in earnings of investees in the condensed consolidated statements of operations). 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.


	Third Quarter				Nine Months
	2020		2019		2020		2019
	(in millions)
Interest income:
Externally managed	$	54	$	66	$	178	$	207
Internally managed:
AssuredIM	3		—		3		—
Loss mitigation and other securities	16		24		54		95
Interest income	73		90		235		302
Investment expenses	(2)		(2)		(6)		(6)
Net investment income	$	71	$	88	$	229	$	296

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.


	Third Quarter				Nine Months
	2020		2019		2020		2019
	(in millions)
Gross realized gains on available-for-sale securities	$	16	$	29	$	39	$	48
Gross realized losses on available-for-sale securities	(3)		(1)		(12)		(4)
Credit impairments (1)	—		(12)		(15)		(32)
Net realized investment gains (losses) (2)	$	13	$	16	$	12	$	12

(1) Credit impairment in Nine Months 2020 was related primarily to an increase in the allowance for credit loss on loss mitigation securities. Shut-downs due to COVID-19 pandemic restrictions contributed to the increase in the allowance for credit losses in Nine Months 2020. Credit impairment in Third Quarter 2019 was primarily attributable to foreign exchange losses while Nine Months 2019 was primarily attributable to foreign exchange losses and loss mitigation securities.

(2) Includes foreign currency gains of $5 million for Third Quarter 2020 and $6 million for Nine Months 2020. Includes foreign currency losses of $12 million in Third Quarter 2019 and $17 million Nine Months 2019, respectively.

The proceeds from sales of fixed-maturity securities classified as available-for-sale were $137 million in Third Quarter 2020, $405 million in Third Quarter 2019, $627 million in Nine Months 2020 and $1,306 million in Nine Months 2019.

The following table presents the roll-forward of the credit losses on fixed-maturity securities for which the Company has recognized an allowance for credit losses in 2020 or an OTTI and for which unrealized loss was recognized in OCI for 2019.


	Third Quarter				Nine Months
	2020		2019		2020		2019
	(in millions)
Balance, beginning of period	$	75	$	191	$	—	$	185
Effect of adoption of accounting guidance on credit losses on January 1, 2020	—		—		62		—
Additions for credit losses on securities for which credit impairments were not previously recognized	—		—		1		—
Reductions for securities sold and other settlements	—		—		—		(7)
Additions (reductions) for credit losses on securities for which credit impairments were previously recognized	1		—		13		13
Balance, end of period	$	76	$	191	$	76	$	191