Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]


	As of
	September 30, 2020		December 31, 2019
	(in millions)
Excess of unpaid principal over fair value of:
FG VIEs’ assets	$	283	$	279
FG VIEs’ liabilities with recourse	17		21
FG VIEs’ liabilities without recourse	17		19
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due	50		52
Unpaid principal for FG VIEs’ liabilities with recourse (1)	353		388

____________________

(1) FG VIEs’ liabilities with recourse will mature at various dates ranging from 2020 to 2038.


	As of September 30, 2020				As of December 31, 2019
	Assets		Liabilities		Assets		Liabilities
	(in millions)
With recourse:
U.S. RMBS first lien	$	228	$	266	$	270	$	297
U.S. RMBS second lien	56		58		70		70
Other	11		12		—		—
Total with recourse	295		336		340		367
Without recourse	19		19		102		102
Total	$	314	$	355	$	442	$	469

Assets and Liabilities

of Consolidated Investment Vehicles


	As of
	September 30, 2020		December 31, 2019
	(in millions)
Assets (1):
Fund assets:
Cash and cash equivalents	$	169	$	2
Fund investments, at fair value (2)
Corporate securities	85		47
Equity securities and warrants	43		17
Structured products	40		—
Obligations of state and political subdivisions	50		—
Due from brokers and counterparties	35		—
Other assets	1		—
CLO and CLO warehouse assets:
Cash	13		12
CLO investments, at fair value
Loans of CFE	878		494
Loans, at fair value option	175		—
Short-term investments	30		—
Due from brokers and counterparties	20		—
Total assets	$	1,539	$	572
Liabilities:
CLO obligations of CFE, at fair value (3)	830		481
Warehouse financing debt, at fair value option (4)	47		—
Securities sold short, at fair value	53		—
Due to brokers and counterparties	162		—
Other liabilities	—		1
Total liabilities	$	1,092	$	482

____________________

(1) Assets held by consolidated investment vehicles are not available to fund the general liquidity needs of the Company.

(2) Includes investment in affiliates of $44 million and $9 million as of September 30, 2020 and December 31, 2019, respectively.

(3) The weighted average maturity and weighted average interest rate of CLO obligations were 5.6 years and 2.4%, respectively, for September 30, 2020 and 12.8 years and 3.8%, respectively, for December 31, 2019. CLO obligations will mature at various dates ranging from 2031 to 2032.

(4) The weighted average maturity and weighted average interest rate of warehouse financing debt of CLO warehouses were 7.0 years and 1.9%, respectively, for September 30, 2020. Bank debt will mature at various dates ranging from 2021 to 2029.

The following table shows the information for assets and liabilities of the consolidated investment vehicles measured using the fair value option.


	As of
	September 30, 2020
	(in millions)
Excess of unpaid principal over fair value of CLO loans	$	3
Unpaid principal for warehouse financing debt	47

Effect of Consolidating FG VIEs and Consolidated Investment Vehicles

on the Condensed Consolidated Balance Sheets

Increase (Decrease)


	As of
	September 30, 2020		December 31, 2019
	(in millions)
Assets
Investment portfolio:
Fixed maturity securities and short-term investments	$	(33)	$	(39)
Equity method investments (1)	(379)		(77)
Total investments	(412)		(116)
Premiums receivable, net of commissions payable	(6)		(7)
Salvage and subrogation recoverable	(9)		(8)
FG VIEs’ assets, at fair value	314		442
Assets of consolidated investment vehicles (1)	1,539		572

Total assets	$	1,426	$	883
Liabilities and shareholders’ equity
Unearned premium reserve	$	(41)	$	(39)
Loss and LAE reserve	(44)		(41)
FG VIEs’ liabilities with recourse, at fair value	336		367
FG VIEs’ liabilities without recourse, at fair value	19		102
Liabilities of consolidated investment vehicles (1)	1,092		482

Total liabilities	1,362		871

Redeemable noncontrolling interests in consolidated investment vehicles (1)	21		7

Retained earnings	27		34
Accumulated other comprehensive income	(31)		(35)
Total shareholders’ equity attributable to Assured Guaranty Ltd.	(4)		(1)
Nonredeemable noncontrolling interests (1)	47		6
Total shareholders’ equity	43		5
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	$	1,426	$	883

____________________

(1) These line items represent the components of the effect of consolidated investment vehicles.

Effect of Consolidating FG VIEs and Consolidated Investment Vehicles

on the Condensed Consolidated Statements of Operations

Increase (Decrease)


	Third Quarter				Nine Months
	2020		2019		2020		2019
	(in millions)
Net earned premiums	$	(2)	$	(2)	$	(4)	$	(16)
Net investment income	(1)		(1)		(4)		(3)
Asset management fees	(2)		—		(4)		—
Fair value gains (losses) on FG VIEs	—		4		(8)		42
Fair value gains (losses) on consolidated investment vehicles	18		—		37		—
Loss and LAE	(1)		(3)		7		(18)
Other operating expense	—		—		1		—
Equity in net earnings of investees	(13)		—		(29)		—
Effect on income before tax	(1)		(2)		(4)		5
Less: Tax provision (benefit)	(1)		—		(2)		1
Effect on net income (loss)	—		(2)		(2)		4
Effect on redeemable noncontrolling interests	3		—		5		—
Effect on net income (loss) attributable to AGL	$	(3)	$	(2)	$	(7)	$	4

Redeemable Noncontrolling Interest

Redeemable Noncontrolling Interests in Consolidated Investment Vehicles


	Third Quarter 2020		Nine Months 2020
	(in millions)
Beginning balance	$	20	$	7
Reallocation of ownership interests	—		(10)
Contributions to investment vehicles	—		25
Net income (loss)	1		(1)
September 30,	$	21	$	21

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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