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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 March 31, 2021,

Or

For the transition Period from              to       

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

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 par value per share	AGO	New York Stock Exchange
Assured Guaranty Municipal Holdings Inc. 6-7/8% $100,000,000 Quarterly Interest Bonds due 2101 (and the related guarantee of Registrant)		AGO PRB	New York Stock Exchange
Assured Guaranty Municipal Holdings Inc. 6.25% $230,000,000 Quarterly Interest Bonds due 2102 (and the related guarantee of Registrant)		AGO PRE	New York Stock Exchange
Assured Guaranty Municipal Holdings Inc. 5.60% $100,000,000 Quarterly Interest Bonds due 2103 (and the related guarantee of Registrant)		AGO PRF	New York Stock Exchange
Assured Guaranty US Holdings Inc. 5.000% $500,000,000 Senior Notes due 2024 (and the related guarantee of Registrant)		AGO 24	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 ☐

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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 May 5, 2021 was 75,404,731 (includes 44,797 unvested restricted shares).

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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 March 31, 2021 and December 31, 2020	1
	Condensed Consolidated Statements of Operations (unaudited) for the Three Months Ended March, 2021 and 2020	2
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three Months Ended March 31, 2021 and 2020	3
	Condensed Consolidated Statements of Shareholders’ Equity (unaudited) for the Three Ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2021 and 2020	5
	Notes to Condensed Consolidated Financial Statements (unaudited)	7
	1. Business and Basis of Presentation	7
	2. Segment Information	9
	3. Outstanding Exposure	11
	4. Expected Loss to be Paid	23
	5. Contracts Accounted for as Insurance	33
	6. Contracts Accounted for as Credit Derivatives	38
	7. Reinsurance	40
	8. Investments and Cash	41
	9. Variable Interest Entities	47
	10. Fair Value Measurement	54
	11. Asset Management Fees	69
	12. Income Taxes	70
	13. Commitments and Contingencies	72
	14. Shareholders' Equity	73
	15. Earnings Per Share	75
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	75
	Forward Looking Statements	75
	Available Information	76
	Overview	77
	Business	77
	Economic Environment	78
	Key Business Strategies	79
	Executive Summary	83
	Financial Performance of Assured Guaranty	84
	Other Matters	86
	Results of Operations	87
	Business Segments	87
	Results of Operations by Segment	88
	Insurance Segment	88
	Asset Management Segment	96
	Corporate	99
	Other	100
	Reconciliation to GAAP	100
	Non-GAAP Financial Measures	102
	Insured Portfolio	106
	Liquidity and Capital Resources	110
	AGL and its U.S. Holding Companies	110
	Insurance Subsidiaries	113
	Investment Portfolio	116
	AssuredIM	119
	Lease Obligations	119
	Consolidated VIEs	119
	Condensed Consolidated Cash Flows	120
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	121
Item 4.	Controls and Procedures	121
PART II	Other Information	122
Item 1.	Legal Proceedings	122
Item 1A.	Risk Factors	122
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	122
Item 6.	Exhibits	123

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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
	March 31, 2021		December 31, 2020
Assets
Investment portfolio:
Fixed-maturity securities, available-for-sale, at fair value (amortized cost of $8,267 and $8,204, allowance for credit loss of $81 and $78)	$	8,687	$	8,773
Short-term investments at fair value	701		851
Other invested assets (includes $92 and $106 measured at fair value)	211		214
Total investment portfolio	9,599		9,838
Cash	95		162
Premiums receivable, net of commissions payable	1,359		1,372
Deferred acquisition costs	124		119
Salvage and subrogation recoverable	977		991
Financial guaranty variable interest entities’ assets, at fair value	281		296
Assets of consolidated investment vehicles (includes $2,594 and $1,727 measured at fair value)	2,956		1,913
Goodwill and other intangible assets	184		203
Other assets (includes $134 and $145 measured at fair value)	443		440
Total assets	$	16,018	$	15,334
Liabilities and shareholders’ equity
Unearned premium reserve	$	3,718	$	3,735
Loss and loss adjustment expense reserve	1,058		1,088
Long-term debt	1,225		1,224
Credit derivative liabilities, at fair value	124		103
Financial guaranty variable interest entities’ liabilities with recourse, at fair value	301		316
Financial guaranty variable interest entities’ liabilities without recourse, at fair value	17		17
Liabilities of consolidated investment vehicles (includes $2,096 and $1,299 measured at fair value)	2,573		1,590
Other liabilities	509		556
Total liabilities	9,525		8,629
Commitments and contingencies (see Note 13)
Redeemable noncontrolling interests (see Note 9)	21		21
Common shares ($0.01 par value, 500,000,000 shares authorized; 75,935,382 and 77,546,896 shares issued and outstanding)	1		1
Retained earnings	6,055		6,143
Accumulated other comprehensive income, net of tax of $68 and $89	373		498
Deferred equity compensation	1		1
Total shareholders’ equity attributable to Assured Guaranty Ltd.	6,430		6,643
Nonredeemable noncontrolling interests (see Note 9)	42		41
Total shareholders’ equity	6,472		6,684
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	$	16,018	$	15,334

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

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Assured Guaranty Ltd.

Condensed Consolidated Statements of Operations (unaudited)

(dollars in millions except per share amounts)

	Three Months Ended March 31,
	2021		2020
Revenues
Net earned premiums	$	103	$	103
Net investment income	70		80
Asset management fees	24		23
Net realized investment gains (losses)	(3)		(5)
Net change in fair value of credit derivatives	(19)		(77)
Fair value gains (losses) on committed capital securities	(19)		48
Fair value gains (losses) on financial guaranty variable interest entities	5		(9)
Fair value gains (losses) on consolidated investment vehicles	16		(12)
Foreign exchange gains (losses) on remeasurement	—		(62)
Other income (loss)	—		7
Total revenues	177		96
Expenses
Loss and loss adjustment expenses	30		20
Interest expense	21		22
Amortization of deferred acquisition costs	3		3
Employee compensation and benefit expenses	60		64
Other operating expenses	57		45
Total expenses	171		154
Income (loss) before income taxes and equity in earnings of investees	6		(58)
Equity in earnings of investees	9		(4)
Income (loss) before income taxes	15		(62)
Provision (benefit) for income taxes	—		(4)
Net income (loss)	15		(58)
Less: Noncontrolling interests	4		(3)
Net income (loss) attributable to Assured Guaranty Ltd.	$	11	$	(55)
Earnings per share:
Basic	$	0.14	$	(0.59)
Diluted	$	0.14	$	(0.59)

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

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Assured Guaranty Ltd.

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)

(in millions)

	Three Months Ended March 31,
	2021		2020
Net income (loss)	$	15	$	(58)
Change in net unrealized gains (losses) on:
Investments with no credit impairment, net of tax provision (benefit) of $(20) and $(27)	(119)		(162)
Investments with credit impairment, net of tax provision (benefit) of $(1) and $(13)	(6)		(52)
Change in net unrealized gains (losses) on investments	(125)		(214)
Change in net unrealized gains (losses) on financial guaranty variable interest entities' liabilities with recourse, net of tax	(1)		10
Other, net of tax provision (benefit)	1		—
Other comprehensive income (loss)	(125)		(204)
Comprehensive income (loss)	(110)		(262)
Less: Comprehensive income (loss) attributable to noncontrolling interests	4		(3)
Comprehensive income (loss) attributable to Assured Guaranty Ltd.