The investment portfolio consists of both externally and internally managed portfolios. The majority of the investment portfolio is managed by three outside managers and AssuredIM, for which the Company has established investment 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+/A1/A+ by S&P Global Ratings, a division of Standard & Poor’s Financial Services LLC (S&P), Moody’s Investors Service, Inc. (Moody’s) and Fitch Ratings Inc., respectively.

The internally managed portfolio primarily consists of the Company’s investments in (i) securities acquired for loss mitigation purposes, (ii) securities managed under an Investment Management Agreement (IMA) with AssuredIM, (iii) other fixed-maturity securities, and (iv) other invested assets which primarily consist of generally less liquid alternative investments including: an equity method investment in one AssuredIM healthcare private equity fund, an investment in renewable and clean energy and a private equity fund. The Company had unfunded commitments of $209 million as of September 30, 2021 related to certain of the Company’s other invested assets, including $121 million for the AssuredIM healthcare private equity fund.


	As of
	September 30, 2021		December 31, 2020
	(in millions)
Fixed-maturity securities (1):
Externally managed	$	7,214	$	7,301
Loss mitigation securities and other	900		925
AssuredIM managed	549		547
Short-term investments	694		851
Other invested assets:
Equity method investments - AssuredIM Funds	102		91
Equity method investments - other	145		107
Other	13		16
Total	$	9,617	$	9,838

(1) 7.9% and 8.1% of fixed-maturity securities were rated BIG as of September 30, 2021 and December 31, 2020, respectively, consisting primarily of loss mitigation and other risk management strategies.

The U.S. Insurance Subsidiaries, through their jointly owned investment subsidiary, AGAS, are authorized to invest up to $750 million in AssuredIM Funds. As of September 30, 2021, the U.S. Insurance Subsidiaries had total commitments to AssuredIM Funds of $659 million, of which $380 million represented net invested capital and $279 million was undrawn. This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based finance, healthcare structured capital and municipal bonds. As of September 30, 2021 and December 31, 2020, the fair value of AGAS’ interest in AssuredIM Funds was $465 million and $345 million, respectively, although such amounts are not shown on the consolidated balance sheet in the investment portfolio if the AssuredIM Fund is consolidated. All of the AssuredIM Funds in which AGAS invests are consolidated, except for the AssuredIM healthcare private equity fund.

AssuredIM Funds, in which AGAS (primarily) and other subsidiaries invest, and where the Company has been deemed to be the primary beneficiary, are not included in the investment portfolio on the condensed consolidated balance sheets, but rather, such AssuredIM Funds are consolidated and included in the line items “assets of consolidated investment vehicles” and “liabilities of consolidated investment vehicles”, with the portion not owned by AGAS and other subsidiaries presented as either redeemable or non-redeemable non-controlling interests. The change in the fair value of CIVs is presented on a separate line on the condensed consolidated statements of operations with the portion not owned by AGAS and other subsidiaries presented as non-controlling interests. See Note 9, Variable Interest Entities.

Accrued investment income, which is reported in other assets, was $79 million as of September 30, 2021 and $75 million as of December 31, 2020. In Nine Months 2021 and 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 (4) Pre-tax Gain (Loss) on Securities with Credit Loss		Weighted Average Credit Rating (2)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	40	%	$	3,550	$	(12)	$	319	$	(4)	$	3,853	$	—	AA-
U.S. government and agencies	1		125		—		8		(2)		131		—		AA+
Corporate securities	29		2,593		(1)		136		(21)		2,707		(4)		A
Mortgage-backed securities (3):	0
RMBS	5		486		(15)		29		(16)		484		(16)		BBB+
Commercial mortgage-backed securities (CMBS)	4		335		—		19		—		354		—		AAA
Asset-backed securities:
CLOs	6		541		—		2		—		543		—		AA
Other	5		423		(7)		40		(2)		454		(2)		CCC+
Non-U.S. government securities	2		135		—		5		(3)		137		(1)		AA-
Total fixed-maturity securities	92		8,188		(35)		558		(48)		8,663		(23)		A+
Short-term investments	8		694		—		—		—		694		—		AAA
Total	100	%	$	8,882	$	(35)	$	558	$	(48)	$	9,357	$	(23)	A+


Security Type	Percent of Total (1)		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		AOCI Pre-tax Gain (Loss) on Securities with Credit Loss		Weighted Average Credit Rating (2)
	(dollars in millions)
Fixed-maturity securities:
Obligations of state and political subdivisions	40	%	$	3,633	$	(11)	$	369	$	—	$	3,991	$	—	AA-
U.S. government and agencies	2		151		—		12		(1)		162		—		AA+
Corporate securities	26		2,366		(42)		210		(21)		2,513		(16)		A
Mortgage-backed securities (3):
RMBS	6		571		(19)		35		(21)		566		(20)		A-
CMBS	4		358		—		29		—		387		—		AAA
Asset-backed securities:
CLOs	6		531		—		2		(1)		532		—		AA-
Other	5		427		(6)		31		(3)		449		(3)		CCC+
Non-U.S. government securities	2		167		—		10		(4)		173		—		AA-
Total fixed-maturity securities	91		8,204		(78)		698		(51)		8,773		(39)		A+
Short-term investments	9		851		—		—		—		851		—		AAA
Total	100	%	$	9,055	$	(78)	$	698	$	(51)	$	9,624	$	(39)	A+

(2)Ratings represent the lower of the Moody’s and S&P classifications, except for loss mitigation or risk management securities, 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	$	122	$	(4)	$	—	$	—	$	122	$	(4)
U.S. government and agencies	36		—		21		(2)		57		(2)
Corporate securities	483		(14)		24		(3)		507		(17)
Mortgage-backed securities:
RMBS	3		—		7		—		10		—
CMBS	5		—		—		—		5		—
Asset-backed securities:
CLOs	292		—		23		—		315		—
Non-U.S. government securities	20		(1)		8		(1)		28		(2)
Total	$	961	$	(19)	$	83	$	(6)	$	1,044	$	(25)
Number of securities (1)			376				24				398


	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	$	1	$	—	$	—	$	—	$	1	$	—
U.S. government and agencies	22		(1)		—		—		22		(1)
Corporate securities	73		—		45		(5)		118		(5)
Mortgage-backed securities:
RMBS	15		(1)		1		—		16		(1)
CMBS	—		—		1		—		1		—
Asset-backed securities:
CLOs	251		(1)		81		—		332		(1)
Non-U.S. government securities	—		—		38		(4)		38		(4)
Total	$	362	$	(3)	$	166	$	(9)	$	528	$	(12)
Number of securities (1)			94				46				139

(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.

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, 2021 were not related to credit quality. In addition, the Company currently does not intend to and is not required to sell investments in an unrealized loss position prior to expected recovery in value. As of September 30, 2021, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 20 securities had unrealized losses in excess of 10% of their carrying value, whereas as of December 31, 2020, 11 securities

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of September 30, 2021 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	$	259	$	265
Due after one year through five years	1,685		1,781
Due after five years through 10 years	1,912		2,018
Due after 10 years	3,511		3,761
Mortgage-backed securities:
RMBS	486		484
CMBS	335		354
Total	$	8,188	$	8,663

Based on fair value, investments and other 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 $254 million as of September 30, 2021 and $262 million as of December 31, 2020. 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 $1,236 million and $1,511 million, based on fair value as of September 30, 2021 and December 31, 2020, respectively.

Net investment income is a function of the yield that the Company earns on fixed-maturity securities and short-term investments, and the size of such 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 securities in this portfolio.


	Third Quarter				Nine Months
	2021		2020		2021		2020
	(in millions)
Investment income:
Externally managed fixed-maturity securities	$	52	$	54	$	155	$	178
Loss mitigation securities and other	11		16		41		53
AssuredIM managed fixed-maturity securities (1)	4		3		12		4
Investment income	67		73		208		235
Investment expenses	(1)		(2)		(4)		(6)
Net investment income	$	66	$	71	$	204	$	229

Equity in earnings of investees (2)	$	23	$	7	$	66	$	3

(2) Includes $13 million and $39 million for Third Quarter 2021 and Nine Months 2021, respectively, related to fair value gains on investments at fair value option using net asset value (NAV), as a practical expedient.


	Third Quarter				Nine Months
	2021		2020		2021		2020
	(in millions)
Gross realized gains on available-for-sale securities	$	3	$	16	$	12	$	39
Gross realized losses on available-for-sale securities	(6)		(3)		(10)		(12)
Net realized gains (losses) on other invested assets	1		—		1		—
Change in credit impairment and intent to sell (1)	5		—		1		(15)
Net realized investment gains (losses) (2)	$	3	$	13	$	4	$	12

(1) Change in credit impairment was a benefit in Third Quarter 2021 and Nine Months 2021 primarily due to lower delinquencies on loss mitigation securities. Change in 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.

(2) Includes foreign currency losses of $2 million in Third Quarter 2021 and gains of $5 million in Third Quarter 2020 and $6 million in Nine Months 2020. Foreign currency losses were de minimis in Nine Months 2021.

The proceeds from sales of fixed-maturity securities classified as available-for-sale were $137 million in Third Quarter 2020, $222 million in Nine Months 2021 and $627 million in Nine Months 2020. There were no sales of fixed-maturity securities classified as available-for-sale in Third Quarter 2021.


	Third Quarter				Nine Months
	2021		2020		2021		2020
	(in millions)
Balance, beginning of period	$	39	$	75	$	78	$	—
Effect of adoption of accounting guidance on credit losses on January 1, 2020	—		—		—		62
Additions for securities for which credit impairments were not previously recognized	—		—		1		1
Reductions for securities sold and other settlements	—		—		(42)		—
Additions (reductions) for credit losses on securities for which credit impairments were previously recognized	(4)		1		(2)		13
Balance, end of period	$	35	$	76	$	35	$	76

The Company recorded a benefit in credit losses of $4 million for Third Quarter 2021 and $1 million for Nine Months 2021. The Company recorded a credit loss expense of $14 million in Nine Months 2020. Credit loss expense was de minimis in Third Quarter 2020. The Company did not purchase any securities with credit deterioration during the periods presented. Most of the Company’s securities with credit deterioration are loss mitigation or other risk management securities.