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Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The table below shows the carrying value of the consolidated FG VIEs’ assets and liabilities in the condensed consolidated financial statements, segregated by the types of assets that collateralize the respective debt obligations for FG VIEs’ liabilities with recourse.

Consolidated FG VIEs by Type of Collateral


	As of
	September 30, 2021		December 31, 2020
	(in millions)
FG VIEs’ assets:
U.S. RMBS first lien	$	227	$	243
U.S. RMBS second lien	44		53
Total FG VIEs’ assets	$	271	$	296

FG VIEs’ liabilities with recourse:
U.S. RMBS first lien	$	235	$	260
U.S. RMBS second lien	46		56
Total FG VIEs’ liabilities with recourse	$	281	$	316

FG VIEs’ liabilities without recourse:
U.S. RMBS first lien	$	20	$	17
U.S. RMBS second lien	—		—
Total FG VIEs’ liabilities without recourse	$	20	$	17


	As of
	September 30, 2021		December 31, 2020
	(in millions)
Excess of unpaid principal over fair value of:
FG VIEs’ assets	$	262	$	274
FG VIEs’ liabilities with recourse	14		15
FG VIEs’ liabilities without recourse	16		16
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due	57		68
Unpaid principal for FG VIEs’ liabilities with recourse (1)	295		330

____________________

(1) FG VIEs’ liabilities with recourse will mature at various dates ranging from 2021 through 2038.

Assets and Liabilities of CIVs


	As of
	September 30, 2021		December 31, 2020
	(in millions)
Assets:
Fund assets:
Cash and cash equivalents	$	88	$	117
Fund investments, at fair value
Obligations of state and political subdivisions	93		61
Structured products	53		39
Corporate securities	2		9
Equity securities (1)	43		18
Due from brokers and counterparties	25		35
Other	2		—
CLO and CLO warehouse assets:
Cash	50		17
CLO investments:
Loans in CLOs, fair value option, collateralized financing entity (CFE)	3,174		1,291
Loans in CLO warehouses, fair value option	498		170
Short-term investments, at fair value	252		139
Due from brokers and counterparties	91		17
Total assets (2)	$	4,371	$	1,913
Liabilities:
CLO obligations, fair value option, CFE (3)	2,937		1,227
Warehouse financing debt, fair value option (4)	275		25
Securities sold short, at fair value	31		47
Due to brokers and counterparties	642		290
Other liabilities	1		1
Total liabilities	$	3,886	$	1,590

____________________

(1) Represents investments in AssuredIM Funds or other affiliated entities that are held by CIVs.

(2) Includes assets of a voting interest entity as of September 30, 2021 and December 31, 2020 of $5 million and $10 million, respectively.

(3) The weighted average maturity of CLO obligations was 6.3 years as of September 30, 2021 and 5.6 years as of December 31, 2020. The weighted average interest rate of CLO obligations was 1.9% as of September 30, 2021 and 2.4% as of December 31, 2020. CLO obligations will mature at various dates from 2032 to 2034.

(4) The weighted average maturity of warehouse financing debt of CLO warehouses was 1.1 years as of September 30, 2021 and 1.7 years as of December 31, 2020. The weighted average interest rate of warehouse financing debt of CLO warehouses was 1.3% as of September 30, 2021 and 1.7% as of December 31, 2020. Warehouse financing debt will mature at various dates from 2022 to 2023.

The table below reflects the effect of consolidating FG VIEs and CIVs. The amounts represent (1) the assets, liabilities, revenues and expenses of the FG VIEs and the CIVs, and (2) the amounts eliminated between consolidated FG VIEs or CIVs and the operating subsidiaries.

Effect of Consolidating FG VIEs and CIVs on the Condensed Consolidated Balance Sheets

Increase (Decrease)


	As of
	September 30, 2021		December 31, 2020
	(in millions)
Assets
Investments:
Fixed-maturity securities and short-term investments (1)	$	(50)	$	(32)
Equity method investments (2)	(363)		(254)
Other invested assets	—		(2)
Total investments	(413)		(288)
Premiums receivable, net of commissions payable (3)	(6)		(6)
Salvage and subrogation recoverable (3)	(15)		(9)
FG VIEs’ assets, at fair value	271		296
Assets of CIVs	4,371		1,913
Other assets	—		(3)
Total assets	$	4,208	$	1,903
Liabilities
Unearned premium reserve (3)	$	(36)	$	(38)
Loss and LAE reserve (3)	(34)		(41)
FG VIEs’ liabilities with recourse, at fair value	281		316
FG VIEs’ liabilities without recourse, at fair value	20		17
Liabilities of CIVs	3,886		1,590
Total liabilities	4,117		1,844

Redeemable noncontrolling interests (4)	21		21

Shareholders’ equity
Retained earnings	22		22
Accumulated other comprehensive income (5)	(27)		(25)
Total shareholders’ equity attributable to Assured Guaranty Ltd.	(5)		(3)
Nonredeemable noncontrolling interests (4)	75		41
Total shareholders’ equity	70		38
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	$	4,208	$	1,903

____________________

(1) Represents the elimination of investment balances related to the insurance subsidiaries’ purchases of insured FG VIEs’ debt.

(2) Represents the elimination of the equity method investment made by AGAS and other subsidiaries in the consolidated AssuredIM Funds.

(3) Represents the elimination of insurance balances related to the insurance subsidiaries’ guarantee of FG VIEs’ liabilities with recourse.

(4) Represents the proportion of consolidated AssuredIM Funds that is not owned by AGAS or other subsidiaries.

(5) Represents (a) the fair value of the FG VIEs’ liabilities with recourse that are attributable to changes in the Company’s own credit risk and (b) elimination of the AOCI related to the insurance subsidiaries’ purchases of insured FG VIEs’ debt.

Effect of Consolidating FG VIEs and CIVs on the Condensed Consolidated Statements of Operations

Increase (Decrease)


	Third Quarter				Nine Months
	2021		2020		2021		2020
	(in millions)
Fair value gains (losses) on FG VIEs (1)	$	5	$	—	$	18	$	(8)
Fair value gains (losses) on CIVs (2)	16		18		53		37
Equity in earnings of investees (3)	(11)		(13)		(35)		(29)
Other (4)	(13)		(6)		(26)		(4)
Effect on income before tax	(3)		(1)		10		(4)
Less: Tax provision (benefit)	(2)		(1)		(1)		(2)
Effect on net income (loss)	(1)		—		11		(2)
Less: Effect on noncontrolling interests (5)	3		3		11		5
Effect on net income (loss) attributable to AGL	$	(4)	$	(3)	$	—	$	(7)

____________________

(1) Changes in fair value of the FG VIEs’ liabilities with recourse that are attributable to factors other than changes in the Company’s own credit risk. Included in other income (loss) in the condensed consolidated statements of operations.

(2) Includes a loss of $2 million resulting from the extinguishment of debt of one of the Company’s CIVs.

(3) Represents the elimination of the equity in earnings of investees of AGAS and the other subsidiaries' investments in the consolidated AssuredIM Funds.

(4) Includes net earned premiums, net investment income, asset management fees, loss and LAE and other operating expenses.

(5) Represents the proportion of consolidated AssuredIM Funds’ income that is not attributable to AGAS’ or any other subsidiaries’ ownership interest.

Redeemable Noncontrolling Interest

Redeemable Noncontrolling Interests in CIVs


	Third Quarter				Nine Months
	2021		2020		2021		2020
	(in millions)
Beginning balance	$	21	$	20	$	21	$	7
Reallocation of ownership interests	—		—		—		(10)
Contributions to investment vehicles	—		—		—		25
Net income (loss)	—		1		—		(1)
September 30,	$	21	$	21	$	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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