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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
AGL and its Bermuda subsidiaries, AG Re, AGRO, and Cedar Personnel Ltd. (collectively, the Bermuda Subsidiaries), are not subject to any income, withholding or capital gains taxes under current Bermuda law. The Company has received an assurance from the Minister of Finance in Bermuda that, in the event of any taxes being imposed, AGL and its Bermuda Subsidiaries will be exempt from taxation in Bermuda until March 31, 2035. AGL’s U.S., U.K. and French subsidiaries are subject to income taxes imposed by U.S., U.K. and French authorities, respectively, and file applicable tax returns. In addition, AGRO, a Bermuda domiciled company, has elected under Section 953(d) of the U.S. Internal Revenue Code (the Code) to be taxed as a U.S. domestic corporation..
 
In November 2013, AGL became tax resident in the U.K. although it remains a Bermuda-based company and its administrative and head office functions continue to be carried on in Bermuda. As a U.K. tax resident company, AGL is required to file a corporation tax return with Her Majesty’s Revenue & Customs. AGL is subject to U.K. corporation tax in respect of its worldwide profits (both income and capital gains), subject to any applicable exemptions. The corporation tax rate was 19%. The Company expects that the dividends AGL receives from its direct subsidiaries will be exempt from U.K. corporation tax due to the exemption in section 931D of the U.K. Corporation Tax Act 2009. In addition, the Company obtained a clearance from Her Majesty’s Revenue & Customs confirming any dividends paid by AGL to its shareholders should not be subject to any withholding tax in the U.K. The Company does not expect any profits of non-U.K. resident members of the group to be taxed under the U.K. “controlled foreign companies” regime.

    AGUS files a consolidated federal income tax return with all of its U.S. subsidiaries.

Assured Guaranty Overseas US Holdings Inc. and its subsidiaries, AGRO and AG Intermediary Inc., file their own consolidated federal income tax return.
The CARES (Coronavirus Aid, Relief, and Economic Security) Act became law on March 27, 2020 and was updated on April 9, 2020. The CARES Act, among other tax changes, accelerates the ability of companies to receive refunds of alternative minimum tax (AMT) credits related to tax years beginning in 2018 and 2019. As a result, the Company received a refund for AMT credits in 2020.

As a result of the BlueMountain Acquisition referred to in Note 2, Business Combinations, the entities acquired will be included in the AGUS consolidated federal income tax return.

Accounting Policy

The provision for income taxes consists of an amount for taxes currently payable and an amount for deferred taxes. Deferred income taxes are provided for temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities, using enacted rates in effect for the year in which the differences are expected to reverse. A valuation allowance is recorded to reduce the deferred tax asset to an amount that is more likely than not to be realized.

Non-interest-bearing tax and loss bonds are purchased in the amount of the tax benefit that results from deducting statutory-basis contingency reserves as provided under Internal Revenue Code Section 832(e). The Company records the purchase of tax and loss bonds in deferred taxes.

The Company recognizes tax benefits only if a tax position is “more likely than not” to prevail.

The Company elected to account for tax associated with Global Intangible Low-Taxed Income (GILTI) as a current-period expense when incurred.

Deferred and current tax assets and liabilities are reported in other assets or liabilities on the consolidated balance sheets.

Tax Assets (Liabilities)
    
Deferred and Current Tax Assets (Liabilities)
As of December 31,
20212020
(in millions)
Net deferred tax assets (liabilities)$(33)$(100)
Net current tax assets (liabilities)(43)21 
Components of Net Deferred Tax Assets (Liabilities)
As of December 31,
20212020
(in millions)
Deferred tax assets:
Unearned premium reserves, net
$51 $56 
Investment basis differences
— 47 
Rent17 24 
Foreign tax credit
24 24 
Net operating loss
28 33 
Depreciation27 — 
Deferred compensation
29 29 
Other
19 4 
Total deferred tax assets195 217 
Deferred tax liabilities:
Unrealized appreciation on investments
74 102 
Discount on long-term debt7 41 
Market discount on investments25 42 
DAC
20 22 
Investment basis differences
5 — 
Loss and LAE reserve
44 44 
Lease16 17 
Unrealized gains on CCS
5 11 
Other
8 14 
Total deferred tax liabilities204 293 
Less: Valuation allowance24 24 
Net deferred tax assets (liabilities) $(33)$(100)

As part of the acquisition of CIFG Holding Inc. (CIFGH, and together with its subsidiaries, CIFG), the Company acquired $189 million of net operating losses (NOL) which will begin to expire in 2033. The NOL has been limited under Internal Revenue Code Section 382 due to a change in control as a result of the acquisition. As of December 31, 2021, the Company had $131 million of NOLs available to offset its future U.S. taxable income.

Valuation Allowance
 
    The Company has $24 million of foreign tax credit (FTC) due to the 2017 Tax Cuts and Jobs Act (TCJA) for use against regular tax in future years. FTCs will expire in 2027. In analyzing the future realizability of FTCs, the Company notes limitations on future foreign source income due to overall foreign losses as negative evidence. After reviewing positive and negative evidence, the Company came to the conclusion that it is more likely than not that the FTC of $24 million will not be utilized, and therefore recorded a valuation allowance with respect to this tax attribute. During 2020, the Company reduced its valuation allowance from $36 million as of December 31, 2019 to $24 million as of December 31, 2020 due to the expiration of the FTC from previous acquisitions. There were no changes in the valuation allowance during 2021 and 2019.

The Company came to the conclusion that it is more likely than not that the remaining deferred tax assets will be fully realized after weighing all positive and negative evidence available as required under GAAP. The positive evidence that was considered included the cumulative income the Company has earned over the last three years, and the significant unearned premium income to be included in taxable income. The positive evidence outweighs any negative evidence that exists. As such, the Company believes that no valuation allowance is necessary in connection with the remaining deferred tax assets. The Company will continue to analyze the need for a valuation allowance on a quarterly basis.

Provision for Income Taxes

    The effective tax rates reflect the proportion of income recognized by each of the Company’s operating subsidiaries, with U.S. subsidiaries taxed at the U.S. marginal corporate income tax rate of 21% in 2021, 2020 and 2019, U.K. subsidiaries
taxed at the U.K. marginal corporate tax rate of 19%, French subsidiaries taxed at the French marginal corporate tax rate of 27.5% in 2021 and 28% in 2020, and no taxes for the Company’s Bermuda Subsidiaries unless subject to U.S. tax by election. Controlled foreign corporations (CFCs) apply the local marginal corporate tax rate. In addition, the TCJA creates a new requirement that a portion of the GILTI earned by CFCs must be included currently in the gross income of the CFCs’ U.S. shareholder. The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions.

A reconciliation of the difference between the provision for income taxes and the expected tax provision at statutory rates in taxable jurisdictions is presented below.

Effective Tax Rate Reconciliation 
 Year Ended December 31,
 202120202019
 (in millions)
Expected tax provision (benefit)$76 $83 $91 
Tax-exempt interest(19)(20)(19)
Change in liability for uncertain tax positions— (17)1 
Effect of provision to tax return filing adjustments(4)(7)(6)
Non-controlling interest(8)(1)— 
State taxes7 4 1 
Taxes on reinsurance(2)9 (5)
Foreign taxes8 (3)6 
Other— (3)(6)
Total provision (benefit) for income taxes$58 $45 $63 
Effective tax rate12.2 %10.9 %13.7 %

The expected tax provision (benefit) is calculated as the sum of pre-tax income in each jurisdiction multiplied by the statutory tax rate of the jurisdiction by which it will be taxed. Where there is a pre-tax loss in one jurisdiction and pre-tax income in another, the total combined expected tax rate may be higher or lower than any of the individual statutory rates.
 
The following tables present pre-tax income and revenue by jurisdiction.
 
Pre-tax Income (Loss) by Tax Jurisdiction
 Year Ended December 31,
 202120202019
 (in millions)
U.S.$378 $385 $440 
Bermuda115 16 33 
U.K.(8)13 (8)
Other(8)(1)(1)
Total$477 $413 $464 

Revenue by Tax Jurisdiction
 Year Ended December 31,
 202120202019
 (in millions)
U.S.$685 $894 $779 
Bermuda123 151 146 
U.K.41 60 36 
Other(1)10 2 
Total$848 $1,115 $963 
 
Pre-tax income by jurisdiction may be disproportionate to revenue by jurisdiction to the extent that insurance losses incurred are disproportionate.
Audits

    As of December 31, 2021, AGUS and Assured Guaranty Overseas US Holdings Inc. had open tax years with the U.S. IRS for 2018 forward. The companies are not currently under audit with the IRS. The Company’s U.K. subsidiaries are not currently under examination and have open tax years of 2020 forward. The Company’s French subsidiary is not currently under examination and has open tax years of 2019 forward.

Uncertain Tax Positions

The following table provides a reconciliation of the beginning and ending balances of the total liability for unrecognized tax positions, excluding accrued interest.
202120202019
(in millions)
Beginning of year$— $15 $14 
Effect of provision to tax return filing adjustments— — 5 
Decrease in unrecognized tax positions as a result of settlement of positions taken during the prior period— (15)— 
Reductions to unrecognized tax benefits as a result of the applicable statute of limitations — — (4)
Balance as of December 31,$— $— $15 

The Company’s policy is to recognize interest related to uncertain tax positions in income tax expense and has accrued zero, $0.3 million and $1 million for full years 2021, 2020 and 2019, respectively. As of both December 31, 2021 and 2020, the Company has accrued zero of interest.
The total amount of reserves for unrecognized tax positions, including accrued interest, that would affect the effective tax rate, if recognized, was zero as of both December 31, 2021 and 2020, and $17 million as of December 31, 2019.