The majority of the investment portfolio is managed by three outside managers and AssuredIM. The Company has established investment guidelines for its investment managers regarding credit quality, exposure to a particular sector and exposure to a particular obligor within a sector.

The remainder of the investment portfolio primarily consists of (i) Loss Mitigation Securities; (ii) New Recovery Bonds and CVIs received in connection with the consummation of the 2022 Puerto Rico Resolutions; and (iii) other investments including certain fixed-maturity and short-term securities, and equity method investments. Equity method investments primarily consist of generally less liquid alternative investments including: an investment in renewable and clean energy and private equity funds. The Company had unfunded commitments of $79 million as of March 31, 2023 related to certain of the Company’s alternative investments other than AssuredIM Funds.


	As of
	March 31, 2023		December 31, 2022
	(in millions)
Fixed-maturity securities, available-for-sale (1):
Externally managed	$	5,498	$	5,519
Loss Mitigation Securities and other	696		705
AssuredIM managed	539		537
Puerto Rico, New Recovery Bonds (2)	136		358
Fixed-maturity securities, trading - Puerto Rico, CVIs (2)	300		303
Short-term investments (3)	1,273		810
Other invested assets:
Equity method investments	122		123
Other	18		10
Total	$	8,582	$	8,365

(1) 7.5% and 7.4% of fixed-maturity securities were rated BIG as of March 31, 2023 and December 31, 2022, respectively, consisting primarily of Loss Mitigation Securities. 2.9% and 5.9% were not rated, as of March 31, 2023 and December 31, 2022, respectively.

(3) Weighted average credit rating of AAA as of both March 31, 2023 and December 31, 2022, based on the lower of the Moody’s Investors Service, Inc. (Moody’s) and S&P Global Ratings, a division of Standard & Poor's Financial Services LLC (S&P) classifications.

The U.S. Insurance Subsidiaries, through their jointly owned investment subsidiary, AGAS, are authorized to invest up to $750 million in affiliated alternative investment funds, which currently consist of investments in AssuredIM Funds. Adding inception-to-date distributed gains, the U.S. Insurance Subsidiaries may invest a total of up to $853 million in affiliated alternative investment funds. As of March 31, 2023, the U.S. Insurance Subsidiaries had total commitments to AssuredIM

Funds of $613 million, of which $366 million represented net invested capital and $247 million was undrawn. This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based finance and healthcare structured capital. As of March 31, 2023 and December 31, 2022, the net asset value (NAV) of investments in AssuredIM Funds was $396 million and $569 million, respectively. The decline in the carrying value of AssuredIM Funds was primarily due to distributions from the municipal bond fund.

As discussed in Note 1, Business and Basis of Presentation, Sound Point Transaction, the U.S. Insurance Subsidiaries agreed after the closing of the transactions contemplated by the Transaction Agreement to engage Sound Point as their sole alternative credit manager and to transition existing investments and commitments in AssuredIM Funds and make new investments in an aggregate amount totaling $1 billion over time, subject to regulatory approval for additional amounts, in funds, other vehicles and separately managed accounts managed by Sound Point as part of the Sound Point Transaction. As of March 31, 2023, current investments and commitments in AssuredIM Funds that will transfer to Sound Point management totaled $393 million, and such amount will be applied to the $1 billion commitment described above. The Company’s $853 million authorization is available for investment in funds, vehicles and separately managed accounts managed by Sound Point and for investment in healthcare strategies.

AssuredIM Funds, in which AGAS (primarily) and other subsidiaries invest, and where the Company has been deemed to be the primary beneficiary, are not reported in “investments” on the condensed consolidated balance sheets, but rather, such AssuredIM Funds are consolidated and reported in “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 noncontrolling interests (NCI). See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

Accrued investment income, which is reported in “other assets,” was $76 million as of March 31, 2023 and $71 million as of December 31, 2022. In first quarter 2023 and first quarter 2022, 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		Weighted Average Credit Rating (2)
	(dollars in millions)
Obligations of state and political subdivisions	43	%	$	3,161	$	(14)	$	46	$	(96)	$	3,097	A+
U.S. government and agencies	1		94		—		1		(7)		88		AA+
Corporate securities (3)	33		2,408		(6)		5		(254)		2,153		A
Mortgage-backed securities (4):
RMBS	6		429		(20)		3		(62)		350		BBB+
Commercial mortgage-backed securities (CMBS)	3		267		—		—		(9)		258		AAA
Asset-backed securities:
CLOs	6		453		—		—		(20)		433		A+
Other	6		426		(29)		20		(28)		389		CCC+
Non-U.S. government securities	2		121		—		—		(20)		101		AA-
Total available-for-sale fixed-maturity securities	100	%	$	7,359	$	(69)	$	75	$	(496)	$	6,869	A


Security Type	Percent of Total (1)		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Weighted Average Credit Rating (2)
	(dollars in millions)
Obligations of state and political subdivisions	45	%	$	3,509	$	(14)	$	37	$	(138)	$	3,394	A
U.S. government and agencies	2		118		—		1		(8)		111		AA+
Corporate securities (3)	31		2,387		(6)		2		(299)		2,084		A
Mortgage-backed securities (4):
RMBS	5		418		(19)		3		(62)		340		BBB
CMBS	4		282		—		—		(11)		271		AAA
Asset-backed securities:
CLOs	6		449		—		—		(21)		428		A+
Other	5		423		(26)		22		(26)		393		CCC+
Non-U.S. government securities	2		121		—		—		(23)		98		AA-
Total available-for-sale fixed-maturity securities	100	%	$	7,707	$	(65)	$	65	$	(588)	$	7,119	A

(2)Ratings represent the lower of the Moody’s and S&P classifications, except for Loss Mitigation Securities and certain other securities, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments. New Recovery Bonds received in connection with the consummation of the 2022 Puerto Rico Resolutions are not rated.


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	667	$	(10)	$	614	$	(84)	$	1,281	$	(94)
U.S. government and agencies	1		—		56		(7)		57		(7)
Corporate securities	627		(14)		1,150		(191)		1,777		(205)
Mortgage-backed securities:
RMBS	117		(5)		51		(4)		168		(9)
CMBS	114		(2)		143		(7)		257		(9)
Asset-backed securities:
CLOs	42		(1)		377		(19)		419		(20)
Other	12		—		15		(1)		27		(1)
Non-U.S. government securities	4		—		93		(20)		97		(20)
Total	$	1,584	$	(32)	$	2,499	$	(333)	$	4,083	$	(365)
Number of securities (1)			602				1,006				1,568


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	1,763	$	(79)	$	163	$	(56)	$	1,926	$	(135)
U.S. government and agencies	32		—		52		(8)		84		(8)
Corporate securities	1,276		(95)		519		(147)		1,795		(242)
Mortgage-backed securities:
RMBS	147		(9)		3		(1)		150		(10)
CMBS	270		(11)		—		—		270		(11)
Asset-backed securities:
CLOs	171		(7)		250		(14)		421		(21)
Other	27		(2)		—		—		27		(2)
Non-U.S. government securities	65		(10)		30		(13)		95		(23)
Total	$	3,751	$	(213)	$	1,017	$	(239)	$	4,768	$	(452)
Number of securities (1)			1,340				466				1,776

(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 March 31, 2023 and December 31, 2022 were related to higher interest rates rather than credit quality. As of March 31, 2023, the Company did not intend to and was not required to sell investments in an unrealized loss position prior to expected recovery in value. As of March 31, 2023, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 482 securities had unrealized losses in excess of 10% of their carrying value, whereas as of December 31, 2022, 567 securities had unrealized losses in excess of 10% of their carrying value. The total unrealized loss for these securities was $253 million as of March 31, 2023 and $329 million as of December 31, 2022.

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of March 31, 2023 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	$	289	$	283
Due after one year through five years	1,636		1,531
Due after five years through 10 years	1,720		1,636
Due after 10 years	3,018		2,811
Mortgage-backed securities:
RMBS	429		350
CMBS	267		258
Total	$	7,359	$	6,869

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 $229 million as of March 31, 2023 and $222 million as of December 31, 2022. 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 amounts of $1,146 million and $1,169 million based on fair value as of March 31, 2023 and December 31, 2022, respectively.

Net investment income is a function of the yield that the Company earns on available-for-sale 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.

Puerto Rico CVIs in the investment portfolio are classified as trading securities. Equity in earnings (losses) of investees represents the Company’s interest in the earnings of its equity method investments.


	First Quarter
	2023		2022
	(in millions)
Investment income:
Externally managed	$	48	$	48
Loss Mitigation Securities and other	26		11
Managed by AssuredIM (1)	8		4
Investment income	82		63
Investment expenses	(1)		(1)
Net investment income	$	81	$	62

Fair value gains (losses) on trading securities (2)	$	(2)	$	(4)
Equity in earnings (losses) of investees (3)	$	2	$	(11)

(2) Fair value losses on trading securities pertaining to securities still held as of March 31, 2023 were $2 million for first quarter 2023. Fair value losses on trading securities pertaining to securities still held as of March 31, 2022 were $4 million for first quarter 2022.

(3) Fair value gains (losses) on investments where the fair value option (FVO) was elected utilizing the NAV as a practical expedient were $1 million in first quarter 2023 and $3 million in first quarter 2022.


	First Quarter
	2023		2022
	(in millions)
Gross realized gains on sales of available-for-sale securities (1)	$	12	$	—
Gross realized losses on sales of available-for-sale securities (2)	(9)		(2)

Change in allowance for credit losses and intent to sell	(5)		(5)
Other net realized gains (losses) (3)	—		10
Net realized investment gains (losses)	$	(2)	$	3


	First Quarter
	2023		2022
	(in millions)
Balance, beginning of period	$	65	$	42
Additions for securities for which credit losses were not previously recognized	—		4

Additions (reductions) for securities for which credit losses were previously recognized	4		1

Balance, end of period	$	69	$	47

The Company recorded credit loss expenses of $4 million and $5 million in first quarter 2023 and first quarter 2022, respectively. The Company did not purchase any securities with credit deterioration in first quarter 2023 or first quarter 2022. Most of the Company’s securities with credit deterioration are Loss Mitigation Securities.