Income Taxes

3 Months Ended

Mar. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Overview

AGL is a tax resident in the U.K. although it remains a Bermuda-based company and its administrative and head office functions are carried on in Bermuda.

AGL’s subsidiaries are subject to income taxes imposed by the local tax authorities in the jurisdictions in which they operate and file applicable tax returns. In addition, AGRO, a Bermuda domiciled company, has elected under Section 953(d) of the Internal Revenue Service (IRS) to be taxed as a U.S. domestic corporation.

In July of 2023, the U.K. government passed legislation to implement the Organization for Economic Co-Operation and Development’s Base Erosion and Profit Shifting Pillar Two income inclusion rule. This includes a multinational top-up tax which will apply to large multinational corporations for accounting periods beginning on or after December 31, 2023. This applies to AGL and its subsidiaries, requiring a minimum effective rate of 15% in all jurisdictions in which they operate.

On December 27, 2023, the Bermuda government enacted a corporate income tax at the rate of 15% which applies to the Bermuda Subsidiaries (collectively, AG Re, AGRO and Cedar Personnel Ltd.) for accounting periods starting on or after January 1, 2025.

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.

Provision for Income Taxes

The Company’s provision for income taxes for interim financial periods is not based on an estimated annual effective rate due, for example, to the variability in loss reserves, fair value of its credit derivatives and VIEs and foreign exchange gains and losses which prevent the Company from projecting a reliable estimated annual effective tax rate and pre-tax income for the full year 2025. A discrete calculation of the provision is calculated for each interim period.

The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions. 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%,

•French subsidiary taxed at the French marginal corporate tax rate of 25%,

•Bermuda Subsidiaries taxed at the Bermuda marginal corporate tax rate of 15% starting January 1, 2025, and 0% for 2024, unless subject to U.S. tax by election, and

•U.K. subsidiaries taxed at the U.K. marginal corporate tax rate of 25%.

For first quarter 2025, the Company’s effective tax rate was 18.9% compared to 21.4% in the prior year period. The effective tax rates are different from the expected tax provision (benefit) primarily due to a tax provision for U.S. state taxes, a tax benefit for U.S. tax-exempt interest and the exclusion of income from noncontrolling interests. In addition, the prior period included a tax provision for foreign taxes and the global minimum tax.

Audits

During first quarter 2025, the IRS audit of AGUS’s 2018 and 2019 tax years closed with no impact to previously accrued taxes. As of March 31, 2025, AGUS had open tax years with the IRS for 2021 forward and is not currently under audit. As of March 31, 2025, Assured Guaranty Overseas US Holdings Inc. had open tax years with the IRS for 2021 forward and is not currently under audit with the IRS. In December 2023, His Majesty’s Revenue & Customs (HMRC) issued an inquiry into the Company’s 2021 U.K. tax returns. As of March 31, 2025, the Company’s U.K. subsidiaries had open tax years with HMRC for 2021 forward. The Company’s French subsidiary is not currently under examination and has open tax years of 2020 forward.