ASSURED GUARANTY LTD

The Company’s principal objectives in managing its investment portfolio are to support the highest possible ratings for each operating company, to manage investment risk within the context of the underlying portfolio of insurance risk, to maintain sufficient liquidity to cover unexpected stress in the insurance portfolio, and to maximize after-tax net investment income. Approximately 60% of the total investment portfolio is managed by external parties. In accordance with the Company’s investment guidelines, each of the three external investment managers is required to maintain the Company’s investment portfolio with an overall credit quality rated at a minimum of A+/A1/A+ by S&P/Moody’s/Fitch Inc., respectively.

Changes in interest rates affect the value of the Company’s fixed-maturity securities. As interest rates fall, the fair value of fixed-maturity securities generally increases and as interest rates rise, the fair value of fixed-maturity securities generally decreases. The Company’s portfolio of fixed-maturity securities primarily consists of investment-grade, liquid instruments. Other invested assets include other alternative investments, which are generally less liquid. For more information about the Investment Portfolio and a detailed description of the Company’s valuation of investments, see Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, and Note 9, Fair Value Measurement.

Carrying Value

(1) As of December 31, 2023 and December 31, 2022, includes $14 million and $358 million, respectively, of New Recovery Bonds received in connection with the consummation of the 2022 Puerto Rico Resolutions.

(2) Represents CVIs received under the 2022 Puerto Rico Resolutions, which are not rated.

The Company’s available-for-sale fixed-maturity securities had a duration of 3.9 years as of December 31, 2023 and 4.4 years as of December 31, 2022, respectively.

Available-for-Sale and Trading Fixed-Maturity Securities By Rating

The following table summarizes the ratings distributions of the Company’s available-for-sale fixed-maturity securities as of December 31, 2023 and December 31, 2022. Ratings generally reflect the lower of Moody’s and S&P classifications, except for (i) Loss Mitigation Securities, which use Assured Guaranty’s internal ratings classifications, or (ii) Puerto Rico securities received under the 2022 Puerto Rico Resolutions, which are not rated.

Distribution of Available-for-Sale Fixed-Maturity Securities by Rating

(1) Includes primarily Loss Mitigation Securities. See Item 8, Financial Statements and Supplementary Data, Note 7, Investments and Cash, for additional information.

(2) As of December 31, 2022, primarily includes New Recovery Bonds received in connection with the consummation of the 2022 Puerto Rico Resolutions.

Portfolio of Obligations of State and Political Subdivisions

The Company’s fixed-maturity securities include issuances by a wide number of municipal authorities across the U.S. and its territories. The following table presents the components of the Company’s $2,661 million (fair value) of obligations of state and political subdivisions included in the Company’s available-for-sale fixed-maturity securities investment portfolio as of December 31, 2023.

Fair Value of Available-for-Sale Fixed-Maturity Securities Investment Portfolio of Obligations of State and Political Subdivisions

As of December 31, 2023 (1)

(1) Excludes $203 million as of December 31, 2023 of pre-refunded bonds, at fair value.

The revenue bond portfolio primarily consists of essential service revenue bonds issued by transportation authorities, utilities, and universities.

Revenue Bonds

Sources of Funds

Other Investments

Other invested assets, which are generally less liquid than fixed-maturity securities primarily consist of the investment in Sound Point and fund investments across a variety of strategies.

The Insurance segment reports the Company’s percentage ownership of Sound Point funds and AHP funds’ as equity method investments with changes in NAV included in the Insurance segment adjusted operating income. As of December 31, 2023, three of the funds in which the Company invests are consolidated and the remaining are accounted as equity method investments in the Company’s consolidated financial statements. As of December 31, 2022, all of the funds in which the Company directly invested were consolidated in the consolidated financial statements. See “— Commitments” below.

Investment in Assets Managers and Alternative Investments by Strategy

(1) The investment in Sound Point is carried on the equity method.

(2) Represents primarily investments in the equity of U.S. and European CLOs.

(3) Includes $34 million in alternative investments reported in fixed-maturity securities, available-for-sale, on the consolidated balance sheets.

Alternative Investments by Strategy

(1) In the first quarter of 2023, the fund distributed substantially all of its available cash to the AGAS and other investors in the fund.

Commitments

Upon closing of the Sound Point Transaction and the AHP Transaction in July, the Company has increased the aggregate amount it has agreed to invest in alternative investments to $1.5 billion, including the $1 billion in Sound Point managed investments, subject to regulatory approval, which includes $739 million of invested capital (at fair value), and $779 million in unfunded commitments. See Part II, Item 8, Financial Statements and Supplementary Data, Note 1, Business and Basis of Presentation, for a description of the Sound Point Transaction.

Of the $1.5 billion mentioned above, the U.S. Insurance Subsidiaries through their jointly owned investment subsidiary, AGAS, are authorized to invest up to $750 million plus previously distributed gains of $108 million for a total of $858 million as of December 31, 2023. As of December 31, 2023, AGAS commitments to Sound Point and AHP funds were $775 million (of which $534 million was funded with a NAV of $571 million). This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based finance and healthcare structured capital. As of December 31, 2023, three of the eight funds in which AGAS invests are accounted for as CIVs.

Restricted Assets

Based on fair value, fixed-maturity securities, short-term investments and cash 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 $234 million and $222 million, as of December 31, 2023 and December 31, 2022, respectively. 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 $1,154 million and $1,169 million, based on fair value as of December 31, 2023 and December 31, 2022, respectively.