ASSURED GUARANTY LTD

The Company’s principal objectives in managing its investment portfolio are to: support the highest possible ratings for each operating company, manage investment risk within the context of the underlying portfolio of insurance risk, maintain sufficient liquidity to cover unexpected stress in the insurance portfolio, and maximize after-tax net investment income. Approximately 61% 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 1, Financial Statements, Note 7, Investments, and Note 9, Fair Value Measurement.

Carrying Value

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

(2) Excludes investments in three Sound Point funds that are consolidated. See Item 1, Financial Statements, Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

The Company’s available-for-sale fixed-maturity securities had a duration of 4.0 years and 3.9 years as of March 31, 2024 and December 31, 2023, 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 March 31, 2024 and December 31, 2023. 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 1, Financial Statements, Note 7, Investments, for additional information.

Other Investments

Other invested assets, which are generally less liquid than fixed-maturity securities primarily consist of the investment in Sound Point and alternative 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 net asset value (NAV) included in the Insurance segment adjusted operating income. As of March 31, 2024 and 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. See “— Commitments” below.

Investment in Assets Managers and Alternative Investments by Strategy

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

(3) Includes $32 million in alternative investments reported in fixed-maturity securities, available-for-sale, on the condensed consolidated balance sheets.

Investment in Assets Managers and Alternative Investments by Strategy

(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 condensed consolidated balance sheets.

Change in Fair Value of Alternative Investments by Strategy

Change in Fair Value of Alternative Investments by Strategy

Beginning in third quarter 2023, the Company records an equity method investment in Sound Point pursuant to the Sound Point Transaction described in Item 1, Financial Statements, Note 1, Business and Basis of Presentation.

Commitments

Upon closing of the Sound Point Transaction and the AHP Transaction in July, the Company has agreed to invest $1.5 billion in alternative investments, including the $1 billion in Sound Point managed investments, subject to regulatory approval, which includes $803 million of invested capital (at fair value) and $743 million in unfunded commitments. See Item 1, Financial Statements, 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 $162 million for a total of $912 million as of March 31, 2024. As of March 31, 2024, AGAS commitments to Sound Point and AHP funds were $772 million (of which $574 million was funded with a NAV of $632 million). This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based/special finance and healthcare structured capital. As of March 31, 2024, 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 $143 million as of March 31, 2024 and $234 million December 31, 2023. The investment portfolio also contains securities that are held in trust by certain AGL subsidiaries or are otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements with a fair value of $1,144 million and $1,154 million as of March 31, 2024 and December 31, 2023, respectively.