ASSURED GUARANTY LTD

The Company has several insurance subsidiaries. AG is an insurance subsidiary domiciled in Maryland. As of August 1, 2024, AG owns: (i) AGUK, an insurance subsidiary domiciled in the U.K; and (ii) AGE, an insurance company domiciled in France. Until August 1, 2024, AGM was an insurance subsidiary of the Company domiciled in New York. See “— Overview — Key Business Strategies — Merger of the U.S. Insurance Subsidiaries” above. AGUK and AGE are collectively referred to as the European Insurance Subsidiaries. AG Re is an insurance company domiciled in Bermuda, which owns AGRO, an insurance subsidiary, also domiciled in Bermuda.

Sources and Uses of Funds

Liquidity of the insurance subsidiaries is primarily used to pay for:

•operating expenses,

•claims on the insured portfolio,

•dividends or other distributions to parent,

•reinsurance premiums, and

•capital investments in their own subsidiaries and in alternative investments.

Management believes that the insurance subsidiaries’ liquidity needs for the next twelve months can be met from current cash, short-term investments and operating cash flow, including premium collections and coupon payments as well as scheduled maturities and paydowns from their respective investment portfolios. The Company generally targets a balance of its most liquid assets including cash and short-term securities, U.S. Treasuries, agency RMBS and pre-refunded municipal bonds equal to 1.5 times its projected operating company cash flow needs over the next four quarters. As of June 30, 2024, the Company intended to hold and had the ability to hold securities in an unrealized loss position until the date of anticipated recovery of amortized cost.

Beyond the next twelve months, the ability of the operating subsidiaries to declare and pay dividends may be influenced by a variety of factors, including market conditions, general economic conditions, and, in the case of the Company’s insurance subsidiaries, insurance regulations and rating agency capital requirements.

Financial Guaranty Policies

Insurance policies issued provide, in general, that payments of principal, interest and other amounts insured may not be accelerated by the holder of the obligation. Amounts paid by the Company therefore are typically in accordance with the obligation’s original payment schedule, unless the Company accelerates such payment schedule, at its sole option. Premiums received on financial guaranty contracts are paid either upfront or in installments over the life of the insured obligations.

Payments made in settlement of the Company’s obligations arising from its insured portfolio may, and often do, vary significantly from year to year, depending primarily on the frequency and severity of payment defaults and whether the Company chooses to accelerate its payment obligations in order to mitigate future losses. For example, the Company made substantial claim payments in 2022 in connection with the resolution of certain Puerto Rico credits, and will continue to pay the debt service on the remaining PRHTA insured obligations with a net par of $228 million as of June 30, 2024. The Company is continuing its efforts to resolve the one remaining unresolved Puerto Rico insured exposure that is in payment default, PREPA. The Company had $624 million in insured net par outstanding of PREPA obligations as of June 30, 2024. For more information, see Item 1, Financial Statements, Note 3, Outstanding Exposure, and Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

The terms of the Company’s credit default swaps (CDS) contracts generally are modified from standard CDS contract forms approved by International Swaps and Derivatives Association, Inc. such that the circumstances giving rise to the Company’s obligation to make loss payments are similar to those for its financial guaranty insurance contracts. The documentation for certain CDS were negotiated to require the Company to also pay if the obligor becomes bankrupt or if the reference obligation were restructured. Furthermore, some CDS documentation requires the Company to make a payment due to an event that is unrelated to the performance of the obligation referenced in the credit derivative. If events of default or termination events specified in the credit derivative documentation were to occur, the Company may be required to make a cash termination payment to its swap counterparty upon such termination. Any such payment would probably occur prior to the maturity of the reference obligation and be in an amount larger than the amount due for that period on a “pay-as-you-go” basis.

Ordinary Dividends From Insurance Subsidiaries to Holding Companies

The Company anticipates that, for the next twelve months, amounts paid by AGL’s direct and indirect insurance subsidiaries as dividends or other distributions will be a major source of the holding companies’ liquidity. The insurance subsidiaries’ ability to pay dividends depends upon their financial condition, results of operations, cash requirements, other potential uses for such funds and compliance with rating agency requirements, and is also subject to restrictions contained in the insurance laws and related regulations of their states of domicile. For more information, see Part II, Item 8, Financial Statements and Supplementary Data, Note 15, Insurance Company Regulatory Requirements, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for a complete discussion of the Company’s dividend restrictions applicable to AG, AG Re and AGRO.

Dividend restrictions by insurance subsidiary are as follows:

•Effective August 1, 2024, AGM merged with and into AG, with AG as the surviving company. See “— Overview — Key Business Strategies — Merger of the U.S. Insurance Subsidiaries” above. The Company expects the remaining amount of ordinary dividends available for distribution by AG, as the surviving company, in the second half of 2024 to be approximately $291.3 million. This expected amount, when combined with the respective $49.2 million and $59.1 million ordinary dividend amounts paid by AGM and AG (together, the U.S. Insurance Subsidiaries) in 2024 prior to the merger, would aggregate to $399.6 million of total ordinary dividends available to be paid by the U.S. Insurance Subsidiaries in 2024.

•Based on the applicable law and regulations, in 2024 AG Re (a subsidiary of AGL) paid dividends of $47 million in the first six months of the year and has the capacity to (i) make capital distributions in an aggregate amount up to $129 million without the prior approval of the Bermuda Monetary Authority and (ii) declare and pay dividends in an aggregate amount up to approximately $226 million as of June 30, 2024. Such dividend capacity is further limited by (i) the actual amount of AG Re’s unencumbered assets, which amount changes from time to time due in part to collateral posting requirements and which was approximately $203 million as of June 30, 2024, and (ii) the amount of statutory surplus, which as of June 30, 2024 was $36 million.

Ordinary Dividends

From Insurance Company Subsidiaries

to Holding Companies

(1) Prior to the merger of AGM with and into AG, with AG as the surviving company, AG had been directly owned by AGUS. As a result of the merger, effective as of August 1, 2024, AG is directly owned by AGMH, a subsidiary of AGUS.

Stock Redemptions by Insurance Subsidiaries

In May 2024, NYDFS approved, and AGM implemented, the redemption of approximately $100 million of its shares of common stock from AGMH.

In connection with the merger of AGM into AG, the MIA approved, and on August 5, 2024 AG implemented, the redemption of approximately $300 million of its shares of common stock from AGMH in exchange for cash of $172 million and the remainder in alternative investments.

Committed Capital Securities

Each of AG and AGM is party to an arrangement that enables it to access, at its discretion, up to $200 million of capital, at any time, and has the right to use such capital for any purpose, including to pay claims. See Item 1, Financial Statements, Note 9, Fair Value Measurement.

Effective August 1, 2024, AGM merged with and into AG, with AG as the surviving company. Accordingly, effective as of August 1, 2024, all rights and obligations of AGM became rights and obligations of AG, including those under the CCS, and AG has the ability to access, at its discretion, up to $400 million of capital at any time under the CCS arrangement.