Core Insights - Small caps are experiencing a resurgence, with significant potential for dividends, specifically a 7.1% payout being highlighted as an opportunity [2][8] Small Cap Performance - Small caps have historically underperformed compared to large caps, but recent trends indicate they are now matching or even surpassing large caps in performance, as evidenced by the iShares Russell 2000 ETF [3] Advantages of Small Caps - Small firms maintain strong client relationships, benefiting from customer loyalty and directly profiting from the strength of the US economy, providing a hedge against global economic issues [4] Dividend Challenges - Many small caps are in early growth stages and may not be able to offer dividends while funding their expansion, contrasting with larger companies that typically provide more consistent dividends [5][6] Investment Strategy - The focus has been on closed-end funds (CEFs) that invest in large caps and high-yield bonds, which have historically provided higher returns and dividends compared to small caps [7] Exception in Small Caps - The Royce Small-Cap Trust (RVT) is noted as an exception, offering a 7.1% dividend while closely tracking small cap performance [8] Fund Structure and Holdings - RVT invests in a diverse portfolio of 488 small caps, with top holdings including IES Holdings, Assured Guaranty, and SEI Investments, all showing strong revenue growth [9][10] Dividend Flexibility - RVT's dividend is not fixed but floats based on the net asset value (NAV), allowing for potential increases in payouts as NAV rises, which has been consistent over the past five years [11][12] Market Position - RVT is currently available at a 9.2% discount to NAV, indicating potential for upside as the discount has decreased from higher levels earlier in the year [12][13]

Financial Data and Key Metrics Changes - Adjusted book value per share reached a record high of $176.95, and adjusted operating shareholders' equity per share also reached a record high of $120.11 at the end of Q2 2025 [6] - Adjusted operating income for Q2 2025 was $50 million or $1.1 per share, compared to $80 million or $1.44 per share in Q2 2024 [22][25] - Net earned premiums and net investment income increased, contributing to the earnings power of core earnings [22] Business Line Data and Key Metrics Changes - The company insured $14.1 billion of new issued par sold in the primary market, a 30% increase compared to the same period last year [13] - In the secondary market, the company wrote nearly $900 million of policies in the first half of 2025, with over $500 million in Q2 alone, representing a 150% increase compared to the total amount insured in all of 2024 [8][13] - The insurance segment contributed $76 million to adjusted operating income, while the asset management segment contributed $4 million [27] Market Data and Key Metrics Changes - US municipal issuance was 17% ahead of last year's record pace through June 30, 2025 [7] - The total market volume reached $278 billion by June 30, 2025, with forecasts suggesting that municipal issuance in 2025 could surpass $500 billion [20] Company Strategy and Development Direction - The company aims to maintain its leadership position in US municipal bond insurance while expanding and diversifying its global infrastructure and structured finance reach [12] - A share repurchase program with a target of $500 million for the year is in place, with $296 million already repurchased as of August 6, 2025 [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory in both US and non-US markets, citing a strong competitive position and excellent capital and earnings [11] - The company is well-positioned for the second half of the year, with many attractive opportunities in global infrastructure and structured finance [20] Other Important Information - The company received affirmations of its financial strength ratings from S&P Global Ratings and KBRA, both with stable outlooks [11] - A $250 million stock redemption by the US insurance subsidiary was approved, expected to be executed in 2025 [30] Q&A Session Summary Question: Impact of lower interest rates on AGO's opportunities - Management noted that a lower interest rate environment could depress premium volume but may also lead to more issuers in the market, balancing the impact [33][34][39] Question: Increase in big exposures and loss expenses - Management explained that the increase in loss expenses is due to additional reserves on certain UK regulated utility and US municipal revenue exposures, emphasizing their strong surveillance team [40][68] Question: Future of Puerto Rico Oversight Board and restructuring - Management expressed optimism that changes in the Puerto Rico Oversight Board could lead to improvements in restructuring processes, viewing it as a potential positive development [52][54] Question: Performance of contingent value instruments - The company holds approximately $117 million in contingent value securities, which have performed well, and expects continued improvement [58][60]

PART I Financial Information This section presents the company's unaudited condensed consolidated financial statements, management's analysis, market risk disclosures, and internal controls [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Assured Guaranty Ltd.'s unaudited condensed consolidated financial statements and detailed notes for Q2 2025 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides the company's condensed consolidated balance sheets as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Investments | $8,569 | $8,663 | | Total Assets | $12,095 | $11,901 | | Total Liabilities | $6,366 | $6,348 | | Total Shareholders' Equity | $5,729 | $5,553 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $281M | $202M | $626M | $447M | | Total Expenses | $151M | $113M | $320M | $238M | | Net Income (Loss) | $106M | $81M | $291M | $194M | | Net Income (Loss) Attributable to AGL | $103M | $78M | $279M | $187M | | Diluted EPS | $2.08 | $1.41 | $5.54 | $3.31 | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This section details the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2025 and 2024 Comprehensive Income (Loss) Highlights (Unaudited) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) | $106M | $81M | $291M | $194M | | Other Comprehensive Income (Loss) | $87M | $(5)M | $158M | $(33)M | | Comprehensive Income (Loss) Attributable to AGL | $190M | $73M | $437M | $154M | [Condensed Consolidated Statements of Shareholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) This section outlines the changes in condensed consolidated shareholders' equity for the periods presented - For the six months ended June 30, 2025, total shareholders' equity attributable to Assured Guaranty Ltd. increased from **$5,495 million** to **$5,633 million**. The increase was primarily driven by net income of **$279 million** and other comprehensive income of **$158 million**, partially offset by common share repurchases of **$252 million** and dividends of **$37 million**[25](index=25&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 Condensed Consolidated Cash Flow Summary (Unaudited) | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $165 | $(16) | | Net cash provided by (used in) investing activities | $351 | $340 | | Net cash provided by (used in) financing activities | $(327) | $(500) | | Increase (decrease) in cash | $197 | $(177) | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed notes explaining the accounting policies and significant financial information presented in the statements - The company operates in two main segments: Insurance, which provides credit protection products for public finance and structured finance markets, and Asset Management, primarily through an ownership interest in Sound Point Capital Management, LP[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) - Total financial guaranty net par outstanding increased to **$272.8 billion** as of June 30, 2025, from **$261.6 billion** at year-end 2024. Below-investment-grade (BIG) exposure constituted **3.8%** of the total net par outstanding[89](index=89&type=chunk)[90](index=90&type=chunk) - Net expected loss to be paid increased to **$186 million** as of June 30, 2025, from **$106 million** at year-end 2024. The increase in the first six months of 2025 was driven by higher expected losses in public finance, particularly U.K. regulated utilities, PREPA, and healthcare, partially offset by a significant recovery from the LBIE litigation[118](index=118&type=chunk)[127](index=127&type=chunk)[130](index=130&type=chunk) - The company repurchased **2.9 million** common shares for **$252 million** in the first six months of 2025. As of August 6, 2025, an additional **$300 million** was authorized for repurchases, leaving a total authorization of approximately **$356 million**[25](index=25&type=chunk)[366](index=366&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=67&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition, operational results, economic environment, business strategies, and non-GAAP reconciliations [Overview](index=68&type=section&id=Overview) This section provides a high-level summary of the company's business segments and the prevailing economic environment - The company operates through two primary segments: Insurance (credit protection for public and structured finance) and Asset Management (via an ownership interest in Sound Point)[381](index=381&type=chunk)[382](index=382&type=chunk) - Management highlights key economic factors impacting the business, including global tariff uncertainty, inflation rates in the U.S. (**2.7%**) and U.K. (**4.1%**), and the Federal Reserve holding the federal funds rate at **4.25%-4.50%**. These factors can influence obligor default rates, new business opportunities, and investment portfolio values[384](index=384&type=chunk)[386](index=386&type=chunk)[387](index=387&type=chunk) [Key Business Strategies](index=70&type=section&id=Key%20Business%20Strategies) This section outlines the company's strategic priorities across its insurance, asset management, alternative investments, and capital management activities - The company is pursuing four key business strategies: **Insurance** (grow portfolio, mitigate losses), **Asset Management** (fee-based earnings via Sound Point), **Alternative Investments** (diversify, enhance returns, **$1.5 billion** commitment including **$1 billion** in Sound Point funds), and **Capital Management** (share repurchases, **154 million** shares for **$5.7 billion** from 2013 through August 6, 2025)[393](index=393&type=chunk)[394](index=394&type=chunk)[412](index=412&type=chunk)[413](index=413&type=chunk)[415](index=415&type=chunk) [Executive Summary](index=73&type=section&id=Executive%20Summary) This section provides a concise overview of the company's financial performance and key metrics for the reporting period Financial Performance Summary | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | **GAAP** | | | | Net Income Attributable to AGL | $279M | $187M | | Diluted EPS | $5.54 | $3.31 | | **Non-GAAP** | | | | Adjusted Operating Income | $212M | $193M | | Adjusted Operating Income per Diluted Share | $4.21 | $3.41 | Shareholders' Equity Per Share Summary | Metric (per share) | As of June 30, 2025 | As of Dec 31, 2024 | | :--- | :--- | :--- | | Shareholders' Equity Attributable to AGL | $117.10 | $108.80 | | Adjusted Operating Shareholders' Equity (Non-GAAP) | $120.11 | $114.75 | | Adjusted Book Value (ABV) (Non-GAAP) | $176.95 | $170.12 | - The increase in net income for the first six months of 2025 compared to 2024 was primarily driven by foreign exchange gains of **$116 million** and a **$103 million** gain from the resolution of the LBIE litigation. This was partially offset by higher loss expenses and lower fair value gains on trading securities[428](index=428&type=chunk)[436](index=436&type=chunk) [Results of Operations by Segment](index=79&type=section&id=Results%20of%20Operations%20by%20Segment) This section analyzes the financial performance and key operational metrics for the company's Insurance, Asset Management, and Corporate segments Insurance Segment: New Business Production (Six Months Ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Gross Written Premiums (GWP) | $120M | $193M | | Present Value of New Business Production (PVP) | $103M | $218M | | Gross Par Written | $15,398M | $13,166M | - The Insurance segment's adjusted operating income decreased to **$244 million** in the first six months of 2025 from **$265 million** in the same period of 2024. The decrease was driven by higher loss expenses in public finance and lower earned premiums from refundings[434](index=434&type=chunk)[448](index=448&type=chunk) - The Asset Management segment's adjusted operating income increased to **$16 million** in the first six months of 2025 from **$1 million** in 2024, primarily reflecting the performance of the company's investment in Sound Point[508](index=508&type=chunk)[509](index=509&type=chunk) - The Corporate division's adjusted operating loss narrowed to **$(49) million** in the first six months of 2025 from **$(72) million** in 2024, mainly due to lower allocated operating expenses and positive equity earnings from alternative investments transferred to the holding company[509](index=509&type=chunk)[510](index=510&type=chunk)[511](index=511&type=chunk) [Non-GAAP Financial Measures](index=92&type=section&id=Non-GAAP%20Financial%20Measures) This section defines and reconciles the company's non-GAAP financial measures, including Adjusted Operating Income and Adjusted Book Value - The company uses several non-GAAP measures, including Adjusted Operating Income, Adjusted Operating Shareholders' Equity, and Adjusted Book Value (ABV), to evaluate performance. These measures exclude items like unrealized gains/losses on investments and derivatives, which management believes are not indicative of core operating results[534](index=534&type=chunk)[535](index=535&type=chunk)[542](index=542&type=chunk)[543](index=543&type=chunk) Reconciliation of Net Income to Adjusted Operating Income (Six Months Ended June 30) | Metric (in millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net income attributable to AGL | $279 | $187 | | Total pre-tax adjustments | $80 | $(6) | | Tax effect on adjustments | $(13) | $0 | | **Adjusted operating income** | **$212** | **$193** | Reconciliation of Shareholders' Equity to ABV (as of June 30, 2025) | Metric (in millions) | Amount | | :--- | :--- | | Shareholders' equity attributable to AGL | $5,633 | | Adjustments for unrealized gains/losses, etc. | $145 | | **Adjusted operating shareholders' equity** | **$5,778** | | Adjustments for DAC, future revenue, etc. | $2,735 | | **Adjusted Book Value (ABV)** | **$8,513** | [Insured Portfolio](index=97&type=section&id=Insured%20Portfolio) This section provides an overview of the company's insured portfolio, detailing net par outstanding by sector and key exposures Financial Guaranty Net Par Outstanding by Sector | Sector | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total U.S. Public Finance | $208,716 | $201,175 | | Total Non-U.S. Public Finance | $53,132 | $49,200 | | Total Structured Finance | $10,930 | $11,177 | | **Total Net Par Outstanding** | **$272,778** | **$261,552** | - As of June 30, 2025, the company's only remaining unresolved insured Puerto Rico exposure in payment default was PREPA, with **$532 million** in net par outstanding[566](index=566&type=chunk) [Liquidity and Capital Resources](index=99&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity sources, capital management strategies, and investment portfolio characteristics - The liquidity of the holding companies (AGL and U.S. Holding Companies) is primarily dependent on dividends and distributions from operating subsidiaries. Key uses of funds include debt service, shareholder dividends, and share repurchases[571](index=571&type=chunk) - In July 2025, the Maryland Insurance Administration (MIA) approved AG's redemption of **$250 million** of its common stock from its parent, AGMH, expected to be completed in Q3 2025[604](index=604&type=chunk) - The company's investment portfolio is managed to support high ratings, manage risk, and maintain liquidity. As of June 30, 2025, the available-for-sale fixed-maturity securities portfolio had a duration of **4.7 years**, with **86.6%** rated BBB or higher[606](index=606&type=chunk)[611](index=611&type=chunk)[613](index=613&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=110&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states that there have been no material changes to its market risk exposures since the end of the previous fiscal year, December 31, 2024 - There were no material changes to the market risks to which the Company is exposed since December 31, 2024[639](index=639&type=chunk) [Controls and Procedures](index=110&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025. No material changes were identified in the company's internal control over financial reporting during the second quarter of 2025 - The President and Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[641](index=641&type=chunk) - No changes in internal control over financial reporting occurred during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[642](index=642&type=chunk) PART II Other Information This section provides additional information on legal proceedings, risk factors, and equity security transactions [Legal Proceedings](index=111&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the detailed disclosures on legal proceedings provided in Notes 4 and 11 of the financial statements, particularly highlighting ongoing litigation related to the company's insured exposure to PREPA (Puerto Rico Electric Power Authority) - The company is subject to various legal proceedings, with specific details provided in Note 4 and Note 11 of the financial statements, including ongoing litigation concerning PREPA[643](index=643&type=chunk) [Risk Factors](index=111&type=section&id=Item%201A.%20Risk%20Factors) The company reports no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024[644](index=644&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=111&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's repurchases of its own common shares during the second quarter of 2025. A total of 1,537,505 shares were repurchased under the publicly announced program at an average price of approximately $85.22 per share. It also notes a new $300 million repurchase authorization by the Board on August 6, 2025 Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | 489,406 | $83.27 | | May 2025 | 510,316 | $87.14 | | June 2025 | 599,579 | $85.17 | | **Total Q2** | **1,599,301** | **$85.22** | - On August 6, 2025, the Board authorized an additional **$300 million** for share repurchases. As of that date, the total remaining authorization was approximately **$356 million**[648](index=648&type=chunk)

Financial Highlights - Adjusted operating income was $50 million, or $1.01 per share, for the second quarter of 2025[9] - The company insured $10 billion of new business par in the second quarter of 2025, the largest second-quarter amount in a decade[9] - The company generated $64 million of new business production (PVP) in the second quarter of 2025[9] - Pretax adjusted operating income from asset management was $5 million in the second quarter of 2025[9] - Pretax adjusted operating income from the alternative investment portfolio was $16 million in the second quarter of 2025[9] - Capital returned to shareholders in the second quarter of 2025 was $150 million, including share repurchases of $131 million (1.5 million shares) and dividends of $19 million[9] - Adjusted operating income was $212 million, or $4.21 per share, in the first half of 2025, a 23% increase compared to the first half of 2024[11] - The company insured $15 billion of new business par in the first half of 2025, the largest amount of first-half par insured in a decade[15] - The company generated $103 million of PVP in the first half of 2025[15] - The company repurchased nearly 3 million shares at a total cost of $251 million in the first half of 2025, representing nearly 6% of shares outstanding on December 31, 2024[15]

[Selected Financial Highlights](index=3&type=section&id=Selected%20Financial%20Highlights) This section overviews Assured Guaranty's Q2 and H1 2025 financial performance, highlighting GAAP net income growth and key balance sheet metrics Q2 and H1 2025 vs 2024 GAAP Performance | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Income (attributable to AGL)** | $103M | $78M | $279M | $187M | | **Net Income per Diluted Share** | $2.08 | $1.41 | $5.54 | $3.31 | | **GAAP ROE (annualized for Qtr)** | 7.4% | 5.6% | 10.0% | 6.6% | Q2 and H1 2025 vs 2024 Non-GAAP Performance | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Adjusted Operating Income** | $50M | $80M | $212M | $193M | | **Adjusted Operating Income per Diluted Share** | $1.01 | $1.44 | $4.21 | $3.41 | | **Adjusted Operating ROE (annualized for Qtr)** | 3.5% | 5.4% | 7.3% | 6.5% | Key Balance Sheet and Exposure Metrics | Metric | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Shareholders' Equity per Share** | $117.10 | $108.80 | | **Adjusted Book Value (ABV) per Share** | $176.95 | $170.12 | | **Financial Guaranty Net Par Outstanding** | $272.8B | $261.6B | | **Claims-Paying Resources** | $10.35B | $10.21B | - New business production in the Insurance Segment showed mixed results in Q2 2025 compared to Q2 2024, with Gross Written Premiums (GWP) decreasing to **$85 million** from **$132 million**, and the Present Value of New Business Production (PVP) falling to **$64 million** from **$155 million**, while Gross Par Written increased to **$10.4 billion** from **$9.4 billion**[6](index=6&type=chunk) [Condensed Consolidated Statements of Operations (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(unaudited)) This section presents the company's detailed income statement for Q2 and H1 2025, showing significant revenue and net income growth from foreign exchange and fair value gains Consolidated Statement of Operations Summary | Line Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | $281M | $202M | $626M | $447M | | **Total Expenses** | $151M | $113M | $320M | $238M | | **Net Income (loss) attributable to AGL** | $103M | $78M | $279M | $187M | | **Diluted Earnings Per Share** | $2.08 | $1.41 | $5.54 | $3.31 | - A significant driver of the revenue increase in H1 2025 was a **$116 million** foreign exchange gain, compared to a **$12 million** loss in H1 2024, with fair value gains on credit derivatives also increasing to **$105 million** in H1 2025 versus **$16 million** in H1 2024[14](index=14&type=chunk) [Condensed Consolidated Balance Sheets (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) This section snapshots Assured Guaranty's financial position as of June 30, 2025, showing increased total assets and shareholders' equity from net income and reduced comprehensive loss Consolidated Balance Sheet Summary | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Investments** | $8,569M | $8,663M | | **Total Assets** | $12,095M | $11,901M | | **Total Liabilities** | $6,366M | $6,348M | | **Total Shareholders' Equity attributable to AGL** | $5,633M | $5,495M | - The company's book value improved, with retained earnings decreasing slightly but a significant reduction in accumulated other comprehensive loss from **($385) million** to **($227) million**, contributing to the overall increase in shareholders' equity[16](index=16&type=chunk) [GAAP to Non-GAAP Reconciliations](index=7&type=section&id=Selected%20Financial%20Highlights%20GAAP%20to%20Non-GAAP%20Reconciliations) This chapter details reconciliations of GAAP measures to non-GAAP Adjusted Operating Income, Adjusted Operating Shareholders' Equity, and Adjusted Book Value, removing non-economic fluctuations - To reconcile Net Income to Adjusted Operating Income for Q2 2025, the largest adjustment was the removal of a **$71 million** pre-tax foreign exchange gain on remeasurement of premiums receivable and loss reserves[18](index=18&type=chunk) Reconciliation of Shareholders' Equity to Adjusted Book Value (ABV) | Line Item | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Shareholders' equity attributable to AGL** | $5,633M | $5,495M | | **Adjusted operating shareholders' equity** | $5,778M | $5,795M | | **Adjusted Book Value (ABV)** | $8,513M | $8,592M | - The primary additions to calculate ABV from adjusted operating shareholders' equity are the net deferred premium revenue on financial guaranty contracts (**$3,409 million**) and adjustments for deferred acquisition costs and future revenue[24](index=24&type=chunk) [Income Components](index=10&type=section&id=Income%20Components) This section breaks down income by segment and division for Q2 and H1 2025, highlighting the Insurance segment as the primary operating income contributor Income Breakdown by Segment (Q2 2025) | Segment/Division | Total (Net Income Contribution) | | :--- | :--- | | **Insurance** | $76M | | **Asset Management** | $4M | | **Corporate** | $(29)M | | **Other** | $(1)M | | **Reconciling Items** | $53M | | **Consolidated Total** | $103M | - For the six months ended June 30, 2025, the Insurance segment generated **$244 million** and the Asset Management segment generated **$16 million** towards the consolidated net income of **$279 million**, before corporate expenses and other items[30](index=30&type=chunk) [Investment Portfolio](index=14&type=section&id=Investment%20Portfolio) This section details Assured Guaranty's investment portfolio composition, performance, and income, showing a conservatively managed portfolio primarily in investment-grade securities [Fixed-Maturity Securities, Short-Term Investments and Cash](index=14&type=section&id=Fixed-Maturity%20Securities,%20Short-Term%20Investments%20and%20Cash) This sub-chapter details the company's fixed-maturity securities, short-term investments, and cash, showing a portfolio primarily in investment-grade corporate and public securities Fixed-Maturity Securities (Available-for-Sale) by Rating | Rating | Fair Value | % of Portfolio | | :--- | :--- | :--- | | AAA/Aaa | $832M | 12.8% | | AA/Aa | $2,074M | 31.9% | | A/A | $1,591M | 24.5% | | BBB | $1,091M | 16.8% | | BIG | $544M | 8.4% | | Not rated | $328M | 5.0% | | **Total** | **$6,498M** | **100.0%** | - The total portfolio of fixed-maturity securities, short-term investments, and cash had a fair value of **$7.738 billion** with an average after-tax book yield of **3.81%** and a duration of **4.1 years**[37](index=37&type=chunk)[39](index=39&type=chunk) [Investment Portfolio, Cash and CIVs](index=15&type=section&id=Investment%20Portfolio,%20Cash%20and%20CIVs) This part shows the allocation of the investment portfolio, cash, and CIVs across subsidiaries, with most assets held within insurance-related entities - As of June 30, 2025, insurance-related subsidiaries held **$8.07 billion** of the total **$8.87 billion** investment portfolio and cash, while holding companies held **$779 million**[42](index=42&type=chunk) - The company's alternative investments (excluding its ownership interest in Sound Point) have demonstrated strong performance, with an inception-to-date annualized internal rate of return (IRR) of **13%**[44](index=44&type=chunk) [Income from Investment Portfolio and CIVs](index=17&type=section&id=Income%20from%20Investment%20Portfolio%20and%20CIVs) This sub-chapter details income from the investment portfolio by segment and type, with the Insurance segment being the primary generator of net investment income Income from Investments by Source (Q2 2025) | Source | Insurance Segment | Corporate | Total | | :--- | :--- | :--- | :--- | | **Net Investment Income** | $89M | $3M | $89M | | **Equity in Earnings of Investees** | $2M | $3M | $3M | - For the six months ended June 30, 2025, total net investment income was **$176 million**, and equity in earnings of investees was **$56 million**, a significant increase from **$29 million** in the prior year period, largely driven by the performance of Sound Point and other funds[51](index=51&type=chunk) [Insurance Segment](index=20&type=section&id=Insurance%20Segment) This core section comprehensively reviews the Insurance segment's performance, claims-paying resources, new business production, and detailed insured portfolio composition and credit quality [Insurance Segment Results](index=21&type=section&id=Insurance%20Segment%20Results) This sub-chapter presents the Insurance segment's operating results, showing a decrease in adjusted operating income for Q2 2025 due to higher expenses Insurance Segment Operating Results | Line Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Segment Revenues** | $199M | $189M | $438M | $418M | | **Total Segment Expenses** | $105M | $70M | $169M | $155M | | **Segment Adjusted Operating Income** | $76M | $116M | $244M | $265M | [Claims-Paying Resources](index=22&type=section&id=Claims-Paying%20Resources) This section details the components of the company's claims-paying resources, which increased slightly to $10.35 billion as of June 30, 2025, underscoring robust capital Components of Claims-Paying Resources (As of June 30, 2025) | Component | Amount | | :--- | :--- | | **Qualified Statutory Capital** | $5,758M | | **Unearned Premium Reserve & Net Deferred Ceding Commission** | $3,003M | | **Present Value of Installment Premium** | $1,137M | | **CCS** | $400M | | **Other Reserves** | $52M | | **Total Claims-Paying Resources** | **$10,350M** | [New Business Production](index=23&type=section&id=New%20Business%20Production) This part details new business activity, reconciling GWP to PVP and showing quarterly trends, with Q2 2025 PVP at $64 million on $10.4 billion gross par written New Business Production Summary | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total GWP** | $85M | $132M | $120M | $193M | | **Total PVP** | $64M | $155M | $103M | $218M | | **Gross Par Written** | $10,396M | $9,423M | $15,398M | $13,166M | - Quarterly PVP has been volatile, with Q2 2025 (**$64 million**) showing a recovery from Q1 2025 (**$39 million**) but remaining significantly below the levels of Q2 2024 (**$155 million**)[68](index=68&type=chunk) [Estimated Net Exposure Amortization and Future Revenues](index=26&type=section&id=Estimated%20Net%20Exposure%20Amortization%20and%20Estimated%20Future%20Financial%20Guaranty%20Net%20Premium%20and%20Credit%20Derivative%20Revenues) This page projects future amortization of insured net debt service and recognition of premium and credit derivative revenues from the in-force portfolio - The company has a total of **$3.67 billion** in deferred premium revenue from financial guaranty insurance and **$104 million** in future credit derivative revenues expected to be earned over the life of the in-force portfolio[74](index=74&type=chunk) [Loss Measures and Reserves](index=27&type=section&id=Loss%20Measures%20and%20Reserves) This section details the company's loss experience, including the roll-forward of expected losses and projected expensing schedule, noting an increase in net expected loss - The roll-forward of net expected loss to be paid shows an increase from **$106 million** at the end of 2024 to **$186 million** as of June 30, 2025, driven by **$95 million** in net economic loss development in Public Finance, partially offset by a **$74 million** benefit in Structured Finance[78](index=78&type=chunk) - The total present value of net expected loss to be expensed over future periods is **$260 million**[86](index=86&type=chunk) [Financial Guaranty Profile](index=30&type=section&id=Financial%20Guaranty%20Profile) This extensive section details the insured portfolio as of June 30, 2025, including breakdowns by asset type, credit rating, geography, and specific below-investment-grade exposures Net Par Outstanding by Asset Type | Asset Type | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total U.S. Public Finance** | $208.7B | $201.2B | | **Total Non-U.S. Public Finance** | $53.1B | $49.2B | | **Total Structured Finance** | $10.9B | $11.2B | | **Total Net Par Outstanding** | **$272.8B** | **$261.6B** | - The insured portfolio remains predominantly investment grade, with **96.2%** of net par outstanding rated BBB or higher based on internal ratings, and below-investment-grade (BIG) exposure representing **3.8%** of the total[90](index=90&type=chunk) - Geographically, the portfolio is concentrated in the U.S. (**79.5%**), with the United Kingdom being the largest non-U.S. exposure at **16.3%** of the total net par outstanding[94](index=94&type=chunk) [Asset Management Segment](index=45&type=section&id=Asset%20Management%20Segment) This section covers the Asset Management segment's financial results, showing significant growth in adjusted operating income for H1 2025 driven by higher revenues and equity in earnings [Asset Management Results](index=46&type=section&id=Asset%20Management%20Results) This sub-chapter presents the Asset Management segment's operating results, showing significant adjusted operating income growth for H1 2025 due to strong investment performance Asset Management Segment Operating Results | Line Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Segment Revenues** | $15M | $7M | $21M | $8M | | **Equity in Earnings (losses)** | $(1)M | $(3)M | $12M | $(2)M | | **Segment Adjusted Operating Income** | $4M | $0M | $16M | $1M | [Corporate Division](index=47&type=section&id=Corporate%20Division) This section details the Corporate division's results, primarily holding company activities and expenses, consistently reporting an operating loss that improved in H1 2025 [Corporate Division Results](index=48&type=section&id=Corporate%20Results) This sub-chapter shows the Corporate division's revenues and expenses, reporting an improved adjusted operating loss for Q2 and H1 2025 due to lower expenses Corporate Division Operating Results | Line Item | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | **Total Expenses** | $39M | $44M | $79M | $91M | | **Adjusted Operating Income (Loss)** | $(29)M | $(35)M | $(49)M | $(72)M | [Other](index=49&type=section&id=Other) This section details the financial impact of consolidating FG VIEs and CIVs, along with intersegment eliminations, which typically have a minor net impact on adjusted operating income [Other Results](index=50&type=section&id=Other%20Results) This sub-chapter breaks down the 'Other' category, showing a minor adjusted operating loss for Q2 2025 and a positive contribution for H1 2025 - The "Other" category, which reflects the consolidation of FG VIEs, CIVs, and intersegment eliminations, resulted in an adjusted operating loss of **($1) million** for the three months ended June 30, 2025[135](index=135&type=chunk) [Summary](index=52&type=section&id=Summary) This final section provides high-level summary tables of financial and statistical data and non-GAAP reconciliations from 2021 through H1 2025, offering historical context [Summary of Financial and Statistical Data](index=53&type=section&id=Summary%20of%20Financial%20and%20Statistical%20Data) This sub-chapter presents a historical summary of key GAAP and statutory financial data from 2021 through H1 2025, enabling trend analysis of core metrics - The company's financial guaranty net par outstanding has steadily grown from **$236.4 billion** at year-end 2021 to **$272.8 billion** as of June 30, 2025[140](index=140&type=chunk) - Total claims-paying resources have remained relatively stable, standing at **$10.35 billion** at June 30, 2025, compared to **$11.22 billion** at year-end 2021[140](index=140&type=chunk) [Summary of GAAP to Non-GAAP Reconciliations](index=55&type=section&id=Summary%20of%20GAAP%20to%20Non-GAAP%20Reconciliations) This sub-chapter provides historical reconciliations for key non-GAAP measures like PVP, Adjusted Operating Income, and ABV from 2021 through H1 2025 Historical Adjusted Book Value (ABV) per Share | Date | ABV per Share | | :--- | :--- | | **June 30, 2025** | $176.95 | | **Dec 31, 2024** | $170.12 | | **Dec 31, 2023** | $155.92 | | **Dec 31, 2022** | $141.98 | | **Dec 31, 2021** | $130.67 | [Glossary](index=57&type=section&id=Glossary) This section provides definitions for key terms and concepts used throughout the financial supplement, including financial guaranty insurance terminology and performance indicators [Non-GAAP Financial Measures](index=60&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the non-GAAP financial measures used by the company, detailing their rationale and specific adjustments from comparable GAAP measures

Financial Highlights - As of March 31, 2025, Assured Guaranty's net par outstanding was $2636 billion[8] - The company's total investment portfolio and cash amounted to $88 billion[8] - Claims-paying resources totaled $103 billion as of March 31, 2025[8, 10] New Business Activity (Q1 2025) - Assured Guaranty insured $5 billion of aggregate par[49] - The company generated $39 million of aggregate PVP[51] - The average premium rate (PVP to gross par written) was 078%[51] U S Public Finance (Q1 2025) - U S public finance insured $4 billion of total par[55] - U S public finance PVP was $25 million[55] - Assured Guaranty insured 64% of par of all primary insured deals[55] Alternative Investments - As of March 31, 2025, the value of alternative investments was $892 million[73] - The inception-to-date return on alternative investments was 13%[73] Insured Portfolio - BIG (Below Investment Grade) exposure is $95 billion, representing 36% of the total net par outstanding[91, 95]

Financial Data and Key Metrics Changes - Adjusted operating income per share for Q1 2025 was $3.18, a 62% increase from $1.96 in Q1 2024 [6][19] - Adjusted operating shareholders' equity reached $117.4 and adjusted book value was $172.79 per share [6][23] - Total investment income from alternative investments was $59 million, the highest quarterly level to date [9] Business Line Data and Key Metrics Changes - New business production in Q1 2025 was $39 million of PVP, with U.S. Public Finance contributing approximately 65% [6][12] - Assured Guaranty captured 64% of the primary market insured par sold in U.S. Municipal bond insurance [13] - Insured par sold increased by 23% to $4.7 billion compared to Q1 2024 [14] Market Data and Key Metrics Changes - The average underlying credit quality of municipal transactions was rated single A, indicating higher credit quality [14] - Secondary market bond insurance activity increased significantly, producing $376 million of insured par, surpassing all of 2024 [15] Company Strategy and Development Direction - The company aims to increase fee-based earnings through its 30% ownership interest in SoundPoint [9] - There is a focus on modernizing processes and technology for secondary market business to build a consistent transaction pipeline [15][18] - The company is expanding its product offerings and presence in Continental Europe, as evidenced by a transaction in France [18] Management's Comments on Operating Environment and Future Outlook - The current volatile market environment is expected to drive increased demand for the company's guarantees [10] - Management expressed confidence in the strong demand for financing in the municipal market despite economic uncertainties [44] - The company anticipates that stronger credits will continue to enter the market, reflecting ongoing demand [45] Other Important Information - A pretax gain of $103 million was recognized from litigation with Lehman Brothers International [8][19] - The company repurchased 1.3 million shares for $120 million at an average price of $89.72 per share [23] Q&A Session Summary Question: What likelihood is placed on a haircut to the debt for Thames Water? - Management indicated that reserves are assessed based on various scenarios and probabilities, with a focus on being senior creditors [26][32] Question: How do tariffs potentially impact credits wrapped by the company? - Management noted that the situation is fluid and emphasized a wait-and-see approach, highlighting increased municipal issuance as a positive sign [34][35] Question: Does the higher-rated credit issuance in Q1 change the outlook for normalized PVP to par? - Management stated that the current market volatility led to higher-rated issuances, but it does not change the overall outlook for the year [41][42] Question: What is the competitive environment in the secondary market? - Management confirmed that there is one other competitor in the secondary market, but they focus on a smaller segment compared to Assured Guaranty [46] Question: What contributed to the stronger performance in the asset management segment? - Management explained that earnings in the asset management business are often back-end loaded, reflecting strong performance from SoundPoint in the previous quarter [49]

Financial Data and Key Metrics Changes - Adjusted operating income per share for Q1 2025 was $3.18, a 62% increase from $1.96 in Q1 2024 [6][20] - Adjusted operating shareholders' equity per share reached over $117, and adjusted book value per share exceeded $172 [25] - Total first quarter investment income from alternative investments was $59 million, the highest quarterly level to date [10] Business Line Data and Key Metrics Changes - New business production in Q1 2025 was $39 million of PVP, with U.S. Public Finance contributing approximately 65% [6][7] - Assured Guaranty captured 64% of the primary market insured par sold and 58% of the insured transaction count in U.S. Municipal bond insurance [14] - Insured par sold increased by 23% to $4.7 billion compared to Q1 2024 [15] Market Data and Key Metrics Changes - The average underlying credit quality of municipal transactions was rated single A, indicating higher credit quality and lower risk [15] - Secondary market bond insurance activity increased significantly, producing $376 million of insured par, surpassing all of 2024 [16] Company Strategy and Development Direction - The company aims to increase fee-based earnings through its 30% ownership in SoundPoint, which contributed $13 million to income in Q1 2025 [9][10] - The strategic focus includes expanding product applications and entering new territories, as evidenced by a recent transaction in France [19] Management's Comments on Operating Environment and Future Outlook - The current volatile market environment is expected to drive increased demand for the company's guarantees as investors seek reliable cash flow [11] - Management expressed confidence in the resilience of the business model and the potential for growth in both primary and secondary markets [11][45] Other Important Information - A pretax gain of $103 million was recognized from litigation with Lehman Brothers International, significantly impacting adjusted operating income [8][20] - The company repurchased 1.3 million shares for $120 million, reflecting strong capital management [25] Q&A Session Summary Question: Likelihood of a haircut to Thames Water debt - Management indicated that reserves are assessed based on various scenarios and probabilities, with a focus on strong creditor positions [28][34] Question: Impact of tariffs on credits - Management noted the fluid situation regarding tariffs and emphasized a wait-and-see approach, highlighting increased municipal issuance as a positive sign [35][36] Question: Outlook on normalized PVP to par - Management stated that the first quarter's higher-rated credit issuance does not change the outlook for the year, with expectations for continued strong demand [41][45] Question: Competition in the secondary market - There is one other competitor in the secondary market, but the company focuses on a larger segment of the market [47] Question: Performance of the asset management segment - The asset management segment's earnings are typically back-end loaded, with strong performance expected in the first quarter due to prior quarter activities [50]

PART I Financial Information [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Q1 2025 net income surged to $176 million, driven by fair value gains and FX, with total assets at $11.94 billion and positive operating cash flow Condensed Consolidated Balance Sheet Highlights (As of March 31, 2025 vs. December 31, 2024) | Metric | March 31, 2025 ($M) | December 31, 2024 ($M) | | :--- | :--- | :--- | | **Total Investments** | 8,670 | 8,663 | | **Total Assets** | 11,938 | 11,901 | | **Total Liabilities** | 6,281 | 6,348 | | **Total Shareholders' Equity** | 5,657 | 5,553 | Condensed Consolidated Statement of Operations Highlights (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | **Total Revenues** | 345 | 245 | | Net Earned Premiums | 91 | 119 | | Fair Value Gains on Credit Derivatives | 104 | 10 | | Foreign Exchange Gains (Losses) | 37 | (12) | | **Total Expenses** | 169 | 125 | | Loss and Loss Adjustment Expenses | 40 | (1) | | **Net Income Attributable to AGL** | 176 | 109 | | **Diluted EPS** | $3.44 | $1.89 | Condensed Consolidated Cash Flow Summary (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | **Net Cash from Operating Activities** | 87 | (74) | | **Net Cash from Investing Activities** | 134 | 253 | | **Net Cash from Financing Activities** | (170) | (327) | | Repurchases of Common Shares | (120) | (129) | | Dividends Paid | (19) | (19) | - During Q1 2025, the company repurchased **1.34 million** common shares for **$120 million** and paid dividends of **$18 million** (**$0.34 per share**)[20](index=20&type=chunk) [Business and Basis of Presentation](index=11&type=section&id=1.%20Business%20and%20Basis%20of%20Presentation) Assured Guaranty operates in Insurance and Asset Management, providing credit protection and managing investments through Sound Point - The company provides credit protection products to public finance (including infrastructure) and structured finance markets in the U.S. and internationally through its insurance subsidiaries[31](index=31&type=chunk)[32](index=32&type=chunk) - The company participates in the asset management business via its **~30% ownership** in Sound Point and has committed to invest **$1 billion** in Sound Point managed funds and vehicles[33](index=33&type=chunk)[34](index=34&type=chunk) [Segment Information](index=12&type=section&id=2.%20Segment%20Information) Q1 2025 saw Insurance segment adjusted operating income rise to $168 million and Asset Management to $12 million, with reduced corporate losses Segment Adjusted Operating Income (Loss) (Q1 2025 vs. Q1 2024) | Segment | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | **Insurance** | 168 | 149 | | **Asset Management** | 12 | 1 | | **Corporate Division** | (20) | (37) | | **Other** | 2 | 0 | | **Total Adjusted Operating Income** | 180 | 150 | - The Chief Operating Decision Maker (CODM) primarily uses adjusted operating income to assess performance and allocate resources for each segment[43](index=43&type=chunk)[44](index=44&type=chunk) [Outstanding Exposure](index=16&type=section&id=3.%20Outstanding%20Exposure) Net par outstanding increased to $263.6 billion, with 96.4% investment grade and below-investment-grade exposure decreasing to $9.5 billion Financial Guaranty Portfolio - Net Par Outstanding | Category | March 31, 2025 ($M) | Dec 31, 2024 ($M) | | :--- | :--- | :--- | | Public Finance | 252,531 | 250,375 | | Structured Finance | 11,060 | 11,177 | | **Total Net Par** | **263,591** | **261,552** | - The portfolio is heavily weighted towards investment-grade credits, with **96.4%** of net par outstanding rated BBB or higher as of March 31, 2025[81](index=81&type=chunk) Components of BIG Net Par Outstanding | Category | March 31, 2025 ($M) | Dec 31, 2024 ($M) | | :--- | :--- | :--- | | BIG 1 | 7,079 | 8,102 | | BIG 2 | 1,099 | 706 | | BIG 3 | 1,364 | 1,374 | | **Total BIG** | **9,542** | **10,182** | [Expected Loss to be Paid (Recovered)](index=22&type=section&id=4.%20Expected%20Loss%20to%20be%20Paid%20(Recovered)) Net expected loss to be paid increased to $150 million, driven by public finance losses but offset by structured finance recoveries from LBIE litigation Net Expected Loss to be Paid (Recovered) Roll Forward - Q1 2025 | (in millions) | Amount | | :--- | :--- | | **Beginning Balance (Dec 31, 2024)** | **$106** | | Total Economic Loss Development (Benefit) | ($15) | | Net (Paid) Recovered Losses | $59 | | **Ending Balance (Mar 31, 2025)** | **$150** | - Economic loss development for public finance in Q1 2025 was primarily due to higher expected losses for Puerto Rico Electric Power Authority (PREPA) and U.K. regulated utilities exposures[120](index=120&type=chunk) - The economic benefit in structured finance was mainly driven by recoveries from the resolution of the LBIE litigation[116](index=116&type=chunk) - As of March 31, 2025, the company's only unresolved defaulting Puerto Rico exposure was PREPA, with net par outstanding of **$532 million**[124](index=124&type=chunk) [Contracts Accounted for as Insurance](index=32&type=section&id=5.%20Contracts%20Accounted%20for%20as%20Insurance) Net earned premiums decreased to $91 million in Q1 2025 due to fewer accelerations, while loss and LAE expense rose to $40 million Net Earned Premiums (Q1 2025 vs. Q1 2024) | Category | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | Scheduled Net Earned Premiums | 76 | 71 | | Accelerations from Refundings | 5 | 39 | | Accretion of Discount | 9 | 7 | | Specialty Net Earned Premiums | 1 | 2 | | **Total Net Earned Premiums** | **91** | **119** | Loss and LAE (Benefit) by Sector (Q1 2025 vs. Q1 2024) | Sector | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | Public Finance | 42 | (2) | | Structured Finance | (2) | 1 | | **Total Loss and LAE (Benefit)** | **40** | **(1)** | [Contracts Accounted for as Credit Derivatives](index=38&type=section&id=6.%20Contracts%20Accounted%20for%20as%20Credit%20Derivatives) Credit derivative net par was $3.76 billion, with Q1 2025 fair value gains of $104 million driven by a $103 million LBIE litigation resolution gain - In Q1 2025, the company recognized a realized gain of **$103 million** from the full satisfaction of the judgment in the LBIE litigation[204](index=204&type=chunk) Fair Value Gains (Losses) on Credit Derivatives (Q1 2025 vs. Q1 2024) | Category | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | Realized Gains (Losses) & Settlements | 105 | (1) | | Net Unrealized Gains (Losses) | (1) | 11 | | **Total Fair Value Gains (Losses)** | **104** | **10** | [Investments](index=40&type=section&id=7.%20Investments) The investment portfolio remained stable at $8.67 billion, generating $87 million in net investment income and $53 million in equity earnings from investees Investment Portfolio Carrying Value | Category | March 31, 2025 ($M) | Dec 31, 2024 ($M) | | :--- | :--- | :--- | | Fixed-maturity securities, available-for-sale | 6,415 | 6,369 | | Fixed-maturity securities, trading | 137 | 147 | | Short-term investments | 1,158 | 1,221 | | Other invested assets | 960 | 926 | | **Total** | **8,670** | **8,663** | Income from Investments (Q1 2025 vs. Q1 2024) | Category | Q1 2025 ($M) | Q1 2024 ($M) | | :--- | :--- | :--- | | Net Investment Income | 87 | 84 | | Equity in Earnings of Investees | 53 | 24 | | Fair Value Gains on Trading Securities | 1 | 26 | - As of March 31, 2025, the company had **$608 million** in unfunded commitments to alternative investments as part of its **$1.5 billion** total commitment[214](index=214&type=chunk) [Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles](index=45&type=section&id=8.%20Financial%20Guaranty%20Variable%20Interest%20Entities%20and%20Consolidated%20Investment%20Vehicles) The company consolidates 23 structured finance FG VIEs and one CIV, with their assets held separately and not available to general creditors - The company consolidates **23** structured finance FG VIEs, all of which are RMBS, for which it has elected the fair value option for all assets and liabilities[251](index=251&type=chunk) - As of March 31, 2025, one CIV was consolidated with assets of **$119 million**, consisting of investments with Sound Point affiliated entities[259](index=259&type=chunk) - The assets of consolidated FG VIEs and CIVs are held in separate legal entities and are not available to creditors of Assured Guaranty, and vice versa[248](index=248&type=chunk)[258](index=258&type=chunk) [Fair Value Measurement](index=48&type=section&id=9.%20Fair%20Value%20Measurement) As of March 31, 2025, $8.11 billion in assets and $197 million in liabilities were at fair value, with $1.42 billion of assets and all liabilities classified as Level 3 Fair Value Hierarchy (As of March 31, 2025) | (in millions) | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | **Assets at Fair Value** | $1,222 | $5,467 | $1,421 | $8,110 | | **Liabilities at Fair Value** | $0 | $0 | $197 | $197 | - Level 3 assets are primarily composed of fixed-maturity securities (**$1,142M**), FG VIEs' assets (**$145M**), and assets of CIVs (**$118M**)[296](index=296&type=chunk) - Level 3 liabilities consist of FG VIEs' liabilities (**$163M**) and other liabilities including credit derivatives (**$34M**)[296](index=296&type=chunk) [Income Taxes](index=59&type=section&id=10.%20Income%20Taxes) The Q1 2025 effective tax rate was 18.9%, influenced by jurisdictional income distribution and the OECD Pillar Two minimum tax rule - The effective tax rate was **18.9%** for Q1 2025, compared to **21.4%** for Q1 2024[327](index=327&type=chunk) - The company is subject to the OECD Pillar Two income inclusion rule, requiring a minimum effective tax rate of **15%** in all jurisdictions of operation[323](index=323&type=chunk) - Bermuda enacted a **15%** corporate income tax effective for accounting periods starting on or after January 1, 2025[324](index=324&type=chunk) [Contingencies](index=60&type=section&id=11.%20Contingencies) The company is involved in ordinary course legal proceedings, including PREPA litigation, with no expected material adverse financial impact - Management believes the outcome of current litigation will not have a material adverse effect on the company's financial position[329](index=329&type=chunk) - The company is actively involved in legal actions concerning its insured exposure to PREPA in Puerto Rico[330](index=330&type=chunk) [Shareholders' Equity](index=61&type=section&id=12.%20Shareholders'%20Equity) The company repurchased 1.34 million shares for $120 million in Q1 2025, with $181 million remaining under authorization as of May 8, 2025 Share Repurchases | Period | Number of Shares | Total Payments ($M) | Average Price Paid | | :--- | :--- | :--- | :--- | | **Q1 2025** | 1,335,228 | 120 | $89.72 | | **Apr 1 - May 8, 2025** | 603,103 | 51 | $84.43 | - As of May 8, 2025, the remaining share repurchase authorization was approximately **$181 million**[338](index=338&type=chunk) [Earnings Per Share](index=63&type=section&id=13.%20Earnings%20Per%20Share) Basic EPS for Q1 2025 increased significantly to $3.49, with diluted EPS at $3.44, driven by higher net income Earnings Per Share (Q1 2025 vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Basic EPS** | $3.49 | $1.94 | | **Diluted EPS** | $3.44 | $1.89 | | Diluted Shares (millions) | 50.7 | 57.1 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=64&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 performance drivers and outlines key strategies for insurance, asset management, and capital management - Net income attributable to AGL for Q1 2025 was **$176 million**, up from **$109 million** in Q1 2024[401](index=401&type=chunk) - The increase in net income was primarily driven by a **$103 million** gain on credit derivatives from the LBIE litigation resolution and **$37 million** in foreign exchange gains[402](index=402&type=chunk)[380](index=380&type=chunk) - Key business strategies are focused on four areas: insurance growth, asset management, alternative investments, and capital management[365](index=365&type=chunk) - Management notes that new U.S. tariff strategies have heightened volatility and raised the risk of recession, which could increase defaults in the insured portfolio but also create new business opportunities from wider credit spreads[357](index=357&type=chunk) [Overview](index=65&type=section&id=Overview) The overview details segment operations, performance drivers, and strategic focus areas including insurance, asset management, and capital management - The company's key business strategies are centered on four areas: (i) insurance; (ii) asset management, (iii) alternative investments; and (iv) capital management[365](index=365&type=chunk) - Management notes that a new U.S. "reciprocal tariff" strategy announced in April 2025 has heightened market volatility and recession risk, which may increase defaults among insured obligors but could also widen credit spreads, creating new business opportunities[357](index=357&type=chunk) - The company has repurchased approximately **78%** of its shares outstanding since the program began in 2013, for a total of **$5.5 billion** through May 8, 2025[387](index=387&type=chunk) Key Financial Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **Net Income (attributable to AGL)** | $176M | $109M | | **Adjusted Operating Income** | $162M | $113M | | **Gross Written Premiums (GWP)** | $35M | $61M | | **PVP** | $39M | $63M | [Results of Operations](index=76&type=section&id=Results%20of%20Operations) Q1 2025 net income rose to $176 million, driven by credit derivative gains and FX, partially offset by higher loss expenses and lower earned premiums - The primary drivers of increased net income were a **$104M** fair value gain on credit derivatives and a **$37M** foreign exchange gain, partially offset by a **$40M** loss expense[401](index=401&type=chunk)[402](index=402&type=chunk) - Insurance segment adjusted operating income increased to **$168 million** in Q1 2025 from **$149 million** in Q1 2024, driven by credit derivative revenues from the LBIE litigation resolution[423](index=423&type=chunk)[431](index=431&type=chunk) - Asset Management segment adjusted operating income grew to **$12 million** in Q1 2025 from **$1 million** in Q1 2024, primarily due to higher equity in earnings from Sound Point[476](index=476&type=chunk) Reconciliation of Net Income to Adjusted Operating Income (Q1 2025) | (in millions) | Amount | | :--- | :--- | | **Net Income Attributable to AGL** | **$176** | | Less: Realized (gains) losses on investments | ($16) | | Less: Non-credit unrealized gains on credit derivatives | ($2) | | Less: Fair value gains on CCS | $2 | | Less: Foreign exchange gains on remeasurement | $33 | | Less: Tax effect on adjustments | ($3) | | **Adjusted Operating Income** | **$162** | [Insured Portfolio](index=94&type=section&id=Insured%20Portfolio) The insured portfolio's net par outstanding reached $263.6 billion, predominantly public finance, with $637 million exposure to Puerto Rico Net Par Outstanding by Sector (As of March 31, 2025) | Sector | Net Par ($M) | | :--- | :--- | | **Total Public Finance** | **252,531** | | U.S. Public Finance | 202,417 | | Non-U.S. Public Finance | 50,114 | | **Total Structured Finance** | **11,060** | | **Total Net Par Outstanding** | **263,591** | - Total insured net par exposure to Puerto Rico was **$637 million** as of March 31, 2025[534](index=534&type=chunk) - The only remaining unresolved defaulting Puerto Rico exposure is PREPA, with **$532 million** in net par outstanding[535](index=535&type=chunk) [Liquidity and Capital Resources](index=96&type=section&id=Liquidity%20and%20Capital%20Resources) Holding company liquidity relies on subsidiary distributions, with Q1 2025 operating cash flow at $87 million, supported by an $8.67 billion investment portfolio - The liquidity of AGL and its U.S. Holding Companies is largely dependent on dividends and other distributions from their operating subsidiaries[540](index=540&type=chunk) - For 2025, the maximum amount available for AG to distribute as ordinary dividends is approximately **$287 million**, while AG Re has the capacity to pay dividends of approximately **$222 million**[569](index=569&type=chunk)[570](index=570&type=chunk) - The total investment portfolio carrying value was **$8.67 billion** as of March 31, 2025[578](index=578&type=chunk) - Net cash flow from operating activities was an inflow of **$87 million** in Q1 2025, compared to an outflow of **$74 million** in Q1 2024, primarily due to the **$97 million** receipt from the LBIE litigation resolution[600](index=600&type=chunk)[603](index=603&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=107&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to the company's market risk exposures have occurred since December 31, 2024 - There were no material changes to the company's market risk exposures since December 31, 2024[608](index=608&type=chunk) [Controls and Procedures](index=107&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2025, with no material changes to internal controls - The President and Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025[610](index=610&type=chunk) - No changes in internal control over financial reporting occurred during Q1 2025 that have materially affected, or are reasonably likely to materially affect, the company's internal controls[611](index=611&type=chunk) PART II Other Information [Legal Proceedings](index=108&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings, including those related to Puerto Rico, as detailed in financial statement notes - The company is subject to legal proceedings and claims, with further details provided in Notes 4 and 11 of the financial statements, particularly concerning Puerto Rico[612](index=612&type=chunk) [Risk Factors](index=108&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K have occurred - No material changes to the risk factors disclosed in the 2024 Annual Report on Form 10-K have occurred[613](index=613&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=108&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 1.34 million shares for $120 million in Q1 2025, with $181 million remaining for future repurchases Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Jan 2025 | 427,425 | $91.02 | 427,425 | | Feb 2025 | 741,194 | $91.35 | 428,486 | | Mar 2025 | 479,444 | $86.44 | 479,317 | | **Total** | **1,648,063** | **$89.83** | **1,335,228** | - As of May 8, 2025, the remaining authorization for share repurchases was approximately **$181 million**[617](index=617&type=chunk) [Other Matters](index=108&type=section&id=Item%205.%20Other%20Matters) No directors or officers adopted, terminated, or modified Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading plan during Q1 2025[616](index=616&type=chunk) [Exhibits](index=109&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including certifications, subsidiary lists, and Inline XBRL financial data - The exhibits filed with the report include CEO and CFO certifications (Sections 302 and 906), a list of subsidiaries, and financial statements in Inline XBRL format[618](index=618&type=chunk)

Group 1 - Assured Guaranty reported quarterly earnings of $3.18 per share, exceeding the Zacks Consensus Estimate of $3.15 per share, and showing a significant increase from $1.96 per share a year ago, representing an earnings surprise of 0.95% [1] - The company posted revenues of $239 million for the quarter ended March 2025, which was 17.59% below the Zacks Consensus Estimate, but an increase from $229 million in the same quarter last year [2] - Assured Guaranty shares have declined approximately 2.6% since the beginning of the year, while the S&P 500 has decreased by 4.3% [3] Group 2 - The current consensus EPS estimate for the upcoming quarter is $1.58 on revenues of $186.4 million, and for the current fiscal year, it is $8.15 on revenues of $847.1 million [7] - The Zacks Industry Rank for Insurance - Multi line is in the top 30% of over 250 Zacks industries, indicating a favorable outlook for the industry [8] - Assured Guaranty has a Zacks Rank of 3 (Hold), suggesting that the stock is expected to perform in line with the market in the near future [6]