XML 22 R11.htm IDEA: XBRL DOCUMENT v3.20.2
Segment Information
 9 Months Ended
Sep. 30, 2020
Segment Reporting [Abstract]  
Segment Information Segment Information
     The Company reports its results of operations consistent with the manner in which the Company's chief operating decision maker (CODM) reviews the business to assess performance and allocate resources. Prior to the acquisition of BlueMountain on October 1, 2019, the Company's operating subsidiaries were all insurance companies, and results of operations were viewed by the CODM as one segment. Beginning in the fourth quarter of 2019, with the acquisition of BlueMountain and expansion into the asset management business, the Company now operates in two distinct segments, Insurance and Asset Management. The following describes the components of each segment, along with the Corporate division and Other categories. The Insurance and Asset Management segments are presented without giving effect to the consolidation of the financial guaranty (FG) VIEs and investment vehicles. See Note 11, Variable Interest Entities.

    The Insurance segment primarily consists of the Company's insurance subsidiaries that provide credit protection products to the U.S. and international public finance (including infrastructure) and structured finance markets. The Insurance segment also includes the income (loss) from its proportionate equity investments in funds managed by AssuredIM (AssuredIM funds).
    
    The Asset Management segment consists of the Company's asset management subsidiaries and their associated entities, which provide asset management services to outside investors as well as to the Company's Insurance segment. The Asset Management segment presents reimbursable fund expenses netted in other operating expenses, whereas on the condensed consolidated statement of operations such reimbursable expenses are shown gross, as components of asset management fees and other operating expenses.

    The Corporate division consists primarily of interest expense on the debt of AGUS and AGMH, as well as other operating expenses attributed to holding company activities, including administrative services performed by operating subsidiaries for the holding companies.

    Other items consist of intersegment eliminations, reclassification of asset management reimbursable expenses, and consolidation adjustments, including the effect of consolidating FG VIEs and certain AssuredIM investment vehicles in which the Insurance segment invests. See Note 11, Variable Interest Entities.
    
    The Company does not report assets by reportable segment as the CODM does not use assets to assess performance and allocate resources and only reviews assets at a consolidated level.

    Total adjusted operating income includes the effect of consolidating both FG VIEs and investment vehicles; however, the effect of consolidating such entities, including the related eliminations, is included in the "other" column in the tables below, which represents the CODM's view, consistent with the management approach guidance for presentation of segment metrics.

    The Company analyzes the operating performance of each segment using "adjusted operating income." Results for each segment include specifically identifiable expenses as well as allocations of expenses between legal entities based on time studies and other cost allocation methodologies based on headcount or other metrics. Adjusted operating income is defined as net income (loss) attributable to AGL, as reported under GAAP, adjusted for the following:
 
1)    Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading.

2)    Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives that are recognized in net income, which is the amount of unrealized fair value gains (losses) in excess of the present value of the expected estimated economic credit losses, and non-economic payments.
 
3)    Elimination of fair value gains (losses) on the Company’s committed capital securities (CCS) that are recognized in net income.

4)    Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and loss adjustment expense (LAE) reserves that are recognized in net income.

5)    Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
The following tables present the Company's operations by operating segment. The information for the prior year has been conformed to the new segment presentation.

Segment Information
Third Quarter 2020
InsuranceAsset ManagementCorporateOtherTotal
(in millions)
Third-party revenues$186 $13 $12 $21 $232 
Intersegment revenues3 1 — (4)— 
Total revenues 189 14 12 17 232 
Total expenses134 29 32 5 200 
Income (loss) before income taxes and equity in net earnings of investees55 (15)(20)12 32 
Equity in net earnings of investees20 — — (13)7 
Adjusted operating income (loss) before income taxes75 (15)(20)(1)39 
Provision (benefit) for income taxes(6)(3)(2)(1)(12)
Noncontrolling interests— — — 3 3 
Adjusted operating income (loss)$81 $(12)$(18)$(3)$48 
Supplemental income statement information
Net investment income$75 $— $— $(4)$71 
Interest expense— — 24 (3)21 
Non-cash compensation and operating expenses (1)9 4 1 — 14 


Third Quarter 2019
InsuranceAsset ManagementCorporateOtherTotal
(in millions)
Third-party revenues$221 $— $1 $1 $223 
Intersegment revenues1 — — (1)— 
Total revenues 222 — 1 — 223 
Total expenses97 — 31 2 130 
Income (loss) before income taxes and equity in net earnings of investees125 — (30)(2)93 
Equity in net earnings of investees1 — (1)— — 
Adjusted operating income (loss) before income taxes126 — (31)(2)93 
Provision (benefit) for income taxes19 — (3)— 16 
Noncontrolling interests— — — — — 
Adjusted operating income (loss)$107 $— $(28)$(2)$77 
Supplemental income statement information
Net investment income$89 $— $1 $(2)$88 
Interest expense— — 23 (1)22 
Non-cash compensation and operating expenses (1)9 — 1 — 10 
Nine Months Ended September 30, 2020
InsuranceAsset ManagementCorporateOtherTotal
(in millions)
Third-party revenues$623 $41 $8 $44 $716 
Intersegment revenues8 3 — (11)— 
Total revenues 631 44 8 33 716 
Total expenses308 81 99 8 496 
Income (loss) before income taxes and equity in net earnings of investees323 (37)(91)25 220 
Equity in net earnings of investees37 — (5)(29)3 
Adjusted operating income (loss) before income taxes360 (37)(96)(4)223 
Provision (benefit) for income taxes40 (7)(13)(2)18 
Noncontrolling interests— — — 5 5 
Adjusted operating income (loss)$320 $(30)$(83)$(7)$200 
Supplemental income statement information
Net investment income$240 $— $1 $(12)$229 
Interest expense— — 72 (8)64 
Non-cash compensation and operating expenses (1)27 13 4 — 44 


Nine Months Ended September 30, 2019
InsuranceAsset ManagementCorporateOtherTotal
(in millions)
Third-party revenues$695 $— $2 $23 $720 
Intersegment revenues2 — — (2)— 
Total revenues 697 — 2 21 720 
Total expenses244 — 93 16 353 
Income (loss) before income taxes and equity in net earnings of investees453 — (91)5 367 
Equity in net earnings of investees3 — — — 3 
Adjusted operating income (loss) before income taxes456 — (91)5 370 
Provision (benefit) for income taxes77 — (12)1 66 
Noncontrolling interests— — — — — 
Adjusted operating income (loss)$379 $— $(79)$4 $304 
Supplemental income statement information
Net investment income$298 $— $3 $(5)$296 
Interest expense— — 69 (2)67 
Non-cash compensation and operating expenses (1)29 — 4 — 33 
_____________________
(1)    Consists of amortization of deferred acquisition costs and intangible assets, depreciation and share-based compensation.
Reconciliation of Net Income (Loss) Attributable to AGL
to Adjusted Operating Income (Loss)

Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
(in millions)
Net income (loss) attributable to AGL$86 $69 $214 $265 
Less pre-tax adjustments:
Realized gains (losses) on investments13 16 12 12 
Non-credit impairment unrealized fair value gains (losses) on credit derivatives(3)11 6 (29)
Fair value gains (losses) on CCS (1)(10)(14)13 (4)
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves40 (20)(15)(23)
Total pre-tax adjustments40 (7)16 (44)
Less tax effect on pre-tax adjustments(2)(1)(2)5 
Adjusted operating income (loss)$48 $77 $200 $304 
_____________________
(1)    Presented in Other income (loss) on the condensed consolidated statements of operations.

Revenue by Country of Domicile

 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (in millions)
U.S.$186 $172 $579 $560 
Bermuda33 43 105 128 
U.K. and other13 8 32 32 
Total$232 $223 $716 $720 
    The following table reconciles the Company's total consolidated revenues and expenses to segment revenues and expenses:

Reconciliation of Segment Revenues and Expenses

 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (in millions)
Revenues
Total consolidated revenues$268 $206 $736 $667 
Less: Realized gains (losses) on investments13 16 12 12 
Less: Non-credit impairment unrealized fair value gains (losses) on credit derivatives(3)11 6 (29)
Less: Fair value gains (losses) on CCS(10)(14)13 (4)
Less: Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves40 (20)(15)(23)
Plus: Credit derivative impairment (recoveries) (1)4 10 (4)9 
Total segment revenues$232 $223 $716 $720 
Expenses
Total consolidated expenses$196 $120 $500 $344 
Plus: Credit derivative impairment (recoveries) (1)4 10 (4)9 
Total segment expenses$200 $130 $496 $353 
_____________________
(1)    Credit derivative impairment (recoveries) are included in "Net change in fair value of credit derivatives" in the Company's condensed consolidated statements of operations.