Segment Information

9 Months Ended

Sep. 30, 2021

Segment Reporting [Abstract]

Segment Information

Segment Information

     The Company reports its results of operations in two distinct segments, Insurance and Asset Management, consistent with the manner in which the Company’s chief operating decision maker (CODM) reviews the business to assess performance and allocate resources. The following describes the components of each segment, along with the Corporate division and Other categories. The Insurance and Asset Management segments and the Corporate division are presented without giving effect to the consolidation of FG VIEs and those AssuredIM investment vehicles (primarily funds and CLOs) for which the Company is deemed to be the primary beneficiary (CIVs). See Note 9, Variable Interest Entities.

The Insurance segment primarily consists of the Company’s insurance subsidiaries that provide credit protection products to the U.S. and non-U.S. public finance (including infrastructure) and structured finance markets. In the case of FG VIEs, the Insurance segment includes premiums and losses of the financial guaranty insurance policies associated with the FG VIEs’ debt. In the case of CIVs, the Insurance segment reports the insurance subsidiaries’ share of earnings from investments in AssuredIM Funds in “equity in earnings of investees.”

    The Asset Management segment consists of AssuredIM, which provides asset management services to third-party investors as well as to the U.S. Insurance Subsidiaries and AGAS. The Asset Management segment includes asset management fees attributable to CIVs and inter-segment asset management fees earned from the U.S. Insurance Subsidiaries. The Asset Management segment presents fund expenses and reimbursable fund expenses netted in other operating expenses, whereas on the condensed consolidated statement of operations, reimbursable expenses are shown as a component of asset management fees.

    The Corporate division primarily consists of interest expense on the debt of the U.S. Holding Companies and any losses on extinguishment or repurchases of their debt, as well as other operating expenses attributed to AGL and the U.S. Holding Companies.

    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 CIVs. 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. Other

items primarily consist of intersegment eliminations, reclassification of the reimbursement of fund expenses to revenue, and consolidation adjustments, including the effect of consolidating FG VIEs and CIVs. See Note 9, Variable Interest Entities.

    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.

Segment Information

	Third Quarter 2021
	Insurance		Asset Management		Corporate		Other		Total
	(in millions)
Third-party revenues	$	187	$	17	$	1	$	23	$	228
Intersegment revenues	3		2		—		(5)		—
Total revenues	190		19		1		18		228
Total expenses	(22)		29		211		10		228
Income (loss) before income taxes and equity in earnings of investees	212		(10)		(210)		8		—
Equity in earnings of investees	33		—		1		(11)		23
Adjusted operating income (loss) before income taxes	245		(10)		(209)		(3)		23
Less: Provision (benefit) for income taxes	31		(3)		(40)		(2)		(14)
Noncontrolling interests	—		—		—		3		3
Adjusted operating income (loss)	$	214	$	(7)	$	(169)	$	(4)	$	34

	Third Quarter 2020
	Insurance		Asset Management		Corporate		Other		Total
	(in millions)
Third-party revenues	$	186	$	13	$	12	$	21	$	232
Intersegment revenues	3		1		—		(4)		—
Total revenues	189		14		12		17		232
Total expenses	134		29		32		5		200
Income (loss) before income taxes and equity in earnings of investees	55		(15)		(20)		12		32
Equity in earnings of investees	20		—		—		(13)		7
Adjusted operating income (loss) before income taxes	75		(15)		(20)		(1)		39
Less: Provision (benefit) for income taxes	(6)		(3)		(2)		(1)		(12)
Noncontrolling interests	—		—		—		3		3
Adjusted operating income (loss)	$	81	$	(12)	$	(18)	$	(3)	$	48

	Nine Months 2021
	Insurance		Asset Management		Corporate		Other		Total
	(in millions)
Third-party revenues	$	544	$	54	$	1	$	79	$	678
Intersegment revenues	7		6		—		(13)		—
Total revenues	551		60		1		66		678
Total expenses	131		82		279		21		513
Income (loss) before income taxes and equity in earnings of investees	420		(22)		(278)		45		165
Equity in earnings of investees	100		—		1		(35)		66
Adjusted operating income (loss) before income taxes	520		(22)		(277)		10		231
Less: Provision (benefit) for income taxes	75		(6)		(45)		(1)		23
Noncontrolling interests	—		—		—		11		11
Adjusted operating income (loss)	$	445	$	(16)	$	(232)	$	—	$	197

	Nine Months 2020
	Insurance		Asset Management		Corporate		Other		Total
	(in millions)
Third-party revenues	$	623	$	41	$	8	$	44	$	716
Intersegment revenues	8		3		—		(11)		—
Total revenues	631		44		8		33		716
Total expenses	308		81		99		8		496
Income (loss) before income taxes and equity in earnings of investees	323		(37)		(91)		25		220
Equity in earnings of investees	37		—		(5)		(29)		3
Adjusted operating income (loss) before income taxes	360		(37)		(96)		(4)		223
Less: Provision (benefit) for income taxes	40		(7)		(13)		(2)		18
Noncontrolling interests	—		—		—		5		5
Adjusted operating income (loss)	$	320	$	(30)	$	(83)	$	(7)	$	200

Reconciliation of Net Income (Loss) Attributable to AGL

to Adjusted Operating Income (Loss)

	Third Quarter				Nine Months
	2021		2020		2021		2020
	(in millions)
Net income (loss) attributable to AGL	$	17	$	86	$	126	$	214
Less pre-tax adjustments:
Realized gains (losses) on investments	3		13		4		12
Non-credit impairment unrealized fair value gains (losses) on credit derivatives	9		(3)		(41)		6
Fair value gains (losses) on CCS	(3)		(10)		(28)		13
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves	(27)		40		(21)		(15)
Total pre-tax adjustments	(18)		40		(86)		16
Less tax effect on pre-tax adjustments	1		(2)		15		(2)
Adjusted operating income (loss)	$	34	$	48	$	197	$	200