Fixed-maturity debt securities are classified as either available-for-sale or trading. All fixed-maturity securities are measured at fair value and reported on a trade-date basis. Unrealized gains and losses on available-for-sale fixed-maturity debt securities that are not associated with credit related factors are reported as a component of accumulated OCI (AOCI), net of deferred income taxes. Loss Mitigation Securities, which are a component of fixed-maturity debt securities, are accounted for based on their underlying investment type, excluding the effects of the Company’s insurance. Realized gains and losses on sales of available-for-sale fixed-maturity debt securities and credit losses are reported as a component of net income. Changes in fair value on trading fixed-maturity debt securities are reported as a component of net income.

Other invested assets primarily consist of equity method investments. The Company reports its interest in the earnings of equity method investments in “equity in earnings (losses) of investees” in the consolidated statement of operations. Certain equity method investments are reported on a lag because information is not received on a timely basis. The Company classifies distributions received from equity method investments using the cumulative earnings approach in the consolidated statements of cash flows. Under the cumulative earnings approach, distributions received up to the amount of cumulative equity in earnings recognized are treated as returns on investment within operating cash flows and those in excess of that amount are treated as returns of investment within investing cash flows. All distributions from equity method investments for which the Company elected the fair value option (FVO) are classified as investing activities.

AssuredIM Funds, in which AGAS (primarily) and other subsidiaries invest, and where the Company has been deemed to be the primary beneficiary, are not reported in “investments” on the consolidated balance sheets, but rather, such AssuredIM Funds are consolidated and reported in “assets of consolidated investment vehicles” and “liabilities of consolidated investment vehicles”, with the portion not owned by AGAS and other subsidiaries presented as either redeemable or non-redeemable noncontrolling interests (NCI). See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles, for further information regarding the CIVs.

Net investment income primarily includes the income earned on fixed-maturity securities and short-term investments, including amortization of premiums and accretion of discounts. For mortgage-backed securities and any other securities for which there is prepayment risk, prepayment assumptions are evaluated quarterly and revised as necessary. For securities other than purchased credit deteriorated (PCD) securities, any necessary adjustments due to changes in effective yields and expected maturities are recognized in net investment income using the retrospective method.

Net realized investment gains (losses) include sales of investments, which are determined using the specific identification method, reductions to amortized cost of available-for-sale investments that have been written down due to the Company’s intent to sell them or it being more likely than not that the Company will be required to sell them, and the change in allowance for credit losses (including accretion).

For all securities that were originally purchased with credit deterioration, accrued interest is not separately presented, but rather is a component of the amortized cost of the instrument. For all other available-for-sale securities, a separate amount for accrued interest is reported in “other assets”.

For fixed-maturity securities classified as available for sale for which a decline in the fair value below the amortized cost is due to credit related factors, an allowance is established for the difference between the estimated recoverable value and amortized cost with a corresponding charge to net realized investment gains (losses). The estimated recoverable value is the present value of cash flows expected to be collected, as determined by management. The allowance for credit losses is limited to the difference between amortized cost and fair value. The difference between fair value and amortized cost that is not associated with credit related factors is presented as a component of AOCI.

When estimating future cash flows for fixed-maturity securities, management considers the historical performance of underlying assets and available market information as well as bond-specific considerations. In addition, the process of estimating future cash flows includes, but is not limited to, the following critical inputs, which vary by security type:

The length of time an instrument has been impaired or the effect of changes in foreign exchange rates are not considered in the Company’s assessment of credit loss. The assessment of whether a credit loss exists is performed each reporting period.

The allowance for credit losses and the corresponding charge to net realized investment gains (losses) may be reversed if conditions change, however, the allowance for credit losses is never reduced below zero. When the Company determines that all or a portion of a fixed-maturity security is uncollectible, the uncollectible amortized cost amount is written off with a corresponding reduction to the allowance for credit losses. If cash flows that were previously written off are collected, the recovery is recognized in net realized investment gains (losses).

PCD securities are defined as financial assets that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination, as determined by the Company’s assessment. An allowance for credit losses is established upon initial recognition for available-for-sale PCD securities. On the date of acquisition, the amortized cost of PCD securities is equal to the purchase price plus the allowance for credit losses, with no credit loss expense recognized in the consolidated statements of operations. After the date of acquisition, deterioration or improvement in credit will result in an increase or decrease, respectively to the allowance and an offsetting credit loss expense (or benefit). To measure this, the Company performs a discounted cash flow analysis. For PCD securities that are also beneficial interests, favorable or adverse changes in expected cash flows are recognized as a change in the allowance for credit losses. Changes in expected cash flows that are not captured through the allowance are reflected as a prospective adjustment to the security’s yield within net investment income.

The Company has elected to not measure credit losses on its accrued interest receivable and instead writes off accrued interest when it is six-months past due or on the date it is deemed uncollectible, if earlier. All write-offs of accrued interest are recorded as a reduction to net investment income in the consolidated statements of operations. For securities the Company intends to sell the amortized cost is written down to fair value with a corresponding charge to net realized investment gains (losses) if (1) it is more-likely-than-not that the Company will be required to sell before recovery of its amortized cost, and (2) the fair value of the security is below amortized cost. No allowance is established in these situations and any previously recorded allowance is reversed. The new cost basis is not adjusted for subsequent increases in estimated fair value.

The investment portfolio consists of both externally and internally managed portfolios. The majority of the investment portfolio is managed by three outside managers and AssuredIM. The Company has established investment guidelines for its investment managers regarding credit quality, exposure to a particular sector and exposure to a particular obligor within a sector.

The internally managed portfolio primarily consists of the Company’s investments in: (i) Loss Mitigation Securities; (ii) securities managed under an Investment Management Agreement (IMA) with AssuredIM; (iii) New Recovery Bonds and CVIs received in connection with the consummation of the 2022 Puerto Rico Resolutions and (iv) other investments including certain fixed-maturity and short-term securities and equity method investments. Equity method investments primarily consist of generally less liquid alternative investments including: an investment in renewable and clean energy and private equity funds. The Company had unfunded commitments of $78 million as of December 31, 2022 related to certain of the Company’s alternative investments, other than AssuredIM Funds.


	As of December 31,
	2022		2021
	(in millions)
Fixed-maturity securities, available-for-sale (1):
Externally managed	$	5,519	$	6,843
Loss Mitigation Securities and other	705		818
AssuredIM managed	537		541
Fixed-maturity securities - Puerto Rico New Recovery Bonds (2)	358		—
Fixed-maturity securities, trading - Puerto Rico CIVs (2)	303		—
Short-term investments (3)	810		1,225
Other invested assets:
Equity method investments	123		169
Other	10		12
Total	$	8,365	$	9,608

(1) 7.4% and 7.5% of fixed-maturity securities were rated BIG as of December 31, 2022 and December 31, 2021, respectively, consisting primarily of Loss Mitigation Securities. 5.9% and 0.9% were not rated, as of December 31, 2022 and December 31, 2021, respectively.

The U.S. Insurance Subsidiaries, through their jointly-owned investment subsidiary, AGAS, are authorized to invest up to $750 million in AssuredIM Funds. Adding distributed gains from inception through December 31, 2022, the U.S. Insurance Subsidiaries may invest a total of up to $810 million in AssuredIM Funds through AGAS. As of December 31, 2022, the U.S. Insurance Subsidiaries had total commitments to AssuredIM Funds of $755 million, of which $536 million represented net invested capital and $219 million was undrawn. This capital was committed to several funds, each dedicated to a single strategy, including CLOs, asset-based finance, and healthcare structured capital. As of December 31, 2022 and December 31, 2021, the fair value of AGAS’ interest in AssuredIM Funds was $569 million and $543 million, respectively.

AssuredIM Funds, in which AGAS (primarily) and other subsidiaries invest, and where the Company has been deemed to be the primary beneficiary, are not reported in “investments” on the consolidated balance sheets, but rather, such AssuredIM Funds are consolidated and reported in “assets of consolidated investment vehicles” and “liabilities of consolidated investment vehicles,” with the portion not owned by AGAS and other subsidiaries presented as either redeemable or non-redeemable noncontrolling interests. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.


Security Type	Percent of Total (1)		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Weighted Average Credit Rating (2)
	(dollars in millions)
Obligations of state and political subdivisions	45	%	$	3,509	$	(14)	$	37	$	(138)	$	3,394	A
U.S. government and agencies	2		118		—		1		(8)		111		AA+
Corporate securities (3)	31		2,387		(6)		2		(299)		2,084		A
Mortgage-backed securities (4):
RMBS	5		418		(19)		3		(62)		340		BBB
Commercial mortgage-backed securities (CMBS)	4		282		—		—		(11)		271		AAA
Asset-backed securities:
CLOs	6		449		—		—		(21)		428		A+
Other	5		423		(26)		22		(26)		393		CCC+
Non-U.S. government securities	2		121		—		—		(23)		98		AA-
Total available-for-sale fixed-maturity securities	100	%	$	7,707	$	(65)	$	65	$	(588)	$	7,119	A


Security Type	Percent of Total (1)		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Weighted Average Credit Rating (2)
	(dollars in millions)
Obligations of state and political subdivisions	43	%	$	3,386	$	(12)	$	290	$	(4)	$	3,660	AA-
U.S. government and agencies	2		123		—		7		(2)		128		AA+
Corporate securities (3)	32		2,516		(1)		111		(21)		2,605		A
Mortgage-backed securities (4):
RMBS	6		454		(17)		24		(24)		437		BBB+
CMBS	4		332		—		14		—		346		AAA
Asset-backed securities:
CLOs	6		457		—		1		—		458		AA-
Other	5		420		(12)		26		(2)		432		CCC+
Non-U.S. government securities	2		134		—		5		(3)		136		AA-
Total available-for-sale fixed-maturity securities	100	%	$	7,822	$	(42)	$	478	$	(56)	$	8,202	A+

(2) Ratings represent the lower of the Moody’s and S&P classifications, except for Loss Mitigation Securities and certain other securities, which use internal ratings classifications. The Company’s portfolio primarily consists of high-quality, liquid instruments. New Recovery Bonds received in connection with the consummation of the 2022 Puerto Rico Resolutions are not rated.


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	1,763	$	(79)	$	163	$	(56)	$	1,926	$	(135)
U.S. government and agencies	32		—		52		(8)		84		(8)
Corporate securities	1,276		(95)		519		(147)		1,795		(242)
Mortgage-backed securities:
RMBS	147		(9)		3		(1)		150		(10)
CMBS	270		(11)		—		—		270		(11)
Asset-backed securities:
CLOs	171		(7)		250		(14)		421		(21)
Other	27		(2)		—		—		27		(2)
Non-U.S. government securities	65		(10)		30		(13)		95		(23)
Total	$	3,751	$	(213)	$	1,017	$	(239)	$	4,768	$	(452)
Number of securities (1)			1,340				466				1,776


	Less than 12 months				12 months or more				Total
	Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss		Fair Value		Gross Unrealized Loss
	(dollars in millions)
Obligations of state and political subdivisions	$	117	$	(3)	$	10	$	(1)	$	127	$	(4)
U.S. government and agencies	26		—		32		(2)		58		(2)
Corporate securities	407		(12)		70		(5)		477		(17)
Mortgage-backed securities:
RMBS	4		—		—		—		4		—
Asset-backed securities:
CLOs	226		—		—		—		226		—
Non-U.S. government securities	24		(2)		8		(1)		32		(3)
Total	$	804	$	(17)	$	120	$	(9)	$	924	$	(26)
Number of securities (1)			355				60				410

(1) The number of securities does not add across because lots consisting of the same securities have been purchased at different times and appear in both categories above (i.e., less than 12 months and 12 months or more). If a security appears in both categories, it is counted only once in the total column.

The Company considered the credit quality, cash flows, interest rate movements, ability to hold a security to recovery and intent to sell a security in determining whether a security had a credit loss. The Company has determined that the unrealized losses recorded as of December 31, 2022 and December 31, 2021 were not related to credit quality, and in the case of 2022, were primarily attributable to rising interest rates. As of December 31, 2022, the Company did not intend to and was not required to sell investments in an unrealized loss position prior to expected recovery in value. As of December 31, 2022, of the securities in an unrealized loss position for which an allowance for credit loss was not recorded, 567 securities had unrealized losses in excess of 10% of their carrying value, whereas as of December 31, 2021, 23 securities had unrealized losses in excess of 10% of their carrying value. The total unrealized loss for these securities was $329 million as of December 31, 2022 and $6 million as of December 31, 2021.

The amortized cost and estimated fair value of available-for-sale fixed-maturity securities by contractual maturity as of December 31, 2022 are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	Amortized Cost		Estimated Fair Value
	(in millions)
Due within one year	$	290	$	282
Due after one year through five years	1,713		1,585
Due after five years through 10 years	1,778		1,667
Due after 10 years	3,226		2,974
Mortgage-backed securities:
RMBS	418		340
CMBS	282		271
Total	$	7,707	$	7,119

Based on fair value, investments and other assets that are either held in trust for the benefit of third-party ceding insurers in accordance with statutory requirements, placed on deposit to fulfill state licensing requirements, or otherwise pledged or restricted totaled $222 million as of December 31, 2022 and $243 million as of December 31, 2021. The investment

portfolio also contains securities that are held in trust by certain AGL subsidiaries or otherwise restricted for the benefit of other AGL subsidiaries in accordance with statutory and regulatory requirements in the amount of $1,169 million and $1,231 million based on fair value as of December 31, 2022 and December 31, 2021, respectively.

No material investments of the Company were non-income producing during the twelve months period ending December 31, 2022. There were no investments that were non-income producing during the twelve months period ending December 31, 2021.

Net investment income is a function of the yield that the Company earns on available-for-sale fixed-maturity securities and short-term investments, and the size of such portfolio. The investment yield is a function of market interest rates at the time of investment as well as the type, credit quality and maturity of the securities in this portfolio.


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Investment income:
Externally managed	$	189	$	204	$	231
Loss Mitigation Securities and other	63		55		65
Managed by AssuredIM (1)	22		16		8
Investment income	274		275		304
Investment expenses	(5)		(6)		(7)
Net investment income	$	269	$	269	$	297

Fair value gains (losses) on trading securities (2)	$	(34)	$	—	$	—
Equity in earnings (losses) of investees	$	(39)	$	94	$	27


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Gross realized gains on sales of available-for-sale securities	$	3	$	20	$	27
Gross realized losses on sales of available-for-sale securities (1)	(45)		(5)		(5)
Net foreign currency gains (losses)	(4)		2		6
Change in the allowance for credit losses and intent to sell (2)	(21)		(7)		(17)
Other net realized gains (losses) (3)	11		5		7
Net realized investment gains (losses)	$	(56)	$	15	$	18


	Year Ended December 31,
	2022		2021		2020
	(in millions)
Balance, beginning of period	$	42	$	78	$	—
Effect of adoption of accounting guidance on credit losses on January 1, 2020	—		—		62
Additions for securities for which credit losses were not previously recognized	7		4		1
Additions for purchases of securities accounted for as purchased financial assets with credit deterioration	2		—		—
Additions (reductions) for securities for which credit losses were previously recognized	14		2		15
Reductions for securities sold and other settlements	—		(42)		—
Balance, end of period	$	65	$	42	$	78

The Company recorded $21 million, $6 million and $16 million in credit loss expense for the years ended December 31, 2022, 2021 and 2020, respectively. During the 2022, the Company purchased a Loss Mitigation Security with a fair value of $22 million that was accounted for as a PCD security. At acquisition, this security had an unpaid principal on remaining collateral of $31 million, an allowance for credit losses of $2 million, and a non-credit related discount of $7 million. The Company did not purchase any other securities with credit deterioration during the periods presented. As of December 31, 2022 and 2021, the majority of allowance for credit losses relates to Loss Mitigation Securities.

The table below presents summarized financial information for equity method investments that meet, in aggregate, the requirements for reporting summarized disclosures. Amounts in the table below represent amounts reported in the consolidated financial statements as of December 31, 2022 and 2021, and for the years ended December 31, 2022, 2021 and 2020. The financial statements for the majority of these equity method investments are reported on a lag.