XML 39 R23.htm IDEA: XBRL DOCUMENT v3.22.4
Employee Benefit Plans
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Employee Benefit Plans Employee Benefit Plans
Assured Guaranty Ltd. 2004 Long-Term Incentive Plan

Under the Assured Guaranty Ltd. 2004 Long-Term Incentive Plan, as amended (the Incentive Plan), the number of AGL common shares that may be delivered under the Incentive Plan may not exceed 18,670,000. As of December 31, 2022, 8,059,991 common shares were available for grant under the Incentive Plan. In the event of certain transactions affecting AGL’s common shares, the number or type of shares subject to the Incentive Plan, the number and type of shares subject to outstanding awards under the Incentive Plan, and the exercise price of awards under the Incentive Plan, may be adjusted.

The Incentive Plan authorizes the grant of incentive stock options, non-qualified stock options, stock appreciation rights, and full value awards that are based on AGL’s common shares. The grant of full value awards may be in return for a participant's previously performed services, or in return for the participant surrendering other compensation that may be due, or may be contingent on the achievement of performance or other objectives during a specified period. The grant of full value awards are subject to a risk of forfeiture or other restrictions that will lapse upon the achievement of one or more goals relating to completion of service by the participant, or achievement of performance or other objectives. Awards under the Incentive Plan may accelerate and become vested upon a change in control of AGL.

The Incentive Plan is administered by the Compensation Committee of AGL's Board of Directors (the Board), except as otherwise determined by the Board. The Board may amend or terminate the Incentive Plan.

Accounting Policy

Share-based compensation expense is based on the grant date fair value using the grant date closing price or the Monte Carlo or Black-Scholes-Merton (Black-Scholes) pricing models. The Company amortizes the fair value of share-based awards on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods, with the exception of retirement‑eligible employees. For retirement-eligible employees, the portion of the unvested time-based awards that become fully vested upon retirement eligibility are expensed immediately.

The fair value of each award under the Assured Guaranty Ltd. Employee Stock Purchase Plan is estimated at the beginning of the offering period using the Black-Scholes option valuation model and are expensed over the period which the employee participates in the plan and pays for the shares.

Long-Term Incentive Plan

Restricted Stock Units

Restricted stock units are valued based on the closing price of the underlying shares at the date of grant. The Company awards restricted stock units to employees that generally vest after a three-year or over a four-year period. Occasionally the Company may award restricted stock units to employees that vest after a four-year period. The shares are delivered on the vesting date.
Restricted Stock Unit Activity
Nonvested Stock Units
Number of
Stock Units
Weighted Average Grant Date Fair Value Per Share
Nonvested at December 31, 2021906,302 $43.25 
Granted441,436 56.46 
Vested(279,089)41.26 
Forfeited(1,583)47.39 
Nonvested at December 31, 20221,067,066 $49.18 

    As of December 31, 2022, the total unrecognized compensation cost related to outstanding non-vested restricted stock units was $21 million, which the Company expects to recognize over the weighted-average remaining service period of 1.8 years. The total fair value of restricted stock units vested during the years ended December 31, 2022, 2021 and 2020 was $12 million, $12 million and $11 million, respectively. The weighted-average grant-date fair value of restricted stock units granted during the years ended December 31, 2022, 2021 and 2020 was $56.46, $44.08, and $41.31, respectively.

Performance Restricted Stock Units

    Each performance restricted stock unit represents a contingent right to receive up to a certain number of the Company’s common shares. Awards tied to core adjusted book value per share represent the right to receive up to two shares at the end of a three-year performance period, depending on the growth in core adjusted book value per share over the three-year performance period. Performance restricted stock units tied to total shareholder return (TSR) relative to the TSR of the 55th percentile of the Russell Midcap Financial Services Index represent the right to receive up to 2.5 shares at the end of a three-year performance period. The shares related to awards tied to core adjusted book value per share are delivered on the vesting date and the shares related to awards tied to relative TSR are generally delivered on the fourth anniversary of the grant date.

Performance Restricted Stock Unit Activity
Performance Restricted Stock Units
Number of
Performance Share Units
Weighted Average Grant Date Fair Value Per Share
Nonvested at December 31, 2021614,912 $46.25 
Granted (1)217,551 62.89 
Vested (1)(197,078)41.34 
Forfeited— — 
Nonvested at December 31, 2022 (2)635,385 $54.26 
____________________
(1)    Includes 94,209 performance restricted stock units that were granted prior to 2022 at a weighted average grant date fair value of $41.34, but met performance hurdles and vested during 2022. The weighted average grant date fair value per share excludes these shares.
(2)    Excludes 167,942 performance restricted stock units that have met performance hurdles and will be eligible for vesting after December 31, 2022.

As of December 31, 2022, the total unrecognized compensation cost related to outstanding non-vested performance share units was $15 million, which the Company expects to recognize over the weighted-average remaining service period of 1.7 years. The total value of performance restricted stock units vested during the years ended December 31, 2022, 2021 and 2020 was based on grant date fair value and was $8 million, $9 million and $8 million, respectively.

For the 2022, 2021 and 2020 awards, the grant-date fair value of the performance restricted stock units tied to relative TSR was calculated using a Monte Carlo simulation in order to determine the total return of the Company’s shares relative to the total return of financial companies in the Russell Midcap Financial Services Index. The inputs to the simulation include the beginning prices of shares, historical volatilities, and dividend yields of all relevant companies as well as all possible pairwise correlation coefficients among the relevant companies. In addition, the risk-free return and discount for illiquidity are also included. 
The following are significant assumptions used in determining the fair value of the performance restricted stock units tied to relative TSR.

Years Ended December 31,
202220212020
Expected term2.85 years2.85 years2.84 years
Expected volatility27.19 %–78.96%26.55 %–65.84%11.93 %–48.12%
Dividend yield 0.00%0.00%0.00%
Risk-free-rates1.74%0.22%1.14%
Grant-date fair value$83.97$60.06$38.96

For the 2022, 2021 and 2020 awards, the grant-date fair value of the performance restricted stock units tied to core adjusted book value was based on the grant date closing price.

The weighted-average grant-date fair value of the 2022, 2021 and 2020 awards was $62.89, $52.04 and $41.03, respectively.

Restricted Stock Awards

    Restricted stock awards are valued based on the closing price of the underlying shares at the date of grant. The Company awards restricted stock awards to non-executive directors that vest after one year. The shares are delivered on the vesting date.

Restricted Stock Award Activity
Nonvested Shares
Number of
Shares
Weighted Average Grant Date Fair Value Per Share
Nonvested at December 31, 202144,797 $51.34 
Granted36,403 59.47 
Vested(44,797)51.34 
Forfeited— — 
Nonvested at December 31, 202236,403 $59.47 

As of December 31, 2022, the total unrecognized compensation cost related to outstanding non-vested restricted stock awards was $0.7 million, which the Company expects to recognize over the weighted-average remaining service period of 0.3 years. The total fair value of shares vested during the years ended December 31, 2022, 2021 and 2020 was $2.3 million, $1.9 million and $2.3 million, respectively. The weighted-average grant-date fair value of shares granted during the years ended December 31, 2022, 2021 and 2020 was $59.47, $51.34 and $28.12, respectively.
Employee Stock Purchase Plan

The Company established the AGL Employee Stock Purchase Plan (Stock Purchase Plan) in accordance with Internal Revenue Code of 1986 (the Code) Section 423, and participation is available to all eligible employees. Maximum annual purchases by participants are limited to the number of whole shares that can be purchased by an amount equal to 10% of the participant's compensation or, if less, shares having a value of $25,000. Participants may purchase shares at a purchase price equal to 85% of the lesser of the fair market value of the stock on the first day or the last day of the subscription period. The Company has reserved for issuance and purchases under the Stock Purchase Plan 850,000 AGL common shares. As of December 31, 2022, 65,042 common shares were available for grant under the Stock Purchase Plan.

    The fair value of each award under the Stock Purchase Plan is estimated using the following assumptions: a) the expected dividend yield is based on the current expected annual dividend and share price on the grant date; b) the expected volatility is estimated at the date of grant based on the historical share price volatility, calculated on a daily basis; c) the risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant; and d) the expected life is based on the term of the offering period.
Stock Purchase Plan
Year Ended December 31,
202220212020
(dollars in millions)
Proceeds from purchase of shares by employees$2.4 $2.1 $1.5 
Number of shares issued by the Company53,453 67,615 72,797 

Share-Based Compensation Expense

The following table presents share-based compensation costs and the amount of such costs that are deferred as policy acquisition costs, pre-tax. Amortization of previously deferred share compensation costs is not shown in the table below.

Share-Based Compensation Expense Summary
Year Ended December 31,
202220212020
(in millions)
Share‑based compensation expense$39 $27 $25 
Share‑based compensation capitalized as DAC3 2 1 
Income tax benefit6 4 4 

Defined Contribution Plan

The Company maintains a savings incentive plan, which is qualified under Section 401(a) of the Code for U.S. employees. Eligible participants may contribute a percentage of their eligible compensation subject to U.S. Internal Revenue Service (IRS) limitations. The Company’s matching contribution is an amount equal to 100% of each participant’s contributions up to 7% of such participant’s eligible compensation, subject to IRS limitations. Certain eligible participants may also contribute a percentage of eligible compensation over the IRS limitations to a nonqualified supplemental executive retirement plan. The Company's matching contribution in the nonqualified plan is an amount equal to 100% of each participant’s contributions up to 6% of participant’s eligible compensation above the IRS limitations for the qualified plan. The Company also makes core contributions of 7% of the participant’s eligible compensation to the qualified plan, subject to IRS limitations, regardless of whether the employee otherwise contributes to the plan, and a core contribution of 6% of the participant’s eligible compensation above the IRS limitations for the qualified plan to the nonqualified plan for eligible employees. Employees become fully vested in Company contributions to the qualified and nonqualified plans after one year of service, as defined in the plan (or upon reaching age 65 for the nonqualified plan, if earlier). Plan eligibility is immediate upon hire. The Company also maintains similar non-qualified plans for non-U.S. employees. The Company recognized defined contribution expenses of $20 million, $20 million and $20 million for the years ended December 31, 2022, 2021 and 2020, respectively.