ASSURED GUARANTY LTD

2. Segment Information

The Company reports its results of operations intwo segments: Insurance and Asset Management. The Company separately reports the results of its Corporate division and the effects of consolidating FG VIEs and CIVs. This presentation is consistent with the manner in which the Chief Executive Officer and President, the CODM, reviews the business to assess performance and allocate resources. The CODM uses adjusted operating income to allocate resources for each segment predominantly in the annual budget and forecasting process and to assess the performance for each segment.

The Company analyzes the operating performance of each segment using “segment adjusted operating income (loss).” Results for each segment and division include specifically identifiable expenses as well as intersegment expense allocations, as applicable, based on time studies and other cost allocation methodologies based on headcount or other metrics. Segment adjusted operating income is defined as “net income (loss) attributable to AGL,” adjusted for the following items, which primarily affect the Insurance segment and Corporate division:

•Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading.

•Elimination of non-credit impairment-related 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.

•Elimination of fair value gains (losses) on the Company’s committed capital securities (CCS) that are recognized in net income.

•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.

•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.

In addition to the adjustments listed above, segment adjusted operating income (loss) differs from GAAP in other respects. The Insurance segment includes: (i) premiums and losses from the financial guaranty insurance policies issued by AG that guarantees the FG VIEs’ debt; and (ii) the insurance subsidiaries’ share of earnings from investments in funds managed by Sound Point and AHP funds (prior to July 1, 2023, AssuredIM) in “equity in earnings (losses) of investees.” Under GAAP, (i) FG VIEs are consolidated by AG and the premiums and losses/recoveries associated with the financial guaranty policies in respect of the FG VIEs’ debt are eliminated (the reconciliation tables below present the FG VIEs and related eliminations in “other”); and (ii) certain investments in funds managed by Sound Point (prior to July 1, 2023, AssuredIM) and AHP funds are, or were in prior periods, accounted for as CIVs, (in the reconciliation tables below, the CIVs and related eliminations of the Insurance segment’s “equity in earnings (losses) of investees” associated with the Company’s ownership interest in CIVs are presented in “other”). Until July 1, 2023, under GAAP, reimbursable fund expenses were shown as a component of “asset management fees” and included in total revenues, whereas in the Asset Management segment in the tables below these expenses were netted in “segment expenses.”

The Company does not report assets by reportable segment as the CODM does not assess performance and allocate resources based on assets.

The Insurance segment primarily consists of the adjusted operating income (loss) of: (i) the Company’s insurance subsidiaries; and (ii) AGAS.

Prior to July 1, 2023, the Asset Management segment consisted of the adjusted operating income (loss) of AssuredIM. Since July 2023, the Company participates in the asset management business through its ownership interest in Sound Point as described in Note 1, Business and Basis of Presentation. Beginning in the third quarter of 2023, the Asset Management segment primarily includes the results of the Company’s equity method ownership interest in Sound Point.

The Corporate division primarily consists of: (i) interest expense and any losses on the extinguishment of the U.S. Holding Companies’ debt; (ii) other corporate operating expenses of AGL and the U.S. Holding Companies, and (iii) beginning in the third quarter of 2024, equity in earnings from certain alternative investments that were transferred from AG to AGMH as part of the share redemption that occurred on August 5, 2024. The Corporate division also included the gain, net of transaction expenses, associated with the Sound Point Transaction and the AHP Transaction in 2023.

The Other category in the tables below primarily includes the effect of consolidating FG VIEs, CIVs, intersegment eliminations and, prior to July 1, 2023, the reclassification of reimbursable fund expenses. See Note 8, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles.

The following table presents information for the Company’s operating segments. Intersegment revenues include transactions between and among the segments, the Corporate division and other.

Segment Information

(1) Other segment items include professional services expenses, maintenance, depreciation expense, lease expense, investment management expenses and certain overhead expenses.

(2) Consists of depreciation and amortization, share-based compensation (see Note 12, Employee Benefit Plans) and the write-off of long-lived intangible assets related to AGM licenses (see Note 1, Business and Basis of Presentation).

(3) In 2023, the Corporate division had revenues of $275 million primarily consisting of a gain on the Sound Point and AHP transactions. Expenses for the Corporate division consisted of $99 million of interest expense, $38 million of employee compensation and benefit expenses, and $79 million of other expenses.

The tables below present a reconciliation of significant components of segment information to the comparable consolidated amounts.

(1) Includes $189 million of tax benefit related to a Bermuda tax law change, which is included in the Insurance segment. See Note 13, Income Taxes.

(2) Credit derivative impairment (recoveries) are included in “fair value gains (losses) on credit derivatives” in the Company’s consolidated statements of operations and in loss and LAE (benefit) on a segment basis.

(2) Credit derivative impairment (recoveries) are included in “fair value gains (losses) on credit derivatives” in the Company’s consolidated statements of operations and in loss and LAE (benefit) on a segment basis.

(2) Credit derivative impairment (recoveries) are included in “fair value gains (losses) on credit derivatives” in the Company’s consolidated statements of operations and in loss and LAE (benefit) on a segment basis.

The table below summarizes revenues for the operating segments, Corporate division and Other category by country of domicile for each period indicated, based on the country of domicile of the Company’s subsidiaries that generated the revenues.

Segment, Corporate Division and Other

Revenues by Country of Domicile