ASSURED GUARANTY LTD

On April 2, 2025, the U.S. government announced a “reciprocal tariff” strategy under the authority of the International Emergency Economic Powers Act (IEEPA) entailing extensive global tariff increases, with the objective of rectifying trade practices that contribute to large and persistent annual U.S. goods trade deficits. The announcement of global tariffs disrupted international trade, sent shocks through the global economy, and heightened volatility in the financial markets. The U.S. subsequently postponed newly announced reciprocal tariffs, which took effect on August 7, 2025, as significant uncertainty remains. On August 29, 2025, the U.S. Court of Appeals for the Federal Circuit ruled that the U.S. government had exceeded its authority under the IEEPA but permitted the tariffs to remain in effect to provide time for the government to appeal. The U.S. Supreme Court granted certiorari on September 9, 2025, and heard oral arguments on the case on November 5, 2025; as of November 6, 2025, a decision is pending. U.S. tariffs can add to inflation, and the Company believes that ongoing uncertainty may increase volatility in U.S. equities and other risk assets, curb corporate capital and consumer spending and raise the risk of recession. Market volatility and the risk of recession may impact the Company in different ways. The Company believes that a recession may make it more likely that obligors whose obligations it guarantees will default. However, market volatility may also cause credit spreads to widen as investors seek security, which tends to create new business opportunities for the Company.

At the end of August 2025, the latest published data available, the U.S. unemployment rate, seasonally adjusted, stood at 4.3%, higher than the 4.1% where it started the year. As of November 6, 2025, the U.S. Bureau of Economic Analysis (BEA) had not released the three-month period ended September 30, 2025 (third quarter 2025) gross domestic product (GDP) estimate due to the 2025 U.S. federal government shutdown. According to the BEA’s third estimate of second quarter 2025 GDP, the latest BEA data available, GDP increased at an annual rate of 3.8%, compared to a real GDP decrease of 0.6% in the first quarter of 2025.

According to the U.S. Bureau of Labor Statistics, the inflation rate in the U.S. before seasonal adjustment for the 12-month period ending September 2025, as measured by the Consumer Price Index for All Urban Consumers, was 3.0%, as compared to 2.4% for the 12-month period ending September 2024. According to the U.K. Office for National Statistics, the Consumer Prices Index including owner occupiers’ housing costs rose 4.1% for the 12 months through September 2025, as compared to 2.6% for the 12 months through September 2024. Generally, inflation reduces the real value of money over time. For obligors whose payments the Company insures, inflation can mean that the real value of their fixed debt payments decreases, potentially making it relatively easier for obligors to service these fixed-rate debts and less likely for them to default. However, if inflation increases operating expenses and revenues or incomes do not keep pace, obligors may find it more difficult to make their payment obligations, even if nominal debt payments remain unchanged. Higher inflation can also lead to tighter monetary policies, which are actions taken by sovereign central banks to reduce the amount of money circulating in the economy, including raising interest rates, which can make refinancing or servicing debt more difficult. In addition, consumer price inflation in the U.K. affects reported net par outstanding for certain U.K. exposures with $25.1 billion of net par outstanding as of September 30, 2025, and also affects projected future installment premiums on the portion of such exposure that pays at least a portion of the premium on an installment basis over the term of the exposure.

At its September 2024 meeting, the Federal Open Market Committee (FOMC) decided to lower the federal funds rate, which was a reversal of the rate increases it had initiated in March 2022 to combat inflation. The federal funds rate is the rate at which banks lend to and borrow from each other, is the benchmark for most interest rates, and tends to influence mortgage rates. As the federal funds rate decreases, interest rates, including mortgage rates, tend to decrease. From September 2024 through December 2024, the FOMC lowered the federal funds rate from a target range of 5.25% to 5.50% to a range of 4.25% to 4.50%. At the FOMC’s first five meetings of 2025, it held the federal funds rate at a target range of 4.25% to 4.50%, before deciding at its September 2025 meeting to further lower the federal funds rate to a target range of 4.00% to 4.25%, stating that it is strongly committed to maximum employment and returning inflation to its 2% objective. Most recently, at its October 2025 meeting, the FOMC lowered the federal funds rate to a target range of 3.75% to 4.00%. In considering additional adjustments to the target range for the federal funds rate, the FOMC has indicated it will carefully assess incoming data, the evolving outlook, and the balance of risks. These assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

From 2022 through November 2025, the Bank of England’s Monetary Policy Committee (MPC) took actions similar to those of the FOMC to combat inflation and spur economic growth. In 2022, the MPC raised the Bank of England base rate (Bank Rate) from historic lows in response to surging inflation, increasing the rate multiple times into 2023 as inflation remained high above MPC’s 2% target. By the end of 2023, the MPC signaled a pause in further increases as inflation began to decline and economic growth slowed. During 2024, as inflationary pressures eased further and the U.K. economy showed signs of stagnation or mild recession, the MPC kept the rate unchanged for most of the year, before beginning to decrease the Bank Rate in August 2024. In 2025, with inflation being closer to the MPC’s target level and economic growth slowed, the MPC further lowered the Bank Rate several times, standing at 4.00% as of November 6, 2025, aiming to support economic growth while maintaining price stability.

The level and direction of change of interest rates and credit spreads impact the Company in numerous ways. On the one hand, lower interest rates may increase the fair value of fixed-maturity securities currently held in the Company’s investment portfolio, encourage municipal and infrastructure bond issuance and positively impact the finances of some of the obligors whose payments the Company insures. On the other hand, lower interest rates may decrease the base on which the Company charges up-front premium on most new municipal and infrastructure bond transactions and may also decrease amounts the Company can earn on fixed-maturity securities newly acquired for its investment portfolio. Lower interest rates also are often accompanied by narrower credit spreads, which may also decrease the level of premiums the Company can charge for transactions.

The 30-year AAA Municipal Market Data (MMD) rate is a measure of interest rates in the Company’s largest financial guaranty insurance market, U.S. public finance. The MMD rate averaged 4.52% for the quarter ended September 2025, higher than the 4.47% average for the quarter ended June 2025 and higher than the 3.60% average for the quarter ended September 2024. Meanwhile, the difference, or credit spread, between the 30-year BBB-rated general obligation relative to the 30-year AAA MMD averaged 90 basis points (bps) for the quarter ended September 2025, which is the same as the 90 bps average for the quarter ended June 2025 and the quarter ended September 2024. The Company believes that wider spreads could permit it to increase its premium rates on new business.

According to Freddie Mac, the 30-year fixed-rate mortgage rate averaged 6.30% for the week ending September 25, 2025, higher than the 30-year mortgage rate average of 6.08% from one year ago. The National Association of Realtors reported that there was a 4.1% increase in year-over-year existing-home sales from September 2024 to September 2025, and that the median existing-home sales price increased 2.1% from September 2024 ($406,700) to September 2025 ($415,200). Higher housing prices may benefit distressed residential mortgage-backed securities (RMBS) the Company insures.