ASSURED GUARANTY LTD – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Form 10-Q contains information that includes or is based upon forward
looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward looking statements give the expectations or
forecasts of future events of Assured Guaranty Ltd. (AGL) and its subsidiaries
(collectively with AGL, Assured Guaranty or the Company). These statements can
be identified by the fact that they do not relate strictly to historical or
current facts and relate to future operating or financial performance.

Any or all of Assured Guaranty's forward looking statements herein are based on
current expectations and the current economic environment and may turn out to be
incorrect. Assured Guaranty's actual results may vary materially. Among factors
that could cause actual results to differ adversely are:

•changes in inflation, interest rates, the world's credit markets or segments
thereof, credit spreads, foreign exchange rates or general economic conditions,
including the possibility of a recession;
•consequences of the conflict in Ukraine, including economic sanctions,
fragmentation of global supply chains, volatility in energy prices, and the
potential for increased cyberattacks;
•the development, course and duration of the COVID-19 pandemic and the
governmental and private actions taken in response, and the global consequences
of the pandemic and such actions, including their impact on the factors listed
in this section;
•developments in the world's financial and capital markets that adversely affect
insured obligors' repayment rates, Assured Guaranty's insurance loss or recovery
experience, investments of Assured Guaranty or assets it manages;
•reduction in the amount of available insurance opportunities and/or in the
demand for Assured Guaranty's insurance;
•the loss of investors in Assured Guaranty's asset management strategies or the
failure to attract new investors to Assured Guaranty's asset management
business;
•the possibility that budget or pension shortfalls or other factors will result
in credit losses or impairments on obligations of state, territorial and local
governments and their related authorities and public corporations that Assured
Guaranty insures or reinsures;
•insured losses in excess of those expected by Assured Guaranty or the failure
of Assured Guaranty to realize loss recoveries that are assumed in its expected
loss estimates for insurance exposures, including as a result of the failure to
resolve Assured Guaranty's exposures to Puerto Rico (Puerto Rico or the
Commonwealth) in a manner substantially consistent with the support agreements
signed to date;
•increased competition, including from new entrants into the financial guaranty
industry;
•poor performance of Assured Guaranty's asset management strategies compared to
the performance of the asset management strategies of Assured Guaranty's
competitors;
•the possibility that investments made by Assured Guaranty for its investment
portfolio, including alternative investments and investments it manages, do not
result in the benefits anticipated or subject Assured Guaranty to reduced
liquidity at a time it requires liquidity, or to unanticipated consequences;
•the impact of market volatility on the mark-to-market of Assured Guaranty's
assets and liabilities subject to mark-to-market, including certain of its
investments, most of its financial guaranty contracts written in credit default
swap (CDS) form, and certain consolidated variable interest entities (VIEs);
•rating agency action, including a ratings downgrade, a change in outlook, the
placement of ratings on watch for downgrade, or a change in rating criteria, at
any time, of AGL or any of its insurance subsidiaries, and/or of any securities
AGL or any of its subsidiaries have issued, and/or of transactions that AGL's
insurance subsidiaries have insured;
•the inability of Assured Guaranty to access external sources of capital on
acceptable terms;
•changes in applicable accounting policies or practices;
•changes in applicable laws or regulations, including insurance, bankruptcy and
tax laws, or other governmental actions;
•the possibility that acquisitions made by Assured Guaranty, including its
acquisition of BlueMountain Capital Management LLC (BlueMountain, now known as
Assured Investment Management LLC) and its associated entities (BlueMountain
Acquisition), do not result in the benefits anticipated or subject Assured
Guaranty to unanticipated consequences;
•difficulties with the execution of Assured Guaranty's business strategy;
•loss of key personnel;
•the effects of mergers, acquisitions and divestitures;
                                       84

--------------------------------------------------------------------------------

Table of Contents

•natural or man-made catastrophes or pandemics;
•other risk factors identified in AGL's filings with the United States (U.S.)
Securities and Exchange Commission (SEC);
•other risks and uncertainties that have not been identified at this time; and
•management's response to these factors.

The foregoing review of important factors should not be construed as exhaustive,
and should be read in conjunction with the other cautionary statements that are
included in this Form 10-Q, as well as the risk factors included in the
Company's 2021 Annual Report on Form 10-K. The Company undertakes no obligation
to update publicly or review any forward looking statement, whether as a result
of new information, future developments or otherwise, except as required by law.
Investors are advised, however, to consult any further disclosures the Company
makes on related subjects in the Company's reports filed with the SEC.

If one or more of these or other risks or uncertainties materialize, or if the
Company's underlying assumptions prove to be incorrect, actual results may vary
materially from what the Company projected. Any forward looking statements in
this Form 10-Q reflect the Company's current views with respect to future events
and are subject to these and other risks, uncertainties and assumptions relating
to its operations, results of operations, growth strategy and liquidity.

For these statements, the Company claims the protection of the safe harbor for
forward looking statements contained in Section 27A of the Securities Act of
1933, as amended (the Securities Act), and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act).

Available Information

  The Company maintains an internet web site at www.assuredguaranty.com. The
Company makes available, free of charge, on its web site (under
www.assuredguaranty.com/sec-filings) the Company's Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13 (a) or 15 (d) of the
Exchange Act as soon as reasonably practicable after the Company files such
material with, or furnishes it to, the SEC. The Company also makes available,
free of charge, through its web site (under www.assuredguaranty.com/governance)
links to the Company's Corporate Governance Guidelines, the Company's Global
Code of Ethics, AGL's Bye-Laws and the charters for the committees of its Board
of Directors. In addition, the SEC maintains a web site (at www.sec.gov) that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC.

The Company routinely posts important information for investors on its web site
(under www.assuredguaranty.com/company-statements and, more generally, under the
Investor Information tab at www.assuredguaranty.com/investor-information and
Businesses tab at www.assuredguaranty.com/businesses). The Company also
maintains a social media account on LinkedIn
(www.linkedin.com/company/assured-guaranty/). The Company uses its web site and
may use its social media account as a means of disclosing material information
and for complying with its disclosure obligations under SEC Regulation FD (Fair
Disclosure). Accordingly, investors should monitor the Company Statements,
Investor Information and Businesses portions of the Company's web site as well
as the Company's social media account on LinkedIn, in addition to following the
Company's press releases, SEC filings, public conference calls, presentations
and webcasts.

The information contained on, or that may be accessed through, the Company's web
site or social media account is not incorporated by reference into, and is not a
part of, this report.

Overview

Business

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 reviews the business to assess
performance and allocate resources. The Company's Corporate division and other
activities (including financial guaranty VIEs (FG VIEs) and consolidated
investment vehicles (CIVs)) are presented separately.

In the Insurance segment, the Company provides credit protection products to the
U.S. and international public finance (including infrastructure) and structured
finance markets. The Company applies its credit underwriting judgment, risk
management skills and capital markets experience primarily to offer credit
protection products to holders of debt instruments and other monetary
obligations that protect them from defaults in scheduled payments. If an obligor
defaults on a scheduled
                                       85

--------------------------------------------------------------------------------

Table of Contents

payment due on an obligation, including a scheduled principal or interest
payment (collectively, debt service), the Company is required under its
unconditional and irrevocable financial guaranty to pay the amount of the
shortfall to the holder of the obligation. The Company markets its credit
protection products directly to issuers and underwriters of public finance and
structured finance securities as well as to investors in such obligations. The
Company guarantees obligations issued principally in the U.S. and the United
Kingdom (U.K.), and also guarantees obligations issued in other countries and
regions, including Western Europe, Canada and Australia. The Company also
provides other forms of insurance that are consistent with its risk profile and
benefit from its underwriting experience, which are referred to as the specialty
insurance and reinsurance business. Premiums are earned over the contractual
lives, or in the case of homogeneous pools of insured obligations, the remaining
expected lives, of financial guaranty insurance contracts.

In the Asset Management segment, the Company provides investment advisory
services, which include the management of collateralized loan obligations
(CLOs), opportunity and liquid strategy funds, as well as certain legacy hedge
and opportunity funds now subject to an orderly wind-down. Assured Investment
Management LLC (AssuredIM LLC) and its investment management affiliates
(together with AssuredIM LLC, AssuredIM) have managed structured, public finance
and credit investments since 2003. AssuredIM provides investment advisory
services while leveraging a technology-enabled risk platform, which aims to
maximize returns for its clients. The establishment, in the fourth quarter of
2019, of the Asset Management segment diversifies the risk profile and revenue
opportunities of the Company. As of September 30, 2022, AssuredIM had $17.5
billion of assets under management (AUM), including $1.3 billion that is managed
on behalf of Assured Guaranty Municipal Corp. (AGM) and Assured Guaranty Corp.
(AGC).

Fees in respect of investment advisory services are the largest component of
revenues for the Asset Management segment. AssuredIM is compensated for its
investment advisory services generally through management fees which are based
on AUM, and may also earn performance fees calculated as a percentage of net
profits or based on an internal rate of return referencing distributions made to
investors, in each case, in respect of funds, CLOs and/or accounts which it
advises.

The Corporate division consists primarily of interest expense on the debt of
Assured Guaranty US Holdings Inc. (AGUS) and Assured Guaranty Municipal Holdings
Inc. (AGMH) (the U.S. Holding Companies), as well as other operating expenses
attributed to holding company activities, including administrative services
performed by certain subsidiaries for the holding companies. Other activities
include the effect of consolidating FG VIEs and CIVs (FG VIE and CIV
consolidation). See Item 1, Financial Statements, Note 2, Segment Information.

Economic Environment

Economic activity in the U.S. and in Europe showed mixed signals in the
three-month period ended September 30, 2022 (third quarter 2022). According to
the U.S. Bureau of Economic Analysis (BEA), the initial estimate for third
quarter 2022 real gross domestic product (GDP) was 2.6%. This return to positive
GDP in third quarter 2022 followed two consecutive negative GDP quarters to
start 2022, with GDP contracting 1.6% in the first quarter of 2022 and
contracting 0.6% in the second quarter of 2022. Two straight quarters of GDP
contraction is commonly recognized as a sign of recession. At the end of
September 2022, the U.S. unemployment rate, seasonally adjusted, stood at 3.5%,
relatively unchanged from the end of June 2022 when it stood at 3.6%, and down
from a pandemic high of 14.7% in April 2020. According to the U.K.'s Office for
National Statistics (ONS), U.K. GDP fell by 0.3% in the three months through
August compared with the three months through May 2022, the latest data
available. More globally, the Organization for Economic Co-operation and
Development (OECD) estimated that GDP in the OECD area increased by 0.4% in the
second quarter of 2022 compared to the first quarter of 2022 (the latest data
available). The Company believes a more robust economy makes it less likely that
obligors whose obligations it guarantees will default.

According to the U.S. Bureau of Labor Statistics, the inflation rate in the U.S.
over the 12-month period ending September 2022, as measured by the consumer
price index (CPI) for all urban consumers, rose to 8.2% before seasonal
adjustment. The energy index increased 19.8% for the 12 months ending September,
a smaller increase than the 41.6% increase over the 12 months ended June 2022.
The food index increased 11.2% over the same period. According to the U.K.'s
ONS, the CPI including owner occupiers' housing costs (CPIH) was 8.8% in the 12
months ending September 2022, up from 8.6% in August 2022 and 8.2% in June 2022.
Consumer price inflation in the U.K. increases exposure for certain U.K
exposures with approximately $18 billion of net par outstanding as of September
30, 2022, and also increases 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. Consumer price inflation may
also impact the Company indirectly to the extent it makes it more difficult for
obligors to make their debt payments or causes interest rates to rise more
generally.

                                       86

--------------------------------------------------------------------------------

Table of Contents

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 30-year AAA MMD rate started third quarter 2022 at 3.18% but rose
72 basis points (bps) to end the quarter at 3.90%. The average rate for the
quarter was 3.22%, considerably above the 2.00% average for the first quarter of
2022 and 1.54% average for full year 2021. With the Federal Open Market
Committee (FOMC) acknowledging inflationary pressure building, the FOMC decided
at its meeting in March 2022 to start again raising the target range for the
federal funds rate, and has continued to do so since then. In addition, the FOMC
stated that it would reduce its holdings of treasury securities and agency debt
and agency mortgage-backed securities. At the conclusion of its September 20-21,
2022 meeting, the FOMC raised the federal funds target rate by 75 bps to 3% to
3.25%, stating that it anticipates that ongoing increases in the target range
will be appropriate. At the conclusion of its November 1-2, 2022 meeting, the
FOMC raised the federal funds target rate by 75 bps to 3.75% to 4%. The level
and direction of interest rates and credit spreads impact the Company in
numerous ways. For example, higher interest rates (when accompanied by wider
spreads) may make the Company's credit enhancement products more attractive in
the market and increase the level of premiums it can charge for those products,
and, over time, also increase the amount the Company can earn on its largely
fixed-income investment portfolio. Specifically, the level of interest rates and
spreads on the U.S. municipal bonds the Company enhances influences how high a
premium the Company can charge for its public finance financial guaranty
insurance product, with higher interest rates and spreads generally increasing
the premium rates the Company may charge. On the other hand, high interest rates
decrease the amount of excess spread available to support the distressed
residential mortgage-backed securities (RMBS) the Company insures and reduce the
market value of its largely fixed rate fixed-maturity securities in the
investment portfolio. Higher interest rates may also dampen municipal bond
issuance and negatively impact the finances of some of the obligors whose
payments the Company insures.

The difference, or credit spread, between the 30-year A-rated general obligation
relative to the 30-year AAA MMD averaged 56 bps in third quarter 2022, the same
as 56 bps in the second quarter of 2022, and 33 bps in full year 2021. BBB
credit spreads measured on the same basis averaged 95 bps in third quarter 2022,
up from 90 bps in the second quarter of 2022 and 70 bps in full year 2021.

U.S. home prices decreased in third quarter 2022. According to the National
Association of Realtors, the median existing-home price for all housing types in
September 2022 was $384,000, a 7.7% decrease. Existing home sales continued to
decline in September 2022, the eighth consecutive month, to a seasonally
adjusted rate of 4.71 million, down 23.8% from one year ago. The S&P CoreLogic
Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census
divisions, continued to decelerate in August, reporting a 13.0% annual gain in
August (the latest data available), down from 15.6% in the previous month. The
10-City Composite annual increase came in at 12.1%, down from 14.9% in the
previous month. The 20-City Composite posted a 13.1% year-over-year gain, down
from 16.0% in the previous month. Home prices in the U.S. impact the performance
of the Company's insured RMBS portfolio. Improved home prices generally result
in fewer losses or more reimbursements with respect to the Company's distressed
insured RMBS risks, and may impact the amount of losses or reimbursements it
projects for its distressed legacy RMBS insured portfolio.
Impact of COVID-19

The emergence and continuation of COVID-19 and reactions to it, including
various intermittent closures and capacity and travel restrictions, have had a
profound effect on the global economy and financial markets. The ultimate size,
depth, course and duration of the pandemic, and the effectiveness, acceptance,
and distribution of vaccines and therapeutics for it, remain unknown, and the
governmental and private responses to the pandemic continue to evolve. Due to
the nature of the Company's business, COVID-19 and its global impact, directly
and indirectly affected certain sectors in the insured portfolio.

Shortly after the pandemic reached the U.S. through early 2021, the Company's
surveillance department conducted supplemental periodic surveillance procedures
to monitor the impact on its insured portfolio of COVID-19 and governmental and
private responses to COVID-19, with emphasis on state and local governments and
entities that were already experiencing significant budget deficits and pension
funding and revenue shortfalls, as well as obligations supported by revenue
streams most impacted by various intermittent closures and capacity and travel
restrictions or an economic downturn. Given significant federal funding to state
and local governments in 2021 and the performance it observed, the Company's
surveillance department has reduced these supplemental procedures. However, the
Company it is still monitoring those sectors it identified as most at risk for
any developments related to COVID-19. The Company has paid only relatively small
insurance claims it believes are due at least in part to credit stress arising
specifically from COVID-19, and has already received reimbursement for most of
those claims.

                                       87

--------------------------------------------------------------------------------

Table of Contents

The Company began operating remotely in accordance with its business continuity
plan in March 2020 in response to the COVID-19 pandemic, instituting mandatory
remote work policies in its offices in Bermuda, U.S., U.K. and France. By the
end of February 2022, the Company had reopened all of its offices, choosing a
hybrid remote and office work model in response to employee feedback and as part
of its commitment to providing a safe and healthy workplace. Whether its
employees are working remotely or in a hybrid remote and office work model, the
Company continues to provide the services and communications it normally would.

Key Business Strategies

  The Company continually evaluates its business strategies. For example, with
the establishment of AssuredIM the Company has increased its focus on asset
management and alternative investments. Currently, the Company is pursuing the
following key business strategies in three areas: (i) insurance; (ii) asset
management and alternative investments; and (iii) capital management.

Insurance

The Company seeks to grow the insurance business through new business
production, acquisitions of remaining other monoline financial guaranty
companies that currently are in runoff and no longer actively writing new
business (legacy monoline insurers) or reinsurance of their insured portfolios,
and to continue to mitigate losses in its current insured portfolio.

Growth of the Insured Portfolio

  The Company seeks to grow its insurance portfolio through new business
production in each of its three markets: U.S. public finance, international
infrastructure and global structured finance. The Company believes high-profile
defaults by municipal obligors, such as Puerto Rico, Detroit, Michigan and
Stockton, California as well as events such as the COVID-19 pandemic have led to
increased awareness of the value of bond insurance and stimulated demand for the
product. The Company believes there will be continued demand for its insurance
in this market because, for those exposures that the Company guarantees, it
undertakes the tasks of credit selection, analysis, negotiation of terms,
surveillance and, if necessary, loss mitigation. The Company believes that its
insurance:

•encourages retail investors, who typically have fewer resources than the
Company for analyzing municipal bonds, to purchase such bonds;
•enables institutional investors to operate more efficiently; and
•allows smaller, less well-known issuers to gain market access on a more
cost-effective basis.

  The low interest rate environment and tight U.S. municipal credit spreads from
when the financial crisis began in 2008 through early 2020 dampened demand for
bond insurance compared to the levels before the financial crisis that began in
2008. More recently, uncertainty related to the COVID-19 pandemic and then
rising interest rates improved demand for financial guaranty insurance. The
Company believes that, if interest rates and credit spreads further increase in
2022, demand for bond insurance may improve.

  In certain segments of the global infrastructure and structured finance
markets the Company believes its financial guaranty product is competitive with
other financing options. For example, certain investors may receive advantageous
capital requirement treatment with the addition of the Company's guaranty. The
Company considers its involvement in both international infrastructure and
structured finance transactions to be beneficial because such transactions
diversify both the Company's business opportunities and its risk profile beyond
U.S. public finance. The timing of new business production in the international
infrastructure and structured finance sectors is influenced by typically long
lead times and therefore may vary from period to period.

                                       88

--------------------------------------------------------------------------------

  Table of Contents

      U.S. Municipal Market Data and Bond Insurance Penetration Rates (1)
                               Based on Sale Date
                                                                                                                     Year Ended
                                                        Nine Months 2022                 Nine Months 2021         December 31, 2021
                                                              (dollars in billions, except number of issues and percentages)
Par:
New municipal bonds issued                             $         292.2                  $        343.4           $       456.7
Total insured                                          $          22.9                  $         29.1           $        37.5
Insured by Assured Guaranty                            $          12.9                  $         17.4           $        22.6
Number of issues:
New municipal bonds issued                                       6,420                           9,125                  11,819
Total insured                                                    1,146                           1,714                   2,198
Insured by Assured Guaranty                                        529                             826                   1,076
Bond insurance market penetration based on:
Par                                                                7.8   %                         8.5   %                 8.2     %
Number of issues                                                  17.9   %                        18.8   %                18.6     %
Single A par sold                                                 29.9   %                        27.2   %                26.6     %
Single A transactions sold                                        58.8   %                        56.4   %                56.6     %
$25 million and under par sold                                    21.6   %                        21.6   %                21.3     %
$25 million and under transactions sold                           21.0   %                        21.9   %                21.7     %

____________________

(1)  Source: The amounts in the table are those reported by Thomson Reuters. The
table excludes Corporate-CUSIP transactions insured by Assured Guaranty, which
the Company also considers to be public finance business.

  The Company also considers opportunities to acquire financial guaranty
portfolios, whether by acquiring financial guarantors who are no longer actively
writing new business or their insured portfolios, generally through reinsurance.
These transactions enable the Company to improve its future earnings and deploy
excess capital.

  Loss Mitigation

In an effort to avoid, reduce or recover losses and potential losses in its
insurance portfolio, the Company employs a number of strategies.

  In the public finance area, the Company believes its experience and the
resources it is prepared to deploy, as well as its ability to provide bond
insurance or other contributions as part of a solution, result in more favorable
outcomes in distressed public finance situations than would be the case without
its participation. This has been illustrated by the Company's role in the
Detroit, Michigan and Stockton, California financial crises, and more recently
by the Company's role in negotiating various agreements in connection with the
restructuring of obligations of the Commonwealth of Puerto Rico and various
obligations of its related authorities and public corporations. The Company will
also, where appropriate, pursue litigation to enforce its rights. For example,
it initiated a number of legal actions to enforce its rights with respect to
obligations of the Commonwealth of Puerto Rico and various obligations of its
related authorities and public corporations.

After over five years of negotiations, 2022 has been a turning point for
resolving a substantial portion of the Company's Puerto Rico exposure in
accordance with four orders entered by the United States District Court of the
District of Puerto Rico (Federal District Court of Puerto Rico):

•On January 18, 2022, the Federal District Court of Puerto Rico, acting under
Title III of the Puerto Rico Oversight, Management and Economic Stability Act
(PROMESA), entered an order and judgment confirming the Modified Eighth Amended
Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico, the
Employees Retirement System of the Government of the Commonwealth of Puerto
Rico, and the Puerto Rico Public Buildings Authority (GO/PBA Plan). The GO/PBA
Plan restructured approximately $35 billion of debt (including the Puerto Rico
General Obligation (GO) and Public Buildings Authority (PBA) bonds insured by
the Company) and other claims against the government of Puerto Rico and certain
entities as well as $50 billion in pension obligations (none of the pension
obligations are insured by the Company), and the Company believes its terms are
consistent with the terms of the settlement embodied in a revised plan support
agreement (PSA) for GO and PBA entered into by AGM and AGC on
                                       89

--------------------------------------------------------------------------------

Table of Contents

February 22, 2021, with certain other stakeholders, the Commonwealth, and the
financial oversight and management board (the FOMB) (GO/PBA PSA).
•On January 20, 2022, the Federal District Court of Puerto Rico, acting under
Title VI of PROMESA, entered an order under Title VI of PROMESA (PRCCDA
Modification) modifying the debt of the Puerto Rico Convention Center District
Authority (PRCCDA).
•On January 20, 2022, the Federal District Court of Puerto Rico, acting under
Title VI of PROMESA, entered another order under Title VI of PROMESA (PRIFA
Modification) modifying certain debt of the Puerto Rico Infrastructure Financing
Authority (PRIFA).
•On October 12, 2022, the Federal District Court of Puerto Rico, acting under
Title III of PROMESA, entered an order and judgment confirming the amended plan
of adjustment for the Puerto Rico Highways and Transportation Authority (PRHTA)
filed by the FOMB with the Federal District Court of Puerto Rico on September 6,
2022 (HTA Plan). The HTA Plan restructures approximately $6.4 billion of debt
(including the PRHTA bonds insured by the Company), and the Company believes its
terms are consistent with the terms of the settlement embodied in the PRHTA PSA
entered into on May 5, 2021, by AGM and AGC and certain other stakeholders, the
Commonwealth, and the FOMB (the HTA PSA). The FOMB will set the effective date
of the HTA Plan (HTA Effective Date) and, as of November 7, 2022, the expected
HTA Effective Date had not yet been announced.

As a result of the consummation on March 15, 2022, of each of the GO/PBA Plan,
PRCCDA Modification and PRIFA Modification (together, the March Puerto Rico
Resolutions), including claim payments made by the Company under the March
Puerto Rico Resolutions, the Company's obligations under its insurance policies
covering debt of the PRCCDA and PRIFA were extinguished, and its insurance
exposure to Puerto Rico GO and PBA was greatly reduced. The Company expects
that, upon consummation of the HTA Plan, its exposure to PRHTA also will be
greatly reduced. In the nine-month period ended September 30, 2022 (nine months
2022), the Company has reduced its total Puerto Rico exposure, all rated
below-investment-grade (BIG), by $1.5 billion (from $3.6 billion as of December
31, 2021 to $2.1 billion as of September 30, 2022), with a further substantial
reduction likely upon implementation of the HTA Plan. The Company believes the
consummation of the March Puerto Rico Resolutions on March 15, 2022, and the
consummation of the HTA Plan that will occur on the HTA Effective Date, mark
significant milestones in its Puerto Rico loss mitigation efforts.

In connection with the consummation of the March Puerto Rico Resolutions and the
HTA PSA, the Company received substantial amounts of cash, new recovery bonds
and contingent value instruments (CVIs).

Under the GO/PBA Plan and in connection with its direct exposure the Company
received (including amounts received in connection with the second election
described in Item 1, Financial Statements, Note 3, Outstanding Exposure, but
excluding amounts received in connection with second-to-pay exposures):

•$530 million in cash, net of ceded reinsurance,
•$605 million of new recovery bonds (see Item 1, Financial Statements, Note 7,
Investments and Note 8, Financial Guaranty Variable Interest Entities and
Consolidated Investment Vehicles for additional information), which represents
the face value of current interest bonds and the maturity value of capital
appreciation bonds, net of ceded reinsurance, and
•$258 million of CVIs (see Item 1, Financial Statements, Note 7, Investments and
Note 8, Financial Guaranty Variable Interest Entities and Consolidated
Investment Vehicles for additional information), which represents the original
notional value, net of ceded reinsurance.

Under the PRCCDA Modification and the PRIFA Modification, on March 15, 2022, the
Company received an aggregate of $47 million in cash (net of ceded reinsurance)
and $98 million in notional amount of CVIs (net of ceded reinsurance).

During third quarter 2022, the Company received from the Commonwealth, pursuant
to the GO/PBA Plan and the terms of the HTA PSA, $147 million of cash and $672
million original notional of CVI. The Company has sold a portion of those CVIs.
On the HTA Effective Date, the Company also expects to receive additional
recoveries in the form of cash and Toll Bonds.

The Company has sold some of the new recovery bonds and CVIs it received in
connection with the March Puerto Rico Resolutions and the HTA PSA and may
continue to sell amounts it still retains, or expects to receive in connection
with the consummation of the HTA Plan, subject to market conditions. The fair
value of such securities held by the Company as of September 30, 2022, is
included in the lines "fixed-maturity securities - Puerto Rico,
available-for-sale" and "fixed-maturity securities - Puerto Rico, trading" in
the table "Investment Portfolio Carrying Value" of Item 1, Financial Statements,
Note 7, Investments.
                                       90

--------------------------------------------------------------------------------

Table of Contents

The Company continues to work to resolve its remaining unresolved defaulted
Puerto Rico exposure, Puerto Rico Electric Power Authority (PREPA). For
information about PREPA developments, see Item 1, Financial Statements, Note 3,
Outstanding Exposure. For more information about developments in Puerto Rico and
related recovery litigation being pursued by the Company, see Item 1, Financial
Statements, Note 3, Outstanding Exposure and the Insured Portfolio section
below.

The Company is and has for several years been working with the servicers of some
of the RMBS transactions it insures to encourage the servicers to provide
alternatives to distressed borrowers that will encourage them to continue making
payments on their loans to help improve the performance of the related RMBS.

The Company also purchases attractively priced obligations, including BIG
obligations, that it has insured and for which it has expected losses to be
paid, in order to mitigate the economic effect of insured losses (loss
mitigation securities). The fair value of loss mitigation securities as of
September 30,2022 (excluding the value of the Company's insurance) was $557
million, with a par of $805 million.

In some instances, the terms of the Company's policy give it the option to pay
principal on an accelerated basis on an obligation on which it has paid a claim,
thereby reducing the amount of guaranteed interest due in the future. The
Company has at times exercised this option, which uses cash but reduces
projected future losses. The Company may also facilitate the issuance of
refunding bonds, by either providing insurance on the refunding bonds or
purchasing refunding bonds, or both. Refunding bonds may provide the issuer with
payment relief.

Asset Management and Alternative Investments

  AssuredIM is a diversified asset manager that serves as investment adviser to
CLOs, opportunity and liquid strategy funds, as well as certain legacy hedge and
opportunity funds now subject to an orderly wind-down. As of September 30, 2022,
AssuredIM was a top 25 CLO manager by AUM, as published by Creditflux Ltd.
AssuredIM is actively pursuing opportunity strategies focused on healthcare and
asset-based lending and liquid strategies relating to municipal obligations.

Over time, the Company seeks to broaden and further diversify its Asset
Management segment leading to increased AUM and a fee-generating platform. The
Company intends to leverage the AssuredIM infrastructure and platform to grow
its Asset Management segment both organically and through strategic
combinations.

The Company monitors certain operating metrics that are common to the asset
management industry. These operating metrics include, but are not limited to,
funded AUM and unfunded capital commitments (together, AUM) and investment
advisory management and performance fees. The Company considers the
categorization of its AUM by product type to be a useful lens in monitoring the
Asset Management segment. AUM by product type assists in measuring the duration
of AUM for which the Asset Management segment has the potential to earn
management fees and performance fees. For a discussion of the AUM metric, see "-
Results of Operations by Segment - Asset Management Segment."

Additionally, the Company believes that AssuredIM provides the Company an
opportunity to deploy excess capital at attractive returns improving the
risk-adjusted return on a portion of the investment portfolio and potentially
increasing the amount of dividends certain of its insurance subsidiaries are
permitted to pay under applicable regulations. The Company allocated $750
million of capital to invest in funds managed by AssuredIM, plus $550 million
aggregate of investment assets of AGM, AGC and, until its merger with AGM on
April 1, 2021, Municipal Assurance Corp. (MAC), (collectively, the U.S.
Insurance Subsidiaries) to be managed by AssuredIM under an Investment
Management Agreement (IMA). The Company is using these allocations to: (i)
launch new products (CLOs, opportunity funds and liquid strategy funds) on the
AssuredIM platform; and (ii) enhance the returns of its own investment
portfolio.

Adding inception-to-date distributed gains to the original $750 million
allocation, the U.S. Insurance Subsidiaries may invest a total of up to $810
million in funds managed by AssuredIM (AssuredIM Funds) through their jointly
owned investment subsidiary, AG Asset Strategies LLC (AGAS). As of September 30,
2022, AGAS had committed $755 million to AssuredIM Funds, including $219 million
that has yet to be funded. This capital was committed to several funds, each
dedicated to a single strategy including CLOs, asset-based finance, healthcare
structured capital and municipal bonds.
Under the IMA with AssuredIM, AGM and AGC have together invested $250 million in
municipal obligation strategies and $300 million to CLO strategies. All of these
strategies are consistent with the investment strengths of AssuredIM and the
Company's plans to continue to grow its investment strategies.

                                       91

--------------------------------------------------------------------------------

Table of Contents

Capital Management

The Company has developed strategies to efficiently manage capital within the
Assured Guaranty group.

From 2013 through November 7, 2022, the Company has repurchased 140 million
common shares for approximately $4.6 billion, representing approximately 72% of
the total shares outstanding at the beginning of the repurchase program in 2013.
On August 3, 2022, the AGL Board of Directors (the Board) authorized the
repurchase of an additional $250 million of common shares. Under this and
previous authorizations, as of November 7, 2022, the Company was authorized to
purchase $261 million of its common shares. Shares may be repurchased from time
to time in the open market or in privately negotiated transactions. The timing,
form and amount of the share repurchases under the program are at the discretion
of management and will depend on a variety of factors, including funds available
at the parent company, other potential uses for such funds, market conditions,
the Company's capital position, legal requirements and other factors. The
repurchase program may be modified, extended or terminated by the Board at any
time and it does not have an expiration date. See Item 1, Financial Statements,
Note 14, Shareholders' Equity, for additional information about the Company's
repurchases of its common shares.

                          Summary of Share Repurchases
                                                                                                       Average price
                                                        Amount             Number of Shares              per share
                                                                   (in millions, except per share data)
2013 - 2021                                          $   4,158                 132.027               $        31.50
2022 (First Quarter)                                       155                   2.738                        56.62
2022 (Second Quarter)                                      151                   2.606                        58.03
2022 (Third Quarter)                                        97                   1.790                        53.77
2022 (through November 7)                                   42                   0.786                        53.99
Cumulative repurchases since the beginning of 2013   $   4,603                 139.947                        32.89



As of September 30, 2022, the estimated accretive effect of the cumulative
repurchases of common shares since the beginning of 2013 was approximately:
$33.62 per share in shareholders' equity attributable to AGL, $41.17 per share
in adjusted operating shareholders' equity, and $73.18 per share in adjusted
book value.

The Company considers the appropriate mix of debt and equity in its capital
structure. On May 26, 2021, the Company issued $500 million of 3.15% Senior
Notes, due in 2031 for net proceeds of $494 million. On July 9, 2021, a portion
of the proceeds from the issuance of the 3.15% Senior Notes was used to redeem
$200 million of AGMH debt as follows: all $100 million of AGMH's 6 7/8%
Quarterly Interest Bonds due in 2101, and $100 million of the $230 million of
AGMH's 6.25% Notes due in 2102. On August 20, 2021, the Company issued $400
million of 3.6% Senior Notes, due in 2051 for net proceeds of $395 million. On
September 27, 2021, all of the proceeds from the issuance of the 3.6% Senior
Notes were used to redeem $400 million of AGMH and AGUS debt as follows: all
$100 million of AGMH's 5.60% Notes due in 2103; the remaining $130 million of
AGMH 6.25% Notes due in 2102; and $170 million of the $500 million of AGUS 5%
Senior Notes due in 2024. Proceeds from the debt issuances that were not used to
redeem debt were used for general corporate purposes, including share
repurchases. See "- Liquidity and Capital Resources - AGL and its U.S. Holding
Companies" for the U.S. Holding Companies' long-term debt.

In 2021, as a result of these redemptions, the Company recognized a loss on
extinguishment of debt of approximately $175 million on a pre-tax basis ($138
million after-tax) which represents the difference between the amount paid to
redeem the debt and the carrying value of the debt. The carrying value of the
debt included the unamortized fair value adjustments that were recorded upon the
acquisition of AGMH in 2009.

Since the second quarter of 2017, AGUS has purchased $154 million in principal
of AGMH's outstanding Junior Subordinated Debentures. The Company may choose to
redeem or make additional purchases of this or other Company debt in the future.

                                       92

--------------------------------------------------------------------------------

Table of Contents

Municipal Assurance Corp. Merger

On April 1, 2021, MAC merged with and into AGM, with AGM as the surviving
company. Upon the merger all direct insurance policies issued by MAC became
direct insurance obligations of AGM. As a result, the Company wrote off the $16
million carrying value of MAC's insurance licenses in the first quarter of 2021.
This restructuring of the Company's U.S. Insurance Subsidiaries simplified the
organizational and capital structure, reduced costs, and increased the future
dividend capacity of the U.S. Insurance Subsidiaries.

Executive Summary

This executive summary of management's discussion and analysis highlights
selected information and may not contain all of the information that is
important to readers of this Quarterly Report. For a more detailed description
of events, trends and uncertainties, as well as the capital, liquidity, credit,
operational and market risks and the critical accounting policies and estimates
affecting the Company, this Quarterly Report should be read in its entirety and
in addition to the Company's 2021 Annual Report on Form 10-K.

The primary drivers of volatility in the Company's net income include: changes
in fair value of credit derivatives, FG VIEs, CIVs, and committed capital
securities (CCS), as well as loss and loss adjustment expense (LAE), foreign
exchange gains (losses), the level of refundings of insured obligations, changes
in the value of the Company's alternative investments, the effects of any large
settlements, commutations and loss mitigation strategies, among other factors.
Changes in the fair value of AssuredIM Funds affect the amount of management and
performance fees earned. Changes in laws and regulations, among other factors,
may also have a significant effect on reported net income or loss in a given
reporting period.

                                       93

--------------------------------------------------------------------------------

Table of Contents

Financial Performance of Assured Guaranty

                               Financial Results
                                                        Third Quarter                          Nine Months
                                                   2022               2021               2022               2021

GAAP

Net income (loss) attributable to AGL $ 11 $ 17

          $      30          $      126
Net income (loss) attributable to AGL per
diluted share                                  $    0.18          $    0.22          $    0.46          $     1.66
Weighted average diluted shares                     62.9               73.6               65.1                75.7

Non-GAAP

Adjusted operating income (loss) (1)           $     133          $      34          $     253          $      197
Adjusted operating income per diluted share    $    2.11          $    0.45          $    3.88          $     2.60
Weighted average diluted shares                     62.9               73.6               65.1                75.7

Gain (loss) related to FG VIE and CIV
consolidation included in adjusted operating
income                                         $       7          $      (4)         $       7          $        -
Gain (loss) related to FG VIE and CIV
consolidation included in adjusted operating
income per share                               $    0.12          $   

(0.06) $ 0.11 $ -

Components of total adjusted operating income
(loss)
Insurance segment                              $     159          $     214          $     347          $      445
Asset Management segment                              (3)                (7)                (3)                (16)
Corporate division                                   (30)              (169)               (98)               (232)
Other (2)                                              7                 (4)                 7                   -
Adjusted operating income (loss)               $     133          $      34 

$ 253 $ 197

Insurance Segment
Gross written premiums (GWP)                   $      94          $     106          $     229          $      277
Present value of new business production (PVP)
(1)                                                   95                 96                240                 263
Gross par written                                  3,846              8,561             15,012              20,170

Asset Management Segment
AUM
Inflows - third party                          $       1          $     843          $   1,362          $    2,082
Inflows - intercompany                               116                 73                270                 182



                                       94

--------------------------------------------------------------------------------

Table of Contents