| Outstanding Exposure | Outstanding Exposure The Company primarily writes financial guaranty contracts in insurance form. Until 2009, the Company also wrote some of its financial guaranty contacts in credit derivative form, and has acquired or reinsured portfolios both before and after 2009 that include financial guaranty contracts in credit derivative form. Whether written as an insurance contract or as a credit derivative, the Company considers these financial guaranty contracts. The Company also writes a relatively small amount of non-financial guaranty insurance. The Company seeks to limit its exposure to losses by underwriting obligations that it views as investment grade at inception, although, as part of its loss mitigation strategy for existing troubled exposures, it may underwrite new issuances that it views as BIG. The Company diversifies its insured portfolio across asset classes and, in the structured finance portfolio, requires rigorous subordination or collateralization requirements. Reinsurance may be used in order to reduce net exposure to certain insured transactions. Public finance obligations insured by the Company consist primarily of general obligation bonds supported by the taxing powers of U.S. state or municipal governmental authorities, as well as tax-supported bonds, revenue bonds and other obligations supported by covenants from state or municipal governmental authorities or other municipal obligors to impose and collect fees and charges for public services or specific infrastructure projects. The Company also includes within public finance obligations those obligations backed by the cash flow from leases or other revenues from projects serving substantial public purposes, including utilities, toll roads, health care facilities and government office buildings. The Company also includes within public finance similar obligations issued by territorial and non-U.S. sovereign and sub-sovereign issuers and governmental authorities. Structured finance obligations insured by the Company are generally issued by special purpose entities, including VIEs, and backed by pools of assets having an ascertainable cash flow or market value or other specialized financial obligations. Some of these VIEs are consolidated as described in Note 9, Consolidated Variable Interest Entities. Unless otherwise specified, the outstanding par and debt service amounts presented in this note include outstanding exposures on VIEs whether or not they are consolidated. Significant Risk Management Activities The Portfolio Risk Management Committee, which includes members of senior management and senior risk and surveillance officers, sets specific risk policies and limits and is responsible for enterprise risk management, establishing the Company's risk appetite, credit underwriting of new business, surveillance and work-out. All transactions in the insured portfolio are assigned internal credit ratings, which are updated based on changes in transaction credit quality. As part of the surveillance process, the Company monitors trends and changes in transaction credit quality, and recommends such remedial actions as may be necessary or appropriate. The Company also develops strategies to enforce its contractual rights and remedies and to mitigate its losses, engage in negotiation discussions with transaction participants and, when necessary, manage the Company's litigation proceedings. Surveillance Categories The Company segregates its insured portfolio into investment grade and BIG surveillance categories to facilitate the appropriate allocation of resources to monitoring and loss mitigation efforts and to aid in establishing the appropriate cycle for periodic review for each exposure. BIG exposures include all exposures with internal credit ratings below BBB-. The Company’s internal credit ratings are based on internal assessments of the likelihood of default and loss severity in the event of default. Internal credit ratings are expressed on a ratings scale similar to that used by the rating agencies and are generally reflective of an approach similar to that employed by the rating agencies, except that the Company's internal credit ratings focus on future performance rather than lifetime performance. The Company monitors its insured portfolio and refreshes its internal credit ratings on individual exposures in quarterly, semi-annual or annual cycles based on the Company’s view of the exposure’s quality, loss potential, volatility and sector. Ratings on exposures in sectors identified as under the most stress or with the most potential volatility are reviewed every quarter. For assumed exposures, the Company may use the ceding company’s credit ratings of transactions where it is impractical for it to assign its own rating. Exposures identified as BIG are subjected to further review to determine the probability of a loss. See Note 5, Expected Loss to be Paid, for additional information. Surveillance personnel then assign each BIG transaction to the appropriate BIG surveillance category based upon whether a future loss is expected and whether a claim has been paid. The Company uses a tax-equivalent yield, which reflects long-term trends in interest rates, to calculate the present value of projected payments and recoveries and determine whether a future loss is expected in order to assign the appropriate BIG surveillance category to a transaction. On the other hand, the Company uses risk-free rates, which are determined each quarter, to calculate the expected loss for financial statement measurement purposes. More extensive monitoring and intervention is employed for all BIG surveillance categories, with internal credit ratings reviewed quarterly. The Company expects “future losses” on a transaction when the Company believes there is at least a 50% chance that, on a present value basis, it will pay more claims on that transaction in the future than it will have reimbursed. The three BIG categories are: • BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected. • BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims, which are claims that the Company expects to be reimbursed within one year) have yet been paid. • BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid. Unless otherwise noted, ratings disclosed herein on the Company's insured portfolio reflect its internal ratings. The Company classifies those portions of risks benefiting from reimbursement obligations collateralized by eligible assets held in trust in acceptable reimbursement structures as the higher of 'AA' or their current internal rating. Financial Guaranty Exposure The Company purchases securities 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 Company excludes amounts attributable to loss mitigation securities from par and debt service outstanding, which amounts are included in the investment portfolio, because it manages such securities as investments and not insurance exposure. As of December 31, 2017 and December 31, 2016 , the Company excluded $2.0 billion and $2.1 billion , respectively, of net par attributable to loss mitigation securities (which are mostly BIG), and other loss mitigation strategies. The following table presents the gross and net debt service for financial guaranty contracts. Financial Guaranty Debt Service Outstanding Gross Debt Service Outstanding Net Debt Service Outstanding December 31, December 31, December 31, December 31, (in millions) Public finance $ 393,010 $ 425,849 $ 386,092 $ 409,447 Structured finance 15,482 29,151 15,026 28,088 Total financial guaranty $ 408,492 $ 455,000 $ 401,118 $ 437,535 In addition to amounts shown in the tables above, the Company had outstanding commitments to provide guaranties of $69 million as of the date of this filing. The commitments are contingent on the satisfaction of all conditions set forth in them and may expire unused or be canceled at the counterparty’s request. Therefore, the total commitment amount does not necessarily reflect actual future guaranteed amounts. Financial Guaranty Portfolio by Internal Rating As of December 31, 2017 Public Finance Public Finance Non-U.S. Structured Finance U.S Structured Finance Non-U.S Total Rating Net Par % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % (dollars in millions) AAA $ 877 0.4 % $ 2,541 5.9 % $ 1,655 14.7 % $ 319 22.5 % $ 5,392 2.1 % AA 30,016 14.3 205 0.5 3,915 34.9 76 5.4 34,212 12.9 A 118,620 56.7 13,936 32.5 1,630 14.5 210 14.9 134,396 50.7 BBB 52,739 25.2 24,509 57.1 763 6.8 703 49.7 78,714 29.7 BIG 7,140 3.4 1,731 4.0 3,261 29.1 106 7.5 12,238 4.6 Total net par outstanding $ 209,392 100.0 % $ 42,922 100.0 % $ 11,224 100.0 % $ 1,414 100.0 % $ 264,952 100.0 % Financial Guaranty Portfolio by Internal Rating As of December 31, 2016 Public Finance U.S. Public Finance Non-U.S. Structured Finance U.S Structured Finance Non-U.S Total Rating Category Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % (dollars in millions) AAA $ 2,066 0.8 % $ 2,221 8.4 % $ 9,757 44.2 % $ 1,447 47.0 % $ 15,491 5.2 % AA 46,420 19.0 170 0.6 5,773 26.2 127 4.1 52,490 17.7 A 133,829 54.7 6,270 23.8 1,589 7.2 456 14.8 142,144 48.0 BBB 55,103 22.5 16,378 62.1 879 4.0 759 24.6 73,119 24.7 BIG 7,380 3.0 1,342 5.1 4,059 18.4 293 9.5 13,074 4.4 Total net par outstanding $ 244,798 100.0 % $ 26,381 100.0 % $ 22,057 100.0 % $ 3,082 100.0 % $ 296,318 100.0 % Financial Guaranty Portfolio by Sector Gross Par Outstanding Net Par Outstanding Sector As of As of As of As of (in millions) Public finance: U.S.: General obligation $ 91,531 $ 110,167 $ 90,705 $ 107,717 Tax backed 44,783 51,325 44,350 49,931 Municipal utilities 32,584 38,442 32,357 37,603 Transportation 17,193 19,915 17,030 19,403 Healthcare 9,087 11,940 8,763 11,238 Higher education 8,210 10,114 8,195 10,085 Infrastructure finance 4,259 3,902 4,216 3,769 Housing revenue 1,336 1,593 1,319 1,559 Investor-owned utilities 523 697 523 697 Other public finance 1,935 2,810 1,934 2,796 Total public finance—U.S. 211,441 250,905 209,392 244,798 Non-U.S.: Infrastructure finance 18,916 11,818 18,234 10,731 Regulated utilities 17,691 11,395 16,689 9,263 Pooled infrastructure 1,561 1,621 1,561 1,513 Other public finance 6,692 5,653 6,438 4,874 Total public finance—non-U.S. 44,860 30,487 42,922 26,381 Total public finance 256,301 281,392 252,314 271,179 Structured finance: U.S.: Residential Mortgage-Backed Securities (RMBS) 4,864 5,933 4,818 5,637 Consumer receivables 1,591 1,707 1,590 1,652 Insurance securitizations 1,825 2,355 1,449 2,308 Financial products 1,418 1,540 1,418 1,540 Pooled corporate obligations 1,347 10,273 1,347 10,050 Commercial receivables 146 234 146 230 Other structured finance 461 689 456 640 Total structured finance—U.S. 11,652 22,731 11,224 22,057 Non-U.S.: RMBS 655 661 637 604 Commercial receivables 296 373 296 356 Pooled corporate obligations 157 1,716 157 1,535 Other structured finance 325 601 324 587 Total structured finance—non-U.S. 1,433 3,351 1,414 3,082 Total structured finance 13,085 26,082 12,638 25,139 Total net par outstanding $ 269,386 $ 307,474 $ 264,952 $ 296,318 Actual maturities of insured obligations could differ from contractual maturities because borrowers have the right to call or prepay certain obligations. The expected maturities of structured finance obligations are, in general, considerably shorter than the contractual maturities for such obligations. Expected Amortization of Net Par Outstanding As of December 31, 2017 Public Finance Structured Finance Total (in millions) 0 to 5 years $ 78,860 $ 6,106 $ 84,966 5 to 10 years 51,541 2,632 54,173 10 to 15 years 45,634 1,718 47,352 15 to 20 years 34,974 1,892 36,866 20 years and above 41,305 290 41,595 Total net par outstanding $ 252,314 $ 12,638 $ 264,952 Components of BIG Net Par Outstanding As of December 31, 2017 BIG Net Par Outstanding Net Par BIG 1 BIG 2 BIG 3 Total BIG Outstanding (in millions) Public finance: U.S. public finance $ 2,368 $ 663 $ 4,109 $ 7,140 $ 209,392 Non-U.S. public finance 1,455 276 — 1,731 42,922 Public finance 3,823 939 4,109 8,871 252,314 Structured finance: U.S. RMBS 374 304 2,083 2,761 4,818 Triple-X life insurance transactions — — 85 85 1,199 Trust preferred securities (TruPS) 161 — — 161 1,349 Other structured finance 170 118 72 360 5,272 Structured finance 705 422 2,240 3,367 12,638 Total $ 4,528 $ 1,361 $ 6,349 $ 12,238 $ 264,952 Components of BIG Net Par Outstanding As of December 31, 2016 BIG Net Par Outstanding Net Par BIG 1 BIG 2 BIG 3 Total BIG Outstanding (in millions) Public finance: U.S. public finance $ 2,402 $ 3,123 $ 1,855 $ 7,380 $ 244,798 Non-U.S. public finance 1,288 54 — 1,342 26,381 Public finance 3,690 3,177 1,855 8,722 271,179 Structured finance: U.S. RMBS 197 493 2,461 3,151 5,637 Triple-X life insurance transactions — — 126 126 2,057 TruPS 304 126 — 430 1,892 Other structured finance 304 263 78 645 15,553 Structured finance 805 882 2,665 4,352 25,139 Total $ 4,495 $ 4,059 $ 4,520 $ 13,074 $ 296,318 BIG Net Par Outstanding and Number of Risks As of December 31, 2017 Net Par Outstanding Number of Risks(2) Description Financial Guaranty Insurance(1) Credit Derivative Total Financial Guaranty Insurance(1) Credit Derivative Total (dollars in millions) BIG: Category 1 $ 4,301 $ 227 $ 4,528 139 7 146 Category 2 1,344 17 1,361 46 3 49 Category 3 6,255 94 6,349 150 9 159 Total BIG $ 11,900 $ 338 $ 12,238 335 19 354 BIG Net Par Outstanding and Number of Risks As of December 31, 2016 Net Par Outstanding Number of Risks(2) Description Financial Guaranty Insurance(1) Credit Derivative Total Financial Guaranty Insurance(1) Credit Derivative Total (dollars in millions) BIG: Category 1 $ 3,861 $ 634 $ 4,495 165 10 175 Category 2 3,857 202 4,059 79 6 85 Category 3 4,383 137 4,520 148 9 157 Total BIG $ 12,101 $ 973 $ 13,074 392 25 417 _____________________ (1) Includes net par outstanding for VIEs. (2) A risk represents the aggregate of the financial guaranty policies that share the same revenue source for purposes of making debt service payments. The Company seeks to maintain a diversified portfolio of insured obligations designed to spread its risk across a number of geographic areas. Geographic Distribution of Net Par Outstanding As of December 31, 2017 Number of Risks Net Par Outstanding Percent of Total Net Par Outstanding (dollars in millions) U.S.: U.S. Public finance: California 1,368 $ 36,507 13.8 % Texas 1,229 19,027 7.2 Pennsylvania 744 18,061 6.8 Illinois 702 17,044 6.4 New York 871 15,672 5.9 New Jersey 444 12,441 4.7 Florida 294 10,272 3.9 Michigan 439 6,353 2.4 Puerto Rico 18 4,968 1.9 Alabama 296 4,808 1.8 Other 3,112 64,239 24.3 Total U.S. public finance 9,517 209,392 79.1 U.S. Structured finance (multiple states) 512 11,224 4.2 Total U.S. 10,029 220,616 83.3 Non-U.S.: United Kingdom 126 30,062 11.3 France 10 3,167 1.2 Canada 9 2,690 1.0 Australia 12 2,309 0.9 Italy 9 1,497 0.6 Other 44 4,611 1.7 Total non-U.S. 210 44,336 16.7 Total 10,239 $ 264,952 100.0 % Exposure to Puerto Rico The Company has insured exposure to general obligation bonds of the Commonwealth of Puerto Rico (Puerto Rico or the Commonwealth) and various obligations of its related authorities and public corporations aggregating $5.0 billion net par as of December 31, 2017 , all of which is rated BIG. Puerto Rico experienced significant general fund budget deficits and a challenging economic environment since at least the financial crisis. Beginning on January 1, 2016, a number of Puerto Rico exposures have defaulted on bond payments, and the Company has now paid claims on all of its Puerto Rico exposures except for Puerto Rico Aqueduct and Sewer Authority (PRASA), Municipal Finance Agency (MFA) and University of Puerto Rico (U of PR). On November 30, 2015 and December 8, 2015, the former governor of Puerto Rico (the Former Governor) issued executive orders (Clawback Orders) directing the Puerto Rico Department of Treasury and the Puerto Rico Tourism Company to "claw back" certain taxes pledged to secure the payment of bonds issued by the Puerto Rico Highways and Transportation Authority (PRHTA), Puerto Rico Infrastructure Financing Authority (PRIFA), and Puerto Rico Convention Center District Authority (PRCCDA). The Puerto Rico exposures insured by the Company subject to clawback are shown in the table “Puerto Rico Net Par Outstanding” below. On June 30, 2016, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) was signed into law by the President of the United States. PROMESA established a seven-member federal financial oversight board (Oversight Board) with authority to require that balanced budgets and fiscal plans be adopted and implemented by Puerto Rico. PROMESA provides a legal framework under which the debt of the Commonwealth and its related authorities and public corporations may be voluntarily restructured, and grants the Oversight Board the sole authority to file restructuring petitions in a federal court to restructure the debt of the Commonwealth and its related authorities and public corporations if voluntary negotiations fail, provided that any such restructuring must be in accordance with an Oversight Board approved fiscal plan that respects the liens and priorities provided under Puerto Rico law. In May and July 2017 the Oversight Board filed petitions under Title III of PROMESA with the Federal District Court of Puerto Rico for the Commonwealth, the Puerto Rico Sales Tax Financing Corporation (COFINA), PRHTA, and Puerto Rico Electric Power Authority (PREPA). Title III of PROMESA provides for a process analogous to a voluntary bankruptcy process under chapter 9 of the United States Bankruptcy Code (Bankruptcy Code). Judge Laura Taylor Swain of the Southern District of New York was selected by Chief Justice John Roberts of the United States Supreme Court to preside over any legal proceedings under PROMESA. Judge Swain has selected a team of five federal judges to act as mediators for certain issues and disputes. On September 20, 2017, Hurricane Maria made landfall in Puerto Rico as a Category 4 hurricane on the Saffir-Simpson scale, causing loss of life and widespread devastation in the Commonwealth. Damage to the Commonwealth’s infrastructure, including the power grid, water system and transportation system, was extensive, and rebuilding and economic recovery are expected to take years. While the federal government is expected to provide substantial resources for relief and rebuilding -- which is expected to help economic activity and address the Commonwealth’s infrastructure needs in the intermediate and longer term -- economic activity in general and tourism in particular, as well as tax collections, have declined in the aftermath of the storm, and out migration to the mainland also has increased. In December 2017 the Tax Act was enacted. Many of the provisions under the new law are geared toward increasing production in the U.S. and discouraging companies from having operations or intangibles off-shore. Since Puerto Rico is considered a foreign territory under the U.S. tax system, it is possible the new law may have adverse consequences to Puerto Rico’s economy. However, the Company is unable to predict the full impact of the new law on Puerto Rico. On January 24, 2018, Puerto Rico released new fiscal plans for the Commonwealth, PRASA and PREPA. In response to comments from the Oversight Board and the enactment of a significant federal disaster relief package by the U.S. Congress, Puerto Rico released a further revised Commonwealth fiscal plan on February 12, 2018. The further revised Commonwealth fiscal plan indicates a primary budget surplus of $2.8 billion that would be available for debt service over the six -year forecast period (as compared to contractual debt service of approximately $17.5 billion over the same period). The PREPA fiscal plan is silent as to the treatment of legacy debt and the current governor of Puerto Rico (the Governor) announced an intention to privatize PREPA. The PRASA fiscal plan projects cash flows available for debt service to equal approximately 47% of aggregate debt service during the five -year projection period, based on projection assumptions (including receipt of certain federal funding). The Company believes that a number of the actions taken by the Commonwealth, the Oversight Board and others with respect to obligations the Company insures are illegal or unconstitutional or both, and has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to these matters. See “Puerto Rico Recovery Litigation” below. Litigation and mediation related to the Commonwealth’s debt have been delayed by Hurricane Maria. The final form and timing of responses to Puerto Rico’s financial distress and the devastation of Hurricane Maria eventually taken by the federal government or implemented under the auspices of PROMESA and the Oversight Board or otherwise, and the final impact, after resolution of legal challenges, of any such responses on obligations insured by the Company, are uncertain. The Company groups its Puerto Rico exposure into three categories: • Constitutionally Guaranteed. The Company includes in this category public debt benefiting from Article VI of the Constitution of the Commonwealth, which expressly provides that interest and principal payments on the public debt are to be paid before other disbursements are made. • Public Corporations – Certain Revenues Potentially Subject to Clawback. The Company includes in this category the debt of public corporations for which applicable law permits the Commonwealth to claw back, subject to certain conditions and for the payment of public debt, at least a portion of the revenues supporting the bonds the Company insures. As a constitutional condition to clawback, available Commonwealth revenues for any fiscal year must be insufficient to pay Commonwealth debt service before the payment of any appropriations for that year. The Company believes that this condition has not been satisfied to date, and accordingly that the Commonwealth has not to date been entitled to claw back revenues supporting debt insured by the Company. Prior to the enactment of PROMESA, the Company sued various Puerto Rico governmental officials in the United States District Court, District of Puerto Rico asserting that Puerto Rico's attempt to "claw back" pledged taxes is unconstitutional, and demanding declaratory and injunctive relief. See "Puerto Rico Recovery Litigation" below. • Other Public Corporations. The Company includes in this category the debt of public corporations that are supported by revenues it does not believe are subject to clawback. Constitutionally Guaranteed General Obligation. As of December 31, 2017 , the Company had $1,419 million insured net par outstanding of the general obligations of Puerto Rico, which are supported by the good faith, credit and taxing power of the Commonwealth. Despite the requirements of Article VI of its Constitution, the Commonwealth defaulted on the debt service payment due on July 1, 2016, and the Company has been making claim payments on these bonds since that date. As noted above, the Oversight Board filed a petition under Title III of PROMESA with respect to the Commonwealth. Also as noted above, on February 12, 2018, Puerto Rico released a further revised Commonwealth fiscal plan indicates a primary budget surplus of $2.8 billion that would be available for debt service over the six -year forecast period (as compared to contractual debt service of approximately $17.5 billion over the same period). The Company does not believe the Commonwealth’s fiscal plan in its current form complies with certain mandatory requirements of PROMESA. Puerto Rico Public Buildings Authority (PBA). As of December 31, 2017 , the Company had $141 million insured net par outstanding of PBA bonds, which are supported by a pledge of the rents due under leases of government facilities to departments, agencies, instrumentalities and municipalities of the Commonwealth, and that benefit from a Commonwealth guaranty supported by a pledge of the Commonwealth’s good faith, credit and taxing power. Despite the requirements of Article VI of its Constitution, the PBA defaulted on most of the debt service payment due on July 1, 2016, and the Company has been making claim payments on these bonds since then. Public Corporations - Certain Revenues Potentially Subject to Clawback PRHTA. As of December 31, 2017 , the Company had $882 million insured net par outstanding of PRHTA (transportation revenue) bonds and $495 million insured net par of PRHTA (highways revenue) bonds. The transportation revenue bonds are secured by a subordinate gross lien on gasoline and gas oil and diesel oil taxes, motor vehicle license fees and certain tolls, plus a first lien on up to $120 million annually of taxes on crude oil, unfinished oil and derivative products. The highways revenue bonds are secured by a gross lien on gasoline and gas oil and diesel oil taxes, motor vehicle license fees and certain tolls. The non-toll revenues consisting of excise taxes and fees collected by the Commonwealth on behalf of PRHTA and its bondholders that are statutorily allocated to PRHTA and its bondholders are potentially subject to clawback. Despite the presence of funds in relevant debt service accounts that the Company believes should have been employed to fund debt service, PRHTA defaulted on the full July 1, 2017 insured debt service payment, and the Company has been making claim payments on these bonds since that date. PRCCDA. As of December 31, 2017 , the Company had $152 million insured net par outstanding of PRCCDA bonds, which are secured by certain hotel tax revenues. These revenues are sensitive to the level of economic activity in the area and are potentially subject to clawback. There were sufficient funds in the PRCCDA bond accounts to make only partial payments on the July 1, 2017 PRCCDA bond payments guaranteed by the Company, and the Company has been making claim payments on these bonds since that date. PRIFA. As of December 31, 2017 , the Company had $18 million insured net par outstanding of PRIFA bonds, which are secured primarily by the return to Puerto Rico of federal excise taxes paid on rum. These revenues are potentially subject to the clawback. The Company has been making claim payments in the PRIFA bonds since January 2016. Other Public Corporations PREPA. As of December 31, 2017 , the Company had $853 million insured net par outstanding of PREPA obligations, which are secured by a lien on the revenues of the electric system. On December 24, 2015, AGM and AGC entered into a Restructuring Support Agreement (RSA) with PREPA, an ad hoc group of uninsured bondholders and a group of fuel-line lenders that subject to certain conditions, would have resulted in, among other things, modernization of the utility and a restructuring of current debt. The Oversight Board did not certify the RSA under Title VI of PROMESA as the Company believes was required by PROMESA, but rather, on July 2, 2017, commenced proceedings for PREPA under Title III of PROMESA. The Company has been making claim payments on these bonds since July 1, 2017. As noted above, on January 24, 2018, PREPA released a new fiscal plan that is silent with respect to the treatment of its legacy debt, and the Governor announced an intention to privatize PREPA. The Company believes that a number of the actions taken by the Commonwealth, the Oversight Board and others with respect to the PREPA obligations it insures and the RSA are illegal or unconstitutional or both, and has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to these matters. See “Puerto Rico Recovery Litigation” below. PRASA. As of December 31, 2017 , the Company had $373 million of insured net par outstanding to PRASA bonds, which are secured by a lien on the gross revenues of the water and sewer system. On September 15, 2015, PRASA entered into a settlement with the U.S.Department of Justice and the U.S. Environmental Protection Agency that requires it to spend $1.6 billion to upgrade and improve its sewer system island-wide. The PRASA bond accounts contained sufficient funds to make the PRASA bond payments due through the date of this filing that were guaranteed by the Company, and those payments were made in full. As noted above, on January 24, 2018, PRASA released a new fiscal plan for PRASA that projects cash flows available for debt service to equal approximately 47% of aggregate debt service during the five -year projection period, based on projection assumptions (including receipt of certain federal funding). MFA. As of December 31, 2017 , the Company had $360 million net par outstanding of bonds issued by MFA secured by a lien on local property tax revenues. The MFA bond accounts contained sufficient funds to make the MFA bond payments due through the date of this filing that were guaranteed by the Company, and those payments were made in full. COFINA. As of December 31, 2017 , the Company had $272 million insured net par outstanding of junior COFINA bonds, which are secured primarily by a second lien on certain sales and use taxes. As noted above, the Oversight Board filed a petition on behalf of the Commonwealth under Title III of PROMESA. COFINA bond debt service payments were not made on August 1, 2017, and the Company made its first claim payments on these bonds. The Company has continued to make claim payments on these bonds. U of PR. As of December 31, 2017 , the Company had $1 million insured net par outstanding of U of PR bonds, which are general obligations of the university and are secured by a subordinate lien on the proceeds, profits and other income of the University, subject to a senior pledge and lien for the benefit of outstanding university system revenue bonds. As of the date of this filing, all debt service payments on U of PR bonds insured by the Company have been made. Puerto Rico Recovery Litigation The Company believes that a number of the actions taken by the Commonwealth, the Oversight Board and others with respect to obligations it insures are illegal or unconstitutional or both, and has taken legal action, and may take additional legal action in the future, to enforce its rights with respect to these matters. On January 7, 2016, AGM, AGC and Ambac Assurance Corporation (Ambac) commenced an action for declaratory judgment and injunctive relief in the U.S. District Court for the District of Puerto Rico (Federal District Court in Puerto Rico) to invalidate the executive orders issued by the Former Governor on November 30, 2015 and December 8, 2015 directing that the Secretary of the Treasury of the Commonwealth of Puerto Rico and the Puerto Rico Tourism Company claw back certain taxes and revenues pledged to secure the payment of bonds issued by the PRHTA, the PRCCDA and the PRIFA. The Commonwealth defendants filed a motion to dismiss the action for lack of subject matter jurisdiction, which the Court denied on October 4, 2016. On October 14, 2016, the Commonwealth defendants filed a notice of PROMESA automatic stay. While the PROMESA automatic stay expired on May 1, 2017, on May 17, 2017, the Court stayed the action under Title III of PROMESA. On May 16, 2017, The Bank of New York Mellon, as trustee for the bonds issued by COFINA, filed an adversary complaint for interpleader and declaratory relief with the Federal District Court in Puerto Rico to resolve competing and conflicting demands made by various groups of COFINA bondholders, insurers of certain COFINA Bonds and COFINA, regarding funds held by the trustee for certain COFINA bond debt service payments scheduled to occur on and after June 1, 2017. On May 19, 2017, an order to show cause was entered permitting AGC and AGM to intervene in this matter. While AGM has insured COFINA Bonds, AGC has not. On June 3, 2017, AGC and AGM filed an adversary complaint in Federal District Court in Puerto Rico seeking (i) a judgment declaring that the application of pledged special revenues to the payment of the PRHTA Bonds is not subject to the PROMESA Title III au |
