| Outstanding Exposure | Outstanding Exposure The Company sells credit protection primarily in financial guaranty insurance form. Until 2009, the Company also sold credit protection by issuing policies that guaranteed payment obligations under credit derivatives, primarily credit default swaps (CDS). The Company’s contracts accounted for as credit derivatives are generally structured such that the circumstances giving rise to the Company’s obligation to make loss payments are similar to those for its financial guaranty insurance contracts. The Company has not entered into any new CDS in order to sell credit protection in the U.S. since the beginning of 2009, when regulatory guidelines were issued that limited the terms under which such protection could be sold. The capital and margin requirements applicable under the Dodd-Frank Wall Street Reform and Consumer Protection Act also contributed to the Company not entering into such new CDS in the U.S. since 2009. The Company has, however, acquired or reinsured portfolios since 2009 that include financial guaranty contracts in credit derivative form. The Company also writes specialty insurance and reinsurance that is consistent with its risk profile and benefits from its underwriting experience. The Company seeks to limit its exposure to losses by underwriting obligations that it views to be investment grade at inception, although on occasion it may underwrite new issuances that it views to be below-investment grade (BIG), typically as part of its loss mitigation strategy for existing troubled exposures. The Company also seeks to acquire portfolios of insurance from financial guarantors that are no longer writing new business by acquiring such companies, providing reinsurance on a portfolio of insurance or reassuming a portfolio of reinsurance it had previously ceded; in such instances, it evaluates the risk characteristics of the target portfolio, which may include some BIG exposures, as a whole in the context of the proposed transaction. The Company diversifies its insured portfolio across sector and geography and, in the structured finance portfolio, typically requires subordination or collateral to protect it from loss. Reinsurance may be used in order to reduce net exposure to certain insured transactions. Public finance obligations insured by the Company primarily consist 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 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, healthcare facilities and government office buildings. The Company also includes within public finance obligations 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, Financial Guaranty Variable Interest Entities and Consolidated Investment Vehicles. Unless otherwise specified, the outstanding par and debt service amounts presented in this note include outstanding exposures on these VIEs whether or not they are consolidated. The Company also provides specialty insurance and reinsurance on transactions without special purpose entities but with risk profiles similar to those of its structured finance exposures written in financial guaranty form. Significant Risk Management Activities The Portfolio Risk Management Committee, which includes members of senior management and senior risk and surveillance officers, is responsible for enterprise risk management for the Insurance segment and focuses on measuring and managing insurance credit, market and liquidity risk for the Company. This committee establishes company-wide credit policy for the Company’s direct and assumed insurance business. It implements specific insurance underwriting procedures and limits for the Company and allocates underwriting capacity among the Company’s insurance subsidiaries. All insurance transactions in new asset classes or new jurisdictions must be approved by this committee. The U.S., AG Re and AGRO risk management committees and AGUK’s and AGE’s (the European Insurance Subsidiaries) surveillance committees conduct in-depth reviews of the insured portfolios of the relevant subsidiaries, focusing on varying portions of the portfolio at each meeting. They review and may revise internal ratings assigned to the insured transactions and review sector reports, monthly product line surveillance reports and compliance reports. All transactions in the insured portfolio are assigned internal credit ratings by the relevant underwriting committee at inception, which credit ratings are updated by the relevant risk management or surveillance committee 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 of 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 generally reflect 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 classifies those portions of risks benefiting from reimbursement obligations collateralized by eligible assets held in trust in acceptable reimbursement structures as being the higher of ‘AA’ or their current internal rating. Unless otherwise noted, ratings disclosed herein on the Company’s insured portfolio reflect its internal ratings. 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 credit 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, although the Company may also review a rating in response to developments impacting a credit when a ratings review is not scheduled. 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 (Recovered), 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 the tax-equivalent yield of the relevant subsidiary’s investment portfolio 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. For financial statement measurement purposes, the Company uses risk-free rates, which are determined each quarter, to calculate the expected loss. More extensive monitoring and intervention are employed for all BIG surveillance categories, with internal credit ratings reviewed quarterly. For purposes of determining the appropriate surveillance category, 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 in the future pay claims on that transaction that will not be fully 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. Impact of COVID-19 Pandemic The coronavirus disease known as COVID-19 was declared a pandemic by the World Health Organization in early 2020 and it (including its variants) continues to spread throughout the world. Several vaccines and therapeutics have been developed and approved by governments, and distribution of vaccines and therapeutics is proceeding unevenly across the globe. The emergence of COVID-19 and reactions to it, including various closures and capacity and travel restrictions, have had a profound effect on the global economy and financial markets. While the COVID-19 pandemic has been impacting the global economy and the Company for almost two years, its ultimate size, depth, course and duration, 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. Consequently, and due to the nature of the Company’s business, all of the direct and indirect consequences of COVID-19 on the Company are not yet fully known to the Company, and still may not emerge for some time. For information about how the COVID-19 pandemic has impacted the Company’s loss projections, see Note 5, Expected Loss to be Paid (Recovered). From 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 closures and capacity and travel restrictions or an economic downturn. Given significant federal funding in 2021 and the performance it observed, the Company’s surveillance department has reduced these supplemental procedures, but is still monitoring those sectors it identified as most at risk for any developments related to COVID-19 that may impact the ability of issuers to make upcoming debt service payments. The Company’s internal ratings and loss projections reflect its supplemental COVID-19 surveillance activity. Through February 24, 2022, the Company has paid less than $12 million in insurance claims it believes are due at least in part to credit stress arising specifically from COVID-19. The Company has already received reimbursement for most of those claims. Financial Guaranty Exposure The Company measures its financial guaranty exposure in terms of: (i) gross and net par outstanding; and (ii) gross and net debt service. The Company typically guarantees the payment of debt service when due. Since most of these payments are due in the future, the Company generally uses gross and net par outstanding as a proxy for its financial guaranty exposure. Gross par outstanding generally represents the principal amount of the insured obligation at a point in time. Net par outstanding equals gross par outstanding net of any reinsurance. The Company includes in its par outstanding calculation the impact of any consumer price index inflator to the reporting date as well as, in the case of accreting (zero-coupon) obligations, accretion to the reporting date. Foreign denominated net par outstanding is translated at the spot rate at the end of the reporting period. The Company has, from time to time, purchased securities that it has insured, and for which it had 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, and instead includes such amounts in the investment portfolio, because the Company manages such securities as investments and not insurance exposure. As of December 31, 2021 and December 31, 2020, the Company excluded from net par outstanding $1.3 billion and $1.4 billion, respectively, attributable to loss mitigation securities. Gross debt service outstanding represents the sum of all estimated future debt service payments on the insured obligations, on an undiscounted basis. Net debt service outstanding equals gross debt service outstanding net of any reinsurance. Future debt service payments include the impact of any consumer price index inflator after the reporting date, as well as, in the case of accreting (zero-coupon) obligations, accretion after the reporting date. The Company calculates its debt service outstanding as follows: • for insured obligations that are not supported by homogeneous pools of assets (which category includes most of the Company’s public finance transactions), as the total estimated contractual future debt service due through maturity, regardless of whether the obligations may be called and regardless of whether, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, the Company believes the obligations will be repaid prior to contractual maturity; and • for insured obligations that are supported by homogeneous pools of assets that are contractually permitted to prepay principal (which category includes, for example, residential mortgage-backed securities (RMBS)), as the total estimated expected future debt service due on insured obligations through their respective expected terms, which includes the Company’s expectations as to whether the obligations may be called and, in the case of obligations where principal payments are due when an underlying asset makes a principal payment, when the Company expects principal payments to be made prior to contractual maturity. The calculation of debt service requires the use of estimates, which the Company updates periodically, including estimates and assumptions for the expected remaining term of insured obligations supported by homogeneous pools of assets, updated interest rates for floating and variable rate insured obligations, behavior of consumer price indices for obligations with consumer price index inflators, foreign exchange rates and other assumptions based on the characteristics of each insured obligation. Debt service is a measure of the estimated maximum potential exposure to insured obligations before considering the Company’s various legal rights to the underlying collateral and other remedies available to it under its financial guaranty contract. Actual debt service may differ from estimated debt service due to refundings, terminations, negotiated restructurings, prepayments, changes in interest rates on variable rate insured obligations, consumer price index behavior differing from that projected, changes in foreign exchange rates on non-U.S. dollar denominated insured obligations and other factors. Financial Guaranty Portfolio Debt Service and Par Outstanding As of December 31, 2021 As of December 31, 2020 Gross Net Gross Net (in millions) Debt Service Public finance $ 357,694 $ 357,314 $ 356,078 $ 355,649 Structured finance 10,076 10,046 10,614 10,584 Total financial guaranty $ 367,770 $ 367,360 $ 366,692 $ 366,233 Par Outstanding Public finance $ 227,507 $ 227,164 $ 225,013 $ 224,625 Structured finance 9,258 9,228 9,558 9,528 Total financial guaranty $ 236,765 $ 236,392 $ 234,571 $ 234,153 In addition to amounts shown in the table above, the Company had outstanding commitments to provide guaranties of $476 million of public finance gross par and $884 million of structured finance gross par as of December 31, 2021. These 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, 2021 Public Finance Public Finance Structured Finance Structured Finance Total Rating Net Par % Net Par % Net Par % Net Par % Net Par % (dollars in millions) AAA $ 272 0.2 % $ 2,217 4.5 % $ 806 9.6 % $ 493 57.7 % $ 3,788 1.6 % AA 16,372 9.2 4,205 8.4 4,760 56.8 22 2.6 25,359 10.7 A 94,459 53.3 10,659 21.3 813 9.7 160 18.7 106,091 44.9 BBB 60,744 34.3 32,264 64.6 611 7.3 179 21.0 93,798 39.7 BIG 5,372 3.0 600 1.2 1,384 16.6 — — 7,356 3.1 Total net par outstanding $ 177,219 100.0 % $ 49,945 100.0 % $ 8,374 100.0 % $ 854 100.0 % $ 236,392 100.0 % Financial Guaranty Portfolio by Internal Rating As of December 31, 2020 Public Finance Public Finance Structured Finance Structured Finance Total Rating Net Par % Net Par % Net Par % Net Par % Net Par % (dollars in millions) AAA $ 340 0.2 % $ 2,617 4.9 % $ 1,146 12.8 % $ 152 26.4 % $ 4,255 1.8 % AA 16,742 9.7 4,690 8.8 4,324 48.3 35 6.0 25,791 11.0 A 90,914 53.0 11,646 22.0 1,006 11.3 137 23.8 103,703 44.3 BBB 58,162 33.9 33,180 62.6 835 9.3 252 43.8 92,429 39.5 BIG 5,439 3.2 895 1.7 1,641 18.3 — — 7,975 3.4 Total net par outstanding $ 171,597 100.0 % $ 53,028 100.0 % $ 8,952 100.0 % $ 576 100.0 % $ 234,153 100.0 % The following tables present net par outstanding by sector for the financial guaranty portfolio. Financial Guaranty Portfolio Net Par Outstanding by Sector As of December 31, Sector 2021 2020 (in millions) Public finance: U.S. public finance: General obligation $ 72,896 $ 72,268 Tax backed 35,726 34,800 Municipal utilities 25,556 25,275 Transportation 17,241 15,179 Healthcare 9,588 8,691 Higher education 6,927 6,127 Infrastructure finance 6,329 5,843 Housing revenue 1,000 1,149 Investor-owned utilities 611 644 Renewable energy 193 204 Other public finance 1,152 1,417 Total U.S. public finance 177,219 171,597 Non-U.S public finance: Regulated utilities 18,814 19,370 Infrastructure finance 16,475 17,819 Sovereign and sub-sovereign 10,886 11,682 Renewable energy 2,398 2,708 Pooled infrastructure 1,372 1,449 Total non-U.S. public finance 49,945 53,028 Total public finance 227,164 224,625 Structured finance: U.S. structured finance: Life insurance transactions 3,431 2,581 RMBS 2,391 2,990 Financial products 770 820 Consumer receivables 583 768 Pooled corporate obligations 534 1,193 Other structured finance 665 600 Total U.S. structured finance 8,374 8,952 Non-U.S. structured finance: Pooled corporate obligations 351 — RMBS 325 357 Other structured finance 178 219 Total non-U.S structured finance 854 576 Total structured finance 9,228 9,528 Total net par outstanding $ 236,392 $ 234,153 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. Financial Guaranty Portfolio Expected Amortization of Net Par Outstanding As of December 31, 2021 Public Finance Structured Finance Total (in millions) 0 to 5 years $ 52,529 $ 3,001 $ 55,530 5 to 10 years 46,480 2,575 49,055 10 to 15 years 43,842 1,859 45,701 15 to 20 years 33,531 1,288 34,819 20 years and above 50,782 505 51,287 Total net par outstanding $ 227,164 $ 9,228 $ 236,392 Financial Guaranty Portfolio Components of BIG Net Par Outstanding As of December 31, 2021 BIG Net Par Outstanding Net Par BIG 1 BIG 2 BIG 3 Total BIG Outstanding (in millions) Public finance: U.S. public finance $ 1,765 $ 116 $ 3,491 $ 5,372 $ 177,219 Non-U.S. public finance 556 — 44 600 49,945 Public finance 2,321 116 3,535 5,972 227,164 Structured finance: U.S. RMBS 121 24 1,120 1,265 2,391 Other structured finance 1 41 77 119 6,837 Structured finance 122 65 1,197 1,384 9,228 Total $ 2,443 $ 181 $ 4,732 $ 7,356 $ 236,392 Financial Guaranty Portfolio Components of BIG Net Par Outstanding As of December 31, 2020 BIG Net Par Outstanding Net Par BIG 1 BIG 2 BIG 3 Total BIG Outstanding (in millions) Public finance: U.S. public finance $ 1,777 $ 57 $ 3,605 $ 5,439 $ 171,597 Non-U.S. public finance 846 — 49 895 53,028 Public finance 2,623 57 3,654 6,334 224,625 Structured finance: U.S. RMBS 200 26 1,254 1,480 2,990 Other structured finance 28 51 82 161 6,538 Structured finance 228 77 1,336 1,641 9,528 Total $ 2,851 $ 134 $ 4,990 $ 7,975 $ 234,153 Financial Guaranty Portfolio BIG Net Par Outstanding and Number of Risks As of December 31, 2021 Net Par Outstanding Number of Risks (2) Description Financial Guaranty Credit Total Financial Guaranty Credit Total (dollars in millions) BIG: Category 1 $ 2,429 $ 14 $ 2,443 117 2 119 Category 2 177 4 181 16 1 17 Category 3 4,687 45 4,732 129 8 137 Total BIG $ 7,293 $ 63 $ 7,356 262 11 273 Financial Guaranty Portfolio BIG Net Par Outstanding and Number of Risks As of December 31, 2020 Net Par Outstanding Number of Risks (2) Description Financial Credit Total Financial Credit Total (dollars in millions) BIG: Category 1 $ 2,781 $ 70 $ 2,851 125 6 131 Category 2 130 4 134 19 1 20 Category 3 4,944 46 4,990 126 7 133 Total BIG $ 7,855 $ 120 $ 7,975 270 14 284 _____________________ (1) Includes FG 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. Financial Guaranty Portfolio Geographic Distribution of Net Par Outstanding As of December 31, 2021 Number of Risks Net Par Outstanding Percent of Total Net Par Outstanding (dollars in millions) U.S.: U.S. Public finance: California 1,277 $ 35,322 14.9 % Texas 1,022 17,233 7.3 Pennsylvania 573 15,631 6.6 New York 625 15,155 6.4 Illinois 517 12,807 5.5 New Jersey 281 10,173 4.3 Florida 226 7,284 3.1 Michigan 260 5,261 2.2 Louisiana 137 5,203 2.2 Alabama 236 3,800 1.6 Other 1,951 49,350 20.9 Total U.S. public finance 7,105 177,219 75.0 U.S. Structured finance (multiple states) 387 8,374 3.5 Total U.S. 7,492 185,593 78.5 Non-U.S.: United Kingdom 285 38,044 16.1 France 7 2,718 1.1 Canada 7 2,107 0.9 Spain 8 1,762 0.8 Australia 7 1,667 0.7 Other 42 4,501 1.9 Total non-U.S. 356 50,799 21.5 Total 7,848 $ 236,392 100.0 % Exposure to Puerto Rico The Company had 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 $3.6 billion net par outstanding as of December 31, 2021, all of which was rated BIG. Beginning on January 1, 2016, a number of Puerto Rico exposures defaulted on bond payments, and the Company has now paid claims on all of its outstanding Puerto Rico exposures except the Municipal Finance Agency (MFA), the Puerto Rico Aqueduct and Sewer Authority (PRASA), and the University of Puerto Rico (U of PR). On June 30, 2016, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) was signed into law. PROMESA established a seven-member Financial Oversight and Management Board (the FOMB) with authority to require that balanced budgets and fiscal plans be adopted and implemented by Puerto Rico. 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). The Company negotiated with the FOMB and other stakeholders over approximately five years and entered into support agreements covering $3.4 billion, or 95% of the Company’s insured net par outstanding, of Puerto Rico exposures. All of the Company’s Puerto Rico exposures that were in payment default on December 31, 2021 are covered by the support agreements. The plan of adjustment contemplated by one of those support agreements, covering $1.2 billion, or 34% of the Company’s insured net par outstanding of Puerto Rico exposures, was confirmed on January 18, 2022. Then, on January 20, 2022, orders were entered finalizing the consensual modification contemplated by the support agreements for another $168 million outstanding as of December 31, 2021, of the Company’s insured Puerto Rico exposures. As a consequence, $1.4 billion net par outstanding, or 39% of the Company’s Puerto Rico net par outstanding as of December 31, 2021, now benefits from court orders for resolution, as further described below. Plan of Adjustment On January 18, 2022, 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) was entered by the United States District Court of the District of Puerto Rico acting under Title III of PROMESA (the Title III Court). The GO/PBA Plan restructures 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 and $50 billion in pension obligations (none of which is insured by the Company) consistent with the terms of the settlement embodied in a revised GO and PBA plan support agreement (PSA) entered into by AGM and AGC on February 22, 2021, with certain other stakeholders, the Commonwealth, and the FOMB (GO/PBA PSA). The FOMB will set the effective date for the GO/PBA Plan (GO/PBA Effective Date), and has announced that it expects the GO/PBA Effective Date to be on or before March 15, 2022. As of December 31, 2021, the Company had $1.2 billion of insured net par outstanding covered by the GO/PBA Plan: $1.1 billion insured net par outstanding of GO bonds and $122 million insured net par outstanding of PBA bonds. In general, the GO/PBA Plan provides for lower Commonwealth debt service payments per annum and provides for the distribution to creditors of new recovery bonds, cash, and additional consideration in the form of a contingent value instrument (CVI). This CVI is intended to provide creditors with additional returns tied to the outperformance of the Puerto Rico 5.5% Sales and Use Tax receipts against May 2020 certified fiscal plan projections, subject to annual and lifetime caps. The GO/PBA Plan provides for different recoveries based on the bonds’ issuance date, with GO and PBA bonds issued before 2011 (Vintage) receiving higher recoveries than GO and PBA bonds issued in 2011 and thereafter (except that, for purposes of the GO/PBA Plan, Series 2011A GO bonds would be treated as Vintage bonds). In August 2021, the Company exercised certain elections under the GO/PBA Plan that impact the timing of payments under its insurance policies. In accordance with the terms of the GO/PBA Plan, the payment of the principal of all GO bonds and PBA bonds insured by the Company will be accelerated against the Commonwealth and become due and payable as of the GO/PBA Effective Date. In accordance with the terms of its insurance policies, the Company has elected to pay 100% of the then outstanding principal amount of insured bonds plus accrued interest thereon to the date of payment (Acceleration Price) on the GO/PBA Effective Date to holders of insured securities with a net par outstanding of $1.1 billion as of December 31, 2021. With respect to the approximately $102 million net par outstanding of remaining insured securities covered by the GO/PBA Plan, insured bondholders were permitted to elect either: (1) to receive the Acceleration Price on the GO/PBA Effective Date; or (2) to receive custody receipts that represent an interest in the legacy insurance policy and cash, new recovery bonds and CVIs (in aggregate, Plan Consideration) that constitute distributions under the GO/PBA Plan. Subject to the terms of the final documentation that govern the terms of the custody receipts, distributions of Plan Consideration will be immediately passed through to insured bondholders under the custody receipts to the extent of any cash or proceeds of new securities held in the custodial trust and will be applied to make payments and/or prepayments of amounts due under the legacy insured bonds. To the extent that distributions of Plan Consideration are insufficient to pay principal and interest coming due on the legacy insured bonds after giving effect to the distributions described in the immediately preceding sentence, the Company’s insurance policy would continue to guarantee such payments in accordance with the terms of such insurance policy on the originally scheduled legacy bond interest and principal payment dates. Copies of the documents governing the terms of the custody receipts are expected to be available for review by insured bondholders in connection with the distribution of a supplement to the GO/PBA Plan. Further, in the case of insured bondholders who elected to receive custody receipts, the Company will retain the right to satisfy its obligations under the insurance policy with respect to the related legacy insured bonds at any time thereafter, with 30 days’ notice, by paying the applicable Acceleration Price. Retention by the Company of the right to satisfy its obligations under its insurance policy with respect to the relevant insured bonds by paying the Acceleration Price is authorized by the GO/PBA Plan and the Company’s rights under its related insurance policies and is expected to be reflected in the applicable custodial trust documentation. Support Agreements In addition to the GO/PBA PSA, the Company has entered into the support agreements described below (Support Agreements): • HTA/CCDA PSA: A PSA with certain other stakeholders, the Commonwealth, and the FOMB with respect to the Puerto Rico Highways and Transportation Authority (PRHTA) and the Puerto Rico Convention Center District Authority (PRCCDA) entered into by AGM and AGC on May 5, 2021. • PRIFA PSA: A PSA signed on July 27, 2021 by certain other stakeholders, the Commonwealth, and the FOMB with respect to the Puerto Rico Infrastructure Financing Authority (PRIFA) and joined by AGC on July 28, 2021. • PREPA RSA: A restructuring support agreement with the Puerto Rico Electric Power Authority (PREPA) and other stakeholders, including a group of uninsured PREPA bondholders, the Commonwealth and the FOMB with respect to PREPA, entered into by AGM and AGC on May 3, 2019. HTA/CCDA PSA. As of December 31, 2021, the Company had $1.4 billion of insured net par outstanding that is covered by the HTA/CCDA PSA: $799 million insured net par outstanding of PRHTA (transportation revenue) bonds; $457 million insured net par outstanding of PRHTA (highway revenue) bonds; and $152 million insured net par outstanding of PRCCDA 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 taxes on crude oil, unfinished oil and derivative products. The highway 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 PRCCDA bonds are secured by certain hotel tax revenues. The FOMB has filed a petition under Title III of PROMESA with respect to PRHTA. The HTA/CCDA PSA provides for payments to AGM and |
