The Company provides financial guaranties with respect to debt obligations of special purpose entities, including VIEs, but does not act as the servicer or collateral manager for any guaranteed VIE obligations. The transaction structure generally provides certain financial protections to the Company that can take several forms, the most common of which are overcollateralization, first loss protection (or subordination) and excess spread. In the case of overcollateralization (i.e., the principal amount of the securitized assets exceeds the principal amount of the structured finance obligations), the transaction structure allows defaults of the securitized assets before a default is experienced on the structured finance obligation guaranteed by the Company. In the case of first loss, the Company’s financial guaranty insurance policy only covers a senior layer of losses experienced by multiple obligations issued by the VIEs. The first loss exposure with respect to the assets is either retained by the seller or sold off in the form of equity or mezzanine debt to other investors. In the case of excess spread, the financial assets contributed to VIEs generate interest income that is in excess of the interest payments on the debt issued by the VIE. Such excess spread is typically distributed through the transaction’s cash flow waterfall and may be used to create additional credit enhancement, applied to redeem debt issued by the VIE (thereby, creating additional overcollateralization) or distributed to equity or other investors in the transaction.

The Company is not primarily liable for the debt obligations issued by the VIEs it insures and would only be required to make payments on insured debt obligations in the event that the issuer defaults on any principal or interest due and only for the amount of the shortfall. The Company’s creditors do not have any rights with regard to the collateral supporting the insured debt issued by the VIEs. Proceeds from sales, maturities, prepayments and interest from the underlying collateral in the VIEs may only be used to pay debt service on the respective VIEs’ liabilities.

As per the terms of its financial guaranty contracts insuring the debt obligations of a VIE, the Company obtains certain protective rights that give it additional controls over the VIE. These protective rights are triggered by the occurrence of certain events, such as failure to be in compliance with a covenant due to poor deal performance or a deterioration in a servicer’s or collateral manager’s financial condition. Typically, at deal inception, the Company is not deemed to control the VIEs whose debt it insures; however, once a trigger event occurs, the Company’s control of the VIE typically increases.

With respect to the debt obligations of VIEs that it insures, the Company continuously evaluates its power to direct the activities that most significantly impact the VIE’s economic performance and the circumstances where it is obligated to absorb VIE losses or is entitled to receive benefits that could potentially be significant to the VIE. Under GAAP, the Company is typically deemed to be the control party for a VIE when its protective rights give it the power to both terminate and replace the transaction’s servicer or collateral manager, which are characteristics specific to the Company’s financial guaranty contracts. If the protective rights that could make the Company the control party have not been triggered, then the VIE is not consolidated. If the Company is deemed to no longer have those protective rights, the VIE is deconsolidated.

If the Company consolidates a VIE whose debt it insures as a result of its consolidation analysis, the Company refers to such consolidated VIE as an FG VIE. The FG VIEs’ liabilities that are insured by the Company are considered to be with recourse, because the Company guarantees the payment of principal and interest regardless of the performance of the related FG VIEs’ assets. The FG VIEs’ liabilities that are not insured by the Company are considered to be without recourse, because the payment of principal and interest of these liabilities is wholly dependent on the performance of the FG VIEs’ assets.

The Company elected the fair value option (FVO) for all assets and liabilities of its consolidated FG VIEs, except for one FG VIE consolidated during the fourth quarter of 2025. Upon consolidation, the assets and liabilities of this VIE were recorded pursuant to the guidance in ASC 805, Business Combinations, which specifies that the VIE’s assets and liabilities are recorded at fair value except for a contract asset which is recognized and measured pursuant to ASC 606, Revenue from Contracts with Customers. Upon initial adoption of the accounting guidance for VIEs in 2010, the Company elected to fair value its FG VIEs’ assets and liabilities as the carrying amount transition method was not practical. To allow for consistency in the accounting for the assets and liabilities of its consolidated FG VIEs, the Company has elected the FVO for FG VIEs consolidated after the initial adoption. The change in fair value of FG VIEs’ assets and liabilities where the FVO was elected is reported in “gains (losses) on financial guaranty variable interest entities” in the condensed consolidated statements of operations, except for the change in fair value attributable to change in instrument-specific credit risk (ISCR) on FG VIEs’ liabilities for which the FVO was elected, which is reported in “other comprehensive income (loss).” Interest income and interest expense are derived from the trustee reports and also included in “gains (losses) on financial guaranty variable interest entities.”

Net fair value gains and losses on FG VIEs are expected to reverse to zero by the maturity of the FG VIEs’ debt, except for net premiums received and net claims paid by the Company under its FG insurance contracts. The Company’s estimate of expected loss to be paid (recovered) for FG VIEs is included in Note 5. Expected Loss to be Paid (Recovered).


	As of
	March 31, 2026		December 31, 2025
	(in millions)
FG VIEs’ assets:
U.S. RMBS (1)	$	137	$	142
Other (includes $30 and $30 at fair value) (2)	64		70
Total FG VIEs’ assets	$	201	$	212
FG VIEs’ liabilities with recourse:
U.S. RMBS (1)	$	143	$	147
Other (includes $– and $35 at fair value)	35		35
Total FG VIEs’ liabilities with recourse	$	178	$	182
FG VIEs’ liabilities without recourse:
U.S. RMBS (1)	$	9	$	9
Other (includes $– and $6 at fair value)	7		7
Total FG VIEs’ liabilities without recourse	$	16	$	16

(2) Includes a contract asset related to a services agreement of approximately $34 million and $40 million as of March 31, 2026 and December 31, 2025, respectively, accounted for in accordance with ASC 606, Revenue from Contracts with Customers, as well as debt and equity investments, and cash and cash equivalents.

The inception-to-date change in fair value of the FG VIEs’ liabilities with recourse measured at fair value under the FVO attributable to the ISCR is calculated by holding all current period assumptions constant for each security and isolating the effect of the change in the Company’s CDS spread from the most recent date of consolidation to the current period. In general, if the Company’s CDS spread tightens, more value will be assigned to the Company’s credit; however, if the Company’s CDS spread widens, less value is assigned to the Company’s credit.


	As of
	March 31, 2026		December 31, 2025
	(in millions)
Excess of unpaid principal over fair value of:
FG VIEs’ assets	$	253	$	252
FG VIEs’ liabilities with recourse	32		31
FG VIEs’ liabilities without recourse	15		15
Unpaid principal balance for FG VIEs’ assets that were 90 days or more past due	19		20
Unpaid principal for FG VIEs’ liabilities with recourse (1)	175		178

CIVs consist of certain Sound Point funds for which the Company is the primary beneficiary or has a controlling interest. The Company consolidates investment vehicles that are VIEs when it is deemed to be the primary beneficiary based on its power to direct the most significant activities of each VIE and its level of economic interest in the entities.

The assets and liabilities of the Company’s CIVs are held within separate legal entities. The assets of the CIVs are not available to creditors of the Company, other than creditors of the applicable CIVs. In addition, creditors of the CIVs have no recourse against the assets of the Company, other than the assets of such applicable CIVs. Liquidity available at the Company’s

During first quarter 2026, the Company deconsolidated a CIV related to its investments with Sound Point affiliated entities and recognized a gain on deconsolidation of $2 million, which was reported in “fair value gains (losses) on consolidated investment vehicles.” As of March 31, 2026, the Company did not consolidate any CIVs. As of December 31, 2025, the Company consolidated one CIV with assets of $175 million.

The Company performs a consolidation analysis of any entities established in its annuity reinsurance business. The assets related to the PRT block of business are held in a sub-fund of an Irish collective asset-management vehicle which meets the definition of a VIE (the PRT VIE). The Company has determined that it is the PRT VIE’s primary beneficiary and, therefore, consolidates the entity in its condensed consolidated financial statements. In instances where the Company consolidates a VIE that was established as part of an assumed annuity reinsurance contract, the Company classifies the assets of that VIE in the financial statement line items that most accurately reflect their nature as opposed to a one-line-item presentation for the VIE’s assets. As of March 31, 2026, the assets of the PRT VIE consisted of available-for-sale fixed-maturity securities of $574 million, short-term investments of $4 million, accrued interest of $9 million reported in “other assets,” a net derivative liability of $3 million and cash of $10 million.

As described in Note 4. Outstanding Exposure, the Company monitors all policies in the insured portfolio. Of the approximately 16 thousand policies monitored as of March 31, 2026, approximately 15 thousand policies are not within the scope of FASB ASC 810, Consolidation, because these financial guaranties relate to the debt obligations of governmental organizations or financing entities established by a governmental organization. The majority of the remaining policies involve transactions where the Company is not deemed to currently have control over the FG VIEs’ most significant activities. As of March 31, 2026 and December 31, 2025, the Company identified 54 and 53 policies, respectively, that contain provisions and experienced events that may trigger consolidation.