Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes Overview AGL is a tax resident in the U.K. although it remains a Bermuda-based company and its administrative and head office functions are carried on in Bermuda. AGL’s subsidiaries are subject to income taxes imposed by the local tax authorities in the jurisdictions in which they operate and file applicable tax returns. In addition, AGRO, a Bermuda domiciled company, has elected under Internal Revenue Code Section 953(d) to be taxed as a U.S. domestic corporation. Assured Life Re, another Bermuda-domiciled company, plans to elect under Internal Revenue Code Section 953(d) to be taxed as a U.S. domestic corporation beginning with the 2026 tax year. As a result of this election, the Company accrues and records U.S. federal income taxes related to Assured Life Re starting in first quarter 2026. In July 2023, the U.K. government passed legislation to implement the Organization for Economic Co-Operation and Development’s Base Erosion and Profit Shifting Pillar Two income inclusion rule. This includes a multinational top-up tax which applies to large multinational corporations for accounting periods beginning on or after December 31, 2023. This applies to AGL and its subsidiaries, requiring a minimum effective rate of 15% in all jurisdictions in which they operate. On December 27, 2023, the Government of Bermuda enacted a corporate income tax at the rate of 15% which applies to the Bermuda Subsidiaries (collectively, AG Re, AGRO, Assured Life Re and Cedar Personnel Ltd.) for accounting periods starting on or after January 1, 2025. On July 4, 2025, the U.S. Congress passed budget reconciliation bill H.R. 1 referred to as the One Big Beautiful Bill Act (OBBBA). The OBBBA includes significant provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company does not expect it to have a material impact. The U.K. Finance Act 2026, enacted on March 18, 2026, clarified that certain pre-regime deferred taxes are not considered covered taxes for purposes of the Pillar Two global minimum tax framework, with the amendments effective for accounting periods ending on or after July 21, 2025. As a result of this enactment, the Company revised its 2025 global minimum tax calculation to exclude certain Bermuda pre-regime deferred tax assets and liabilities arising from the introduction of Bermuda’s corporate income tax on January 1, 2025, and recorded a discrete tax benefit of $33 million in first quarter 2026. AGUS files a consolidated federal income tax return with all of its U.S. subsidiaries. Assured Guaranty Overseas US Holdings Inc. and its subsidiaries, AGRO and AG Intermediary Inc., file their own consolidated federal income tax return. Assured Life Re will file its own federal income tax return. Provision for Income Taxes The Company’s provision for income taxes for interim financial periods is not based on an estimated annual effective rate due in part to the variability in loss reserves, fair value of its derivatives and foreign exchange gains and losses which prevent the Company from projecting a reliable estimated annual effective tax rate and pre-tax income for the full year 2026. A discrete calculation of the provision is calculated for each interim period. The Company’s overall effective tax rate fluctuates based on the distribution of income across jurisdictions. The effective tax rates reflect the proportion of income recognized by each of the Company’s operating subsidiaries with •U.S. subsidiaries taxed at the U.S. marginal corporate income tax rate of 21%, •French subsidiary taxed at the French marginal corporate tax rate of 25%, •Bermuda Subsidiaries taxed at the Bermuda marginal corporate tax rate of 15%, unless subject to U.S. tax by election, and •U.K. subsidiaries taxed at the U.K. marginal corporate tax rate of 25%. The Company’s effective tax rate was (31.5)% and 18.9% for first quarter 2026 and first quarter 2025, respectively. The effective tax rates are different from the expected tax provision (benefit) primarily due to tax law changes to the Pillar Two global minimum tax for 2025 recognized in 2026 of $33 million, a tax benefit recognized upon Assured Life Re’s change in tax status effective for the 2026 tax year, and a tax benefit for U.S. tax-exempt interest. In addition, first quarter 2026 and first quarter 2025 included the global minimum tax. Audits During 2025, the IRS closed the audit of AGUS’ 2018 and 2019 tax years with no impact to previously accrued taxes and opened an audit of AGUS’ 2021 tax year. As of March 31, 2026, AGUS had open tax years with the IRS for 2021 forward. As of March 31, 2026, Assured Guaranty Overseas US Holdings Inc. had open tax years with the IRS for 2022 forward and is not currently under audit. In December 2023, His Majesty’s Revenue & Customs (HMRC) issued an inquiry into the Company’s 2021 U.K. tax returns. In October 2025, HMRC issued an inquiry into the Company’s 2022 and 2023 U.K. tax returns along with issuing inquires into AGUK, Assured Guaranty (UK) Services Limited and Assured Guaranty Finance Overseas Ltd.’s 2023 U.K. tax returns. In March 2026, HMRC closed the audit of the Company’s 2021, 2022 and 2023 inquiries with no impact to previously accrued taxes. As of March 31, 2026, the Company had open tax years with HMRC for 2024 forward; AGUK, Assured Guaranty (UK) Services Limited and Assured Guaranty Finance Overseas Ltd. had open tax years with HMRC for 2023 forward; and the Company’s other U.K. subsidiaries had open tax year with HMRC for 2024 forward. The Company’s French subsidiary is not currently under examination and has open tax years of 2021 forward.
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