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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
(Mark One)
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to          
Commission File Number 001-13459
 
AFFILIATED MANAGERS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
04-3218510
(State or other jurisdiction
of incorporation or organization)
 
(IRS Employer Identification Number)
777 South Flagler Drive, West Palm Beach, Florida 33401
(Address of principal executive offices)
(800345-1100
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock ($0.01 par value)
 
AMG
 
New York Stock Exchange
5.875% Junior Subordinated Notes due 2059
 
MGR
 
New York Stock Exchange


Table of Contents

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer 
 
Non-accelerated filer 

 
Smaller reporting company
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
There were 46,553,083 shares of the registrant’s common stock outstanding on July 29, 2020.
 


Table of Contents

FORM 10-Q
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents

PART I—FINANCIAL INFORMATION
Item 1.
Financial Statements
AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share data)
(unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2019
 
2020
 
2019
 
2020
Consolidated revenue
$
591.9

 
$
471.1

 
$
1,135.1

 
$
978.3

 
 
 
 
 
 
 
 
Consolidated expenses:
 
 
 
 
 
 
 
Compensation and related expenses
258.0

 
216.5

 
486.2

 
424.4

Selling, general and administrative
96.2

 
73.6

 
191.8

 
163.8

Intangible amortization and impairments
21.2

 
80.9

 
50.9

 
101.5

Interest expense
19.7

 
22.3

 
37.9

 
41.8

Depreciation and other amortization
5.3

 
5.0

 
10.6

 
10.1

Other expenses (net)
12.2

 
11.3

 
23.0

 
22.3

Total consolidated expenses
412.6

 
409.6

 
800.4

 
763.9

 
 
 
 
 
 
 
 
Equity method income (loss) (net)
29.4

 
17.4

 
(328.8
)
 
(95.8
)
 
 
 
 
 
 
 
 
Investment and other income (expense)
7.2

 
(12.1
)
 
15.2

 
(9.7
)
Income before income taxes
215.9

 
66.8

 
21.1

 
108.9

 
 
 
 
 
 
 
 
Income tax expense (benefit)
35.7

 
3.3

 
(26.1
)
 
5.5

Net income
180.2

 
63.5

 
47.2

 
103.4

 
 
 
 
 
 
 
 
Net income (non-controlling interests)
(72.5
)
 
(32.8
)
 
(140.3
)
 
(88.3
)
Net income (loss) (controlling interest)
$
107.7

 
$
30.7

 
$
(93.1
)
 
$
15.1

 
 
 
 
 
 
 
 
Average shares outstanding (basic)
51.0

 
47.2

 
51.5

 
47.5

Average shares outstanding (diluted)
51.0

 
47.3

 
51.5

 
47.6

 
 
 
 
 
 
 
 
Earnings (loss) per share (basic)
$
2.11

 
$
0.65

 
$
(1.81
)
 
$
0.32

Earnings (loss) per share (diluted)
$
2.11

 
$
0.65

 
$
(1.81
)
 
$
0.32

The accompanying notes are an integral part of the Consolidated Financial Statements.

2

Table of Contents

AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2019
 
2020
 
2019
 
2020
Net income
$
180.2

 
$
63.5

 
$
47.2

 
$
103.4

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation gain (loss)
5.2

 
(23.2
)
 
12.7

 
(76.1
)
Change in net realized and unrealized gain (loss) on derivative financial instruments
(0.7
)
 
(1.3
)
 
0.5

 
(2.3
)
Other comprehensive income (loss), net of tax
4.5

 
(24.5
)
 
13.2

 
(78.4
)
Comprehensive income
184.7

 
39.0

 
60.4

 
25.0

Comprehensive income (non-controlling interests)
(65.2
)
 
(32.2
)
 
(139.6
)
 
(71.5
)
Comprehensive income (loss) (controlling interest)
$
119.5

 
$
6.8

 
$
(79.2
)
 
$
(46.5
)
The accompanying notes are an integral part of the Consolidated Financial Statements.

3

Table of Contents

AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
 
December 31,
2019
 
June 30,
2020
Assets
 
 
 
Cash and cash equivalents
$
539.6

 
$
681.6

Receivables
417.1

 
497.1

Investments in marketable securities
59.4

 
61.4

Goodwill
2,651.7

 
2,627.6

Acquired client relationships (net)
1,182.0

 
1,052.3

Equity method investments in Affiliates (net)
2,195.6

 
1,991.0

Fixed assets (net)
92.3

 
85.8

Other investments
211.8

 
204.0

Other assets
304.0

 
295.3

Total assets
$
7,653.5

 
$
7,496.1

Liabilities and Equity
 
 
 
Payables and accrued liabilities
$
634.6

 
$
572.5

Debt
1,793.8

 
2,042.8

Deferred income tax liability (net)
450.2

 
388.3

Other liabilities
359.1

 
468.5

Total liabilities
3,237.7

 
3,472.1

Commitments and contingencies (Note 7)


 


Redeemable non-controlling interests
916.7

 
682.1

Equity:
 
 
 
Common stock ($0.01 par value, 153.0 shares authorized; 58.5 shares outstanding in 2019 and 2020)
0.6

 
0.6

Additional paid-in capital
707.2

 
768.2

Accumulated other comprehensive loss
(108.8
)
 
(170.4
)
Retained earnings
3,819.8

 
3,819.3

 
4,418.8

 
4,417.7

Less: Treasury stock, at cost (10.4 shares in 2019 and 11.7 shares in 2020)
(1,481.3
)
 
(1,563.0
)
Total stockholders' equity
2,937.5

 
2,854.7

Non-controlling interests
561.6

 
487.2

Total equity
3,499.1

 
3,341.9

Total liabilities and equity
$
7,653.5

 
$
7,496.1

The accompanying notes are an integral part of the Consolidated Financial Statements.

4

Table of Contents

AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
(unaudited)
Three Months Ended June 30, 2019
 
Total Stockholders’ Equity
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Treasury
Stock at
Cost
 
Non-
controlling
Interests
 
Total
Equity
March 31, 2019
 
$
0.6

 
$
804.4

 
$
(106.9
)
 
$
3,652.6

 
$
(1,210.3
)
 
$
619.9

 
$
3,760.3

Net income
 

 

 

 
107.7

 

 
72.5

 
180.2

Other comprehensive income (loss)
 

 

 
11.8

 

 

 
(7.3
)
 
4.5

Share-based compensation
 

 
10.2

 

 

 

 

 
10.2

Common stock issued under share-based incentive plans
 

 
(0.8
)
 

 

 
0.7

 

 
(0.1
)
Share repurchases
 

 

 

 

 
(50.1
)
 

 
(50.1
)
Dividends ($0.32 per share)
 

 

 

 
(16.6
)
 

 

 
(16.6
)
Issuance costs and other
 

 
0.2

 

 

 

 

 
0.2

Affiliate equity activity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate equity compensation
 

 
2.8

 

 

 

 
9.6

 
12.4

Issuances
 

 
(0.6
)
 

 

 

 
1.0

 
0.4

Repurchases
 

 
3.1

 

 

 

 

 
3.1

Changes in redemption value of Redeemable non-controlling interests
 

 
16.5

 

 

 

 

 
16.5

Transfers to Redeemable non-controlling interests
 

 

 

 

 

 
(7.1
)
 
(7.1
)
Distributions to non-controlling interests
 

 

 

 

 

 
(88.1
)
 
(88.1
)
June 30, 2019
 
$
0.6

 
$
835.8

 
$
(95.1
)
 
$
3,743.7

 
$
(1,259.7
)
 
$
600.5

 
$
3,825.8

Three Months Ended June 30, 2020
 
Total Stockholders’ Equity
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Treasury
Stock at
Cost
 
Non-
controlling
Interests
 
Total
Equity
March 31, 2020
 
$
0.6

 
$
860.7

 
$
(146.5
)
 
$
3,789.1

 
$
(1,523.9
)
 
$
528.9

 
$
3,508.9

Net income
 

 

 

 
30.7

 

 
32.8

 
63.5

Other comprehensive income (loss)
 

 

 
(23.9
)
 

 

 
(0.6
)
 
(24.5
)
Share-based compensation
 

 
22.5

 

 

 

 

 
22.5

Common stock issued under share-based incentive plans
 

 
(6.4
)
 

 

 
6.4

 

 

Share repurchases
 

 
(4.5
)
 

 

 
(45.5
)
 

 
(50.0
)
Dividends ($0.01 per share)
 

 

 

 
(0.5
)
 

 

 
(0.5
)
Affiliate equity activity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate equity compensation
 

 
5.1

 

 

 

 
5.1

 
10.2

Issuances
 

 

 

 

 

 
4.6

 
4.6

Repurchases
 

 
1.7

 

 

 

 
(11.2
)
 
(9.5
)
Changes in redemption value of Redeemable non-controlling interests
 

 
(110.9
)
 

 

 

 

 
(110.9
)
Transfers to Redeemable non-controlling interests
 

 

 

 

 

 
(0.3
)
 
(0.3
)
Capital contributions and other
 

 

 

 

 

 

 

Distributions to non-controlling interests
 

 

 

 

 

 
(72.1
)
 
(72.1
)
June 30, 2020
 
$
0.6

 
$
768.2

 
$
(170.4
)
 
$
3,819.3

 
$
(1,563.0
)
 
$
487.2

 
$
3,341.9

The accompanying notes are an integral part of the Consolidated Financial Statements.




5

Table of Contents

AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(in millions)
(unaudited)
Six Months Ended June 30, 2019
 
Total Stockholders' Equity
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive Loss
 
Retained
Earnings
 
Treasury
Stock at
Cost
 
Non-
controlling
Interests
 
Total
Equity
December 31, 2018
 
$
0.6

 
$
835.6

 
$
(109.0
)
 
$
3,876.8

 
$
(1,146.6
)
 
$
677.5

 
$
4,134.9

Impact of adoption of new accounting standards (ASU 2018-02)
 

 

 

 
(6.6
)
 

 

 
(6.6
)
Net income (loss)
 

 

 

 
(93.1
)
 

 
140.3

 
47.2

Other comprehensive income (loss)
 

 

 
13.9

 

 

 
(0.7
)
 
13.2

Share-based compensation
 

 
19.0

 

 

 

 

 
19.0

Common stock issued under share-based incentive plans
 

 
(33.8
)
 

 

 
27.6

 

 
(6.2
)
Share repurchases
 

 

 

 

 
(140.7
)
 

 
(140.7
)
Dividends ($0.64 per share)
 

 

 

 
(33.4
)
 

 

 
(33.4
)
Issuance costs and other
 

 
0.2

 

 

 

 

 
0.2

Affiliate equity activity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate equity compensation
 

 
5.0

 

 

 

 
18.0

 
23.0

Issuances
 

 
(1.5
)
 

 

 

 
12.1

 
10.6

Repurchases
 

 
7.7

 

 

 

 

 
7.7

Changes in redemption value of Redeemable non-controlling interests
 

 
3.6

 

 

 

 

 
3.6

Transfers to Redeemable non-controlling interests
 

 

 

 

 

 
(54.4
)
 
(54.4
)
Capital contributions and other
 

 

 

 

 

 
0.4

 
0.4

Distributions to non-controlling interests
 

 

 

 

 

 
(192.7
)
 
(192.7
)
June 30, 2019

$
0.6

 
$
835.8

 
$
(95.1
)
 
$
3,743.7

 
$
(1,259.7
)
 
$
600.5

 
$
3,825.8

Six Months Ended June 30, 2020
 
Total Stockholders' Equity
 
 
 
 
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Treasury
Stock at
Cost
 
Non-
controlling
Interests
 
Total
Equity
December 31, 2019
 
$
0.6

 
$
707.2

 
$
(108.8
)
 
$
3,819.8

 
$
(1,481.3
)
 
$
561.6

 
$
3,499.1

Net income
 

 

 

 
15.1

 

 
88.3

 
103.4

Other comprehensive income (loss)
 

 

 
(61.6
)
 

 

 
(16.8
)
 
(78.4
)
Share-based compensation
 

 
30.7

 

 

 

 

 
30.7

Common stock issued under share-based incentive plans
 

 
(39.8
)
 

 

 
33.4

 

 
(6.4
)
Share repurchases
 

 
(4.5
)
 

 

 
(115.1
)
 

 
(119.6
)
Dividends ($0.33 per share)
 

 

 

 
(15.6
)
 

 

 
(15.6
)
Affiliate equity activity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliate equity compensation
 

 
7.9

 

 

 

 
18.9

 
26.8

Issuances
 

 
(1.8
)
 

 

 

 
18.6

 
16.8

Repurchases
 

 
36.4

 

 

 

 
(11.2
)
 
25.2

Changes in redemption value of Redeemable non-controlling interests
 

 
32.1

 

 

 

 

 
32.1

Transfers to Redeemable non-controlling interests
 

 

 

 

 

 
(5.4
)
 
(5.4
)
Capital contributions and other
 

 

 

 

 

 
4.9

 
4.9

Distributions to non-controlling interests
 

 

 

 

 

 
(171.7
)
 
(171.7
)
June 30, 2020
 
$
0.6

 
$
768.2

 
$
(170.4
)
 
$
3,819.3

 
$
(1,563.0
)
 
$
487.2

 
$
3,341.9

The accompanying notes are an integral part of the Consolidated Financial Statements.

6

Table of Contents

AFFILIATED MANAGERS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(unaudited)
 
For the Six Months Ended June 30,
 
2019
 
2020
Cash flow from (used in) operating activities:
 
 
 
Net income
$
47.2

 
$
103.4

Adjustments to reconcile Net income to cash flow from (used in) operating activities:
 
 
 
Intangible amortization and impairments
50.9

 
101.5

Depreciation and other amortization
10.6

 
10.1

Deferred income tax benefit
(80.5
)
 
(19.5
)
Equity method loss (net)
328.8

 
95.8

Distributions of earnings received from equity method investments
155.9

 
160.2

Share-based compensation and Affiliate equity expense
42.0

 
57.5

Other non-cash items
(8.8
)
 
24.3

Changes in assets and liabilities:
 
 
 
Purchases of securities by consolidated Affiliate sponsored investment products

 
(64.8
)
Sales of securities by consolidated Affiliate sponsored investment products
3.2

 
62.3

Increase in receivables
(126.5
)
 
(92.5
)
(Increase) decrease in other assets
(0.8
)
 
14.0

Decrease in payables, accrued liabilities and other liabilities
(112.8
)
 
(76.9
)
Cash flow from operating activities
309.2

 
375.4

Cash flow from (used in) investing activities:
 
 
 
Investments in Affiliates
(59.8
)
 
(2.4
)
Divestments of Affiliates
28.8

 

Purchase of fixed assets
(6.3
)
 
(4.5
)
Purchase of investment securities
(30.7
)
 
(23.5
)
Sale of investment securities
25.0

 
33.5

Cash flow from (used) in investing activities
(43.0
)
 
3.1

Cash flow from (used in) financing activities:
 
 
 
Borrowings of senior bank debt and senior notes
420.7

 
599.8

Repayments of senior bank debt
(460.0
)
 
(350.0
)
Repurchases of common stock (net)
(141.8
)
 
(113.3
)
Dividends paid on common stock
(33.4
)
 
(15.8
)
Distributions to non-controlling interests
(192.7
)
 
(171.7
)
Affiliate equity repurchases and issuances (net)
(41.9
)
 
(143.5
)
Other financing items
(21.3
)
 
(31.8
)
Cash flow used in financing activities
(470.4
)
 
(226.3
)
Effect of foreign currency exchange rate changes on cash and cash equivalents
1.3

 
(10.2
)
Net increase (decrease) in cash and cash equivalents
(202.9
)
 
142.0

Cash and cash equivalents at beginning of period
565.5

 
539.6

Effect of deconsolidation of Affiliate sponsored investment products
(2.6
)
 

Cash and cash equivalents at end of period
$
360.0

 
$
681.6

The accompanying notes are an integral part of the Consolidated Financial Statements.

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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)



1.
Basis of Presentation and Use of Estimates
The Consolidated Financial Statements of Affiliated Managers Group, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for full year financial statements. In the opinion of management, all normal and recurring adjustments considered necessary for a fair statement of the Company’s interim financial position and results of operations have been included and all intercompany balances and transactions have been eliminated. Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation. Operating results for interim periods are not necessarily indicative of the results that may be expected for any other period or for the full year. The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019 includes additional information about its operations, financial position and accounting policies, and should be read in conjunction with this Quarterly Report on Form 10-Q.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
All amounts in these notes, except per share data in the text and tables herein, are stated in millions unless otherwise indicated.
2.
Accounting Standards and Policies
Recently Adopted Accounting Standards

Effective January 1, 2020, the Company adopted the following new Accounting Standard Updates (“ASUs”):

ASU 2016-13, Measurement of Credit Losses on Financial Instruments

The adoption of this standard did not have a significant impact on the Company’s Consolidated Financial Statements.

Recent Accounting Developments

In June 2020, the FASB extended the effective date of ASU 2016-02, Leases, for the Company’s Affiliates accounted for under the equity method. After the extension, ASU 2016-02 is effective for annual periods beginning after December 15, 2021 and interims periods beginning after December 15, 2022.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The standard is effective for interim and annual periods beginning after December 15, 2020 for the Company and its consolidated Affiliates, and is effective for annual periods beginning after December 15, 2021 and interim periods beginning after December 15, 2022 for the Company’s Affiliates accounted for under the equity method. The Company is evaluating the impact of this standard on its Consolidated Financial Statements.
3.
Investments in Marketable Securities
The following is a summary of the cost, gross unrealized gains, gross unrealized losses and fair value of Investments in marketable securities:
 
December 31,
2019
 
June 30,
2020
Cost
$
57.9

 
$
62.3

Unrealized gains
2.1

 
1.7

Unrealized losses
(0.6
)
 
(2.6
)
Fair value
$
59.4

 
$
61.4


The Company recorded proceeds of $3.4 million and $18.5 million for the three and six months ended June 30, 2019, respectively, and $37.9 million and $64.1 million for the three and six months ended June 30, 2020, respectively, from the sale of investments in marketable securities. The Company recorded net gains (losses) of $0.2 million and $0.7 million for the three

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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


and six months ended June 30, 2019, respectively, and $0.9 million and $(0.1) million for the three and six months ended June 30, 2020, respectively.
As of December 31, 2019 and June 30, 2020, Investments in marketable securities includes consolidated Affiliate sponsored investment products with fair values of $38.1 million and $37.6 million, respectively.
4.
Investments in Affiliates and Affiliate Sponsored Investment Products
In evaluating whether an investment must be consolidated, the Company evaluates the risk, rewards and significant terms of each of its Affiliates and other investments to determine if an investment is considered a voting rights entity (“VRE”) or a variable interest entity (“VIE”). An entity is a VRE when the total equity investment at risk is sufficient to enable the entity to finance its activities independently, and when the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact its economic performance. An entity is a VIE when it lacks one or more of the characteristics of a VRE, which, for the Company, are Affiliate investments structured as partnerships (or similar entities) where the Company is a limited partner and lacks substantive kick-out or substantive participation rights over the general partner. Assessing whether an entity is a VRE or VIE involves judgment. Upon the occurrence of certain events, management reviews and reconsiders its previous conclusion regarding the status of an entity as a VRE or a VIE.

The Company consolidates VREs when it has control over significant operating, financial and investing decisions of the entity. When the Company lacks such control, but is deemed to have significant influence, the Company accounts for the VRE under the equity method. Other investments in which the Company does not have rights to exercise significant influence are recorded at fair value, with changes in fair value recorded in Investment and other income (expense) on the Consolidated Statements of Income.

The Company consolidates VIEs when it is the primary beneficiary of the entity, which is defined as having the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Substantially all of the Company’s consolidated Affiliates considered VIEs are controlled because the Company holds a majority of the voting interests or it is the managing member or general partner. Furthermore, an Affiliate’s assets can be used for purposes other than the settlement of the respective Affiliate’s obligations. The Company applies the equity method of accounting to VIEs where the Company is not the primary beneficiary, but has the ability to exercise significant influence over operating and financial matters of the VIE.

Investments in Affiliates

Substantially all of the Company’s Affiliates are considered VIEs and are either consolidated or accounted for under the equity method. A limited number of the Company’s Affiliates are considered VREs and most of these are accounted for under the equity method.

When an Affiliate is consolidated, the portion of the earnings attributable to Affiliate management’s equity ownership is included in Net income (non-controlling interests) in the Consolidated Statements of Income. Undistributed earnings attributable to Affiliate managements’ equity ownership, along with their share of any tangible or intangible net assets, are presented within Non-controlling interests on the Consolidated Balance Sheets. Affiliate equity interests where the holder has certain rights to demand settlement are presented, at their current redemption values, as Redeemable non-controlling interests on the Consolidated Balance Sheets. The Company periodically issues, sells and repurchases the equity of its consolidated Affiliates. Because these transactions take place between entities that are under common control, any gains or losses attributable to these transactions are required to be included within Additional paid-in capital in the Consolidated Balance Sheets, net of any related income tax effects in the period the transaction occurs.

When an Affiliate is accounted for under the equity method, the Company’s share of an Affiliate’s earnings or losses, net of amortization and impairments, is included in Equity method income (loss) (net) in the Consolidated Statements of Income and the carrying value of the Affiliate is reported in Equity method investments in Affiliates (net) in the Consolidated Balance Sheets. Deferred taxes recorded on intangible assets upon acquisition of an Affiliate accounted for under the equity method are presented on a gross basis within Equity method investments in Affiliates (net) and Deferred income tax liability (net) in the Consolidated Balance Sheets. The Company’s share of income taxes incurred directly by Affiliates accounted for under the equity method is recorded within Income tax expense (benefit) in the Consolidated Statements of Income.

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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


The Company periodically performs assessments to determine if fair value may have declined below related carrying value for its Affiliates accounted for under the equity method for a period that the Company considers to be other-than temporary. Where the Company believes that such declines may have occurred, the Company determines the amount of impairment using valuation methods, such as discounted cash flow techniques. Impairments are recorded as an expense in Equity method income (loss) (net) to reduce the carrying value of the Affiliate to its fair value.
The unconsolidated assets, net of liabilities and non-controlling interests of Affiliates accounted for under the equity method considered VIEs, and the Company’s carrying value and maximum exposure to loss, were as follows:
 
December 31, 2019
 
June 30, 2020
 
Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
 
Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
Affiliates accounted for under the equity method
$
1,141.4

 
$
1,843.0

 
$
986.2

 
$
1,816.2



As of December 31, 2019 and June 30, 2020, the carrying value and maximum exposure to loss for all of the Company’s Affiliates accounted for under the equity method was $2,195.6 million and $1,991.0 million, respectively, including Affiliates accounted for under the equity method considered VREs of $352.6 million and $174.8 million, respectively.

Affiliate Sponsored Investment Products

The Company’s Affiliates sponsor various investment products where they also act as the investment adviser. These investment products are typically owned primarily by third-party investors; however, certain products are funded with general partner and seed capital investments from the Company and its Affiliates.

Third-party investors in Affiliate sponsored investment products are generally entitled to substantially all of the economics of these products, except for the asset and performance based fees earned by the Company’s Affiliates or any gains or losses attributable to the Company’s or its Affiliates’ investments in these products. As a result, the Company does not generally consolidate these products unless the Company’s or its consolidated Affiliate’s interest in the product is considered substantial. When the Company’s or its consolidated Affiliates’ interests are considered substantial and the products are consolidated, the Company retains the specialized investment company accounting principles of the underlying products, and all of the underlying investments are carried at fair value in Investments in marketable securities in the Consolidated Balance Sheets, with corresponding changes in the investments’ fair values reflected in Investment and other income (expense). Purchases and sales of securities are presented within purchases and sales by consolidated Affiliate sponsored investment products in the Consolidated Statements of Cash Flows and the third-party investors’ interests are recorded in Redeemable non-controlling interests. When the Company or its consolidated Affiliates no longer control these products, due to a reduction in ownership or other reasons, the products are deconsolidated with only the Company’s or its consolidated Affiliate’s investment in the product reported from the date of deconsolidation.

The Company’s carrying value, and maximum exposure to loss from unconsolidated Affiliate sponsored investment products, is its or its consolidated Affiliate’s interest in the unconsolidated net assets of the respective products. The net assets of unconsolidated VIEs attributable to Affiliate sponsored investment products, and the Company’s carrying value and maximum exposure to loss, were as follows:
 
December 31, 2019
 
June 30, 2020

Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
 
Unconsolidated
VIE Net Assets
 
Carrying Value and
Maximum Exposure
to Loss
Affiliate sponsored investment products
$
2,282.1

 
$
0.9

 
$
2,321.1

 
$
0.3


5.
Debt

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AFFILIATED MANAGERS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)


The following table summarizes the Company’s Debt:
 
December 31,
2019
 
June 30,
2020
Senior bank debt
$
449.7

 
$
349.7

Senior notes
743.8

 
1,091.1

Junior convertible securities
310.6

 
312.3

Junior subordinated notes
289.7

 
289.7

Debt
$
1,793.8

 
$
2,042.8


The Company’s senior notes, junior convertible securities and junior subordinated notes are carried at amortized cost. Unamortized discounts and debt issuance costs are presented in the Consolidated Balance Sheets as an adjustment to the carrying value of the associated debt.

Senior Bank Debt

The Company has a $1.25 billion senior unsecured multicurrency revolving credit facility (the “revolver”) and a $350.0 million senior unsecured term loan facility (the “term loan” and, together with the revolver, the “credit facilities”). The revolver matures on January 18, 2024, and the term loan matures on January 18, 2023. Subject to certain conditions, the Company may increase the commitments under the revolver by up to an additional $500.0 million and may borrow up to an additional $75.0 million under the term loan. The Company pays interest on any outstanding obligations under the credit facilities at specified rates, based either on an applicable LIBOR or prime rate, plus a marginal rate determined based on its credit rating. For the three months ended June 30, 2020, the interest rate for substantially all of the Company’s borrowings under the credit facilities was LIBOR plus 1.1% for the revolver and LIBOR plus 0.875% for the term loan. As of December 31, 2019 and June 30, 2020, the Company had no outstanding borrowings under the revolver.

Senior Notes
On June 5, 2020, the Company issued $350.0 million aggregate principal amount of 3.3% senior unsecured notes due June 15, 2030 (the “2030 senior notes”). The 2030 senior notes pay interest semi-annually and may be redeemed at any time, in whole or in part, at a make-whole redemption price plus accrued and unpaid interest. In addition to customary event of default provisions, the indenture governing the 2030 senior notes limits the Company's ability to consolidate, merge or sell all or substantially all of its assets and requires the Company to make an offer to repurchase the 2030 senior notes upon certain change of control triggering events.