Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q1 2023 Earnings Presentation
64 slides from Assured Guaranty's earnings presentation, May 10, 2023
Slide 1: Equity Investor Presentation March 31, 2023
Equity Investor Presentation March 31, 2023
Slide 2: Forward-Looking Statements and Safe Harbor Disclosure
Forward-Looking Statements and Safe Harbor Disclosure • This presentation contains information that includes or is based upon forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements give the expectations or forecasts of future
Slide 3: Conventions and Non-GAAP Financial Measures
Conventions and Non-GAAP Financial Measures • Unless otherwise noted, the following conventions are used in this presentation: – Ratings on Assured Guaranty’s insured portfolio are Assured Guaranty’s internal ratings. ▪ Internal credit ratings are expressed on a ratings scale similar to that used by
Slide 4: Table of Contents
Table of Contents • First Quarter 2023 Accomplishments • Assured Guaranty overview – Track record of creating shareholder value – Dividend limitation calculations – Simplified corporate structure • Underlying value – High-quality investment portfolio – Deleveraging while maintaining total invested a
Slide 5: First Quarter 2023 Overview
First Quarter 2023 Overview Financial Results • Earned $68 million of adjusted operating income1 (or $1.12 per share) • Increased adjusted operating shareholders' equity1 per share and adjusted book value1 per share to record highs of $94.58 and $143.04, respectively Insurance • Generated $112 milli
Slide 6: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due ‒ Insurance law requires that each policy must provide that there shall be no acceleration of our obligations unless such acceleration is at our sole option • Issuers that defaul
Slide 7: Assured Guaranty Overview
Assured Guaranty Overview
Slide 8: Assured Guaranty Overview
Assured Guaranty Overview • We are the leading financial guaranty Assured Guaranty Ltd. franchise, with over thirty-five years of experience in the municipal and structured ($ in billions) Mar 31, 2023 Sept 30, 2009 finance markets Insured net par outstanding $236.4 $646.6 • We serve the bond insura
Slide 9: Corporate Structure
Assured Guaranty Ltd. Corporate Structure Assured Guaranty Ltd. Hamilton, Bermuda Publicly Traded Holding Company (NYSE: AGO) A (stable outlook) / Baa1 (stable outlook) issuer credit ratings Assured Guaranty US Holdings (AGUS) U.S. Holding Company Assured Guaranty Re Ltd (AG Re) S&P: A (stable outlo
Slide 10: Adjusted Operating Income per Share by Year
Assured Guaranty Overview • Our annual adjusted operating income1 per share was $4.14 in 2022, compared with $6.32 in 2021 and $1.88 in 2004, the year of our initial public offering – First quarter adjusted operating income1 per share in 2023 was $1.12, compared with $1.34 in 2022 • Adjusted operati
Slide 11: Track Record of Creating Shareholder Value
Assured Guaranty Overview Track Record of Creating Shareholder Value • We have returned excess capital to shareholders by repurchasing our common shares and distributing dividends – Since 2013, when we started our capital management strategy of repurchasing our common shares, through May 9, 2023, we
Slide 12: Dividend Limitation Calculations
Dividend Limitation Calculations Assured Guaranty Municipal Corp. Assured Guaranty Corp. Assured Guaranty Re Ltd. (AG Re) (Domiciled in New York) (Domiciled in Maryland) (Domiciled in Bermuda) • Based on most recently filed quarterly or annual statement • Based on most recently filed annual statemen
Slide 13: Simplified Corporate Structure With Dividend Capacity
Assured Guaranty Overview Simplified Corporate Structure With Dividend Capacity1 Shareholders Assured Guaranty Ltd. • Total investment portfolio and cash of $30 million2 (Head Office – Bermuda; Tax Residence – U.K.) • Annual net expenses of $51 million Assured Guaranty Re Ltd. • Annual dividend dist
Slide 14: Underlying Value
Underlying Value
Slide 15: High-Quality Investment Portfolio
Underlying Value High-Quality Investment Portfolio Total Invested Assets and Cash1,2 As of March 31, 2023 AAA 3 • Predominately consists of highly rated, fixed 28% maturity and short-term investments, and cash; 58% rated AA or higher 5 NR 2% AA • Approximately $1.4 billion invested in liquid, Other
Slide 16: Deleveraging
Underlying Value Deleveraging • Our ratio of insured net par outstanding to adjusted operating shareholders’ equity1 has declined considerably from 157:1 in 4Q-09 to 42:1 as of 1Q-23 • Meanwhile, total invested assets and cash has declined more modestly – Total invested assets and cash does not incl
Slide 17: Net Investment Income and Operating Expenses
Underlying Value Net Investment Income1 and Operating Expenses • Net investment income1 excludes the returns generated from alternative investments with a fair value of approximately $526 million as of March 31, 2023, composed primarily of AssuredIM3 funds Net Investment Income1 ($ in millions) $423
Slide 18: Historical Growth: Adjusted Book Value per Share
Underlying Value Historical Growth Adjusted Book Value1 per Share $143.04 $141.98 $130.67 $114.87 $48.06 $48.46 $41.94 $96.99 $36.38 $30.03 $48.26 $88.73 $93.92 $94.58 $78.49 $24.51 $26.06 $26.12 $66.96 $6.43 $7.18 $18.08 $18.88 $22.14 $0.00 $0.00 6/30/04 2004 ... 2009 ... 2019 2020 2021 2022 1Q 202
Slide 19: Creating Value
Creating Value
Slide 20: Penetration in the U.S. Public Finance Market
Creating Value Insurance Penetration in the U.S. Public Finance Market • Assured Guaranty’s U.S. public finance new business production was lower in the first quarter 2023 compared with the same period in 2022 – U.S. public finance insured nearly $2.9 billion of par that closed in the first quarter
Slide 21: Non-U.S. Public Finance Business Activity
Creating Value Insurance Non-U.S. Public Finance Business Activity • Non-U.S. public finance insured the third First Quarter Non-U.S. Public Finance PVP1 largest amount of first quarter new business $30 PVP in a decade $21 • In first quarter 2023, new business primarily included a long-term sale and
Slide 22: Global Structured Finance Business Activity
Creating Value Insurance Global Structured Finance Business Activity • After a strong fourth quarter 2022, global First Quarter Global Structured PVP1 structured finance continued its momentum ($ in millions) in first quarter 2023, insuring over $60 $60 million of new business PVP, the largest amoun
Slide 23: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • Assured Guaranty’s first quarter PVP of $112 million in the insurance segment is the largest amount of total first quarter PVP since first quarter of 2010 – This is only the second time that first quarter PVP exceeded $100 mil
Slide 24: Puerto Rico Update
Creating Value Puerto Rico Update • The Company continued to divest plan consideration received in connection with resolution of General Obligation (GO) and Public Buildings Authority (PBA), Puerto Rico Convention Center District Authority (PRCCDA), Puerto Rico Infrastructure Financing Authority (PR
Slide 25: AssuredIM
Creating Value AssuredIM • The Company remains committed to growing asset management-related earnings – On April 5, 2023, the Company announced an agreement pursuant to which most of its asset management business, other than that conducted by Assured Healthcare Partners LLC, will combine with Sound
Slide 26: Financial Results
ASSURED (GUARANTY Financial Results VL hE |
Slide 27: First Quarter 2023 Results: Select Financial Items
First Quarter 2023 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Three Months Ended March 31, 1Q-22 2023 2022 Net income (loss) attributable to AGL $81 $66 23% Net income (loss) attributable to AGL per diluted share $1.34 $0.98
Slide 28: Supplemental Information: Select Income Components
First Quarter 2023 Results Supplemental Information Select Income Components ($ in millions) Three Months Ended March 31, 2023 Employee Net Income (Loss) Asset Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Expenses and Other Assured Guaranty, Premiums Income
Slide 29: Consolidated Insurance Expected Loss and LAE to Be Paid
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended March 31, 2023 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended March 31, 2023 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Benefit) N
Slide 30: Insurance Loss Measures
Insurance Loss Measures Loss and LAE reported on the GAAP Consolidated Statement of Operations: • Represents loss and loss adjustment expenses (LAE) for contracts accounted for as insurance and not those accounted for as credit derivatives or those accounted for as FG VIEs ̶ GAAP financial guaranty
Slide 31: Insurance Portfolio Overview
Insurance Portfolio Overview
Slide 32: Three Discrete Insurance Companies with Separate Capital Bases
Three Discrete Insurance Companies with Separate Capital Bases Consolidated Statutory-Basis Claims-Paying Resources and Exposures As of March 31, 2023 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $2,742 $1,920 $732 $(220) $5,174 Contingency
Slide 33: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of March 31, 2023 – 77% U.S. public finance Non-U.S. Structured ($ in billions) – 19% Non-U.S. public finance Finance AA Average Rating – 4% U.S. st
Slide 34: Net Par Outstanding Amortization
Net Par Outstanding Amortization • In the last six years, the net par outstanding of the insured portfolio has stabilized significantly, driven mainly by increased insured net par for the non-U.S. public finance sector – We expect this stabilization of net par outstanding of our portfolio should hel
Slide 35: U.S. Public Finance
U.S. Public Finance Net Par Outstanding U.S. Public Finance • U.S. public finance net par outstanding is $181 As of March 31, 2023 billion and makes up 77% of our total insured ($ in billions) portfolio as of March 31, 2023 Higher education Other Public Finance • U.S. public finance portfolio genera
Slide 36: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Related Authorities and Public Corporations1 As of March 31, 2023 ($ in millions) Net Par Outstanding Total Net Par Gross Par AGM AGC AG Re Eliminations2 Outstanding Outstanding Defaulted Puerto Rico Exposures Puerto Rico E
Slide 37: Puerto Rico Scheduled Net Par Amortization
Public Finance Puerto Rico Exposure Scheduled Net Par Amortization of Exposure to the Commonwealth and its Related Authorities and Public Corporations As of March 31, 2023 2023 2023 2023 2033 – 2038 – ($ in millions) (2Q) (3Q) (4Q) 2024 2025 2026 2027 2028 2029 2030 2031 2032 2037 2041 Total Default
Slide 38: Puerto Rico Scheduled Net Debt Service Amortization
Public Finance Puerto Rico Exposure Scheduled Net Debt Service Amortization of Exposure to the Commonwealth and its Related Authorities and Public Corporations As of March 31, 2023 2023 2023 2023 2033 – 2038 – ($ in millions) (2Q) (3Q) (4Q) 2024 2025 2026 2027 2028 2029 2030 2031 2032 2037 2041 Tota
Slide 39: Non-U.S. Public Finance Exposure
Non-U.S. Public Finance Exposure Net Par Outstanding By Type As of March 31, 2023 ($ in billions) • Non-U.S. public finance net par outstanding is Infrastructure finance $46 billion and makes up 19% of our total $14.2 Sovereign and insured portfolio as of March 31, 2023 31% sub-sovereign $9.9 – Dire
Slide 40: Global Structured Finance Exposures
Global Structured Finance Exposures Net Par Outstanding By Type As of March 31, 2023 ($ in billions) U.S. RMBS • Assured Guaranty’s total structured finance $1.9 exposure of $9.6 billion, as of March 31, 2023, 20% reflects a $165.0 billion reduction from $174.6 Global Pooled Corporate billion on Dec
Slide 41: Consolidated U.S. RMBS
Consolidated U.S. RMBS By Type • Our $1.9 billion U.S. RMBS portfolio is As of March 31, 2023 amortizing both on a dollar basis and as a ($ in millions) percentage of the portfolio Subprime First Lien – Assured Guaranty’s U.S. RMBS exposure of $1.9 billion on $1,168 March 31, 2023, reflects a $27.3
Slide 42: CLO Exposures
CLO Exposures Exposure in Three Distinct Areas Non-CLO Exposure 1. $519 million of insured exposure $235.9 – Six transactions Insured Portfolio >99% – Average rating is AAA Net Par Outstanding – Average credit enhancement is approximately 39% As of Mar 31, 2023 (in billions) <1% CLO Exposure $0.5 No
Slide 43: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories • As of March 31, 2023, approximately $3.4 ($ millions) March 31, 2023 December 31, 2022 BIG Category 1 billion (57%) of the aggregate BIG U.S. public fin
Slide 44: BIG Financial Guaranty Exposure Decline
BIG Financial Guaranty Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $20.9 billion • The largest components of our BIG exposure are Puerto Rico at 23% and U.S. RMBS at 17% BIG Net Par Outstanding Changes in BIG Net Par Outstanding ($ in billions) Full Full Full Year Year Ye
Slide 45: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of March 31, 2023 Net Par Internal Type1 Name or Description Outstanding Rating2 PF ProMedica Healthcare Obligated Group, Ohio $820 BB+ PF Puerto Rico Electric Power Authority 720 CCC PF Coventry & Rugby Ho
Slide 46: Asset Management Overview
ASSURED (GUARANTY Asset Management Overview VL hE |
Slide 47: Asset Management: Assets Under Management
Asset Management • AssuredIM1 has $17.3 billion in assets under management as of March 31, 2023 – Wind-down funds, which are legacy BlueMountain hedge and opportunity funds, had gross outflows of $48 million in Assets Under Management first quarter 2023 As of March 31, 2023 ($ in billions) • Assured
Slide 48: Assets Under Management Rollforward
Asset Management Assets Under Management1 Select GAAP Results Year-to-Date (December 31, 2022 to March 31, 2023) ($ in millions) Opportunity Liquid Wind-Down CLOs Funds Strategies Funds Total AUM, December 31, 2022 $15,150 $1,884 $248 $182 $17,464 Inflows: Third-party - 1 - - 1 Intercompany - - - -
Slide 49: Appendix
ASSURED GUARANTY F | Appendix
Slide 50: Explanation of Non-GAAP Financial Measures
Appendix Explanation of Non-GAAP Financial Measures The Company discloses both (a) financial measures determined in accordance with GAAP and (b) financial measures not determined in accordance with GAAP (non-GAAP financial measures). Financial measures identified as non-GAAP should not be considered
Slide 51: Explanation of Non-GAAP Financial Measures (Cont'd)
Appendix Explanation of Non-GAAP Financial Measures (Cont’d) The following paragraphs define each non-GAAP financial measure disclosed by the Company and describe why it is useful. To the extent there is a directly comparable GAAP financial measure, a reconciliation of the non-GAAP financial measure
Slide 52: Explanation of Non-GAAP Financial Measures (Cont'd)
Appendix Explanation of Non-GAAP Financial Measures (Cont’d) Adjusted Operating Shareholders’ Equity and Adjusted Book Value: Management believes that adjusted operating shareholders’ equity is a useful measure because it excludes the fair value adjustments on investments, credit derivatives and CCS
Slide 53: Explanation of Non-GAAP Financial Measures (Cont'd)
Appendix Explanation of Non-GAAP Financial Measures (Cont’d) Adjusted Operating Return on Equity (Adjusted Operating ROE): Adjusted Operating ROE represents adjusted operating income for a specified period divided by the average of adjusted operating shareholders’ equity at the beginning and the end
Slide 54: Reconciliation of Gross Written Premiums (GWP) to PVP
Appendix Reconciliation of Gross Written Premiums (GWP) to PVP Three Months Ended Reconciliation of GWP to PVP March 31, Year Ended December 31, (dollars in millions) 2023 2022 2022 2021 2020 2019 2018 2017 2016 Total GWP $86 $70 $360 $377 $454 $677 $612 $307 $154 Less: Installment GWP and other GAA
Slide 55: Reconciliation of Net Income to Adjusted Operating Income
Appendix Reconciliation of Net Income (Loss) Attributable to AGL to Adjusted Operating Income1 Three Months Ended Year Ended Adjusted Operating Income Reconciliation March 31, December 31, (dollars in millions, except per share amounts) 2023 2022 2022 Per Diluted Per Diluted Per Diluted Total Share
Slide 56: Reconciliation of Net Income to Adjusted Operating Income (2010-2021)
Appendix Reconciliation of Net Income (Loss) to Adjusted Operating Income1 (2010-2021) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2021 2020 2019 2018 2017 2016 Total Per Share Total Per Share Total Per Share Total Per Share Total
Slide 57: Reconciliation of Net Income to Adjusted Operating Income (2004-2009)
Appendix Reconciliation of Net Income (Loss) to Adjusted Operating Income1 (2004-2009) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2009 2008 2007 2006 2005 Total Per Share Total Per Share Total Per Share Total Per Share Total Per
Slide 58: Reconciliation of Shareholders' Equity to Adjusted Book Value
Appendix Reconciliation of Shareholders’ Equity to Adjusted Book Value1 Adjusted book value1 reconciliation As of (dollars in millions, except per share amounts) March 31, 2023 December 31, 2022 March 31, 2022 December 31, 2021 December 31, 2020 Total Per Share Total Per Share Total Per Share Total
Slide 59: Reconciliation of Shareholders' Equity to Adjusted Book Value (2011-2019)
Appendix Reconciliation of Shareholders’ Equity to Adjusted Book Value1 (2011-2019) Adjusted Book Value1 Reconciliation (dollars in millions, except per share amounts) 2011 2012 2013 2014 2015 2016 2017 2018 2019 Per Per Per Per Per Per Per Per Per Total Share Total Share Total Share Total Share Tot
Slide 60: Reconciliation of Shareholders' Equity to Adjusted Book Value (2004-2010)
Appendix Reconciliation of Shareholders’ Equity to Adjusted Book Value1 (2004-2010) Adjusted Book Value1 Reconciliation (dollars in millions, except per share amounts) 2Q 2004 2004 2005 2006 2007 2008 2009 2010 Per Per Per Per Per Per Per Per Total Share Total Share Total Share Total Share Total Sha
Slide 61: Calculation of Adjusted Operating Portfolio Leverage
Appendix Calculation of Adjusted Operating Portfolio Leverage Adjusted Operating Leverage (dollars in millions, except leverage) 2009 2010 2011 2012 2013 2014 2015 Insured net par outstanding $640,194 $616,686 $556,830 $518,772 $459,107 $403,729 $358,571 Adjusted operating shareholders' equity1 4,07
Slide 62: Reconciliation of GAAP ROE to Adjusted Operating ROE
Appendix Reconciliation of GAAP ROE1 to Adjusted Operating ROE1,2 ROE Reconciliation (dollars in millions) Three Months Ended March 31, 2023 2022 Net income (loss) attributable to AGL $81 $66 Adjusted operating income2 68 90 Average shareholders' equity attributable to AGL $5,142 $6,047 Average adju
Slide 63: Assets Under Management
Appendix Assets Under Management Assets Under Management: The Company uses AUM as a metric to measure progress in its Asset Management segment. 1 Management fee revenue is based on a variety of factors and is not perfectly correlated with AUM. However, we believe that AUM is a useful metric for asse
Slide 64: Assured Guaranty Contacts
Assured Guaranty Contacts: Robert Tucker Senior Managing Director, Investor Relations and Corporate Communications Direct: 212.339.0861 rtucker@agltd.com Andre Thomas Managing Director, Equity Investor Relations Direct: 212.339.3551 athomas@agltd.com Equity Investor Presentation March 31, 2023 63