Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q4 2023 Earnings Presentation
65 slides from Assured Guaranty's earnings presentation, Feb 28, 2024
Slide 1: Equity Investor Presentation December 31, 2023
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation December 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 • Overview and 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 assets
Slide 5: Fourth Quarter 2023 Overview
Fourth Quarter 2023 Overview Financial Results • Earned $338 million of adjusted operating income1 (or $5.75 per share) – This compared with $14 million (or $0.22 per share) in the fourth quarter of 2022 – The result was primarily due to a $189 million benefit resulting from the establishment of a d
Slide 6: Year End 2023 Overview
Year End 2023 Overview Financial Results • Earned $648 million of adjusted operating income1 (or $10.78 per share), up from $267 million in the same period of 2022 • On a per share basis, increased shareholders’ equity attributable to AGL, adjusted operating shareholders' equity1 and adjusted book v
Slide 7: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due – Insurance law requires that each policy must provide that there shall be no acceleration of the Company's obligations unless such acceleration is at our sole option • Issuers t
Slide 8: Assured Guaranty Overview
ASSURED GUARANTY Assured Guaranty Overview
Slide 9: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. ($ in billions) Dec 31, 2023 Sep 30, 2009 • We are the leading financial guaranty franchise, with nearly four decades of experience in the Insured net par outstanding $249.2 $646.6 municipal and structured finance markets • We serve the bond insurance
Slide 10: 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 S&P: A (stable outlook) / Assured Guaranty Re Ltd (A
Slide 11: Adjusted Operating Income per Share by Year
Assured Guaranty Overview • Our annual adjusted operating income1 per share increased to $10.78 in 2023, up from $1.88 in 2004, the year of our initial public offering – This is nearly double the previous high of $6.68 in 2016, and primarily driven by a large net gain related to the Sound Point and
Slide 12: 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 February 27, 20
Slide 13: Dividend Limitation Calculations
Assured Guaranty Overview 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 rece
Slide 14: 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 $41 million2 • Annual net expenses of $45 million Assured Guaranty Re Ltd. (Head Office – Bermuda; Tax Residence – U.K.) • Annual dividend dist
Slide 15: Underlying Value
Underlying Value
Slide 16: High-Quality Investment Portfolio
Underlying Value High-Quality Investment Portfolio Total Invested Assets and Cash1,2 As of December 31, 2023 U.S. government & AAA 3 • Predominately consists of highly rated, agencies 28% 1% fixed maturity and short-term investments, Other invested and cash; 54% rated AA or higher assets 4% • Approx
Slide 17: Deleveraging
Underlying Value Deleveraging • Our insured net par outstanding to adjusted operating shareholders’ equity1 has declined considerably from 157:1 in 4Q-09 to 42:1 as of 4Q-23 • Over the same time period, total invested assets and cash has declined more modestly – As of 4Q23, total invested assets and
Slide 18: Net Investment Income and Operating Expenses
Underlying Value Net Investment Income1 and Operating Expenses2 • Net investment income1 excludes the returns generated from (i) $692 million in alternative investments2, (ii) the $429 million ownership interest in Sound Point and (iii) $318 million of trading securities as of December 31, 2023. Net
Slide 19: Historical Growth: Adjusted Book Value per Share
Underlying Value Historical Growth Adjusted Book Value1 per Share $155.92 $141.98 $130.67 $49.38 $114.87 $48.06 ) CAGR $41.94 $96.99 (1 0% rease $36.38 36 % inc Val ue: 5 $30.03 Adj. Book $53.39 $48.26 $106.54 $16.15 $88.73 $93.92 $78.49 $24.51 $26.06 $26.12 $66.96 $6.43 $7.18 $37.24 $18.08 $18.88 $
Slide 20: Creating Value
ASSURED GUARANTY Creating Value
Slide 21: Insurance: 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 had a very successful 2023 – U.S. public finance insured $22.5 billion of total par that closed in 2023, the second largest annual amount of par insured in a decade
Slide 22: Non-U.S. Public Finance Business Activity
Creating Value Insurance Non-U.S. Public Finance Business Activity Non-U.S. Public Finance PVP1 • In fourth quarter 2023, business activity was (FY; $ in millions) attributable to guarantees of transactions in the airport, university housing, regulated utility and $308 transportation sectors • In th
Slide 23: Global Structured Finance Business Activity
Creating Value Insurance Global Structured Finance Business Activity • In the fourth quarter of 2023, new business Global Structured Finance PVP1 PVP primarily consisted of insurance (FY; $ in millions) securitization transactions $109 • In the third quarter of 2023, new business PVP primarily consi
Slide 24: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • Assured Guaranty insured $29.0 billion of aggregate par in 2023 – This is 31% more insured par than in 2022 – It is also the largest amount of aggregate par insured in a decade • Assured Guaranty closed $404 million of aggrega
Slide 25: Puerto Rico Update
Creating Value Puerto Rico Update • The Company has divested portions of its Plan Consideration it received in connection with the resolution of General Obligation (GO) and Public Buildings Authority (PBA), Puerto Rico Convention Center District Authority (PRCCDA), Puerto Rico Infrastructure Financi
Slide 26: Asset Management
Creating Value Asset Management • In July, Assured Guaranty contributed most of AssuredIM to Sound Point in exchange for approximately 30% of the combined Sound Point entity – AGM and AGC engaged Sound Point as their sole alternative credit manager ▪ In the first two years of Sound Point's engagemen
Slide 27: Financial Results
ASSURED GUARANTY Financial Results M4
Slide 28: Fourth Quarter 2023 Results
Fourth Quarter 2023 Results Select Financial Items Select GAAP Results ($ in millions, except per share data and percentages) Three Months Ended December 31, % Change vs. 4Q-22 2023 2022 Net income (loss) attributable to AGL $376 $94 300% Net income (loss) attributable to AGL per diluted share $6.40
Slide 29: Full Year 2023 Results
Full Year 2023 Results Select Financial Items Select GAAP Results ($ in millions, except per share data and percentages) Year Ended December 31, % Change vs. 2022 2023 2022 Net income (loss) attributable to AGL $739 $124 496% Net income (loss) attributable to AGL per diluted share $12.30 $1.92 541%
Slide 30: Fourth Quarter 2023 Results: Supplemental Information
Fourth Quarter 2023 Results Supplemental Information Select Income Components ($ in millions) Three Months Ended December 31, 2023 Employee Net Income (Loss) Asset Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Expenses and Other Assured Guaranty Premiums Inc
Slide 31: Full Year 2023 Results: Supplemental Information
Full Year 2023 Results Supplemental Information Select Income Components ($ in millions) Year Ended December 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 Fees (Ben
Slide 32: Expected Loss and LAE to Be Paid, Q4 2023
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended December 31, 2023 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended December 31, 2023 Net Expected Loss Net Economic Loss Net Expected Loss to be Paid Development Net (Paid) to be
Slide 33: Expected Loss and LAE to Be Paid, Year 2023
Consolidated Insurance Expected Loss and LAE to Be Paid Year Ended December 31, 2023 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Year Ended December 31, 2023 Net Expected Loss Net Economic Loss Net Expected Loss to be Paid Development Net (Paid) to be Paid (Recovered
Slide 34: 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 35: Insurance Portfolio Overview
Insurance Portfolio Overview Eiffage CEVM / Foster + Partners / Jean-Pierre Lescourret
Slide 36: 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 December 31, 2023 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $ 2,646 $ 1,651 $ 734 $ (224) $ 4,807 Con
Slide 37: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is largely Consolidated Net Par Outstanding concentrated in U.S. public finance As of December 31, 2023 ($ in billions) — 76% U.S. public finance Non-U.S. — 20% Non-U.S. public finance Structured Finance — 3% U.S. structured financ
Slide 38: Net Par Outstanding Amortization
Net Par Outstanding Amortization • Over the last six years, the net par outstanding of the insured portfolio has stabilized significantly – This stabilization was primarily driven by new business production in U.S. public finance and non-U.S. public finance – This will help stabilize our future earn
Slide 39: U.S. Public Finance
U.S. Public Finance Net Par Outstanding U.S. Public Finance As of December 31, 2023 ($ in billions) • U.S. public finance net par outstanding is $190 billion and makes up 76% of our total General obligation insured portfolio as of December 31, 2023 $74.6 • U.S. public finance portfolio generally Oth
Slide 40: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Exposure to Puerto Rico1 As of December 31, 2023 ($ in millions) Net Par Outstanding Total Net Par Gross Par AGM AGC AG Re Eliminations2 Outstanding Outstanding Defaulted Puerto Rico Exposures Puerto Rico Electric Power Authority (PREPA) $377 $67 $180 $— $624 $633
Slide 41: Scheduled Net Par Amortization of Puerto Rico Exposure
Public Finance Puerto Rico Exposure Scheduled Net Par Amortization of Exposure to Puerto Rico As of December 31, 2023 2024 2024 2024 2024 2034 - 2039 - ($ in millions) (Q1) (Q2) (Q3) (Q4) 2025 2026 2027 2028 2029 2030 2031 2032 2033 2038 2041 Total Defaulted Puerto Rico Exposures PREPA $ — $ — $ 93
Slide 42: Scheduled Net Debt Service Amortization of Puerto Rico Exposure
Public Finance Puerto Rico Exposure Scheduled Net Debt Service Amortization of Exposure to Puerto Rico As of December 31, 2023 2024 2024 2024 2024 2034 - 2039 - ($ in millions) (Q1) (Q2) (Q3) (Q4) 2025 2026 2027 2028 2029 2030 2031 2032 2033 2038 2041 Total Defaulted Puerto Rico Exposures PREPA $ 12
Slide 43: Non-U.S. Public Finance Exposure
Non-U.S. Public Finance Exposure Net Par Outstanding By Type As of December 31, 2023 ($ in billions) Infrastructure • Non-U.S. public finance net par outstanding is finance $49 billion and makes up 20% of our total $15.4 Sovereign and insured portfolio as of December 31, 2023 sub-sovereign 31% $9.9
Slide 44: Global Structured Finance Exposures
Global Structured Finance Exposures Net Par Outstanding By Type As of December 31, 2023 ($ in billions) U.S. RMBS $1.8 • Assured Guaranty’s total structured Insurance finance exposure of $9.9 billion, as of Securitizations 18% Global Pooled 21% Corporate December 31, 2023, reflects a $164.7 $4.4 $1.
Slide 45: CLO Exposures
CLO Exposures Exposure in Three Distinct Areas Non-CLO Exposure $248.5 1. $644 million of insured exposure • Eight transactions Insured Portfolio • All of the exposure is investment grade Net Par Outstanding As of Dec 31, 2023 • Average credit enhancement is approximately 41% ($ in billions) • The C
Slide 46: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories • As of December 31, 2023, approximately ($ millions) December 31, 2023 December 31, 2022 $2.4 billion (44%) of the aggregate BIG BIG Category 1 exposure
Slide 47: BIG Financial Guaranty Exposure Decline
BIG Financial Guaranty Exposure Decline • Since the fourth quarter of 2011, BIG net par outstanding has declined by $21.4 billion • The largest components of our BIG exposure are Puerto Rico at 20%, Healthcare at 20% and U.S. RMBS at 17% BIG Net Par Outstanding Changes in BIG Net Par Outstanding ($
Slide 48: BIG Exposures > $250 Million
BIG Exposures > $250 Million BIG Exposures Greater Than $250 Million As of December 31, 2023 ($ in millions) Net Par Internal Type1 Name or Description Outstanding Rating2 PF ProMedica Healthcare Obligated Group, Ohio $820 BB- PF Puerto Rico Electric Power Authority 624 CCC PF Coventry & Rugby Hospi
Slide 49: Appendix
Appendix
Slide 50: Explanation of Non-GAAP Financial Measures
Appendix Explanation of Non-GAAP Financial Measures The Company discloses both: (i) financial measures determined in accordance with GAAP; and (ii) financial measures not determined in accordance with GAAP (non-GAAP financial measures). Financial measures identified as non-GAAP should not be conside
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 to PVP
Appendix AGL Consolidated Reconciliation of Gross Written Premiums (GWP) to PVP Three Months Ended Reconciliation of GWP to PVP December 31, Year Ended December 31, (dollars in millions) 2023 2022 2022 2021 2020 2019 2018 2017 2016 Total GWP $136 $131 $360 $377 $454 $677 $612 $307 $154 1 Less: Insta
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 December 31, December 31, (dollars in millions, except per share amounts) 2023 2022 2023 2022 Per Per Per Per Diluted Diluted Diluted
Slide 56: Reconciliation to Adjusted Operating Income (2011-2022)
Appendix Reconciliation of Net Income (Loss) Attributable to AGL to Adjusted Operating Income1 (2011-2022) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2022 2021 2020 2019 2018 2017 Total Per Share Total Per Share Total Per Share T
Slide 57: Reconciliation to Adjusted Operating Income (2004-2010)
Appendix Reconciliation of Net Income (Loss) Attributable to AGL to Adjusted Operating Income1 (2004-2010) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2010 2009 2008 2007 2006 2005 Total Per Share Total Per Share Total Per Share T
Slide 58: Reconciliation of Shareholders' Equity to Adjusted Book Value
Appendix Reconciliation of AGL Shareholders’ Equity to Adjusted Book Value1 Adjusted book value1 reconciliation As of (dollars in millions, except per share amounts) Dec 31, 2023 Sept 30, 2023 Dec 31, 2022 Sept 30, 2022 Dec 31, 2021 Per Per Per Per Total Share Total Share Total Per Share Total Share
Slide 59: Adjusted Book Value Reconciliation (2016-2020)
Appendix Reconciliation of AGL Shareholders’ Equity to Adjusted Book Value1 (2016-2020) Adjusted book value1 reconciliation As of December 31, (dollars in millions, except per share amounts) 2020 2019 2018 2017 2016 Per Per Per Per Per Total Share Total Share Total Share Total Share Total Share Reco
Slide 60: Adjusted Book Value Reconciliation (2011-2015)
Appendix Reconciliation of AGL Shareholders’ Equity to Adjusted Book Value1 (2011-2015) Adjusted book value1 reconciliation As of December 31, (dollars in millions, except per share amounts) 2015 2014 2013 2012 2011 Per Per Per Per Per Total Share Total Share Total Share Total Share Total Share Reco
Slide 61: Adjusted Book Value Reconciliation (2006-2010)
Appendix Reconciliation of AGL Shareholders’ Equity to Adjusted Book Value1 (2006-2010) Adjusted book value1 reconciliation As of December 31, (dollars in millions, except per share amounts) 2010 2009 2008 2007 2006 Per Per Per Per Per Total Share Total Share Total Share Total Share Total Share Reco
Slide 62: Adjusted Book Value Reconciliation (2004-2005)
Appendix Reconciliation of AGL Shareholders’ Equity to Adjusted Book Value1 (2004-2005) Adjusted book value1 reconciliation As of December 31, (dollars in millions, except per share amounts) 2005 2004 2004 Q2 Per Per Per Total Share Total Share Total Share Reconciliation of shareholders' equity to a
Slide 63: Calculation of Adjusted Operating Portfolio Leverage
Appendix Calculation of Adjusted Operating Portfolio Leverage Adjusted Operating Leverage As of December 31, (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 shareho
Slide 64: Reconciliation of GAAP ROE to Adjusted Operating ROE
Appendix Reconciliation of AGL GAAP ROE1 to Adjusted Operating ROE1,2 ROE Reconciliation (dollars in millions) Three Months Ended Year Ended December 31, December 31, 2023 2022 2023 2022 Net income (loss) attributable to AGL $376 $94 $739 $124 2 Adjusted operating income 338 14 648 267 Average share
Slide 65: 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 Glenn Alterman Vice President Investor Relations Di