Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q3 2021 Earnings Presentation
66 slides from Assured Guaranty's earnings presentation, November 2021
Slide 1: Equity Investor Presentation September 30, 2021
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation September 30, 2021
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 and on bonds purchased pursuant to our loss mitigation or risk management strategies are our internal credit ratings. Inter
Slide 4: Table of Contents
Table of Contents • Third Quarter and Year-to-Date 2021 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
Slide 5: Third Quarter 2021 Accomplishments
Third Quarter 2021 Accomplishments • Earned $34 million of adjusted operating income1, or $0.45 per share, despite an after-tax loss of approximately $138 million ($1.87 per share) that resulted from the voluntary early redemption of certain senior notes • Increased shareholders’ equity per share, a
Slide 6: Year-to-Date 2021 Accomplishments
Year-to-Date 2021 Accomplishments • Earned $197 million of adjusted operating income1, or $2.60 per share, an increase of $0.32 per share compared to the same period in 2020, despite an after-tax loss of approximately $138 million ($1.82 per share) that resulted from the voluntary early redemption o
Slide 7: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due ‒ Insurance regulations forbid acceleration of our obligations without our consent • Issuers that default on a few debt service payments may have the resources later to repay the
Slide 8: Assured Guaranty Overview
Assured Guaranty Overview
Slide 9: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. ($ in billions) Sept 30, 2021 Sept 30, 2009 • We are the leading financial guaranty franchise, with over three decades of Insured net par outstanding $235.7 $646.6 experience in the municipal and structured finance markets U.S. public finance $176.0 $4
Slide 10: Corporate Structure
Assured Guaranty Ltd. Corporate Structure Assured Guaranty Ltd. Hamilton, Bermuda Publicly Traded Holding Company (NYSE: AGO) A (stable outlook) / Baa2 (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 11: Assured Guaranty Overview: Adjusted Operating Income per Share
Assured Guaranty Overview • Our annual adjusted operating income1 per share was $2.97 in 2020 compared with $1.88 in 2004, the year of our initial public offering – Our year-to-date adjusted operating income1 per share of $2.60 includes an after-tax loss of $138 million ($1.82 per share) that result
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 November 4, 202
Slide 13: 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 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 $91 million2 (Head Office – Bermuda; Tax Residence – U.K.) • Annual net expenses of $33 million Assured Guaranty Re Ltd. • 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 • Predominately consists of highly rated, fixed As of September 30, 2021 maturity and short-term investments, and cash; 54% rated AA or higher 4 BBB A 22% 12% Nearly 100% of BIG is held • Approximately $795 million
Slide 17: Deleveraging
Underlying Value Deleveraging • Our insured net par outstanding to adjusted operating shareholders’ equity1 has improved from 157:1 as of 4Q-09 to 40:1 as of 3Q-21 – Each quarter since the first quarter of 2020, insured net par outstanding has increased, which has led to a modest increase in adjuste
Slide 18: 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 $609 million as of September 30, 2021, composed primarily of AssuredIM funds Net Investment Income1 ($ in millions) N
Slide 19: Historical Growth: Adjusted Book Value per Share
Underlying Value Historical Growth Adjusted Book Value1 per Share $122.50 $114.87 $96.99 $37.77 $86.18 $34.50 $77.86 $28.26 $1.84 $1.88 $23.32 $66.52 $20.53 $1.77 $60.99 $1.69 $53.39 $15.85 $1.13 $48.26 $46.54 $48.37 $17.07 $0.78 $46.22 $45.06 $41.90 $41.97 $15.34 $0.96 $78.49 $82.89 $35.66 $14.63 $
Slide 20: Creating Value
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 has seen strong new business production for U.S. public finance in the first nine months of 2021 – Year-to-date, we insured 826 primary market transactions totaling approximately $17.4 billion of par, up approx
Slide 22: U.S. Structured Finance Business Activity
Creating Value Insurance U.S. Structured Finance Business Activity • In third quarter 2021, we insured a large insurance securitization transaction U.S. Structured PVP1 (excluding SGI reinsurance portfolio)2 • In second quarter 2021, we insured an ($ in millions) insurance securitization and a whole
Slide 23: Non-U.S. Business Activity
Creating Value Insurance Non-U.S. Business Activity • In third quarter 2021, non-U.S. new business Non-U.S. PVP1 PVP was primarily driven by a large U.K. (excluding SGI reinsurance portfolio)2 university housing transaction ($ in millions) • In second quarter 2021, activity included a $315 healthcar
Slide 24: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • Nine-month 2021 new business production gross par written was the largest amount in over a decade, 22% higher than last year’s record nine-month gross par written – U.S. public finance insured par written increased by approxim
Slide 25: AssuredIM
Creating Value AssuredIM • AssuredIM executed on its key strategic goals during the first nine months of 2021 – Had gross inflows of $2.3 billion – Issued four new CLOs, selling a significant percentage of the new CLOs’ equity to third parties – Increased fee earning AUM to $16.3 billion as of Septe
Slide 26: Financial Results
ASSURED (GUARANTY: Financial Results VLSE |
Slide 27: Third Quarter 2021 Results: Select Financial Items
Third Quarter 2021 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Three Months Ended September 30, 3Q-20 2021 2020 Net income (loss) attributable to AGL1 $17 $86 (80)% Net income (loss) attributable to AGL per diluted share $0.2
Slide 28: Year-to-Date 2021 Results: Select Financial Items
Year-to-Date 2021 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Nine Months Ended September 30, 9m-20 2021 2020 Net income (loss) attributable to AGL1 $126 $214 (41)% Net income (loss) attributable to AGL per diluted share $1.6
Slide 29: Third Quarter 2021 Results: Select Segment Results
Third Quarter 2021 Results Select Segment Results Select Segment Results1 ($ in millions) Three Months Ended September 30, 2021 Insurance Asset Management Corporate Other Total Adjusted operating income (loss) $214 $(7) $(169) $(4) $34 Net earned premiums and credit derivative revenues 114 - - (1) 1
Slide 30: Year-to-Date 2021 Results: Select Segment Results
Year-To-Date 2021 Results Select Segment Results Select Segment Results1 ($ in millions) Nine Months Ended September 30, 2021 Insurance Asset Management Corporate Other Total Adjusted operating income (loss) $445 $(16) $(232) $- $197 Net earned premiums and credit derivative revenues 327 - - (3) 324
Slide 31: Consolidated Insurance Expected Loss and LAE to Be Paid
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended September 30, 2021 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended September 30, 2021 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Be
Slide 32: Consolidated Insurance Expected Loss and LAE to Be Paid
Consolidated Insurance Expected Loss and LAE to Be Paid Nine Months Ended September 30, 2021 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Nine Months Ended September 30, 2021 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Bene
Slide 33: 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 34: Insurance Portfolio Overview
Insurance Portfolio Overview
Slide 35: 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 September 30, 2021 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $2,910 $1,758 $759 $(211) $5,216 Conting
Slide 36: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of September 30, 2021 ($ in billions) Non-U.S. Structured – 75% U.S. public finance Finance A+ Average Rating – 21% Non-U.S. public finance $0.7 <1%
Slide 37: Net Par Outstanding Amortization
Net Par Outstanding Amortization • In the last five years, the net par outstanding of the insured portfolio has stabilized significantly, driven mainly by increased insured net par for the international sector – Since 2015, the international portfolio has increased by over 50%, and currently account
Slide 38: U.S. Public Finance
U.S. Public Finance Net Par Outstanding • U.S. public finance net par outstanding is $176.0 billion and makes up 75% of our total insured portfolio as of U.S. Public Finance September 30, 2021 As of September 30, 2021 ($ in billions) • U.S. public finance portfolio generally performed well during th
Slide 39: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1,2 As of September 30, 2021 ($ in millions) Net Par Outstanding Eliminations Total Net Par Gross Par AGM AGC AG Re 2 Outstanding Outstanding Puerto Rico Exposures Subject to a Support Agreement 3: Commonwealth of P
Slide 40: Puerto Rico Exposure: Net Par Amortization
Public Finance Puerto Rico Exposure Scheduled Net Par Amortization of Exposure to the Commonwealth and its Agencies As of September 30, 2021 2021 2022 2022 2022 2022 2031 - 2036 - 2041 - ($ millions) (4Q) (1Q) (2Q) (3Q) (4Q) 2023 2024 2025 2026 2027 2028 2029 2030 2035 2040 2042 Total Puerto Rico Ex
Slide 41: Puerto Rico Exposure: Net Debt Service Amortization
Public Finance Puerto Rico Exposure Scheduled Net Debt Service Amortization of Exposure to the Commonwealth and its Agencies As of September 30, 2021 2021 2022 2022 2022 2022 2031 - 2036 - 2041 - ($ millions) (4Q) (1Q) (2Q) (3Q) (4Q) 2023 2024 2025 2026 2027 2028 2029 2030 2035 2040 2042 Total Puert
Slide 42: Consolidated Non-U.S. Exposure
Consolidated Non-U.S. Exposure Non-U.S. Public and Structured Finance Non-U.S. Exposure • 99% of non-U.S. exposure is Public Finance As of September 30, 2021 – Direct sovereign debt is limited to Poland ($279 million) ($ in billions) and Mexico ($50 million) Australia $1.8 5% 6% • 1% of non-U.S. exp
Slide 43: Structured Finance Exposures
Structured Finance Exposures Net Par Outstanding By Type As of September 30, 2021 ($ in billions) Life Insurance Transactions • Assured Guaranty’s total structured finance $3.4 exposure of $9.4 billion, as of September 30, Financial Products 36% 2021, reflects a $165.2 billion reduction from 1 (GICs
Slide 44: Consolidated U.S. RMBS
Consolidated U.S. RMBS By Type • Our $2.5 billion U.S. RMBS portfolio is amortizing As of September 30, 2021 both on a dollar basis and as a percentage of the ($ in millions) portfolio Subprime First Lien – Assured Guaranty’s U.S. RMBS exposure of $2.5 billion on $1,513 September 30, 2021, reflects
Slide 45: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories ($ millions) September 30, 2021 December 31, 2020 • As of September 30, 2021, BIG Category 1 approximately $2.4 billion (33%) of U.S. public finance $1,83
Slide 46: BIG Exposure Decline
BIG Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $19.5 billion • The largest components of our BIG exposure are Puerto Rico at 49% and U.S. RMBS at 18% BIG Net Par Outstanding Changes in BIG Net Par Outstanding ($ in billions) Full Full Full Year Year Year Q3 ($ in million
Slide 47: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of September 30, 2021 Net Par Internal Type1 Name or Description Outstanding Rating2 PF Puerto Rico Highways and Transportation Authority $1,256 CCC PF Puerto Rico General Obligation, Appropriations and Gua
Slide 48: Asset Management Overview
ASSURED (GUARANTY: Asset Management Overview VLSE |
Slide 49: Asset Management
Asset Management • AssuredIM currently has $17.6 billion in assets under management as of September 30, 2021 – CLOs had gross inflows of $1,977 million, including $1,811 Assets Under Management million of gross inflows from third parties in the first nine months As of September 30, 2021 of 2021 ($ i
Slide 50: Asset Management: Assets Under Management
Asset Management Assets Under Management Select GAAP Results Year-to-Date (December 31, 2020 to September 30, 2021) ($ in millions) Opportunity Liquid Wind-Down CLOs Funds Strategies Funds Total AUM, December 31, 2020 $13,856 $1,486 $383 $1,623 $17,348 Inflows: Third-party 1,811 271 - - 2,082 Interc
Slide 51: Appendix
ASSURED GUARANTY
Slide 52: 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 53: Explanation of Non-GAAP Financial Measures (Cont'd)
Appendix Explanation of Non-GAAP Financial Measures (Cont’d) Adjusted Operating Income: Management believes that adjusted operating income is a useful measure because it clarifies the understanding of the operating results of the Company. Adjusted operating income is defined as net income (loss) att
Slide 54: 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 55: 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 56: 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 September 30, Year Ended December 31, (dollars in millions) 2021 2020 2020 2019 2018 2017 2016 2015 2014 Total GWP $106 $121 $454 $677 $612 $307 $154 $181 $104 Less: Installment GWP and oth
Slide 57: Reconciliation of Net Income (Loss) Attributable to AGL to Adjusted Operating Income
Appendix Reconciliation of Net Income (Loss) Attributable to AGL to Adjusted Operating Income1 Three Months Ended Nine Months Ended Adjusted Operating Income Reconciliation September 30, September 30, (dollars in millions, except per share amounts) 2021 2020 2021 2020 Per Diluted Per Diluted Per Dil
Slide 58: Reconciliation of Net Income to Adjusted Operating Income (2010-2020)
Appendix Reconciliation of Net Income (Loss) to Adjusted Operating Income1 (2010-2020) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2020 2019 2018 2017 2016 2015 Total Per Share Total Per Share Total Per Share Total Per Share Total
Slide 59: 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 60: 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) September 30, 2021 June 30, 2021 December 31, 2020 September 30, 2020 June 30, 2020 December 31, 2019 Total Per Share Total Per Share Tota
Slide 61: 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 62: Reconciliation of Shareholders' Equity to Adjusted Book Value (2011-2018)
Appendix Reconciliation of Shareholders’ Equity to Adjusted Book Value1 (2011-2018) Adjusted Book Value1 Reconciliation (dollars in millions, except per share amounts) 2011 2012 2013 2014 2015 2016 2017 2018 Per Per Per Per Per Per Per Total Share Total Share Total Share Total Share Total Share Tota
Slide 63: Calculation of Adjusted Operating Portfolio Leverage
Appendix Calculation of Adjusted Operating Portfolio Leverage Adjusted Operating Leverage Actual (dollars in millions, except leverage) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 3Q 2021 Insured net par outstanding $640,194 $616,686 $556,830 $518,772 $459,107 $403,729 $358,571 $296,
Slide 64: 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 Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Net income (loss) attributable to AGL $17 $86 $126 214 Adjusted operating income2 34 48 197 200 Average shar
Slide 65: 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. Management fee revenue is based on a variety of factors and is not perfectly correlated with AUM. However, we believe AUM is a useful metric for assessing t
Slide 66: 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 September 30, 2021 6