Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q3 2023 Earnings Presentation
65 slides from Assured Guaranty's earnings presentation, Nov 8, 2023
Slide 1: Equity Investor Presentation September 30, 2023
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation September 30, 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: Third Quarter 2023 Overview
Third Quarter 2023 Overview Financial Results • Earned $206 million of adjusted operating income1 (or $3.42 per share) – This compared with $133 million (or $2.11 per share) in the third quarter of 2022 – The strong result was primarily driven by a net gain related to the Sound Point and Assured Hea
Slide 6: Year-to-Date 2023 Overview
Year-to-Date 2023 Overview Financial Results • Earned $310 million of adjusted operating income1 (or $5.12 per share), up from $253 million in the same period of 2022 • Increased adjusted operating shareholders' equity1 per share and adjusted book value1 per share to record highs of $99.18 and $148.
Slide 7: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due – Insurance law requires that each policy must provide that there shall be no acceleration of the Company's obligations unless such acceleration is at our sole option • Issuers t
Slide 8: Assured Guaranty Overview
ASSURED GUARANTY Assured Guaranty Overview
Slide 9: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. ($ in billions) Sep 30, 2023 Sep 30, 2009 • We are the leading financial guaranty franchise, with over three decades of experience in the Insured net par outstanding $241.8 $646.6 municipal and structured finance markets • We serve the bond insurance m
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 was $4.14 in 2022, up from $1.88 in 2004, the year of our initial public offering – Adjusted operating income1 per share through September 30, 2023 was $5.12 per share, compared to $3.88 per share in the same period of 2022
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 7, 202
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 $43 million2 • Annual net expenses of $49 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 September 30, 2023 NR 5 AAA 3 • Predominately consists of highly rated, 27% Other 2% fixed maturity and short-term investments, invested assets 4% and cash; 54% rated AA or higher Sound Point • Approximately $
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 3Q-23 • Meanwhile, total invested assets and cash has declined more modestly compared to prior periods – Total invested assets and c
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) $596 million in equity-method alternative investments, (ii) the $419 million ownership interest in Sound Point and (iii) $350 million of trading securities as of September
Slide 19: Historical Growth
Underlying Value Historical Growth Adjusted Book Value1 per Share $148.03 $141.98 $130.67 $114.87 $48.85 $48.06 $41.94 $96.99 GR) 0 % CA $36.38 c r e a se (1 04 % in $30.03 lue: 5 o ok Va Adj. B $53.39 $48.26 $93.92 $99.18 $16.15 $88.73 $78.49 $24.51 $26.06 $26.12 $66.96 $6.43 $7.18 $37.24 $18.08 $1
Slide 20: Creating Value
ASSURED GUARANTY Creating Value
Slide 21: 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 has had a very successful 2023 – U.S. public finance insured approximately $15.8 billion of total par that closed in the first nine months of 2023, the second large
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 third quarter 2023, business activity was (YTD; $ in millions) attributable to a guaranty on a U.K. regulated utility $73 $67 $63 • In second quarter 2023, business activity was attributable to a gua
Slide 23: Global Structured Finance Business Activity
Creating Value Insurance Global Structured Finance Business Activity • After a strong fourth quarter 2022, global Global Structured Finance PVP1 structured finance continued its momentum in (YTD; $ in millions) first nine months of 2023, insuring $82 million $82 of new business PVP, the second large
Slide 24: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • Assured Guaranty insured $20.3 billion of aggregate par in the first nine months of 2023 – This is 35% more insured par than the same period in 2022 – It is also the largest amount of aggregate par insured in a decade • Assure
Slide 25: Puerto Rico Update
Creating Value Puerto Rico Update • The Company has divested portions of its Plan Consideration it received in connection with the resolution of General Obligation (GO) and Public Buildings Authority (PBA), Puerto Rico Convention Center District Authority (PRCCDA), Puerto Rico Infrastructure Financi
Slide 26: Asset Management
Creating Value Asset Management • In July, Assured Guaranty completed the combination of AssuredIM and Sound Point – Assured Guaranty owns 30% of the combined entity – AGM and AGC engaged Sound Point as their sole alternative credit manager ▪ In the first two years of Sound Point's engagement, AGM a
Slide 27: Financial Results
ASSURED GUARANTY Financial Results M4
Slide 28: Third Quarter 2023 Results
Third Quarter 2023 Results Select Financial Items Select GAAP Results ($ in millions, except per share data and percentages) Three Months Ended September 30, % Change vs. 3Q-22 2023 2022 Net income (loss) attributable to AGL $157 $11 1327% Net income (loss) attributable to AGL per diluted share $2.6
Slide 29: Year-to-Date 2023 Results
Year-to-Date 2023 Results Select Financial Items Select GAAP Results ($ in millions, except per share data and percentages) Nine Months Ended September 30, % Change vs. 9M-22 2023 2022 Net income (loss) attributable to AGL $363 $30 1110% Net income (loss) attributable to AGL per diluted share $5.99
Slide 30: Third Quarter 2023 Results Supplemental Information
Third Quarter 2023 Results Supplemental Information Select Income Components ($ in millions) Three Months Ended September 30, 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: Year-to-Date 2023 Results Supplemental Information
Year-to-Date 2023 Results Supplemental Information Select Income Components ($ in millions) Nine Months Ended September 30, 2023 Employee Net Income (Loss) Asset Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Expenses and Other Assured Guaranty Premiums Incom
Slide 32: Expected Loss and LAE to Be Paid, Three Months
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended September 30, 2023 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended September 30, 2023 Net Expected Loss Net Economic Loss Net Expected Loss to be Paid Development Net (Paid) to
Slide 33: Expected Loss and LAE to Be Paid, Nine Months
Consolidated Insurance Expected Loss and LAE to Be Paid Nine Months Ended September 30, 2023 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Nine Months Ended September 30, 2023 Net Expected Loss Net Economic Loss Net Expected Loss to be Paid Development Net (Paid) to be
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 September 30, 2023 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $ 2,569 $ 1,897 $ 677 $ (224) $ 4,919 Co
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 September 30, 2023 ($ in billions) — 77% U.S. public finance Non-U.S. — 19% Non-U.S. public finance Structured Finance — 4% U.S. structured finan
Slide 38: 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 39: U.S. Public Finance
U.S. Public Finance Net Par Outstanding U.S. Public Finance As of September 30, 2023 ($ in billions) • U.S. public finance net par outstanding is $186 billion and makes up 77% of our total General obligation insured portfolio as of September 30, 2023 $73.3 • U.S. public finance portfolio generally O
Slide 40: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Related Authorities and Public Corporations1 As of September 30, 2023 ($ in millions) Net Par Outstanding Total Net Par Gross Par AGM AGC AG Re Eliminations2 Outstanding Outstanding Defaulted Puerto Rico Exposures Puerto Ri
Slide 41: 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 September 30, 2023 2023 2024 2024 2024 2024 2033 - 2038 - ($ in millions) (4Q) (1Q) (2Q) (3Q) (4Q) 2025 2026 2027 2028 2029 2030 2031 2032 2037
Slide 42: 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 September 30, 2023 2023 2024 2024 2024 2024 2033 - 2038 - ($ in millions) (4Q) (1Q) (2Q) (3Q) (4Q) 2025 2026 2027 2028 2029 2030 2031
Slide 43: Non-U.S. Public Finance Exposure
Non-U.S. Public Finance Exposure Net Par Outstanding By Type As of September 30, 2023 ($ in billions) Infrastructure • Non-U.S. public finance net par outstanding is finance $46 billion and makes up 19% of our total Sovereign and $14.0 sub-sovereign insured portfolio as of September 30, 2023 $9.4 31
Slide 44: Global Structured Finance Exposures
Global Structured Finance Exposures Net Par Outstanding By Type As of September 30, 2023 ($ in billions) U.S. RMBS $1.8 • Assured Guaranty’s total structured finance Life Insurance Global Pooled exposure of $10.1 billion, as of September 30, 18% 21% Transactions Corporate 2023, reflects a $164.5 bil
Slide 45: CLO Exposures
CLO Exposures Exposure in Three Distinct Areas Non-CLO Exposure $241.3 1. $510 million of insured exposure • Six transactions Insured Portfolio • All of the exposure is rated AAA Net Par Outstanding As of Sep 30, 2023 • Average credit enhancement is approximately 39% ($ in billions) • The Company on
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 September 30, 2023, approximately ($ millions) September 30, 2023 December 31, 2022 $2.1 billion (41%) of the aggregate BIG BIG Category 1 exposur
Slide 47: BIG Financial Guaranty Exposure Decline
BIG Financial Guaranty Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $21.6 billion • The largest components of our BIG exposure are Puerto Rico (21%), U.S. Healthcare (21%) and U.S. RMBS (18%) • In August 2023, the Company paid down $108 million of par exposure related to c
Slide 48: BIG Exposures > $250 Million
BIG Exposures > $250 Million BIG Exposures Greater Than $250 Million As of September 30, 2023 ($ 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 Hosp
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 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) 2023 2022 2022 2021 2020 2019 2018 2017 2016 Total GWP $40 $94 $360 $377 $454 $677 $612 $307 $154 1 Less: Installment GWP and oth
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 Nine Months Ended Adjusted Operating Income Reconciliation September 30, September 30, (dollars in millions, except per share amounts) 2023 2022 2023 2022 Per Per Per Per Diluted Diluted
Slide 56: Reconciliation of Net Income to Adjusted Operating Income (2011-2022)
Appendix Reconciliation of Net Income (Loss) 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 Total Per Share Total
Slide 57: Reconciliation of Net Income to Adjusted Operating Income (2004-2010)
Appendix Reconciliation of Net Income (Loss) 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 Total Per Share Total
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) Sept 30, 2023 Jun 30, 2023 Dec 31, 2022 Sept 30, 2022 Jun 30, 2022 Dec 31, 2021 Per Per Per Per Per Total Share Total Share Total Per Shar
Slide 59: Reconciliation of Shareholders' Equity to Adjusted Book Value (2016-2020)
Appendix Reconciliation of 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 Reconcil
Slide 60: Reconciliation of Shareholders' Equity to Adjusted Book Value (2011-2015)
Appendix Reconciliation of 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 Reconcil
Slide 61: Reconciliation of Shareholders' Equity to Adjusted Book Value (2006-2010)
Appendix Reconciliation of 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 Reconcil
Slide 62: Reconciliation of Shareholders' Equity to Adjusted Book Value (2004-2005)
Appendix Reconciliation of 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 adjus
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 GAAP ROE1 to Adjusted Operating ROE1,2 ROE Reconciliation (dollars in millions) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Net income (loss) attributable to AGL $157 $11 $363 $30 2 Adjusted operating income 206 133 310 253 Average
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 Equity Investor Presentation September 30, 2023 65