Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Debt Investor Presentation (December 2018)
70 slides from Assured Guaranty's debt investor presentation, Dec 31, 2018
Slide 1: Fixed Income Investor Presentation December 31, 2018
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Fixed Income Investor Presentation December 31, 2018
Slide 2: Table of Contents
Table of Contents Page Forward-Looking Statements and Safe Harbor Disclosure 2 Conventions, Disclaimers and Non-GAAP Financial Measures 3 Corporate Overview 4 Assured Guaranty Ltd. Consolidated Insured Portfolio Overview 30 AGM1 Portfolio Review 40 Municipal Assurance Corp. Portfolio Review 49 Assur
Slide 3: 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 4: Conventions, Non-GAAP Financial Measures and Certain Statutory Data
Conventions, Non-GAAP Financial Measures and Certain Statutory Data • Unless otherwise noted, the following conventions are used in this presentation: – “AGM Consolidated” means Assured Guaranty Municipal Corp. and its consolidated entities (consisting primarily of Assured Guaranty (Europe) plc (AGE
Slide 5: Corporate Overview
ASSURED GUARANTY Corporate Overview
Slide 6: Corporate Overview
Corporate Overview • Assured Guaranty Ltd. (“AGL” and, together with its subsidiaries, “Assured Guaranty” or the “Company”) is the leading financial guaranty franchise – We are the only long-standing financial guaranty company to have written new business throughout the financial crisis and recessio
Slide 7: Operating Principles and Investor and Issuer Benefits
Operating Principles and Investor and Issuer Benefits • Underwriting principles and a strong risk management culture designed to protect our franchise • Experienced and disciplined management • Commitment to disclosure and transparency • Our guaranty benefits investors and issuers because we provide
Slide 8: Strategic Priorities
Strategic Priorities • Generate current and future revenue through new business production • Manage capital efficiently • Execute alternative strategies to create value, including acquisitions, investments and commutations • Mitigate losses 7
Slide 9: 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 Re Ltd (AG Re) Assured Guaranty US Holdings (AGUS) Assured Guaranty Finance Financial Guaran
Slide 10: Four Discrete Operating Companies with Separate Capital Bases
Four Discrete Operating Companies with Separate Capital Bases Consolidated Statutory-Basis Claims-Paying Resources and Exposures As of December 31, 2018 ($ in millions) AGM AGC MAC AG Re8 Eliminations3 Consolidated Claims-paying resources Policyholders' surplus $2,533 $1,793 $321 $986 ($485) $5,148
Slide 11: Principal Operating Platforms
Assured Guaranty Principal Operating Platforms • Assured Guaranty Municipal1, MAC, AGC and AGE operate as four separate direct financial guaranty platforms, with AG Re operating as a reinsurer – Assured Guaranty Municipal1 focuses exclusively on public finance and global infrastructure finance – MAC
Slide 12: Principal Operating Platforms (Continued)
Assured Guaranty Principal Operating Platforms (Continued) • Companies distinct for legal and regulatory purposes – Separate capital bases – claims-paying resources2 as of December 31, 2018 – AGM1 $6.0 billion, MAC $0.9 billion, AGC $3.4 billion, AG Re $2.1 billion – Separate insurance licenses – Se
Slide 13: Assured Guaranty Municipal's Commitment to the Public Finance Market
Assured Guaranty Municipal’s1 Commitment to the Public Finance Market Net Par Outstanding • Assured Guaranty Municipal1 is committed to As of December 31, 2018 insuring only U.S. public finance and global ($ in billions) infrastructure transactions now and in the future2 U.S. • Assured Guaranty Muni
Slide 14: Municipal Assurance Corp. (MAC)
Municipal Assurance Corp. (MAC) • MAC was launched in July of 2013 as a municipal-only bond insurer having positive attributes it takes most start-up companies years to establish. As of December 31, 2018, Municipal Assurance Corp. (MAC) has: • $895 million in claims-paying resources, consisting of $
Slide 15: AGC is Our Most Diversified Platform
AGC is Our Most Diversified Platform • AGC, a diversified insurer, may write all Net Par Outstanding classes of financial guaranty business, As of December 31, 2018 ($ in billions) including structured finance, U.S. public finance and global infrastructure U.S. • Structured finance eligible for new
Slide 16: AG Re and AGRO
AG Re and AGRO • AG Re is an insurance company • AG Re’s subsidiary AGRO is a specialty primarily engaged in providing reinsurance company reinsurance to financial guarantors – Rated AA (stable outlook) by S&P and A+ (stable – Rated AA (stable outlook) by S&P outlook) by A.M. Best – Licensed as a Cl
Slide 17: Underwriting Discipline
Underwriting Discipline • Our U.S. public finance portfolio, our largest exposure category, generally performed well Consolidated Financial Guaranty during the recession and in subsequent Net Par Outstanding years, despite persistent financial pressures As of December 31, 2018 on municipal obligors
Slide 18: Creating Value: New Business Production
Creating Value New Business Production (Par Insured) Penetration in the U.S. Public Finance Market (excluding SGI portfolio) • We are focused on building demand for New Issue U.S. Public Finance our guarantees, both in the primary and Insured Par Sold and Transaction Penetration1 the secondary marke
Slide 19: Broadening Market Awareness
Broadening Market Awareness Advertising Campaigns 18
Slide 20: Market Update: Select Assured Guaranty Transactions in 2018
Market Update Select Assured Guaranty Transactions in 2018 Assured Guaranty has maintained its market leadership in 2018, insuring $11 billion of par on almost 600 primary market transactions, ranging in size from $1 million to over $500 million in par. Some of our 2018 transactions are highlighted
Slide 21: Creating Value: U.S. Structured Finance Business Activity
Creating Value New Business Production U.S. Structured Finance Business Activity • During 2018, we continued to execute U.S. Structured PVP1 transactions in aviation and commercial (excluding SGI reinsurance portfolio)2 real estate markets, and guaranteed a ($ in millions) collateralized loan obliga
Slide 22: Creating Value: Non-U.S. Business Activity
Creating Value New Business Production Non-U.S. Business Activity • During 4Q-18 we closed non-U.S. transactions in both public finance and structured finance, Non-U.S. PVP1 including a United Kingdom social housing (excluding SGI reinsurance portfolio)2 ($ in millions) $42 financing • During 3Q-18
Slide 23: Alternative Strategies: Acquisitions and Reinsurance
Creating Value Alternative Strategies Acquisitions and Reinsurance • SGI reinsurance transaction closed on June 1, 2018 - Resulted in $11.3 billion of gross written par and $391 million of PVP, which helped lead the Company to a 10-year record high for PVP - Increased non-GAAP adjusted book value by
Slide 24: Alternative Strategies: Alternative Investments
Creating Value Alternative Strategies Alternative Investments • In February 2018, the Company acquired a minority interest in Rubicon Infrastructure Advisors - Rubicon is a full-service investment banking firm active in the global infrastructure sector, that has advised on over 70 merger and acquisi
Slide 25: Creating Value: Commutations
Creating Value Commutations • Reassumption of previously ceded business has increased the unearned premium reserve and non-GAAP adjusted book value1 Commutations Since 2009 Ceded Par Outstanding by Reinsurer As of December 31, 2018 As of December 31, 2018 Commutation Reassumed Par Reassumed UPR Gain
Slide 26: Financial Strength Ratings
Financial Strength Ratings • In June 2018, S&P affirmed the AA (stable outlook) Financial Strength Ratings financial strength ratings of AGM, MAC and AGC As of December 31, 2018 – S&P found the Assured Guaranty group’s capital adequacy to be above their AAA requirement; although S&P did not S&P Mood
Slide 27: Net Par Outstanding Amortization
Net Par Outstanding Amortization • Amortization of the existing portfolio reduces rating Consolidated Net Par Outstanding Amortization1 agency capital charges, but also embedded future As of December 31, 2018 ($ in billions) earned premiums $640 Public Finance – Currently, the existing portfolio con
Slide 28: Assured Guaranty Today
Assured Guaranty Today Insured Portfolio and Capital Changes Since the Global Financial Crisis Claims-Paying Resources Insured Leverage $ in billions $13.2 $12.8 $13.2 $12.6 $12.4 $12.5 $12.6 $12.0 $12.0 $11.8 71.3x 70.5x 62.9x 59.8x 53.5x 47.4x 46.7x 46.8x 41.2x 40.0x 39.4x 57% Decline 35.0x 33.5x
Slide 29: AGL Consolidated Investment Portfolio
AGL Consolidated Investment Portfolio Fair Value as of December 31, 2018 Total Invested Assets and Cash1 Total Invested Assets and Cash1 By Category By Rating2 U.S. NR Other Other U.S. Treasuries, Gov't & Treasuries & Agency <1% Invested 7 Invested Agency Obligations AAA Short-term Government Obliga
Slide 30: Credit Default Swap Spreads
Credit Default Swap Spreads • Movements in credit default swap (CDS) levels for Assured Guaranty Municipal1 and AGC continue to be significantly affected by technical factors such as supply/demand imbalance and light trading volume • The deterioration in the asset-backed securities market’s pricing
Slide 31: Assured Guaranty Ltd. Consolidated Insured Portfolio Overview
Assured Guaranty Ltd. Consolidated Insured Portfolio Overview
Slide 32: AGL Consolidated Insured Portfolio
AGL Consolidated Insured Portfolio Net Par Outstanding as of December 31, 2018 Portfolio Diversification by Sector Non-U.S. Structured U.S. Finance Structured <1% Finance 4% Non-U.S. Public Finance 18% U.S. Public Finance 77% $241.8 billion1,2 Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. S
Slide 33: AGL Consolidated Insured Portfolio Ratings
AGL Consolidated Insured Portfolio Ratings Net Par Outstanding as of December 31, 2018 Portfolio Diversification by Rating BIG AAA AA 4% 2% 11% BBB 33% A 49% $241.8 billion1,2 Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance Portfolio Public & Structured Finance BIG AAA AA A
Slide 34: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1 As of December 31, 2018 Net Par Gross Par ($ in millions) Outstanding Outstanding Commonwealth Commonwealth of Puerto Rico - General Obligation Bonds 2,3 $1,340 $1,383 Constitutionally Puerto Rico Public Buildings
Slide 35: Puerto Rico Exposure: Scheduled Net Par Amortization
Public Finance Puerto Rico Exposure Scheduled Net Par Amortization of Exposure to the Commonwealth and its Agencies As of December 31, 2018 1Q 2Q 3Q 4Q 2029- 2034- 2039- 2044- ($ in millions) 2019 2019 2019 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2033 2038 2043 2047 Total Commonwealth – GO
Slide 36: Puerto Rico Exposure: Scheduled Net Debt Service Amortization
Public Finance Puerto Rico Exposure Scheduled Net Debt Service Amortization of Exposure to the Commonwealth and its Agencies As of December 31, 2018 1Q 2Q 3Q 4Q 2029- 2034- 2039- 2044- ($ in millions) 2019 2019 2019 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2033 2038 2043 2047 Total Commonwe
Slide 37: Detroit & Stockton Exposure
AGL Consolidated Detroit & Stockton Exposure Details of Assured Guaranty’s Exposure to Detroit • Municipal utilities exposure is $429 million of water revenue bonds and $982 million of sewer revenue bonds. Both the water and sewer systems provide services to areas that extend significantly beyond th
Slide 38: Structured Finance Exposures
Structured Finance Exposures Net Par Outstanding By Type As of December 31, 2018 U.S. and Non-U.S. ($ in billions) U.S. • Assured Guaranty’s total structured finance Pooled RMBS exposure of $240.9 billion at December 31, Corporate $4.3 $1.3 12% 2007 has declined by $229.8 billion to $11.1 38% billio
Slide 39: Consolidated U.S. RMBS
Consolidated U.S. RMBS • Our $4.3 billion U.S. RMBS portfolio is amortizing both on a dollar basis and as a U.S. RMBS by Exposure Type1 percentage of the portfolio As of December 31, 2018 ($ in billions) – Total U.S. RMBS has declined from $29.2 billion at December Subprime 31, 2009 to $4.3 billion
Slide 40: Consolidated Non-U.S. Exposure
Consolidated Non-U.S. Exposure Non-U.S. Public and Structured Finance Non-U.S. Exposure As of December 31, 2018 ($ in billions) • 97% of non-U.S. exposure is Public Finance Canada – Direct sovereign debt is limited to Poland ($282 Other $2.7 France million outstanding) $6.2 $3.2 Australia $2.1 6% 14
Slide 41: AGM Portfolio Review
AGM Portfolio Review Eiffage CEVM / Foster + Partners / Jean-Pierre Lescourret
Slide 42: AGM Insured Portfolio
AGM1 Insured Portfolio Net Par Outstanding as of December 31, 2018 Portfolio Diversification by Sector Non-U.S. Structured Finance U.S. <1% Structured Finance 3% U.S. Public Finance 70% Non-U.S. Public Finance 26% $118.5 billion2 Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Fina
Slide 43: AGM Insured Portfolio Ratings
AGM1 Insured Portfolio Ratings Net Par Outstanding as of December 31, 2018 Portfolio Diversification by Rating BIG AAA AA 4% 1% 9% BBB 37% A 49% $118.5 billion2 Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance Portfolio Public & Structured Finance BIG AAA AA A BIG AAA 3% <1%
Slide 44: AGM Net Par Outstanding By Asset Type
AGM1 Insured Portfolio Net Par Outstanding as of December 31, 2018 Net Par Outstanding By Asset Type ($ in millions) Net Par Avg. Internal Net Par Avg. Internal Outstanding Rating Outstanding Rating U.S. public finance: U.S. structured finance: General obligation $ 33,184 A- RMBS $ 2,488 BB+ Tax bac
Slide 45: AGM Projected Amortization of Global Insured Structured Finance Portfolio
AGM1 Projected Amortization of Global Insured Structured Finance Portfolio Financial A Other Products AA $0.1 Structured (GICs) 3 $1.4 Finance $1.1 $0.7 BBB $0.4 3 AAA $0.8 BIG U.S. RMBS $1.6 $2.5 $4.3 Billion Net Par Outstanding2 As of December 31, 2018 $Million $4,500 $4,000 Other Structured Finan
Slide 46: AGM U.S. RMBS Exposure
AGM1 U.S. RMBS Exposure By Type As of December 31, 2018 ($ in million) • AGM’s1 U.S. RMBS portfolio is amortizing on an Prime First Lien Alt-A First absolute basis and has declined as a percentage $25 Lien $337 of the portfolio 1% – $2.5 billion net par outstanding versus $17.1 billion at 14% year-e
Slide 47: AGM Investment Portfolio
AGM1 Investment Portfolio Fair Value as of December 31, 2018 Total Invested Assets and Cash2 Total Invested Assets and Cash2 By Category By Rating3 Other Short-term & U.S. Invested Cash Treasuries & U.S. 8 7% Government Treasuries & AAA Assets 25% <1% Obligations Gov't <1% Obligations Foreign <1% As
Slide 48: AGM Expected Loss and LAE to Be Paid: Three Months Ended December 31, 2018
AGM Expected Loss and LAE to Be Paid Three Months Ended December 31, 2018 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended December 31, 2018 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) as Development During (Paid) Recover
Slide 49: AGM Expected Loss and LAE to Be Paid: Year Ended December 31, 2018
AGM Expected Loss and LAE to Be Paid Year Ended December 31, 2018 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Year Ended December 31, 2018 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development During (Paid) Recovered be Paid (Recover
Slide 50: Municipal Assurance Corp. Portfolio Review
Municipal Assurance Corp. Portfolio Review
Slide 51: MAC Insured Portfolio
MAC Insured Portfolio (100% U.S. Public Finance) Net Par Outstanding as of December 31, 2018 Portfolio Diversification by Sector Portfolio Diversification by Rating 1 BIG AAA AA Muni Utility 1% 1% 20% Revenue 15% BBB 16% Tax Backed 14% General Obligations 63% Other 8% A 62% $28.1 billion Net Par Out
Slide 52: MAC Investment Portfolio
MAC Investment Portfolio Fair Value as of December 31, 2018 Total Invested Assets and Cash1 Total Invested Assets and Cash1 By Category By Rating2 U.S. Short Term Treasuries & Cash Investments Government <1% 4 2% Obligations U.S. AAA 3% Treasuries & 14% Mortgage- Gov't backed & Obligations Asset- 3%
Slide 53: Assured Guaranty Corp. Portfolio Review
Assured Guaranty Corp. Portfolio Review Eiffage CEVM / Foster + Partners / Jean-Pierre Lescourret
Slide 54: AGC Insured Portfolio
AGC Insured Portfolio Net Par Outstanding as of December 31, 2018 Portfolio Diversification by Sector Non-U.S. Structured Finance 2% Non-U.S. Public Finance 18% U.S. Public Finance 65% U.S. Structured Finance $27.4 billion 15% Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance
Slide 55: AGC Insured Portfolio Ratings
AGC Insured Portfolio Ratings Net Par Outstanding as of December 31, 2018 Portfolio Diversification by Rating BIG AAA 10% 6% AA 17% BBB 32% A 35% $27.4 billion Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance Portfolio Public & Structured Finance AAA AA AAA BIG BIG <1% BIG 1
Slide 56: AGC Net Par Outstanding By Asset Type
AGC Insured Portfolio Net Par Outstanding as of December 31, 2018 Net Par Outstanding By Asset Type ($ in millions) Net Par Avg. Internal Net Par Avg. Internal Outstanding Rating Outstanding Rating U.S. public finance: U.S. structured finance: Tax backed $ 4,168 BBB- RMBS $ 1,399 BBB- General obliga
Slide 57: AGC U.S. RMBS Exposure
AGC U.S. RMBS Exposure By Type As of December 31, 2018 ($ in millions) Second Alt-A First Lien • AGC’s U.S. RMBS portfolio is amortizing on Lien $297 $205 an absolute basis and has declined as a percentage of the portfolio Prime First 21% Lien 15% Option – $1.4 billion versus $13.4 billion at year-e
Slide 58: AGC Non-RMBS Exposure
AGC Non-RMBS Exposure U.S. Structured Finance U.S. Non-RMBS Structured Finance • AGC’s non-RMBS U.S. structured finance As of December 31, 2018 ($ in billions) exposures consist principally of: Other – Pooled corporate obligations structured finance – Consumer receivables $0.4 – Insurance securitiza
Slide 59: AGC Investment Portfolio
AGC Investment Portfolio Fair Value as of December 31, 2018 Total Invested Assets and Cash1 Total Invested Assets and Cash1 By Category By Rating2 Other U.S. Invested Cash Treasuries & Agency Assets 1% Government Obligations <1% 1% U.S. 6 AA Obligations AAA Treasuries, 43% Short-term 1% 14% Gov't 4%
Slide 60: AGC Expected Loss and LAE to Be Paid: Three Months Ended December 31, 2018
AGC Expected Loss and LAE to Be Paid Three Months Ended December 31, 2018 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended December 31, 2018 Net Expected Loss to Economic Loss (Paid) Recovered Net Expected Loss to be Paid (Recovered) as Development Loss
Slide 61: AGC Expected Loss and LAE to Be Paid: Year Ended December 31, 2018
AGC Expected Loss and LAE to Be Paid Year Ended December 31, 2018 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Year Ended December 31, 2018 Net Expected Loss Net Expected Loss to be to be Paid on SGI Economic Loss (Paid) Recovered Net Expected Loss to Paid (Recovered)
Slide 62: Appendix
ASSURED GUARANTY
Slide 63: Explanation of Non-GAAP Financial Measures
Appendix Explanation of Non-GAAP Financial Measures To reflect the key financial measures that management analyzes in evaluating the Company’s operations and progress towards long-term goals, the Company discloses both financial measures determined in accordance with GAAP and financial measures not
Slide 64: Explanation of Non-GAAP Financial Measures
Appendix Explanation of Non-GAAP Financial Measures Non-GAAP Operating Income: Management believes that non-GAAP operating income is a useful measure because it clarifies the understanding of the underwriting results and financial condition of the Company and presents the results of operations of th
Slide 65: Explanation of Non-GAAP Financial Measures (Cont'd)
Appendix Explanation of Non-GAAP Financial Measures (Cont’d) Management uses non-GAAP adjusted book value, adjusted for FG VIE consolidation, to measure the intrinsic value of the Company, excluding franchise value. Growth in non-GAAP adjusted book value per share, adjusted for FG VIE consolidation
Slide 66: 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 December 31, Year Ended December 31, (dollars in millions) 2018 2017 2018 2017 2016 2015 2014 Total GWP $96 $72 $612 $307 $154 $181 $104 Less: Installment GWP and other GAAP adjustments1 27
Slide 67: Reconciliation of Net Income (Loss) to Non-GAAP Operating Income
Appendix Reconciliation of Net Income (Loss) to Non-GAAP Operating Income1 Three Months Ended Year Ended Non-GAAP Operating Income Reconciliation December 31, December 31, (dollars in millions, except per share amounts) 2018 2017 2018 2017 Per Diluted Per Diluted Per Diluted Per Diluted Total Share
Slide 68: Reconciliation of Shareholders' Equity to Non-GAAP Adjusted Book Value
Appendix Reconciliation of Shareholders’ Equity to Non-GAAP Adjusted Book Value1 Non-GAAP Adjusted book value reconciliation As of (dollars in millions, except per share amounts) December 31, 2018 September 30, 2018 December 31, 2017 September 30, 2017 December 31, 2016 Total Per Share Total Per Sha
Slide 69: Reconciliation of GAAP ROE to Non-GAAP Operating ROE
Appendix Reconciliation of GAAP ROE to Non-GAAP Operating ROE ROE Reconciliation (dollars in millions) Three Months Ended Year Ended December 31, December 31, 2018 2017 2018 2017 Net income (loss) $88 $52 $521 $730 Non-GAAP Operating income 92 91 482 661 Gain (loss) related to FG VIE consolidation i
Slide 70: Assured Guaranty Contacts
Assured Guaranty Contacts: Robert Tucker Senior Managing Director Investor Relations and Corporate Communications Direct: 212.339.0861 rtucker@agltd.com Michael Walker Managing Director Fixed Income Investor Relations Direct: 212.261.5575 mwalker@agltd.com Andre Thomas Managing Director Investor Rel
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