Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q2 2021 Earnings Presentation
66 slides from Assured Guaranty's earnings presentation, Jun 30, 2021
Slide 1: Equity Investor Presentation June 30, 2021
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation June 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 • Second 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 maintainin
Slide 5: Second Quarter 2021 Accomplishments
Second Quarter 2021 Accomplishments • Earned $120 million of adjusted operating income1, or $1.59 per share, an increase of $0.23 per share compared with the second quarter of 2020 • Increased shareholders’ equity per share, adjusted operating shareholders' equity1 per share and adjusted book value1
Slide 6: Year-to-Date 2021 Accomplishments
Year-to-Date 2021 Accomplishments • Earned $163 million of adjusted operating income1, or $2.13 per share, an increase of $0.45 per share compared with the same period in 2020 • Generated $167 million of new insurance business production PVP1, an increase of approximately 14% compared the same perio
Slide 7: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due ‒ Insurance regulations forbid acceleration of our obligations without consent • Issuers that default on a few debt service payments may have the resources later to repay the Com
Slide 8: Assured Guaranty Overview
Assured Guaranty Overview
Slide 9: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. ($ in billions) June 30, 2021 Sept 30, 2009 • We are the leading financial guaranty franchise, with over three decades of Insured net par outstanding $234.7 $646.6 experience in the municipal and structured finance markets U.S. public finance $173.7 $4
Slide 10: Assured Guaranty Ltd. 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: Adjusted Operating Income per Share by Year
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 • Repurchases of our shares improve adjusted operating income1 per share, adjusted operating shareholders’ equity1 per share and adjusted
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 August 5, 2021,
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 $89 million2 (Head Office – Bermuda; Tax Residence – U.K.) • Annual net expenses of $32 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 June 30, 2021 maturity and short-term investments, and cash; 57% rated AA or higher Nearly 100% of BIG A BBB is held for loss 21% 12% mitigation or other • Appro
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 39:1 as of 2Q-21 – We expect that our rate of new business written should tend to equal or exceed that of exposures amortized in a given year, stabilizin
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 $566 million as of June 30, 2021, composed primarily of AssuredIM funds Net Investment Income1 ($ in millions) Net in
Slide 19: Historical Growth: Adjusted Book Value per Share
Underlying Value Historical Growth Adjusted Book Value1 per Share $119.72 $114.87 $96.99 $35.99 $86.18 $34.50 $77.86 $28.26 $1.92 $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 $81.81 $35.66 $14.63 $
Slide 20: Creating Value
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 has seen strong new business production for U.S. public finance in the first half of 2021 – Year-to-date, we insured 456 primary market transactions totaling approximately $10.1 billion of par, up approximately
Slide 22: U.S. Structured Finance Business Activity
Creating Value Insurance U.S. Structured Finance Business Activity • In second quarter 2021, we insured an insurance securitization and a whole business securitization U.S. Structured PVP1 (excluding SGI reinsurance portfolio)2 ($ in millions) • In first quarter 2021, we insured a balloon note guara
Slide 23: Non-U.S. Business Activity
Creating Value Insurance Non-U.S. Business Activity • In second quarter 2021, activity included a Non-U.S. PVP1 healthcare transaction, a toll road concession, (excluding SGI reinsurance portfolio)2 a solar energy transaction, and two secondary ($ in millions) market transactions $315 • In first qua
Slide 24: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • Year-to-date new business production was the second largest amount in over a decade – U.S. public finance insured par written increased by approximately 28% from par written in the same period last year – U.S. public finance P
Slide 25: AssuredIM
Creating Value AssuredIM • AssuredIM executed on its key strategic goals during the first half of 2021 – Issued three new CLOs, selling a significant percentage of the new CLOs’ equity to third parties – Increased fee earning AUM to $16.3 billion as of June 30, 2021, from $8.0 billion on December 31
Slide 26: Financial Results
ASSURED (GUARANTY Financial Results VL hE |
Slide 27: Second Quarter 2021 Results: Select Financial Items
Second Quarter 2021 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Three Months Ended June 30, 2Q-20 2021 2020 Net income (loss) attributable to AGL $98 $183 (46)% Net income (loss) attributable to AGL per diluted share $1.29 $2
Slide 28: First Half 2021 Results: Select Financial Items
First Half 2021 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Six Months Ended June 30, 1H-20 2021 2020 Net income (loss) attributable to AGL $109 $128 (15)% Net income (loss) attributable to AGL per diluted share $1.42 $1.42 -
Slide 29: Second Quarter 2021 Select Segment Results
Second Quarter 2021 Results Select Segment Results Select Segment Results ($ in millions) Three Months Ended June 30, 2021 Insurance Asset Management Corporate Other Total1 Adjusted operating income (loss) $152 $(2) $(34) $4 $120 Net earned premiums and credit derivative revenues $106 $- $- $(1) $10
Slide 30: First Half 2021 Select Segment Results
First Half 2021 Results Select Segment Results Select Segment Results ($ in millions) Six Months Ended June 30, 2021 Insurance Asset Management Corporate Other Total1 Adjusted operating income (loss) $231 $(9) $(63) $4 $163 Net earned premiums and credit derivative revenues $213 $- $- $(2) $211 Net
Slide 31: Expected Loss and LAE to Be Paid: Three Months
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended June 30, 2021 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended June 30, 2021 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Benefit) (Pa
Slide 32: Expected Loss and LAE to Be Paid: Six Months
Consolidated Insurance Expected Loss and LAE to Be Paid Six Months Ended June 30, 2021 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Six Months Ended June 30, 2021 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Benefit) (Paid)
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 June 30, 2021 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $2,943 $1,725 $725 $(220) $5,173 Contingency
Slide 36: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of June 30, 2021 ($ in billions) Non-U.S. Structured – 74% U.S. public finance Finance A Average Rating – 22% Non-U.S. public finance $0.5 <1% – 4%
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 $173.7 billion and makes up 74% of our total insured portfolio as of U.S. Public Finance June 30, 2021 As of June 30, 2021 ($ in billions) • U.S. public finance portfolio generally performed well during the Great Re
Slide 39: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1,2 As of June 30, 2021 Net Par ($ in millions) Outstanding Puerto Rico Exposures Subject to a Support Agreement 2: Commonwealth of Puerto Rico - General Obligation (GO) Bonds 3 $1,112 Puerto Rico Public Buildings A
Slide 40: Puerto Rico Scheduled Net Par Amortization
Public Finance Puerto Rico Exposure Scheduled Net Par Amortization of Exposure to the Commonwealth and its Agencies As of June 30, 2021 3Q 4Q 2031- 2036- 2041- ($ in millions) 2021 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2035 2040 2042 Total Commonwealth – GO $16 $- $37 $14 $73 $68 $34 $90
Slide 41: Puerto Rico Scheduled Net Debt Service Amortization
Public Finance Puerto Rico Exposure Scheduled Net Debt Service Amortization of Exposure to the Commonwealth and its Agencies As of June 30, 2021 3Q 4Q 2031- 2036- 2041- ($ in millions) 2021 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2035 2040 2042 Total Commonwealth – GO $45 $- $94 $70 $128 $
Slide 42: Consolidated Non-U.S. Exposure
Consolidated Non-U.S. Exposure Non-U.S. Public and Structured Finance Non-U.S. Exposure As of June 30, 2021 ($ in billions) • 99% of non-U.S. exposure is Public Finance – Direct sovereign debt is limited to Poland ($280 million) and Mexico ($50 million) Australia $1.9 5% 6% 4% 11% France United • 1%
Slide 43: Structured Finance Exposures
Structured Finance Exposures Net Par Outstanding By Type As of June 30, 2021 Financial 1 ($ in billions) Life Insurance Transactions • Assured Guaranty’s total structured finance Products $3.0 exposure of $9.1 billion as of June 30, 2021, (GICs) reflects a $165.5 billion reduction from $174.6 $0.8 3
Slide 44: Consolidated U.S. RMBS
Consolidated U.S. RMBS By Type • Our $2.7 billion U.S. RMBS portfolio is amortizing As of June 30, 2021 both on a dollar basis and as a percentage of the ($ in millions) portfolio Subprime First Lien – Assured Guaranty’s U.S. RMBS exposure of $2.7 billion on June $1,649 30, 2021, reflects a $26.5 bi
Slide 45: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories ($ millions) June 30, 2021 December 31, 2020 • As of June 30, 2021, approximately BIG Category 1 $2.5 billion (33%) of the aggregate U.S. public finance $
Slide 46: BIG Exposure Decline
BIG Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $19.2 billion • The largest components of our BIG exposure are Puerto Rico at 49% and U.S. RMBS at 18% BIG Net Par Outstanding Changes in BIG Net Par Outstanding ($ in billions) Full Full Full Year Year Year 1H ($ in million
Slide 47: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of June 30, 2021 Net Par Internal Type1 Name or Description Outstanding Rating2 PF Puerto Rico Highways and Transportation Authority $1,310 CCC PF Puerto Rico General Obligation, Appropriations and Guarante
Slide 48: Asset Management Overview
ASSURED (GUARANTY Asset Management Overview VL hE |
Slide 49: Asset Management
Asset Management • AssuredIM currently has $17.6 billion in assets under management – CLOs had gross inflows of $1,322 million, including $1,213 Assets Under Management million of gross inflows from third parties As of June 30, 2021 ($ in billions) – Wind-down funds, which are legacy BlueMountain he
Slide 50: Assets Under Management
Asset Management Assets Under Management Select GAAP Results Year-to-Date (December 31, 2020 to June 30, 2021) ($ in millions) Opportunity Liquid Wind-Down CLOs Funds Strategies Funds Total AUM, Beginning of Period $13,856 $1,486 $383 $1,623 $17,348 Inflows: Third-party 1,213 26 - - 1,239 Intercompa
Slide 51: Appendix
ASSURED GUARANTY F | Appendix
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 June 30, Year Ended December 31, (dollars in millions) 2021 2020 2020 2019 2018 2017 2016 2015 2014 Total GWP $84 $149 $454 $677 $612 $307 $154 $181 $104 Less: Installment GWP and other GAA
Slide 57: Reconciliation of Net Income to Adjusted Operating Income
Appendix Reconciliation of Net Income (Loss) Attributable to AGL to Adjusted Operating Income1 Three Months Ended Six Months Ended Adjusted Operating Income Reconciliation June 30, June 30, (dollars in millions, except per share amounts) 2021 2020 2021 2020 Per Diluted Per Diluted Per Diluted Per Di
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) June 30, 2021 March 31, 2021 December 31, 2020 June 30, 2020 March 31, 2020 December 31, 2019 Total Per Share Total Per Share Total Per Sh
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 2Q 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 Six Months Ended June 30, June 30, 2021 2020 2021 2020 Net income (loss) attributable to AGL $98 $183 $109 128 Adjusted operating income2 120 119 163 152 Average shareholders
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 June 30, 2021 65