Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q4 2022 Earnings Presentation
66 slides from Assured Guaranty's earnings presentation, Mar 1, 2023
Slide 1: Equity Investor Presentation December 31, 2022
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation December 31, 2022
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 • Year-End 2022 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: Year-to-Date 2022 Overview
Year-to-Date 2022 Overview Financial Results • Earned $267 million of adjusted operating income1 (or $4.14 per share) • Increased adjusted operating shareholders' equity1 per share and adjusted book value1 per share to record highs of $93.92 and $141.98, respectively Insurance • Generated $375 milli
Slide 6: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due ‒ Insurance law requires that each policy must provide that there shall be no acceleration of our obligations unless such acceleration is at our sole option • Issuers that defaul
Slide 7: Assured Guaranty Overview
Assured Guaranty Overview
Slide 8: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. ($ in billions) Dec 31, 2022 Sept 30, 2009 • We are the leading financial guaranty franchise, with over three decades of Insured net par outstanding $233.3 $646.6 experience in the municipal and structured finance markets U.S. public finance $179.6 $42
Slide 9: Assured Guaranty Ltd. 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 Assured Guaranty Re Ltd (AG Re) S&P: A (stable outlo
Slide 10: Adjusted Operating Income per Share by Year
Assured Guaranty Overview • Our annual adjusted operating income1 per share was $4.14 in 2022, compared with $6.32 in 2021 and $1.88 in 2004, the year of our initial public offering – The primary drivers of this variance between 2021 and 2022 came from three events in 2021: a large loss expense bene
Slide 11: 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 24, 20
Slide 12: 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 13: 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 $26 million2 (Head Office – Bermuda; Tax Residence – U.K.) • Annual net expenses of $45 million Assured Guaranty Re Ltd. • Annual dividend dist
Slide 14: Underlying Value
Underlying Value
Slide 15: High-Quality Investment Portfolio
Underlying Value High-Quality Investment Portfolio Total Invested Assets and Cash1,2 As of December 31, 2022 AAA 3 • Predominately consists of highly rated, fixed 23% maturity and short-term investments, and 5 cash; 54% rated AA or higher NR 5% AA 30% • Approximately $0.9 billion invested in liquid,
Slide 16: 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-22 • Meanwhile, total invested assets and cash has declined more modestly compared to prior periods – Total invested assets and c
Slide 17: 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 $692 million as of December 31, 2022, composed primarily of AssuredIM funds Net Investment Income1 ($ in millions) $4
Slide 18: Historical Growth: Adjusted Book Value per Share
Underlying Value Historical Growth Adjusted Book Value1 per Share $141.98 $130.67 $114.87 $45.94 $40.05 $96.99 $2.12 $86.18 $34.50 $1.89 $77.86 $28.26 $1.88 $66.52 $23.32 $20.53 $1.77 $60.99 $1.69 $53.39 $15.85 $1.13 $48.26 $46.54 $48.37 $17.07 $0.78 $41.90 $41.97 $46.22 $45.06 $88.73 $93.92 $15.34
Slide 19: Creating Value
Creating Value
Slide 20: 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 was robust in in 2022 – U.S. public finance direct PVP1 in 2022 was approximately $257 million, the second largest amount of new business production in a decade and
Slide 21: Non-U.S. Public Finance Business Activity
Creating Value Insurance Non-U.S. Public Finance Business Activity • In fourth quarter 2022, business activity was Non-U.S. Public Finance PVP1 primarily attributable to a guaranty of (excluding SGI reinsurance portfolio)2 regulated utilities ($ in millions) • In third quarter 2022, business activit
Slide 22: Global Structured Finance Business Activity
Creating Value Insurance Global Structured Finance Business Activity • Global structured finance had a particularly successful 2022, insuring nearly $50 million Global Structured PVP1 of new business PVP, the second largest (excluding SGI reinsurance portfolio)2 amount in a decade ($ in millions) •
Slide 23: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • New business production gross par written and PVP were strong in 2022 – U.S. public finance ▪ Gross par written was the third largest amount in a decade ▪ Direct PVP was the second largest amount in a decade ▪ Secondary gross
Slide 24: Puerto Rico Update
Creating Value Puerto Rico Update • During 2022, the Company completed settlement agreements related to our General Obligation (GO) and Public Buildings Authority (PBA), Puerto Rico Convention Center District Authority (PRCCDA), Puerto Rico Infrastructure Financing Authority (PRIFA) and Puerto Rico
Slide 25: AssuredIM
Creating Value AssuredIM • AssuredIM continued to execute on its key initiatives in 2022 – Third-party gross inflows were $1.4 billion – Reduced AUM from the wind-down funds to under $200 million • Despite market headwinds, AssuredIM has delivered strong results in funds invested for the insurance s
Slide 26: Financial Results
ASSURED (GUARANTY Financial Results VL hE |
Slide 27: Fourth Quarter 2022 Results: Select Financial Items
Fourth Quarter 2022 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Three Months Ended December 31, 4Q-21 2022 2021 Net income (loss) attributable to AGL $94 $263 (64)% Net income (loss) attributable to AGL per diluted share $1.5
Slide 28: Full Year 2022 Results: Select Financial Items
Full Year 2022 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Year Ended December 31, 2021 2022 2021 Net income (loss) attributable to AGL $124 $389 (68)% Net income (loss) attributable to AGL per diluted share $1.92 $5.23 (63)%
Slide 29: Fourth Quarter 2022 Supplemental Information
Fourth Quarter 2022 Results Supplemental Information Select Income Components ($ in millions) Three Months Ended December 31, 2022 Employee Net Income (Loss) Asset Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Expenses and Other Assured Guaranty, Premiums In
Slide 30: Full Year 2022 Supplemental Information
Full Year 2022 Results Supplemental Information Select Income Components ($ in millions) Year Ended December 31, 2022 Employee Net Income (Loss) Asset Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Expenses and Other Assured Guaranty, Premiums Income Fees (Be
Slide 31: Expected Loss and LAE to Be Paid, Q4 2022
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended December 31, 2022 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended December 31, 2022 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Bene
Slide 32: Expected Loss and LAE to Be Paid, Year 2022
Consolidated Insurance Expected Loss and LAE to Be Paid Year Ended December 31, 2022 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Year Ended December 31, 2022 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Benefit) Net (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 December 31, 2022 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $2,747 $1,916 $709 $(217) $5,155 Continge
Slide 36: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of December 31, 2022 – 77% U.S. public finance Non-U.S. Structured ($ in billions) – 19% Non-U.S. public finance Finance AA Average Rating – 4% U.S.
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 non-U.S. public finance sector – Our current net par of $233 billion includes a negative adjustment of over $4.
Slide 38: U.S. Public Finance Net Par Outstanding
U.S. Public Finance Net Par Outstanding • U.S. public finance net par outstanding is $180 billion and makes up 77% of our total insured portfolio as of U.S. Public Finance December 31, 2022 As of December 31, 2022 ($ in billions) • U.S. public finance portfolio generally performed well Higher Other
Slide 39: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Related Authorities and Public Corporations1 As of December 31, 2022 ($ in millions) Net Par Outstanding Total Net Par Gross Par AGM AGC AG Re Eliminations2 Outstanding Outstanding Resolved Puerto Rico Exposures Puerto Rico
Slide 40: 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 December 31, 2022 2023 2023 2023 2023 2033 – 2038 – ($ in millions) (1Q) (2Q) (3Q) (4Q) 2024 2025 2026 2027 2028 2029 2030 2031 2032 2037 2042
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 Related Authorities and Public Corporations As of December 31, 2022 2023 2023 2023 2023 2033 – 2038 – ($ in millions) (1Q) (2Q) (3Q) (4Q) 2024 2025 2026 2027 2028 2029 2030 2031 2032 2
Slide 42: Non-U.S. Public Finance Exposure
Non-U.S. Public Finance Exposure Net Par Outstanding By Type As of December 31, 2022 ($ in billions) • Non-U.S. public finance net par outstanding is Infrastructure finance $44 billion and makes up 19% of our total $13.9 Sovereign and insured portfolio as of December 31, 2022 31% sub-sovereign $9.5
Slide 43: Global Structured Finance Exposures
Global Structured Finance Exposures Net Par Outstanding By Type As of December 31, 2022 ($ in billions) U.S. RMBS • Assured Guaranty’s total structured finance $2.0 exposure of $9.2 billion, as of December 31, 21% Global Pooled 2022, reflects a $165.4 billion reduction from Corporate $174.6 billion
Slide 44: Consolidated U.S. RMBS
Consolidated U.S. RMBS By Type • Our $2.0 billion U.S. RMBS portfolio is As of December 31, 2022 amortizing both on a dollar basis and as a ($ in millions) percentage of the portfolio Subprime First Lien – Assured Guaranty’s U.S. RMBS exposure of $2.0 billion on $1,191 December 31, 2022, reflects a
Slide 45: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories • As of December 31, 2022, approximately ($ millions) December 31, 2022 December 31, 2021 BIG Category 1 $3.4 billion (57%) of the aggregate BIG U.S. publ
Slide 46: BIG Financial Guaranty Exposure Decline
BIG Financial Guaranty Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $20.9 billion • The largest components of our BIG exposure are Puerto Rico at 23% and U.S. RMBS at 17% • The finalization of the 2022 Puerto Rico Resolutions and its normal amortization led to a reduction
Slide 47: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of December 31, 2022 Net Par Internal Type1 Name or Description Outstanding Rating2 PF ProMedica Healthcare Obligated Group, Ohio $820 BB+ PF Puerto Rico Electric Power Authority 720 CCC PF Coventry & Rugby
Slide 48: Asset Management Overview
ASSURED (GUARANTY Asset Management Overview VL hE |
Slide 49: Asset Management
Asset Management • AssuredIM has $17.5 billion in assets under management as of December 31, 2022 – CLOs had gross inflows of over $1.2 billion in 2022 – Wind-down funds, which are legacy BlueMountain hedge and Assets Under Management opportunity funds, had gross outflows of $399 million in 2022 As
Slide 50: Assets Under Management
Asset Management Assets Under Management Select GAAP Results Year-Ended 2022 (December 31, 2021 to December 31, 2022) ($ in millions) Opportunity Liquid Wind-Down CLOs Funds Strategies Funds Total AUM, December 31, 2021 $14,699 $1,824 $389 $582 $17,494 Inflows: Third-party $1,049 315 21 - 1,385 Inte
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) 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 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 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) 2022 2021 2022 2021 2020 2019 2018 2017 2016 Total GWP $131 $100 $360 $377 $454 $677 $612 $307 $154 Less: Installment GWP and othe
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 Year Ended Adjusted Operating Income Reconciliation December 31, December 31, (dollars in millions, except per share amounts) 2022 2021 2022 2021 Per Diluted Per Diluted Per Diluted Per
Slide 58: Reconciliation of Net Income to Adjusted Operating Income (2010-2021)
Appendix Reconciliation of Net Income (Loss) to Adjusted Operating Income1 (2010-2021) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2021 2020 2019 2018 2017 2016 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) December 31, 2022 September 30, 2022 December 31, 2021 September 30, 2021 December 31, 2020 Total Per Share Total Per Share Total Per Shar
Slide 61: Reconciliation of Shareholders' Equity to Adjusted Book Value (2011-2019)
Appendix Reconciliation of Shareholders’ Equity to Adjusted Book Value1 (2011-2019) Adjusted Book Value1 Reconciliation (dollars in millions, except per share amounts) 2011 2012 2013 2014 2015 2016 2017 2018 2019 Per Per Per Per Per Per Per Per Per Total Share Total Share Total Share Total Share Tot
Slide 62: 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 63: Calculation of Adjusted Operating Portfolio Leverage
Appendix Calculation of Adjusted Operating Portfolio Leverage Adjusted Operating Leverage (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 shareholders' equity1 4,07
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 Year Ended December 31, December 31, 2022 2021 2022 2021 Net income (loss) attributable to AGL $94 $263 $124 $389 Adjusted operating income2 14 273 267 470 Average shareholde
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 that AUM is a useful metric for assess
Slide 66: Equity Investor Presentation 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 December 31, 2022 65