Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q1 2020 Earnings Presentation
65 slides from Assured Guaranty's earnings presentation, May 2020
Slide 1: Equity Investor Presentation March 31, 2020
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation March 31, 2020
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 • First Quarter 2020 • 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 – Investme
Slide 5: First Quarter 2020 Accomplishments
First Quarter 2020 Accomplishments • Earned $33 million of adjusted operating income1, or $0.36 per share • Increased adjusted operating shareholders' equity1 per share and adjusted book value1 per share, reaching new record highs of $67.25 and $98.02, respectively • Generated $51 million of new ins
Slide 6: COVID-19 Market Disruption
COVID-19 Market Disruption • The COVID-19 pandemic led the major stock indices to post significant losses, and caused Assured Guaranty’s share price to fall significantly during the 1st quarter – Both the Dow Jones Industrial Average (“DJIA”) and the S&P 500 reached intra-day lows not seen since 201
Slide 7: COVID-19 Market Disruption: Strength of Financial Guaranty Business Model
COVID-19 Market Disruption Strength of Financial Guaranty Business Model • The Company is required to pay only any shortfall of principal and interest due on the scheduled payment dates ‒ Insurance regulations forbid acceleration of its obligations without its consent ‒ Many of the obligations the C
Slide 8: Assured Guaranty Overview
Assured Guaranty Overview
Slide 9: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. • We are the leading financial guaranty ($ in billions) Mar 31, 2020 Sept 30, 2009 franchise, with over three decades of experience in the municipal and structured Insured net par outstanding $230.9 $646.6 finance markets U.S. public finance $172.8 $42
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 Re Ltd (AG Re) Assured Guaranty US Holdings (AGUS) Assured Guaranty Finance Financial Guaran
Slide 11: Assured Guaranty Overview: Adjusted Operating Income per Share
Assured Guaranty Overview • Since our initial public offering in 2004, we have grown our annual adjusted operating income1 from $1.88 per share to $3.91 per share in 2019, a 5% compounded annual growth rate (CAGR) ‒ Our annual adjusted operating income1 grew from $141 million in 2004 to $391 million
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 distributing dividends and repurchasing our common shares – Since 2013, when we started our capital management strategy of repurchasing our common shares, through May 7, 2020, we
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 $33 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 • Predominately consists of highly rated, fixed maturity and short-term investments, and Total Invested Assets and Cash1,2 cash; 66% rated AA or higher As of March 31, 2020 Nearly 100% of BIG • Approximately $1.1 billion invested in liquid, A 19% BB
Slide 17: Deleveraging
Underlying Value Deleveraging • Our insured net par outstanding to adjusted operating shareholders’ equity1 has declined from 157:1 in 4Q-09 to 38:1 as of 1Q-20 – Assuming the municipal market normalizes over the course of 2020, we still expect that beginning in 2020, our rate of new business writte
Slide 18: Net Investment Income to Insurance Segment and Corporate Division Operating Expenses
Underlying Value Net Investment Income1 to Insurance Segment and Corporate Division Operating Expenses • Net investment income1 is expected to cover operating expenses of the Insurance segment and Corporate division Net Investment Income1 ($ in millions) 1 Net investment income $423 $417 $404 $393 $
Slide 19: Historical Growth: Adjusted Book Value per Share
Underlying Value Historical Growth Adjusted Book Value1 per Share $96.99 $98.02 $86.18 $77.86 $28.26 $29.06 $23.32 $66.52 $20.53 $1.77 $1.71 $60.99 $1.69 $53.39 $15.85 $1.13 $48.26 $46.54 $46.22 $48.37 $17.07 $0.78 $45.06 $41.90 $41.97 $15.34 $0.96 $14.63 $35.66 $7.38 $9.05 $18.46 $15.62 $0.81 $66.9
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 (excluding SGI portfolio) • We are focused on building demand for our guarantees, both in the primary and the secondary markets for U.S. public finance – In Q1 2020, we insured 162 primary market transactions totaling $2.5 billio
Slide 22: U.S. Structured Finance Business Activity
Creating Value Insurance U.S. Structured Finance Business Activity • During 1Q-20, we insured a portion of a whole business securitization U.S. Structured PVP1 (excluding SGI reinsurance portfolio)2 • Focus has been on bilateral transactions to ($ in millions) improve policy beneficiaries’ capital m
Slide 23: Non-U.S. Business Activity
Creating Value Insurance Non-U.S. Business Activity • During 1Q-20, new business included a guaranty of a solar bond transaction in Spain, written by the Non-U.S. PVP1 Company’s new French subsidiary, Assured (excluding SGI reinsurance portfolio)2 ($ in millions) Guaranty (Europe) SA, as well as add
Slide 24: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline Gross Par Written Quarter Ended March 31, 2020 2019 Gross Par Avg. Gross Par Avg. Sector: Written Rating1 Written Rating1 U.S. public finance $2,641 BBB+ $2,016 A- Non-U.S. public finance 377 BBB+ 176 A- Total public finance $3,
Slide 25: Puerto Rico Settlement Agreements
Creating Value Insurance Puerto Rico Settlement Agreements • In February 2019, consummated a resolution under an RSA relating to the Company’s Puerto Rico Sales Tax Financing Corporation (COFINA) exposure ‒ Paid off the entire exposure of $273 million, plus accrued and unpaid interest ‒ Received $15
Slide 26: Acquisitions and Reinsurance of Legacy Monolines
Creating Value Insurance Acquisitions and Reinsurance of Legacy Monolines • Radian Asset Assurance acquisition closed on April 1, 2015 - Resulted in an increase of $654 million to claims-paying resources, an increase of $193 million to adjusted operating shareholders’ equity1 and $570 million to adj
Slide 27: Assured Investment Management Platform
Creating Value Assured Investment Management Platform • On October 1, 2019, Assured Guaranty completed the acquisition of all of the outstanding equity interests in BlueMountain and its associated entities for a purchase price of $157 million - Assured Guaranty contributed $60 million of cash to Blu
Slide 28: Financial Results
Financial Results March 31, 2020
Slide 29: First Quarter 2020 Results: Select Financial Items
First Quarter 2020 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Quarter Ended March 31, 1Q-19 2020 2019 Net income (loss) attributable to AGL $(55) $54 NM Net income (loss) attributable to AGL per diluted share $(0.59) $0.52 N
Slide 30: First Quarter 2020 Results: Select Segment Results
First Quarter 2020 Results Select Segment Results Select Segment Results ($ in millions) Quarter Ended March 31, 2020 Insurance Asset Management Corporate Other Total Adjusted operating income (loss) $85 $(9) $(39) $(4) $33 Net earned premiums and credit derivative revenues $107 $- $- $(1) $106 Net
Slide 31: Insurance Loss Measures
Insurance Loss Measures Economic loss development (all contracts): • Represents the estimated change in expected losses due to changes in transaction performance, discount rates, loss mitigation and other factors. Economic loss development excludes the effects of deferred premium revenue. The effect
Slide 32: Consolidated Insurance Expected Loss and LAE to Be Paid
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended March 31, 2020 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended March 31, 2020 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Benefit) (
Slide 33: Insurance Portfolio Overview
Insurance Portfolio Overview March 31, 2020
Slide 34: Four Discrete Insurance Companies with Separate Capital Bases
Four Discrete Insurance Companies with Separate Capital Bases Consolidated Statutory-Basis Claims-Paying Resources and Exposures As of March 31, 2020 ($ in millions) AGM AGC MAC AG Re7 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $2,573 $1,668 $277 $823 $(478) $4,863 Con
Slide 35: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of March 31, 2020 ($ in billions) Non-U.S. Structured – 75% U.S. public finance Finance A Average Rating – 21% Non-U.S. public finance $0.7 – 4% U.S
Slide 36: Net Par Outstanding Amortization
Net Par Outstanding Amortization • Amortization of the existing portfolio reduces rating agency capital charges, but also embedded future earned premiums – Currently, the existing $231 billion portfolio consists of $221 billion of public finance and $10 billion of structured finance net par – The ex
Slide 37: U.S. Public Finance Net Par Outstanding
U.S. Public Finance Net Par Outstanding • U.S. public finance net par outstanding is $172.8 billion and makes up 75% of our total U.S. Public Finance insured portfolio as of March 31, 2020 As of March 31, 2020 ($ in billions) • U.S. public finance portfolio generally Higher Other Public performed we
Slide 38: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1,2 As of March 31, 2020 Net Par Gross Par ($ in millions) Outstanding Outstanding Commonwealth Commonwealth of Puerto Rico - General Obligation Bonds 3 $1,253 $1,294 Constitutionally Puerto Rico Public Buildings Au
Slide 39: Puerto Rico Scheduled Net Par Amortization
Public Finance Puerto Rico Exposure Scheduled Net Par Amortization of Exposure to the Commonwealth and its Agencies As of March 31, 2020 2Q 3Q 4Q 2030- 2035- 2040- 2045- ($ in millions) 2020 2020 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2039 2044 2047 Total Commonwealth – GO $- $141 $-
Slide 40: Puerto Rico Scheduled Net Debt Service Amortization
Public Finance Puerto Rico Exposure Scheduled Net Debt Service Amortization of Exposure to the Commonwealth and its Agencies As of March 31, 2020 2Q 3Q 4Q 2030- 2035- 2040- 2045- ($ in millions) 2020 2020 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2039 2044 2047 Total Commonwealth – GO $
Slide 41: Consolidated Non-U.S. Exposure
Consolidated Non-U.S. Exposure Non-U.S. Public and Structured Finance Non-U.S. Exposure As of March 31, 2020 ($ in billions) • 99% of non-U.S. exposure is Public Finance – Direct sovereign debt is limited to Poland ($289 Canada $2.4 France million) and Mexico ($50 million) Other $3.1 Australia $1.9
Slide 42: Structured Finance Exposures
Structured Finance Exposures Net Par Outstanding By Type As of March 31, 2020 • Assured Guaranty’s total structured finance Life Insurance Financial ($ in billions) Transactions Products $1.8 (GICs) 1 exposure of $9.5 billion through March 31, $0.8 8% 19% U.S. and Non- 2020 reflects a $231.4 billion
Slide 43: Consolidated U.S. RMBS
Consolidated U.S. RMBS • Our $3.4 billion U.S. RMBS portfolio is amortizing both on a dollar basis and as a U.S. RMBS by Exposure Type percentage of the portfolio As of March 31, 2020 – Assured Guaranty’s U.S. RMBS exposure of $3.4 billion ($ in billions) through March 31, 2020 reflects a $25.8 bill
Slide 44: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories ($ millions) March 31, 2020 December 31, 2019 • As of March 31, 2020, approximately BIG Category 1 $2.5 billion (30%) of the aggregate U.S. public finance
Slide 45: BIG Exposure Decline
BIG Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $18.6 billion • The largest components of our BIG exposure are Puerto Rico at 52% and U.S. RMBS at 19% BIG Net Par Outstanding BIG Net Par Outstanding $ in Billions Full Year Full Year Full Year Q1 ($ in millions) 2017 2018
Slide 46: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of March 31, 2020 Net Par Internal Type1 Name or Description Outstanding Rating2 PF Puerto Rico General Obligation, Appropriations and Guarantees of the Commonwealth $1,409 CCC PF Puerto Rico Highways and T
Slide 47: Asset Management Overview
Asset Management Overview March 31, 2020
Slide 48: Asset Management: Assets Under Management
Asset Management • The Assured Investment Management platform currently has $16.5 billion in assets under management Assets Under Management – CLOs had small net outflows of $67 million As of March 31, 2020 ($ in billions) – Opportunity funds had small net inflows of $3 million CLOs – Wind-down fund
Slide 49: Asset Management: Assets Under Management Rollforward
Asset Management Assets Under Management Select GAAP Results ($ in millions, except per share data and percentages) Quarter Ended March 31, 2020 Opportunity Wind-Down CLOs Funds Funds Total AUM beginning of period, December 31, 2019 $12,758 $1,023 $4,046 $17,827 Inflows - 88 - 88 Outflows: Redemptio
Slide 50: Appendix
ASSURED GUARANTY F | Appendix 5S.
Slide 51: 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 52: Explanation of Non-GAAP Financial Measures
Appendix Explanation of Non-GAAP Financial Measures Adjusted Operating Income: Management believes that adjusted operating income is a useful measure because it clarifies the understanding of the underwriting results of the Company. Adjusted operating income is defined as net income (loss) attributa
Slide 53: 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 54: 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 55: Reconciliation of Gross Written Premiums to PVP
Appendix Reconciliation of Gross Written Premiums (GWP) to PVP Three Months Ended Reconciliation of GWP to PVP March 31, Year Ended December 31, (dollars in millions) 2020 2019 2019 2018 2017 2016 2015 2014 Total GWP $64 $39 $677 $612 $307 $154 $181 $104 Less: Installment GWP and other GAAP adjustme
Slide 56: Reconciliation of Net Income to Adjusted Operating Income
Appendix Reconciliation of Net Income (Loss) Attributable to AGL to Adjusted Operating Income1 Three Months Ended Adjusted Operating Income1 Reconciliation March 31, (dollars in millions, except per share amounts) 2020 2019 Per Diluted Per Diluted Total Share Total Share Net income (loss) attributab
Slide 57: Reconciliation of Net Income to Adjusted Operating Income (2010-2019)
Appendix Reconciliation of Net Income (Loss) to Adjusted Operating Income1 (2010-2019) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2019 2018 2017 2016 2015 Total Per Share Total Per Share Total Per Share Total Per Share Total Per
Slide 58: 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 59: 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) March 31, 2020 December 31, 2019 March 31, 2019 December 31, 2018 Total Per Share Total Per Share Total Per Share Total Per Share Reconcil
Slide 60: 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 61: 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 62: 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 Q1 2020 Insured net par outstanding $640,194 $616,686 $556,830 $518,772 $459,107 $403,729 $358,571 $296,318 $
Slide 63: 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 March 31, 2020 2019 Net income (loss) attributable to AGL $(55) 54 Adjusted operating income2 33 86 Gain (loss) related to VIE consolidation included in adjusted operating in
Slide 64: 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. The Company uses measures of its AUM in its decision making process and intends to use a measure of change in AUM in its calculation of certain components o
Slide 65: Equity Investor Presentation: 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 March 31, 2020 64