Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q4 2021 Earnings Presentation
67 slides from Assured Guaranty's earnings presentation, February 2022
Slide 1: Equity Investor Presentation December 31, 2021
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation December 31, 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 • Fourth 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: Fourth Quarter 2021 Accomplishments
Fourth Quarter 2021 Accomplishments • Mitigated losses successfully during the quarter resulting in a positive economic loss development of $186 million – Primarily the result of updated assumptions on certain Puerto Rico exposure to reflect upcoming settlements – Additionally, the Company sold a po
Slide 6: Year-to-Date 2021 Accomplishments
Year-to-Date 2021 Accomplishments • Negotiated agreements in principle on over 70% of the Company’s Puerto Rico exposure – In total, 95% of the Company’s Puerto Rico net par outstanding, including all the debt that is in payment default, is now covered by negotiated agreements • Mitigated losses suc
Slide 7: Year-to-Date 2021 Accomplishments (Cont.)
Year-to-Date 2021 Accomplishments (Cont.) • Repurchased approximately 10.5 million common shares ($496 million), or approximately 14% of shares outstanding at the start of 2021 – Additionally, 1.7 million common shares were repurchased for approximately $91 million between January 1, 2022, and Febru
Slide 8: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due ‒ Insurance regulations forbid acceleration of our obligations without our consent • Issuers that default on a few debt service payments may have the resources later to repay the
Slide 9: Assured Guaranty Overview
Assured Guaranty Overview
Slide 10: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. ($ in billions) Dec 31, 2021 Sep 30, 2009 • We are the leading financial guaranty franchise, with over three decades of Insured net par outstanding $236.4 $646.6 experience in the municipal and structured finance markets U.S. public finance $177.2 $424
Slide 11: 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 12: Assured Guaranty Overview: Adjusted Operating Income per Share
Assured Guaranty Overview • Our annual adjusted operating income1 per share was $6.32 in 2021, compared with $2.97 in 2020 and $1.88 in 2004, the year of our initial public offering – The large increase in adjusted operating income per share was primarily the result of a large positive loss developm
Slide 13: 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 14: 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 15: 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 $188 million2 (Head Office – Bermuda; Tax Residence – U.K.) • Annual net expenses of $34 million Assured Guaranty Re Ltd. • Annual dividend dis
Slide 16: Underlying Value
Underlying Value
Slide 17: High-Quality Investment Portfolio
Underlying Value High-Quality Investment Portfolio Total Invested Assets and Cash1,2 • Predominately consists of highly rated, fixed As of December 31, 2021 maturity and short-term investments, and cash; 58% rated AA or higher 4 BBB A 21% 12% Nearly 100% of BIG is held • Approximately $1.3 billion i
Slide 18: 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 4Q-21 – Each quarter since the first quarter of 2020, insured net par outstanding has increased, which has led to a slight increase in adjuste
Slide 19: 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 $710 million as of December 31, 2021, composed primarily of AssuredIM funds Net Investment Income1 ($ in millions) Ne
Slide 20: Historical Growth
Underlying Value Historical Growth Adjusted Book Value1 per Share $130.67 $114.87 $40.05 $96.99 $86.18 $34.50 $1.89 $77.86 $28.26 $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 $88.73 $41.90 $41.97 $15.34 $0.96 $78.49 $35.66 $14.63 $
Slide 21: Creating Value
Creating Value
Slide 22: Insurance: 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 strong in 2021 – The $23.4 billion we insured of U.S. public finance new-issue par sold in 2021 was our highest annual total in over a decade and approximately
Slide 23: International Public Finance Business Activity
Creating Value Insurance International Public Finance Business Activity • In fourth quarter 2021, international public International Public Finance PVP1 finance new business PVP was primarily (excluding SGI reinsurance portfolio)2 attributable to the restructuring of several ($ in millions) existing
Slide 24: Global Structured Finance Business Activity
Creating Value Insurance Global Structured Finance Business Activity • In fourth quarter 2021, we insured a large insurance securitization transaction Global Structured PVP1 (excluding SGI reinsurance portfolio)2 • In third quarter 2021, we insured a large ($ in millions) insurance securitization tr
Slide 25: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • Full-year 2021 new business production gross par written was the largest amount in over a decade, 15% higher than last year’s record gross par written – U.S. public finance insured par written increased by approximately 12% co
Slide 26: AssuredIM
Creating Value AssuredIM • AssuredIM executed on its key strategic goals during 2021 – Raised gross inflows of $3.2 billion, including $3.0 billion from third-parties – Issued six new CLOs, selling a significant percentage of the new CLOs’ equity to third parties – Increased fee earning AUM to $16.6
Slide 27: Financial Results
ASSURED (GUARANTY: Financial Results VLSE |
Slide 28: Fourth Quarter 2021 Results
Fourth Quarter 2021 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Three Months Ended December 31, 4Q-20 2021 2020 Net income (loss) attributable to AGL $263 $148 78% Net income (loss) attributable to AGL per diluted share $3.74
Slide 29: Year Ended 2021 Results
Year Ended 2021 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Year Ended December 31, 2020 2021 2020 Net income (loss) attributable to AGL1 $389 $362 7% Net income (loss) attributable to AGL per diluted share $5.23 $4.19 25% Ne
Slide 30: Fourth Quarter 2021 Results: Supplemental Information
Fourth Quarter 2021 Results Supplemental Information Select Income Components1 ($ in millions) Three Months Ended December 31, 2021 Employee Net Income (Loss) Asset Loss on Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Extinguishment Expenses and Other Assur
Slide 31: Year-End 2021 Results: Supplemental Information
Year-End 2021 Results Supplemental Information Select Income Components1 ($ in millions) Year Ended December 31, 2021 Employee Net Income (Loss) Asset Loss on Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Extinguishment Expenses and Other Assured Guaranty, P
Slide 32: Expected Loss and LAE to Be Paid: Three Months Ended December 31, 2021
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended December 31, 2021 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended December 31, 2021 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Bene
Slide 33: Expected Loss and LAE to Be Paid: Year Ended December 31, 2021
Consolidated Insurance Expected Loss and LAE to Be Paid Year Ended December 31, 2021 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Year Ended December 31, 2021 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Benefit) Net (Paid)
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 VIE and CIVs ̶ GAAP financial g
Slide 35: Insurance Portfolio Overview
Insurance Portfolio Overview
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 December 31, 2021 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $3,053 $2,070 $660 $(211) $5,572 Continge
Slide 37: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of December 31, 2021 ($ in billions) – 75% U.S. public finance Non-U.S. Structured Finance – 21% Non-U.S. public finance AA Average Rating $0.9 – 4%
Slide 38: 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 public finance sector – Since year-end 2016, the international public finance portfolio has incre
Slide 39: U.S. Public Finance
U.S. Public Finance Net Par Outstanding • U.S. public finance net par outstanding is $177 billion and makes up 75% of our total insured portfolio as of U.S. Public Finance December 31, 2021 As of December 31, 2021 ($ in billions) • U.S. public finance portfolio generally performed well during the Gr
Slide 40: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1,2 As of December 31, 2021 ($ in millions) Net Par Outstanding Eliminations Total Net Par Gross Par AGM AGC AG Re 2 Outstanding Outstanding Puerto Rico Exposures Subject to a Support Agreement 3: Commonwealth of Pu
Slide 41: 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 December 31, 2021 2022 2022 2022 2022 2032 - 2037 - ($ millions) (1Q) (2Q) (3Q) (4Q) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2036 2041 2042 Total Commonwealth of Puerto Rico
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 Agencies As of December 31, 2021 2022 2022 2022 2022 2032 - 2037 - ($ millions) (1Q) (2Q) (3Q) (4Q) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2036 2041 2042 Total Puerto Rico Exposu
Slide 43: International Public Finance Exposure
International Public Finance Exposure Net Par Outstanding By Type As of December 31, 2021 ($ in billions) • International public finance net par outstanding Infrastructure Sovereign and is $50 billion and makes up 21% of our total finance $16.5 sub-sovereign insured portfolio as of December 31, 2021
Slide 44: Global Structured Finance Exposures
Global Structured Finance Exposures Net Par Outstanding By Type As of December 31, 2021 ($ in billions) U.S. RMBS $2.4 • Assured Guaranty’s total structured finance exposure of $9.2 billion, as of December 31, 26% Global Pooled 2021, reflects a $165.4 billion reduction from Corporate $174.6 billion
Slide 45: Consolidated U.S. RMBS
Consolidated U.S. RMBS By Type • Our $2.4 billion U.S. RMBS portfolio is amortizing As of December 31, 2021 both on a dollar basis and as a percentage of the ($ in millions) portfolio Subprime First Lien – Assured Guaranty’s U.S. RMBS exposure of $2.4 billion on $1,454 December 31, 2021, reflects a
Slide 46: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories ($ millions) December 31, 2021 December 31, 2020 • As of December 31, 2021, BIG Category 1 approximately $2.4 billion (33%) of U.S. public finance $1,765
Slide 47: BIG Exposure Decline
BIG Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $19.4 billion • The largest components of our BIG exposure are Puerto Rico at 49% and U.S. RMBS at 17% • With the expected finalization of GO, PBA, CCDA and PRIFA settlements in March 2022, total BIG should decline by approx
Slide 48: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of December 31, 2021 Net Par Internal Type1 Name or Description Outstanding Rating2 PF Puerto Rico Highways and Transportation Authority $1,256 CCC PF Puerto Rico General Obligation, Appropriations and Guar
Slide 49: Asset Management Overview
ASSURED (GUARANTY: Asset Management Overview VLSE |
Slide 50: Asset Management
Asset Management • AssuredIM currently has $17.5 billion in assets under management as of December 31, 2021 – CLOs had gross inflows of $2.8 billion, including $2.6 billion of gross inflows from third parties in 2021 Assets Under Management As of December 31, 2021 – Opportunity funds had gross inflo
Slide 51: Asset Management: Assets Under Management
Asset Management Assets Under Management Select GAAP Results Year-to-Date (December 31, 2020 to December 31, 2021) ($ in millions) Opportunity Liquid Wind-Down CLOs Funds Strategies Funds Total AUM, December 31, 2020 $13,856 $1,486 $383 $1,623 $17,348 Inflows: Third-party 2,608 363 - - 2,971 Interco
Slide 52: Appendix
ASSURED GUARANTY
Slide 53: 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 54: 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 55: 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 56: 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 57: 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) 2021 2020 2021 2020 2019 2018 2017 2016 2015 Total GWP $100 $120 $377 $454 $677 $612 $307 $154 $181 Less: Installment GWP and othe
Slide 58: 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) 2021 2020 2021 2020 Per Diluted Per Diluted Per Diluted Per
Slide 59: 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 60: 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 61: 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, 2021 September 30, 2021 December 31, 2020 September 30, 2020 December 31, 2019 Total Per Share Total Per Share Total Per Shar
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: 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 64: 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 2021 Insured net par outstanding $640,194 $616,686 $556,830 $518,772 $459,107 $403,729 $358,571 $296,318
Slide 65: 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, 2021 2020 2021 2020 Net income (loss) attributable to AGL $263 $148 $389 362 Adjusted operating income2 273 56 470 256 Average shareholde
Slide 66: 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 67: 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 December 31, 2021 66