Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q1 2022 Earnings Presentation
63 slides from Assured Guaranty's earnings presentation, May 5, 2022
Slide 1: Embrace Possibilities, Invest in Certainties: Equity Investor Presentation
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation March 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 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 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 a
Slide 5: First Quarter 2022 Accomplishments
First Quarter 2022 Accomplishments • Consummated the settlement of our Puerto Rico GO, PBA, CCDA and PRIFA exposure – Extinguished approximately 94% of our exposure to those credits – Reduced our exposure to BIG credits by approximately $1.3 billion, helping reduce the percentage of BIG credits to 2
Slide 6: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due ‒ Insurance regulations forbid acceleration of our obligations without our consent • Issuers that default on a few debt service payments may have the resources later to repay the
Slide 7: Assured Guaranty Overview
Assured Guaranty Overview
Slide 8: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. ($ in billions) Mar 31, 2022 Sep 30, 2009 • We are the leading financial guaranty franchise, with over three decades of Insured net par outstanding $233.4 $646.6 experience in the municipal and structured finance markets U.S. public finance $176.0 $424
Slide 9: Corporate Structure: Assured Guaranty Ltd.
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 $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 in 2021 was primarily the result of a large positive loss
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 May 5, 2022, we
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 $142 million2 (Head Office – Bermuda; Tax Residence – U.K.) • Annual net expenses of $36 million Assured Guaranty Re Ltd. • Annual dividend dis
Slide 14: Underlying Value
Underlying Value
Slide 15: High-Quality Investment Portfolio
Underlying Value High-Quality Investment Portfolio Total Invested Assets and Cash1,2 • Predominately consists of highly rated, fixed As of March 31, 2022 maturity and short-term investments, and cash; 52% rated AA or higher A 21% BBB 4 Nearly 100% of BIG is held • Approximately $704 million invested
Slide 16: Deleveraging
Underlying Value Deleveraging • Our insured net par outstanding to adjusted operating shareholders’ equity1 has declined considerably from 157:1 as of 4Q-09 to 40:1 as of 1Q-22 • Meanwhile, total invested assets and cash has declined only slightly compared to prior periods – Total invested assets an
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 $700 million as of March 31, 2022, composed primarily of AssuredIM funds Net Investment Income1 ($ in millions) 1 Net
Slide 18: Historical Growth: Adjusted Book Value per Share
Underlying Value Historical Growth Adjusted Book Value1 per Share $130.67 $133.21 $114.87 $41.11 $40.05 $96.99 $86.18 $34.50 $1.89 $2.01 $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 $46.22 $45.06 $88.73 $90.09 $41.90 $41.97 $15.34
Slide 19: Creating Value
Creating Value
Slide 20: 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 solid in the first quarter of 2022 – The $3.6 billion we insured of U.S. public finance new-issue par closed in the first quarter was our second highest first q
Slide 21: International Public Finance Business Activity
Creating Value Insurance International Public Finance Business Activity • In first quarter 2022, we guaranteed a U.K. International Public Finance PVP1 water liquidity guarantee and a restructuring (excluding SGI reinsurance portfolio)2 of an existing U.K. water transaction ($ in millions) • The Com
Slide 22: Global Structured Finance Business Activity
Creating Value Insurance Global Structured Finance Business Activity • In first quarter 2022, among other transactions, we insured rental income cash flows for an insurance company Global Structured PVP1 (excluding SGI reinsurance portfolio)2 ($ in millions) • Focus has been on bilateral transaction
Slide 23: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • New business production gross par written was robust in all three insurance sectors – U.S. public finance gross par written was the second largest first quarter amount in a decade – Global structured finance gross par written
Slide 24: Puerto Rico Update
Creating Value Puerto Rico Update • On March 15, 2022, the Commonwealth plan of adjustment (GO/PBA) and the PRCCDA and PRIFA debt modification settlements became effective – As a result of this settlement, the Company extinguished $1.3 billion of BIG exposure, nearly 94% of our exposure to those cre
Slide 25: AssuredIM
Creating Value AssuredIM • AssuredIM improved its adjusted operating income to break even for the first quarter – Completed an interim close on Assured Healthcare Partners’ Fund II during the quarter and a final close in April, exceeding its original hard cap of $750 million. – Reset a CLO and price
Slide 26: Financial Results
ASSURED (GUARANTY: Financial Results VLSE |
Slide 27: First Quarter 2022 Results: Select Financial Items
First Quarter 2022 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Three Months Ended March 31, 1Q-21 2022 2021 Net income (loss) attributable to AGL $66 $11 500% Net income (loss) attributable to AGL per diluted share $0.98 $0.1
Slide 28: First Quarter 2022 Results: Supplemental Information
First Quarter 2022 Results Supplemental Information Select Income Components1 ($ in millions) Three Months Ended March 31, 2022 Employee Net Income (Loss) Asset Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Expenses and Other Assured Guaranty, Premiums Incom
Slide 29: Consolidated Insurance Expected Loss and LAE to Be Paid
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended March 31, 2022 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended March 31, 2022 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Benefit) N
Slide 30: 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 31: Insurance Portfolio Overview
Insurance Portfolio Overview
Slide 32: 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 March 31, 2022 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $2,909 $1,992 $691 $(212) $5,380 Contingency
Slide 33: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of March 31, 2022 – 75% U.S. public finance ($ in billions) Non-U.S. Structured – 21% Non-U.S. public finance Finance AA Average Rating – 3% U.S. st
Slide 34: 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 35: U.S. Public Finance
U.S. Public Finance Net Par Outstanding • U.S. public finance net par outstanding is $176 billion and makes up 75% of our total insured portfolio as of U.S. Public Finance March 31, 2022 As of March 31, 2022 ($ in billions) • U.S. public finance portfolio generally performed well during the Great Re
Slide 36: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1 As of March 31, 2022 ($ in millions) Net Par Outstanding Total Net Par Gross Par AGM AGC AG Re Eliminations2 Outstanding Outstanding Puerto Rico Exposures Subject to a Plan or Support Agreement: Commonwealth of Pu
Slide 37: 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 March 31, 2022 2022 2022 2022 2032 - 2037 - ($ millions) (2Q) (3Q) (4Q) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2036 2041 2042 Total Commonwealth of Puerto Rico - GO $ - $ 2
Slide 38: 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 March 31, 2022 2022 2022 2022 2032 - 2037 - ($ millions) (2Q) (3Q) (4Q) 2023 2024 2025 2026 2027 2028 2029 2030 2031 2036 2041 2042 Total Commonwealth of Puerto Rico - G
Slide 39: International Public Finance Exposure
International Public Finance Exposure Net Par Outstanding By Type As of March 31, 2022 ($ in billions) • International public finance net par outstanding Infrastructure is $49 billion and makes up 21% of our total finance Sovereign and $15.7 sub-sovereign insured portfolio as of March 31, 2022 32% $
Slide 40: Global Structured Finance Exposures
Global Structured Finance Exposures Net Par Outstanding By Type As of March 31, 2022 ($ in billions) U.S. RMBS $2.3 • Assured Guaranty’s total structured finance exposure of $8.9 billion, as of March 31, 2022, 26% reflects a $165.7 billion reduction from $174.6 Global Pooled Corporate billion on Dec
Slide 41: Consolidated U.S. RMBS
Consolidated U.S. RMBS By Type • Our $2.3 billion U.S. RMBS portfolio is amortizing As of March 31, 2022 both on a dollar basis and as a percentage of the ($ in millions) portfolio Subprime First Lien – Assured Guaranty’s U.S. RMBS exposure of $2.3 billion on March $1,399 31, 2022, reflects a $26.9
Slide 42: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit • As of March 31, 2022, approximately $2.0 Derivatives Surveillance Categories billion (36%) of the aggregate BIG exposure was Category 1, which are ($ millions) March 31, 2022 December 31,
Slide 43: BIG Exposure Summary
BIG Exposure Summary • Since 4Q-11, BIG net par outstanding has declined by $21.2 billion • The largest components of our BIG exposure are Puerto Rico at 40% and U.S. RMBS at 22% • The finalization of the GO, PBA, CCDA and PRIFA settlements in March 2022 accounted for approximately $1.3 billion of t
Slide 44: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of March 31, 2022 Net Par Internal Type1 Name or Description Outstanding Rating2 PF Puerto Rico Highways and Transportation Authority $1,256 CCC PF Puerto Rico Electric Power Authority 748 CCC PF Illinois S
Slide 45: Asset Management Overview
ASSURED (GUARANTY: Asset Management Overview VLSE |
Slide 46: Asset Management
Asset Management • AssuredIM currently has $17.0 billion in assets under management as of March 31, 2022 – Opportunity funds had gross inflows of $91 million Assets Under Management – Wind-down funds, which are legacy BlueMountain hedge and As of March 31, 2022 opportunity funds, had net outflows of
Slide 47: Asset Management: Assets Under Management
Asset Management Assets Under Management Select GAAP Results Year-to-Date (December 31, 2021 to March 31, 2022) ($ 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 - 91 - - 91 Intercompany - - - -
Slide 48: Appendix
ASSURED GUARANTY
Slide 49: 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 50: 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 51: 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 52: 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 53: 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 March 31, Year Ended December 31, (dollars in millions) 2022 2021 2021 2020 2019 2018 2017 2016 2015 Total GWP $70 $87 $377 $454 $677 $612 $307 $154 $181 Less: Installment GWP and other GAA
Slide 54: 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 Income Reconciliation March 31, (dollars in millions, except per share amounts) 2022 2021 Per Diluted Per Diluted Total Share Total Share Net income (loss) attributabl
Slide 55: 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 2015 Total Per Share Total Per Share Total Per Share Total Per Share Total
Slide 56: 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 57: 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, 2022 December 31, 2021 March 31, 2021 December 31, 2020 Total Per Share Total Per Share Total Per Share Total Per Share Reconcil
Slide 58: 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 59: 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 60: 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 61: 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, 2022 2021 Net income (loss) attributable to AGL 66 $11 Adjusted operating income 1 90 43 Average Shareholders' equity attributable to AGL $6,047 $6,537 Average Adju
Slide 62: 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 63: 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, 2022 62