Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Q3 2022 Earnings Presentation
68 slides from Assured Guaranty's earnings presentation, Nov 8, 2022
Slide 1: Equity Investor Presentation September 30, 2022
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation September 30, 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 • Third Quarter and Year-to-Date 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 tota
Slide 5: Third Quarter 2022 Overview
Third Quarter 2022 Overview • Assured Guaranty delivered solid financial results and continued to execute on its three principal strategies in the third quarter of 2022: Financial Results • Earned $133 million of adjusted operating income1 (or $2.11 per share), compared with $34 million (or $0.45 pe
Slide 6: Year-to-Date 2022 Overview
Year-to-Date 2022 Overview • This success of the third quarter built on the success delivered in the first half of 2022: Financial Results • Earned $253 million of adjusted operating income1, (or $3.88 per share), compared with $197 million (or $2.60 per share) in the same period of 2021 Insurance •
Slide 7: Strength of Financial Guaranty Business Model
Strength of Financial Guaranty Business Model • The Company insures scheduled payments of principal and interest when due ‒ Insurance law requires that each policy must provide that there shall be no acceleration of our obligations unless such acceleration is at our sole option • Issuers that defaul
Slide 8: Assured Guaranty Overview
Assured Guaranty Overview
Slide 9: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. ($ in billions) Sept 30, 2022 Sept 30, 2009 • We are the leading financial guaranty franchise, with over three decades of Insured net par outstanding $227.1 $646.6 experience in the municipal and structured finance markets U.S. public finance $177.8 $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) / 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 11: 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 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 November 3, 202
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 $91 million2 (Head Office – Bermuda; Tax Residence – U.K.) • Annual net expenses of $39 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 September 30, 2022 maturity and short-term investments, and cash; 62% rated AA or higher Fixed maturity 5 6 NR securities, trading 1% U.S. Treasuries, Other Inve
Slide 17: 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 41:1 as of 3Q-22 • Meanwhile, total invested assets and cash has declined only modestly compared to prior periods – Total invested assets an
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 $692 million as of September 30, 2022, composed primarily of AssuredIM funds Net Investment Income1 ($ in millions) $
Slide 19: Historical Growth: Adjusted Book Value per Share
Underlying Value Historical Growth Adjusted Book Value1 per Share $137.87 $130.67 $114.87 $43.96 $40.05 $96.99 $86.18 $2.09 $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 $46.22 $45.06 $88.73 $91.82 $41.90 $41.97 $15.34
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 • Assured Guaranty’s U.S. public finance new business production was solid in the first three quarters of 2022 – The $14 billion we insured of U.S. public finance total new-issue par closed in the first nine months of 2022 was ou
Slide 22: International Public Finance Business Activity
Creating Value Insurance International Public Finance Business Activity • In third quarter 2022, business activity was International Public Finance PVP1 primarily attributable to a secondary market (excluding SGI reinsurance portfolio)2 guarantee of regulated utilities ($ in millions) • In second qu
Slide 23: Global Structured Finance Business Activity
Creating Value Insurance Global Structured Finance Business Activity • In the third quarter of 2022, we provided a guaranty on a whole business securitization Global Structured PVP1 (excluding SGI reinsurance portfolio)2 • In the first half of 2022, among other ($ in millions) transactions, we insur
Slide 24: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline • New business production gross par written and PVP were strong in the first nine months of 2022, driven by particularly strong U.S. public finance production and international public finance production – U.S. Public Finance – G
Slide 25: Puerto Rico Update
Creating Value Puerto Rico Update • On March 15, 2022, the General Obligation (GO) and Public Buildings Authority (PBA) Plan of Adjustment (GO/PBA Plan)1, and the Puerto Rico Convention Center District Authority (PRCCDA) and the Puerto Rico Infrastructure Financing Authority (PRIFA) debt modificatio
Slide 26: AssuredIM
Creating Value AssuredIM • AssuredIM continued to execute on its key initiatives first three quarters of 2022 – Completed the final closing for Assured Healthcare Partners’ Fund II, bringing final aggregate commitments to $760 million – Priced two U.S. CLOs, selling nearly 50% of the equity to third
Slide 27: AssuredIM
Creating Value AssuredIM • AssuredIM brings knowledge and experience to expand the categories and types of investments in Assured Guaranty’s investment portfolio, and it manages a portion of the investment portfolio – The U.S. Insurance Subsidiaries, through AGAS, are authorized to invest up to $750
Slide 28: Financial Results
ASSURED (GUARANTY: Financial Results VLSE |
Slide 29: Third Quarter 2022 Results
Third Quarter 2022 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Three Months Ended September 30, 3Q-21 2022 2021 Net income (loss) attributable to AGL $11 $17 (35)% Net income (loss) attributable to AGL per diluted share $0.18
Slide 30: Year-to-Date 2022 Results
Year-to-Date 2022 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Nine Months Ended September 30, 9m-21 2022 2021 Net income (loss) attributable to AGL $30 $126 (76)% Net income (loss) attributable to AGL per diluted share $0.46
Slide 31: Third Quarter 2022 Results Supplemental Information
Third Quarter 2022 Results Supplemental Information Select Income Components1 ($ in millions) Three Months Ended September 30, 2022 Employee Net Income (Loss) Asset Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Expenses and Other Assured Guaranty, Premiums I
Slide 32: Year-to-Date 2022 Results Supplemental Information
Year-to-Date 2022 Results Supplemental Information Select Income Components1 ($ in millions) Nine Months Ended September 30, 2022 Employee Net Income (Loss) Asset Compensation, Benefit Attributable to Net Earned Net Investment Management Loss Expense Expenses and Other Assured Guaranty, Premiums Inc
Slide 33: Expected Loss and LAE to Be Paid, Three Months
Consolidated Insurance Expected Loss and LAE to Be Paid Three Months Ended September 30, 2022 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended September 30, 2022 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Be
Slide 34: Expected Loss and LAE to Be Paid, Nine Months
Consolidated Insurance Expected Loss and LAE to Be Paid Nine Months Ended September 30, 2022 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Nine Months Ended September 30, 2022 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) Development (Bene
Slide 35: 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 ̶ GAAP financial guaranty a
Slide 36: Insurance Portfolio Overview
Insurance Portfolio Overview
Slide 37: 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 September 30, 2022 ($ in millions) AGM AGC AG Re6 Eliminations2 Consolidated Claims-paying resources Policyholders' surplus $2,660 $1,964 $721 $(215) $5,130 Conting
Slide 38: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of September 30, 2022 – 78% U.S. public finance ($ in billions) Non-U.S. Structured – 18% Non-U.S. public finance Finance AA Average Rating – 3% U.S
Slide 39: 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 – Our current net par of $227 billion includes a negative adjustment of ove
Slide 40: U.S. Public Finance
U.S. Public Finance Net Par Outstanding • U.S. public finance net par outstanding is $178 billion and makes up 78% of our total insured portfolio as of U.S. Public Finance September 30, 2022 As of September 30, 2022 ($ in billions) • U.S. public finance portfolio generally performed well Higher duri
Slide 41: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1 As of September 30, 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 o
Slide 42: 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 September 30, 2022 2022 2023 2023 2023 2023 2032 - 2037 - ($ millions) (4Q) (1Q) (2Q) (3Q) (4Q) 2024 2025 2026 2027 2028 2029 2030 2031 2036 2041 2042 Total Commonwealth of Puert
Slide 43: 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 September 30, 2022 2022 2023 2023 2023 2023 2032 - 2037 - ($ millions) (4Q) (1Q) (2Q) (3Q) (4Q) 2024 2025 2026 2027 2028 2029 2030 2031 2036 2041 2042 Total Commonwealth
Slide 44: International Public Finance Exposure
International Public Finance Exposure Net Par Outstanding By Type As of September 30, 2022 ($ in billions) • International public finance net par outstanding Infrastructure finance is $41 billion and makes up 18% of our total $12.6 Sovereign and insured portfolio as of September 30, 2022 sub-soverei
Slide 45: Global Structured Finance Exposures
Global Structured Finance Exposures Net Par Outstanding By Type As of September 30, 2022 ($ in billions) U.S. RMBS • Assured Guaranty’s total structured finance $2.0 exposure of $8.2 billion, as of September 30, 25% 2022, reflects a $166.4 billion reduction from Global Pooled Corporate $174.6 billio
Slide 46: Consolidated U.S. RMBS
Consolidated U.S. RMBS By Type • Our $2.0 billion U.S. RMBS portfolio is As of September 30, 2022 amortizing both on a dollar basis and as a ($ in millions) percentage of the portfolio Subprime First Lien – Assured Guaranty’s U.S. RMBS exposure of $2.0 billion on $1,218 September 30, 2022, reflects
Slide 47: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories • As of September 30, 2022, approximately ($ millions) September 30, 2022 December 31, 2021 $2.5 billion (43%) of the aggregate BIG BIG Category 1 U.S. pu
Slide 48: BIG Financial Guaranty Exposure Decline
BIG Financial Guaranty Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $21.0 billion • The largest components of our BIG exposure are Puerto Rico at 36% and U.S. RMBS at 18% • The finalization of the GO, PBA, CCDA and PRIFA settlements in March 2022 accounted for approximatel
Slide 49: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of September 30, 2022 Net Par Internal Type1 Name or Description Outstanding Rating2 PF Puerto Rico Highways and Transportation Authority $1,189 CCC PF ProMedica Healthcare Obligated Group, Ohio 820 BB+ PF
Slide 50: Asset Management Overview
ASSURED (GUARANTY: Asset Management Overview VLSE |
Slide 51: Asset Management
Asset Management • AssuredIM currently has $17.5 billion in assets under management as of September 30, 2022 – CLOs had gross inflows of over $1.2 billion Assets Under Management – Wind-down funds, which are legacy BlueMountain hedge and As of September 30, 2022 opportunity funds, had gross outflows
Slide 52: Asset Management: Assets Under Management
Asset Management Assets Under Management Select GAAP Results Year-to-Date (December 31, 2021 to September 30, 2022) ($ 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 $1,049 292 21 - 1,362 Interc
Slide 53: Appendix
ASSURED GUARANTY
Slide 54: 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 55: 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 56: 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 57: 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 58: Reconciliation of Gross Written Premiums to PVP
Appendix Reconciliation of Gross Written Premiums (GWP) to PVP Three Months Ended Reconciliation of GWP to PVP September 30, Year Ended December 31, (dollars in millions) 2022 2021 2021 2020 2019 2018 2017 2016 2015 Total GWP $94 $106 $377 $454 $677 $612 $307 $154 $181 Less: Installment GWP and othe
Slide 59: Reconciliation of Net Income to Adjusted Operating Income
Appendix Reconciliation of Net Income (Loss) Attributable to AGL to Adjusted Operating Income1 Three Months Ended Nine Months Ended Adjusted Operating Income Reconciliation September 30, September 30, (dollars in millions, except per share amounts) 2022 2021 2022 2021 Per Diluted Per Diluted Per Dil
Slide 60: 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 61: 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 62: 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) September 30, 2022 June 30, 2022 December 31, 2021 September 30, 2021 June 30, 2021 December 31, 2020 Total Per Share Total Per Share Tota
Slide 63: 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 64: 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 65: 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 66: 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 Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net income (loss) attributable to AGL $11 $17 $30 126 Adjusted operating income2 133 34 253 197 Average shar
Slide 67: 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 68: 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 September 30, 2022 6