Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Investor Presentation (December 2019)
64 slides from Assured Guaranty's investor presentation, Dec 31, 2019
Slide 1: Equity Investor Presentation December 31, 2019
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Equity Investor Presentation December 31, 2019
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 2019 and Year End 2019 • 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 investe
Slide 5: Fourth Quarter 2019 Accomplishments
Fourth Quarter 2019 Accomplishments • Earned $87 million of adjusted operating income1, or $0.90 per share • Increased shareholders' equity per share, adjusted operating shareholders' equity1 per share and adjusted book value1 per share, reaching new record highs of $71.18, $66.96 and $96.86, respec
Slide 6: 2019 Accomplishments
2019 Accomplishments • Earned $391 million of adjusted operating income1, or $3.91 per share. • Increased shareholders' equity per share and adjusted book value1 per share by 13%, and adjusted operating shareholders' equity1 per share by 9%. This marks the 5th consecutive record year for each of the
Slide 7: Assured Guaranty Overview
Assured Guaranty Overview
Slide 8: Assured Guaranty Overview
Assured Guaranty Overview Assured Guaranty Ltd. • We are the leading financial guaranty ($ in billions) Dec 31, 2019 Sept 30, 2009 franchise, with over three decades of experience in the municipal and structured Insured net par outstanding $236.8 $646.6 finance markets U.S. public finance $175.5 $42
Slide 9: 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 10: 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 11: 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 February 27, 20
Slide 12: U.S. Insurance Subsidiary Dividend Limitation Calculations
U.S. Insurance Subsidiary 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 rece
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 $135 million2 (Head Office – Bermuda; Tax Residence – U.K.) • 2019 net expenses of $31 million Assured Guaranty Re Ltd. • 2019 dividend distrib
Slide 14: Underlying Value
Underlying Value
Slide 15: High-Quality Investment Portfolio
Underlying Value High-Quality Investment Portfolio Total Invested Assets and Cash1,2 As of December 31, 2019 A Nearly 100% of BIG • Predominately consists of highly rated, is held for loss 18% BBB mitigation or other fixed maturity and short-term 7% risk management investments, and cash; 66% rated A
Slide 16: Deleveraging While Maintaining Total Invested Assets
Underlying Value Deleveraging While Maintaining Total Invested Assets • Our insured net par outstanding to adjusted operating shareholders’ equity1 has declined from 157:1 in 4Q-09 to 38:1 as of year-end 2019 – We expect that beginning in 2020, our rate of new business written should tend to equal o
Slide 17: Net Investment Income to Operating Expenses and Interest Expense
Underlying Value Net Investment Income to Operating Expenses and Interest Expense • Net investment income fees generally covers the combination of operating and interest expenses Net Investment Income ($ in millions) Net investment income $423 $417 $404 $393 $403 $408 $395 $396 $378 $361 $347 $341 $
Slide 18: Historical Growth
Underlying Value Historical Growth Adjusted Book Value1 per Share $96.86 $86.06 $28.26 $77.74 $23.32 $66.46 $20.53 $1.64 $60.87 $1.57 $53.27 $15.85 $1.01 $48.26 $46.54 $48.22 $17.07 $46.22 $44.84 $0.72 $41.90 $41.97 $15.34 $0.84 $14.63 $35.66 $7.38 $9.05 $23.30 $18.46 $15.62 $0.69 $66.96 $20.72 $61.
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 (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 2019, we insured 840 primary market transactions totaling $14.7 billion,
Slide 21: U.S. Structured Finance Business Activity
Creating Value Insurance U.S. Structured Finance Business Activity • During 4Q-19, we insured a refinancing and extension of an existing triple-X life reinsurance transaction, a participation in a U.S. Structured PVP1 new insurance reserve financing transaction, (excluding SGI reinsurance portfolio)
Slide 22: Non-U.S. Business Activity
Creating Value Insurance Non-U.S. Business Activity • During 4Q-19, we issued privately executed, bilateral guarantees on a large number of Non-U.S. PVP1 European sub-sovereign credits, guaranteed U.K. (excluding SGI reinsurance portfolio)2 ($ in millions) university housing transactions and restruc
Slide 23: Underwriting Principles and Pricing Discipline
Creating Value Insurance Underwriting Principles and Pricing Discipline Gross Par Written1 Quarter Ended December 31, Year-Ended December 31, 2019 2018 2019 2018 Gross Par Avg. Gross Par Avg. Gross Par Avg. Gross Par Avg. Sector: Written Rating2 Written Rating2 Written Rating2 Written Rating2 U.S. p
Slide 24: 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 25: 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 26: 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 $60 million of cash to Blu
Slide 27: Commutations
Creating Value Insurance Commutations • Reassumption of previously ceded business has increased the unearned premium reserve and adjusted book value1 Commutations Since 2009 Ceded Par Outstanding by Reinsurer As of December 31, 2019 As of December 31, 2019 Commutation Reassumed Par Reassumed UPR Gai
Slide 28: Financial Results
Financial Results December 31, 2019
Slide 29: Fourth Quarter 2019 Results: Select Financial Items
Fourth Quarter 2019 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) Quarter Ended December 31, 4Q-18 2019 2018 Net income (loss) attributable to AGL $137 $88 56% Net income (loss) attributable to AGL per diluted share $1.42 $0.83
Slide 30: YTD 2019 Results: Select Financial Items
YTD 2019 Results Select Financial Items Select GAAP Results % Change vs. ($ in millions, except per share data and percentages) YTD December 31, YTD 18 2019 2018 Net income (loss) attributable to AGL $402 $521 (23)% Net income (loss) attributable to AGL per diluted share $4.00 $4.68 (14)% Net earned
Slide 31: Fourth Quarter 2019 Results: Select Segment Results
Fourth Quarter 2019 Results Select Segment Results Select Segment Results ($ in millions, except per share data and percentages) Quarter Ended December 31, 2019 Insurance Asset Management Corporate Other Total Adjusted operating income (loss) $133 $(10) $(32) $(4) $87 Net earned premiums and credit
Slide 32: Year Ended 2019 Results: Select Segment Results
Year Ended 2019 Results Select Segment Results Select GAAP Results ($ in millions, except per share data and percentages) Year Ended December 31, 2019 Insurance Asset Management Corporate Other Total Adjusted operating income (loss) $512 ($10) ($111) $- $391 Net earned premiums and credit derivative
Slide 33: Loss Measures
Loss Measures Economic loss development (all contracts): • Represents the estimated change in expected losses due to changes in transaction performance, discount rates, loss mitigation and other factors. Economic loss development excludes the effects of deferred premium revenue. The effect of change
Slide 34: Insurance Portfolio Overview
Insurance Portfolio Overview December 31, 2019
Slide 35: Four Discrete Insurance Companies with Separate Capital Bases
Four Discrete Insurance Companies with Separate Capital Bases Consolidated Statutory-Basis Claims-Paying Resources and Exposures As of December 31, 2019 ($ in millions) AGM AGC MAC AG Re8 Eliminations3 Consolidated Claims-paying resources Policyholders' surplus $2,691 $1,775 $276 $799 $(485) $5,056
Slide 36: Net Par Outstanding By Sector
Net Par Outstanding By Sector • Assured Guaranty’s insured portfolio is Consolidated Net Par Outstanding largely concentrated in U.S. public finance As of December 31, 2019 ($ in billions) Non-U.S. Structured – 74% U.S. public finance Finance A Average Rating – 22% Non-U.S. public finance $0.8 Non-U
Slide 37: 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 $237 billion portfolio consists of $227 billion of public finance and $10 billion of structured finance net par – The ex
Slide 38: U.S. Public Finance Net Par Outstanding
U.S. Public Finance Net Par Outstanding • U.S. public finance net par outstanding is $175.5 billion and makes up 74% of our total U.S. Public Finance insured portfolio as of December 31, 2019 As of December 31, 2019 ($ in billions) • U.S. public finance portfolio generally Higher Other Public perfor
Slide 39: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1,2 As of December 31, 2019 Net Par Gross Par ($ in millions) Outstanding Outstanding Commonwealth Commonwealth of Puerto Rico - General Obligation Bonds 3 $1,253 $1,294 Constitutionally Puerto Rico Public Buildings
Slide 40: Puerto Rico Exposure: Scheduled Net Par Amortization
Public Finance Puerto Rico Exposure Scheduled Net Par Amortization of Exposure to the Commonwealth and its Agencies As of December 31, 2019 1Q 2Q 3Q 4Q 2030- 2035- 2040- 2045- ($ in millions) 2020 2020 2020 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2039 2044 2047 Total Commonwealth – GO
Slide 41: 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 December 31, 2019 1Q 2Q 3Q 4Q 2030- 2035- 2040- 2045- ($ in millions) 2020 2020 2020 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2034 2039 2044 2047 Total Commonwe
Slide 42: Consolidated Non-U.S. Exposure
Consolidated Non-U.S. Exposure Non-U.S. Public and Structured Finance Non-U.S. Exposure As of December 31, 2019 ($ in billions) • 99% of non-U.S. exposure is Public Finance – Direct sovereign debt is limited to Poland ($286 Canada $2.5 France Australia million) and Mexico ($50 million) Other $3.1 $2
Slide 43: Structured Finance Exposures
Structured Finance Exposures Net Par Outstanding By Type As of December 31, 2019 • Assured Guaranty’s total structured finance Life Insurance Financial ($ in billions) Transactions Products $1.8 (GICs) 1 exposure of $240.9 billion at December 31, $1.0 10% 18% U.S. and Non- 2007 has declined by $230.
Slide 44: Consolidated U.S. RMBS
Consolidated U.S. RMBS • Our $3.5 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 December 31, 2019 – Total U.S. RMBS has declined from $29.2 billion at December ($ in billions) 31, 2009 to $3.5 billion at Decembe
Slide 45: Below Investment Grade Exposures
Below Investment Grade Exposures Net Par Outstanding by BIG Category1 Financial Guaranty Insurance and Credit Derivatives Surveillance Categories ($ millions) December 31, 2019 December 31, 2018 • As of December 31, 2019, BIG Category 1 approximately $2.7 billion (31%) of U.S. public finance $1,582
Slide 46: BIG Exposure Decline
BIG Exposure Decline • Since 4Q-11, BIG net par outstanding has declined by $18.3 billion • The largest components of our BIG exposure are Puerto Rico at 50% and U.S. RMBS at 19% • The reassumption of American Overseas in Q2 2019 increased BIG exposure by $6 million • BIG credits account for only 3.
Slide 47: BIG Exposures > $250 Million
BIG Exposures > $250 Million (dollars in millions) BIG Exposures Greater Than $250 Million as of December 31, 2019 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 an
Slide 48: Asset Management Overview
Asset Management Overview December 31, 2019
Slide 49: Asset Management: Assets Under Management
Asset Management • The Assured Investment Management platform currently has $17.8 billion in assets under management Assets Under Management – CLOs had net inflows of $885 million driven primarily by the As of December 31, 2019 ($ in billions) launch of two new CLOs and a CLO fund – Opportunity fund
Slide 50: Assets Under Management
Asset Management Assets Under Management Select GAAP Results ($ in millions, except per share data and percentages) Quarter Ended December 31, 2019 Opportunity Wind-Down CLOs Funds Funds Total AUM beginning of period, October 1, 2019 $11,844 $923 $5,528 $18,295 Inflows 977 165 - 1,142 Outflows: Rede
Slide 51: Appendix
ASSURED GUARANTY F | Appendix 5S.
Slide 52: 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 53: 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 and financial condition of the Company and presents the results of operations of th
Slide 54: Explanation of Non-GAAP Financial Measures (Cont'd)
Appendix Explanation of Non-GAAP Financial Measures (Cont’d) Management uses adjusted book value, further adjusted for VIE consolidation, to measure the intrinsic value of the Company, excluding franchise value. Growth in adjusted book value per share, further adjusted for VIE consolidation (core ad
Slide 55: 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) 2019 2018 2019 2018 2017 2016 2015 2014 Total GWP $518 $96 $677 $612 $307 $154 $181 $104 Less: Installment GWP and other GAAP adju
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 Year Ended Adjusted Operating Income1 Reconciliation December 31, December 31, (dollars in millions, except per share amounts) 2019 2018 2019 2018 Per Diluted Per Diluted Per Diluted Per
Slide 57: Reconciliation of Net Income to Adjusted Operating Income (2009-2018)
Appendix Reconciliation of Net Income (Loss) to Adjusted Operating Income1 (2009-2018) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2018 2017 2016 2015 2014 Total Per Share Total Per Share Total Per Share Total Per Share Total Per
Slide 58: Reconciliation of Net Income to Adjusted Operating Income (2004-2008)
Appendix Reconciliation of Net Income (Loss) to Adjusted Operating Income1 (2004-2008) Adjusted Operating Income1 Reconciliation Year Ended December 31, (dollars in millions, except per share amounts) 2008 2007 2006 2005 2004 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) December 31, 2019 September 30, 2019 December 31, 2018 September 30, 2018 December 31, 2017 Total Per Share Total Per Share Total Per Shar
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 (dollars in millions, except leverage) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Insured net par outstanding $640,194 $616,686 $556,830 $518,772 $459,107 $403,729 $358,571
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 Year Ended December 31, December 31, 2019 2018 2019 2018 Net income (loss) attributable to AGL $137 $88 $402 $521 Adjusted operating income2 87 92 391 482 Gain (loss) related
Slide 64: 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, 2019 63
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