Assured Guaranty Ltd. · NYSE:AGO
Assured Guaranty — Debt Investor Presentation (March 2019)
69 slides from Assured Guaranty's debt investor presentation, Mar 31, 2019
Slide 1: Fixed Income Investor Presentation March 31, 2019
EMBRACE POSSIBILITIES, INVEST IN CERTAINTIES Fixed Income Investor Presentation March 31, 2019
Slide 2: Table of Contents
Table of Contents Page Forward-Looking Statements and Safe Harbor Disclosure 2 Conventions, Disclaimers and Non-GAAP Financial Measures 3 Corporate Overview 4 Assured Guaranty Ltd. Consolidated Insured Portfolio Overview 31 AGM1 Portfolio Review 41 Municipal Assurance Corp. Portfolio Review 49 Assur
Slide 3: 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 4: Conventions, Non-GAAP Financial Measures and Certain Statutory Data
Conventions, Non-GAAP Financial Measures and Certain Statutory Data • Unless otherwise noted, the following conventions are used in this presentation: – “AGM Consolidated” means Assured Guaranty Municipal Corp. and its consolidated entities (consisting primarily of Assured Guaranty (Europe) plc (AGE
Slide 5: Corporate Overview
ASSURED GUARANTY Corporate Overview
Slide 6: Corporate Overview
Corporate Overview • Assured Guaranty Ltd. (“AGL” and, together with its subsidiaries, “Assured Guaranty” or the “Company”) is the leading financial guaranty franchise – We are the only long-standing financial guaranty company to have written new business throughout the financial crisis and recessio
Slide 7: Operating Principles and Investor and Issuer Benefits
Operating Principles and Investor and Issuer Benefits • Underwriting principles and a strong risk management culture designed to protect our franchise • Experienced and disciplined management • Commitment to disclosure and transparency • Our guaranty benefits investors and issuers because we provide
Slide 8: Strategic Priorities
Strategic Priorities • Generate current and future revenue through new business production • Manage capital efficiently • Execute alternative strategies to create value, including through acquisitions, investments and commutations • Mitigate losses 7
Slide 9: Assured Guaranty Ltd. 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: Four Discrete Operating Companies with Separate Capital Bases
Four Discrete Operating Companies with Separate Capital Bases Consolidated Statutory-Basis Claims-Paying Resources and Exposures As of March 31, 2019 ($ in millions) AGM AGC MAC AG Re8 Eliminations3 Consolidated Claims-paying resources Policyholders' surplus $2,523 $1,770 $322 $952 ($497) $5,070 Con
Slide 11: Principal Operating Platforms
Assured Guaranty Principal Operating Platforms • Assured Guaranty Municipal1, MAC, AGC and AGE operate as four separate direct financial guaranty platforms, with AG Re operating as a reinsurer – Assured Guaranty Municipal1 focuses exclusively on public finance and global infrastructure finance – MAC
Slide 12: Principal Operating Platforms (Continued)
Assured Guaranty Principal Operating Platforms (Continued) • Companies distinct for legal and regulatory purposes – Separate capital bases – claims-paying resources2 as of March 31, 2019 – AGM1 $5.9 billion, MAC $0.9 billion, AGC $3.3 billion, AG Re $2.1 billion – Separate insurance licenses – Separ
Slide 13: AGM's Commitment to the Public Finance Market
AGM’s1 Commitment to the Public Finance Market Net Par Outstanding • AGM1 is committed to insuring U.S. public finance As of March 31, 2019 and global infrastructure transactions2. Through its ($ in billions) subsidiary, AGE, AGM1 may underwrite some U.S. structured finance transactions Structured F
Slide 14: Municipal Assurance Corp.
Municipal Assurance Corp. Municipal Only Bond Insurance • MAC is committed to insuring only U.S. public finance transactions; • A $26 billion insured U.S. municipal-only portfolio that is geographically diversified; • Conservative and well-defined underwriting standards; and • A high level of transp
Slide 15: AGC is Our Most Diversified Platform
AGC is Our Most Diversified Platform • AGC, a diversified insurer, may write all Net Par Outstanding classes of financial guaranty business, As of March 31, 2019 including structured finance, U.S. public ($ in billions) finance and global infrastructure • Structured finance eligible for new business
Slide 16: AG Re and AGRO
AG Re and AGRO • AG Re is an insurance company • AG Re’s subsidiary AGRO is a specialty primarily engaged in providing reinsurance company reinsurance to financial guarantors – Rated AA (stable outlook) by S&P and A+ (stable – Rated AA (stable outlook) by S&P outlook) by A.M. Best – Licensed as a Cl
Slide 17: Underwriting Discipline
Underwriting Discipline • Our U.S. public finance portfolio, our largest exposure category, generally performed well Consolidated Financial Guaranty during the recession and in subsequent Net Par Outstanding years, despite persistent financial pressures As of March 31, 2019 on municipal obligors Non
Slide 18: New Business Production
New Business Production Penetration in the U.S. Public Finance Market (excluding SGI1 portfolio) • We are focused on building demand for our guarantees, both in the primary and the secondary markets for U.S. public finance – In 1Q 2019, we insured 163 primary market transactions totaling $2.0 billio
Slide 19: Broadening Market Awareness
Broadening Market Awareness Advertising Campaigns 18
Slide 20: Market Update
Market Update Select Assured Guaranty Transactions in 2019 Our market leadership has continued into 2019: $179,415,000 $140,000,000 $100,000,000 $85,950,000 Transportation Revenue General Obligation Bonds Water and Sewer Revenue General Obligation (Limited Green Bonds Series, 2016 Election, Series B
Slide 21: Creating Value: U.S. Structured Finance Business Activity
Creating Value New Business Production U.S. Structured Finance Business Activity • During 1Q-19, we insured a collateralized loan obligation U.S. Structured PVP1 (excluding SGI reinsurance portfolio)2 ($ in millions) • Focus has been on bilateral transactions to improve policy beneficiaries’ capital
Slide 22: Creating Value: Non-U.S. Business Activity
Creating Value New Business Production Non-U.S. Business Activity • During 1Q-19, we closed a debt service reserve Non-U.S. PVP1 guarantee on a water and sewerage company in (excluding SGI reinsurance portfolio)2 the United Kingdom and provided reinsurance on ($ in millions) an aircraft residual val
Slide 23: Creating Value: Puerto Rico Settlement Agreements
Creating Value Loss Mitigation Puerto Rico Settlement Agreements • In February 2019, consummated a resolution of the Company’s Puerto Rico Sales Tax Financing Corporation (COFINA) exposure under a plan of adjustment approved by the Title III Court ‒ Paid off the entire exposure of $273 million, plus
Slide 24: Creating Value: Acquisitions and Reinsurance of Legacy Monolines
Creating Value Alternative Strategies 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 non-GAAP operating shareholder’s equity and $570 mi
Slide 25: Creating Value: Alternative Investments
Creating Value Alternative Strategies Alternative Investments • The Company continues to investigate additional opportunities • In July 2016, the Company announced the formation of an Alternative Investments group - The Alternative Investments group focuses on deploying a portion of Assured Guaranty
Slide 26: Creating Value: Commutations
Creating Value Commutations • Reassumption of previously ceded business has increased the unearned premium reserve and non-GAAP adjusted book value1 Commutations Since 2009 Ceded Par Outstanding by Reinsurer As of March 31, 2019 As of March 31, 2019 Commutation Reassumed Par Reassumed UPR Gain / (Lo
Slide 27: Financial Strength Ratings
Financial Strength Ratings • In June 2018, S&P affirmed the AA (stable outlook) Financial Strength Ratings financial strength ratings of Assured Guaranty Municipal1, As of March 31, 2019 MAC and AGC – S&P found the Assured Guaranty group’s capital adequacy S&P Moody’s KBRA to be above their AAA requ
Slide 28: Net Par Outstanding Amortization
Net Par Outstanding Amortization • Amortization of the existing portfolio reduces rating Consolidated Net Par Outstanding Amortization1 agency capital charges, but also embedded future As of March 31, 2019 ($ in billions) earned premiums $640 – Currently, the existing portfolio consists of $226 bill
Slide 29: Assured Guaranty Today
Assured Guaranty Today Insured Portfolio and Capital Changes Since the Global Financial Crisis Claims-Paying Resources Insured Leverage $ in billions $13.2 $12.8 $13.2 $12.6 $12.4 $12.5 $12.6 $12.0 $12.0 $11.8 $11.5 71.3x 70.5x 62.9x 59.8x 53.5x 47.4x 46.7x 46.8x 41.2x 40.0x 39.4x 57% Decline 35.0x
Slide 30: AGL Consolidated Investment Portfolio
AGL Consolidated Investment Portfolio Fair Value as of March 31, 2019 Total Invested Assets and Cash1 Total Invested Assets and Cash1 By Category By Rating2 U.S. NR 9 Other Other U.S. Treasuries, Gov't & Treasuries & Agency 2% Invested 7 Invested Agency Obligations AAA Short-term Government Obligati
Slide 31: Credit Default Swap Spreads
Credit Default Swap Spreads • Movements in credit default swap (CDS) levels for Assured Guaranty Municipal1 and AGC continue to be significantly affected by technical factors such as supply/demand imbalance and light trading volume • The deterioration in the asset-backed securities market’s pricing
Slide 32: Assured Guaranty Ltd. Consolidated Insured Portfolio Overview
Assured Guaranty Ltd. Consolidated Insured Portfolio Overview
Slide 33: AGL Consolidated Insured Portfolio
AGL Consolidated Insured Portfolio Net Par Outstanding as of March 31, 2019 Portfolio Diversification by Sector Non-U.S. Structured U.S. Finance Structured <1% Finance 4% Non-U.S. Public Finance 19% U.S. Public Finance 76% $237.3 billion1,2 Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Stru
Slide 34: AGL Consolidated Insured Portfolio Ratings
AGL Consolidated Insured Portfolio Ratings Updated Net Par Outstanding as of March 31, 2019 Portfolio Diversification by Rating BIG AAA AA 4% 2% 12% BBB 33% A 49% $237.3 billion1,2 Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance Portfolio Public & Structured Finance BIG AAA
Slide 35: Puerto Rico Exposure
Public Finance Puerto Rico Exposure Par Exposure to the Commonwealth and its Agencies1,2 As of March 31, 2019 Elimi- ($ in millions) AGM AGC AG Re nations Net Par O/S Gross Par O/S Commonwealth Commonwealth of Puerto Rico - General Obligation Bonds 3,4 $647 $301 $393 $(1) $1,340 $1,383 Constitutiona
Slide 36: Puerto Rico Scheduled Net Par Amortization
Public Finance Puerto Rico Exposure Scheduled Net Par Amortization of Exposure to the Commonwealth and its Agencies As of March 31, 2019 2Q 3Q 4Q 2029- 2034- 2039- 2044- ($ in millions) 2019 2019 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2033 2038 2043 2047 Total Commonwealth – GO1 $- $87 $-
Slide 37: Puerto Rico Scheduled Net Debt Service Amortization
Public Finance Puerto Rico Exposure Scheduled Net Debt Service Amortization of Exposure to the Commonwealth and its Agencies As of March 31, 2019 2Q 3Q 4Q 2029- 2034- 2039- 2044- ($ in millions) 2019 2019 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2033 2038 2043 2047 Total Commonwealth – GO1
Slide 38: Detroit & Stockton Exposure
AGL Consolidated Detroit & Stockton Exposure Details of Assured Guaranty’s Exposure to Detroit • Municipal utilities exposure is $429 million of water revenue bonds and $974 million of sewer revenue bonds. Both the water and sewer systems provide services to areas that extend significantly beyond th
Slide 39: Structured Finance Exposures
Structured Finance Exposures Net Par Outstanding By Type As of March 31, 2019 U.S. and Non-U.S. ($ in billions) U.S. • Assured Guaranty’s total structured finance RMBS exposure of $240.9 billion at December 31, Pooled $4.1 Corporate $1.5 13% 2007 has declined by $229.6 billion to $11.3 36% billion t
Slide 40: Consolidated U.S. RMBS
Consolidated U.S. RMBS • Our $4.1 billion U.S. RMBS portfolio is amortizing both on a dollar basis and as a U.S. RMBS by Exposure Type1 percentage of the portfolio As of March 31, 2019 – Total U.S. RMBS has declined from $29.2 billion at December ($ in billions) 31, 2009 to $4.1 billion at March 31,
Slide 41: Consolidated Non-U.S. Exposure
Consolidated Non-U.S. Exposure Non-U.S. Public and Structured Finance Non-U.S. Exposure As of March 31, 2019 ($ in billions) • 98% of non-U.S. exposure is Public Finance Canada – Direct sovereign debt is limited to Poland ($279 $2.6 Other France Australia million outstanding) $5.9 $3.1 $2.1 6% 7% 5%
Slide 42: AGM Portfolio Review
AGM Portfolio Review Eiffage CEVM / Foster + Partners / Jean-Pierre Lescourret
Slide 43: AGM Insured Portfolio
AGM1 Insured Portfolio Net Par Outstanding as of March 31, 2019 Portfolio Diversification by Sector Non-U.S. Structured Finance U.S. <1% Structured Finance 3% U.S. Public Finance 70% Non-U.S. Public Finance 26% $118.1 billion2 Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance
Slide 44: AGM Insured Portfolio Ratings
AGM1 Insured Portfolio Ratings Net Par Outstanding as of March 31, 2019 Portfolio Diversification by Rating BIG AAA AA 4% 1% 9% BBB 36% A 49% $118.1 billion2 Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance Portfolio Public & Structured Finance BIG AAA A BIG AAA 3% <1% AA AA
Slide 45: AGM Insured Portfolio: Net Par by Asset Type
AGM1 Insured Portfolio Net Par Outstanding as of March 31, 2019 Net Par Outstanding By Asset Type ($ in millions) Net Par Avg. Internal Net Par Avg. Internal Outstanding Rating Outstanding Rating U.S. public finance: U.S. structured finance: General obligation $ 33,245 A- RMBS $ 2,380 BB+ Tax backed
Slide 46: AGM Projected Amortization of Global Insured Structured Finance Portfolio
AGM1 Projected Amortization of Global Insured Structured Finance Portfolio Portfolio Diversification by Sector Portfolio Diversification by Rating 3 Financial Other A Products AA $0.1 Structured $1.3 (GICs) Finance $1.0 $0.6 BBB $0.4 3 AAA $0.7 U.S. BIG RMBS $1.5 $2.4 $4.0 Billion Net Par Outstandin
Slide 47: AGM U.S. RMBS Exposure
AGM1 U.S. RMBS Exposure By Type As of March 31, 2019 ($ in millions) • AGM’s1 U.S. RMBS portfolio is amortizing on an Prime First Lien Alt-A First absolute basis and has declined as a percentage $24 Lien $328 of the portfolio 1% – $2.4 billion net par outstanding versus $17.1 billion at 14% year-end
Slide 48: AGM Investment Portfolio
AGM1 Investment Portfolio Fair Value as of March 31, 2019 Total Invested Assets and Cash2 Total Invested Assets and Cash2 By Category By Rating3 Other Short-term & U.S. Cash Treasuries & 10 U.S. 8 Invested NR AAA Assets 7% Government 3% Treasuries & Obligations Gov't 24% 1% <1% Obligations Foreign <
Slide 49: AGM Consolidated Expected Loss and LAE to Be Paid
AGM Consolidated Expected Loss and LAE to Be Paid Three Months Ended March 31, 2019 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended March 31, 2019 Net Expected Loss to Economic Loss Net Expected Loss to be Paid (Recovered) as Development During (Paid)
Slide 50: Municipal Assurance Corp. Portfolio Review
Municipal Assurance Corp. Portfolio Review
Slide 51: MAC Insured Portfolio
MAC Insured Portfolio (100% U.S. Public Finance) Net Par Outstanding as of March 31, 2019 Portfolio Diversification by Sector Portfolio Diversification by Rating 1 BIG AAA AA Muni Utility 1% 1% 19% Revenue 14% BBB 17% Tax Backed 14% General Obligations 64% Other 9% A 63% $26.1 billion Net Par Outsta
Slide 52: MAC Investment Portfolio
MAC Investment Portfolio Fair Value as of March 31, 2019 Total Invested Assets and Cash1 Total Invested Assets and Cash1 By Category By Rating2 U.S. Short Term Treasuries & Cash Investments Government <1% 4 2% Obligations U.S. AAA 3% Treasuries & 15% Mortgage- Gov't backed & Obligations Asset- 3 3%
Slide 53: Assured Guaranty Corp. Portfolio Review
Assured Guaranty Corp. Portfolio Review Eiffage CEVM / Foster + Partners / Jean-Pierre Lescourret
Slide 54: AGC Insured Portfolio
AGC Insured Portfolio Net Par Outstanding as of March 31, 2019 Portfolio Diversification by Sector Non-U.S. Structured Finance 2% Non-U.S. Public Finance 19% U.S. Public Finance 63% U.S. Structured Finance $25.8 billion 16% Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance Po
Slide 55: AGC Insured Portfolio Ratings
AGC Insured Portfolio Ratings Net Par Outstanding as of March 31, 2019 Portfolio Diversification by Rating BIG AAA 10% 6% AA 19% BBB 33% A 32% $25.8 billion Non-U.S. Portfolios U.S. Public Finance Portfolio U.S. Structured Finance Portfolio Public & Structured Finance AAA AA AAA BIG BIG BIG AAA <1%
Slide 56: AGC Insured Portfolio: Net Par by Asset Type
AGC Insured Portfolio Net Par Outstanding as of March 31, 2019 Net Par Outstanding By Asset Type ($ in millions) Net Par Avg. Internal Net Par Avg. Internal Outstanding Rating Outstanding Rating U.S. public finance: U.S. structured finance: Tax backed $ 3,802 BBB- RMBS $ 1,327 BBB General obligation
Slide 57: AGC U.S. RMBS Exposure
AGC U.S. RMBS Exposure By Type As of March 31, 2019 ($ in millions) Second Alt-A First Lien • AGC’s U.S. RMBS portfolio is amortizing on Lien $284 $192 an absolute basis and has declined as a percentage of the portfolio Prime First 21% Lien 14% Option – $1.3 billion versus $13.4 billion at year-end
Slide 58: AGC Non-RMBS Exposure
AGC Non-RMBS Exposure U.S. Structured Finance U.S. Non-RMBS Structured Finance • AGC’s non-RMBS U.S. structured finance As of March 31, 2019 ($ in billions) exposures consist principally of: Other – Pooled corporate obligations structured finance – Consumer receivables $0.4 – Life insurance transact
Slide 59: AGC Investment Portfolio
AGC Investment Portfolio Fair Value as of March 31, 2019 Total Invested Assets and Cash1 Total Invested Assets and Cash1 By Category By Rating2 Other U.S. Invested Cash Treasuries & Agency Assets <1% Government Obligations 6 AAA <1% Obligations 1% U.S. Treasuries, 13% AA Short-term 1% Gov't 43% 4% O
Slide 60: AGC Expected Loss and LAE to Be Paid
AGC Expected Loss and LAE to Be Paid Three Months Ended March 31, 2019 ($ in millions) Rollforward of Net Expected Loss and LAE to be Paid1 for the Three Months Ended March 31, 2019 Net Expected Loss to Economic Loss (Paid) Recovered Net Expected Loss to be Paid (Recovered) as Development Losses Dur
Slide 61: Appendix
ASSURED GUARANTY
Slide 62: 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 63: Explanation of Non-GAAP Financial Measures
Appendix Explanation of Non-GAAP Financial Measures Non-GAAP Operating Income: Management believes that non-GAAP 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 64: Explanation of Non-GAAP Financial Measures (Cont'd)
Appendix Explanation of Non-GAAP Financial Measures (Cont’d) Management uses non-GAAP adjusted book value, adjusted for FG VIE consolidation, to measure the intrinsic value of the Company, excluding franchise value. Growth in non-GAAP adjusted book value per share, adjusted for FG VIE consolidation
Slide 65: Reconciliation of Gross Written Premiums (GWP) to PVP
Appendix Reconciliation of Gross Written Premiums (GWP) to PVP Reconciliation of GWP to PVP Three Months Ended March 31, Year Ended December 31, (dollars in millions) 2019 2018 2018 2017 2016 2015 2014 Total GWP $39 $73 $612 $307 $154 $181 $104 Less: Installment GWP and other GAAP adjustments1 5 22
Slide 66: Reconciliation of Net Income (Loss) to Non-GAAP Operating Income
Appendix Reconciliation of Net Income (Loss) to Non-GAAP Operating Income1 Three Months Ended Non-GAAP Operating Income Reconciliation March 31, (dollars in millions, except per share amounts) 2019 2018 Per Diluted Per Diluted Total Share Total Share Net income (loss) $54 $0.52 $197 $1.68 Less pre-t
Slide 67: Reconciliation of Shareholders' Equity to Non-GAAP Adjusted Book Value
Appendix Reconciliation of Shareholders’ Equity to Non-GAAP Adjusted Book Value1 Non-GAAP Adjusted book value reconciliation As of (dollars in millions, except per share amounts) March 31, 2019 December 31, 2018 March 31, 2018 December 31, 2017 Total Per Share Total Per Share Total Per Share Total P
Slide 68: Reconciliation of GAAP ROE to Non-GAAP Operating ROE
Appendix Reconciliation of GAAP ROE to Non-GAAP Operating ROE ROE Reconciliation (dollars in millions) Three Months Ended March 31, 2019 2018 Net income (loss) $54 $197 Non-GAAP Operating income 86 155 Gain (loss) related to FG VIE consolidation included in non-GAAP operating income - 5 Average shar
Slide 69: Assured Guaranty Contacts
Assured Guaranty Contacts: Robert Tucker Senior Managing Director Investor Relations and Corporate Communications Direct: 212.339.0861 rtucker@agltd.com Michael Walker Managing Director Fixed Income Investor Relations Direct: 212.261.5575 mwalker@agltd.com Andre Thomas Managing Director Investor Rel
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