- GAAP Highlights:
- Net income attributable to Assured Guaranty Ltd. was $109
million, or $1.89 per share(1), for first quarter 2024.
- Shareholders’ equity attributable to Assured Guaranty Ltd. per
share was $102.19 as of March 31, 2024.
- Gross written premiums (GWP) were $61 million for first quarter
2024.
- Non-GAAP Highlights:
- Adjusted operating income(2) was $113 million, or $1.96 per
share, for first quarter 2024.
- Adjusted operating shareholders’ equity(2) per share and
adjusted book value (ABV)(2) per share were $107.69 and $157.31,
respectively, as of March 31, 2024.
- Present value of new business production (PVP)(2) was $63
million for first quarter 2024.
- Return of Capital to Shareholders:
- First quarter 2024 capital returned to shareholders was $148
million including share repurchases of $129 million and dividends
of $19 million.
- Share repurchase authorization was increased by $300 million on
May 2, 2024.
Assured Guaranty Ltd. (NYSE: AGO) (AGL and, together with its
subsidiaries, Assured Guaranty or the Company) announced today its
financial results for the three-month period ended March 31, 2024
(first quarter 2024).
“Assured Guaranty produced excellent first quarter 2024
results,” said Dominic Frederico, President and CEO. “First quarter
net income increased 35% year over year, and adjusted operating
income increased 66%. Shareholders’ equity per share, adjusted
operating shareholders’ equity per share, and adjusted book value
per share all reached record levels of $102.19, $107.69 and
$157.31, respectively. New business written produced $61 million of
GWP and $63 million of PVP, reflecting strong production in U.S.
public finance and global structured finance.
“In U.S. public finance, we continued to lead the bond insurance
industry in primary market par sold. Premiums were strong in the
first quarter, with new municipal business producing approximately
twice as much GWP and PVP as in last year’s first quarter, on a
similar amount of gross par written, due to several large
transportation revenue issuances this year.
“In April of this year, we celebrated the 20th anniversary of
our IPO. Since that time through the end of the first quarter, our
share price has increased almost 385%, more than those of the
S&P 500 Financials, the S&P 500, the Dow Jones Industrial
Average and the NYSE Composite Index, and we have paid common share
dividends of $1 billion. For 2024, we have ramped up our share
repurchase program, repurchasing $129 million of common shares in
the first quarter alone, which equals 2.7% of our shares
outstanding on December 31, 2023.”
(1)
All per share information for net income
and adjusted operating income is based on diluted shares.
(2)
Please see “Explanation of Non-GAAP
Financial Measures.”
Summary Financial
Results
(in millions, except per share
amounts)
Quarter Ended
March 31,
2024
2023
GAAP (1)
Net income (loss) attributable to
AGL
$
109
$
81
Net income (loss) attributable to AGL
per diluted share
$
1.89
$
1.34
Weighted average diluted shares
57.1
60.4
Non-GAAP
Adjusted operating income (loss) (2)
$
113
$
68
Adjusted operating income per diluted
share (2)
$
1.96
$
1.12
Weighted average diluted shares
57.1
60.4
Gain (loss) related to FG VIE and CIV
consolidation (3) included in adjusted operating income
$
—
$
(4
)
Gain (loss) related to FG VIE and CIV
consolidation included in adjusted operating income per share
$
—
$
(0.06
)
Components of total adjusted operating
income (loss)
Insurance segment
$
149
$
117
Asset Management segment
1
(1
)
Corporate division
(37
)
(44
)
Other
—
(4
)
Adjusted operating income (loss)
$
113
$
68
As of
March 31, 2024
December 31, 2023
Amount
Per Share
Amount
Per Share
Shareholders’ equity attributable to
AGL
$
5,629
$
102.19
$
5,713
$
101.63
Adjusted operating shareholders’ equity
(2)
5,932
107.69
5,990
106.54
ABV (2)
8,665
157.31
8,765
155.92
Common Shares Outstanding
55.1
56.2
________________________________________________
(1)
Generally accepted accounting principles
in the United States of America.
(2)
Please see “Explanation of Non-GAAP
Financial Measures” at the end of this press release.
(3)
The effect of consolidating financial
guaranty variable interest entities (FG VIEs) and consolidated
investment vehicles (CIVs).
On a per share basis, shareholders’ equity attributable to AGL
increased to $102.19 as of March 31, 2024 from $101.63 as of
December 31, 2023, primarily due to net income and share
repurchases, partially offset by dividends and unrealized losses in
the investment portfolio. On a per share basis, ABV increased to
$157.31 primarily due to adjusted operating income, new business
production and share repurchases, partially offset by
dividends.
Insurance Segment
The Insurance segment primarily consists of the Company’s
insurance subsidiaries that provide credit protection products to
the United States (U.S.) and non-U.S. public finance (including
infrastructure) and structured finance markets.
Insurance Segment New Business Production
Insurance Segment
New Business
Production
(in millions)
Quarter Ended March
31,
2024
2023
GWP
PVP (1)
Gross Par
Written (2)
GWP
PVP (1)
Gross Par
Written (2)
Public finance - U.S.
$
44
$
43
$
2,909
$
22
$
22
$
2,907
Public finance - non-U.S.
2
1
—
36
30
360
Structured finance - U.S.
13
15
480
28
27
582
Structured finance - non-U.S.
2
4
354
—
33
1,514
Total
$
61
$
63
$
3,743
$
86
$
112
$
5,363
________________________________________________
(1)
PVP, a non-GAAP financial measure,
measures the value of the Insurance segment’s new business
production for all contracts regardless of form or GAAP accounting
model. See “Explanation of Non-GAAP Financial Measures” at the end
of this press release. PVP is based on “close date,” when the
transaction settles. PVP was discounted at 5% and 4% in first
quarter 2024 and in the three-month period ended March 31, 2023
(first quarter 2023), respectively.
(2) Gross Par Written is based on “close date,” when the
transaction settles.
U.S. public finance GWP and PVP in first quarter 2024 were
higher than the comparable GWP and PVP in first quarter 2023,
primarily due to several large transportation revenue transactions
that closed in first quarter 2024. The Company’s direct par written
represented 53% of the total U.S. municipal market insured issuance
in first quarter 2024, compared with 60% in first quarter 2023, and
the Company’s penetration of all municipal issuance was 3.8% in
first quarter 2024 compared with 4.6% in first quarter 2023.
Structured finance GWP and PVP in first quarter 2024 were
primarily attributable to insurance securitization and subscription
finance transactions.
Business activity in the non-U.S. public finance and structured
finance sectors often has long lead times and therefore may vary
from period to period.
Insurance Segment Adjusted Operating Income
Insurance segment adjusted operating income increased to $149
million in first quarter 2024, from $117 million in first quarter
2023. The increase was primarily due to higher net earned premiums
and fair value gains on trading securities in first quarter
2024.
Insurance Segment
Results
(in millions)
Quarter Ended
March 31,
2024
2023
Segment revenues
Net earned premiums and credit derivative
revenues
$
122
$
84
Net investment income
83
82
Fair value gains (losses) on trading
securities
26
(2
)
Foreign exchange gains (losses) on
remeasurement
—
1
Other income (loss)
(2
)
25
Total segment revenues
229
190
Segment expenses
Loss expense (benefit)
4
9
Amortization of deferred acquisition costs
(DAC)
6
3
Employee compensation and benefit
expenses
48
39
Other operating expenses
27
28
Total segment expenses
85
79
Equity in earnings (losses) of
investees
40
30
Segment adjusted operating income
(loss) before income taxes
184
141
Less: Provision (benefit) for income
taxes
35
24
Segment adjusted operating income
(loss)
$
149
$
117
The components of the Insurance segment’s premiums, losses and
income from the investment portfolio are presented below.
Insurance Segment Net Earned Premiums and Credit Derivative
Revenues
Insurance Segment
Net Earned Premiums and Credit
Derivative Revenues
(in millions)
Quarter Ended
March 31,
2024
2023
Scheduled net earned premiums and credit
derivative revenues
$
83
$
80
Accelerations
39
4
Total
$
122
$
84
Net earned premiums and credit derivative revenues increased in
first quarter 2024 compared with first quarter 2023 primarily due
to a large refunded transaction in first quarter 2024.
Insurance Segment Loss Expense (Benefit) and the Roll Forward of
Expected Losses
Loss expense is a function of net economic loss development
(benefit) and deferred premium revenue.
Insurance Segment
Loss Expense (Benefit)
(in millions)
Quarter Ended
March 31,
2024
2023
Public finance
$
1
$
1
U.S. residential mortgage-backed
securities (RMBS)
2
6
Other structured finance
1
2
Total
$
4
$
9
The table below presents the roll forward of net expected losses
for first quarter 2024.
Roll Forward of Net Expected
Loss to be Paid (Recovered) (1)
(in millions)
Net Expected Loss to be Paid
(Recovered) as of December 31, 2023
Net
Economic Loss Development
(Benefit)
Net (Paid) Recovered
Losses
Net Expected Loss to be Paid
(Recovered) as of March 31, 2024
Public finance
$
418
$
(3
)
$
(17
)
$
398
U.S. RMBS
43
(3
)
(42
)
(2
)
Other structured finance
44
(1
)
(6
)
37
Total
$
505
$
(7
)
$
(65
)
$
433
________________________________________________
(1)
Net economic loss development (benefit)
represents the change in net expected loss to be paid (recovered)
attributable to the effects of changes in the economic performance
of insured transactions, changes in assumptions based on observed
market trends, changes in discount rates, accretion of discount and
the economic effects of loss mitigation efforts, each net of
reinsurance. Net economic loss development (benefit) is the
principal measure that the Company uses to evaluate the loss
experience in its insured portfolio. Expected loss to be paid
(recovered) includes all transactions insured by the Company,
regardless of the accounting model prescribed under GAAP and
without consideration of deferred premium revenue.
The net economic loss development was a benefit of $7 million in
first quarter 2024, mainly attributable to improved performance
across various public finance exposures and higher recoveries in
second-lien RMBS. The effect of changes in risk-free rates used to
discount expected losses was a benefit of $3 million.
Insurance Segment Income from Investment Portfolio
Insurance Segment
Income from Investment
Portfolio
(in millions)
Quarter Ended
March 31,
2024
2023
Net investment income
$
83
$
82
Fair value gains (losses) on trading
securities (1)
26
(2
)
Equity in earnings (losses) of investees
(2)
40
30
Total
$
149
$
110
________________________________________________
(1)
Represents contingent value instruments
issued by Puerto Rico that are classified as trading securities
with changes in fair value reported in the condensed consolidated
statements of operations.
(2)
Equity in earnings (losses) of investees
primarily relates to funds managed by Sound Point Capital
Management, LP and certain of its investment management
subsidiaries (Sound Point) and Assured Healthcare Partners, LLC
(AHP), and certain other managers, as well as, prior to July 1,
2023, Assured Investment Management LLC and its investment
management affiliates (AssuredIM). Investments in funds are
reported on a one-quarter lag.
Net investment income, which represents interest income on
available-for-sale fixed-maturity debt securities and short-term
investments, increased to $83 million in first quarter 2024 from
$82 million in first quarter 2023 primarily due to higher
short-term interest rates and average balances, partially offset by
lower income on loss mitigation securities.
As of March 31, 2024, the Insurance segment had $796 million in
alternative investments, which had an inception-to-date annualized
internal rate of return of approximately 14.4%. In the Insurance
segment, alternative investments consist primarily of funds managed
by Sound Point, AHP and other managers, and are generally recorded
at net asset value (NAV), with changes in NAV reported in “equity
in earnings (losses) of investees.” Equity in earnings of investees
is more volatile than net investment income on available-for-sale
fixed-maturity securities and short-term investments. To the extent
that the amounts invested in alternative fund investments increase
and available-for-sale fixed-maturity securities decrease, net
investment income may decline and mark-to-market volatility related
to equity in earnings of investees may increase.
Ratings Action
On April 30th 2024, Moody’s Ratings (Moody’s) upgraded the
insurance financial strength rating of Assured Guaranty Corp. (AGC)
and affirmed the rating of Assured Guaranty Municipal Corp. (AGM),
both with a stable outlook. In the report, Moody’s cited AGC’s
strong risk-adjusted capital adequacy, the significant improvement
in the credit quality of its insured portfolio, and an increased
strategic role within Assured Guaranty. About AGM, Moody’s noted
AGM’s strong capital profile and leading market position in the
financial guaranty sector.
Asset Management Segment
Since July 2023, the Company participates in the asset
management business through its ownership interest in Sound Point.
Prior to July 1, 2023, the Company participated in the asset
management business through AssuredIM. Asset Management segment
adjusted operating income was $1 million for first quarter 2024 and
a loss of $1 million for first quarter 2023. Sound Point’s results
are reported on a one quarter lag and are included in “equity in
earnings (losses) of investees.” In first quarter 2024, equity in
earnings (losses) of investees consisted of a $4 million gain on
the Company’s ownership interest in Sound Point and a $3 million
impairment loss related to a legacy investment in a small financial
services advisory firm.
Corporate Division
The Corporate division primarily consists of interest expense on
the debt of Assured Guaranty US Holdings Inc. and Assured Guaranty
Municipal Holdings Inc., as well as other operating expenses
attributed to holding company activities. Adjusted operating loss
for the Corporate division was $37 million in first quarter 2024
compared with $44 million in first quarter 2023. The decrease in
the net loss attributable to the Corporate division is primarily
due to an additional value added tax in the United Kingdom and
expenses related to the Sound Point transaction in first quarter
2023, offset in part by increases in premises related expenses.
Reconciliation to GAAP
The following table presents a reconciliation of net income
(loss) attributable to AGL to adjusted operating income (loss).
Reconciliation of Net Income
(Loss) Attributable to AGL to
Adjusted Operating Income
(Loss)
(in millions, except per share
amounts)
Quarter Ended
March 31,
2024
2023
Total
Per Diluted Share
Total
Per Diluted Share
Net income (loss) attributable to
AGL
$
109
$
1.89
$
81
$
1.34
Less pre-tax adjustments:
Realized gains (losses) on investments
8
0.14
(2
)
(0.03
)
Non-credit impairment-related unrealized
fair value gains (losses) on credit derivatives
10
0.16
13
0.21
Fair value gains (losses) on committed
capital securities (CCS)
(10
)
(0.17
)
(16
)
(0.26
)
Foreign exchange gains (losses) on
remeasurement of premiums receivable and loss and loss adjustment
expense (LAE) reserves
(12
)
(0.20
)
20
0.32
Total pre-tax adjustments
(4
)
(0.07
)
15
0.24
Less tax effect on pre-tax adjustments
—
—
(2
)
(0.02
)
Adjusted operating income (loss)
$
113
$
1.96
$
68
$
1.12
Gain (loss) related to FG VIE and CIV
consolidation included in adjusted operating income
$
—
$
—
$
(4
)
$
(0.06
)
Non-credit impairment-related unrealized fair value gains on
credit derivatives in first quarter 2024 were generated primarily
as a result of the termination of certain structured finance
contracts. Non-credit impairment-related unrealized fair value
gains on credit derivatives in first quarter 2023 were generated
primarily as a result of the increased cost to buy protection on
AGC. Except for credit impairment, the fair value adjustments on
credit derivatives in the insured portfolio are non-economic
adjustments that reverse to zero over the remaining term of that
portfolio.
Fair value losses on CCS in first quarter 2024 and first quarter
2023 were primarily due to a tightening in market spreads. Fair
value of CCS is heavily affected by, and in part fluctuates with,
changes in market interest rates, credit spreads and other market
factors and is not expected to result in an economic gain or
loss.
Foreign exchange gains (losses) in both periods primarily relate
to remeasurement of premiums receivable and are mainly due to
changes in the exchange rate relative to the U.S. dollar of the
pound sterling and, to a lesser extent, the euro.
Common Share Repurchases
On May 2, 2024, AGL's Board of Directors (the Board) authorized
the repurchase of an additional $300 million of the Company’s
common shares. From the beginning of the repurchase program in 2013
through May 7, 2024, the Company repurchased a total of 146 million
common shares at an average price of $34.50, representing
approximately 75% of the total shares outstanding. As of May 7,
2024, the Company was authorized to purchase $414 million of its
common shares. These repurchases can be made from time to time in
the open market or in privately negotiated transactions.
Summary of Share
Repurchases
(in millions, except per share
amounts)
Amount (1)
Number of Shares
Average Price Per
Share
2024 (January 1 - March 31)
$
129
1.54
$
84.07
2024 (April 1 - May 7)
61
0.75
80.70
Total 2024
$
190
2.29
82.96
________________________________________________
(1)
Excludes commissions and excise taxes.
The timing, form and amount of the share repurchases under the
program are at the discretion of management and will depend on a
variety of factors, including funds available at the parent
company, other potential uses for such funds, market conditions,
the Company’s capital position, legal requirements and other
factors. The repurchase program may be modified, extended or
terminated by the Board at any time. It does not have an expiration
date.
Financial Statements
Condensed Consolidated
Statements of Operations (unaudited)
(in millions)
Quarter Ended
March 31,
2024
2023
Revenues
Net earned premiums
$
119
$
81
Net investment income
84
81
Asset management fees
—
26
Net realized investment gains (losses)
8
(2
)
Fair value gains (losses) on credit
derivatives
10
15
Fair value gains (losses) on CCS
(10
)
(16
)
Fair value gains (losses) on FG VIEs
(3
)
(5
)
Fair value gains (losses) on CIVs
22
58
Foreign exchange gain (loss) on
remeasurement
(12
)
20
Fair value gains (losses) on trading
securities
26
(2
)
Other income (loss)
1
27
Total revenues
245
283
Expenses
Loss and LAE (benefit)
(1
)
4
Interest expense
23
21
Amortization of DAC
6
3
Employee compensation and benefit
expenses
58
82
Other operating expenses
39
55
Total expenses
125
165
Income (loss) before income taxes and
equity in earnings (losses) of investees
120
118
Equity in earnings (losses) of
investees
24
2
Income (loss) before income
taxes
144
120
Less: Provision (benefit) for income
taxes
31
23
Net income (loss)
113
97
Less: Noncontrolling interests
4
16
Net income (loss) attributable to
AGL
$
109
$
81
Condensed Consolidated Balance
Sheets (unaudited)
(in millions)
As of
March 31, 2024
December 31, 2023
Assets
Investments:
Fixed-maturity securities
available-for-sale, at fair value
$
6,091
$
6,307
Fixed-maturity securities, trading, at
fair value
272
318
Short-term investments, at fair value
1,649
1,661
Other invested assets
875
829
Total investments
8,887
9,115
Cash
115
97
Premiums receivable, net of commissions
payable
1,450
1,468
DAC
164
161
Salvage and subrogation recoverable
295
298
FG VIEs’ assets
167
328
Assets of CIVs
377
366
Other assets
713
706
Total assets
$
12,168
$
12,539
Liabilities
Unearned premium reserve
$
3,612
$
3,658
Loss and LAE reserve
307
376
Long-term debt
1,695
1,694
Credit derivative liabilities, at fair
value
43
53
FG VIEs’ liabilities, at fair value
399
554
Other liabilities
430
439
Total liabilities
6,486
6,774
Shareholders’ equity
Common shares
1
1
Retained earnings
6,014
6,070
Accumulated other comprehensive income
(loss)
(387
)
(359
)
Deferred equity compensation
1
1
Total shareholders’ equity attributable
to AGL
5,629
5,713
Nonredeemable noncontrolling interests
53
52
Total shareholders’ equity
5,682
5,765
Total liabilities and shareholders’
equity
$
12,168
$
12,539
Explanation of Non-GAAP Financial Measures
The Company discloses both: (i) financial measures determined in
accordance with GAAP; and (ii) financial measures not determined in
accordance with GAAP (non-GAAP financial measures). Financial
measures identified as non-GAAP should not be considered
substitutes for GAAP financial measures. The primary limitation of
non-GAAP financial measures is the potential lack of comparability
to financial measures of other companies, whose definitions of
non-GAAP financial measures may differ from those of the
Company.
The Company believes its presentation of non-GAAP financial
measures provides information that is necessary for analysts to
calculate their estimates of Assured Guaranty’s financial results
in their research reports on Assured Guaranty and for investors,
analysts and the financial news media to evaluate Assured
Guaranty’s financial results.
GAAP requires the Company to consolidate entities where it is
deemed to be the primary beneficiary which include:
- FG VIEs, which the Company does not own and where its exposure
is limited to its obligation under the financial guaranty insurance
contract, and
- CIVs in which certain subsidiaries invest.
The Company discloses the effect of FG VIE and CIV consolidation
that is embedded in each non-GAAP financial measure, as applicable.
The Company believes this information may also be useful to
analysts and investors evaluating Assured Guaranty’s financial
results. In the case of both the consolidated FG VIEs and the CIVs,
the economic effect on the Company of each of the consolidated FG
VIEs and CIVs is reflected primarily in the results of the
Insurance segment.
Management of the Company and AGL’s Board of Directors use
non-GAAP financial measures further adjusted to remove the effect
of FG VIE and CIV consolidation (which the Company refers to as its
core financial measures), as well as GAAP financial measures and
other factors, to evaluate the Company’s results of operations,
financial condition and progress towards long-term goals. The
Company uses core financial measures in its decision-making process
for and in its calculation of certain components of management
compensation. The financial measures that the Company uses to help
determine compensation are: (1) adjusted operating income, further
adjusted to remove the effect of FG VIE and CIV consolidation; (2)
adjusted operating shareholders’ equity, further adjusted to remove
the effect of FG VIE and CIV consolidation; (3) adjusted book value
per share, further adjusted to remove the effect of FG VIE and CIV
consolidation; and (4) PVP.
Management believes that many investors, analysts and financial
news reporters use adjusted operating shareholders’ equity and/or
adjusted book value, each further adjusted to remove the effect of
FG VIE and CIV consolidation, as the principal financial measures
for valuing AGL’s current share price or projected share price and
also as the basis of their decision to recommend, buy or sell AGL’s
common shares. Management also believes that many of the Company’s
fixed income investors also use adjusted operating shareholders’
equity, further adjusted to remove the effect of FG VIE and CIV
consolidation, to evaluate the Company’s capital adequacy.
Adjusted operating income, further adjusted for the effect of FG
VIE and CIV consolidation, enables investors and analysts to
evaluate the Company’s financial results in comparison with the
consensus analyst estimates distributed publicly by financial
databases.
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 and the most
directly comparable GAAP financial measure is presented below.
Adjusted Operating Income
Management believes that adjusted operating income is a useful
measure because it clarifies the understanding of the operating
results of the Company. Adjusted operating income is defined as net
income (loss) attributable to AGL, as reported under GAAP, adjusted
for the following:
1) Elimination of realized gains (losses) on
the Company’s investments, except for gains and losses on
securities classified as trading. The timing of realized gains and
losses, which depends largely on market credit cycles, can vary
considerably across periods. The timing of sales is largely subject
to the Company’s discretion and influenced by market opportunities,
as well as the Company’s tax and capital profile.
2) Elimination of non-credit
impairment-related unrealized fair value gains (losses) on credit
derivatives that are recognized in net income, which is the amount
of unrealized fair value gains (losses) in excess of the present
value of the expected estimated economic credit losses, and
non-economic payments. Such fair value adjustments are heavily
affected by, and in part fluctuate with, changes in market interest
rates, the Company’s credit spreads, and other market factors and
are not expected to result in an economic gain or loss.
3) Elimination of fair value gains (losses)
on the Company’s CCS that are recognized in net income. Such
amounts are affected by changes in market interest rates, the
Company’s credit spreads, price indications on the Company’s
publicly traded debt and other market factors and are not expected
to result in an economic gain or loss.
4) Elimination of foreign exchange gains
(losses) on remeasurement of net premium receivables and loss and
LAE reserves that are recognized in net income. Long-dated
receivables and loss and LAE reserves represent the present value
of future contractual or expected cash flows. Therefore, the
current period’s foreign exchange remeasurement gains (losses) are
not necessarily indicative of the total foreign exchange gains
(losses) that the Company will ultimately recognize.
5) The tax effects related to the above
adjustments, which are determined by applying the statutory tax
rate in each of the jurisdictions that generate these
adjustments.
See “Reconciliation to GAAP” above for a reconciliation of net
income (loss) attributable to AGL to adjusted operating income
(loss).
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 that are not expected to
result in economic gain or loss.
Adjusted operating shareholders’ equity is defined as
shareholders’ equity attributable to AGL, as reported under GAAP,
adjusted for the following:
1) Elimination of non-credit
impairment-related unrealized fair value gains (losses) on credit
derivatives, which is the amount of unrealized fair value gains
(losses) in excess of the present value of the expected estimated
economic credit losses, and non-economic payments. Such fair value
adjustments are heavily affected by, and in part fluctuate with,
changes in market interest rates, credit spreads and other market
factors and are not expected to result in an economic gain or
loss.
2) Elimination of fair value gains (losses)
on the Company’s CCS. Such amounts are affected by changes in
market interest rates, the Company’s credit spreads, price
indications on the Company’s publicly traded debt, and other market
factors and are not expected to result in an economic gain or
loss.
3) Elimination of unrealized gains (losses)
on the Company’s investments that are recorded as a component of
accumulated other comprehensive income (AOCI). The AOCI component
of the fair value adjustment on the investment portfolio is not
deemed economic because the Company generally holds these
investments to maturity and therefore would not recognize an
economic gain or loss.
4) The tax effects related to the above
adjustments, which are determined by applying the statutory tax
rate in each of the jurisdictions that generate these
adjustments.
Management uses adjusted book value, further adjusted to remove
the effect of FG VIE and CIV consolidation, to measure the
intrinsic value of the Company, excluding franchise value. Adjusted
book value per share, further adjusted for FG VIE and CIV
consolidation (core adjusted book value), is one of the key
financial measures used in determining the amount of certain
long-term compensation elements to management and employees and
used by rating agencies and investors. Management believes that
adjusted book value is a useful measure because it enables an
evaluation of the Company’s in-force premiums and revenues net of
expected losses. Adjusted book value is adjusted operating
shareholders’ equity, as defined above, further adjusted for the
following:
1) Elimination of deferred acquisition costs,
net. These amounts represent net deferred expenses that have
already been paid or accrued and will be expensed in future
accounting periods.
2) Addition of the net present value of
estimated net future revenue. See below.
3) Addition of the deferred premium revenue
on financial guaranty contracts in excess of expected loss to be
expensed, net of reinsurance. This amount represents the present
value of the expected future net earned premiums, net of the
present value of expected losses to be expensed, which are not
reflected in GAAP equity.
4) The tax effects related to the above
adjustments, which are determined by applying the statutory tax
rate in each of the jurisdictions that generate these
adjustments.
The unearned premiums and revenues included in adjusted book
value will be earned in future periods, but actual earnings may
differ materially from the estimated amounts used in determining
current adjusted book value due to changes in foreign exchange
rates, prepayment speeds, terminations, credit defaults and other
factors.
Reconciliation of
Shareholders’ Equity Attributable to AGL to
Adjusted Operating
Shareholders’ Equity and ABV
(in millions, except per share
amounts)
As of
March 31, 2024
December 31, 2023
Total
Per Share
Total
Per Share
Shareholders’ equity attributable to
AGL
$
5,629
$
102.19
$
5,713
$
101.63
Less pre-tax adjustments:
Non-credit impairment-related unrealized
fair value gains (losses) on credit derivatives
44
0.79
34
0.61
Fair value gains (losses) on CCS
3
0.05
13
0.22
Unrealized gain (loss) on investment
portfolio
(393
)
(7.13
)
(361
)
(6.40
)
Less taxes
43
0.79
37
0.66
Adjusted operating shareholders’
equity
5,932
107.69
5,990
106.54
Pre-tax adjustments:
Less: DAC
164
2.99
161
2.87
Plus: Net present value of estimated net
future revenue
191
3.47
199
3.54
Plus: Net deferred premium revenue on
financial guaranty contracts in excess of expected loss to be
expensed
3,393
61.61
3,436
61.12
Plus taxes
(687
)
(12.47
)
(699
)
(12.41
)
ABV
$
8,665
$
157.31
$
8,765
$
155.92
Gain (loss) related to FG VIE and CIV
consolidation included in:
Adjusted operating shareholders’
equity
$
3
$
0.06
$
5
$
0.07
ABV
(3
)
(0.05
)
—
—
Shares outstanding at the end of the
period
55.1
56.2
Net Present Value of Estimated Net Future Revenue
Management believes that this amount is a useful measure because
it enables an evaluation of the present value of estimated net
future revenue for non-financial guaranty insurance contracts. This
amount represents the net present value of estimated future revenue
from these contracts (other than credit derivatives with net
expected losses), net of reinsurance, ceding commissions and
premium taxes.
Future installment premiums are discounted at the approximate
average pre-tax book yield of fixed-maturity securities purchased
during the prior calendar year, other than Loss Mitigation
Securities. The discount rate is recalculated annually and updated
as necessary. Net present value of estimated future revenue for an
obligation may change from period to period due to a change in the
discount rate or due to a change in estimated net future revenue
for the obligation, which may change due to changes in foreign
exchange rates, prepayment speeds, terminations, credit defaults or
other factors that affect par outstanding or the ultimate maturity
of an obligation. There is no corresponding GAAP financial
measure.
PVP or Present Value of New Business Production
Management believes that PVP is a useful measure because it
enables the evaluation of the value of new business production in
the Insurance segment by taking into account the value of estimated
future installment premiums on all new contracts underwritten in a
reporting period as well as additional installment premiums and
fees on existing contracts (which may result from supplements or
fees or from the issuer not calling an insured obligation the
Company projected would be called), regardless of form, which
management believes GAAP gross written premiums and changes in fair
value of credit derivatives do not adequately measure. PVP in
respect of contracts written in a specified period is defined as
gross upfront and installment premiums received and the present
value of gross estimated future installment premiums.
Future installment premiums are discounted at the approximate
average pre-tax book yield of fixed-maturity securities purchased
during the prior calendar year, other than certain fixed-maturity
securities such as Loss Mitigation Securities. The discount rate is
recalculated annually and updated as necessary. Under GAAP,
financial guaranty installment premiums are discounted at a
risk-free rate. Additionally, under GAAP, management records future
installment premiums on financial guaranty insurance contracts
covering non-homogeneous pools of assets based on the contractual
term of the transaction, whereas for PVP purposes, management
records an estimate of the future installment premiums the Company
expects to receive, which may be based upon a shorter period of
time than the contractual term of the transaction.
Actual installment premiums may differ from those estimated in
the Company’s PVP calculation due to factors including, but not
limited to, changes in foreign exchange rates, prepayment speeds,
terminations, credit defaults or other factors that affect par
outstanding or the ultimate maturity of an obligation.
Reconciliation of GWP to
PVP
(in millions)
Quarter Ended
March 31, 2024
Public Finance
Structured Finance
U.S.
Non - U.S.
U.S.
Non - U.S.
Total
GWP
$
44
$
2
$
13
$
2
$
61
Less: Installment GWP and other GAAP
adjustments (1)
12
2
12
2
28
Upfront GWP
32
—
1
—
33
Plus: Installment premiums and other
(2)
11
1
14
4
30
PVP
$
43
$
1
$
15
$
4
$
63
Quarter Ended
March 31, 2023
Public Finance
Structured Finance
U.S.
Non - U.S.
U.S.
Non - U.S.
Total
GWP
$
22
$
36
$
28
$
—
$
86
Less: Installment GWP and other GAAP
adjustments (1)
8
33
28
—
69
Upfront GWP
14
3
—
—
17
Plus: Installment premiums and other
(2)
8
27
27
33
95
PVP
$
22
$
30
$
27
$
33
$
112
________________________________________________
(1)
Includes the present value of new business
on installment policies discounted at the prescribed GAAP discount
rates, GWP adjustments on existing installment policies due to
changes in assumptions and other GAAP adjustments.
(2)
Includes the present value of future
premiums and fees on new business paid in installments, discounted
at the approximate average pre-tax book yield of fixed-maturity
securities purchased during the prior calendar year, other than
certain fixed-maturity securities such as Loss Mitigation
Securities. First quarter 2023 also includes the present value of
future premiums and fees associated with other guaranties written
by the Company that, under GAAP, are accounted for under Accounting
Standards Codification (ASC) 460, Guarantees.
Conference Call and Webcast Information
The Company will host a conference call for investors at 8:00
a.m. Eastern Time (9:00 a.m. Atlantic Time) on Wednesday, May 8,
2024. The conference call will be available via live webcast in the
Investor Information section of the Company’s website at
AssuredGuaranty.com or by dialing 1-833-470-1428 (in the U.S.) or
1-404-975-4839 (International); the access code is 480610.
A replay of the conference call will be available approximately
three hours after the call ends. The webcast replay will be
available for 90 days in the Investor Information section of the
Company’s website at AssuredGuaranty.com and the telephone replay
will be available for 30 days by dialing 1-866-813-9403 (in the
U.S.) or 1-929-458-6194 (International); the access code is
626852.
Please refer to Assured Guaranty’s March 31, 2024 Financial
Supplement, which is posted on the Company's website at
assuredguaranty.com/agldata, for more information on the Company’s
financial guaranty portfolio, investment portfolio and other items.
In addition, the Company is posting at
assuredguaranty.com/presentations its “March 31, 2024 Equity
Investor Presentation.”
The Company plans to post by early next week on its website at
assuredguaranty.com/agldata the following:
- “Public Finance Transactions in 1Q 2024,” which lists the U.S.
public finance new issues insured by the Company in first quarter
2024, and
- “Structured Finance Transactions at March 31, 2024,” which
lists the Company’s structured finance exposure as of that
date.
In addition, the Company will post on its website, when
available, the Company’s separate-company subsidiary financial
supplements and its “Fixed Income Presentation” for the current
quarter. Those documents will be furnished to the Securities and
Exchange Commission in a Current Report on Form 8-K.
# # #
Assured Guaranty Ltd. is a publicly traded (NYSE: AGO),
Bermuda-based holding company. Through its subsidiaries, Assured
Guaranty provides credit enhancement products to the U.S. and
international public finance, infrastructure and structured finance
markets. Assured Guaranty also participates in the asset management
business through its ownership interest in Sound Point. More
information on Assured Guaranty Ltd. and its subsidiaries can be
found at AssuredGuaranty.com.
Cautionary Statement Regarding Forward-Looking
Statements
Any forward-looking statements made in this press release
reflect the Company’s current views with respect to future events
and financial performance and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements involve risks and uncertainties that may cause
actual results to differ materially from those set forth in these
statements. Among factors that could cause actual results to differ
adversely are: (1) significant changes in inflation, interest
rates, the world’s credit markets or segments thereof, credit
spreads, foreign exchange rates or general economic conditions,
including the possibility of a recession or stagflation; (2)
geopolitical risk, including Russia’s invasion of Ukraine and risk
of intentional or accidental escalation between The North Atlantic
Treaty Organization (NATO) and Russia, conflict in the Middle East,
confrontation over Iran’s nuclear program, United States (U.S.) –
China strategic competition and pursuit of technological
independence; (3) global terrorism risk with threats increasing
from conflicts in the Middle East and Ukraine/Russia, and the
polarized political environment of the 2024 U.S. presidential
election; (4) the impacts of artificial intelligence, machine
learning and other technological advances, including potentially
increasing the risks of malicious cyber attacks, dissemination of
misinformation, and disruption of markets; (5) the possibility of a
U.S. government shutdown, payment defaults on the debt of the U.S.
government or instruments issued, insured or guaranteed by related
institutions, agencies or instrumentalities, and downgrades to
their credit ratings; (6) public health crises, including pandemics
and endemics, and the governmental and private actions taken in
response to such events; (7) developments in the world’s financial
and capital markets, including stresses in the financial condition
of banking institutions in the U.S. and the possibility that
increasing participation of unregulated financial institutions in
these markets results in losses or lower valuations of assets,
reduced liquidity and credit and/or contraction of these markets,
that adversely affect repayment rates of insured obligors, Assured
Guaranty’s insurance loss or recovery experience, or investments of
Assured Guaranty; (8) reduction in the amount of available
insurance opportunities and/or in the demand for Assured Guaranty’s
insurance; (9) the possibility that budget or pension shortfalls or
other factors will result in credit losses or liquidity claims on
obligations of state, territorial and local governments and their
related authorities and public corporations that Assured Guaranty
insures or reinsures; (10) insured losses, including losses with
respect to related legal proceedings, in excess of those expected
by Assured Guaranty or the failure of Assured Guaranty to realize
loss recoveries that are assumed in its expected loss estimates for
insurance exposures, including as a result of the final resolution
of Assured Guaranty’s Puerto Rico Electric Power Authority exposure
or the amounts recovered on securities received in connection with
the resolution of Puerto Rico exposures already resolved; (11) the
impact of Assured Guaranty satisfying its obligations under
insurance policies with respect to legacy insured Puerto Rico
bonds; (12) increased competition, including from new entrants into
the financial guaranty industry, nonpayment insurance and other
forms of capital saving or risk syndication available to banks and
insurers; (13) the possibility that investments made by Assured
Guaranty for its investment portfolio, including alternative
investments, do not result in the benefits anticipated or subject
Assured Guaranty to reduced liquidity at a time it requires
liquidity, or to other negative or unanticipated consequences; (14)
the impacts of Assured Guaranty’s transactions with Sound Point
Capital Management, LP (Sound Point, LP) and certain of its
investment management affiliates (together with Sound Point, LP,
Sound Point) and/or Assured Healthcare Partners LLC (AHP) on
Assured Guaranty and its relationships with its shareholders,
regulators, rating agencies, employees and the obligors it insures
and on the asset management business contributed to Sound Point, LP
and on the business of AHP and their relationships with their
respective clients and employees; (15) the possibility that
strategic transactions made by Assured Guaranty, including the
consummation of the transactions with Sound Point and/or AHP, do
not result in the benefits anticipated or subject Assured Guaranty
to negative consequences; (16) the inability to control the
business, management or policies of entities in which Assured
Guaranty holds a minority interest; (17) the impact of market
volatility on the fair value of Assured Guaranty’s assets and
liabilities subject to mark-to-market, including certain of its
investments, contracts accounted for as derivatives, its committed
capital securities, its consolidated investment vehicles and
certain consolidated variable interest entities (VIEs); (18) rating
agency action, including a ratings downgrade, a change in outlook,
the placement of ratings on watch for downgrade, or a change in
rating criteria, at any time, of AGL or any of its insurance
subsidiaries, and/or of any securities AGL or any of its
subsidiaries have issued, and/or of transactions that AGL’s
insurance subsidiaries have insured; (19) the inability of Assured
Guaranty to access external sources of capital on acceptable terms;
(20) changes in applicable accounting policies or practices; (21)
changes in applicable laws or regulations, including insurance,
bankruptcy and tax laws, or other governmental actions; (22)
difficulties with the execution of Assured Guaranty’s business
strategy; (23) loss of key personnel; (24) the effects of mergers,
acquisitions and divestitures; (25) natural or man-made
catastrophes; (26) the impact of climate change on Assured
Guaranty’s business and regulatory actions taken related to such
risk; (27) other risk factors identified in AGL’s filings with the
U.S. Securities and Exchange Commission (SEC); (28) other risks and
uncertainties that have not been identified at this time; and (29)
management’s response to these factors. Readers are cautioned not
to place undue reliance on these forward-looking statements. These
forward-looking statements are made as of May 7, 2024, and Assured
Guaranty undertakes no obligation to update publicly or review any
forward-looking statement, whether as a result of new information,
future developments or otherwise, except as required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240506225212/en/
Robert Tucker Senior Managing Director, Investor Relations and
Corporate Communications 212-339-0861 rtucker@agltd.com
Ashweeta Durani Director, Media Relations 212-408-6042
adurani@agltd.com
Grafico Azioni Assured Guaranty Municipal (NYSE:AGO)
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Da Feb 2025 a Mar 2025
Grafico Azioni Assured Guaranty Municipal (NYSE:AGO)
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Da Mar 2024 a Mar 2025
