Assured Guaranty Ltd. Reports Results for Second Quarter 2016

  • Net income was $146 million, or $1.09 per share, for second quarter 2016, compared with $297 million, or $1.96 per share, for second quarter 2015.
  • Operating income 1 was $139 million, or $1.03 per share, for second quarter 2016, compared with $278 million, or $1.83 per share, for second quarter 2015.
  • Shareholders' equity per share was $47.06, operating shareholders' equity 1 per share was $45.26 and adjusted book value 1 per share was $61.86.
  • Second quarter 2016 share repurchases totaled $60 million, or 2.3 million shares.
  • Assured Guaranty Corp. acquired CIFG Holding Inc. on July 1, 2016.

Category:

Wednesday, August 3, 2016 4:19 pm EDT

Dateline:

HAMILTON, Bermuda

Public Company Information:

NYSE:
AGO
"We continued to build our financial strength, and furthered our strategic objectives on July 1 when we completed our acquisition of CIFG."

HAMILTON, Bermuda--(BUSINESS WIRE)--Assured Guaranty Ltd. (NYSE:AGO) (AGL and, together with its consolidated entities, Assured Guaranty or the Company) announced today its financial results for the three-month period ended June 30, 2016 (second quarter 2016).

Summary Financial Results

(in millions, except per share amounts)
  Quarter Ended
  June 30,
  2016 2015
     
Net income $146  $297
Operating income1 139  278
     
Net income per diluted share $1.09  $1.96
Operating income1 per diluted share 1.03  1.83
     
Diluted shares2 134.8  151.6
     
Gross written premiums $36  $22
PVP1 41  26
Gross par written 4,775  5,581
 

1 Please see “Explanation of Non-GAAP Financial Measures” at the end of this press release.

2 Diluted shares for generally accepted accounting principles (GAAP) net income and non-GAAP operating income were the same.

Summary Financial Results (continued)

(in millions, except per share amounts)
  As of
  June 30, 2016 December 31, 2015
  Amount Per Share Amount Per Share
         
Shareholders' equity $6,250  $47.06  $6,063  $43.96
Operating shareholders' equity1 6,011  45.26  5,946  43.11
Adjusted book value1 8,215  61.86  8,439  61.18
         
Common shares outstanding 132.8    137.9   
 

________________________________________________

(1) Please see “Explanation of Non-GAAP Financial Measures” at the end of this press release.

“Assured Guaranty had a solid second quarter,” said Dominic Frederico, President and CEO. “We continued to build our financial strength, and furthered our strategic objectives on July 1 when we completed our acquisition of CIFG.

“S&P Global Ratings took note of our positive risk-adjusted pricing trend in its July 27th report affirming our AA financial strength ratings,” he added. “In the report, S&P said that none of the severe stress scenarios it applied to our Puerto Rico exposure reduced our ‘very strong’ capital adequacy score.”

Second Quarter Results

GAAP Financial Information

Net income for second quarter 2016 was $146 million, compared with net income of $297 million for the three-month period ended June 30, 2015 (second quarter 2015). Net income was higher in second quarter 2015 compared with second quarter 2016 due primarily to the gains recognized upon the acquisition of Radian Asset Assurance Inc. (Radian Asset) in second quarter 2015. This was offset in part by lower loss and loss adjustment expenses (LAE) in second quarter 2016 compared with second quarter 2015.

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 the portfolio. Fair value gains on credit derivatives were $63 million in second quarter 2016, and were generated primarily by terminations of several transactions. Fair value gains on credit derivatives in second quarter 2015 were $90 million, primarily driven by tighter implied net spreads as a result of the increased cost to buy protection in Assured Guaranty Corp. and Assured Guaranty Municipal Corp.

Loss and LAE incurred was $102 million in second quarter 2016, and $188 million in second quarter 2015. In both periods, the primary component of loss and LAE was an increase in loss reserves on Puerto Rico exposures.

Consolidated Statements of Operations (unaudited)

(in millions)
  Quarter Ended
  June 30,
  2016 2015
Revenues:    
Net earned premiums $214  $219 
Net investment income 98  98 
Net realized investment gains (losses) 10  (9)
Net change in fair value of credit derivatives:    
Realized gains (losses) and other settlements 24  8 
Net unrealized gains (losses) 39  82 
Net change in fair value of credit derivatives 63  90 
Fair value gains (losses) on committed capital securities (CCS) (11) 23 
Fair value gains (losses) on financial guaranty variable interest      
entities (FG VIEs) 4  5 
Bargain purchase gain and settlement of pre-existing relationship   214 
Other income (loss) 18  55 
Total revenues 396  695 
Expenses:    
Loss and LAE 102  188 
Amortization of deferred acquisition costs 5  6 
Interest expense 25  26 
Other operating expenses 63  66 
Total expenses 195  286 
Income (loss) before income taxes 201  409 
Provision (benefit) for income taxes 55  112 
Net income (loss) $146  $297 
 

Economic Loss Development

Economic loss development in second quarter 2016 was $22 million, comprising $109 million in loss development in the public finance sector and a benefit of $87 million in the structured finance sector. These amounts include an aggregate $45 million in loss development for all sectors, attributable to the decline in discount rates.

The economic loss development of $109 million in the public finance sector includes losses of $29 million related to the decline in discount rates. The remainder of the loss development was driven by increases in expected losses on various Puerto Rico exposures. The benefit for U.S. residential mortgage-backed securities (RMBS) of $81 million was due mainly to the acceleration of claim payments as a means of mitigating future losses on certain Alt-A transactions.

Roll Forward of Net Expected Loss to be Paid (1)

(in millions)
  

Net Expected

Loss to be Paid

(Recovered) as

of March 31,

2016

 

Economic Loss

Development/

(Benefit)

 

Losses

(Paid)/

Recovered

 

Net Expected

Loss to be Paid

(Recovered) as

of June 30, 2016

         
Public finance $903  $109  $(12) $1,000
U.S. RMBS:        
Before representations and warranties           
(R&W) payable (recoverable) 340  (107) (99) 134
R&W payable (recoverable) (2) (47) 26  79  58
U.S. RMBS 293  (81) (20) 192
Other structured finance 141  (6) (1) 134
Total $1,337  $22  $(33) $1,326
 

________________________________________________

(1) Economic loss development represents the change in net expected loss to be paid attributable to the effects of changes in assumptions based on observed market trends, changes in discount rates, accretion of discount and the economic effects of loss mitigation efforts. Economic loss development is the principal measure that the Company uses to evaluate the loss experience in its insured portfolio. Expected loss to be paid includes all transactions insured by the Company, whether written in insurance or credit derivative form, regardless of the accounting model prescribed under GAAP.

(2) The Company’s agreements with R&W providers generally provide that, as the Company makes claim payments, the R&W providers reimburse it for those claims; if the Company later receives reimbursement through the transaction (for example, from excess spread), the Company repays the R&W providers. When the Company projects receiving more reimbursements in the future than it projects paying in claims on transactions covered by R&W settlement agreements, the Company will have a net R&W payable.

New Business Production

New Business Production

(in millions)
  Quarter Ended June 30,
  2016 2015
  

Gross

Written

Premiums

 PVP(1) 

Gross Par

Written

 

Gross

Written

Premiums

 PVP(1) 

Gross Par

Written

             
Public finance - U.S. $33  $33  $4,366  $23  $25  $5,581
Public finance - non - U.S. 7  7  406  (1)   
Structured finance - U.S. (3) 1  3  0  1  
Structured finance - non-U.S. (1)     0    
Total $36  $41  $4,775  $22  $26  $5,581
 

________________________________________________

(1) Please see “Explanation of Non-GAAP Financial Measures” at the end of this press release.

Gross written premiums in second quarter 2016 were $36 million, compared to $22 million in second quarter 2015. Gross written premiums include amounts collected upfront on financial guaranty insurance new business written, as well as the present value of contractual or expected premiums discounted at risk free rates, and the effects of changes in the estimated lives of in-force financial guaranty insurance contracts consisting of homogeneous pools of assets. The increase in gross written premiums was primarily attributable to the increase in new business written in the public finance sector.

U.S. public finance PVP increased to $33 million in second quarter 2016 from $25 million in second quarter 2015, representing an increase of 32%. The average premium rate increased compared with second quarter 2015 while the average rating of par written remained in the A- category. During second quarter 2016, Assured Guaranty once again guaranteed the majority of insured par issued. Non-U.S. public finance PVP in second quarter 2016 represents secondary market financial guarantees written on utility bonds.

Other Non-GAAP Financial Measures

Operating income was $139 million in second quarter 2016, compared with operating income of $278 million in second quarter 2015. Operating income was higher in second quarter 2015 compared with second quarter 2016 due primarily to the gains recognized upon the acquisition of Radian Asset in second quarter 2015. This was offset in part by lower loss and LAE in second quarter 2016 compared with second quarter 2015.

Total operating net earned premiums and credit derivative revenues in second quarter 2016 were $248 million, compared with $259 million in second quarter 2015. The acceleration of operating net earned premiums and credit derivative revenues was $136 million in second quarter 2016, compared with $98 million in second quarter 2015. On an operating income basis, credit derivative contracts and FG VIEs are accounted for as financial guaranty insurance.

Common Share Repurchases

As of August 3, 2016, the Company's remaining share repurchase authorization was $150 million.

Summary of Share Repurchases

(in millions, except per share amounts)
  Amount 

Number of

Shares

 

Average Price

Per Share

       
2013 $264  12.5  $21.12
2014 590  24.4  24.17
2015 555  21.0  26.43
2016 (January 1 - March 31) 75  3.0  24.69
2016 (April 1 - June 30, 2016) 60  2.3  25.73
2016 (July 1 - through August 3, 2016) 20  0.9  25.89
Total 2016 155  6.2  25.24
Cumulative repurchases since the beginning of 2013 $1,564  64.1  $24.42
 

As in the past, the Company's execution of its capital management strategy is contingent upon its available free cash and the capital position of the parent company, market conditions, the maintenance of its strong financial strength ratings and other factors. The repurchase program may be modified, extended or terminated by the board of directors at any time. It does not have an expiration date.

On a per-share basis, shareholders' equity, operating shareholders' equity and adjusted book value increased in second quarter 2016 in part due to the Company's repurchase of its common shares.

Consolidated Balance Sheets (unaudited)

(in millions)
  As of
  June 30, 2016 December 31, 2015
Assets    
Investment portfolio:    
Fixed maturity securities, available-for-sale, at fair value $9,960  $10,627
Short-term investments, at fair value 585  396
Other invested assets 170  169
Total investment portfolio 10,715  11,192
Cash 190  166
Premiums receivable, net of commissions payable 623  693
Ceded unearned premium reserve 228  232
Deferred acquisition costs 110  114
Reinsurance recoverable on unpaid losses 82  69
Salvage and subrogation recoverable 323  126
Credit derivative assets 36  81
Deferred tax asset, net 235  276
Current income tax receivable   40
Funds restricted for CIFG acquisition 451  
FG VIE assets, at fair value 814  1,261
Other assets 285  294
Total assets $14,092  $14,544
Liabilities and shareholders' equity    
Liabilities    
Unearned premium reserve $3,617  $3,996
Loss and LAE reserve 1,268  1,067
Reinsurance balances payable, net 56  51
Long-term debt 1,303  1,300
Credit derivative liabilities 432  446
Current income tax payable 19  
FG VIE liabilities with recourse, at fair value 790  1,225
FG VIE liabilities without recourse, at fair value 115  124
Other liabilities 242  272
Total liabilities 7,842  8,481
Shareholders' equity    
Common stock 1  1
Additional paid-in capital 1,213  1,342
Retained earnings 4,648  4,478
Accumulated other comprehensive income 383  237
Deferred equity compensation 5  5
Total shareholders' equity 6,250  6,063
Total liabilities and shareholders' equity $14,092  $14,544
 

Explanation of Non-GAAP Financial Measures

The Company references financial measures that are not in accordance with GAAP. Management and the Board of Directors use non-GAAP 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. By disclosing non-GAAP financial measures, the Company gives investors, analysts and financial news reporters access to some of the same information that management and the Board of Directors review internally. Assured Guaranty believes its presentation of non-GAAP financial measures is consistent with how analysts calculate their estimates of Assured Guaranty’s financial results in their research reports on Assured Guaranty and with how investors, analysts and the financial news media evaluate Assured Guaranty’s financial results.

Many investors, analysts and financial news reporters use operating shareholders’ equity as the principal financial measure 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. Many of the Company’s fixed income investors also use operating shareholders’ equity to evaluate the Company’s capital adequacy. Many investors, analysts and financial news reporters also use adjusted book value to evaluate AGL’s share price and as the basis of their decision to recommend, buy or sell the AGL common shares. Operating income enables investors and analysts to evaluate the Company’s financial results as compared with the consensus analyst estimates distributed publicly by financial databases. Two non-GAAP financial measures, growth in adjusted book value per share and operating income, are key measures used to help determine compensation.

The following paragraphs and tables define each non-GAAP financial measure disclosed by the Company and describe why it is useful. A reconciliation of the non-GAAP financial measure and the most directly comparable GAAP financial measure is presented below.

Operating Income

Management believes that operating income is a useful measure because it presents the results of operations of the Company with all financial guaranty contracts accounted for on a consistent basis and excludes fair value adjustments that are not expected to result in economic gain or loss, which clarifies the understanding of the underwriting results and financial condition of the Company. 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 unrealized fair value gains (losses) on credit derivatives, which is the amount 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. Additionally, this adjustment presents all financial guaranty contracts on a more consistent basis of accounting, whether or not they are subject to derivative accounting rules.

3) Elimination of fair value gains (losses) on the Company’s CCS. Such amounts 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.

4) Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves. 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) Elimination of the effects of consolidating FG VIEs. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs. This adjustment presents all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation.

6) Elimination of 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.

Summary Reconciliation of

GAAP Net Income to Non-GAAP Operating Income (1)

(in millions)
  Quarter Ended
  June 30,
  2016 2015
     
Net income (loss) $146  $297 
Less pre-tax adjustments:    
Realized gains (losses) on investments 9  (12)
Non-credit impairment unrealized fair value gains (losses) on credit      
derivatives 32  10 
Fair value gains (losses) on CCS (11) 22 
Foreign exchange gains (losses) on remeasurement of premiums receivable      
and loss and LAE reserves (17) 13 
Effect of consolidating FG VIEs (3) 4 
Total pre-tax adjustments 10  37 
Less tax effect on pre-tax adjustments (3) (18)
Operating income $139  $278 
 

________________________________________________

(1) The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

Detailed Reconciliation of GAAP Net Income

to Non-GAAP Operating Income (1)

(in millions, except per share amounts)
  Quarter Ended June 30, 2016 Quarter Ended June 30, 2015
  

GAAP

Income

Statement

Line Items

As Reported

 

Less:

Operating

Income

Adjustments

 

Non-GAAP

Operating

Income

Components

 

GAAP

Income

Statement

Line Items

As Reported

 

Less:

Operating

Income

Adjustments

 

Non-GAAP

Operating

Income

Components

Revenues:            
Net earned premiums $214  $(3) $217  $219  $(5) $224 
Net investment income 98  5  93  98  (1) 99 
Net realized investment gains (losses) 10  10    (9) (9) 0 

Net change in fair value of credit derivatives:

            
Realized gains (losses) and other settlements 24  24    8  8   
Net unrealized gains (losses) 39  44  

(5)

 

 82  82   
Credit derivative revenues   (31) 31    (35) 35 

Net change in fair value of credit derivatives

 63  37  26  90  55  35 
Fair value gains (losses) on CCS (11) (11)   23  23   
Fair value gains (losses) on FG VIEs 4  4    5  5   

Bargain purchase gain and settlement of pre-existing relationships

       214  (35)

 

 

249

 
Other income (loss) 18  (18) 36  55  13  42 
Total revenues 396  24  372  695  46  649 
Expenses:            
Loss and LAE:            
Financial guaranty insurance 102  3  99  188  (1) 189 
Credit derivatives   11  

(11)

 

 

  9  (9)
Amortization of deferred acquisition costs 5  0  5  6  0  6 
Interest expense 25    25  26    26 
Other operating expenses 63  0  63  66  1  65 
Total expenses 195  14  181  286  9  277 
Income (loss) before income taxes 201  10  191  409  37  372 
Provision (benefit) for income taxes 55  3  52  112  18  94 
Income (loss) $146  $7  $139  $297  $19  $278 
             
Diluted shares 134.8    134.8  151.6    151.6 
             
Per share $1.09    $1.03  $1.96    $1.83 
             
Effective tax rate 26.9%   27.4% 27.5%   25.4%
 

________________________________________________

(1) The non-GAAP measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

Operating Shareholders’ Equity and Adjusted Book Value

Management believes that operating shareholders’ equity is a useful measure because it presents the equity of the Company with all financial guaranty contracts accounted for on a consistent basis and excludes fair value adjustments that are not expected to result in economic gain or loss, which clarifies the understanding of the underwriting results and financial condition of the Company. Operating shareholders’ equity is the basis of the calculation of adjusted book value (see below). Operating shareholders’ equity is defined as shareholders’ equity attributable to AGL, as reported under GAAP, adjusted for the following:

1) Elimination of the effects of consolidating FG VIEs in order to present all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs.

2) Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount 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.

3) Elimination of fair value gains (losses) on the Company’s CCS. Such amounts 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.

4) Elimination of unrealized gains (losses) on the Company’s investments that are recorded as a component of accumulated other comprehensive income (AOCI) (excluding foreign exchange remeasurement). 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 should not recognize an economic gain or loss.

5) Elimination of the tax asset or liability 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 to measure the intrinsic value of the Company, excluding franchise value. Growth in adjusted book value per share is one of the key financial measures used in determining the amount of certain long term compensation 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 net present value of the Company’s in-force premiums and revenues net of expected losses. Adjusted book value is 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 credit derivative 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 expected future net earned premiums, net of expected losses to be expensed, which are not reflected in GAAP equity.

4) Elimination of the tax asset or liability related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.

The 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 GAAP Shareholders' Equity to

Operating Shareholders' Equity (1) and Adjusted Book Value (1)

(in millions, except per share amounts)
  As of
  June 30, 2016 

December 31,

2015

     
Shareholders' equity $6,250  $6,063 
Less pre-tax adjustments:    
Effect of consolidating FG VIEs (18) (35)
Non-credit impairment unrealized fair value gains (losses) on credit      
derivatives 

(265)

  (241)
Fair value gains (losses) on CCS 35  62 
Unrealized gain (loss) on investment portfolio excluding foreign      
exchange effect 598  376 
Taxes (111) (45)
Operating shareholders' equity 6,011  5,946 
Pre-tax adjustments:    
Less: Deferred acquisition costs 110  114 
Plus: Net present value of estimated net future credit derivative revenue 93  169 
Plus: Net unearned premium reserve on financial guaranty contracts in      
excess of expected loss to be expensed 3,073  3,417 
Taxes (852) (979)
Adjusted book value $8,215  $8,439 
     
Shares outstanding at the end of the period 132.8  137.9 
     
Per share:    
Shareholders' equity $47.06  $43.96 
Operating shareholders' equity 45.26  43.11 
Adjusted book value 61.86  61.18 
 

________________________________________________

(1) The non-GAAP financial measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

Net Present Value of Estimated Net Future Credit Derivative Revenue

Management believes that this amount is a useful measure because it enables an evaluation of the value of future estimated credit derivative revenue. There is no corresponding GAAP financial measure. This amount represents the present value of estimated future revenue from the Company’s credit derivative in-force book of business, net of reinsurance, ceding commissions and premium taxes, for contracts without expected economic losses, and is discounted at 6%. Estimated net future credit derivative revenue may change from period to period 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.

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 for the Company by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as premium supplements and additional installment premium on existing contracts as to which the issuer has the right to call the insured obligation but has not exercised such right, whether in insurance or credit derivative contract form, which GAAP gross written premiums and the net credit derivative premiums received and receivable portion of net realized gains and other settlements on credit derivatives (Credit Derivative Revenues) do not adequately measure. PVP in respect of financial guaranty 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, in each case, discounted at 6%. For purposes of the PVP calculation, management discounts estimated future installment premiums on insurance contracts at 6%, while under GAAP, these amounts 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 future net earned or written premiums and Credit Derivative Revenues may differ from PVP 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 PVP

to Gross Written Premiums (1)

(in millions)
  Quarter Ended
  June 30, 2016
  Public Finance Structured Finance  
  U.S. Non - U.S. U.S. Non - U.S. Total
Total PVP $33  $7  $1  $  $41
Less: PVP of non-financial guaranty              
insurance     1    1
Less: Financial guaranty installment              
premium PVP   7      7

Plus: Installment gross written premiums

              

and other GAAP adjustments(2)

 0  7  (3)

 

 (1) 3
Total gross written premiums $33  $7  $(3) $(1) $36
 
  Quarter Ended
  June 30, 2015
  Public Finance Structured Finance  
  U.S. Non - U.S. U.S. Non - U.S. Total
Total PVP $25  $  $1  $  $26 
Less: PVP of non-financial guaranty               
insurance     0    0 
Less: Financial guaranty installment               
premium PVP     1    1 

Plus: Installment gross written premiums

               

and other GAAP adjustments(2)

 (2) (1) 0  0  (3)
Total gross written premiums $23  $(1) $0  $0  $22 
 

________________________________________________

(1) The non-GAAP financial measures presented in the table above should not be considered a substitute for financial results and measures determined or calculated in accordance with GAAP.

(2) Includes present value of new business on installment policies discounted at the prescribed GAAP discount rates, gross written premium adjustments on existing installment policies due to changes in assumptions, any cancellations of assumed reinsurance contracts, and other GAAP adjustments.

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 Thursday, August 4, 2016. The conference call will be available via live and archived webcast in the Investor Information section of the Company's website at AssuredGuaranty.com or by dialing 1-877-281-1545 (in the U.S.) or 1-412-902-6609 (International). A replay of the call will be made available through November 4, 2016. To listen to the replay, dial 1-877-344-7529 (in the U.S.) or 1-412-317-0088 (International), passcode 10089860. The replay will be available one hour after the conference call ends.

Please refer to Assured Guaranty's June 30, 2016 Financial Supplement, which is posted on the Company's website at assuredguaranty.com/investor-information/by-company/assured-guaranty-ltd , for more information on the Company's financial guaranty portfolios, investment portfolio and other items. The Company is also posting on the same page of its website:

  • “Public Finance Transactions in 2Q 2016,” which lists the U.S. public finance new issues insured by the Company in second quarter 2016, and
  • “Structured Finance Transactions at June 30, 2016,” which lists the Company's structured finance exposure as of that date.

In addition, the Company is posting at assuredguaranty.com/presentations the “June 30, 2016 Equity Investor Presentation.” Furthermore, the Company's separate-company subsidiary financial supplements and its Fixed Income Presentation for the current quarter will be posted on the Company's website when available. 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. Its operating subsidiaries provide credit enhancement products to the U.S. and international public finance, infrastructure and structured finance markets. 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. For example, Assured Guaranty's calculations of adjusted book value, PVP, net present value of estimated future installment premiums in force and total estimated net future premium earnings and statements regarding its capital position and demand for its insurance and other forward-looking statements could be affected by 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 subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s subsidiaries have insured; reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance; developments in the world’s financial and capital markets that adversely affect obligors’ payment rates, Assured Guaranty’s loss experience, or its exposure to refinancing risk in transactions (which could result in substantial liquidity claims on its guarantees); the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures; the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates; deterioration in the financial condition of Assured Guaranty’s reinsurers, the amount and timing of reinsurance recoverables actually received and the risk that reinsurers may dispute amounts owed to Assured Guaranty under its reinsurance agreements; increased competition, including from new entrants into the financial guaranty industry; rating agency action on obligors, including sovereign debtors, resulting in a reduction in the value of securities in Assured Guaranty's investment portfolio and in collateral posted by and to Assured Guaranty; the inability of Assured Guaranty to access external sources of capital on acceptable terms; changes in the world’s credit markets, segments thereof, interest rates or general economic conditions; the impact of market volatility on the mark-to-market of Assured Guaranty’s contracts written in credit default swap form; changes in applicable accounting policies or practices; changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions; the impact of changes in the world’s economy and credit and currency markets and in applicable laws or regulations relating to the decision of the United Kingdom to exit the European Union; difficulties with the execution of Assured Guaranty’s business strategy; loss of key personnel; the effects of mergers, acquisitions and divestitures; natural or man-made catastrophes; other risks and uncertainties that have not been identified at this time; management’s response to these factors; and other risk factors identified in AGL’s filings with the U.S. Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made as of August 3, 2016, 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.

 

Contact:

Assured Guaranty Ltd.
Robert Tucker, 212-339-0861
Senior Managing Director, Investor Relations and Corporate Communications
rtucker@assuredguaranty.com
or
Ashweeta Durani, 212-408-6042
Vice President, Corporate Communications
adurani@assuredguaranty.com