GAAP Highlights
- Net income attributable to Assured Guaranty Ltd. was $137
million, or $1.42 per share(1), for fourth quarter 2019, and $402
million, or $4.00 per share, for FY 2019.
- Shareholders' equity attributable to Assured Guaranty Ltd. per
share was $71.18.
Non-GAAP Highlights
- Adjusted operating income(2) was $87 million, or $0.90 per
share, for fourth quarter 2019, and $391 million, or $3.91 per
share, for FY 2019.
- Adjusted operating shareholders' equity(2) per share and
adjusted book value (ABV)(2) per share reached new records at
$66.96 and $96.86.
Total Capital Returned to Shareholders
- Total capital returned to shareholders was $178 million,
including share repurchases of $160 million, in fourth quarter
2019. Total capital returned to shareholders was $574 million,
including share repurchases of $500 million, or 11.2 million
shares, in FY 2019.
- On February 26, 2020, the Board of Directors authorized an
additional $250 million in share repurchases and an increase in the
dividend per share from $0.18 to $0.20.
Insurance Segment(3)
- Adjusted operating income was $133 million for fourth quarter
2019 and $512 million for FY 2019.
- Gross written premiums (GWP) were $518 million for fourth
quarter 2019 and $677 million for FY 2019, the highest annual
direct GWP in 10 years.
- PVP(4) was $286 million for fourth quarter 2019 and $463
million for FY 2019, the highest annual direct PVP in 10
years.
Asset Management Segment(3)
- Adjusted operating loss was $10 million for fourth quarter 2019
and FY 2019 including $8 million in after-tax restructuring charges
and amortization of intangible assets.
- Collateralized loan obligations (CLOs) net inflows were $885
million in fourth quarter 2019.
- Wind-down funds net outflows were $1,297 million in fourth
quarter 2019.
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
December 31, 2019 (fourth quarter 2019) and the year ended December
31, 2019 (FY 2019).
“In 2019, Assured Guaranty’s diversified insurance strategy -
across U.S. public finance, international infrastructure and global
structured finance markets - produced by far our best direct PVP
result since 2009. We maintained our capital management strategy,
bringing our key measures of shareholder value - shareholders’
equity, adjusted operating shareholders’ equity and adjusted book
value - to record levels on a per-share basis. And we transformed
our corporate profile by acquiring the firm that forms the core of
our new asset management platform, Assured Investment Management,”
said Dominic Frederico, President and CEO.
(1)
All per share information is based on
diluted shares.
(2)
Adjusted operating income, adjusted
operating shareholders' equity and adjusted book value were
formerly known as "Non-GAAP operating income", "Non-GAAP operating
shareholders' equity" and "Non-GAAP adjusted book value",
respectively. Please see “Explanation of Non-GAAP Financial
Measures.”
(3)
Beginning in fourth quarter 2019, with the
acquisition of BlueMountain Capital Management, LLC and expansion
into the asset management business, the Company now operates in two
distinct operating segments: Insurance and Asset Management. The
Company also has a Corporate division; please see "Summary
Financial Results" table below. Adjusted operating income is the
Company's segment measure.
(4)
Please see “Explanation of Non-GAAP
Financial Measures.”
Summary Financial
Results
(in millions, except per share
amounts)
Quarter Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
GAAP Highlights
Net income (loss) attributable to
AGL
$
137
$
88
$
402
$
521
Net income (loss) attributable to
AGL
per diluted share
1.42
0.83
4.00
4.68
Weighted average diluted shares
96.1
106.4
100.2
111.3
Adjusted operating income (loss)
Insurance(1)
$
133
$
129
$
512
$
582
Asset Management(1)
(10
)
—
(10
)
—
Corporate
(32
)
(34
)
(111
)
(96
)
Other
(4
)
(3
)
—
(4
)
Adjusted operating income (loss)(2)
$
87
$
92
$
391
$
482
Adjusted operating income per diluted
share(2)
$
0.90
$
0.87
$
3.91
$
4.34
As of
December 31, 2019
December 31, 2018
Amount
Per Share
Amount
Per Share
Shareholders' equity attributable to
AGL
$
6,639
$
71.18
$
6,555
$
63.23
Adjusted operating shareholders'
equity(2)
6,246
66.96
6,342
61.17
ABV(2)
9,035
96.86
8,922
86.06
Common Shares Outstanding
93.3
103.7
________________________________________________
(1) Adjusted operating income (loss) represents the Company's
segment measure.
(2) Please see “Explanation of Non-GAAP Financial Measures” at
the end of this press release.
Shareholders' equity attributable to AGL increased in FY 2019
primarily due to net income and unrealized gains on available for
sale investment securities, offset in part by share repurchases and
dividends. Adjusted operating shareholders' equity decreased in FY
2019 primarily due to share repurchases and dividends, partially
offset by positive adjusted operating income. ABV increased in FY
2019 primarily due to new business development, partially offset by
share repurchases and dividends.
Shareholders' equity attributable to AGL per share, adjusted
operating shareholders' equity per share and ABV per share all
increased in FY 2019, benefiting from the repurchase of an
additional 11.2 million shares in FY 2019.
Insurance Segment
The Insurance segment primarily consists of the Company's
domestic and foreign insurance subsidiaries and their wholly owned
subsidiaries that provide credit protection products to the United
States (U.S.) and international public finance (including
infrastructure) and structured finance markets. The Insurance
segment also includes the income (loss) from its proportionate
equity interest in Assured Investment Management funds. The
Insurance segment is presented without giving effect to the
consolidation of variable interest entities (VIEs).
Insurance Results
(in millions)
Quarter Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Revenues
Net earned premiums and credit derivative
revenues
$
129
$
133
$
511
$
580
Net investment income
85
99
383
396
Commutation gains (losses)
—
—
1
(16
)
Other income (loss)
6
(1
)
22
32
Total revenues
220
231
917
992
Expenses
Loss expense
20
24
86
70
Amortization of deferred acquisition costs
(DAC)
5
4
18
16
Employee compensation and benefit
expenses
32
35
137
134
Other operating expenses
23
21
83
82
Total expenses
80
84
324
302
Equity in net earnings of investees
(1
)
1
2
1
Adjusted operating income (loss) before
income
taxes
139
148
595
691
Provision (benefit) for income taxes
6
19
83
109
Adjusted operating income
(loss)
$
133
$
129
$
512
$
582
Fourth Quarter
Insurance adjusted operating income for fourth quarter 2019 was
$133 million, compared with adjusted operating income of $129
million for the three-month period ended December 31, 2018 (fourth
quarter 2018). The increase was mainly due to the following:
- Loss expense was $20 million in fourth quarter 2019, compared
with $24 million in fourth quarter 2018. Loss expense was primarily
due to Puerto Rico exposures in both periods.
- The effective tax rate was 4.5% in fourth quarter 2019,
compared with 12.7% in fourth quarter 2018. The lower tax rate was
primarily due to a favorable impact of a regulation issued in
fourth quarter 2019 related to base erosion and anti-abuse
tax.
This was partially offset by lower net investment income,
primarily due to a decrease in the average asset balances in the
investment portfolio.
Full Year
Insurance adjusted operating income for FY 2019 was $512
million, compared with $582 million for the year ended December 31,
2018 (FY 2018). The decrease was primarily due to the
following:
- Net earned premiums and credit derivative revenues in FY 2019
were $511 million, compared with $580 million in FY 2018. The
decline in net earned premiums was due to the scheduled decline in
net par outstanding and lower accelerations from refundings and
terminations.
- Loss expense was $86 million in FY 2019, compared with $70
million in FY 2018. The expense in FY 2019 and FY 2018 was mainly
related to Puerto Rico exposures, offset in part by benefits in
U.S. residential mortgage-backed securities (RMBS)
transactions.
- Net investment income decreased in FY 2019 compared with FY
2018 primarily due to a decrease in the average asset balances in
the investment portfolio, which was due, in part, to funds used in
connection with the BlueMountain Acquisition and share
repurchases.
Economic Loss Development
Fourth Quarter
Net economic loss development in fourth quarter 2019 was
primarily due to increased losses for certain Puerto Rico
exposures, and an increase in loss and loss adjustment expense
(LAE) reserves. This was partially offset by a benefit of $11
million related to U.S. RMBS due to improved performance of the
underlying collateral. The economic development attributable to
changes in discount rates was a benefit of $7 million for fourth
quarter 2019.
Roll Forward of Net Expected
Loss to be Paid(1)
(in millions)
Net Expected Loss to
be Paid (Recovered)
as of September 30,
2019
Economic Loss
Development/
(Benefit)
Losses (Paid)/
Recovered
Net Expected Loss to
be Paid (Recovered)
as of December 31,
2019
Public finance
$
548
$
15
$
(9
)
$
554
U.S. RMBS
135
(11
)
22
146
Other structured finance
35
9
(7
)
37
Total
$
718
$
13
$
6
$
737
________________________________________________
(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 accounting principles generally accepted in the
United States of America (GAAP).
Full Year
The economic benefit for FY 2019 was $1 million. The economic
benefit in U.S. RMBS of $234 million was mainly related to
improvement in the performance of second lien U.S. RMBS
transactions, and was partially offset by economic loss development
in the U.S. public finance sector that related primarily to Puerto
Rico exposures. The economic development attributable to changes in
discount rates was a benefit of $11 million in FY 2019.
Roll Forward of Net Expected
Loss to be Paid
(in millions)
Net Expected Loss to
be Paid (Recovered)
as of December 31,
2018
Economic Loss
Development/
(Benefit)
Losses
(Paid)/
Recovered
Net Expected Loss to
be Paid (Recovered)
as of December 31,
2019
Public finance
$
864
$
215
$
(525
)
$
554
U.S. RMBS
293
(234
)
87
146
Other structured finance
26
18
(7
)
37
Total
$
1,183
$
(1
)
$
(445
)
$
737
New Business Production
GWP relates to both financial guaranty insurance and specialty
insurance and reinsurance contracts. Financial guaranty GWP
includes amounts collected upfront on new business written, the
present value of future premiums on new business written
(discounted at risk free rates), as well as the effects of changes
in the estimated lives of transactions in the inforce book of
business. Specialty insurance and reinsurance GWP is recorded as
premiums are due. Credit derivatives are accounted for at fair
value and therefore not included in GWP. The non-GAAP measure, PVP,
on the other hand, includes upfront premiums and estimated future
installments on new business at the time of issuance, discounted at
6%, for all contracts whether in insurance or credit derivative
form.
Fourth Quarter
New Business
Production
(in millions)
Quarter Ended December
31,
2019
2018
GWP
PVP(1)
Gross Par
Written(1)
GWP
PVP(1)
Gross Par
Written(1)
Public finance - U.S.
$
79
$
79
$
6,452
$
93
$
89
$
4,555
Public finance - non-U.S.
383
187
5,635
4
3
96
Structured finance - U.S.
53
18
422
(1
)
1
25
Structured finance - non-U.S.
3
2
45
—
3
174
Total
$
518
$
286
$
12,554
$
96
$
96
$
4,850
________________________________________________
(1) PVP and Gross Par Written in the table above are based on
"close date," when the transaction settles. Please see “Explanation
of Non-GAAP Financial Measures” at the end of this press
release.
The increase in GWP and PVP was attributable to non-U.S. public
finance and global structured finance new business. The Company has
consistently written new non-U.S. public finance business every
quarter since the end of 2015. Non-U.S. public finance gross par
written of $5.6 billion represents investment grade par with an
average rating of AA-. These results were driven primarily by
privately executed, bilateral guarantees on a large number of
European sub-sovereign credits, and also included additional
premiums upon the conversion of several existing transactions from
credit default swaps to financial guaranty insurance contracts, and
from a U.K. university housing transaction and a restructuring of a
previously insured regulated utility transaction.
Global structured finance GWP and PVP were $56 million and $20
million, respectively, in fourth quarter 2019, including: a
refinancing and extension of an existing triple-X life reinsurance
transaction resulting in no additional par written, a participation
in a new insurance reserve financing transaction, as well as
several whole business securitizations and residual value
reinsurance policies.
Business activity in the international infrastructure and
structured finance sectors is influenced by typically long lead
times and therefore may vary from period to period.
In the U.S. public finance sector, Assured Guaranty once again
guaranteed the majority of insured par issued.
Full Year
New Business
Production
(in millions)
Year Ended December
31,
2019
2018
GWP
PVP(2)
Gross Par
Written(2)
GWP(1)
PVP(2)
Gross Par
Written(2)
Public finance - U.S.
$
198
$
201
$
16,337
$
320
$
391
$
19,572
Public finance - non - U.S.
417
211
6,347
115
94
3,817
Structured finance - U.S.
57
45
1,581
167
166
902
Structured finance - non-U.S.
5
6
88
10
12
333
Total
$
677
$
463
$
24,353
$
612
$
663
$
24,624
________________________________________________
(1) FY 2018 GWP includes amounts assumed from Syncora Guarantee
Inc. (SGI), in a reinsurance transaction closed on June 1, 2019
(SGI Transaction), as follows: $123 million in U.S. public finance,
$50 million in non-U.S. public finance, and $157 million in U.S.
structured finance for a total of $330 million.
(2) Please see “Explanation of Non-GAAP Financial Measures” at
the end of this press release. FY 2018 PVP includes amounts assumed
in the SGI Transaction as follows: $185 million in U.S. public
finance, $50 million in non-U.S. public finance, and $156 million
in U.S. structured finance for a total of $391 million.
Excluding amounts assumed in the SGI Transaction in FY 2018, GWP
and PVP increased in FY 2019 compared with FY 2018. GWP was $677
million in FY 2019, compared with $282 million in FY 2018
(excluding the SGI Transaction), and PVP was $463 million in FY
2019 compared with $272 million in FY 2018 (excluding the SGI
Transaction). FY 2019 GWP and PVP were the highest reported direct
new business production since 2009.
In FY 2019 the Company generated non-U.S. public finance GWP of
$417 million, representing PVP of $211 million, on $6.3 billion of
investment-grade par with an average rating of A+. Excluding the
SGI Transaction in FY 2018, GWP and PVP for non-U.S. public finance
transactions was $65 million and $44 million, respectively. GWP and
PVP in FY 2019 were driven primarily by:
- privately executed, bilateral guarantees on a large number of
European sub-sovereign credits,
- additional premiums upon the conversion of several existing
transactions from credit default swaps to financial guaranty
insurance contracts,
- several U.K financings for the construction of new student
accommodations, and
- debt refinancings including a Spanish solar plant transaction,
which was the first insured issuance in Spain since the 2008
financial crisis, and a previously insured regulated utility
transaction.
Global structured finance GWP and PVP was also higher in FY 2019
compared with FY 2018 (excluding the SGI Transaction), as the
Company wrote insurance on more transactions and par in the
collateralized loan obligation, life insurance reserve, and
residual value reinsurance asset classes.
In FY 2019, Assured Guaranty once again guaranteed the majority
of U.S. public finance insured par issued. FY 2019 U.S. public
finance GWP of $198 million was consistent with FY 2018 GWP of $197
million, excluding the SGI Transaction. Similarly, PVP of $201
million in FY 2019 was consistent with PVP of $206 million in FY
2018, excluding the SGI Transaction.
Asset Management Segment
The Asset Management segment, which consists of BlueMountain and
its associated entities operating within the Assured Investment
Management platform, provides asset management services to outside
investors as well as to the Insurance segment.
Asset Management
Results
(in millions)
Quarter Ended
Year Ended
December 31,
December 31,
2019
2019
Revenues
Management fees:
CLOs
$
3
$
3
Opportunity funds
2
2
Wind-down funds
13
13
Total management fees
18
18
Performance fees
4
4
Total asset management fees
22
22
Total revenues
22
22
Expenses
Restructuring expenses
7
7
Amortization of intangible assets
3
3
Employee compensation and benefit
expenses
17
17
Other operating expenses
7
7
Total expenses
34
34
Adjusted operating income (loss) before
income taxes
(12
)
(12
)
Provision (benefit) for income taxes
(2
)
(2
)
Adjusted operating income
(loss)
$
(10
)
$
(10
)
Fourth Quarter/Full Year
Asset Management adjusted operating loss was $10 million for
fourth quarter 2019 and FY 2019, including $7 million of pretax
restructuring charges, as Assured Investment Management refocuses
on its core strategies and began an orderly wind-down of certain
hedge and opportunity funds. It also includes $3 million in pretax
amortization related to intangible assets which primarily consist
of the fair value of investment management and CLO contracts.
Management fees from CLOs represent the net management fees that
Assured Investment Management retains after rebating the portion of
such fees pertaining to the CLO equity that is held directly by
Assured Investment Management funds. Gross management fees from
CLOs, before such rebates, were $11 million for fourth quarter
2019.
Opportunity funds include two opportunity funds, one focused on
asset-backed finance and the other on healthcare structured
capital, launched in fourth quarter 2019 with capital from the
Company's Insurance segment, as well as two established funds in
their harvest periods. Management fees from opportunity funds for
the quarter are largely driven by fees earned from one of the
established opportunity funds. The newly launched funds are
expected to start earning management fees in 2020.
Performance fees are derived primarily from two funds currently
in wind-down. Distributions to investors in the wind-down funds are
expected to continue, at least throughout 2020. Funds that do not
hit high-water marks or return hurdles are not eligible to receive
performance fees for the year. Performance fees for opportunity
funds are recorded when the contractual performance criteria have
been met and when it is probable that a significant reversal of
revenues will not occur in future reporting periods, which is
typically close to the end of the opportunity fund’s life.
Assets Under Management
Assets Under Management
(in millions)
CLOs
Opportunity
Funds
Wind-Down
Funds
Total
Rollforward:
Assets under management (AUM), October 1,
2019
$
11,844
$
923
$
5,528
$
18,295
Inflows
977
165
—
1,142
Outflows:
Redemptions
—
—
(171
)
(171
)
Distributions
(92
)
(43
)
(1,126
)
(1,261
)
Total outflows
(92
)
(43
)
(1,297
)
(1,432
)
Net flows
885
122
(1,297
)
(290
)
Change in fund value
29
(22
)
(185
)
(178
)
AUM, end of period(1)
$
12,758
$
1,023
$
4,046
$
17,827
Funded AUM(2)
$
12,721
$
796
$
3,980
$
17,497
Unfunded AUM(2)
37
227
66
330
Fee Earning AUM(2)
$
3,438
$
695
$
3,838
$
7,971
Non-Fee Earning AUM(2)
9,320
328
208
9,856
________________________________________________
(1) Includes $142 million and $49 million of AUM related to
intercompany investments in Assured Investment Management
opportunity funds and CLO fund, respectively.
(2) Please see “Definitions” at the end of this press
release.
CLOs AUM includes $536 million of CLO equity that is held by
various Assured Investment Management funds. This CLO equity
corresponds to the majority of the non-fee earning CLO AUM, as
Assured Investment Management typically rebates the CLO fees back
to Assured Investment Management funds.
Net outflows were $290 million, primarily driven by the return
of capital in wind-down funds, which includes funds that are now
subject to orderly wind-down and certain funds in their harvest
period, partially offset by the issuance of two new CLOs and a CLO
fund, as well as the launch of opportunity funds focused on
asset-backed finance and healthcare structured capital strategies.
The funds launched in fourth quarter 2019 were primarily funded
with capital from the Insurance segment.
Corporate Division
The Corporate division consists primarily of interest expense on
the debt of Assured Guaranty US Holdings Inc. (AGUS) and Assured
Guaranty Municipal Holdings Inc. (AGMH), as well as other operating
expenses attributed to holding company activities such as Board of
Directors' expenses, and administrative services performed by
operating subsidiaries for the holding companies.
Corporate Results
(in millions)
Quarter Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Revenues
Net investment income
$
1
$
1
$
4
$
6
Loss on extinguishment of debt
—
(8
)
(1
)
(34
)
Total revenues
1
(7
)
3
(28
)
Expenses
Interest expense
25
24
94
97
Employee compensation and benefit
expenses
4
5
17
18
Other operating expenses
11
4
22
14
Total expenses
40
33
133
129
Adjusted operating income (loss) before
income
taxes
(39
)
(40
)
(130
)
(157
)
Provision (benefit) for income taxes
(7
)
(6
)
(19
)
(61
)
Adjusted operating income
(loss)
$
(32
)
$
(34
)
$
(111
)
$
(96
)
Adjusted operating loss for the Corporate division for all
periods consisted primarily of (1) interest expense, (2) operating
expenses of the holding companies, and (3) loss on extinguishment
of debt recorded in other income. It also includes acquisition
expenses related to the BlueMountain Acquisition in fourth quarter
2019, which are recorded in other operating expenses. The loss on
extinguishment of debt is related to AGUS' purchase of a portion of
the principal amount of AGMH's outstanding Junior Subordinated
Debentures and represents the difference between the amount paid to
purchase AGMH's debt and the carrying value of the debt, which
includes the unamortized fair value adjustments that were recorded
upon the acquisition of AGMH in 2009.
Other Items
Other items consist of intersegment eliminations,
reclassifications, and consolidation adjustments, including the
effect of consolidating financial guaranty (FG) VIEs and certain
Assured Investment Management investment vehicles in which
Insurance segment invests.
The types of VIEs the Company consolidates when it is deemed to
be the primary beneficiary include (1) entities whose debt
obligations the insurance subsidiaries insure, and (2) investment
vehicles such as collateralized financing entities and investment
funds managed by the Asset Management subsidiaries, in which the
insurance company subsidiaries have a variable interest
(consolidated investment vehicles). The Company eliminates the
effects of intercompany transactions between consolidated VIEs and
its insurance and asset management subsidiaries, as well as
intercompany transactions between consolidated VIEs.
Generally, the consolidation of the Company's investment
vehicles and FG VIEs has a significant gross-up effect on the
Company's assets, liabilities and cash flows. The consolidated
investment vehicles have no net effect on the net income
attributable to the Company. The economic interest the Company
holds in consolidated funds is presented in the Insurance segment.
The ownership interests of the Company's consolidated funds, to
which the Company has no economic rights, are reflected as either
redeemable or nonredeemable noncontrolling interests in the
consolidated funds in the Company's consolidated financial
statements.
Reconciliation to GAAP
Reconciliation of Net Income
Attributable to AGL to
Adjusted Operating Income
(Loss)
(in millions, except per share
amounts)
Quarter Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Total
Per
Diluted
Share
Total
Per
Diluted
Share
Total
Per
Diluted
Share
Total
Per
Diluted
Share
Net income (loss) attributable
to
AGL
$
137
$
1.42
$
88
$
0.83
$
402
$
4.00
$
521
$
4.68
Less pre-tax adjustments:
Realized gains (losses) on
investments
10
0.11
(18
)
(0.17
)
22
0.22
(32
)
(0.29
)
Non-credit-impairment unrealized
fair value gains (losses) on credit
derivatives
19
0.19
10
0.09
(10
)
(0.11
)
101
0.90
Fair value gains (losses) on
committed capital securities (CCS)
(18
)
(0.18
)
17
0.16
(22
)
(0.22
)
14
0.13
Foreign exchange gains (losses) on
remeasurement of premiums
receivable and loss and LAE
reserves
45
0.46
(12
)
(0.11
)
22
0.21
(32
)
(0.29
)
Total pre-tax adjustments
56
0.58
(3
)
(0.03
)
12
0.10
51
0.45
Less tax effect on pre-tax
adjustments
(6
)
(0.06
)
(1
)
(0.01
)
(1
)
(0.01
)
(12
)
(0.11
)
Adjusted operating income (loss)
$
87
$
0.90
$
92
$
0.87
$
391
$
3.91
$
482
$
4.34
Net realized investment gains in fourth quarter 2019 were
primarily due to sales of fixed maturity securities, compared with
net realized investment losses in fourth quarter 2018, which were
mainly attributable to other-than-temporary impairments (OTTI). Net
realized investment gains in FY 2019 related primarily to the sale
of the COFINA Exchange Senior Bonds and other fixed maturity
securities, offset in part by OTTI. Net realized investment losses
in FY 2018 related primarily to OTTI.
Non-credit-impairment fair value gains on credit derivatives in
fourth quarter 2019 related primarily to price improvements on the
underlying collateral of certain transactions. Fair value gains on
credit derivatives in fourth quarter 2018 were primarily
attributable to the increased cost to buy protection on the
Company's name. Fair value losses on credit derivatives in FY 2019
primarily related to the decreased cost to buy protection on the
Company's name. Fair value gains on credit derivatives in FY 2018
were primarily attributable to price improvements on the underlying
collateral transactions and credit derivative terminations.
Non-credit-impairment 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 fourth quarter 2019 and FY 2019
related primarily to a tightening in market spreads during the
periods. Fair value gains on CCS in fourth quarter 2018 and FY 2018
related primarily to a widening in market spreads during the
periods. 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 are not expected to result in an
economic gain or loss.
Foreign exchange gains and losses during all periods presented
relate primarily to remeasurement of premiums receivable, driven by
changes in the exchange rate of the pound sterling relative to the
U.S. dollar.
Common Share Repurchases
Summary of Share
Repurchases
(in millions, except per share
amounts)
Amount
Number of Shares
Average Price Per
Share
2019 (January 1 - March 31)
$
79.4
1.91
$
41.62
2019 (April 1 - June 30)
110.6
2.52
43.89
2019 (July 1 - September 30)
150.0
3.40
44.11
2019 (October 1 - December 31)
160.0
3.33
47.97
Total 2019
500.0
11.16
44.79
2020 (January 1 - February 27)
$
40.0
0.84
$
47.41
From January 2013 through February 27, 2020, the Company
repurchased a total of 106.6 million common shares at an average
price of $30.56, representing approximately 55% of the total shares
outstanding at the beginning of the repurchase program in 2013. On
February 26, 2020, the Board of Directors authorized the repurchase
of another $250 million of common shares. As of February 27, 2020,
the Company was authorized to purchase $408 million of its common
shares. These repurchases can be made from time to time in the open
market or in privately negotiated transactions.
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.
Financial Statements
Consolidated Statements of
Operations (unaudited)
(in millions)
Quarter Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Revenues
Net earned premiums
$
123
$
125
$
476
$
548
Net investment income
82
98
378
395
Asset management fees
22
—
22
—
Net realized investment gains (losses)
10
(18
)
22
(32
)
Net change in fair value of credit
derivatives
19
9
(6
)
112
Fair value gains (losses) on FG VIEs
—
3
42
14
Foreign exchange gains (losses) on
remeasurement
48
(15
)
24
(37
)
Commutation gains (losses)
—
—
1
(16
)
Other income (loss)
(8
)
11
4
17
Total revenues
296
213
963
1,001
Expenses
Loss and LAE
18
21
93
64
Interest expense
22
23
89
94
Amortization of DAC
5
4
18
16
Employee compensation and benefit
expenses
60
40
178
152
Other operating expenses
54
25
125
96
Total expenses
159
113
503
422
Income (loss) before income taxes and
equity in net
earnings of investees
137
100
460
579
Equity in net earnings of investees
1
1
4
1
Income (loss) before income
taxes
138
101
464
580
Provision (benefit) for income taxes
2
13
63
59
Net income (loss)
$
136
$
88
$
401
$
521
Less: Redeemable noncontrolling
interests
(1
)
—
(1
)
—
Net income (loss) attributable to
AGL
$
137
$
88
$
402
$
521
Results by Segment
(in millions)
Quarter Ended December 31,
2019
Insurance
Asset
Management
Corporate
Other
Total
Revenues
Net earned premiums and credit
derivative
revenues
$
129
$
—
$
—
$
(2
)
$
127
Net investment income
85
—
1
(4
)
82
Asset management fees
—
22
—
—
22
Other income (loss)
6
—
—
7
13
Total revenues
220
22
1
1
244
Expenses:
Loss expense
20
—
—
2
22
Interest expense
—
—
25
(3
)
22
Amortization of DAC and intangible
assets
5
3
—
—
8
Employee compensation and benefit
expenses
32
24
4
—
60
Other operating expenses
23
7
11
10
51
Total expenses
80
34
40
9
163
Equity in net earnings of investees
(1
)
—
—
2
1
Adjusted operating income
(loss)
before income taxes
139
(12
)
(39
)
(6
)
82
Provision (benefit) for income taxes
6
(2
)
(7
)
(1
)
(4
)
Noncontrolling interests
—
—
—
(1
)
(1
)
Adjusted operating income
(loss)
$
133
$
(10
)
$
(32
)
$
(4
)
$
87
Results by Segment
(continued)
(in millions)
Quarter Ended December 31,
2018
Insurance
Asset
Management
Corporate
Other
Total
Revenues
Net earned premiums and credit
derivative
revenues
$
133
$
—
$
—
$
(3
)
$
130
Net investment income
99
—
1
(2
)
98
Fair value gains (losses) on FG VIEs
—
—
—
3
3
Other income (loss)
(1
)
—
(8
)
—
(9
)
Total revenues
231
—
(7
)
(2
)
222
Expenses:
Loss expense
24
—
—
3
27
Interest expense
—
—
24
(1
)
23
Amortization of DAC and intangible
assets
4
—
—
—
4
Employee compensation and benefit
expenses
35
—
5
—
40
Other operating expenses
21
—
4
—
25
Total expenses
84
—
33
2
119
Equity in net earnings of investees
1
—
—
—
1
Adjusted operating income
(loss)
before income taxes
148
—
(40
)
(4
)
104
Provision (benefit) for income taxes
19
—
(6
)
(1
)
12
Adjusted operating income
(loss)
$
129
$
—
$
(34
)
$
(3
)
$
92
Results by Segment
(continued)
(in millions)
Year Ended December 31,
2019
Insurance
Asset
Management
Corporate
Other
Total
Revenues
Net earned premiums and credit
derivative
revenues
$
511
$
—
$
—
$
(18
)
$
493
Net investment income
383
—
4
(9
)
378
Asset management fees
—
22
—
—
22
Fair value gains (losses) on FG VIEs
—
—
—
42
42
Commutation gains (losses)
1
—
—
—
1
Other income (loss)
22
—
(1
)
7
28
Total revenues
917
22
3
22
964
Expenses:
Loss expense
86
—
—
20
106
Interest expense
—
—
94
(5
)
89
Amortization of DAC and intangible
assets
18
3
—
—
21
Employee compensation and benefit
expenses
137
24
17
—
178
Other operating expenses
83
7
22
10
122
Total expenses
324
34
133
25
516
Equity in net earnings of investees
2
—
—
2
4
Adjusted operating income
(loss)
before income taxes
595
(12
)
(130
)
(1
)
452
Provision (benefit) for income taxes
83
(2
)
(19
)
—
62
Noncontrolling interests
—
—
—
(1
)
(1
)
Adjusted operating income
(loss)
$
512
$
(10
)
$
(111
)
$
—
$
391
Results by Segment
(continued)
(in millions)
Year Ended December 31,
2018
Insurance
Asset
Management
Corporate
Other
Total
Revenues
Net earned premiums and credit
derivative
revenues
$
580
$
—
$
—
$
(12
)
$
568
Net investment income
396
—
6
(7
)
395
Fair value gains (losses) on FG VIEs
—
—
—
14
14
Commutation gains (losses)
(16
)
—
—
—
(16
)
Other income (loss)
32
—
(34
)
—
(2
)
Total revenues
992
—
(28
)
(5
)
959
Expenses:
Loss expense
70
—
—
3
73
Interest expense
—
—
97
(3
)
94
Amortization of DAC and intangible
assets
16
—
—
—
16
Employee compensation and benefit
expenses
134
—
18
—
152
Other operating expenses
82
—
14
—
96
Total expenses
302
—
129
—
431
Equity in net earnings of investees
1
—
—
—
1
Adjusted operating income
(loss)
before income taxes
691
—
(157
)
(5
)
529
Provision (benefit) for income taxes
109
—
(61
)
(1
)
47
Adjusted operating income
(loss)
$
582
$
—
$
(96
)
$
(4
)
$
482
Consolidated Balance Sheets
(unaudited)
(in millions)
As of
December 31, 2019
December 31, 2018
Assets
Investment portfolio:
Fixed maturity securities,
available-for-sale, at fair value
$
8,854
$
10,089
Short-term investments, at fair value
1,268
729
Other invested assets
118
55
Total investment portfolio
10,240
10,873
Cash
169
104
Premiums receivable, net of commissions
payable
1,286
904
Deferred acquisition costs
111
105
Salvage and subrogation recoverable
747
490
FG VIEs’ assets, at fair value
442
569
Assets of consolidated investment
vehicles
572
—
Goodwill and other intangible assets
216
24
Other assets
543
534
Total assets
$
14,326
$
13,603
Liabilities and shareholders'
equity
Liabilities
Unearned premium reserve
$
3,736
$
3,512
Loss and LAE reserve
1,050
1,177
Long-term debt
1,235
1,233
Credit derivative liabilities
191
209
FG VIEs’ liabilities with recourse, at
fair value
367
517
FG VIEs’ liabilities without recourse, at
fair value
102
102
Liabilities of consolidated investment
vehicles
482
—
Other liabilities
511
298
Total liabilities
7,674
7,048
Redeemable noncontrolling interests in
consolidated investment vehicles
7
—
Shareholders' equity
Common stock
1
1
Additional paid-in capital
—
86
Retained earnings
6,295
6,374
Accumulated other comprehensive income
342
93
Deferred equity compensation
1
1
Total shareholders' equity attributable
to AGL
6,639
6,555
Nonredeemable noncontrolling interests
6
—
Total shareholders' equity
6,645
6,555
Total liabilities, redeemable
noncontrolling interests and
shareholders’ equity
$
14,326
$
13,603
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
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.
By disclosing non-GAAP financial measures, the Company gives
investors, analysts and financial news reporters access to
information that management and the Board of Directors review
internally. The Company believes its presentation of non-GAAP
financial measures, along with the effect of VIE consolidation,
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 certain FG VIEs and
investment vehicles. The Company does not own such FG VIEs and its
exposure is limited to its obligation under the financial guaranty
insurance contract, which is captured in the Insurance segment
results. The economic effect of its consolidated investment
vehicles is also captured in its Insurance segment results through
the insurance subsidiaries' economic interest in such vehicles.
Management and the Board of Directors use non-GAAP financial
measures further adjusted to remove VIE 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 these core financial measures in
its decision making process and in its calculation of certain
components of management compensation. Wherever possible, the
Company has separately disclosed the effect of VIE
consolidation.
Management believes that many investors, analysts and financial
news reporters use adjusted operating shareholders’ equity, further
adjusted to remove the effect of VIE consolidation, 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. Management also
believes that many of the Company’s fixed income investors also use
this measure to evaluate the Company’s capital adequacy.
Management believes that many investors, analysts and financial
news reporters also use adjusted book value, further adjusted to
remove the effect of VIE consolidation, to evaluate AGL’s share
price and as the basis of their decision to recommend, buy or sell
the AGL common shares. Adjusted operating income further adjusted
for the effect of VIE 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 core financial measures that the Company uses to help
determine compensation are: (1) adjusted operating income, further
adjusted to remove the effect of VIE consolidation, (2) adjusted
operating shareholders' equity, further adjusted to remove the
effect of VIE consolidation, (3) growth in adjusted book value per
share, further adjusted to remove the effect of VIE consolidation,
and (4) PVP.
The following paragraphs and tables 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 underwriting
results and financial condition of the Company and presents the
results of operations of the Company excluding the fair value
adjustments on credit derivatives and CCS that are not expected to
result in economic gain or loss, as well as other adjustments
described below. Management further adjusts adjusted operating
income by removing VIE consolidation to arrive at its core
operating income measure. 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
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) 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.
Adjusted Operating Shareholders’ Equity and Adjusted Book
Value
Management believes that adjusted operating shareholders’ equity
is a useful measure because it presents the equity of the Company
excluding the fair value adjustments on investments, credit
derivatives and CCS that are not expected to result in economic
gain or loss, along with other adjustments described below.
Management further adjusts adjusted operating shareholders’ equity
by removing VIE consolidation to arrive at its core operating
shareholders' equity and core adjusted book value.
Adjusted operating shareholders’ equity is the basis of the
calculation of adjusted book value (see below). 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
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) (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.
4) 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.
Management uses adjusted book value, further adjusted for VIE
consolidation, to measure the intrinsic value of the Company,
excluding franchise value. Growth in adjusted book value per share,
further adjusted for VIE consolidation (core 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 expected
future net earned premiums, net of expected losses to be expensed,
which are not reflected in GAAP equity.
4) 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.
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 GAAP
Shareholders' Equity Attributable to AGL to
Adjusted Operating
Shareholders' Equity and ABV
(in millions, except per share
amounts)
As of
December 31, 2019
December 31, 2018
Total
Per Share
Total
Per Share
Shareholders' equity Attributable to
AGL
$
6,639
71.18
$
6,555
63.23
Less pre-tax adjustments:
Non-credit-impairment unrealized fair
value gains
(losses) on credit derivatives
(56
)
(0.60
)
(45
)
(0.44
)
Fair value gains (losses) on CCS
52
0.56
74
0.72
Unrealized gain (loss) on investment
portfolio excluding
foreign exchange effect
486
5.21
247
2.39
Less taxes
(89
)
(0.95
)
(63
)
(0.61
)
Adjusted operating shareholders'
equity
6,246
66.96
6,342
61.17
Pre-tax adjustments:
Less: Deferred acquisition costs
111
1.19
105
1.01
Plus: Net present value of estimated net
future revenue
192
2.05
204
1.96
Plus: Net unearned premium reserve on
financial
guaranty contracts in excess of expected
loss to be
expensed
3,296
35.34
3,005
28.98
Plus taxes
(588
)
(6.30
)
(524
)
(5.04
)
ABV
$
9,035
96.86
$
8,922
86.06
Gain (loss) related to VIE
consolidation included in
adjusted operating shareholders' equity
(net of tax
provision of $2 and $1)
$
7
$
0.07
$
3
$
0.03
Gain (loss) related to VIE
consolidation included in ABV
(net of tax benefit of $1 and
$4)
$
(4
)
$
(0.05
)
$
(15
)
$
(0.15
)
Shares outstanding at the end of the
period
93.3
103.7
Net Present Value of Estimated Net Future Revenue
Management believes that this amount is a useful measure because
it enables an evaluation of the value of future estimated revenue
for contracts other than financial guaranty insurance contracts
(such as specialty insurance and reinsurance contracts and credit
derivatives). There is no corresponding GAAP financial measure.
This amount represents the present value of estimated future
revenue from these contracts, net of reinsurance, ceding
commissions and premium taxes, for contracts without expected
economic losses, and is discounted at 6%. Estimated net future
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 management believes 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 Realized Gains (Losses)) 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,
discounted, in each case, at 6%. 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 future earned or
written premiums and Credit Derivative Realized Gains (Losses) 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 GWP to
PVP
(in millions)
Quarter Ended December 31,
2019
Public Finance
Structured Finance
U.S.
Non - U.S.
U.S.
Non - U.S.
Total
GWP
$
79
$
383
$
53
$
3
$
518
Less: Installment GWP and other GAAP
adjustments (1)
—
383
52
1
436
Upfront GWP
79
—
1
2
82
Plus: Installment premium PVP
—
187
17
—
204
PVP
$
79
$
187
$
18
$
2
$
286
Quarter Ended December 31,
2018
Public Finance
Structured Finance
U.S.
Non - U.S.
U.S.
Non - U.S.
Total
GWP
$
93
$
4
$
(1
)
$
—
$
96
Less: Installment GWP and other GAAP
adjustments(1)
25
3
(1
)
—
27
Upfront GWP
68
1
—
—
69
Plus: Installment premium PVP
21
2
1
3
27
PVP
$
89
$
3
$
1
$
3
$
96
Year Ended December 31,
2019
Public Finance
Structured Finance
U.S.
Non - U.S.
U.S.
Non - U.S.
Total
GWP
$
198
$
417
$
57
$
5
$
677
Less: Installment GWP and other GAAP
adjustments(1)
(3
)
417
55
—
469
Upfront GWP
201
—
2
5
208
Plus: Installment premium PVP
—
211
43
1
255
PVP
$
201
$
211
$
45
$
6
$
463
Year Ended December 31,
2018
Public Finance
Structured Finance
U.S.
Non - U.S.
U.S.
Non - U.S.
Total
GWP
$
320
$
115
$
167
$
10
$
612
Less: Installment GWP and other GAAP
adjustments(1)
34
75
9
1
119
Upfront GWP
286
40
158
9
493
Plus: Installment premium PVP(2)
105
54
8
3
170
PVP
$
391
$
94
$
166
$
12
$
663
________________________________
(1) Includes 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, any cancellations of assumed reinsurance contracts,
and other GAAP adjustments.
(2) Includes PVP of credit derivatives assumed in the SGI
Transaction.
Definitions
The Company uses AUM as a metric to measure progress in its
Asset Management segment. The Company uses measures of its AUM in
its decision-making process and intends to use a measure of change
in AUM in its calculation of certain components of management
compensation. Investors also use AUM to evaluate companies that
participate in the asset management business. AUM refers to the
assets managed, advised or serviced by the Asset Management segment
and equals the sum of the following:
- the net asset value of the opportunity and wind-down funds plus
any unfunded commitments;
- the amount of aggregate collateral balance and principal cash
of Assured Investment Management's CLOs, including CLO equity that
may be held by Assured Investment Management funds. This also
includes CLO assets managed by BlueMountain Fuji Management, LLC
(BM Fuji). BlueMountain is not the investment manager of BM Fuji
CLOs, but rather has entered into a services agreement and a
secondment agreement with BM Fuji pursuant to which BlueMountain
provides certain services associated with the management of BM
Fuji-advised CLOs and acts in the capacity of service
provider.
The Company’s calculation of AUM may differ from the calculation
employed by other investment managers and, as a result, this
measure may not be directly comparable to similar measures
presented by other investment managers. The calculation also
differs from the manner in which Assured Investment Management
affiliates registered with the U.S. Securities and Exchange
Commission (SEC) report “Regulatory Assets Under Management” on
Form ADV and Form PF in various ways.
The Company also uses several other measurements of AUM to
understand and measure its AUM in more detail and for various
purposes, including its relative position in the market and its
income and income potential:
“Third-party assets under management” or “3rd Party AUM” refers
to the assets Assured Investment Management manages or advises on
behalf of third-party investors. This includes current and former
employee investments in Assured Investment Management's funds. For
CLOs, this also includes CLO equity that may be held by Assured
Investment Management's funds.
“Intercompany assets under management” or “Intercompany AUM”
refers to the assets Assured Investment Management manages or
advises on behalf of the Company. This includes investments from
affiliates of Assured Guaranty along with general partners'
investments of BlueMountain (or its affiliates) into the funds.
“Funded assets under management” or “Funded AUM” refers to
assets that have been deployed or invested into the funds or
CLOs.
“Unfunded assets under management” or “Unfunded AUM” refers to
unfunded capital commitments from closed-end funds and CLO
warehouse fund.
“Fee earning assets under management” or “Fee Earning AUM”
refers to assets where Assured Investment Management collects fees
and has elected not to waive or rebate fees to investors.
“Non-fee earning assets under management” or “Non-Fee Earning
AUM” refers to assets where Assured Investment Management does not
collect fees or has elected to waive or rebate fees to investors.
Assured Investment Management reserves the right to waive some or
all fees for certain investors, including investors affiliated with
Assured Investment Management and/or the Company. Further, to the
extent that the Company's wind-down and/or opportunity funds are
invested in Assured Investment Management managed CLOs, Assured
Investment Management may rebate any management fees and/or
performance compensation earned from the CLOs to the extent such
fees are attributable to the wind-down and opportunity funds’
holdings of CLOs also managed by Assured Investment Management.
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 Friday, February 28,
2020. 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 May 28, 2020. To listen to the replay,
dial 1-877-344-7529 (in the U.S.) or 1-412-317-0088
(International), passcode 10139449. The replay will be available
one hour after the conference call ends.
Please refer to Assured Guaranty's December 31, 2019 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.
The Company is also posting on the same page of its website:
- “Public Finance Transactions in 4Q 2019,” which lists the U.S.
public finance new issues insured by the Company in fourth quarter
2019, and
- “Structured Finance Transactions at December 31, 2019,” which
lists the Company's structured finance exposure as of that
date.
In addition, the Company is posting at
assuredguaranty.com/presentations the “December 31, 2019 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. Through its subsidiaries, Assured
Guaranty provides credit enhancement products to the U.S. and
international public finance, infrastructure and structured finance
markets and also provides asset management services. 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 ABV,
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
changes in the world’s credit markets, segments thereof, interest
rates, credit spreads or general economic conditions; developments
in the world’s financial and capital markets that adversely affect
insured obligors’ repayment rates, Assured Guaranty’s insurance
loss or recovery experience, investments of Assured Guaranty or
assets it manages; reduction in the amount of available insurance
opportunities and/or in the demand for Assured Guaranty's
insurance; the loss of investors in Assured Guaranty's asset
management strategies or the failure to attract new investors to
Assured Guaranty's asset management business; 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; insured
losses 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;
increased competition, including from new entrants into the
financial guaranty industry; poor performance of Assured Guaranty's
asset management strategies compared to the performance of the
asset management strategies of Assured Guaranty's competitors; the
possibility that investments made by Assured Guaranty for its
investment portfolio, including alternative investments and
investments it manages, do not result in the benefits anticipated
or subject Assured Guaranty to reduced liquidity at a time it
requires liquidity or to unanticipated consequences; the impact of
market volatility on the mark-to-market of Assured Guaranty’s
assets and liabilities subject to mark-to-market, including certain
of its investments, most of its contracts written in credit default
swap form, and VIEs as well as on the mark-to-market of assets
Assured Guaranty manages; 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; the inability of Assured
Guaranty to access external sources of capital on acceptable terms;
changes in applicable accounting policies or practices; changes in
applicable laws or regulations, including insurance, bankruptcy and
tax laws, or other governmental actions; the failure of Assured
Guaranty to successfully integrate the business of BlueMountain and
its associated entities; the possibility that acquisitions made by
Assured Guaranty, including its acquisition of BlueMountain, do not
result in the benefits anticipated or subject Assured Guaranty to
unanticipated consequences; 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 or pandemics; other risk factors identified
in AGL’s filings with the SEC; other risks and uncertainties that
have not been identified at this time; and 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 February 27, 2020, 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/20200227006052/en/
Robert Tucker Senior Managing Director, Investor Relations and
Corporate Communications 212-339-0861 rtucker@agltd.com
Ashweeta Durani Vice President, Corporate Communications
212-408-6042 adurani@agltd.com
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