- GAAP Highlights:
- Net income attributable to Assured Guaranty Ltd. was $171
million, or $3.17 per share(1), for third quarter 2024.
- Shareholders’ equity attributable to Assured Guaranty Ltd. per
share was $111.09 as of September 30, 2024.
- Gross written premiums (GWP) were $61 million for third quarter
2024.
- Non-GAAP Highlights:
- Adjusted operating income(2) was $130 million, or $2.42 per
share, for third quarter 2024.
- Adjusted operating shareholders’ equity(2) per share and
adjusted book value (ABV)(2) per share were $113.96 and $166.47,
respectively, as of September 30, 2024.
- Present value of new business production (PVP)(2) was $63
million for third quarter 2024.
- Return of Capital to Shareholders:
- Third quarter 2024 capital returned to shareholders was $147
million including share repurchases of $131 million and dividends
of $16 million.
- Share repurchase authorization was increased by $250 million on
November 8, 2024.
Assured Guaranty Ltd. (NYSE: AGO) (AGL and, together with its
subsidiaries, Assured Guaranty or the Company) announced today its
financial results for the three-month period ended September 30,
2024 (third quarter 2024).
“Assured Guaranty has continued to build both shareholder and
policyholder value this year,” said Dominic Frederico, President
and CEO. “Shareholders’ equity per share on September 30, 2024 was
a record $111.09. Adjusted book value per share also set a record
at $166.47, as did adjusted operating shareholders’ equity per
share at $113.96. For the first three quarters, net income has
increased to $6.44 per share, up 8% year-over-year, and adjusted
operating income reached $5.80 per share, up 13%
year-over-year.
“New business production has been strong this year. GWP and PVP
for the first three quarters reached $254 million and $281 million,
respectively, which were $33 million and $32 million higher than
for last year’s comparable period. Municipal production benefited
from greater overall issuance and solid investor demand. We also
saw significant contributions from our non-U.S. public finance and
global structured finance businesses. After the merger of AGM into
AG (formerly AGC) in the third quarter, we believe the new AG is
positioned for significant growth, as we pursue further expansion
into new product and geographic markets.
“In our capital management program, as of November 8, 2024, the
Company had repurchased 10% of the shares that were outstanding on
December 31, 2023, and in November our board authorized an
additional $250 million of share repurchases.”
(1)
All per share information for net income
and adjusted operating income is based on diluted shares.
(2)
Please see “Explanation of Non-GAAP
Financial Measures.”
Summary Financial
Results
(in millions, except per share
amounts)
Quarter Ended
September 30,
2024
2023
GAAP (1)
Net income (loss) attributable to
AGL
$
171
$
157
Net income (loss) attributable to AGL
per diluted share
$
3.17
$
2.60
Weighted average diluted shares
53.4
59.6
Non-GAAP
Adjusted operating income (loss) (2)
$
130
$
206
Adjusted operating income per diluted
share (2)
$
2.42
$
3.42
Weighted average diluted shares
53.4
59.6
Gain (loss) related to FG VIE and CIV
consolidation (3) included in adjusted operating income
$
(7
)
$
(8
)
Gain (loss) related to FG VIE and CIV
consolidation included in adjusted operating income per share
$
(0.12
)
$
(0.13
)
Components of total adjusted operating
income (loss)
Insurance segment
$
162
$
59
Asset Management segment
4
—
Corporate division
(29
)
155
Other
(7
)
(8
)
Adjusted operating income (loss)
$
130
$
206
As of
September 30, 2024
December 31, 2023
Amount
Per Share
Amount
Per Share
Shareholders’ equity attributable to
AGL
$
5,728
$
111.09
$
5,713
$
101.63
Adjusted operating shareholders’ equity
(2)
5,875
113.96
5,990
106.54
ABV (2)
8,582
166.47
8,765
155.92
Common Shares Outstanding
51.6
56.2
________________________________________________
(1)
Generally accepted accounting principles
in the United States of America.
(2)
Please see “Explanation of Non-GAAP
Financial Measures” at the end of this press release.
(3)
The effect of consolidating financial
guaranty (FG) variable interest entities (VIEs) and consolidated
investment vehicles (CIVs).
On a per share basis, shareholders’ equity attributable to AGL
increased to $111.09 as of September 30, 2024 from $101.63 as of
December 31, 2023, primarily due to net income, unrealized gains in
the investment portfolio and share repurchases, partially offset by
dividends. On a per share basis, ABV increased to $166.47 primarily
due to adjusted operating income, new business production and share
repurchases, partially offset by dividends.
Insurance Segment
The Insurance segment primarily consists of (i) the Company’s
insurance subsidiaries that provide credit protection products to
the United States (U.S.) and non-U.S. public finance (including
infrastructure) and structured finance markets, excluding the
effect of VIE consolidations, and (ii) Assured Guaranty Inc.’s (AG,
formerly Assured Guaranty Corp.) investment subsidiary.
Insurance Segment New Business Production
Insurance Segment
New Business
Production
(in millions)
Quarter Ended September
30,
2024
2023
GWP
PVP (1)
Gross Par Written (2)
GWP
PVP (1)
Gross Par Written (2)
Public finance - U.S.
$
35
$
34
$
5,387
$
29
$
30
$
5,098
Public finance - non-U.S.
7
10
665
(5
)
2
61
Structured finance - U.S.
4
5
551
15
12
267
Structured finance - non-U.S.
15
14
834
1
2
522
Total
$
61
$
63
$
7,437
$
40
$
46
$
5,948
________________________________________________
(1)
PVP, a non-GAAP financial measure,
measures the value of the Insurance segment’s new business
production for all contracts regardless of form or GAAP accounting
model. See “Explanation of Non-GAAP Financial Measures” at the end
of this press release. PVP is based on “close date,” when the
transaction settles. PVP was discounted at 5.0% in third quarter
2024 and 4.0% in the three-month period ended September 30, 2023
(third quarter 2023).
(2)
Gross Par Written is based on “close
date,” when the transaction settles.
U.S. public finance GWP and PVP in third quarter 2024 were
higher than the comparable GWP and PVP in third quarter 2023,
primarily due to an increase in insured par and higher premium
rates on primary market transactions. The Company’s direct par
written represented 60% of the total U.S. municipal market insured
issuance in third quarter 2024, compared with 61% in third quarter
2023, and the Company’s penetration of all municipal issuance was
4.2% in third quarter 2024 compared with 4.6% in third quarter
2023.
In third quarter 2024, non-U.S. public finance GWP and PVP were
higher than GWP and PVP in third quarter 2023, primarily due to
guaranties of several United Kingdom (U.K.) regulated utility and
airport transactions in third quarter 2024.
Global structured finance GWP and PVP in third quarter 2024 were
higher than the comparable GWP and PVP in third quarter 2023. In
third quarter 2024, the Company insured a transaction in Australia
that provided protection on an approximately $600 million core
lending portfolio for an Australian bank.
Insurance Segment Adjusted Operating Income
Insurance segment adjusted operating income increased to $162
million in third quarter 2024 from $59 million in third quarter
2023, primarily due to a benefit in loss expense in third quarter
2024. This was offset in part by lower net investment income and a
$6 million write-off of insurance licenses in connection with the
merger of the U.S. insurance subsidiaries Assured Guaranty
Municipal Corp. and AG on August 1, 2024.
Insurance Segment
Results
(in millions)
Quarter Ended
September 30,
2024
2023
Segment revenues
Net earned premiums and credit derivative
revenues
$
101
$
99
Net investment income
82
101
Fair value gains (losses) on trading
securities
9
4
Foreign exchange gains (losses) on
remeasurement
1
(2
)
Other income (loss)
11
6
Total segment revenues
204
208
Segment expenses
Loss expense (benefit)
(53
)
101
Amortization of deferred acquisition costs
(DAC)
5
4
Employee compensation and benefit
expenses
40
37
Other operating expenses
36
23
Total segment expenses
28
165
Equity in earnings (losses) of
investees
28
25
Segment adjusted operating income
(loss) before income taxes
204
68
Less: Provision (benefit) for income
taxes
42
9
Segment adjusted operating income
(loss)
$
162
$
59
The components of the Insurance segment’s premiums, losses and
income from the investment portfolio are presented below.
Insurance Segment Net Earned Premiums and Credit Derivative
Revenues
Insurance Segment
Net Earned Premiums and Credit
Derivative Revenues
(in millions)
Quarter Ended
September 30,
2024
2023
Scheduled net earned premiums and credit
derivative revenues
$
87
$
84
Accelerations
14
15
Total
$
101
$
99
Insurance Segment Loss Expense (Benefit) and the Roll Forward of
Expected Losses
Loss expense is a function of net economic loss development
(benefit) and deferred premium revenue. The difference between loss
expense and economic development in a given period represents the
amount of deferred premium revenue absorbing expected losses to be
paid.
Insurance Segment
Loss Expense (Benefit)
(in millions)
Quarter Ended
September 30,
2024
2023
Public finance
$
(8
)
$
138
U.S. residential mortgage-backed
securities (RMBS)
(44
)
(38
)
Other structured finance
(1
)
1
Total
$
(53
)
$
101
The table below presents the roll forward of net expected losses
for third quarter 2024.
Roll Forward of Net Expected
Loss to be Paid (Recovered) (1)
(in millions)
Net Expected Loss to be Paid
(Recovered) as of June 30, 2024
Net Economic Loss
Development (Benefit)
Net (Paid) Recovered
Losses
Net Expected Loss to be Paid
(Recovered) as of September 30, 2024
Public finance
$
411
$
23
$
(115
)
$
319
U.S. RMBS
—
(56
)
10
(46
)
Other structured finance
36
(1
)
(2
)
33
Total
$
447
$
(34
)
$
(107
)
$
306
________________________________________________
(1)
Net economic loss development (benefit)
represents the change in net expected loss to be paid (recovered)
attributable to the effects of changes in the economic performance
of insured transactions, changes in assumptions based on observed
market trends, changes in discount rates, accretion of discount and
the economic effects of loss mitigation efforts, each net of
reinsurance. Net economic loss development (benefit) is the
principal measure that the Company uses to evaluate the loss
experience in its insured portfolio. Expected loss to be paid
(recovered) includes all transactions insured by the Company,
regardless of the accounting model prescribed under GAAP and
without consideration of deferred premium revenue.
The net economic benefit was $34 million in third quarter 2024,
and was primarily attributable to improved recovery assumptions in
U.S. RMBS and improvements in certain healthcare transactions,
offset in part by an increase in expected losses on certain U.K.
regulated utilities. The effect of changes in risk-free rates used
to discount expected losses was a loss of $3 million.
Insurance Segment Income from Investment Portfolio
Insurance Segment
Income from Investment
Portfolio
(in millions)
Quarter Ended
September 30,
2024
2023
Net investment income
$
82
$
101
Fair value gains (losses) on trading
securities (1)
9
4
Equity in earnings (losses) of investees
(2)
28
25
Total
$
119
$
130
________________________________________________
(1)
Primarily includes contingent value
instruments issued by Puerto Rico.
(2)
Equity in earnings (losses) of investees
primarily relates to funds managed by Sound Point Capital
Management, LP and certain of its investment management
subsidiaries (Sound Point) and Assured Healthcare Partners, LLC
(AHP). Investments in funds are reported on a one-quarter lag.
Net investment income, which represents interest income on
available-for-sale fixed-maturity debt and short-term investments,
decreased to $82 million in third quarter 2024 from $101 million in
third quarter 2023 primarily due to lower income on loss mitigation
securities.
As of September 30, 2024, the Insurance segment had $720 million
in alternative investments. In the Insurance segment, alternative
investments consist primarily of funds managed by Sound Point and
AHP, and are generally recorded at net asset value (NAV), with
changes in NAV reported in “equity in earnings (losses) of
investees.” Equity in earnings of investees is more volatile than
net investment income on available-for-sale fixed-maturity
securities and short-term investments. To the extent that the
amounts invested in alternative fund investments increase and
available-for-sale fixed-maturity securities decrease, net
investment income may decline and mark-to-market volatility related
to equity in earnings of investees may increase.
The inception-to-date annualized internal rate of return for all
alternative investments, which are primarily in the Insurance
segment and Corporate division, was approximately 13%.
Asset Management Segment
Since July 2023, the Company participates in the asset
management business through its ownership interest in Sound Point.
In third quarter 2024 asset management adjusted operating income of
$4 million was primarily due to the Company’s ownership interest in
Sound Point, including the amortization of intangible assets, as
well as certain ongoing performance fees. Sound Point’s results are
reported on a one quarter lag and are included in “equity in
earnings (losses) of investees.”
Corporate Division
Corporate Division
Results
(in millions)
Quarter Ended
September 30,
2024
2023
Revenues
Gain on sale of asset management
subsidiaries
$
—
$
255
Other
4
4
Total revenues
4
259
Expenses
Interest expense
24
26
Employee compensation and benefit
expenses
7
10
Other operating expenses
6
21
Total expenses
37
57
Adjusted operating income (loss) before
income taxes
(33
)
202
Less: Provision (benefit) for income
taxes
(4
)
47
Adjusted operating income
(loss)
$
(29
)
$
155
Corporate division adjusted operating income in third quarter
2023 included a pre-tax gain resulting from the Sound Point and AHP
transactions of $241 million, which was net of $14 million in
transaction costs (primarily advisory and legal expenses reported
in other operating expenses).
As part of the share redemption that occurred on August 5, 2024,
AG transferred certain alternative investments to Assured Guaranty
Municipal Holdings Inc., whose results are now reported in the
corporate division.
Reconciliation to GAAP
The following table presents a reconciliation of net income
(loss) attributable to AGL to adjusted operating income (loss).
Reconciliation of Net Income
(Loss) Attributable to AGL to
Adjusted Operating Income
(Loss)
(in millions, except per share
amounts)
Quarter Ended
September 30,
2024
2023
Total
Per Diluted Share
Total
Per Diluted Share
Net income (loss) attributable to
AGL
$
171
$
3.17
$
157
$
2.60
Less pre-tax adjustments:
Realized gains (losses) on investments
—
—
(9
)
(0.16
)
Non-credit impairment-related unrealized
fair value gains (losses) on credit derivatives
(2
)
(0.03
)
6
0.12
Fair value gains (losses) on committed
capital securities (CCS)
(3
)
(0.06
)
(20
)
(0.33
)
Foreign exchange gains (losses) on
remeasurement of premiums receivable and loss and loss adjustment
expense (LAE) reserves
54
1.00
(37
)
(0.61
)
Total pre-tax adjustments
49
0.91
(60
)
(0.98
)
Less tax effect on pre-tax adjustments
(8
)
(0.16
)
11
0.16
Adjusted operating income (loss)
$
130
$
2.42
$
206
$
3.42
Gain (loss) related to FG VIE and CIV
consolidation included in adjusted operating income
$
(7
)
$
(0.12
)
$
(8
)
$
(0.13
)
Non-credit impairment-related unrealized fair value gains on
credit derivatives in third quarter 2023 were primarily generated
by lower collateral asset spreads. Except for credit impairment,
the fair value adjustments on credit derivatives in the insured
portfolio are non-economic adjustments that reverse to zero over
the remaining term of that portfolio.
Fair value losses on CCS in both periods were primarily due to a
tightening in market spreads. Fair value of CCS is heavily affected
by, and in part fluctuates with, changes in market interest rates,
credit spreads and other market factors and is not expected to
result in an economic gain or loss.
Foreign exchange gains (losses) primarily relate to the
remeasurement of premiums receivable and are mainly due to changes
in the exchange rate relative to the U.S. dollar of the pound
sterling and, to a lesser extent, the euro.
Common Share Repurchases
On November 8, 2024, AGL’s Board of Directors (the Board)
authorized the repurchase of an additional $250 million of the
Company’s common shares. From the beginning of the repurchase
program in 2013 through November 8, 2024, the Company has
repurchased a total of 150 million common shares for $5.3 billion,
representing approximately 77% of the total shares outstanding as
of January 1, 2013. As of November 8, 2024, the Company was
authorized to purchase approximately $385 million of its common
shares. These repurchases can be made from time to time in the open
market or in privately negotiated transactions.
Summary of Share
Repurchases
(in millions, except per share
amounts)
Amount (1)
Number of Shares
Average Price Per
Share
2024 (January 1 - March 31)
$
129
1.54
$
84.07
2024 (April 1 - June 30)
152
1.93
78.50
2024 (July 1 - September 30)
131
1.66
78.87
2024 (October 1- November 8)
58
0.69
83.61
Total 2024
$
470
5.82
80.69
________________________________________________
(1)
Excludes commissions and excise taxes.
The timing, form and amount of the share repurchases under the
program are at the discretion of management and will depend on a
variety of factors, including funds available at the parent
company, other potential uses for such funds, market conditions,
the Company’s capital position, legal requirements and other
factors. The repurchase program may be modified, extended or
terminated by the Board at any time. It does not have an expiration
date.
Financial Statements
Condensed Consolidated
Statements of Operations (unaudited)
(in millions)
Quarter Ended
September 30,
2024
2023
Revenues
Net earned premiums
$
97
$
95
Net investment income
82
100
Net realized investment gains (losses)
—
(9
)
Fair value gains (losses) on credit
derivatives
3
9
Fair value gains (losses) on CCS
(3
)
(20
)
Fair value gains (losses) on FG VIEs
(7
)
6
Fair value gains (losses) on CIVs
21
(4
)
Foreign exchange gain (loss) on
remeasurement
55
(39
)
Fair value gains (losses) on trading
securities
9
4
Gain on sale of asset management
subsidiaries
—
255
Other income (loss)
12
6
Total revenues
269
403
Expenses
Loss and LAE (benefit)
(51
)
100
Interest expense
22
24
Amortization of DAC
5
4
Employee compensation and benefit
expenses
47
47
Other operating expenses
44
44
Total expenses
67
219
Income (loss) before income taxes and
equity in earnings (losses) of investees
202
184
Equity in earnings (losses) of
investees
18
18
Income (loss) before income
taxes
220
202
Less: Provision (benefit) for income
taxes
44
43
Net income (loss)
176
159
Less: Noncontrolling interests
5
2
Net income (loss) attributable to
AGL
$
171
$
157
Condensed Consolidated Balance
Sheets (unaudited)
(in millions)
As of
September 30, 2024
December 31, 2023
Assets
Investments:
Fixed-maturity securities
available-for-sale, at fair value
$
6,284
$
6,307
Fixed-maturity securities, trading, at
fair value
163
318
Short-term investments, at fair value
1,487
1,661
Other invested assets
912
829
Total investments
8,846
9,115
Cash
147
97
Premiums receivable, net of commissions
payable
1,513
1,468
DAC
172
161
Salvage and subrogation recoverable
412
298
FG VIEs’ assets
156
328
Assets of CIVs
359
366
Other assets
686
706
Total assets
$
12,291
$
12,539
Liabilities
Unearned premium reserve
$
3,631
$
3,658
Loss and LAE reserve
253
376
Long-term debt
1,698
1,694
Credit derivative liabilities, at fair
value
39
53
FG VIEs’ liabilities, at fair value
392
554
Other liabilities
496
439
Total liabilities
6,509
6,774
Shareholders’ equity
Common shares
1
1
Retained earnings
5,957
6,070
Accumulated other comprehensive income
(loss)
(231
)
(359
)
Deferred equity compensation
1
1
Total shareholders’ equity attributable
to AGL
5,728
5,713
Nonredeemable noncontrolling interests
54
52
Total shareholders’ equity
5,782
5,765
Total liabilities and shareholders’
equity
$
12,291
$
12,539
Explanation of Non-GAAP Financial Measures
The Company discloses both: (i) financial measures determined in
accordance with GAAP; and (ii) financial measures not determined in
accordance with GAAP (non-GAAP financial measures). Financial
measures identified as non-GAAP should not be considered
substitutes for GAAP financial measures. The primary limitation of
non-GAAP financial measures is the potential lack of comparability
to financial measures of other companies, whose definitions of
non-GAAP financial measures may differ from those of the
Company.
The Company believes its presentation of non-GAAP financial
measures provides information that is necessary for analysts to
calculate their estimates of Assured Guaranty’s financial results
in their research reports on Assured Guaranty and for investors,
analysts and the financial news media to evaluate Assured
Guaranty’s financial results.
GAAP requires the Company to consolidate entities where it is
deemed to be the primary beneficiary which include:
- FG VIEs, which the Company does not own and where its exposure
is limited to its obligation under the financial guaranty insurance
contract, and
- CIVs in which certain subsidiaries invest.
The Company discloses the effect of FG VIE and CIV consolidation
that is embedded in each non-GAAP financial measure, as applicable.
The Company believes this information may also be useful to
analysts and investors evaluating Assured Guaranty’s financial
results. In the case of both the consolidated FG VIEs and the CIVs,
the economic effect on the Company of each of the consolidated FG
VIEs and CIVs is reflected primarily in the results of the
Insurance segment.
Management of the Company and AGL’s Board of Directors use
non-GAAP financial measures further adjusted to remove the effect
of FG VIE and CIV consolidation (which the Company refers to as its
core financial measures), as well as GAAP financial measures and
other factors, to evaluate the Company’s results of operations,
financial condition and progress towards long-term goals. The
Company uses core financial measures in its decision-making process
for and in its calculation of certain components of management
compensation. The financial measures that the Company uses to help
determine compensation are: (1) adjusted operating income, further
adjusted to remove the effect of FG VIE and CIV consolidation; (2)
adjusted operating shareholders’ equity, further adjusted to remove
the effect of FG VIE and CIV consolidation; (3) adjusted book value
per share, further adjusted to remove the effect of FG VIE and CIV
consolidation; and (4) PVP.
Management believes that many investors, analysts and financial
news reporters use adjusted operating shareholders’ equity and/or
adjusted book value, each further adjusted to remove the effect of
FG VIE and CIV consolidation, as the principal financial measures
for valuing AGL’s current share price or projected share price and
also as the basis of their decision to recommend, buy or sell AGL’s
common shares. Management also believes that many of the Company’s
fixed income investors also use adjusted operating shareholders’
equity, further adjusted to remove the effect of FG VIE and CIV
consolidation, to evaluate the Company’s capital adequacy.
Adjusted operating income, further adjusted for the effect of FG
VIE and CIV consolidation, enables investors and analysts to
evaluate the Company’s financial results in comparison with the
consensus analyst estimates distributed publicly by financial
databases.
The following paragraphs define each non-GAAP financial measure
disclosed by the Company and describe why it is useful. To the
extent there is a directly comparable GAAP financial measure, a
reconciliation of the non-GAAP financial measure and the most
directly comparable GAAP financial measure is presented below.
Adjusted Operating Income
Management believes that adjusted operating income is a useful
measure because it clarifies the understanding of the operating
results of the Company. Adjusted operating income is defined as net
income (loss) attributable to AGL, as reported under GAAP, adjusted
for the following:
1) Elimination of realized gains (losses) on
the Company’s investments, except for gains and losses on
securities classified as trading. The timing of realized gains and
losses, which depends largely on market credit cycles, can vary
considerably across periods. The timing of sales is largely subject
to the Company’s discretion and influenced by market opportunities,
as well as the Company’s tax and capital profile.
2) Elimination of non-credit
impairment-related unrealized fair value gains (losses) on credit
derivatives that are recognized in net income, which is the amount
of unrealized fair value gains (losses) in excess of the present
value of the expected estimated economic credit losses, and
non-economic payments. Such fair value adjustments are heavily
affected by, and in part fluctuate with, changes in market interest
rates, the Company’s credit spreads, and other market factors and
are not expected to result in an economic gain or loss.
3) Elimination of fair value gains (losses)
on the Company’s CCS that are recognized in net income. Such
amounts are affected by changes in market interest rates, the
Company’s credit spreads, price indications on the Company’s
publicly traded debt and other market factors and are not expected
to result in an economic gain or loss.
4) Elimination of foreign exchange gains
(losses) on remeasurement of net premium receivables and loss and
LAE reserves that are recognized in net income. Long-dated
receivables and loss and LAE reserves represent the present value
of future contractual or expected cash flows. Therefore, the
current period’s foreign exchange remeasurement gains (losses) are
not necessarily indicative of the total foreign exchange gains
(losses) that the Company will ultimately recognize.
5) The tax effects related to the above
adjustments, which are determined by applying the statutory tax
rate in each of the jurisdictions that generate these
adjustments.
See “Reconciliation to GAAP” above for a reconciliation of net
income (loss) attributable to AGL to adjusted operating income
(loss).
Adjusted Operating Shareholders’ Equity and Adjusted Book
Value
Management believes that adjusted operating shareholders’ equity
is a useful measure because it excludes the fair value adjustments
on investments, credit derivatives and CCS that are not expected to
result in economic gain or loss.
Adjusted operating shareholders’ equity is defined as
shareholders’ equity attributable to AGL, as reported under GAAP,
adjusted for the following:
1) Elimination of non-credit
impairment-related unrealized fair value gains (losses) on credit
derivatives, which is the amount of unrealized fair value gains
(losses) in excess of the present value of the expected estimated
economic credit losses, and non-economic payments. Such fair value
adjustments are heavily affected by, and in part fluctuate with,
changes in market interest rates, credit spreads and other market
factors and are not expected to result in an economic gain or
loss.
2) Elimination of fair value gains (losses)
on the Company’s CCS. Such amounts are affected by changes in
market interest rates, the Company’s credit spreads, price
indications on the Company’s publicly traded debt and other market
factors and are not expected to result in an economic gain or
loss.
3) Elimination of unrealized gains (losses)
on the Company’s investments that are recorded as a component of
accumulated other comprehensive income (AOCI). The AOCI component
of the fair value adjustment on the investment portfolio is not
deemed economic because the Company generally holds these
investments to maturity and therefore would not recognize an
economic gain or loss.
4) The tax effects related to the above
adjustments, which are determined by applying the statutory tax
rate in each of the jurisdictions that generate these
adjustments.
Management uses adjusted book value, further adjusted to remove
the effect of FG VIE and CIV consolidation, to measure the
intrinsic value of the Company, excluding franchise value. Adjusted
book value per share, further adjusted for FG VIE and CIV
consolidation (core adjusted book value), is one of the key
financial measures used in determining the amount of certain
long-term compensation elements to management and employees and
used by rating agencies and investors. Management believes that
adjusted book value is a useful measure because it enables an
evaluation of the Company’s in-force premiums and revenues net of
expected losses. Adjusted book value is adjusted operating
shareholders’ equity, as defined above, further adjusted for the
following:
1) Elimination of deferred acquisition costs,
net. These amounts represent net deferred expenses that have
already been paid or accrued and will be expensed in future
accounting periods.
2) Addition of the net present value of
estimated net future revenue. See below.
3) Addition of the deferred premium revenue
on financial guaranty contracts in excess of expected loss to be
expensed, net of reinsurance. This amount represents the present
value of the expected future net earned premiums, net of the
present value of expected losses to be expensed, which are not
reflected in GAAP equity.
4) The tax effects related to the above
adjustments, which are determined by applying the statutory tax
rate in each of the jurisdictions that generate these
adjustments.
The unearned premiums and revenues included in adjusted book
value will be earned in future periods, but actual earnings may
differ materially from the estimated amounts used in determining
current adjusted book value due to changes in foreign exchange
rates, prepayment speeds, terminations, credit defaults and other
factors.
Reconciliation of
Shareholders’ Equity Attributable to AGL to
Adjusted Operating
Shareholders’ Equity and ABV
(in millions, except per share
amounts)
As of
September 30, 2024
December 31, 2023
Total
Per Share
Total
Per Share
Shareholders’ equity attributable to
AGL
$
5,728
$
111.09
$
5,713
$
101.63
Less pre-tax adjustments:
Non-credit impairment-related unrealized
fair value gains (losses) on credit derivatives
45
0.89
34
0.61
Fair value gains (losses) on CCS
1
0.02
13
0.22
Unrealized gain (loss) on investment
portfolio
(211
)
(4.10
)
(361
)
(6.40
)
Less taxes
18
0.32
37
0.66
Adjusted operating shareholders’
equity
5,875
113.96
5,990
106.54
Pre-tax adjustments:
Less: DAC
172
3.33
161
2.87
Plus: Net present value of estimated net
future revenue
189
3.67
199
3.54
Plus: Net deferred premium revenue on
financial guaranty contracts in excess of expected loss to be
expensed
3,370
65.35
3,436
61.12
Plus taxes
(680
)
(13.18
)
(699
)
(12.41
)
ABV
$
8,582
$
166.47
$
8,765
$
155.92
Gain (loss) related to FG VIE and CIV
consolidation included in:
Adjusted operating shareholders’
equity
$
(5
)
$
(0.08
)
$
5
$
0.07
ABV
(9
)
(0.17
)
—
—
Shares outstanding at the end of the
period
51.6
56.2
Net Present Value of Estimated Net Future Revenue
Management believes that this amount is a useful measure because
it enables an evaluation of the present value of estimated net
future revenue for non-financial guaranty insurance contracts. This
amount represents the net present value of estimated future revenue
from these contracts (other than credit derivatives with net
expected losses), net of reinsurance, ceding commissions and
premium taxes.
Future installment premiums are discounted at the approximate
average pre-tax book yield of fixed-maturity securities purchased
during the prior calendar year, other than Loss Mitigation
Securities. The discount rate is recalculated annually and updated
as necessary. Net present value of estimated future revenue for an
obligation may change from period to period due to a change in the
discount rate or due to a change in estimated net future revenue
for the obligation, which may change due to changes in foreign
exchange rates, prepayment speeds, terminations, credit defaults or
other factors that affect par outstanding or the ultimate maturity
of an obligation. There is no corresponding GAAP financial
measure.
PVP or Present Value of New Business Production
Management believes that PVP is a useful measure because it
enables the evaluation of the value of new business production in
the Insurance segment by taking into account the value of estimated
future installment premiums on all new contracts underwritten in a
reporting period as well as additional installment premiums and
fees on existing contracts (which may result from supplements or
fees or from the issuer not calling an insured obligation the
Company projected would be called), regardless of form, which
management believes GAAP gross written premiums and changes in fair
value of credit derivatives do not adequately measure. PVP in
respect of contracts written in a specified period is defined as
gross upfront and installment premiums received and the present
value of gross estimated future installment premiums.
Future installment premiums are discounted at the approximate
average pre-tax book yield of fixed-maturity securities purchased
during the prior calendar year, other than certain fixed-maturity
securities such as Loss Mitigation Securities. The discount rate is
recalculated annually and updated as necessary. Under GAAP,
financial guaranty installment premiums are discounted at a
risk-free rate. Additionally, under GAAP, management records future
installment premiums on financial guaranty insurance contracts
covering non-homogeneous pools of assets based on the contractual
term of the transaction, whereas for PVP purposes, management
records an estimate of the future installment premiums the Company
expects to receive, which may be based upon a shorter period of
time than the contractual term of the transaction.
Actual installment premiums may differ from those estimated in
the Company’s PVP calculation due to factors including, but not
limited to, changes in foreign exchange rates, prepayment speeds,
terminations, credit defaults or other factors that affect par
outstanding or the ultimate maturity of an obligation.
Reconciliation of GWP to
PVP
(in millions)
Quarter Ended
September 30, 2024
Public Finance
Structured Finance
U.S.
Non - U.S.
U.S.
Non - U.S.
Total
GWP
$
35
$
7
$
4
$
15
$
61
Less: Installment GWP and other GAAP
adjustments (1)
2
(1
)
2
15
18
Upfront GWP
33
8
2
—
43
Plus: Installment premiums and other
(2)
1
2
3
14
20
PVP
$
34
$
10
$
5
$
14
$
63
Quarter Ended
September 30, 2023
Public Finance
Structured Finance
U.S.
Non - U.S.
U.S.
Non - U.S.
Total
GWP
$
29
$
(5
)
$
15
$
1
$
40
Less: Installment GWP and other GAAP
adjustments (1)
6
(5
)
15
1
17
Upfront GWP
23
—
—
—
23
Plus: Installment premiums and other
(2)
7
2
12
2
23
PVP
$
30
$
2
$
12
$
2
$
46
________________________________________________
(1)
Includes the present value of new business
on installment policies discounted at the prescribed GAAP discount
rates, GWP adjustments on existing installment policies due to
changes in assumptions and other GAAP adjustments.
(2)
Includes the present value of future
premiums and fees on new business paid in installments, discounted
at the approximate average pre-tax book yield of fixed-maturity
securities purchased during the prior calendar year, other than
certain fixed-maturity securities such as Loss Mitigation
Securities. Nine months 2023 also includes the present value of
future premiums and fees associated with other guaranties written
by the Company that, under GAAP, are accounted for under ASC 460,
Guarantees.
Conference Call and Webcast Information
The Company will host a conference call for investors at 8:00
a.m. Eastern Time (9:00 a.m. Atlantic Time) on Tuesday, November
12, 2024. The conference call will be available via live webcast in
the Investor Information section of the Company’s website at
AssuredGuaranty.com or by dialing 1-833-470-1428 (in the U.S.) or
1-404-975-4839 (International); the access code is 921215.
A replay of the conference call will be available approximately
three hours after the call ends. The webcast replay will be
available for 90 days in the Investor Information section of the
Company’s website at AssuredGuaranty.com and the telephone replay
will be available for 30 days by dialing 1-866-813-9403 (in the
U.S.) or 1-929-458-6194 (International); the access code is
946421.
Please refer to Assured Guaranty’s September 30, 2024 Financial
Supplement, which is posted on the Company's website at
assuredguaranty.com/agldata, for more information on the Company’s
financial guaranty portfolio, investment portfolio and other items.
In addition, the Company is posting at
assuredguaranty.com/presentations its “September 30, 2024 Equity
Investor Presentation.”
The Company plans to post by early next week on its website at
assuredguaranty.com/agldata the following:
- “Public Finance Transactions in 3Q 2024,” which lists the U.S.
public finance new issues insured by the Company in third quarter
2024, and
- “Structured Finance Transactions at September 30, 2024,” which
lists the Company’s structured finance exposure as of that
date.
In addition, the Company will post on its website, when
available, the Company’s separate-company subsidiary financial
supplements and its “Fixed Income Presentation” for the current
quarter. Those documents will be furnished to the Securities and
Exchange Commission in a Current Report on Form 8-K.
Assured Guaranty Ltd. is a publicly traded (NYSE: AGO),
Bermuda-based holding company. Through its subsidiaries, Assured
Guaranty provides credit enhancement products to the U.S. and
non-U.S. public finance, infrastructure and structured finance
markets. Assured Guaranty also participates in the asset management
business through its ownership interest in Sound Point Capital
Management, LP and certain of its investment management affiliates.
More information on Assured Guaranty Ltd. and its subsidiaries can
be found at AssuredGuaranty.com.
Cautionary Statement Regarding Forward-Looking
Statements
Any forward-looking statements made in this press release
reflect the Company’s current views with respect to future events
and financial performance and are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Such statements involve risks and uncertainties that may cause
actual results to differ materially from those set forth in these
statements. Among factors that could cause actual results to differ
adversely are:
(i) significant changes in inflation, interest rates, the
world’s credit markets or segments thereof, credit spreads, foreign
exchange rates or general economic conditions, including the
possibility of a recession or stagflation; (ii) geopolitical risk,
terrorism and political violence risk, including those arising out
of Russia’s invasion of Ukraine and intentional or accidental
escalation between The North Atlantic Treaty Organization (NATO)
and Russia, conflict in the Middle East and confrontation over
Iran’s nuclear program, the polarized political environment in the
United States (U.S.), and U.S. – China strategic competition; (iii)
cybersecurity risk and the impacts of artificial intelligence,
machine learning and other technological advances, including
potentially increasing the risks of malicious cyber attacks,
dissemination of misinformation, and disruption of markets; (iv)
the possibility of a U.S. government shutdown, payment defaults on
the debt of the U.S. government or instruments issued, insured or
guaranteed by related institutions, agencies or instrumentalities,
and downgrades to their credit ratings; (v) developments in the
world’s financial and capital markets, including stresses in the
financial condition of banking institutions in the U.S. and the
possibility that increasing participation of unregulated financial
institutions in these markets results in losses or lower valuations
of assets, reduced liquidity and credit and/or contraction of these
markets, that adversely affect repayment rates of insured obligors,
Assured Guaranty’s insurance loss or recovery experience, or
investments of Assured Guaranty; (vi) reduction in the amount of
available insurance opportunities and/or in the demand for Assured
Guaranty’s insurance; (vii) the possibility that budget or pension
shortfalls, difficulties in obtaining additional financing or other
factors will result in credit losses or liquidity claims on
obligations of state, territorial and local governments, their
related authorities, public corporations and other obligors that
Assured Guaranty insures or reinsures; (viii) insured losses,
including losses with respect to related legal proceedings, in
excess of those expected by Assured Guaranty or the failure of
Assured Guaranty to realize loss recoveries that are assumed in its
expected loss estimates for insurance exposures, including as a
result of the final resolution of Assured Guaranty’s Puerto Rico
Electric Power Authority (PREPA) exposure or the amounts recovered
on securities received in connection with the resolution of Puerto
Rico exposures already resolved; (ix) the impact of Assured
Guaranty satisfying its obligations under insurance policies with
respect to legacy insured Puerto Rico bonds; (x) the possibility
that underwriting insurance in new jurisdictions and/or covering
new sectors or classes of business does not result in the benefits
anticipated or subjects Assured Guaranty to negative consequences;
(xi) increased competition, including from new entrants into the
financial guaranty industry, nonpayment insurance and other forms
of capital saving or risk syndication available to banks and
insurers; (xii) the possibility that investments made by Assured
Guaranty for its investment portfolio, including alternative
investments, do not result in the benefits anticipated or subject
Assured Guaranty to reduced liquidity at a time it requires
liquidity, or to other negative or unanticipated consequences;
(xiii) the impacts of Assured Guaranty’s transactions with Sound
Point Capital Management, LP (Sound Point, LP) and certain of its
investment management affiliates (together with Sound Point, LP,
Sound Point) and/or Assured Healthcare Partners LLC (AHP) on
Assured Guaranty and its relationships with its shareholders,
regulators, rating agencies, employees and the obligors it insures
and on the asset management business contributed to Sound Point, LP
and on the business of AHP and their relationships with their
respective clients and employees; (xiv) the possibility that
strategic transactions made by Assured Guaranty, including the
transactions with Sound Point and/or AHP and/or merger of Assured
Guaranty Municipal Corp. (AGM) with and into Assured Guaranty Inc.
(AG, formerly Assured Guaranty Corp.), do not result in the
benefits anticipated or subject Assured Guaranty to negative
consequences; (xv) the inability to control the business,
management or policies of entities in which Assured Guaranty holds
a minority interest; (xvi) the impact of market volatility on the
fair value of Assured Guaranty’s assets and liabilities subject to
mark-to-market, including certain of its investments, contracts
accounted for as derivatives, its committed capital securities, its
consolidated investment vehicles and certain consolidated variable
interest entities (VIEs); (xvii) 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;
(xviii) the inability of Assured Guaranty to access external
sources of capital on acceptable terms; (xix) changes in applicable
accounting policies or practices; (xx) changes in applicable laws
or regulations, including insurance, bankruptcy and tax laws, or
other governmental actions; (xxi) the possibility that legal or
regulatory decisions or determinations subject obligations that
Assured Guaranty insures or reinsures to negative consequences;
(xxii) difficulties with the execution of Assured Guaranty’s
business strategy; (xxiii) loss of key personnel; (xxiv) the
effects of mergers, acquisitions and divestitures; (xxv) public
health crises, including pandemics and endemics, and the
governmental and private actions taken in response to such events;
(xxvi) natural or man-made catastrophes; (xxvii) the impact of
climate change on Assured Guaranty’s business and regulatory
actions taken related to such risk; (xxviii) other risk factors
identified in AGL’s filings with the U.S. Securities and Exchange
Commission (SEC); (xxix) other risks and uncertainties that have
not been identified at this time; and (xxx) 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 November 11, 2024, and Assured Guaranty undertakes no
obligation to update publicly or review any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as required by law.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241107954631/en/
Robert Tucker Senior Managing Director, Investor Relations and
Corporate Communications 212-339-0861 rtucker@agltd.com
Ashweeta Durani Director, Media Relations 212-408-6042
adurani@agltd.com
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