Exhibit 99.2
Assured Guaranty Ltd.
Financial Supplement
Second Quarter 2005
June 30, 2005
This supplement should be read in conjunction with documents filed by Assured Guaranty Ltd. (the “Company”) with the Securities and Exchange Commission, including our IPO prospectus dated April 22, 2004, our 10-Q’s dated March 31, 2004, June 30, 2004, September 30, 2004 and March 31, 2005 and our 10-K for the year ended December 31, 2004.
Cautionary Statement Regarding Forward-Looking Statements:
Any forward-looking statements made in this supplement 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, the Company’s forward-looking statements, such as its statements regarding PVP and present value of estimated installment premiums in force, could be affected by a significant reduction in the amount of reinsurance ceded by one or more of our principal ceding companies, rating agency action such as a ratings downgrade, difficulties with the execution of the Company’s business strategy, contract cancellations, developments in the world’s financial and capital markets, more severe losses or more frequent losses associated with products affecting the adequacy of the Company’s loss reserve, changes in regulation or tax laws, the Company’s dependence on customers, decreased demand or increased competition, loss of key personnel, the effects of mergers, acquisitions and divestitures, changes in accounting policies or practices, and changes in general economic conditions, as well as management’s response to these factors, and other risk factors identified in the Company’s filings with the Securities and Exchange Commission.
1
Assured Guaranty Ltd.
Selected Financial Highlights
(dollars and shares in millions except per share amounts)
| | Quarter Ended
June 30, | | % Change
versus | | Six Months Ended
June 30, | | % Change
versus | |
| | 2005 | | 2004 | | 2Q-04 | | 2005 | | 2004 | | YTD 2004 | |
Gross written premiums (GWP) analysis: | | | | | | | | | | | | | |
Present value of financial guaranty & mortgage guaranty GWP (PVP) (a) | | $ | 57.9 | | $ | 54.4 | | 6 | % | $ | 146.2 | | $ | 159.5 | | -8 | % |
Less: Installment premium PVP | | 38.3 | | 31.6 | | 21 | % | 91.8 | | 88.3 | | 4 | % |
Upfront financial guaranty & mortgage guaranty GWP | | 19.6 | | 22.9 | | -14 | % | 54.4 | | 71.3 | | -24 | % |
Plus: Upfront premium due to novations | | (18.4 | ) | — | | NMF | | (18.4 | ) | — | | NMF | |
Plus: Installment GWP | | 29.8 | | 31.5 | | -6 | % | 72.2 | | 75.1 | | -4 | % |
Financial guaranty & mortgage guaranty GWP | | 31.0 | | 54.4 | | -43 | % | 108.2 | | 146.4 | | -26 | % |
Plus: Other segment GWP | | 9.5 | | 10.0 | | -5 | % | 10.4 | | (83.6 | ) | NMF | |
Total GWP | | $ | 40.5 | | $ | 64.4 | | -37 | % | $ | 118.6 | | $ | 62.8 | | 89 | % |
| | | | | | | | | | | | | |
Net income | | $ | 66.8 | | $ | 43.1 | | 55 | % | $ | 111.1 | | $ | 90.0 | | 23 | % |
Less: After-tax realized gains on investments | | 1.2 | | 6.3 | | -81 | % | 2.7 | | 6.3 | | -57 | % |
Less: After-tax unrealized (losses) gains on derivatives | | (9.7 | ) | 9.0 | | NMF | | (8.1 | ) | 12.1 | | NMF | |
Operating income (b) | | $ | 75.2 | | $ | 27.9 | | 170 | % | $ | 116.6 | | $ | 71.6 | | 63 | % |
| | | | | | | | | | | | | |
Book value | | $ | 1,619.5 | | $ | 1,421.9 | | 14 | % | $ | 1,619.5 | | $ | 1,421.9 | | 14 | % |
Plus: Net unearned premium reserve less DAC, after-tax (1) | | 304.2 | | 245.1 | | 24 | % | 304.2 | | 245.1 | | 24 | % |
Plus: Net present value of installment premiums in-force, after-tax | | 300.6 | | 261.8 | | 15 | % | 300.6 | | 261.8 | | 15 | % |
Adjusted book value (c) | | $ | 2,224.3 | | $ | 1,928.8 | | 15 | % | $ | 2,224.3 | | $ | 1,928.8 | | 15 | % |
| | | | | | | | | | | | | |
ROE, excluding AOCI | | 17.7 | % | 12.4 | % | | | 14.9 | % | 13.2 | % | | |
Less: After-tax realized gains on investments | | 0.3 | % | 1.8 | % | | | 0.4 | % | 0.9 | % | | |
Less: After-tax unrealized (losses) gains on derivatives | | -2.6 | % | 2.6 | % | | | -1.1 | % | 1.8 | % | | |
Operating ROE, excluding AOCI (b) | | 19.9 | % | 8.0 | % | | | 15.6 | % | 10.5 | % | | |
| | | | | | | | | | | | | |
Per diluted share: | | | | | | | | | | | | | |
Net income | | $ | 0.90 | | $ | 0.57 | | 58 | % | $ | 1.49 | | $ | 1.20 | | 24 | % |
Less: After-tax realized gains on investments | | 0.02 | | 0.08 | | -75 | % | 0.04 | | 0.08 | | -50 | % |
Less: After-tax unrealized gains on derivatives | | (0.13 | ) | 0.12 | | NMF | | (0.11 | ) | 0.16 | | NMF | |
Operating income (b) | | $ | 1.02 | | $ | 0.37 | | 176 | % | $ | 1.56 | | $ | 0.95 | | 64 | % |
| | | | | | | | | | | | | |
Book value | | $ | 21.63 | | $ | 18.73 | | 15 | % | $ | 21.63 | | $ | 18.73 | | 15 | % |
Plus: Net unearned premium reserve less DAC, after-tax (1) | | 4.06 | | 3.23 | | 26 | % | 4.06 | | 3.23 | | 26 | % |
Plus: Net present value of installment premiums in-force, after-tax | | 4.01 | | 3.45 | | 16 | % | 4.01 | | 3.45 | | 16 | % |
Adjusted book value (c) | | $ | 29.71 | | $ | 25.40 | | 17 | % | $ | 29.71 | | $ | 25.40 | | 17 | % |
| | | | | | | | | | | | | |
Additional information: | | | | | | | | | | | | | |
Shares outstanding at the end of period | | 74.9 | | 75.9 | | — | | 74.9 | | 75.9 | | — | |
Weighted average basic shares outstanding | | 73.8 | | 75.0 | | -2 | % | 74.1 | | 75.0 | | -1 | % |
Weighted average diluted shares outstanding | | 74.1 | | 75.0 | | -1 | % | 74.5 | | 75.0 | | -1 | % |
| | | | | | | | | | | | | |
Consolidated net debt service outstanding | | $ | 137,104 | | $ | 132,527 | | 3 | % | $ | 137,104 | | $ | 132,527 | | 3 | % |
Consolidated net par outstanding | | 94,867 | | 91,350 | | 4 | % | 94,867 | | 91,350 | | 4 | % |
Consolidated claims-paying resources | | 3,028 | | 2,745 | | 10 | % | 3,028 | | 2,745 | | 10 | % |
(1) Unearned premium reserve (UPR) less pre-paid reinsurance premiums and deferred acquisition costs (DAC), all after-tax
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].
2
Assured Guaranty Ltd.
Consolidated GAAP Income Statements
(in millions, except per share amounts)
| | Quarter Ended
June 30, | | % Change
versus | | Six Months Ended
June 30, | | % Change
versus | |
| | 2005 | | 2004 | | 2Q-04 | | 2005 | | 2004 | | YTD 2004 | |
| | | | | | | | | | | | | |
Revenues | | | | | | | | | | | | | |
Gross written premiums | | $ | 40.5 | | $ | 64.4 | | -37 | % | $ | 118.6 | | $ | 62.8 | | 89 | % |
| | | | | | | | | | | | | |
Net written premiums | | 30.2 | | (29.9 | ) | NMF | | 106.6 | | (36.8 | ) | NMF | |
| | | | | | | | | | | | | |
Net earned premiums | | 48.3 | | (9.3 | ) | NMF | | 96.4 | | 77.3 | | 25 | % |
| | | | | | | | | | | | | |
Net investment income | | 23.7 | | 23.5 | | 1 | % | 46.8 | | 47.8 | | -2 | % |
Other income | | (0.2 | ) | — | | NMF | | 0.1 | | 0.5 | | -80 | % |
Total revenues | | $ | 71.8 | | $ | 14.2 | | 406 | % | $ | 143.3 | | $ | 125.6 | | 14 | % |
| | | | | | | | | | | | | |
Expenses | | | | | | | | | | | | | |
Loss and loss adjustment expenses | | (59.1 | ) | (60.0 | ) | -2 | % | (68.5 | ) | (36.3 | ) | 89 | % |
Profit commission expense | | 3.3 | | 4.8 | | -31 | % | 4.3 | | 10.3 | | -58 | % |
Acquisition costs | | 11.7 | | 8.4 | | 39 | % | 21.9 | | 21.5 | | 2 | % |
Other operating expenses | | 14.5 | | 26.6 | | -45 | % | 29.0 | | 39.2 | | -26 | % |
Other expenses | | 5.9 | | 2.5 | | 136 | % | 9.2 | | 5.6 | | 64 | % |
Total expenses | | $ | (23.7 | ) | $ | (17.6 | ) | 35 | % | $ | (4.1 | ) | $ | 40.4 | | NMF | |
| | | | | | | | | | | | | |
Income before provision for income taxes | | 95.5 | | 31.8 | | 200 | % | 147.4 | | 85.3 | | 73 | % |
| | | | | | | | | | | | | |
Total provision for income taxes | | 20.3 | | 3.9 | | 425 | % | 30.8 | | 13.8 | | 124 | % |
| | | | | | | | | | | | | |
Operating income (b) | | $ | 75.2 | | $ | 27.9 | | 170 | % | $ | 116.6 | | $ | 71.6 | | 63 | % |
| | | | | | | | | | | | | |
After-tax net realized gains on investments | | 1.2 | | 6.3 | | -81 | % | 2.7 | | 6.3 | | -57 | % |
After-tax unrealized (losses) gains on derivative instruments | | (9.7 | ) | 9.0 | | NMF | | (8.1 | ) | 12.1 | | NMF | |
| | | | | | | | | | | | | |
Net income | | $ | 66.8 | | $ | 43.1 | | 55 | % | $ | 111.1 | | $ | 90.0 | | 23 | % |
| | | | | | | | | | | | | |
Per diluted share | | | | | | | | | | | | | |
Operating income (b) | | $ | 1.02 | | $ | 0.37 | | 176 | % | $ | 1.56 | | $ | 0.95 | | 64 | % |
After-tax net realized gains on investments | | 0.02 | | 0.08 | | -75 | % | 0.04 | | 0.08 | | -50 | % |
After-tax unrealized (losses) gains on derivative instruments | | (0.13 | ) | 0.12 | | NMF | | (0.11 | ) | 0.16 | | NMF | |
Net income | | $ | 0.90 | | $ | 0.57 | | 58 | % | $ | 1.49 | | $ | 1.20 | | 24 | % |
| | | | | | | | | | | | | |
Weighted average shares outstanding (in millions) | | | | | | | | | | | | | |
Basic shares outstanding | | 73.8 | | 75.0 | | -2 | % | 74.1 | | 75.0 | | -1 | % |
Plus: effect of options | | 0.2 | | — | | NMF | | 0.1 | | — | | NMF | |
Plus: effect of restricted stock | | 0.1 | | — | | NMF | | 0.2 | | — | | NMF | |
Diluted shares outstanding | | 74.1 | | 75.0 | | -1 | % | 74.5 | | 75.0 | | -1 | % |
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].
3
Assured Guaranty Ltd.
Consolidated GAAP Balance Sheets
(dollars in millions)
| | As of : | |
| | June 30,
2005 | | December 31,
2004 | |
| | | | | |
Assets | | | | | |
Fixed maturity securities, at fair value | | $ | 2,076.8 | | $ | 1,965.1 | |
Short-term investments, at cost which approximates fair value | | 121.1 | | 175.8 | |
Total investments | | 2,197.9 | | 2,140.9 | |
| | | | | |
Cash and cash equivalents | | 4.7 | | 17.0 | |
Accrued investment income | | 21.4 | | 21.9 | |
Deferred acquisition costs | | 188.2 | | 186.4 | |
Prepaid reinsurance premiums | | 13.8 | | 15.2 | |
Reinsurance recoverable on ceded losses | | 112.4 | | 120.2 | |
Loss recovery receivable | | 63.7 | | — | |
Premiums receivable | | 28.5 | | 40.8 | |
Goodwill | | 85.4 | | 85.4 | |
Unrealized gains on derivative financial instruments | | 34.5 | | 43.9 | |
Other assets | | 21.0 | | 22.3 | |
Total assets | | $ | 2,771.6 | | $ | 2,694.0 | |
| | | | | |
Liabilities and shareholders’ equity | | | | | |
Liabilities | | | | | |
Unearned premium reserves | | $ | 530.2 | | $ | 521.3 | |
Reserves for losses and loss adjustment expenses | | 206.4 | | 226.5 | |
Profit commissions payable | | 45.4 | | 61.7 | |
Reinsurance balances payable | | 21.9 | | 25.1 | |
Current income taxes | | 28.4 | | — | |
Deferred income taxes | | 18.2 | | 40.1 | |
Funds held by Company under reinsurance contracts | | 53.8 | | 50.8 | |
Long-term debt | | 197.3 | | 197.4 | |
Other liabilities | | 50.5 | | 43.7 | |
Total liabilities | | 1,152.1 | | 1,166.4 | |
| | | | | |
Shareholders’ equity | | | | | |
Common stock | | 0.7 | | 0.8 | |
Treasury stock | | (7.9 | ) | (7.9 | ) |
Additional paid-in capital | | 884.4 | | 894.2 | |
Unearned stock grant compensation | | (10.1 | ) | (6.7 | ) |
Retained earnings | | 674.8 | | 568.3 | |
Accumulated other comprehensive income | | 77.5 | | 79.0 | |
Total shareholders’ equity | | 1,619.5 | | 1,527.6 | |
| | | | | |
Total liabilities and shareholders’ equity | | $ | 2,771.6 | | $ | 2,694.0 | |
4
Assured Guaranty Ltd.
Segment Consolidation (1 of 2)
(dollars in millions)
| | Quarter Ended June 30, 2005 | |
| | Financial
Guaranty
Direct | | Financial
Guaranty
Reinsurance(1) | | Mortgage
Guaranty | | Total
Financial
Guaranty | | Other | | Total | |
Present value of financial guaranty gross written premiums (PVP): (a) | | | | | | | | | | | | | |
Public finance | | $ | 6.3 | | $ | 15.8 | | $ | — | | $ | 22.1 | | | | $ | 22.1 | |
Structured finance | | 16.4 | | 19.4 | | — | | 35.8 | | | | 35.8 | |
Total PVP | | $ | 22.7 | | $ | 35.2 | | $ | — | | $ | 57.9 | | | | $ | 57.9 | |
| | | | | | | | | | | | | |
Income statement: | | | | | | | | | | | | | |
Gross written premiums | | $ | 20.9 | | $ | 8.2 | | $ | 1.9 | | $ | 31.0 | | $ | 9.5 | | $ | 40.5 | |
Net written premiums | | 20.4 | | 8.0 | | 1.9 | | 30.2 | | — | | 30.2 | |
| | | | | | | | | | | | | |
Net earned premiums | | 16.0 | | 27.2 | | 5.1 | | 48.3 | | — | | 48.3 | �� |
| | | | | | | | | | | | | |
Loss and loss adjustment expenses | | 5.0 | | (64.1 | ) | — | | (59.1 | ) | — | | (59.1 | ) |
Profit commission expense | | — | | 2.3 | | 1.0 | | 3.3 | | — | | 3.3 | |
Acquisition costs | | 1.6 | | 9.5 | | 0.6 | | 11.7 | | — | | 11.7 | |
Operating expenses | | 8.4 | | 5.7 | | 0.4 | | 14.5 | | — | | 14.5 | |
Total underwriting expenses | | $ | 15.0 | | $ | (46.6 | ) | $ | 2.0 | | $ | (29.6 | ) | $ | — | | $ | (29.6 | ) |
| | | | | | | | | | | | | |
Underwriting gain | | $ | 1.1 | | $ | 73.8 | | $ | 3.1 | | $ | 77.9 | | $ | — | | $ | 77.9 | |
| | | | | | | | | | | | | |
Loss and loss adjustment expense ratio | | 31.3 | % | -235.7 | % | — | | -122.4 | % | | | -122.4 | % |
Expense ratio | | 62.2 | % | 64.3 | % | 39.6 | % | 61.0 | % | | | 61.0 | % |
Combined ratio | | 93.5 | % | -171.4 | % | 39.6 | % | -61.4 | % | | | -61.4 | % |
| | Quarter Ended June 30, 2004 | |
| | Financial
Guaranty
Direct | | Financial
Guaranty
Reinsurance(1) | | Mortgage
Guaranty | | Total
Financial
Guaranty | | Other | | Total | |
PVP: | | | | | | | | | | | | | |
Public finance | | $ | 2.9 | | $ | 31.2 | | $ | — | | $ | 34.1 | | | | $ | 34.1 | |
Structured finance | | 11.4 | | 8.9 | | — | | 20.3 | | | | 20.3 | |
Total PVP | | $ | 14.4 | | $ | 40.1 | | $ | — | | $ | 54.4 | | | | $ | 54.4 | |
| | | | | | | | | | | | | |
Income statement: | | | | | | | | | | | | | |
Gross written premiums | | $ | 17.7 | | $ | 35.8 | | $ | 0.9 | | $ | 54.4 | | $ | 10.0 | | $ | 64.4 | |
Net written premiums | | 17.3 | | 35.8 | | 0.9 | | 54.0 | | (84.0 | ) | (29.9 | ) |
| | | | | | | | | | | | | |
Net earned premiums | | 16.1 | | 25.6 | | 15.0 | | 56.7 | | (66.0 | ) | (9.3 | ) |
| | | | | | | | | | | | | |
Loss and loss adjustment expenses | | 1.6 | | (0.9 | ) | (3.3 | ) | (2.6 | ) | (57.4 | ) | (60.0 | ) |
Profit commission expense | | — | | 0.3 | | 4.3 | | 4.6 | | 0.2 | | 4.8 | |
Acquisition costs | | 0.1 | | 6.6 | | 1.7 | | 8.4 | | — | | 8.4 | |
Operating expenses (2) | | 9.1 | | 5.0 | | 1.1 | | 15.3 | | — | | 15.3 | |
Total underwriting expenses | | $ | 10.8 | | $ | 11.0 | | $ | 3.8 | | $ | 25.7 | | $ | (57.2 | ) | $ | (31.5 | ) |
| | | | | | | | | | | | | |
Underwriting gain (loss) | | $ | 5.3 | | $ | 14.6 | | $ | 11.2 | | $ | 31.0 | | $ | (8.8 | ) | $ | 22.3 | |
| | | | | | | | | | | | | |
Loss and loss adjustment expense ratio | | 9.9 | % | -3.5 | % | -22.0 | % | -4.6 | % | 87.0 | % | 645.2 | % |
Expense ratio | | 57.1 | % | 46.5 | % | 47.5 | % | 50.0 | % | -0.3 | % | -306.8 | % |
Combined ratio | | 67.0 | % | 43.0 | % | 25.5 | % | 45.4 | % | 86.7 | % | 338.4 | % |
(1) Due to the timing of receipts of reports prepared by our ceding companies, present value of financial guaranty gross written premiums (PVP) for installment premiums, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a one-quarter lag.
(2) Excludes $11.3 million of operating expenses, related to accelerated vesting of stock awards at the IPO date.
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].
5
Assured Guaranty Ltd.
Segment Consolidation (2 of 2)
(dollars in millions)
| | Six Months Ended June 30, 2005 | |
| | Financial
Guaranty
Direct | | Financial
Guaranty
Reinsurance(1) | | Mortgage
Guaranty | | Total
Financial
Guaranty | | Other | | Total | |
Present value of financial guaranty gross written premiums (PVP): (a) | | | | | | | | | | | | | |
Public finance | | $ | 7.9 | | $ | 50.5 | | $ | — | | $ | 58.4 | | | | $ | 58.4 | |
Structured finance | | 52.2 | | 22.5 | | 13.1 | | 87.8 | | | | 87.8 | |
Total PVP | | $ | 60.1 | | $ | 73.0 | | $ | 13.1 | | $ | 146.2 | | | | $ | 146.2 | |
| | | | | | | | | | | | | |
Income statement: | | | | | | | | | | | | | |
Gross written premiums | | $ | 44.7 | | $ | 42.2 | | $ | 21.3 | | $ | 108.2 | | $ | 10.4 | | $ | 118.6 | |
Net written premiums | | 43.5 | | 42.0 | | 21.3 | | 106.6 | | — | | 106.6 | |
| | | | | | | | | | | | | |
Net earned premiums | | 36.4 | | 50.2 | | 9.7 | | 96.4 | | — | | 96.4 | |
| | | | | | | | | | | | | |
Loss and loss adjustment expenses | | 3.5 | | (71.2 | ) | 0.2 | | (67.5 | ) | (1.1 | ) | (68.5 | ) |
Profit commission expense | | — | | 2.3 | | 2.0 | | 4.3 | | — | | 4.3 | |
Acquisition costs | | 3.1 | | 17.6 | | 1.1 | | 21.9 | | — | | 21.9 | |
Operating expenses | | 17.8 | | 10.1 | | 1.1 | | 29.0 | | — | | 29.0 | |
Total underwriting expenses | | $ | 24.3 | | $ | (41.2 | ) | $ | 4.4 | | $ | (12.4 | ) | $ | (1.1 | ) | $ | (13.4 | ) |
| | | | | | | | | | | | | |
Underwriting gain | | $ | 12.1 | | $ | 91.4 | | $ | 5.3 | | $ | 108.8 | | $ | 1.1 | | $ | 109.9 | |
| | | | | | | | | | | | | |
Loss and loss adjustment expense ratio | | 9.7 | % | -141.8 | % | 2.1 | % | -70.0 | % | | | -71.1 | % |
Expense ratio | | 57.1 | % | 59.8 | % | 43.3 | % | 57.2 | % | | | 57.2 | % |
Combined ratio | | 66.8 | % | -82.0 | % | 45.4 | % | -12.8 | % | | | -13.9 | % |
| | Six Months Ended June 30, 2004 | |
| | Financial
Guaranty
Direct | | Financial
Guaranty
Reinsurance(1) | | Mortgage
Guaranty | | Total
Financial
Guaranty | | Other | | Total | |
PVP: | | | | | | | | | | | | | |
Public finance | | $ | 2.9 | | $ | 77.0 | | $ | — | | $ | 79.9 | | | | $ | 79.9 | |
Structured finance | | 19.3 | | 41.2 | | 19.2 | | 79.6 | | | | 79.6 | |
Total PVP | | $ | 22.2 | | $ | 118.2 | | $ | 19.2 | | $ | 159.5 | | | | $ | 159.5 | |
| | | | | | | | | | | | | |
Income statement: | | | | | | | | | | | | | |
Gross written premiums | | $ | 43.3 | | $ | 88.2 | | $ | 14.9 | | $ | 146.4 | | $ | (83.6 | ) | $ | 62.8 | |
Net written premiums | | 42.6 | | 88.2 | | 14.9 | | 145.7 | | (182.5 | ) | (36.8 | ) |
| | | | | | | | | | | | | |
Net earned premiums | | 56.8 | | 46.0 | | 23.4 | | 126.2 | | (48.9 | ) | 77.3 | |
| | | | | | | | | | | | | |
Loss and loss adjustment expenses | | 15.0 | | 3.0 | | (4.5 | ) | 13.5 | | (49.9 | ) | (36.3 | ) |
Profit commission expense | | — | | 0.4 | | 9.3 | | 9.7 | | 0.6 | | 10.3 | |
Acquisition costs | | 1.5 | | 13.7 | | 2.6 | | 17.8 | | 3.7 | | 21.5 | |
Operating expenses (2) | | 14.6 | | 8.0 | | 1.8 | | 24.4 | | 3.5 | | 27.9 | |
Total underwriting expenses | | $ | 31.1 | | $ | 25.1 | | $ | 9.2 | | $ | 65.4 | | $ | (42.0 | ) | $ | 23.4 | |
| | | | | | | | | | | | | |
Underwriting gain (loss) | | $ | 25.7 | | $ | 20.9 | | $ | 14.3 | | $ | 60.9 | | $ | (7.1 | ) | $ | 53.8 | |
| | | | | | | | | | | | | |
Loss and loss adjustment expense ratio | | 26.4 | % | 6.5 | % | -19.2 | % | 10.7 | % | 102.0 | % | -47.0 | % |
Expense ratio | | 28.3 | % | 48.0 | % | 58.3 | % | 41.1 | % | -16.1 | % | 77.2 | % |
Combined ratio | | 54.7 | % | 54.5 | % | 39.1 | % | 51.8 | % | 85.9 | % | 30.2 | % |
(1) Due to the timing of receipts of reports prepared by our ceding companies, present value of financial guaranty gross written premiums (PVP) for installment premiums, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a one-quarter lag.
(2) Excludes $11.3 million of operating expenses, related to accelerated vesting of stock awards at the IPO date.
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].
6
Assured Guaranty Ltd.
Financial Guaranty Direct Segment (1 of 2)
(dollars in millions)
| | 1Q-04 | | 2Q-04 | | 3Q-04 | | 4Q-04 | | 1Q-05 | | 2Q-05 | | YTD 2004 | | YTD 2005 | |
Present value of gross written premiums (PVP) (a) | | $ | 7.9 | | $ | 14.4 | | $ | 7.9 | | $ | 39.6 | | $ | 37.5 | | $ | 22.7 | | $ | 22.2 | | $ | 60.1 | |
less: Present value of installment premiums (a) | | (7.9 | ) | (14.4 | ) | (7.9 | ) | (33.9 | ) | (35.8 | ) | (17.6 | ) | (22.2 | ) | (53.4 | ) |
Upfront gross written premiums (GWP) | | — | | — | | — | | 5.7 | | 1.7 | | 5.1 | | — | | 6.8 | |
plus: Installment GWP | | 25.6 | | 17.7 | | 16.2 | | 15.6 | | 22.1 | | 15.8 | | 43.3 | | 37.9 | |
Financial guaranty direct GWP | | $ | 25.6 | | $ | 17.7 | | $ | 16.2 | | $ | 21.3 | | $ | 23.8 | | $ | 20.9 | | $ | 43.3 | | $ | 44.7 | |
| | | | | | | | | | | | | | | | | |
Income statement: | | | | | | | | | | | | | | | | | |
Gross written premiums | | $ | 25.6 | | $ | 17.7 | | $ | 16.2 | | $ | 21.3 | | $ | 23.8 | | $ | 20.9 | | $ | 43.3 | | $ | 44.7 | |
Net written premiums | | 25.3 | | 17.3 | | 14.2 | | 20.9 | | 23.1 | | 20.4 | | 42.6 | | 43.5 | |
Net earned premiums: | | | | | | | | | | | | | | | | | |
Public finance | | — | | — | | — | | 0.1 | | 0.1 | | 0.4 | | — | | 0.5 | |
Structured finance | | 40.7 | | 16.1 | | 16.5 | | 15.4 | | 20.3 | | 15.6 | | 56.8 | | 35.9 | |
Total net earned premiums | | 40.7 | | 16.1 | | 16.5 | | 15.5 | | 20.4 | | 16.0 | | 56.8 | | 36.4 | |
| | | | | | | | | | | | | | | | | |
Loss and loss adjustment expenses | | 13.4 | | 1.6 | | (1.2 | ) | 1.0 | | (1.5 | ) | 5.0 | | 15.0 | | 3.5 | |
Profit commission expense | | — | | — | | — | | — | | — | | — | | — | | — | |
Acquisition costs | | 1.4 | | 0.1 | | 1.4 | | 1.6 | | 1.5 | | 1.6 | | 1.5 | | 3.1 | |
Operating expenses (1) | | 5.5 | | 9.1 | | 8.5 | | 8.6 | | 9.4 | | 8.4 | | 14.6 | | 17.8 | |
Total expenses | | $ | 20.3 | | $ | 10.8 | | $ | 8.7 | | $ | 11.3 | | $ | 9.4 | | $ | 15.0 | | $ | 31.1 | | $ | 24.3 | |
| | | | | | | | | | | | | | | | | |
Underwriting gain | | $ | 20.4 | | $ | 5.3 | | $ | 7.8 | | $ | 4.2 | | $ | 11.0 | | $ | 1.1 | | $ | 25.7 | | $ | 12.1 | |
| | | | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio | | 32.9 | % | 9.9 | % | -7.3 | % | 6.5 | % | -7.1 | % | 31.3 | % | 26.4 | % | 9.7 | % |
Expense ratio | | 17.0 | % | 57.1 | % | 59.8 | % | 66.3 | % | 53.1 | % | 62.2 | % | 28.3 | % | 57.1 | % |
Combined ratio | | 49.9 | % | 67.0 | % | 52.5 | % | 72.8 | % | 46.0 | % | 93.5 | % | 54.7 | % | 66.8 | % |
(1) 2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and present value of installment premiums in force adjusted book value (c)].
7
Assured Guaranty Ltd.
Financial Guaranty Direct Segment (2 of 2)
(dollars in millions)
| | 1Q-04 | | 2Q-04 | | 3Q-04 | | 4Q-04 | | 1Q-05 | | 2Q-05 | | YTD 2004 | | YTD 2005 | |
PVP (a): | | | | | | | | | | | | | | | | | |
Public finance | | $ | — | | $ | 2.9 | | $ | — | | $ | 5.7 | | $ | 1.6 | | $ | 6.3 | | $ | 2.9 | | $ | 7.9 | |
Structured finance | | 7.9 | | 11.4 | | 7.9 | | 33.9 | | 35.9 | | 16.4 | | 19.3 | | 52.2 | |
Total | | $ | 7.9 | | $ | 14.4 | | $ | 7.9 | | $ | 39.6 | | $ | 37.5 | | $ | 22.7 | | $ | 22.2 | | $ | 60.1 | |
| | | | | | | | | | | | | | | | | |
U.S. | | $ | 4.2 | | $ | 11.1 | | $ | 7.9 | | $ | 34.6 | | $ | 32.5 | | $ | 21.2 | | $ | 15.3 | | $ | 53.7 | |
Non-U.S. | | 3.7 | | 3.2 | | — | | 5.0 | | 4.9 | | 1.5 | | 6.9 | | 6.4 | |
Total | | $ | 7.9 | | $ | 14.4 | | $ | 7.9 | | $ | 39.6 | | $ | 37.5 | | $ | 22.7 | | $ | 22.2 | | $ | 60.1 | |
| | | | | | | | | | | | | | | | | |
Par written: | | | | | | | | | | | | | | | | | |
Public finance | | $ | — | | $ | 246 | | $ | 508 | | $ | 194 | | $ | 77 | | $ | 386 | | $ | 246 | | $ | 463 | |
Structured finance | | 1,488 | | 2,444 | | 854 | | 7,263 | | 1,438 | | 2,137 | | 3,932 | | 3,575 | |
Total | | $ | 1,488 | | $ | 2,691 | | $ | 1,361 | | $ | 7,457 | | $ | 1,515 | | $ | 2,524 | | $ | 4,178 | | $ | 4,038 | |
| | | | | | | | | | | | | | | | | |
U.S. | | $ | 1,435 | | $ | 2,397 | | $ | 854 | | $ | 7,357 | | $ | 1,250 | | $ | 2,422 | | $ | 3,832 | | $ | 3,672 | |
International | | 53 | | 293 | | 508 | | 100 | | 265 | | 102 | | 346 | | 367 | |
Total | | $ | 1,488 | | $ | 2,691 | | $ | 1,361 | | $ | 7,457 | | $ | 1,515 | | $ | 2,524 | | $ | 4,178 | | $ | 4,038 | |
| | | | | | | | | | | | | | | | | |
Par outstanding: | | | | | | | | | | | | | | | | | |
Public finance | | $ | 2,112 | | $ | 2,321 | | $ | 2,852 | | $ | 3,144 | | $ | 3,146 | | $ | 3,463 | | $ | 2,321 | | $ | 3,463 | |
Structured finance | | 21,737 | | 23,454 | | 23,605 | | 28,468 | | 27,444 | | 26,556 | | 23,454 | | 26,556 | |
Total | | $ | 23,849 | | $ | 25,775 | | $ | 26,457 | | $ | 31,612 | | $ | 30,590 | | $ | 30,019 | | $ | 25,775 | | $ | 30,019 | |
| | | | | | | | | | | | | | | | | |
Present value of installment premiums in force: (a) | | $ | 220.6 | | $ | 219.7 | | $ | 218.9 | | $ | 231.0 | | $ | 238.3 | | $ | 216.4 | | $ | 219.7 | | $ | 216.4 | |
Unearned premium reserve net of ceded reinsurance | | 16.0 | | 17.1 | | 14.7 | | 20.3 | | 23.0 | | 27.0 | | 17.1 | | 27.0 | |
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and present value of installment premiums in force adjusted book value (c)].
8
Assured Guaranty Ltd.
Financial Guaranty Reinsurance Segment (1)(1 of 2)
(dollars in millions)
| | 1Q-04 | | 2Q-04 | | 3Q-04 | | 4Q-04 | | 1Q-05 | | 2Q-05 | | YTD 2004 | | YTD 2005 | |
Present value of gross written premiums (PVP) (a) | | $ | 78.1 | | $ | 40.1 | | $ | 38.9 | | $ | 35.7 | | $ | 37.7 | | $ | 35.2 | | $ | 118.2 | | $ | 73.0 | |
less: Present value of installment premiums (a) | | (40.0 | ) | (17.2 | ) | (14.5 | ) | (11.6 | ) | (17.8 | ) | (20.7 | ) | (57.2 | ) | (38.4 | ) |
Upfront gross written premiums (GWP) | | 38.1 | | 22.9 | | 24.5 | | 24.1 | | 20.0 | | 14.6 | | 61.0 | | 34.5 | |
plus: Upfront premium due to novations (4) | | — | | — | | — | | — | | — | | (18.4 | ) | — | | (18.4 | ) |
plus: Installment GWP (2) | | 14.3 | | 12.9 | | 11.1 | | 12.4 | | 14.0 | | 12.0 | | 27.2 | | 26.1 | |
Financial guaranty reinsurance GWP | | $ | 52.4 | | $ | 35.8 | | $ | 35.6 | | $ | 36.5 | | $ | 34.0 | | $ | 8.2 | | $ | 88.2 | | $ | 42.2 | |
| | | | | | | | | | | | | | | | | |
Income statement: | | | | | | | | | | | | | | | | | |
Gross written premiums | | $ | 52.4 | | $ | 35.8 | | $ | 35.6 | | $ | 36.5 | | $ | 34.0 | | $ | 8.2 | | $ | 88.2 | | $ | 42.2 | |
Net written premiums | | 52.4 | | 35.8 | | 35.6 | | 36.3 | | 34.0 | | 8.0 | | 88.2 | | 42.0 | |
| | | | | | | | | | | | | | | | | |
Net earned premiums: | | | | | | | | | | | | | | | | | |
Scheduled net earned premiums | | 17.5 | | 21.2 | | 26.7 | | 31.5 | | 21.6 | | 23.6 | | 38.7 | | 45.2 | |
Net premiums earned from refundings | | 2.9 | | 4.4 | | 5.2 | | 5.0 | | 1.4 | | 3.6 | | 7.3 | | 5.0 | |
Total net earned premiums | | 20.4 | | 25.6 | | 31.9 | | 36.5 | | 23.0 | | 27.2 | | 46.0 | | 50.2 | |
| | | | | | | | | | | | | | | | | |
Loss and loss adjustment expenses | | 3.9 | | (0.9 | ) | 10.8 | | 1.6 | | (7.1 | ) | (64.1 | ) | 3.0 | | (71.2 | ) |
Profit commission expense | | 0.1 | | 0.3 | | (0.2 | ) | 0.9 | | — | | 2.3 | | 0.4 | | 2.3 | |
Acquisition costs | | 7.1 | | 6.6 | | 12.1 | | 13.0 | | 8.1 | | 9.5 | | 13.7 | | 17.6 | |
Operating expenses (3) | | 3.0 | | 5.0 | | 4.7 | | 4.8 | | 4.4 | | 5.7 | | 8.0 | | 10.1 | |
Total expenses | | $ | 14.1 | | $ | 11.0 | | $ | 27.4 | | $ | 20.2 | | $ | 5.4 | | $ | (46.6 | ) | $ | 25.1 | | $ | (41.2 | ) |
| | | | | | | | | | | | | | | | | |
Underwriting gain | | $ | 6.3 | | $ | 14.6 | | $ | 4.5 | | $ | 16.2 | | $ | 17.6 | | $ | 73.8 | | $ | 20.9 | | $ | 91.4 | |
| | | | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio | | 19.1 | % | -3.5 | % | 33.9 | % | 4.4 | % | -30.9 | % | -235.7 | % | 6.5 | % | -141.8 | % |
Expense ratio | | 50.0 | % | 46.5 | % | 51.9 | % | 51.1 | % | 54.3 | % | 64.3 | % | 48.0 | % | 59.8 | % |
Combined ratio | | 69.1 | % | 43.0 | % | 85.8 | % | 55.5 | % | 23.4 | % | -171.4 | % | 54.5 | % | -82.0 | % |
(1) Due to the timing of receipts of reports prepared by our ceding companies, present value of financial guaranty gross installment premiums written (PVP), par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a one-quarter lag.
(2) Installment gross written premiums includes the reclassification of certain deals originally recorded as installment that were discovered during 3Q-04 to be upfront premiums. As a result, prior period amounts have been restated. This reclass had an immaterial impact on our QTD and YTD results of operations and financial condition.
(3) 2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.
(4) Relates to reassumption by FSA of approximately $820 million par value of healthcare related business.
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and present value of installment premiums in force adjusted book value (c)].
9
Assured Guaranty Ltd.
Financial Guaranty Reinsurance Segment (1)(2 of 2)
(dollars in millions)
| | 1Q-04 | | 2Q-04 | | 3Q-04 | | 4Q-04 | | 1Q-05 | | 2Q-05 | | YTD 2004 | | YTD 2005 | |
PVP (a): | | | | | | | | | | | | | | | | | |
Public finance | | $ | 45.8 | | $ | 31.2 | | $ | 33.9 | | $ | 26.4 | | $ | 34.7 | | $ | 15.8 | | $ | 77.0 | | $ | 50.5 | |
Structured finance | | 32.3 | | 8.9 | | 5.0 | | 9.3 | | 3.1 | | 19.4 | | 41.2 | | 22.5 | |
Total | | $ | 78.1 | | $ | 40.1 | | $ | 38.9 | | $ | 35.7 | | $ | 37.7 | | $ | 35.2 | | $ | 118.2 | | $ | 73.0 | |
| | | | | | | | | | | | | | | | | |
Par written: | | | | | | | | | | | | | | | | | |
Public finance | | $ | 1,932 | | $ | 1,590 | | $ | 2,262 | | $ | 1,443 | | $ | 2,206 | | $ | 98 | | $ | 3,522 | | $ | 2,304 | |
Structured finance | | 1,154 | | 629 | | 507 | | 861 | | 1,718 | | 893 | | 1,783 | | 2,611 | |
Total | | $ | 3,086 | | $ | 2,219 | | $ | 2,769 | | $ | 2,304 | | $ | 3,924 | | $ | 991 | | $ | 5,305 | | $ | 4,915 | |
| | | | | | | | | | | | | | | | | |
Par outstanding: | | | | | | | | | | | | | | | | | |
Public finance | | $ | 51,806 | | $ | 52,061 | | $ | 52,926 | | $ | 51,324 | | $ | 52,579 | | $ | 51,039 | | $ | 52,061 | | $ | 51,039 | |
Structured finance | | 13,935 | | 13,514 | | 13,084 | | 12,656 | | 13,225 | | 13,809 | | 13,514 | | 13,809 | |
Total | | $ | 65,741 | | $ | 65,575 | | $ | 66,010 | | $ | 63,980 | | $ | 65,804 | | $ | 64,848 | | $ | 65,575 | | $ | 64,848 | |
| | | | | | | | | | | | | | | | | |
Present value of installment premiums in force (a) | | $ | 140.3 | | $ | 147.2 | | $ | 138.0 | | $ | 138.9 | | $ | 146.9 | | $ | 152.3 | | $ | 147.2 | | $ | 152.3 | |
Unearned premium reserve net of ceded reinsurance | | 436.4 | | 441.0 | | 444.2 | | 443.8 | | 454.8 | | 435.6 | | 441.0 | | 435.6 | |
(1) Due to the timing of receipts of reports prepared by our ceding companies, present value of financial guaranty gross installment premiums written (PVP), par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a one-quarter lag.
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and present value of installment premiums in force adjusted book value (c)].
10
Assured Guaranty Ltd.
Mortgage Guaranty Segment
(dollars in millions)
| | 1Q-04 | | 2Q-04 | | 3Q-04 | | 4Q-04 | | 1Q-05 | | 2Q-05 | | YTD 2004 | | YTD 2005 | |
Present value of gross written premiums (PVP) (a) | | $ | 19.2 | | $ | — | | $ | 1.1 | | $ | 6.9 | | $ | 13.1 | | $ | — | | $ | 19.2 | | $ | 13.1 | |
less: Present value of installment premiums (a) | | (8.9 | ) | — | | (1.1 | ) | (6.9 | ) | — | | — | | (8.9 | ) | — | |
Upfront gross written premiums (GWP) | | 10.3 | | — | | — | | — | | 13.1 | | — | | 10.3 | | 13.1 | |
plus: Installment GWP | | 3.7 | | 0.9 | | 5.3 | | 4.2 | | 6.3 | | 1.9 | | 4.6 | | 8.2 | |
Mortgage guaranty GWP | | $ | 14.0 | | $ | 0.9 | | $ | 5.3 | | $ | 4.2 | | $ | 19.4 | | $ | 1.9 | | $ | 14.9 | | $ | 21.3 | |
| | | | | | | | | | | | | | | | | |
Income statement: | | | | | | | | | | | | | | | | | |
Gross written premiums | | $ | 14.0 | | $ | 0.9 | | $ | 5.3 | | $ | 4.2 | | $ | 19.4 | | $ | 1.9 | | $ | 14.9 | | $ | 21.3 | |
Net written premiums | | 14.0 | | 0.9 | | 5.3 | | 4.2 | | 19.4 | | 1.9 | | 14.9 | | 21.3 | |
| | | | | | | | | | | | | | | | | |
Net earned premiums | | 8.4 | | 15.0 | | 5.1 | | 5.2 | | 4.6 | | 5.1 | | 23.4 | | 9.7 | |
| | | | | | | | | | | | | | | | | |
Loss and loss adjustment expenses | | (1.2 | ) | (3.3 | ) | (5.4 | ) | (2.0 | ) | 0.2 | | — | | (4.5 | ) | 0.2 | |
Profit commission expense | | 5.0 | | 4.3 | | 1.3 | | 3.5 | | 1.0 | | 1.0 | | 9.3 | | 2.0 | |
Acquisition costs | | 0.9 | | 1.7 | | 0.5 | | 0.6 | | 0.5 | | 0.6 | | 2.6 | | 1.1 | |
Operating expenses (1) | | 0.6 | | 1.1 | | 1.0 | | 1.0 | | 0.7 | | 0.4 | | 1.8 | | 1.1 | |
Total expenses | | $ | 5.3 | | $ | 3.8 | | $ | (2.6 | ) | $ | 3.2 | | $ | 2.4 | | $ | 2.0 | | $ | 9.2 | | $ | 4.4 | |
| | | | | | | | | | | | | | | | | |
Underwriting gain | | $ | 3.1 | | $ | 11.2 | | $ | 7.7 | | $ | 2.0 | | $ | 2.2 | | $ | 3.1 | | $ | 14.3 | | $ | 5.3 | |
| | | | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio | | -14.3 | % | -22.0 | % | -105.9 | % | -37.8 | % | 4.3 | % | — | | -19.2 | % | 2.1 | % |
Expense ratio | | 77.6 | % | 47.5 | % | 55.5 | % | 98.5 | % | 47.4 | % | 39.6 | % | 58.3 | % | 43.3 | % |
Combined ratio | | 63.3 | % | 25.5 | % | -50.4 | % | 60.7 | % | 51.7 | % | 39.6 | % | 39.1 | % | 45.4 | % |
| | | | | | | | | | | | | | | | | |
Risk in force | | $ | 2,201 | | $ | 2,394 | | $ | 2,437 | | $ | 2,325 | | $ | 2,582 | | $ | 2,547 | | $ | 2,394 | | $ | 2,547 | |
Risk written | | 237 | | — | | 136 | | 271 | | 419 | | — | | 237 | | 419 | |
Unearned premium reserve net of ceded reinsurance | | 57.6 | | 43.5 | | 43.7 | | 42.7 | | 57.5 | | 54.2 | | 43.5 | | 54.2 | |
(1). 2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.
Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].
11
Assured Guaranty Ltd.
Other Segment
(dollars in millions)
| | 1Q-04 | | 2Q-04 | | 3Q-04 | | 4Q-04 | | 1Q-05 | | 2Q-05 | | YTD 2004 | | YTD 2005 | |
Income statement: | | | | | | | | | | | | | | | | | |
Gross written premiums | | $ | (93.6 | ) | $ | 10.0 | | $ | 5.2 | | $ | 3.8 | | $ | 0.9 | | $ | 9.5 | | $ | (83.6 | ) | $ | 10.4 | |
Net written premiums | | (98.5 | ) | (84.0 | ) | — | | — | | — | | — | | (182.5 | ) | — | |
| | | | | | | | | | | | | | | | | |
Net earned premiums | | 17.2 | | (66.0 | ) | — | | — | | — | | — | | (48.9 | ) | — | |
| | | | | | | | | | | | | | | | | |
Loss and loss adjustment expenses | | 7.5 | | (57.4 | ) | — | | (0.4 | ) | (1.1 | ) | — | | (49.9 | ) | (1.1 | ) |
Profit commission expense | | 0.4 | | 0.2 | | — | | — | | — | | — | | 0.6 | | — | |
Acquisition costs | | 3.6 | | — | | — | | — | | — | | — | | 3.7 | | — | |
Operating expenses (1) | | 3.5 | | — | | — | | — | | — | | — | | 3.5 | | — | |
Total expenses | | $ | 15.1 | | $ | (57.2 | ) | $ | — | | $ | (0.4 | ) | $ | (1.1 | ) | $ | — | | $ | (42.0 | ) | $ | (1.1 | ) |
| | | | | | | | | | | | | | | | | |
Underwriting gain (loss) | | $ | 2.1 | | $ | (8.8 | ) | $ | — | | $ | 0.4 | | $ | 1.1 | | $ | — | | $ | (7.1 | ) | $ | 1.1 | |
| | | | | | | | | | | | | | | | | |
Loss and loss adjustment expense ratio | | 43.6 | % | 87.0 | % | — | | — | | — | | — | | 102.0 | % | — | |
Expense ratio | | 44.0 | % | -0.3 | % | — | | — | | — | | — | | -16.1 | % | — | |
Combined ratio | | 87.6 | % | 86.7 | % | — | | — | | — | | — | | 85.9 | % | — | |
| | | | | | | | | | | | | | | | | |
Net earned premiums: | | | | | | | | | | | | | | | | | |
Equity layer credit protection | | $ | 5.4 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 5.4 | | $ | — | |
Trade credit reinsurance | | 9.3 | | (34.6 | ) | — | | — | | — | | — | | (25.3 | ) | — | |
Title reinsurance | | 2.5 | | 0.8 | | — | | — | | — | | — | | 3.3 | | — | |
Auto residual value reinsurance | | — | | (32.2 | ) | — | | — | | — | | — | | (32.2 | ) | — | |
Total net earned premiums | | $ | 17.2 | | $ | (66.0 | ) | $ | — | | $ | — | | $ | — | | $ | — | | $ | (48.9 | ) | $ | — | |
| | | | | | | | | | | | | | | | | |
Underwriting gain (loss): (1) | | | | | | | | | | | | | | | | | |
Equity layer credit protection | | $ | 2.5 | | $ | 0.5 | | $ | — | | $ | 0.4 | | $ | 1.1 | | $ | — | | $ | 3.0 | | $ | 1.1 | |
Trade credit reinsurance | | 1.4 | | (4.2 | ) | — | | — | | — | | — | | (2.8 | ) | — | |
Title reinsurance | | 0.7 | | 0.3 | | — | | — | | — | | — | | 1.0 | | — | |
Auto residual value reinsurance | | (2.5 | ) | (5.4 | ) | — | | — | | — | | — | | (7.9 | ) | — | |
Total underwriting gain (loss) | | $ | 2.1 | | $ | (8.8 | ) | $ | — | | $ | 0.4 | | $ | 1.1 | | $ | — | | $ | (7.1 | ) | $ | 1.1 | |
(1). 2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.
12
Assured Guaranty Ltd.
Loss and LAE Reserves by Segment, Type of Reserve and by Segment and Type of Reserve
(dollars in millions)
| | As of
June 30,
2005 | | As of
December 31,
2004 | | | | | | | | | |
Loss and LAE reserves by segment: | | | | | | | | | | | | | |
Financial guaranty direct | | $ | 22.6 | | $ | 19.9 | | | | | | | | | |
Financial guaranty reinsurance | | 74.0 | | 78.8 | | | | | | | | | |
Mortgage guaranty | | 11.2 | | 11.2 | | | | | | | | | |
Other | | 98.6 | | 116.6 | | | | | | | | | |
Total | | $ | 206.4 | | $ | 226.5 | | | | | | | | | |
| | | | | | | | | | | | | |
| | As of
June 30,
2005 | | As of
December 31,
2004 | | | | | | | | | |
Loss and LAE reserves by type: | | | | | | | | | | | | | |
Case | | $ | 51.7 | | $ | 53.5 | | | | | | | | | |
IBNR | | 91.2 | | 105.8 | | | | | | | | | |
Portfolio | | 63.5 | | 67.2 | | | | | | | | | |
Total | | $ | 206.4 | | $ | 226.5 | | | | | | | | | |
| | | | | | | | | | | | | |
| | As of June 30, 2005 | |
| | Financial
Guaranty
Direct | | Financial
Guaranty
Reinsurance | | Mortgage
Guaranty | | Total
Financial
Guaranty | | Other | | Total | |
Reserves by segment and type: | | | | | | | | | | | | | |
Case | | $ | 7.9 | | $ | 27.6 | | $ | 0.6 | | $ | 36.1 | | $ | 15.6 | | $ | 51.7 | |
IBNR | | — | | — | | 8.2 | | 8.2 | | 83.0 | | 91.2 | |
Portfolio | | 14.7 | | 46.4 | | 2.4 | | 63.5 | | — | | 63.5 | |
Total | | $ | 22.6 | | $ | 74.0 | | $ | 11.2 | | $ | 107.8 | | $ | 98.6 | | $ | 206.4 | |
| | | | | | | | | | | | | |
| | As of December 31, 2004 | |
| | Financial
Guaranty
Direct | | Financial
Guaranty
Reinsurance | | Mortgage
Guaranty | | Total
Financial
Guaranty | | Other | | Total | |
Reserves by segment and type: | | | | | | | | | | | | | |
Case | | $ | 4.3 | | $ | 29.1 | | $ | 0.8 | | $ | 34.2 | | $ | 19.3 | | $ | 53.5 | |
IBNR | | — | | — | | 8.5 | | 8.5 | | 97.3 | | 105.8 | |
Portfolio | | 15.6 | | 49.7 | | 1.9 | | 67.2 | | — | | 67.2 | |
Total | | $ | 19.9 | | $ | 78.8 | | $ | 11.2 | | $ | 109.9 | | $ | 116.6 | | $ | 226.5 | |
13
Assured Guaranty Ltd.
Investment Portfolio
as of June 30, 2005
(dollars in millions)
| | Amortized
Cost | | Pre-Tax
Book
Yield | | Fair Value | | Annualized
Investment
Income | |
Fixed maturity securities available for sale: | | | | | | | | | |
U.S. Treasury securities and obligations of U.S. government agencies | | $ | 158.5 | | 3.9 | % | $ | 162.4 | | $ | 6.2 | |
Agency obligations | | 192.8 | | 5.2 | % | 201.4 | | 10.0 | |
Foreign government securities | | 17.6 | | 4.9 | % | 18.0 | | 0.9 | |
Obligations of states and political subdivisions | | 298.2 | | 4.8 | % | 318.5 | | 14.2 | |
Insured obligations of state and political subdivisions | | 519.4 | | 4.9 | % | 560.2 | | 25.2 | |
Corporate securities | | 139.0 | | 5.6 | % | 147.5 | | 7.8 | |
Mortgage-backed securities: | | | | | | | | | |
Pass-thrus | | 477.4 | | 5.0 | % | 485.2 | | 23.7 | |
PACs | | 76.7 | | 4.6 | % | 77.0 | | 3.6 | |
Asset-backed securities | | 106.2 | | 3.9 | % | 106.6 | | 4.1 | |
Total fixed maturity securities available for sale | | 1,985.8 | | 4.8 | % | 2,076.8 | | 95.7 | |
Short-term investments | | 121.1 | | 2.9 | % | 121.1 | | 3.5 | |
Total investments | | $ | 2,106.9 | | 4.7 | % | $ | 2,197.9 | | $ | 99.1 | |
| | | | | | | | | |
| | Fair Value | | % | | | | | |
Ratings distribution(1): | | | | | | | | | |
Treasury and U.S. government obligations | | $ | 162.4 | | 7.8 | % | | | | |
Agency obligations | | 201.4 | | 9.7 | % | | | | |
AAA/Aaa | | 1,376.1 | | 66.3 | % | | | | |
AA/Aa | | 234.3 | | 11.3 | % | | | | |
A/A | | 102.6 | | 4.9 | % | | | | |
BBB/Baa | | — | | — | | | | | |
Total | | $ | 2,076.8 | | 100.0 | % | | | | |
| | | | | | | | | |
Duration of investment portfolio (in years): | | | | 4.2 | | | | | |
(1). Ratings are represented by the lower of the Moody’s Investor Services and Standard & Poor’s classifications.
14
Assured Guaranty Ltd.
Financial Guaranty Profile (1 of 3)
(dollars in millions)
| | Gross Par Written | | As of June 30, 2005: | |
Sector | | 2Q 2005 | | 2Q 2004 | | Net Par
Outstanding | | % | | Avg. Rating (7) | |
U.S. public finance | | | | | | | | | | | |
General obligation | | $ | 176 | | $ | 517 | | $ | 11,898 | | 12.5 | % | A+ | |
Municipal utilities | | 43 | | 82 | | 10,813 | | 11.4 | % | A+ | |
Tax backed | | 319 | | 128 | | 10,604 | | 11.2 | % | A+ | |
Transportation | | 217 | | 85 | | 5,937 | | 6.3 | % | A | |
Healthcare | | (564 | ) | 335 | | 5,742 | | 6.1 | % | A | |
Investor-owned utilities | | 24 | | 29 | | 1,284 | | 1.4 | % | A- | |
Housing | | (11 | ) | 21 | | 1,160 | | 1.2 | % | AA- | |
Higher education | | 114 | | 10 | | 1,080 | | 1.1 | % | A | |
Structured municipal (1) | | — | | — | | 1,050 | | 1.1 | % | AAA | |
Other public finance (2) | | 19 | | 131 | | 731 | | 0.8 | % | A+ | |
Total public finance | | $ | 338 | | $ | 1,337 | | $ | 50,299 | | 53.0 | % | A+ | |
| | | | | | | | | | | |
U.S. structured finance | | | | | | | | | | | |
CDOs (3) | | $ | 1,514 | | $ | 1,056 | | $ | 15,811 | | 16.7 | % | AA+ | |
Mortgage-backed and home equity | | 268 | | 1,092 | | 10,030 | | 10.6 | % | AA | |
Commercial receivables (4) | | 600 | | 192 | | 4,401 | | 4.6 | % | AA- | |
Consumer receivables (5) | | 30 | | 23 | | 2,426 | | 2.6 | % | A- | |
Other structured finance (6) | | 56 | | 129 | | 1,509 | | 1.6 | % | AA | |
Single name corporate CDS | | — | | — | | 21 | | 0.0 | % | A+ | |
Total structured finance | | $ | 2,467 | | $ | 2,492 | | $ | 34,198 | | 36.0 | % | AA | |
| | | | | | | | | | | |
International | | | | | | | | | | | |
Structured finance | | $ | 563 | | $ | 581 | | $ | 6,167 | | 6.5 | % | AA- | |
Project finance/PFI/PPP | | 146 | | 253 | | 3,176 | | 3.3 | % | BBB+ | |
Public finance | | — | | 245 | | 1,026 | | 1.1 | % | A- | |
Total international | | $ | 709 | | $ | 1,080 | | $ | 10,370 | | 10.9 | % | A+ | |
| | | | | | | | | | | |
Total exposures | | $ | 3,515 | | $ | 4,910 | | $ | 94,867 | | 100.0 | % | AA- | |
| | | | | | | | | | | |
Mortgage guaranty risk in force | | $ | — | | $ | — | | $ | 2,547 | | NA | | NA | |
| | | | | | | | | | | | | | | |
(1). Structured municipal: includes excess of loss reinsurance on portfolios of municipal credits where the Company attached in excess of the AAA rating level.
(2). Other public finance: primarily includes student loans and government-sponsored project finance.
(3). Collateralized debt obligations (CDOs) are structured financings backed by a pool of debt obligations. These financings are typically structured in multiple tranches (layers) from equity (first loss) through super senior (high excess). Losses on defaulted pool assets are allocated successively first to the equity tranche then to higher rated tranches.
(4). Commercial receivables: principally includes equipment leases and commercial mortgage-backed securities.
(5). Consumer receivables: principally includes auto loan receivables and credit card receivables.
(6). Other structured finance: predominantly trade receivable securitization, secured structured lending, and future flow transactions.
(7). Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.
15
Assured Guaranty Ltd.
Financial Guaranty Profile (2 of 3)
(dollars in millions)
Distribution by ratings of financial guaranty portfolio
| | June 30, 2005 | | December 31, 2004 | |
Ratings (1) | | Net Par
Outstanding | | % | | Net Par
Outstanding | | % | |
AAA/Aaa | | $ | 28,291 | | 29.8 | % | $ | 29,696 | | 31.1 | % |
AA/Aa | | 20,486 | | 21.6 | % | 19,856 | | 20.8 | % |
A/A | | 31,051 | | 32.7 | % | 31,393 | | 32.8 | % |
BBB/Baa | | 13,709 | | 14.5 | % | 13,137 | | 13.7 | % |
Below investment grade | | 1,330 | | 1.4 | % | 1,509 | | 1.6 | % |
Total exposures | | $ | 94,867 | | 100 | % | $ | 95,592 | | 100 | % |
Distribution by ratings of CDO exposure
| | June 30, 2005 | | December 31, 2004 | |
| | Net Par | | | | Net Par | | | |
Ratings (1) | | Outstanding | | % | | Outstanding | | % | |
AAA/Aaa | | $ | 12,646 | | 70.4 | % | $ | 12,975 | | 75.2 | % |
AA/Aa | | 3,972 | | 22.1 | % | 2,784 | | 16.1 | % |
A/A | | 1,035 | | 5.8 | % | 1,155 | | 6.7 | % |
BBB/Baa | | 198 | | 1.1 | % | 216 | | 1.3 | % |
Below investment grade | | 117 | | 0.7 | % | 116 | | 0.7 | % |
Total exposures | | $ | 17,968 | | 100 | % | $ | 17,246 | | 100 | % |
Distribution of CDOs by year of issue as of June 30, 2005
| | Net Par
Outstanding | | % | | | | | |
1999 and prior | | 50 | | 0.3 | % | | | | |
2000 | | 1,098 | | 6.1 | % | | | | |
2001 | | 4,251 | | 23.7 | % | | | | |
2002 | | 3,562 | | 19.8 | % | | | | |
2003 | | 3,583 | | 19.9 | % | | | | |
2004 | | 1,578 | | 8.8 | % | | | | |
2005 year to date | | 3,847 | | 21.4 | % | | | | |
| | $ | 17,968 | | 100.0 | % | | | | |
| | | | | | | | | | |
(1) Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.
16
Assured Guaranty Ltd.
Financial Guaranty Profile (3 of 3)
(dollars in millions)
Geographic distribution of financial guaranty portfolio, as of June 30, 2005
U.S.: | | Net Par
Outstanding | | % | |
California | | $ | 7,332 | | 7.7 | % |
New York | | 5,730 | | 6.0 | % |
Texas | | 3,462 | | 3.6 | % |
Florida | | 2,694 | | 2.8 | % |
Illinois | | 2,693 | | 2.8 | % |
Massachusetts | | 2,318 | | 2.4 | % |
New Jersey | | 2,206 | | 2.3 | % |
Pennsylvania | | 2,152 | | 2.3 | % |
Puerto Rico | | 1,773 | | 1.9 | % |
Washington | | 1,710 | | 1.8 | % |
Other states | | 18,229 | | 19.2 | % |
Mortgage and structured (multiple states) | | 34,198 | | 36.0 | % |
Total U.S. | | $ | 84,497 | | 89.1 | % |
| | | | | |
International: | | | | | |
United Kingdom | | $ | 5,529 | | 5.8 | % |
Germany | | 863 | | 0.9 | % |
Australia | | 780 | | 0.8 | % |
Italy | | 386 | | 0.4 | % |
Brazil | | 347 | | 0.4 | % |
Other | | 2,465 | | 2.6 | % |
Total International | | $ | 10,370 | | 10.9 | % |
| | | | | |
Total exposures | | $ | 94,867 | | 100 | % |
17
Assured Guaranty Ltd.
Non-Investment Grade Exposures
as of June 30, 2005
(dollars in millions)
Asset Type | | Weighted Average
Remaining Life | | Net Par
Outstanding | | Average
Rating (6) | |
| | | | | | | |
Public finance | | | | | | | |
Transportation | | 18.4 | | $ | 408.0 | | BB- | |
Healthcare | | 12.7 | | 51.2 | | BB- | |
General obligation | | 8.6 | | 1.0 | | BB+ | |
Other public finance (1) | | 17.3 | | 3.5 | | D | |
Investor-owned utilities | | 16.2 | | 15.2 | | BB- | |
Municipal utilities | | 11.2 | | 13.5 | | C | |
Tax backed | | 10.0 | | 7.4 | | BB- | |
Housing | | 8.6 | | 3.1 | | B | |
Higher education | | 12.0 | | 1.0 | | BB+ | |
Total public finance | | 17.3 | | $ | 503.8 | | BB- | |
| | | | | | | |
Structured finance | | | | | | | |
Consumer receivables (2) | | 4.3 | | $ | 273.1 | | BB | |
Mortgage-backed and home equity | | 6.9 | | 151.4 | | CCC+ | |
Commercial receivables (3) | | 8.4 | | 278.9 | | BB- | |
CDOs (4) | | 2.3 | | 117.0 | | B+ | |
Other structured finance (5) | | 4.9 | | 6.2 | | CCC- | |
Total structured finance | | 5.9 | | $ | 826.6 | | B+ | |
| | | | | | | |
Total non-investment grade exposures | | 10.2 | | $ | 1,330.4 | | B+ | |
(1). Other public finance: primarily includes student loans and government-sponsored project finance.
(2). Consumer receivables: principally includes auto loan receivables and credit card receivables.
(3). Commercial receivables: principally includes equipment leases and commercial mortgage-backed securities.
(4). Collateralized debt obligations (CDOs) are structured financings backed by a pool of debt obligations. These financings are typically structured in multiple tranches (layers) from equity (first loss) through super senior (high excess). Losses on defaulted pool assets are allocated successively first to the equity tranche then to higher rated tranches.
(5). Other structured finance: predominantly trade receivable securitization, secured structured lending, and future flow transactions.
(6). Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.
18
Assured Guaranty Ltd.
Closely Monitored Credits (“CMC”)
(dollars in millions)
Net par outstanding by credit monitoring category (1)
| | June 30, 2005 | |
Description | | Net Par
Outstanding | | % | | Number of
credits in
category | |
Fundamentally sound, normal risk | | $ | 93,507 | | 98.6 | % | | |
| | | | | | | |
Closely monitored: | | | | | | | |
Category 1 | | 922 | | 1.0 | % | 25 | |
Category 2 | | 295 | | 0.3 | % | 10 | |
Category 3 | | 131 | | 0.1 | % | 17 | |
Category 4 | | 12 | | — | | 9 | |
CMC Total | | 1,360 | | 1.4 | % | 61 | |
Total | | $ | 94,867 | | 100 | % | | |
| | | | | | | |
| | December 31, 2004 | |
Description | | Net Par Outstanding | | % | | Number of
credits in
category | |
Fundamentally sound, normal risk | | $ | 93,855 | | 98.2 | % | | |
| | | | | | | |
Closely monitored: | | | | | | | |
Category 1 | | 1,490 | | 1.6 | % | 35 | |
Category 2 | | 165 | | 0.2 | % | 9 | |
Category 3 | | 70 | | 0.1 | % | 16 | |
Category 4 | | 12 | | — | | 8 | |
CMC Total | | 1,737 | | 1.8 | % | 68 | |
Total | | $ | 95,592 | | 100 | % | | |
| | | | | | | |
Top Ten Non-Investment Grade Exposures as of June 30, 2005 | | | | | | | |
| | | | | | | |
Name or description | | Average Rating | | Weighted
Average
Remaining Life | | Net Par
Outstanding | |
Public Finance Domestic Project Finance Transaction | | BB | | 21.9 | | $ | 176 | |
Public Finance International Project Finance Transaction | | B | | 17.8 | | 170 | |
Structured Finance Domestic Credit Card Transaction | | BB | | 3.0 | | 163 | |
Structured Finance Domestic EETC Transaction | | B+ | | 8.8 | | 147 | |
Structured Finance Domestic Credit Card Transaction | | BB+ | | 3.4 | | 79 | |
Structured Finance Domestic Manufactured Housing Transaction | | CCC+ | | 6.6 | | 78 | |
Structured Finance Domestic EETC Transaction | | BB | | 9.8 | | 67 | |
Structured Finance Domestic Securitized Franchise Receivables | | B | | 4.8 | | 41 | |
International Airport Facility | | BB | | 7.8 | | 34 | |
Structured Finance Domestic Residential Mortgage Transaction | | B- | | 4.2 | | 29 | |
Total | | BB- | | 11.7 | | $ | 983 | |
(1) Our risk management department is responsible for monitoring our portfolio of credits and maintains a list of closely monitored credits. The closely monitored credits are divided into four categories: Category 1 (low priority; fundamentally sound, greater than normal risk); Category 2 (medium priority; weakening credit profile, may result in loss); Category 3 (high priority; claim/default probable, case reserve established); Category 4 (claim paid, case reserve established for future payments). Credits that are not included in the closely monitored credit list are categorized as fundamentally sound, normal risk.
19
Assured Guaranty Ltd.
Largest Exposures by Sector (Part 1 of 2)
as of June 30, 2005
(dollars in millions)
10 Largest U.S. Public Finance Exposures
Revenue Source | | Net Par
Outstanding | | Rating(1) | |
California State General Obligation & Leases | | $ | 802 | | A- | |
Massachusetts State General Obligation & Bay | | 712 | | AA- | |
Long Island Power Authority | | 711 | | A- | |
New Jersey State General Obligation & Leases | | 687 | | AA- | |
New York City General Obligation & Leases | | 686 | | A | |
Jefferson County Alabama Sewer | | 660 | | A | |
New York City Municipal Water Finance Authority | | 634 | | AA+ | |
Denver Colorado Airport System | | 626 | | A | |
Houston Texas Water & Sewer System | | 563 | | A+ | |
New York State Metro Trans Auth - Transportation Revenue | | 535 | | A | |
Total top 10 public finance exposures | | $ | 6,617 | | | |
| | | | | | | |
10 Largest U.S. Structured Finance Exposures
Revenue Source | | Net Par
Outstanding | | Rating(1) | |
Park Place (Ameriquest) PPSI 2004-MHQ1 Class A-1 | | $ | 1,311 | | AAA | |
Ameriquest Mortgage Securities Inc. 2004-R10 A-1 | | 850 | | AAA | |
Argent Securities Inc. 2004-W11 Class A-1 | | 811 | | AAA | |
Structured Finance Corporate Pool | | 781 | | AA | |
Synthetic CDO - IG Corporate | | 740 | | AAA | |
Synthetic CDO - IG ABS | | 594 | | AAA | |
Synthetic CDO - IG ABS | | 579 | | AAA | |
Synthetic CDO - IG Corporate | | 567 | | A+ | |
Bear Stearns ABS I Trust 2004-FR3 2-A | | 565 | | AAA | |
Synthetic Credit Card Master Trust | | 550 | | AAA | |
Total top 10 structured finance exposures | | $ | 7,349 | | | |
(1) Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.
20
Assured Guaranty Ltd.
Largest Exposures by Sector (Part 2 of 2)
as of June 30, 2005
(dollars in millions)
10 Largest Healthcare Exposures
Revenue Source | | Net Par
Outstanding | | Rating(1) | |
Public Finance Domestic Hospital System | | $ | 205 | | A- | |
Public Finance Domestic Hospital System | | 194 | | AAA(2) | |
Public Finance Domestic Hospital System | | 186 | | A+ | |
Public Finance Domestic Hospital System | | 158 | | AA | |
Public Finance Domestic Hospital - Stand Alone | | 148 | | AAA(2) | |
Public Finance Domestic Hospital System | | 131 | | AA- | |
Public Finance Domestic Hospital System | | 113 | | A+ | |
Public Finance Domestic Hospital System | | 111 | | BBB | |
Public Finance Domestic Hospital System | | 108 | | BBB+ | |
Public Finance Domestic Hospital - Stand Alone | | 102 | | AA | |
Total top 10 healthcare exposures | | $ | 1,455 | | | |
10 Largest International Exposures
Revenue Source | | Net Par
Outstanding | | Rating(1) | |
Synthetic CDO - IG ABS | | $ | 579 | | AAA | |
Synthetic CDO - IG Corporate | | 500 | | AAA | |
Structured Finance - Whole Business Securitization | | 276 | | BBB+ | |
Structured Finance - Equipment Leasing Receivables | | 231 | | A | |
Synthetic CDO - IG Corporate | | 200 | | AAA | |
Structured Finance - Whole Business Securitization | | 189 | | BBB+ | |
Public Finance International Project Finance Transaction | | 170 | | B | |
Private UK RMBS | | 166 | | A+ | |
Synthetic CDO - IG ABS | | 153 | | AAA | |
International PFI Transportation Authority | | 142 | | BBB | |
Total top 10 international exposures | | $ | 2,606 | | | |
(1) Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.
21
Assured Guaranty Ltd.
Consolidated Capital and Claims Paying Resources
(dollars in millions)
| | As of June 30, 2005 | | As of December 31, 2004 | |
| | AGC | | AG Re (1) | | Consolidated | | AGC | | AG Re (1) | | Consolidated | |
Statutory surplus and reserves | | | | | | | | | | | | | |
Unearned premium reserve (2) | | $ | 227 | | $ | 347 | | $ | 574 | | $ | 406 | | $ | 186 | | $ | 592 | |
Contingency reserve | | 543 | | — | | 543 | | 518 | | — | | 518 | |
Policyholders’ surplus | | 277 | | 655 | | 932 | | 237 | | 596 | | 833 | |
Loss & loss adjustment expense reserves | | 12 | | 118 | | 130 | | 32 | | 103 | | 135 | |
Total policyholders’ surplus & reserves | | $ | 1,059 | | $ | 1,120 | | $ | 2,179 | | $ | 1,193 | | $ | 885 | | $ | 2,078 | |
| | | | | | | | | | | | | |
Claims paying resources | | | | | | | | | | | | | |
Policyholders’ surplus | | $ | 277 | | $ | 655 | | $ | 932 | | $ | 237 | | $ | 596 | | $ | 833 | |
Contingency reserve | | 543 | | — | | 543 | | 518 | | — | | 518 | |
Qualified statutory capital | | 820 | | 655 | | 1,475 | | 755 | | 596 | | 1,351 | |
Unearned premium reserve (2) | | 227 | | 347 | | 574 | | 406 | | 186 | | 592 | |
Loss & loss adjustment expense reserves | | 12 | | 118 | | 130 | | 32 | | 103 | | 135 | |
Total policyholders’ surplus & reserves | | 1,059 | | 1,120 | | 2,179 | | 1,193 | | 885 | | 2,078 | |
Present value of installment premium | | 233 | | 161 | | 394 | | 268 | | 132 | | 400 | |
Standby line of credit/stop loss | | 455 | | — | | 455 | | 255 | | — | | 255 | |
Total claims paying resources | | $ | 1,747 | | $ | 1,281 | | $ | 3,028 | | $ | 1,716 | | $ | 1,017 | | $ | 2,734 | |
Net par insured outstanding | | $ | 52,051 | | $ | 42,816 | | $ | 94,867 | | $ | 74,001 | | $ | 21,590 | | $ | 95,592 | |
Net debt service outstanding | | $ | 71,101 | | $ | 66,004 | | $ | 137,104 | | $ | 105,831 | | $ | 30,288 | | $ | 136,120 | |
| | | | | | | | | | | | | |
Ratios: | | | | | | | | | | | | | |
Net par insured to statutory capital | | 63.5 | | 65.4 | | 64.3 | | 98.0 | | 36.2 | | 70.8 | |
Capital ratio(3) | | 86.7 | | 100.8 | | 92.9 | | 140.2 | | 50.8 | | 100.7 | |
Financial resources ratio(4) | | 40.7 | | 51.5 | | 45.3 | | 61.7 | | 29.8 | | 49.8 | |
(1) AG Re numbers are our estimate of US statutory as the company files Bermuda statutory financial statements.
(2) Unearned premium reserve for AG Re is U.S. GAAP based and net of prepaid reinsurance premiums.
(3) Capital ratio is net par and interest insured divided by qualified statutory capital.
(4) Financial resources ratio is calculated by dividing net par and interest insured by total claims paying resources.
22
Assured Guaranty Ltd.
Summary Financial and Statistical Data
(dollars in millions, except per share amounts)
| | YTD 2005 | | 2004 | | 2003 | | 2002 | | 2001 | | 2000 | |
GAAP Summary Income Statement Data | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 118.6 | | $ | 190.9 | | $ | 349.2 | | $ | 417.2 | | $ | 442.9 | | $ | 206.0 | |
Net earned premiums | | 96.4 | | 187.9 | | 310.9 | | 247.4 | | 293.5 | | 140.7 | |
Net investment income | | 46.8 | | 94.8 | | 96.3 | | 97.2 | | 99.5 | | 98.1 | |
Total expenses | | (4.1 | ) | 114.6 | | 266.1 | | 218.8 | | 282.8 | | 131.8 | |
Income before provision for income taxes | | 141.4 | | 233.3 | | 246.2 | | 83.2 | | 110.1 | | 118.1 | |
Net income | | 111.1 | | 182.8 | | 214.5 | | 72.6 | | 63.8 | | 93.2 | |
Operating income | | 116.6 | | 141.1 | | 127.3 | | 115.7 | | 96.1 | | 87.6 | |
| | | | | | | | | | | | | |
Net income per diluted share | | $ | 1.49 | | $ | 2.44 | | $ | 2.86 | | $ | 0.97 | | $ | 0.85 | | $ | 1.24 | |
Operating income per diluted share | | $ | 1.56 | | $ | 1.88 | | $ | 1.70 | | $ | 1.54 | | $ | 1.28 | | $ | 1.17 | |
| | | | | | | | | | | | | |
Financial Ratios | | | | | | | | | | | | | |
Loss and LAE ratio | | -71.1 | % | -17.0 | % | 46.5 | % | 48.6 | % | 60.5 | % | 21.6 | % |
Expense ratio | | 57.2 | % | 65.4 | % | 37.2 | % | 35.5 | % | 30.6 | % | 61.2 | % |
Combined ratio | | -13.9 | % | 48.4 | % | 83.7 | % | 84.1 | % | 91.1 | % | 82.8 | % |
GAAP Summary Balance Sheet Data (end of period) | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Total investments and cash | | $ | 2,202.6 | | $ | 2,157.9 | | $ | 2,222.1 | | $ | 2,061.9 | | $ | 1,710.8 | | $ | 1,549.6 | |
Total assets | | 2,771.6 | | 2,694.0 | | 2,857.9 | | 2,719.9 | | 2,322.1 | | 1,913.7 | |
Unearned premium reserves | | 530.2 | | 521.3 | | 625.4 | | 613.3 | | 500.3 | | 444.6 | |
Loss and LAE reserves | | 206.4 | | 226.5 | | 522.6 | | 458.8 | | 401.1 | | 171.0 | |
Long-term debt | | 197.3 | | 197.4 | | 75.0 | | 75.0 | | 150.0 | | 150.0 | |
Shareholders’ equity | | 1,619.5 | | 1,527.6 | | 1,437.6 | | 1,257.2 | | 1,061.6 | | 994.5 | |
Book value per share | | $ | 21.63 | | $ | 20.19 | | $ | 19.17 | | $ | 16.76 | | $ | 14.15 | | $ | 13.26 | |
Other Financial Information | | | | | | | | | | | | | |
Net debt service outstanding (end of period) | | $ | 137,104 | | $ | 136,120 | | $ | 130,047 | | $ | 124,082 | | $ | 117,909 | | $ | 102,744 | |
Net par outstanding (end of period) | | 94,867 | | 95,592 | | 87,524 | | 80,394 | | 75,249 | | 65,756 | |
| | | | | | | | | | | | | |
Consolidated qualified statutory capital | | 1,475 | | 1,351 | | 1,216 | | 1,133 | | 1,095 | | 1,004 | |
Consolidated policyholders’ surplus & reserves | | 2,179 | | 2,078 | | 1,145 | | 2,041 | | 1,744 | | 1,482 | |
| | | | | | | | | | | | | |
Ratios: | | | | | | | | | | | | | |
Par insured to statutory capital | | 64.3 | | 70.8 | | 72.0 | | 71.0 | | 68.7 | | 65.5 | |
Capital ratio(1) | | 92.9 | | 100.7 | | 106.9 | | 109.5 | | 107.7 | | 102.3 | |
Financial resources ratio(2) | | 45.3 | | 49.8 | | 43.4 | | 39.8 | | 50.1 | | 56.3 | |
| | | | | | | | | | | | | |
Debt service written: | | | | | | | | | | | | | |
Public finance | | $ | 1,029 | | $ | 14,493 | | $ | 12,130 | | $ | 14,312 | | $ | 8,694 | | $ | 7,385 | |
Structured finance | | 3,525 | | 16,477 | | 11,038 | | 13,210 | | 12,627 | | 9,054 | |
Total debt service written | | $ | 4,554 | | $ | 30,970 | | $ | 23,168 | | $ | 27,522 | | $ | 21,321 | | $ | 16,439 | |
| | | | | | | | | | | | | |
U.S. | | $ | 3,129 | | $ | 27,073 | | $ | 19,346 | | $ | 25,453 | | $ | 19,196 | | $ | 15,451 | |
International | | 1,426 | | 3,897 | | 3,822 | | 2,069 | | 2,125 | | 988 | |
Total debt service written | | $ | 4,554 | | $ | 30,970 | | $ | 23,168 | | $ | 27,522 | | $ | 21,321 | | $ | 16,439 | |
(1). Capital ratio is net par and interest insured divided by qualified statutory capital.
(2). Financial resources ratio is calculated by dividing net par and interest insured by total claims paying resources.
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Endnotes related to non-GAAP financial measures discussed in the operating supplement:
(a) PVP, which is a non-GAAP financial measure, represents gross premiums and fees related to financial guaranty and mortgage guaranty contracts written in the current period, including upfront and installment premiums received on contracts written in the current period and the present value of estimated future installment premiums, discounted at 6% per year. We use 6% as the present value discount because it is the approximate taxable equivalent yield on our investment portfolio for the periods presented. Present value of installment premiums in-force, which is a non-GAAP financial measure, represents our future premiums on our in-force book of installment premium business in our financial guaranty direct and financial guaranty reinsurance segments. It is calculated net of reinsurance ceded and using a discount rate of 6%. We believe PVP and Present value of installment premiums in-force are useful measures for management, equity analysts and investors because they permit the evaluation of the value of new business production for Assured Guaranty by taking into account the value of installment premiums on new contracts underwritten in a reporting period, which the GAAP gross premiums written does not adequately measure.
(b) Operating income, which is a non-GAAP financial measure, is defined as net income excluding after-tax realized gains (losses) on investments and after-tax unrealized gains (losses) on derivative financial instruments. Operating ROE represents operating income as a percentage of average shareholder’s equity, excluding accumulated other comprehensive income (AOCI). We believe the presentation of operating income and operating ROE enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude net realized gains (losses) on investments and net unrealized gains (losses) on derivative financial instruments because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the market interest rates, credit spreads and other factors that management cannot control or predict. This measure should not be viewed as a substitute for net income determined in accordance with GAAP.
(c) Adjusted book value, which is a non-GAAP financial measure, is derived by beginning with shareholder’s equity (book value) and adding or subtracting the after-tax value of: the financial guaranty and mortgage guaranty net unearned premium reserve; deferred acquisition costs and the present value of estimated net future installment premiums (discounted at 6%). The adjustments described above will not be realized until future periods and may differ materially from the amounts used in determining adjusted book value. Management, investors and analysts use the calculation of adjusted book value to evaluate the net present value of the Company’s in-force premium and capital base.
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| | Contacts: | | |
| | | | |
| | Equity investors and media | | |
| | Sabra Purtill | | |
| | Managing Director, Investor Relations | | |
| | (212) 408-6044 | | |
| | spurtill@assuredguaranty.com | | |
| | | | |
| | Chris McNamee | | |
| | Assistant Vice President, Investor Relations | | |
| | (212) 261-5509 | | |
| | cmcnamee@assuredguaranty.com | | |
| | | | |
| | Fixed income investors | | |
Assured Guaranty Ltd. | | Patrick Early | | |
30 Woodbourne Avenue | | Director, Fixed Income Investor Relations | | |
Hamilton HM 08 Bermuda | | (212) 408 6043 | | |
www.assuredguaranty.com | | pearly@assuredguaranty.com | | |
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