Exhibit 99.2
Financial Supplement MARCH 31, 2011 Assured Guaranty Ltd. |
Table of Contents Page Selected Financial Highlights 1 Consolidated Statements of Operations 2 Net Income (Loss) Reconciliation to Operating Income 3 Consolidated Balance Sheets 4 Adjusted Book Value 5 Claims Paying Resources 6 New Business Production 7 Financial Guaranty Gross Par Written 8 New Business Production by Quarter 9 Investment Portfolio, Available-for-Sale 10 Estimated Net Exposure Amortization and Estimated Future Net Premium and Credit Derivative Revenues 11 Expected Amortization of Net Par Outstanding 12 Present Value of Financial Guaranty Insurance Net Expected Loss to be Expensed 13 Financial Guaranty Profile 14-16 Direct Pooled Corporate Obligations Profile 17 Consolidated U.S. RMBS Profile 18 Direct U.S. RMBS Profile 19-20 Direct U.S. Commercial Real Estate Profile 21 Direct U.S. Consumer Receivables Profile 22 Below Investment Grade Exposures 23-27 Largest Exposures by Sector 28-31 Rollforward of Net Expected Loss and Loss Adjustment Expense to be Paid 32 Financial Guaranty Insurance and Credit Derivative U.S. RMBS Representations and Warranties Benefit Development 33 Losses Incurred and Paid 34 Summary Financial and Statistical Data 35 Glossary 36 Endnotes Related to Non-GAAP Financial Measures 37 Some amounts in this financial supplement may not add due to rounding. Assured Guaranty Ltd. This financial supplement should be read in conjunction with documents filed by Assured Guaranty Ltd. (‘‘AGL’’ and, together with its subsidiaries, ‘‘Assured Guaranty’’ or the ‘‘Company’’) with the Securities and Exchange Commission (‘‘SEC’’), including its Annual Report on Form 10-K for the year ended December 31, 2010 and its Quarterly Report on Form 10-Q for the three months ended March 31, 2011. Financial Supplement Amounts in this financial supplement include the consolidated results of Assured Guaranty Municipal Holdings Inc., formerly Financial Security Assurance Holdings Ltd. ("AGMH"), which Assured Guaranty acquired on July 1, 2009. March 31, 2011 Cautionary Statement Regarding Forward-Looking Statements: Any forward-looking statements made in this supplement reflect the current views of Assured Guaranty 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. The Company’s forward looking statements could be affected by many events. These events include (1) rating agency action, including a ratings downgrade or change in outlook at any time of AGL or its subsidiaries and/or of transactions that AGL's subsidiaries have insured, both of which have occurred in the past, or a change in rating criteria; (2) developments in the world’s financial and capital markets that adversely affect issuers’ payment rates, the Company’s loss experience, its ability to cede exposure to reinsurers, its access to capital, its unrealized (losses) gains on derivative financial instruments or its investment returns; (3) changes in the world’s credit markets, segments thereof or general economic conditions; (4) more severe or frequent losses implicating the adequacy of the Company’s expected loss estimates; (5) the impact of market volatility on the mark-to-market of the Company’s contracts written in credit default swap form; (6) reduction in the amount of insurance or reinsurance opportunities available to the Company; (7) deterioration in the financial condition of our reinsurers, the amount and timing of reinsurance recoverables actually received and the risk that reinsurers may dispute amount s owed to us under our reinsurance agreements; (8) the possibility that the Company will not realize insurance loss recoveries or damages expected from originators, sellers, sponsors, underwriters or servicers of residential mortgage-backed securities transactions; (9) increased competition; (10) changes in applicable accounting policies or practices; (11) changes in applicable laws or regulations, including insurance and tax laws; (12) other governmental actions; (13) difficulties with the execution of the Company’s business strategy; (14) contract cancellations; (15) the Company’s dependence on customers; (16) loss of key personnel; (17) adverse technological developments; (18) the effects of mergers, acquisitions and divestitures; (19) natural or man-made catastrophes; (20) other risks and uncertainties that have not been identified at this time; (21) management’s response to these factors; and (22) other risk factors identified in Assured Guaranty’s filings with the SEC. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except as required by law. |
2011 2010 Operating income reconciliation: Operating income 1 248.9 $ 112.6 $ Plus after-tax adjustments: Realized gains (losses) on investments 1.9 6.7 Non-credit impairment unrealized fair value gains (losses) on credit derivatives (217.4) 230.8 Fair value gains (losses) on committed capital securities 0.3 (0.8) Foreign exchange gains (losses) on revaluation of premiums receivable 9.2 (23.0) Effect of consolidating financial guaranty variable interest entities ("VIEs") 82.5 (4.3) Net income (loss) 125.4 $ 322.0 $ Return on equity ("ROE") calculations 2: ROE, excluding unrealized gain (loss) on investment portfolio 13.4% 37.5% Operating ROE 20.4% 10.7% Earnings per diluted share: Operating income 1.33 $ 0.59 $ Plus after-tax adjustments: Realized gains (losses) on investments 0.01 0.03 Non-credit impairment unrealized fair value gains (losses) on credit derivatives (1.16) 1.21 Fair value gains (losses) on committed capital securities - - Foreign exchange gains (losses) on revaluation of premiums receivable 0.05 (0.12) Effect of consolidating financial guaranty VIEs 0.44 (0.02) Net income (loss) 0.67 $ 1.69 $ Other information: Gross par written 2,319 $ 7,188 $ Effective tax rate on operating income 28.0% 32.2% Effective tax rate on net income 34.7% 26.3% Other information: March 31, 2011 December 31, 2010 Net debt service outstanding 905,999 $ 927,143 $ Net par outstanding 602,287 617,131 Claims paying resources 3 12,655 12,630 2. Quarterly ROE calculations represent annualized returns. 3. See page 6. Note: Please refer to the endnotes for an explanation of the non-GAAP financial measures. 1. The Company revised its definition of operating income in second quarter 2010 to exclude foreign exchange revaluation gains and losses on premiums receivable. Three months ended March 31, 2010 are presented on a consistent basis. As of Assured Guaranty Ltd. Selected Financial Highlights (dollars in millions, except per share amounts) March 31, Three Months Ended Page 1 |
2011 2010 Revenues: Net earned premiums 254.0 $ 319.6 $ Net investment income 96.4 84.3 Net realized investment gains (losses) 2.8 9.4 Net change in fair value of credit derivatives: Credit derivative revenues 61.0 54.7 Losses incurred on credit derivatives (0.1) (76.4) Net unrealized gains (losses), excluding losses incurred (296.6) 300.5 Net change in fair value of credit derivatives (235.7) 278.8 Fair value gains (losses) on committed capital securities 0.5 (1.3) Net change in financial guaranty VIEs 93.9 (10.6) Other income 42.2 (12.9) Total revenues 254.1 667.3 Expenses: Loss and loss adjustment expenses (27.0) 130.5 Amortization of deferred acquisition costs 7.4 8.2 - 4.0 Interest expense 24.8 25.1 Other operating expenses 56.8 62.6 Total expenses 62.0 230.4 Income (loss) before income taxes 192.1 436.9 Provision (benefit) for income taxes 66.7 114.9 Net income (loss) 125.4 $ 322.0 $ Less after-tax adjustments: Realized gains (losses) on investments 1.9 6.7 Non-credit impairment unrealized fair value gains (losses) on credit derivatives (217.4) 230.8 Fair value gains (losses) on committed capital securities 0.3 (0.8) Foreign exchange gains (losses) on revaluation of premiums receivable 9.2 (23.0) Effect of consolidating financial guaranty VIEs 82.5 (4.3) Operating income 248.9 $ 112.6 $ Weighted average shares outstanding Basic shares outstanding 183.9 184.3 Diluted shares outstanding 1 187.1 190.6 Shares outstanding at the end of period 184.0 184.3 Effect of refundings and accelerations, net Net earned premiums from refundings and accelerations 29.6 $ 15.4 $ Operating income effect 19.8 9.9 Operating income per diluted share effect 0.11 0.05 Note: Please refer to the endnotes for an explanation of the non-GAAP financial measures. 1. Non-GAAP diluted shares outstanding were 187.1 million and 190.8 million for the three months ended March 31, 2011 and 2010, respectively. Assured Guaranty Municipal Holdings Inc. ("AGMH") acquisition-related expenses Assured Guaranty Ltd. Consolidated Statements of Operations (dollars and shares in millions, except per share amounts) March 31, Three Months Ended Page 2 |
GAAP Income Statement As Reported Less: Operating Income Adjustments Non-GAAP Operating Income Results GAAP Income Statement As Reported Less: Operating Income Adjustments Non-GAAP Operating Income Results Revenues: Net earned premiums 254.0 $ (19.1) $ (1) 273.1 $ 319.6 $ (6.0) $ (1) 325.6 $ Net investment income 96.4 - 96.4 84.3 - 84.3 Net realized investment gains (losses) 2.8 2.8 (2) - 9.4 9.4 (2) - Net change in fair value of credit derivatives: Realized gains and other settlements 35.4 35.4 - 26.7 26.7 - Net unrealized gains (losses) (271.1) (271.1) - 252.1 252.1 - Credit derivative revenues - (61.0) 61.0 - (54.7) 54.7 Losses incurred on credit derivatives - 0.1 (0.1) - 76.4 (76.4) Net change in fair value of credit derivatives (235.7) (296.6) (3) 60.9 278.8 300.5 (3) (21.7) Fair value gain (loss) on committed capital securities 0.5 0.5 (4) - (1.3) (1.3) (4) - Net change in financial guaranty VIEs 93.9 93.9 (1) - (10.6) (10.6) (1) - Other income 42.2 12.9 (5) 29.3 (12.9) (31.1) (5) 18.2 Total revenues 254.1 (205.6) 459.7 667.3 260.9 406.4 Expenses: Loss and loss adjustment expenses (27.0) (51.9) (1) 24.9 130.5 (10.0) (1) 140.5 Amortization of deferred acquisition costs 7.4 - 7.4 8.2 - 8.2 AGMH acquisition-related expenses - - - 4.0 - 4.0 Interest expense 24.8 - 24.8 25.1 - 25.1 Other operating expenses 56.8 - 56.8 62.6 - 62.6 Total expenses 62.0 (51.9) 113.9 230.4 (10.0) 240.4 Income (loss) before income taxes 192.1 (153.7) 345.8 436.9 270.9 166.0 Provision (benefit) for income taxes 66.7 (30.2) (6) 96.9 114.9 61.5 (6) 53.4 Net income (loss) 125.4 $ (123.5) $ 248.9 $ 322.0 $ 209.4 $ 112.6 $ 1. Adjustments to eliminate the effects of consolidating financial guaranty VIEs. 2. Adjustments to eliminate realized gains (losses) on investments. 3. Adjustments to eliminate non-economic fair value gains (losses) on credit derivatives and reclassification to revenues and losses incurred. 4. Adjustments to eliminate fair value gain (loss) on committed capital securities. 5. Adjustments to eliminate foreign exchange gains (losses) on revaluation of net premiums receivable. 6. Tax effect of the above adjustments. Note: Please refer to the endnotes for an explanation of non-GAAP financial measures. March 31, 2011 March 31, 2010 Assured Guaranty Ltd. Consolidated Statements of Operations Net Income (Loss) Reconciliation to Operating Income (in millions) Three Months Ended Three Months Ended Page 3 |
Assured Guaranty Ltd. Consolidated Balance Sheets March 31, December 31, 2011 2010 Assets: Investment portfolio: Fixed maturity securities, available-for-sale, at fair value 9,472.1 $ 9,415.3 $ Short-term investments, at fair value 768.5 1,031.6 Other invested assets 264.5 283.0 Total investment portfolio 10,505.1 10,729.9 Cash 95.9 107.2 Premiums receivable, net of ceding commissions payable 1,118.0 1,167.6 Ceded unearned premium reserve 794.3 821.8 Deferred acquisition costs 236.0 239.8 Reinsurance recoverable on unpaid losses 18.6 22.3 Salvage and subrogation recoverable 1,057.0 1,032.4 Credit derivative assets 619.3 592.9 Deferred tax asset, net 1,004.5 1,224.0 Current income tax receivable 159.6 - Financial guaranty VIE assets, at fair value 3,679.0 3,657.5 Other assets 221.9 199.2 Total assets 19,509.2 $ 19,794.6 $ Liabilities and shareholders' equity: Liabilities: Unearned premium reserve 6,637.2 $ 6,972.9 $ Loss and loss adjustment expense reserve 407.9 563.0 Reinsurance balances payable, net 268.2 274.4 Long-term debt 1,049.7 1,052.9 Credit derivative liabilities 2,761.5 2,465.5 Current income tax payable - 93.0 Financial guaranty VIE liabilities with recourse, at fair value 2,757.8 2,927.0 Financial guaranty VIE liabilities without recourse, at fair value 1,373.0 1,337.2 Other liabilities 359.4 309.9 Total liabilities 15,614.7 15,995.8 Shareholders' equity: Common stock 1.8 1.8 Additional paid-in capital 2,589.2 2,585.4 Retained earnings 1,215.9 1,098.9 Accumulated other comprehensive income 85.6 110.7 Deferred equity compensation 2.0 2.0 Total shareholders' equity 3,894.5 3,798.8 Total liabilities and shareholders' equity 19,509.2 $ 19,794.6 $ As of : (in millions) Page 4 |
Total Per share Total Per share Reconciliation of shareholders' equity to adjusted book value: Shareholders' equity 3,894.5 $ 21.16 $ 3,798.8 $ 20.67 $ Less after-tax adjustments: Effect of consolidating financial guaranty VIEs (229.2) (1.25) (311.8) (1.70) Non-credit impairment unrealized fair value gains (losses) on credit derivatives (970.0) (5.27) (764.8) (4.16) Fair value gains (losses) on committed capital securities 12.5 0.07 12.2 0.07 Unrealized gain (loss) on investment portfolio excluding foreign exchange effect 78.1 0.42 100.1 0.54 Operating shareholders' equity 5,003.1 $ 27.18 $ 4,763.1 $ 25.92 $ After-tax adjustments: Less: Deferred acquisition costs 241.9 1.31 248.4 1.35 Plus: Net present value of estimated net future credit derivative revenue 405.4 2.20 424.8 2.31 Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed 3,952.4 21.48 4,059.6 22.09 Adjusted book value 9,119.0 $ 49.55 $ 8,999.1 $ 48.98 $ Note: Please refer to the endnotes for an explanation of the non-GAAP financial measures. Assured Guaranty Ltd. Adjusted Book Value (dollars in millions, except per share amounts) March 31, 2011 December 31, 2010 As of : Page 5 |
Assured Guaranty Corp. Assured Guaranty Re Ltd. 1 Assured Guaranty Municipal Corp. Eliminations 2 Consolidated Claims paying resources Policyholders' surplus 866 $ 1,131 $ 1,393 $ (300) $ 3,090 $ Contingency reserve 739 - 1,666 - 2,405 Qualified statutory capital 1,605 1,131 3,059 (300) 5,495 Unearned premium reserve 860 1,054 2,286 - 4,200 Loss and loss adjustment expense reserves 3, 4 402 181 37 - 620 Total policyholders' surplus and reserves 2,867 2,366 5,382 (300) 10,315 Present value of installment premium 4 495 281 666 - 1,442 Standby line of credit/stop loss 200 200 498 - 898 Total claims paying resources 3,562 $ 2,847 $ 6,546 $ (300) $ 12,655 $ Net par outstanding 5 115,145 $ 136,292 $ 337,264 $ (1,728) $ 586,973 $ Net debt service outstanding 5 166,459 $ 220,009 $ 506,701 $ (3,937) $ 889,232 $ Ratios: Net par outstanding to qualified statutory capital 72:1 121:1 110:1 107:1 Capital ratio 6 104:1 195:1 166:1 162:1 Financial resources ratio 7 47:1 77:1 77:1 70:1 3. Reserves are reduced by approximately $2.3 billion for benefit related to representation and warranty recoverables. 4. Includes financial guaranty insurance and credit derivatives. 6. The capital ratio is calculated by dividing net debt service outstanding by qualified statutory capital. 7. The financial resources ratio is calculated by dividing net debt service outstanding by total claims paying resources. 5. Net par outstanding and net debt service outstanding are presented on a statutory basis. Under statutory accounting, such amounts would be reduced both when an outstanding issue is legally defeased (i.e., the rights and interests of bondholders and their lien on pledged revenues or other security are terminated in accordance with bond documentation) and when such issue is economically defeased (i.e., bond documentation does not provide a procedure for termination of such rights, interests and lien other than through payment of all outstanding debt in full; funds are deposited in an escrow account for future payment of the debt; and if the funds deposited prove insufficient to pay the outstanding debt in full, the issuer continues to be legally obligated to make payment on such debt). 2. In 2009, Assured Guaranty Corp. ("AGC") issued a $300.0 million note payable to Assured Guaranty Municipal Corp. ("AGM"). Net par and net debt service outstanding eliminations represent second-to-pay policies between Assured Guaranty's insurance subsidiaries. As of March 31, 2011 Assured Guaranty Ltd. Claims Paying Resources (dollars in millions) 1. Assured Guaranty Re Ltd. ("AG Re") numbers are the Company's estimate of U.S. statutory. Page 6 |
2011 2010 Consolidated new business production analysis: Present value of new business production ("PVP") Public finance - U.S.: Primary markets 26.7 $ 60.4 $ Secondary markets 7.3 13.9 Public finance - non-U.S. Primary markets - - Secondary markets - - Structured finance - U.S. 11.3 4.5 Structured finance - non-U.S. 7.2 - Total PVP 52.5 78.8 Less: PVP of credit derivatives - - PVP of financial guaranty insurance 52.5 78.8 Less: financial guaranty installment premium PVP 18.7 4.5 Total: financial guaranty upfront gross written premiums ("GWP") 33.8 74.3 Plus: financial guaranty installment adjustment 1 (45.3) 17.8 Total GWP (11.5) $ 92.1 $ Consolidated financial guaranty gross par written: Public finance - U.S. Primary markets 1,886 $ 5,816 $ Secondary markets 333 372 Public finance - non-U.S. Primary markets - - Secondary markets - - Structured finance - U.S. 100 1,000 Structured finance - non-U.S. - - Total 2,319 $ 7,188 $ Note: Please refer to the endnotes for an explanation of the non-GAAP financial measures. Assured Guaranty Ltd. New Business Production (dollars in millions) 1. Represents present value of new business on installment policies plus GWP adjustment on existing installment deals due to changes in assumptions and any cancellations of assumed reinsurance contracts. March 31, Three Months Ended Page 7 |
Sector: Gross Par Written Avg. Rating 1 U.S. public finance: General obligation 1,390 $ A- Tax backed 312 A Municipal utilities 160 A- Higher education 174 A Transportation 172 A Healthcare 5 BBB+ Other public finance 6 A- Total U.S. public finance 2,219 A- Non- U.S. public finance: Total non-U.S. public finance - - Total public finance 2,219 $ A- U. S. structured finance: Other structure finance 100 $ A+ Total U.S. structured finance 100 A+ Non-U.S. structured finance: Total non-U.S. structured finance - - Total structured finance 100 $ A+ Total gross par written 2,319 $ A- 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the nationally recognized statistical rating organizations ("NRSROs"); however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. Note: Please refer to the Glossary for a description of select types of U.S. public finance, non-U.S. public finance, U.S. structured finance and non-U.S. structured finance obligations that the Company insures and reinsures. Assured Guaranty Ltd. Financial Guaranty Gross Par Written (in millions) Financial Guaranty Gross Par Written by Asset Type Three Months Ended March 31, 2011 Page 8 |
3Q-09 4Q-09 1Q-10 2Q-10 3Q-10 4Q-10 1Q-11 PVP: Public finance - U.S. Primary markets 150.6 $ 99.5 $ 60.4 $ 72.7 $ 74.7 $ 77.8 $ 26.7 $ Secondary markets 4.3 14.5 13.9 8.7 9.8 10.1 7.3 Public finance - non-U.S. Primary markets - - - - - - - Secondary markets - - - 0.7 - - - Structured finance - U.S. 2.3 6.3 4.5 5.7 3.7 16.3 11.3 Structured finance - non-U.S. 0.9 0.1 - 2.1 0.7 0.9 7.2 Total PVP 158.1 120.4 78.8 89.9 88.9 105.1 52.5 Less: PVP of credit derivatives - - - - - - - PVP of financial guaranty insurance 158.1 120.4 78.8 89.9 88.9 105.1 52.5 Less: financial guaranty installment premium PVP 4.2 (2.9) 4.5 8.0 4.9 15.8 18.7 Total: financial guaranty upfront GWP 153.9 123.3 74.3 81.9 84.0 89.3 33.8 Plus: financial guaranty installment adjustment 1 (29.8) (66.9) 17.8 9.8 (6.4) (128.4) (45.3) Total financial guaranty GWP 124.1 56.4 92.1 91.7 77.6 (39.1) (11.5) Plus: other GWP 0.1 - - - - - - Total GWP 124.2 $ 56.4 $ 92.1 $ 91.7 $ 77.6 $ (39.1) $ (11.5) $ Gross par written2: Public finance - U.S. Primary markets 8,338 $ 6,296 $ 5,816 $ 6,537 $ 6,785 $ 7,057 $ 1,886 $ Secondary markets 159 440 372 290 441 464 333 Public finance - non-U.S. Primary markets - - - - - - - Secondary markets - - - 34 - - - Structured finance - U.S. 600 1,250 1,000 1,400 200 363 100 Structured finance - non-U.S. - - - - - - - Total 9,097 $ 7,986 $ 7,188 $ 8,261 $ 7,426 $ 7,884 $ 2,319 $ Net par outstanding (end of period): 3Q-09 4Q-09 1Q-10 2Q-10 3Q-10 4Q-10 1Q-11 Public finance - U.S. 424,885 $ 423,078 $ 430,112 $ 429,874 $ 426,584 $ 426,996 $ 417,367 $ Public finance - non-U.S. 43,227 42,775 41,406 39,573 42,125 40,743 41,828 Structured finance - U.S. 142,183 138,301 133,544 125,955 125,679 118,756 113,108 Structured finance - non-U.S. 36,335 36,268 34,403 32,112 33,684 30,636 29,984 Total 646,630 $ 640,422 $ 639,465 $ 627,514 $ 628,072 $ 617,131 $ 602,287 $ 2. Includes committed amount including undrawn revolvers. Note: AGM is included in the financial guaranty direct segment. Assured Guaranty Ltd. New Business Production by Quarter (in millions) 1. Represents present value of new business on installment policies plus GWP adjustment on existing installment deals due to changes in assumptions and any cancellations of assumed reinsurance contracts. Note: Please refer to the endnotes for an explanation of the non-GAAP financial measures. Page 9 |
Investment Portfolio, Available-For-Sale Pre-Tax After-Tax Annualized Amortized Book Book Fair Investment Cost Yield Yield Value Income1 Investment portfolio, available-for-sale: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. government agencies 496.8 $ 2.87% 2.19% 514.7 $ 14.3 $ Agency obligations 470.5 3.34% 2.81% 493.1 15.7 Foreign government securities 346.3 3.08% 2.01% 348.8 10.7 Obligations of states and political subdivisions 3,028.9 4.10% 3.87% 3,043.1 124.2 Insured obligations of state and political subdivisions 2 1,876.6 4.85% 4.59% 1,888.5 90.9 Corporate securities 946.9 3.64% 2.99% 953.1 34.4 Mortgage-backed securities ("MBS") 3: Residential MBS ("RMBS") 1,328.9 5.37% 4.35% 1,305.8 71.3 Commercial MBS ("CMBS") 395.6 4.52% 3.90% 409.0 17.9 Asset-backed securities 4 491.7 3.52% 2.52% 516.0 17.3 Total fixed maturity securities 9,382.2 4.23% 3.71% 9,472.1 396.7 Short-term investments 768.5 0.14% 0.10% 768.5 1.1 Total 10,150.7 $ 3.92% 3.44% 10,240.6 $ 397.8 $ Fair Ratings 5: Value % U.S. Treasury securities and obligations of U.S. government agencies 514.7 $ 5.4% Agency obligations 493.1 5.2% AAA/Aaa 3,169.5 33.5% AA/Aa 3,253.4 34.3% A/A 1,439.5 15.2% BBB 100.5 1.1% Below investment grade ("BIG") 6 302.1 3.2% Not rated 6 199.3 2.1% Total fixed maturity securities available-for-sale 9,472.1 $ 100.0% Duration of available-for-sale investment portfolio (in years): 5.0 Average ratings of available-for-sale investment portfolio AA 3. Contains no U.S. subprime RMBS. 4. Contains no collateralized debt obligations ("CDOs") of asset-backed securities ("ABS"). 6. Included in the investment portfolio are securities purchased or obtained as part of loss mitigation or other risk management strategies of $1,204.0 million in par with carrying value of $454.0 million. As of March 31, 2011 Assured Guaranty Ltd. (dollars in millions) 2. Reflects obligations of state and local political subdivisions that have been insured by other financial guarantors. The underlying ratings of these bonds, after giving effect to the lower of the rating assigned by Standard & Poor's Rating Services ("S&P") or Moody's Investors Service, Inc. ("Moody's") average A+. Includes $314.2 million insured by AGC and AGM. 1. Represents annualized investment income based on amortized cost and pre-tax book yields. 5.Ratings are represented by the lower of the Moody's and S&P classifications except for bonds purchased for loss mitigation or risk management strategies which use internal ratings classifications. Page 10 |
Estimated Future Estimated Net Ending Net Expected PV Future Net Credit Debt Service Debt Service Net Earned Accretion of Premiums Derivative Amortization Outstanding Premiums Discount Earned Revenues 3 Total 2011 (as of March 31, 2011) 905,999 $ 2011 (April 1 - December 31) 51,238 $ 854,761 557.1 $ 23.6 $ 580.7 $ 118.4 $ 699.1 $ 2012 68,447 786,314 589.9 29.5 619.4 132.0 751.4 2013 62,992 723,322 491.2 27.1 518.3 102.6 620.9 2014 64,268 659,054 434.7 25.3 460.0 72.8 532.8 2015 53,802 605,252 385.4 23.3 408.7 51.3 460.0 2011-2015 300,747 605,252 2,458.3 128.8 2,587.1 477.1 3,064.2 2016-2020 198,543 406,709 1,451.2 93.7 1,544.9 131.1 1,676.0 2021-2025 155,614 251,095 918.3 62.8 981.1 71.6 1,052.7 2026-2030 107,255 143,840 567.9 39.3 607.2 54.7 661.9 After 2030 143,840 - 611.3 33.8 645.1 91.2 736.3 Total 905,999 $ 6,007.0 $ 358.4 $ 6,365.4 $ 825.7 $ 7,191.1 $ 2. See page 13 for ‘‘Present Value of Financial Guaranty Insurance Net Expected Loss to be Expensed.’’ 3. Excludes contracts with credit impairment. Assured Guaranty Ltd. (in millions) Estimated Net Exposure Amortization 1 and Estimated Future Net Premium and Credit Derivative Revenues 1. Represents the future expected amortization of current debt service outstanding (principal and interest), assuming no advance refundings, as of March 31, 2011. Actual amortization differs from expected maturities because borrowers may have the right to call or prepay guaranteed obligations and because of management's assumptions on structured finance amortization. Financial Guaranty Insurance 2 Page 11 |
Structured Finance U.S. and Other Estimated Non-U.S. Pooled U.S. Financial Structured Ending Net Par Corporate RMBS Products 1 Finance Total Outstanding 2011 (as of March 31, 2011) 143,092 $ 2011 (April 1 - December 31) 8,301 $ 4,197 $ 281 $ 3,056 $ 15,835 $ 127,257 2012 14,001 4,103 1,107 4,121 23,332 103,925 2013 15,345 3,157 860 1,897 21,259 82,666 2014 19,500 2,247 659 1,825 24,231 58,435 2015 9,395 1,789 357 4,245 15,786 42,649 2011-2015 66,542 15,493 3,264 15,144 100,443 42,649 2016-2020 14,267 4,934 488 3,818 23,507 19,142 2021-2025 2,606 2,033 630 1,810 7,079 12,063 2026-2030 421 711 596 524 2,252 9,811 After 2030 3,565 954 1,315 3,977 9,811 - Total structured finance 87,401 $ 24,125 $ 6,293 $ 25,273 $ 143,092 $ Public Finance Estimated Estimated Net Par Ending Net Par Amortization Outstanding 2011 (as of March 31, 2011) 459,195 $ 2011 (April 1 - December 31) 17,072 $ 442,123 2012 22,106 420,017 2013 20,138 399,879 2014 19,832 380,047 2015 19,076 360,971 2011-2015 98,224 360,971 2016-2020 96,581 264,390 2021-2025 93,787 170,603 2026-2030 70,879 99,724 After 2030 99,724 - Total public finance 459,195 $ 1. See Glossary for description of financial products. Assured Guaranty Ltd. Expected Amortization of Net Par Outstanding (in millions) Estimated Net Par Amortization Page 12 |
Operating 2 GAAP 2011 (April 1 - June 30) 57.8 $ 48.0 $ 2011 (July 1 - September 30) 58.1 49.1 2011 (October 1 - December 31) 48.4 40.2 2012 138.0 110.8 2013 85.9 61.8 2014 66.8 45.8 2015 56.4 37.2 2011-2015 511.4 392.9 2016-2020 194.3 138.4 2021-2025 85.3 68.1 2026-2030 58.7 54.6 After 2030 54.5 53.6 Total expected PV of net expected loss to be expensed 904.2 707.6 Discount 709.3 707.1 Total future value 1,613.5 $ 1,414.7 $ 2. Operating income includes net expected loss to be expensed on consolidated VIEs. Assured Guaranty Ltd. Present Value ("PV") of Financial Guaranty Insurance Net Expected Loss to be Expensed (in millions) Net Expected Loss to be Expensed 1 1. The expected present value of net loss to be expensed is discounted by weighted-average risk free rates ranging from 0.0% to 5.29%. Page 13 |
Net Par Outstanding and Average Rating by Asset Type Net Par Outstanding Avg. Rating 1 Net Par Outstanding Avg. Rating 1 U.S. public finance: General obligation 178,259 $ A+ 181,799 $ A+ Tax backed 81,687 A+ 83,403 A+ Municipal utilities 67,908 A 70,066 A Transportation 35,996 A 36,973 A Healthcare 20,957 A 21,592 A Higher education 15,654 A+ 15,687 A+ Housing 6,280 AA- 6,562 AA- Infrastructure finance 4,121 BBB+ 4,092 BBB+ Investor-owned utilities 1,260 A- 1,505 A- Other public finance 5,245 A- 5,317 A- Total U.S. public finance 417,367 A+ 426,996 A+ Non-U.S. public finance: Infrastructure finance 16,339 BBB 15,973 BBB Regulated utilities 14,220 BBB+ 13,978 BBB+ Pooled infrastructure 3,551 AA 3,432 AA Other public finance 7,718 AA- 7,360 AA- Total non-U.S. public finance 41,828 A- 40,743 A- Total public finance 459,195 $ A 467,739 $ A U.S. structured finance: Pooled corporate obligations 64,402 $ AAA 67,384 $ AAA RMBS 24,125 BB 25,130 BB CMBS and other commercial real estate related exposures 6,919 AAA 7,084 AAA Financial products 2 6,293 AA- 6,831 AA- Consumer receivables 5,549 A+ 6,073 AA- Commercial receivables 2,057 BBB+ 2,139 BBB+ Insurance securitizations 1,698 A+ 1,584 A+ Structured credit 930 BB 1,729 BBB Other structured finance 1,135 A- 802 A- Total U.S. structured finance 113,108 AA- 118,756 AA- Non- U.S. structured finance: Pooled corporate obligations 22,999 AAA 22,610 AAA RMBS 2,623 AA+ 3,394 AA+ Commercial receivables 1,616 A- 1,729 A- Structured credit 1,195 BBB 1,267 BBB Insurance securitizations 964 CCC- 964 CCC- CMBS and other commercial real estate related exposures 188 AAA 251 AAA Other structured finance 399 Super Senior 421 Super Senior Total non-U.S. structured finance 29,984 AA+ 30,636 AA+ Total structured finance 143,092 $ AA- 149,392 $ AA Total net par outstanding 602,287 $ A+ 617,131 $ A+ December 31, 2010 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAA-rated exposure on its internal rating scale has additional credit enhancement due to either (a) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (b) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point. 2. See the Glossary for a description of financial products. Note: Please refer to the Glossary for a description of select types of U.S. public finance, non-U.S. public finance, U.S. structured finance and non-U.S. structured finance obligations that the Company insures and reinsures. Assured Guaranty Ltd. Financial Guaranty Profile (1 of 3) As of March 31, 2011 (in millions) March 31, 2011 Page 14 |
Distribution by Ratings of Financial Guaranty Portfolio Ratings 1: Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Net Par Outstanding % Super senior - $ 0.0% 1,486 $ 3.6% 22,256 $ 19.7% 8,081 $ 27.0% 31,823 $ 5.3% AAA 5,587 1.3% 1,382 3.3% 41,376 36.6% 12,911 43.1% 61,256 10.2% AA 156,954 37.6% 1,367 3.3% 15,776 13.9% 1,970 6.6% 176,067 29.2% A 210,705 50.5% 12,932 30.9% 6,181 5.5% 1,827 6.1% 231,645 38.5% BBB 41,130 9.9% 22,793 54.4% 6,841 6.0% 3,903 12.9% 74,667 12.3% BIG 2,991 0.7% 1,868 4.5% 20,678 18.3% 1,292 4.3% 26,829 4.5% Total net par outstanding 417,367 $ 100.0% 41,828 $ 100.0% 113,108 $ 100.0% 29,984 $ 100.0% 602,287 $ 100.0% 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAA-rated exposure on its internal rating scale has additional credit enhancement due to either (a) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (b) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point. As of March 31, 2011 Assured Guaranty Ltd. Financial Guaranty Profile (2 of 3) (dollars in millions) Structured Finance - Non-U.S. Consolidated Structured Finance - U.S. Public Finance - U.S. Public Finance - Non-U.S. Page 15 |
Geographic Distribution of Financial Guaranty Portfolio as of March 31, 2011 U.S.: Net Par Public finance: Outstanding % of Total California 59,432 $ 9.9% New York 34,360 5.7% Pennsylvania 30,438 5.1% Texas 30,321 5.0% Florida 26,384 4.4% Illinois 25,783 4.3% New Jersey 17,594 2.9% Michigan 16,586 2.8% Massachusetts 12,149 2.0% Other states 164,320 27.3% Total public finance 417,367 69.4% Structured finance (multiple states) 113,108 18.8% Total U.S. 530,475 88.2% Non-U.S.: United Kingdom 26,731 4.4% Australia 9,192 1.5% Canada 4,471 0.7% France 2,706 0.4% Italy 2,379 0.4% Other 26,333 4.4% Total non-U.S. 71,812 11.8% Total net par outstanding 602,287 $ 100.0% Assured Guaranty Ltd. Financial Guaranty Profile (3 of 3) (dollars in millions) Page 16 |
Distribution of Direct Pooled Corporate Obligations by Ratings as of March 31, 2011 Ratings 1: Net Par Outstanding % of Total Avg. Initial Credit Enhancement 2 Avg. Current Credit Enhancement 2 Super Senior 24,262 $ 28.2% 31.0% 29.3% AAA 48,530 56.5% 28.5% 28.8% AA 5,543 6.4% 41.3% 37.5% A 550 0.6% 47.1% 40.2% BBB 3,859 4.5% 29.7% 23.6% BIG 3,202 3.8% 45.9% 22.4% Total exposures 85,946 $ 100.0% 30.9% 29.1% Distribution of Direct Pooled Corporate Obligations by Asset Class as of March 31, 2011 Asset class: Net Par Outstanding % of Total Avg. Initial Credit Enhancement 2 Avg. Current Credit Enhancement 2 Avg. Rating1 CBOs/CLOs3 51,094 $ 59.4% 31.2% 30.5% AAA Synthetic investment grade pooled corporates 15,165 17.6% 19.2% 17.5% AAA Synthetic high yield pooled corporates 6,605 7.7% 39.6% 34.6% AAA Market value CDOs of corporates 5,378 6.3% 34.5% 41.7% AAA Trust preferred – banks and insurance 4 3,495 4.1% 47.0% 32.6% BBBTrust preferred – U.S. mortgage and REITs 4 5 2,338 2.7% 50.0% 32.6% BB Trust preferred – European mortgage and REITs 4 5 974 1.1% 36.7% 33.5% BBBOther pooled corporates 897 1.1% 24.4% 21.1% BBB+ Total exposures 85,946 $ 100.0% 30.9% 29.1% AAA 5. REITs are real estate investment trusts. 3. CBOs (collateralized bond obligation)/CLOs (collateralized loan obligation) are largely non-investment grade/high yield collateral. 4. Prior to fourth quarter 2010, the ratio of average current credit enhancement for Trust Preferred Pooled Corporate Obligations was based on the value of the collateral as reported by the trustees, which for non-performing or low-rated collateral varied by transaction in accordance with the individual transaction documents. Beginning fourth quarter 2010, Assured Guaranty has made the measure consistent across transactions, assigning a value of 100% of the par to all performing securities, applying a standard haircut for restructured performing collateral, assigning recovery assumptions for defaulted collateral by collateral type, and making additional negative adjustments for transactions where the notional amount of interest rate hedges materially exceeds the amount of performing collateral requiring hedges. 2. ‘‘Average Credit Enhancement’’ is intended to provide a measure of the amount of equity and/or subordinated tranches that are junior in the capital structure to Assured Guaranty’s exposure, expressed as a percentage of the total transaction size, and reflects any reduction of that credit support resulting from defaults or other factors. For transactions where excess spread may be available to absorb certain losses, the amounts shown above do not include any benefit from excess spread. The calculation methodologies differ for the various asset classes to reflect differences in transaction structures in order to provide a measure that management believes is comparable across asset classes. Data is obtained from third-party sources such as trustee reports and may be subject to misstatement or correction. 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAArated exposure on its internal rating scale has additional credit enhancement due to either (a) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (b) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point. Assured Guaranty Ltd. Direct Pooled Corporate Obligations Profile (dollars in millions) Page 17 |
Distribution of U.S. RMBS by Rating 1 and Type of Exposure as of March 31, 2011 Ratings: Prime First Lien 2 Closed End Seconds HELOC 3 Alt-A First Lien Alt-A Option ARMs Subprime First Lien Net Interest Margin Total Net Par Outstanding AAA 9 $ 0 $ 418 $ 97 $ - $ 2,129 $ - $ 2,654 $ AA 24 30 251 269 27 1,834 0 2,435 A 153 1 19 40 123 909 - 1,245 BBB 25 - 15 580 107 872 0 1,600 BIG 601 1,084 3,809 4,953 2,763 2,921 60 16,191 Total exposures 813 $ 1,114 $ 4,513 $ 5,939 $ 3,020 $ 8,665 $ 60 $ 24,125 $ Distribution of U.S. RMBS by Year Insured 4 and Type of Exposure as of March 31, 2011 Year insured: Prime First Lien Closed End Seconds HELOC Alt-A First Lien Alt-A Option ARMs Subprime First Lien Net Interest Margin Total Net Par Outstanding 2004 and prior 52 $ 1 $ 337 $ 126 $ 49 $ 1,590 $ 0 $ 2,155 $ 2005 180 - 1,008 675 140 361 0 2,364 2006 134 453 1,378 472 757 3,697 14 6,906 2007 446 659 1,790 2,994 1,968 2,930 47 10,835 2008 - - - 1,672 106 87 - 1,865 Total exposures 813 $ 1,114 $ 4,513 $ 5,939 $ 3,020 $ 8,665 $ 60 $ 24,125 $ Distribution of U.S. RMBS by Rating 1 and Year Insured 4 as of March 31, 2011 AAA AA A BBB BIG Year insured: Rated Rated Rated Rated Rated Total 2004 and prior 1,429 $ 81 $ 104 $ 171 $ 370 $ 2,155 $ 2005 167 152 40 124 1,881 2,364 2006 766 1,611 952 416 3,161 6,906 2007 286 430 44 575 9,499 10,835 2008 5 160 106 314 1,280 1,865 Total exposures 2,654 $ 2,435 $ 1,245 $ 1,600 $ 16,191 $ 24,125 $ % of total 11.0% 10.1% 5.2% 6.6% 67.1% 100.0% 2. Includes primarily Prime First Lien plus an insignificant amount of other miscellaneous RMBS transactions. 3. Home equity line of credit ("HELOC") securitizations. 4. Assured Guaranty has not insured any U.S. RMBS transactions since 2008. Assured Guaranty Ltd. Consolidated U.S. RMBS Profile (dollars in millions) 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. Page 18 |
U.S. Prime First Lien 2 Year insured: Net Par Outstanding Pool Factor 3 Subordination 4 Cumulative Losses 5 60+ Day Delinquencies 6 Number of Transactions 2005 $ 176 47.4% 5.3% 1.0% 9.4% 6 2006 134 63.0% 8.2% 0.0% 15.0% 1 2007 446 59.8% 10.1% 2.7% 15.0% 1 2008 - - - - - - 757 $ 57.5% 8.6% 1.8% 13.7% 8 U.S. Closed End Seconds Year insured: Net Par Outstanding Pool Factor Subordination 7 Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 - $ - - - - - 2006 442 18.8% - 57.7% 13.4% 2 2007 659 22.9% - 63.2% 11.2% 10 2008 - - - - - - 1,102 $ 21.3% - 61.0% 12.1% 12 U.S. HELOC Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 947 $ 19.9% 2.6% 13.8% 12.0% 6 2006 1,353 32.4% 1.9% 30.7% 11.1% 7 2007 1,790 47.5% 3.1% 27.1% 6.4% 9 2008 - - - - - - 4,090 $ 36.1% 2.6% 25.2% 9.3% 22 U.S. Alt-A First Lien Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 672 $ 38.6% 10.9% 5.0% 19.6% 21 2006 472 45.9% 0.1% 14.4% 37.7% 7 2007 2,994 57.7% 6.5% 10.1% 34.1% 12 2008 1,672 53.7% 25.3% 10.2% 31.5% 5 5,810 $ 53.4% 11.9% 9.9% 31.9% 45 3. Pool factor is the percentage of the current collateral balance divided by the original collateral balance of the transactions at inception. 5. Cumulative losses are defined as net charge-offs on the underlying loan collateral divided by the original collateral balance. 7. Many of the closed end second lien transactions insured by the Company have unique structures whereby the collateral may be written down for losses without a corresponding write-down of the obligations insured by the Company. Many of these transactions are currently under-collateralized, with the principal amount of collateral being less than the principal amount of the obligation insured by the Company. The Company is not required to pay principal shortfalls until legal maturity (rather than making timely principal payments), and takes the under-collateralization into account when estimating expected losses for these transactions. 4. Represents the sum of subordinate tranches and over-collateralization, expressed as a percentage of total transaction size and does not include any benefit from excess interest collections that may be used to absorb losses. 6. 60+ day delinquencies are defined as loans that are greater than 60 days delinquent and all loans that are in foreclosure, bankruptcy or real estate owned ("REO") divided by current collateral balance. Assured Guaranty Ltd. Direct U.S. RMBS Profile (1 of 2) (dollars in millions) Distribution of Direct U.S. RMBS Insured January 1, 2005 or Later by Exposure Type, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies as of March 31, 2011 1 1. Net par outstanding is based on values as of March 31, 2011. All performance information such as pool factor, subordination, cumulative losses and delinquency is based on March 31, 2011 information obtained from Intex, Bloomberg, and/or provided by the trustee and may be subject to restatement or correction. 2. Includes primarily Prime First Lien plus an insignificant amount of other miscellaneous MBS transactions. Page 19 |
U.S. Alt-A Option ARMs Year insured: Net Par Outstanding Pool Factor2 Subordination 3 Cumulative Losses 4 60+ Day Delinquencies 5 Number of Transactions 2005 131 $ 27.9% 8.7% 8.2% 38.9% 4 2006 751 52.9% 3.6% 11.9% 52.7% 7 2007 1,968 57.7% 4.5% 13.0% 40.8% 11 2008 106 60.2% 49.5% 8.9% 28.2% 1 $ 2,956 55.3% 6.1% 12.3% 43.3% 23 U.S. Subprime First Lien Year insured: Net Par Outstanding Pool Factor Subordination Cumulative Losses 60+ Day Delinquencies Number of Transactions 2005 $ 352 36.0% 46.7% 5.3% 41.4% 7 2006 3,690 24.7% 61.4% 14.4% 40.5% 4 2007 2,930 57.2% 25.7% 14.6% 48.7% 13 2008 82 70.1% 31.9% 8.4% 29.4% 1 $ 7,054 39.3% 45.5% 14.0% 43.8% 25 2. Pool factor is the percentage of the current collateral balance divided by the original collateral balance of the transactions at inception. 4. Cumulative losses are defined as net charge-offs on the underlying loan collateral divided by the original collateral balance. 5. 60+ day delinquencies are defined as loans that are greater than 60 days delinquent and all loans that are in foreclosure, bankruptcy or REO divided by current collateral balance. Assured Guaranty Ltd. Direct U.S. RMBS Profile (2 of 2) (dollars in millions) Distribution of Direct U.S. RMBS Insured January 1, 2005 or Later by Exposure Type, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies as of March 31, 2011 1 1. Net par outstanding is based on values as of March 31, 2011. All performance information such as pool factor, subordination, cumulative losses and delinquency is based on March 31, 2011 information obtained from Intex, Bloomberg, and/or provided by the trustee and may be subject to restatement or correction. 3. Represents the sum of subordinate tranches and over-collateralization, expressed as a percentage of total transaction size and does not include any benefit from excess interest collections that may be used to absorb losses. Page 20 |
U.S. CMBS Rating: Net Par Outstanding Pool Factor3 Subordination 4 Cumulative Losses 5 60+ Day Delinquencies 6 Number of Transactions Super senior $ 4,164 86.8% 34.4% 0.8% 8.5% 182 AAA 260 80.2% 27.7% 0.8% 12.4% 10 AA 750 83.7% 19.0% 1.2% 7.1% 29 A 404 74.7% 16.1% 0.8% 11.6% 11 BBB - - - - - - BIG - - - - - - Total exposures $ 5,578 85.2% 30.7% 0.9% 8.7% 232 CDOs of U.S. Commercial Real Estate and CMBS7 Net Par Outstanding % of Total Avg. Initial Credit Enhancement 8 Avg. Current Credit Enhancement 8 CDOs of commercial real estate $ 664 69.5% 49.8% 51.6% CDOs of CMBS9 291 30.5% 30.8% 46.8% Total exposures $ 955 100.0% 44.0% 50.1% 3. Pool factor is the percentage of the current collateral balance divided by the original collateral balance of the transactions at inception. 5. Cumulative losses are defined as net charge-offs on the underlying loan collateral divided by the original pool balance. 7. Represents other U.S. Commercial Real Estate not included in the table above. 9. Relates to vintages 2003 and prior. 6. 60+ day delinquencies are defined as loans that are greater than 60 days delinquent and all loans that are in foreclosure, bankruptcy or REO and any matured non-performing loans divided by current collateral balance. 8. "Average Credit Enhancement" is intended to provide a measure of the amount of equity and/or subordinated tranches that are junior in the capital structure to Assured's exposure, expressed as a percentage of the total transaction size, and reflects any reduction of that credit support resulting from defaults or other factors. For transactions where excess spread may be available to absorb certain losses, the amounts shown above do not include any benefit from excess spread. The calculation methodologies differ for the various asset classes to reflect differences in transaction structures in order to provide a measure that management believes is comparable across asset classes. Data is obtained from third-party sources such as trustee reports and may be subject to misstatement or correction. Assured Guaranty Ltd. Direct U.S. Commercial Real Estate Profile (dollars in millions) Distribution of Direct U.S. CMBS Insured January 1, 2005 or Later by Exposure Type, Internal Rating 1, Average Pool Factor, Subordination, Cumulative Losses and 60+ Day Delinquencies as of March 31, 2011 2 2. Net par outstanding is based on values as of March 31, 2011. All performance information such as pool factor, subordination, cumulative losses and delinquency is based on March 31, 2011 information obtained from Intex, Trepp LLC, and/or provided by the trustee and may be subject to restatement or correction. 4. Represents the sum of subordinate tranches, over-collateralization and any first loss deductible, expressed as a percentage of total transaction size and does not include any benefit from excess interest collections that may be used to absorb losses. 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAA-rated exposure on its internal rating scale has additional credit enhancement due to either (a) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (b) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point. Page 21 |
Distribution of Direct U.S. Consumer Receivables by Rating 1 as of March 31, 2011 Rating: Credit Cards Student Loans Manufactured Housing Auto Total Net Par Outstanding Super senior $ 1,150 $ - $ - $ - $ 1,150 AAA - 392 76 16 484 AA - - 44 860 904 A - - - 664 664 BBB - 869 - 178 1,047 BIG - - 158 - 158 Total exposures $ 1,150 $ 1,261 $ 278 $ 1,718 $ 4,407 Average rating 1 Super Senior A A- A+ AA- Avg. initial credit enhancement 2 53.7% 7.2% 27.5% 13.5% 23.1% Avg. current credit enhancement 2 56.8% 8.7% 25.9% 35.1% 32.6% Assured Guaranty Ltd. Direct U.S. Consumer Receivables Profile (dollars in millions) 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAA-rated exposure on its internal rating scale has additional credit enhancement due to either (a) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (b) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point. 2."Average Credit Enhancement" is intended to provide a measure of the amount of equity and/or subordinated tranches that are junior in the capital structure to Assured Guaranty's exposure, expressed as a percentage of the total transaction size, and reflects any reduction of that credit support resulting from defaults or other factors. For transactions where excess spread may be available to absorb certain losses, the amounts shown above do not include any benefit from excess spread. The calculation methodologies differ for the various asset classes to reflect differences in transaction structures in order to provide a measure that management believes is comparable across asset classes. Data is obtained from third-party sources such as trustee reports and may be subject to misstatement or correction. Page 22 |
BIG Exposures by Asset Exposure Type March 31, 2011 December 31, 2010 U.S. public finance: General obligation $ 776 $ 882 Municipal utilities 521 541 Tax backed 428 430 Healthcare 310 333 Transportation 160 162 Infrastructure finance 61 61 Higher education 21 21 Housing 1 8 Other public finance 713 721 Total U.S. public finance 2,991 3,159 Non-U.S. public finance: Infrastructure finance 1,557 1,506 Regulated utilities 5 289 Other public finance 306 - Total non-U.S. public finance 1,868 1,795 Total public finance $ 4,859 $ 4,954 U.S. structured finance: RMBS $ 16,191 $ 16,355 Pooled corporate obligations 3,131 2,976 Consumer receivables 488 425 Structured credit 387 399 Commercial receivables 318 240 Other structured finance 163 163 Total U.S. structured finance 20,678 20,558 Non-U.S. structured finance: Insurance securitizations 923 923 Pooled corporate obligations 353 355 Commercial receivables 16 16 Total non-U.S. structured finance 1,292 1,294 Total structured finance $ ,970 $ 21,852 Total BIG net par outstanding $ ,829 $ 26,806 Assured Guaranty Ltd. Below Investment Grade Exposures (1 of 5) (in millions) 1. Securities purchased for loss mitigation purposes represented $956.5 million and $489.3 million of gross par outstanding as of March 31, 2011 and December 31, 2010, respectively. In addition, under the terms of certain credit derivative contracts, the Company has obtained the underlying collateral of transactions and recorded it in invested assets in the consolidated balance sheets. Such amounts totaled $248.7 million and $251.8 million in gross par outstanding as of March 31, 2011 and December 31, 2010, respectively. Note: Please refer to the Glossary for a description of select types of U.S. public finance, non-U.S. public finance, U.S. structured finance and non-U.S. structured finance obligations that the Company insures and reinsures. BIG Net Par Outstanding 1 Page 23 |
Net Par Outstanding by BIG Category 1 March 31, 2011 2 December 31, 2010 2 Category 1 U.S. public finance $ 1,824 $ 1,958 Non-U.S. public finance 1,867 1,794 U.S. structured finance 4,387 4,717 Non-U.S. structured finance 291 293 Total Category 1 8,369 8,762 Category 2 U.S. public finance 281 282 Non-U.S. public finance 1 1 U.S. structured finance 8,998 8,818 Non-U.S. structured finance 2 2 Total Category 2 9,282 9,103 Category 3 U.S. public finance 886 919 Non-U.S. public finance - - U.S. structured finance 7,293 7,023 Non-U.S. structured finance 999 999 Total Category 3 9,178 8,941 BIG Total $ 26,829 $ 26,806 2. Securities purchased for loss mitigation purposes represented $956.5 million and $489.3 million of gross par outstanding as of March 31, 2011 and December 31, 2010, respectively. In addition, under the terms of certain credit derivative contracts, the Company has obtained the underlying collateral of transactions and recorded it in invested assets in the consolidated balance sheets. Such amounts totaled $248.7 million and $251.8 million in gross par outstanding as of March 31, 2011 and December 31, 2010, respectively. Assured Guaranty Ltd. Below Investment Grade Exposures (2 of 5) (dollars in millions) 1. Assured Guaranty's surveillance department is responsible for monitoring our portfolio of credits and maintains a list of below investment grade (“BIG”) credits. During the fourth quarter of 2010 the Company revised the definitions of the three BIG surveillance categories to more closely track its view of whether a transaction is expected to experience a loss, without regard to whether the probability weighted expected loss exceeded the unearned premium reserve. While the revisions resulted in a number of transactions moving between BIG categories, the Company estimates that the revisions had a relatively small impact on the totals in each category. BIG Category 1: Below investment grade transactions showing sufficient deterioration to make lifetime losses possible, but for which none are currently expected. Transactions on which claims have been paid but are expected to be fully reimbursed (other than investment grade transactions on which only liquidity claims have been paid) are in this category. BIG Category 2: Below investment grade transactions for which lifetime losses are expected but for which no claims (other than liquidity claims) have yet been paid. BIG Category 3: Below investment grade transactions for which lifetime losses are expected and on which claims (other than liquidity claims) have been paid. Transactions remain in this category when claims have been paid and only a recoverable remains. Financial Guaranty Insurance and Credit Derivatives Surveillance Categories Page 24 |
Public Finance BIG Exposures Greater Than $50 Million Net Par Internal Name or description Outstanding Rating 1 U.S. public finance: Jefferson County Alabama Sewer 494 $ D Detroit (City of) Michigan 414 BB Jefferson County Alabama School Sales Tax Limited Obligation 176 BB Detroit (City of) School District Michigan 165 BB San Joaquin Hills California Transportation 160 BB Guaranteed Student Loan transaction 158 B Guaranteed Student Loan transaction 136 CCC St. Barnabas Health System - New Jersey 133 BB Orlando Tourist Development Tax - Florida 118 BB+ Mashantucket Pequot Tribe, Connecticut 107 B Harrisburg (City of) Pennsylvania General Obligation 93 B- erto Rico Public Finance Corporation - Commonwealth Appropriation 88 BB+ Guaranteed Student Loan transaction 74 B Guaranteed Student Loan transaction 62 BB Guaranteed Student Loan transaction 59 BB Total 2,437 $ Non-U.S. public finance: Reliance Rail Finance Pty. Ltd 852 BB Hellenic Republic 307 BB+ Cross City Tunnel Motorway Finance Limited 306 BB Aeroporti Di Roma (ADR) Romulus Finance S.R.L. (Rome Airport) 267 BB Alte Liebe I Limited (Wind Farm) 106 BB Total $ 838 $ Total 4,275 Assured Guaranty Ltd. Below Investment Grade Exposures (3 of 5) As of March 31, 2011 (dollars in millions) 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. Page 25 |
Structured Finance BIG Exposures Greater Than $50 Million Net Par Internal Current Credit 60+ Day Name or description Outstanding Rating 1 Enhancement Delinquencies 2 U.S. structured finance: U.S. RMBS: Deutsche Alt-A Securities Mortgage Loan 2007-2 872 $ CCC 0.6% 31.3% MABS 2007-NCW 579 B 32.6% 66.1% Countrywide HELOC 2006-I 503 CCC 0.0% 7.5% MASTR 2007-3 489 CCC 0.0% 54.0% Mortgage IT Securities Corp. Mortgage Loan 2007-2 446 B 10.1% 15.0% Private Residential Mortgage Transaction 443 B 20.3% 31.5% Private Residential Mortgage Transaction 440 B 21.1% 30.2% Countrywide HELOC 2006-F (includes $36.4 million repurchased) 3 426 CCC 0.0% 21.0% Deutsche Alt-A Securities Mortgage Loan 2007-3 398 B 5.5% 23.3% Private Residential Mortgage Transaction 397 B 20.8% 28.7% Private Residential Mortgage Transaction 395 CCC 23.2% 33.0% Option One 2007-FXD2 384 CCC 17.0% 31.5% CWALT Alternative Loan Trust 2007-HY9 363 CCC 6.2% 47.9% Private Residential Mortgage Transaction 355 CCC 13.0% 35.8% Nomura Asset Accept. Corp. 2007-1 (includes $0.8 million repurchased) 3 352 CCC 0.0% 39.6% AAA Trust 2007-2 316 CCC 32.1% 46.0% Harborview 2006-12 312 CCC 8.2% 59.4% Countrywide Home Equity Loan Trust 2007-D 311 CCC 0.0% 8.6% Countrywide Home Equity Loan Trust 2005-J 310 CCC 0.0% 16.2% Countrywide HELOC 2005-D 289 CCC 0.0% 11.8% Countrywide 2007-13 268 B 31.3% 57.6% Countrywide HELOC 2007-A (includes $24.0 million repurchased) 3 261 CCC 0.0% 7.4% Terwin Mortgage Trust 2006-12SL (includes $258.1 million repurchased) 3 249 CCC 0.0% 14.7% MARM 2007-1 (FKA MASTR 2007-OA1) (includes $1.2 million repurchased) 3 245 CCC 0.0% 34.2% GMACM 2004-HE3 234 B 0.0% 3.9% Countrywide HELOC 2007-B 234 CCC 0.0% 7.0% CWABS 2007-4 220 CCC 21.5% 45.8% Terwin Mortgage Trust 2007-1SL (includes $198.3 million repurchased) 3 205 CCC 0.0% 11.1% FHABS 2007-HE1 HELOC 201 B 0.0% 3.2% Soundview 2007-WMC1 193 CCC 8.9% 71.6% Terwin Mortgage Trust 2006-10SL (includes $94.9 million repurchased) 3 193 CCC 0.0% 11.7% Indymac 2007-H1 HELOC 191 CCC 0.0% 8.9% Harborview 2006-1 181 CCC 0.0% 60.7% FHABS 2006-HE2 HELOC 179 B 0.0% 4.3% Harborview 2007-1 179 CCC 11.8% 60.1% New Century 2005-A 163 B 20.7% 33.5% Renaissance (DELTA) 2007-3 147 CCC 23.8% 34.9% Countrywide HELOC 2005-C 138 B 0.0% 12.1% CSAB 2006-3 138 CCC 0.0% 43.7% CWALT 2007-OA10 (includes $42.1 million repurchased) 3 130 CCC 11.4% 51.5% Lehman Excess Trust 2007-16N 120 CCC 7.5% 43.6% Flagstar HELOC 2006-2 106 CCC 20.7% 8.2% Flagstar HELOC 2005-1 105 BB 20.5% 5.7% Taylor Bean & Whitaker 2007-2 (includes $29.4 million repurchased) 3 104 CCC 0.0% 28.3% Harborview 2006-10 103 CCC 0.0% 28.1% ACE Home Equity Loan Trust 2007-SL3 98 B 0.0% 9.6% American Home Mortgage Assets Trust 2007-4 96 CCC 0.0% 31.4% NAAC 2007-S2 92 CCC 0.0% 13.4% Deutsche Alt-B 2006-AB1 91 CCC 0.5% 28.6% CSAB 2006-2 (includes $11.8 million repurchased) 3 90 CCC 0.0% 38.2% IndyMac IMSC Mortgage Loan Trust 2007-HOA1 84 CCC 0.0% 33.8% Private Residential Mortgage Transaction 81 B 26.0% 34.0% MASTR Asset Backed Securities Trust 2005-NC2 80 CCC 12.9% 39.1% Countrywide ALTA 2005-22T 77 B 5.8% 26.5% Countrywide HELOC 2006-H (includes $14.1 million repurchased) 3 68 CCC 0.0% 19.7% Terwin Mortgage Trust 2005-16HE 67 B 9.2% 26.8% CSMC 2007-3 67 CCC 0.0% 32.9% MASTR 2006-OA2 (NEGAM) 65 BB 0.0% 52.0% Terwin Mortgage Trust 2007-6ALT (includes $27.7 million repurchased) 3 63 CCC 0.0% 53.3% ACE 2007-SL1 62 BB 0.0% 10.8% CSAB Mortgage-Backed Trust 2007-1 (includes $11.7 million repurchased) 3 59 CCC 0.0% 35.2% Deutsche Alt-B 2006-AB4 56 CCC 0.0% 34.5% ACE 2006-GP1 55 CCC 0.0% 7.2% Terwin Mortgage Trust 2005-14HE 52 B 8.4% 24.0% Total U.S. RMBS 14,270 $ 2. 60+ day delinquencies are defined as loans that are greater than 60 days delinquent and all loans that are in foreclosure, bankruptcy or REO divided by net par outstanding. 3. Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio. Assured Guaranty Ltd. Below Investment Grade Exposures (4 of 5) As of March 31, 2011 (dollars in millions) 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. Page 26 |
Structured Finance BIG Exposures Greater Than $50 Million (continued) Net Par Internal Current Credit Name or description Outstanding Rating 1 Enhancement U.S. structured finance: Other: Taberna Preferred Funding IV, Ltd 292 $ CCC 26.8% Taberna Preferred Funding III, Ltd 287 CCC 16.6% Alesco Preferred Funding XVI, Ltd 257 B 7.1% Taberna Preferred Funding II, Ltd 233 CCC 22.2% Attentus CDO I, Ltd 228 BB 29.7% Trapeza CDO XI 218 BB- 28.2% Weinstein Film Securitization 213 CCC N/A Alesco Preferred Funding XVII, Ltd 203 B 16.0% Attentus CDO II, Ltd 189 BB 26.1% Trapeza CDO X, Ltd 165 BB- 31.2% Taberna Preferred Funding VI, Ltd 152 CCC 26.5% Preferred Term Securities XIX, Ltd 149 BB+ 34.4% US Capital Funding IV, LTD 148 B- 13.5% NRG PEAKER (includes $231.1 million repurchased) 2 3 143 CCC N/A Private Student Loan Transaction 124 CCC N/A Preferred Term Securities XVI, Ltd 120 B 21.5% Synthetic High Yield Pooled Corporate CDO 114 CCC 7.7% Private Other Non-Municipal Transaction 111 B N/A Private Student Loan Transaction 100 CCC N/A Conseco Finance Manufactured Housing Series 2001-2 94 BB 16.3% Greenpoint 2000-4 69 BB 12.6% Preferred Term Securities XVII, Ltd 64 BB+ 28.9% America West Airlines EETC 63 BB N/A CAPCO - Excess SIPC Excess of Loss Reinsurance 63 BB N/A Preferred Term Securities XVIII, Ltd 63 BB 33.7% Preferred Term Securities XX, Ltd 53 BB 29.2% Rental Car Finance Corp 2006-1 50 BB N/A Rental Car Finance Corp 2007-1 50 BB N/A Total other 4,015 $ Total 18,285 $ Non-U.S. structured finance: Ballantyne RE, PLC Class A-2 Floating Rate Notes (includes $106.4 million repurchased) 2 500 $ CC N/A Orkney Re II, Plc Series A-1 Floating Rate Notes 423 CCC N/A Augusta Funding Limited 05 Perpetual Note Issue 82 BB N/A Augusta Funding Limited 07 Perpetual Note Issue 77 BB N/A Synthetic High Yield Pooled Corporate CDO 76 CCC 7.7% Total 1,158 $ Total 19,443 $ 2. Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio. 3. Net par shown is net of $96 million of ceded par. The Company owns 100% of the collateral in the insured transaction. Assured Guaranty Ltd. Below Investment Grade Exposures (5 of 5) As of March 31, 2011 (dollars in millions) 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. Page 27 |
Net Par Credit name: Outstanding Rating1 New Jersey (State of) 4,367 $ AA- California (State of) 3,534 BBB+ Massachusetts (Commonwealth of) 3,161 AA New York (City of) New York 3,025 AA New York (State of) 2,808 AA- Puerto Rico (Commonwealth of) 2,636 BBB- Chicago (City of) Illinois 2,516 AA- Washington (State of) 2,320 AA- Miami-Dade County Florida Aviation Authority - Miami International Airport 2,306 A+ Houston Texas Water and Sewer Authority 2,290 A+ Port Authority of New York and New Jersey 2,260 AA- Illinois (State of) 2,257 BBB+ Wisconsin (State of) 2,225 AA- Los Angeles California Unified School District 2,208 AAUniversity of California Board of Regents 2,005 AA- Massachusetts (Commonwealth of) State Sales Tax 1,976 AA New York MTA Transportation Authority 1,966 A Pennsylvania (Commonwealth of) 1,898 AA- New York City Municipal Water Finance Authority 1,816 AA+ Michigan (State of) 1,667 A+ Long Island Power Authority 1,626 A- Chicago-O'Hare International Airport 1,610 A Philadelphia (City of) Pennsylvania 1,605 BBB- Miami-Dade County Florida School Board 1,575 A- Arizona (State of) 1,549 AA- Florida (State of) 1,487 AA+ Los Angeles California Department of Water and Power - Electric Revenue Bonds 1,473 AA- Chicago Illinois Public Schools 1,456 A+ Kentucky (Commonwealth of) 1,448 AAPuerto Rico Highway and Transportation Authority 1,419 BBB New Jersey Turnpike Authority 1,399 A- Massachusetts (Commonwealth of) Water Resources 1,392 AA New York MTA Dedicated Tax 1,388 AA- Atlanta Georgia Water & Sewer System 1,356 BBB+ New York State Thruway - Highway Trust Fund 1,335 AA- Illinois Toll Highway Authority 1,300 AA San Francisco Airports Commission 1,294 A Broward County Florida School Board 1,279 AA- Hawaii (State of) Department of Hawaiian Home Lands 1,271 AA Metro Washington Airport Authority 1,271 AAPhiladelphia Pennsylvania School District 1,186 A Connecticut (State of) 1,185 AA+ District of Columbia 1,184 A+ Puerto Rico Electric Power Authority 1,182 A- California (State of) Department of Water Resources - Electric Power Revenue 1,146 A+ California State University System Trustee 1,115 AA- Detroit Michigan Sewer 1,110 BBB+ Orlando-Orange County Expressway Authority, Florida 1,087 A+ Clark County Nevada School District 1,083 AA- Pennsylvania Turnpike Commission 1,075 A+ Total top 50 U.S. public finance exposures 89,127 $ 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. Assured Guaranty Ltd. 50 Largest U.S. Public Finance Exposures As of March 31, 2011 (in millions) Largest Exposures by Sector (1 of 4) Page 28 |
Net Par Credit Credit name: Outstanding Rating1 Enhancement Fortress Credit Opportunities I, LP. 1,302 $ AA 31.4% Stone Tower Credit Funding 1,254 AAA 53.6% Synthetic Investment Grade Pooled Corporate CDO 1,157 AAA 13.3% Synthetic High Yield Pooled Corporate CDO 975 AA- 41.1% Deutsche Alt-A Securities Mortgage Loan 2007-2 872 CCC 0.6% Synthetic High Yield Pooled Corporate CDO 842 Super Senior 31.4% Synthetic High Yield Pooled Corporate CDO 815 Super Senior 30.3% Synthetic Investment Grade Pooled Corporate CDO 781 Super Senior 23.6% Synthetic Investment Grade Pooled Corporate CDO 764 Super Senior 14.8% Synthetic Investment Grade Pooled Corporate CDO 754 Super Senior 24.2% Mizuho II Synthetic CDO 747 A N/A Synthetic Investment Grade Pooled Corporate CDO 739 Super Senior 29.2% Synthetic High Yield Pooled Corporate CDO 731 AA- 40.0% 280 Funding I 660 AAA 39.8% Synthetic Investment Grade Pooled Corporate CDO 653 AAA 17.2% Private Consumer Receivable Transaction 650 Super Senior 49.4% ARES Enhanced Credit Opportunities Fund 608 AAA 43.9% MABS 2007-NCW 578 B 32.6% Sandelman Finance 2006-1 Limited 563 AAA 41.1% Synthetic Investment Grade Pooled Corporate CDO 514 Super Senior 14.3% Countrywide HELOC 2006-I 503 CCC 0.0% Synthetic High Yield Pooled Corporate CDO 494 AAA 46.7% MASTR 2007-3 489 CCC 0.0% Shenandoah Trust Capital I Term Securities 484 A+ N/A Denali CLO VII, Ltd 481 AAA 20.2% Eastland CLO, Ltd 468 Super Senior 36.4% SLM Private Credit Student Trust 2007-A 450 BBB 11.5% Avenue CLO V 449 AAA 21.1% Mortgage IT Securities Corp. Mortgage Loan 2007-2 446 B 10.1% Private Residential Mortgage Transaction 443 B 20.3% Private Residential Mortgage Transaction 440 B 21.1% Synthetic Investment Grade Pooled Corporate CDO 438 Super Senior 12.0% Synthetic High Yield Pooled Corporate CDO 437 AAA 29.5% Private Structured Credit Transaction 435 BBB+ N/A Synthetic Investment Grade Pooled Corporate CDO 433 AAA 10.7% LIICA Holdings, LLC 428 AA N/A Countrywide HELOC 2006-F (includes $36.4 million repurchased) 2 426 CCC 0.0% Liberty CLO Ltd Series 420 Super Senior 36.3% Synthetic High Yield Pooled Corporate CDO 419 Super Senior 24.5% Synthetic High Yield Pooled Corporate CDO 416 Super Senior 35.6% Churchill Financial Cayman 413 AAA 35.2% KKR Financial CLO 2007-1 409 AAA 51.3% Grayson CLO 401 Super Senior 27.1% Private Consumer Receivable Transaction 400 Super Senior 62.2% Synthetic Investment Grade Pooled Corporate CDO 399 Super Senior 14.0% Deutsche Alt-A Securities Mortgage Loan 2007-3 398 B 5.5% Private Residential Mortgage Transaction 397 B 20.8% Private Residential Mortgage Transaction 395 CCC 23.2% Synthetic Investment Grade Pooled Corporate CDO 394 Super Senior 14.2% SLM Student Loan Trust 2007 -6 392 AAA 3.5% Total top 50 U.S. structured finance exposures 28,956 $ 2. Represents amounts of gross par which were purchased or obtained as part of loss mitigation strategies and recorded as part of the investment portfolio. 50 Largest U.S. Structured Finance Exposures 1. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAA-rated exposure on its internal rating scale has additional credit enhancement due to either (a) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (b) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point. Assured Guaranty Ltd. Largest Exposures by Sector (2 of 4) As of March 31, 2011 (dollars in millions) Page 29 |
Net Par Credit name: Outstanding Rating1 Quebec Province 2,263 $ A+ Sydney Airport Finance Company 1,684 BBB Thames Water Utility Finance PLC 1,542 A- Essential Public Infrastructure Capital II 1,036 Super Senior Fortress Credit Investments I 1,017 AAA Channel Link Enterprises Finance PLC 924 BBB Reliance Rail Finance Pty. Ltd 853 BB Southern Gas Networks PLC 835 BBB Campania Region - Healthcare receivable 825 A- International AAA Sovereign Debt Synthetic CDO 821 AAA Societe des Autoroutes du Nord et de l'est de France S.A. 737 BBB+ United Utilities Water PLC 735 BBB+ Paragon Mortgages (No.13) PLC 728 AAA Powercor Australia LLC 720 A- Synthetic Investment Grade Pooled Corporate CDO 715 Super Senior Capital Hospitals (Issuer) PLC 703 BBB- International Infrastructure Pool 689 AInternational Infrastructure Pool 689 A- International Infrastructure Pool 689 A- Artesian Finance II Plc (Southern) 668 A- Japan Expressway Holding and Debt Repayment Agency 667 AA Synthetic Investment Grade Pooled Corporate CDO 583 Super Senior ETSA Utility Finance Pty. Ltd 582 A- DBNGP Finance Co Pty Ltd Note Issue 1 & 2 574 BBB Taberna Europe CDO II PLC 571 BBB- Total top 25 non-U.S. exposures 21,850 $ 1.Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. The super senior category, which is not generally used by rating agencies, is used by the Company in instances where Assured Guaranty's AAA-rated exposure on its internal rating scale has additional credit enhancement due to either (a) the existence of another security rated AAA that is subordinated to Assured Guaranty's exposure or (b) Assured Guaranty's exposure benefiting from a different form of credit enhancement that would pay any claims first in the event that any of the exposures incurs a loss, and such credit enhancement, in management's opinion, causes Assured Guaranty's attachment point to be materially above the AAA attachment point. 25 Largest Non-U.S. Exposures Assured Guaranty Ltd. Largest Exposures by Sector (3 of 4) As of March 31, 2011 (in millions) Page 30 |
Net Par Servicer: Outstanding Bank of America, N.A. 1 7,393 $ American Home Mortgage Servicing, Inc. 2,549 Wells Fargo Bank, N.A. 2,203 GMAC Mortgage Corporation 1,890 Specialized Loan Servicing, LLC. 1,538 Ocwen Loan Servicing, LLC. 1,193 JPMorgan Chase Bank 820 OneWest Bank Group, LLC. 725 Select Portfolio Servicing, Inc. 491 Litton Loan Servicing LP 394 Total top 10 U.S. residential mortgage servicers exposures 19,196 $ Net Par Credit name: Outstanding Rating2 State CHRISTUS Health 498 $ A+ TX MultiCare Health System 447 A+ WA Methodist Healthcare, TN 377 A TN Virtua Health - New Jersey 363 A NJ Meridian Health System 361 A- NJ Covenant Health Hospital Revenue Bonds 348 A- TN Iowa Health System 327 A+ IA Bon Secours Health System Obligated Group 313 A- MD Asante Health System 295 A OR Lehigh Valley Health Network 294 A+ PA Total top 10 U.S. healthcare exposures 3,623 $ 2. Assured Guaranty's internal rating. The Company’s ratings scale is similar to that used by the NRSROs; however, the ratings in the above table may not be the same as ratings assigned by any such rating agency. Assured Guaranty Ltd. 10 Largest U.S. Residential Mortgage Servicers Exposures As of March 31, 2011 (in millions) Largest Exposures by Sector (4 of 4) 10 Largest U.S. Healthcare Exposures 1. Includes Countrywide Home Loans Servicing LP. Page 31 |
Rollforward of Net Expected Loss and LAE to be Paid for the Three Months Ended March 31, 2011 Expected Loss to be Paid as of Loss Development and Accretion of Paid Losses Expected Loss to be Paid as of Credit Derivatives December 31, 2010 Discount for 1Q-11 1 1Q-11 March 31, 2011 First lien: Prime first lien 1.4 $ 0.1 $ - $ 1.5 $ Alt-A first lien 399.8 14.4 (19.6) 394.6 Alt-A option ARMs 628.8 (119.4) (99.7) 409.7 Subprime first lien 310.6 13.4 (9.2) 314.8 Total first lien 1,340.6 (91.5) (128.5) 1,120.6 Second lien: Closed end seconds 87.5 (133.7) (31.9) (78.1) HELOC (805.7) 77.6 (64.6) (792.7) Total second lien (718.2) (56.1) (96.5) (870.8) Total U.S. RMBS 622.4 (147.6) (225.0) 249.8 TruPS 90.3 0.1 (1.4) 89.0 Other structured finance 247.2 12.1 (2.2) 257.1 Public finance 88.9 (13.2) (9.0) 66.7 1,048.8 $ (148.6) $ (237.6) $ 662.6 $ 1. Includes the effect of changes in the Company's estimate of future recovery on representations and warranties ("R&W"). Total Assured Guaranty Ltd. Rollforward of Net Expected Loss and LAE to be Paid As of March 31, 2011 (in millions) Financial Guaranty Insurance Contracts and U.S. RMBS Page 32 |
Financial Guaranty Insurance and Credit Derivatives U.S. RMBS R&W Benefit Development for the Three Months Ended March 31, 2011 R&W Development and R&W Future Net R&W Accretion of Recovered Future Net R&W Benefit at Discount During During Benefit at December 31, 2010 1Q-11 1Q-11 March 31, 2011 Financial guaranty insurance: Prime first lien 1.1 $ 1.2 $ - $ 2.3 $ Alt-A first lien 81.0 39.7 - 120.7 Alt-A option ARMs 309.3 335.3 (25.6) 619.0 Subprime first lien 1 26.8 54.3 - 81.1 Closed end seconds 178.2 95.0 - 273.2 HELOC 1,004.1 154.5 (33.9) 1,124.7 Total 1,600.5 $ 680.0 $ (59.5) $ 2,221.0 $ Credit derivatives 70.2 $ 104.0 $ - $ 174.2 $ as of March 31, 2011 and December 31, 2010 March 31, 2011 December 31, 2010 March 31, 2011 December 31, 2010 Financial guaranty insurance: Prime first lien 1 1 55.6 $ 57.1 $ Alt-A first lien 21 17 1,909.9 1,882.8 Alt-A option ARMs 12 11 2,099.7 1,909.8 Subprime first lien 1 4 1 995.9 228.7 Closed end seconds 4 4 411.0 444.9 HELOC 16 13 3,909.7 2,969.8 Total 58 47 9,381.8 $ 7,493.1 $ Credit derivatives 7 6 4,005.1 $ 3,616.5 $ 1. Includes net interest margin. Benefit Recorded as of Policies with R&W Benefit Recorded as of Assured Guaranty Ltd. Financial Guaranty Insurance and Credit Derivatives U.S. RMBS R&W Benefit Development (dollars in millions) # of Insurance Policies with R&W Outstanding Principal and Interest Financial Guaranty Insurance and Credit Derivatives U.S. RMBS Policies With R&W Benefit Page 33 |
Total Net Par Outstanding for BIG Transactions 1 1Q-11 Losses Incurred Net Reserve and Credit Impairment Net Salvage and Subrogation Assets Net Expected Loss to be Expensed First lien: Prime first lien 601.2 $ (0.1) $ 1.1 $ - $ 0.2 $ Alt-A first lien 4,953.1 11.7 228.2 4.6 180.2 Alt-A option ARMs 2,762.5 (35.2) 198.9 76.2 299.2 Subprime first lien 2 2,981.4 22.5 222.2 - 85.6 Total first lien 11,298.2 (1.1) 650.4 80.8 565.2 Second lien: Closed end seconds 1,083.5 (36.7) 6.4 113.3 80.5 HELOC 3,809.3 61.0 7.5 849.1 190.3 Total second lien 4,892.8 24.3 13.9 962.4 270.8 Total U.S. RMBS 16,191.0 23.2 664.3 1,043.2 836.0 Other structured finance 5,778.3 17.6 301.4 1.8 26.8 Public finance 4,859.3 (15.8) 60.2 36.6 41.4 26,828.6 25.0 1,025.9 1,081.6 904.2 Effect of consolidating financial guaranty VIEs - (51.9) (62.5) (153.5) (196.6) Total 26,828.6 (26.9) 963.4 928.1 707.6 Other - - 2.1 - - Total 26,828.6 $ (26.9) $ 965.5 $ 928.1 $ 707.6 $ Total Loss and Loss Adjustment Expense Reserves Insurance reserves: Gross 407.9 $ Ceded 18.6 Net insurance reserves 389.3 $ Salvage and subrogation recoverable: Gross 1,057.0 $ Ceded 3 128.9 Net salvage and subrogation recoverable 928.1 $ Credit impairment on credit derivative contracts 4: Gross 597.1 $ Ceded 20.9 Net credit derivative credit impairment 576.2 $ Net loss and LAE reserves on financial guaranty insurance and credit derivative contracts, net of reinsurance 5 Net loss and LAE reserves on financial guaranty contracts net of ceded reinsurance 389.3 $ Credit impairment on credit derivative contracts 576.2 Net loss and LAE reserves and credit impairment 965.5 $ 2. Includes net interest margin. 3. Recorded in "reinsurance balances payable, net" on the consolidated balance sheets. 4. Credit derivative assets and liabilities recorded on the balance sheet incorporate estimates of expected losses. 5. Gross of salvage and subrogation assets. 1. As of March 31, 2011, securities purchased for loss mitigation purposes represented $956.5 million of gross par outstanding. In addition, under the terms of certain credit derivative contracts, the Company has obtained the underlying collateral of transactions and recorded it in invested assets in the consolidated balance sheets. Such amounts totaled $248.7 million in gross par outstanding. Subtotal Financial Guaranty Insurance Contracts and Credit Derivatives Assured Guaranty Ltd. Losses Incurred and Paid As of March 31, 2011 (in millions) Page 34 |
Q1 2011 2010 2009 2008 2007 GAAP Summary Income Statement Data Net earned premiums 254.0 $ 1,186.7 $ 930.4 $ 261.4 $ 159.3 $ Realized gains and other settlements on credit derivatives 35.4 153.5 163.6 117.6 74.0 Net investment income 96.4 354.7 259.2 162.6 128.1 Total expenses 62.0 765.8 784.2 440.9 161.5 Income (loss) before income taxes 192.1 635.5 132.9 112.3 (463.0) Net income (loss) attributable to Assured Guaranty Ltd. 125.4 548.9 97.2 68.9 (303.3) Net income (loss) attributable to Assured Guaranty Ltd. per diluted share 0.67 $ 2.90 $ 0.75 $ 0.77 $ (4.38) $ Non-GAAP Summary Income Statement Data Operating income 248.9 660.3 293.4 74.5 178.0 Operating income per diluted share 1.33 $ 3.49 $ 2.27 $ 0.84 $ 2.57 $ GAAP Summary Balance Sheet Data (End of Period) Total investments and cash 10,601.0 $ 10,837.1 $ 11,012.5 $ 3,643.6 $ 3,147.9 $ Total assets 19,509.2 19,794.6 16,802.7 4,555.7 3,762.9 Unearned premium reserve 6,637.2 6,972.9 8,400.2 1,233.7 887.2 Loss and LAE reserve 407.9 563.0 289.5 196.8 125.6 Long-term debt 1,049.7 1,052.9 1,066.5 347.2 347.1 Shareholders’ equity attributable to Assured Guaranty Ltd. 3,894.5 3,798.8 3,520.5 1,926.2 1,666.6 Book value attributable to Assured per share 21.16 $ 20.67 $ 19.12 $ 21.18 $ 20.85 $ Other Financial Information (GAAP Basis) Net debt service outstanding (end of period) 905,999 $ 927,143 $ 958,265 $ 348,816 $ 302,413 $ Gross debt service outstanding (end of period) 1,005,512 1,029,982 1,095,037 354,858 307,657 Net par outstanding (end of period) 602,287 617,131 640,422 222,722 200,279 Gross par outstanding (end of period) 664,330 681,248 726,929 227,164 204,809 Other Financial Information (Statutory Basis) Net debt service outstanding (end of period) 889,232 $ 905,131 $ 942,193 $ 348,816 $ 302,413 $ Gross debt service outstanding (end of period) 985,897 1,004,096 1,076,039 354,858 307,657 Net par outstanding (end of period) 586,973 598,843 626,274 222,722 200,279 Gross par outstanding (end of period) 646,418 659,765 709,786 227,164 204,809 Consolidated qualified statutory capital 5,495 4,915 4,841 2,310 2,079 Consolidated policyholders' surplus and reserves 10,315 10,247 10,409 3,652 3,040 Ratios: Par insured to statutory capital 107:1 122:1 129:1 96:1 96:1 Capital ratio 1 162:1 184:1 195:1 151:1 145:1 Financial resources ratio 2 70:1 72:1 72:1 70:1 68:1 Gross debt service written: Public finance - U.S. 2,235 $ 48,990 $ 87,940 $ 68,265 $ 66,190 $ Public finance - non-U.S. - 51 894 3,350 11,849 Structured finance - U.S. 100 2,962 2,501 13,972 42,414 Structured finance - non-U.S. - - - 5,490 13,122 Total gross debt service written 2,335 $ 52,003 $ 91,335 $ 91,077 $ 133,575 $ Net debt service written 2,335 $ 52,003 $ 91,335 $ 89,871 $ 129,872 $ Net par written 2,319 30,759 49,759 55,418 84,686 Gross par written 2,319 30,759 49,921 56,140 88,117 1. The capital ratio is calculated by dividing net debt service outstanding by qualified statutory capital. Note: Please refer to the endnotes for an explanation of the non-GAAP financial measures. Assured Guaranty Ltd. Summary Financial and Statistical Data (dollars in millions, except per share amounts) 2. The financial resources ratio is calculated by dividing net debt service outstanding by total claims paying resources. Year Ended December 31, Page 35 |
Glossary Below are the brief descriptions of selected types of U.S. public finance, non-U.S. public finance, U.S. structured finance and non-U.S. structured finance obligations that the Company insures and reinsures. For a more complete description, please refer to Assured Guaranty Ltd.’s 10-K report for December 31, 2010. General Obligation Bonds are full faith and credit bonds that are issued by states, their political subdivisions and other municipal issuers, and are supported by the general obligation of the issuer to pay from available funds and by a pledge of the issuer to levy ad valorem taxes in an amount sufficient to provide for the full payment of the bonds. Tax-Backed Bonds are obligations that are supported by the issuer from specific and discrete sources of taxation. They include tax-backed revenue bonds, general fund obligations and lease revenue bonds. Tax-backed obligations may be secured by a lien on specific pledged tax revenues, such as a gasoline or excise tax, or incrementally from growth in property tax revenue associated with growth in property values. These obligations also include obligations secured by special assessments levied against property owners and often benefit from issuer covenants to enforce collections of such assessments and to foreclose on delinquent properties. Lease revenue bonds typically are general fund obligations of a municipality or other governmental authority that are subject to annual appropriation or abatement; projects financed and subject to such lease payments ordinarily include real estate or equipment serving an essential public purpose. Bonds in this category also include moral obligations of municipalities or governmental authorities. Municipal Utility Bonds are obligations of all forms of municipal utilities, including electric, water and sewer utilities and resource recovery revenue bonds. These utilities may be organized in various forms, including municipal enterprise systems, authorities or joint action agencies. Transportation Bonds include a wide variety of revenue-supported bonds, such as bonds for airports, ports, tunnels, municipal parking facilities, toll roads and toll bridges. Healthcare Bonds are obligations of healthcare facilities, including community based hospitals and systems, as well as of health maintenance organizations and long-term care facilities. Higher Education Bonds are obligations secured by revenue collected by either public or private secondary schools, colleges and universities. Such revenue can encompass all of an institution’s revenue, including tuition and fees, or in other cases, can be specifically restricted to certain auxiliary sources of revenue. Housing Revenue Bonds are obligations relating to both single and multi-family housing, issued by states and localities, supported by cash flow and, in some cases, insurance from entities such as the Federal Housing Administration. Infrastructure Bonds include obligations issued by a variety of entities engaged in the financing of infrastructure projects, such as roads, airports, ports, social infrastructure and other physical assets delivering essential services supported by long-term concession arrangements with a public sector entity. Investor-Owned Utility Bonds are obligations primarily backed by investor-owned utilities, first mortgage bond obligations of for-profit electric or water utilities providing retail, industrial and commercial service, and also include sale-leaseback obligation bonds supported by such entities. Regulated Utilities Obligations are issued by government-regulated providers of essential services and commodities, including electric, water and gas utilities. The majority of the Company’s international regulated utility business is conducted in the UK. Pooled Infrastructure Obligations are synthetic asset-backed obligations that take the form of CDS obligations or credit-linked notes that reference either infrastructure finance obligations or a pool of such obligations, with a defined deductible to cover credit risks associated with the referenced obligations. Other public finance: primarily includes government insured student loans, government-sponsored project finance and structured municipal which includes excess of loss reinsurance on portfolios of municipal credits. Pooled Corporate Obligations are securities primarily backed by various types of corporate debt obligations, such as secured or unsecured bonds, bank loans or loan participations and trust preferred securities. These securities are often issued in ‘‘tranches,’’ with subordinated tranches providing credit support to the more senior tranches. The Company’s financial guaranty exposures generally are to the more senior tranches of these issues. Residential Mortgage-Backed Securities (‘‘RMBS’’) and Home Equity Securities are obligations backed by closed-end first mortgage loans and closed- and open-end second mortgage loans or home equity loans on one-to-four family residential properties, including condominiums and cooperative apartments. First mortgage loan products in these transactions include fixed rate, adjustable rate (‘‘ARM’’) and option adjustable-rate (‘‘Option ARM’’) mortgages. The credit quality of borrowers covers a broad range, including ‘‘prime’’, ‘‘subprime’’ and ‘‘Alt-A’’. A prime borrower is generally defined as one with strong risk characteristics as measured by factors such as payment history, credit score, and debt-to-income ratio. A subprime borrower is a borrower with higher risk characteristics, usually as determined by credit score and/or credit history. An Alt-A borrower is generally defined as a prime quality borrower that lacks certain ancillary characteristics, such as fully documented income. Financial Products is the guaranteed investment contracts ("GICs") portion of the former Financial Products Business of AGMH. AGM has issued financial guaranty insurance policies on the GICs and in respect of the GICs business that cannot be revoked or cancelled. Assured Guaranty is indemnified against exposure to the former financial products business by Dexia SA and certain of its affiliates. In addition, the French and Belgian governments have issued guaranties in respect of the GICs portion of the financial products business. The financial products business is currently being in run off. Structured Credit Securities include program-wide credit enhancement for commercial paper conduits in the U.S., and securities issued in whole business securitizations and intellectual property securitizations. Program-wide credit enhancement generally involves insuring against the default of ABS in a banksponsored commercial paper conduit. Securities issued in whole business and intellectual property securitizations are backed by revenue-producing assets sold to a limited-purpose company by an operating company, including franchise agreements, lease agreements, intellectual property and real property. Consumer Receivables Securities are obligations backed by non-mortgage consumer receivables, such as automobile loans and leases, credit card receivables and other consumer receivables. Commercial Mortgage-Backed Securities (‘‘CMBS’’) are obligations backed by pools of commercial mortgages. The collateral supporting CMBS include office, multi-family, retail, hotel, industrial and other specialized or mixed-use properties. Commercial Receivables Securities are obligations backed by equipment loans or leases, fleet auto financings, business loans and trade receivables. Credit support is derived from the cash flows generated by the underlying obligations, as well as property or equipment values as applicable. Insurance Securitization Securities are obligations secured by the future earnings from pools of various types of insurance/reinsurance policies and income produced by invested assets. Other Structured Finance Securities are obligations backed by assets not generally described in any of the other described categories. One such type of asset is a tax benefit to be realized by an investor in one of the Federal or state programs that permit such investor to receive a credit against taxes (such as Federal corporate income tax or state insurance premium tax) for making qualified investments in specified enterprises, typically located in designated low-income areas. Page 36 |
Endnotes related to non-GAAP financial measures discussed in the financial supplement: The Company references financial measures that are not in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Assured Guaranty’s management and board of directors utilize non-GAAP measures in evaluating the Company’s financial performance and as a basis for determining senior management incentive compensation. By providing these non-GAAP financial measures, investors, analysts and financial news reporters have access to the same information that management reviews internally. In addition, Assured Guaranty’s presentation of non-GAAP financial measures is consistent with how analysts calculate their estimates of Assured Guaranty’s financial results in their research reports on Assured Guaranty and with how investors, analysts and the financial news media evaluate Assured Guaranty’s financial results. The following paragraphs define each non-GAAP financial measure and describe why it is useful. A reconciliation of the non-GAAP financial measure and the most directly comparable GAAP financial measure, if available, is presented within this financial supplement. Non-GAAP financial measures should not be viewed as substitutes for their most directly comparable GAAP measures. Operating Income: Management believes that operating income is a useful measure because it clarifies the understanding of the underwriting results of the Company’s financial guaranty insurance business, and also includes financing costs and net investment income, and enables investors and analysts to evaluate the Company’s financial results as compared to the consensus analyst estimates distributed publicly by financial databases. Operating income is defined as net income (loss) attributable to Assured Guaranty Ltd., as reported under GAAP, adjusted for the following: 1) Elimination of the after-tax realized gains (losses) on the Company’s investments, including other than temporary impairments, and credit and interest rate related gains and losses from sales of securities. Impairments and losses from sales of creditimpaired securities, the timing of which depends largely on market credit cycles, can vary considerably across periods. The timing of other sales that would result in gains or losses, such as interest rate related gains or losses, is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile. Trends in the underlying profitability of the Company’s business can be more clearly identified without the fluctuating effects of these transactions. 2) Elimination of the after-tax non-credit impairment unrealized fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit losses. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. Additionally, such adjustments present all financial guaranty contracts on a more consistent basis of accounting, whether or not they are subject to derivative accounting rules. 3) Elimination of the after-tax fair value gains (losses) on the Company’s committed capital securities. Such amounts are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. 4) Elimination of the after-tax foreign exchange gains (losses) on revaluation of net premium receivables. Long-dated receivables constitute a significant portion of the net premium receivable balance and represent the present value of future contractual or expected collections. Therefore, the current period’s foreign exchange revaluation gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize. 5) Elimination of the effects of consolidating certain financial guaranty VIEs in order to present all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs. Operating Shareholders’ Equity: Management believes that operating shareholders’ equity is a useful measure because it presents the equity of Assured Guaranty Ltd. with all financial guaranty contracts accounted for on a more consistent basis and excluding fair value adjustments that are not expected to result in economic loss. Many investors, analysts and financial news reporters use operating shareholders’ equity as the principal financial measure for valuing Assured Guaranty Ltd.’s current share price or projected share price and also as the basis of their decision to recommend, buy or sell the Assured Guaranty Ltd.’s common shares. Many of the Company’s fixed income investors also use operating shareholders’ equity to evaluate the Company’s capital adequacy. Operating shareholders’ equity is the basis of the calculation of adjusted book value (see below). Operating shareholders’ equity is defined as shareholders’ equity attributable to Assured Guaranty Ltd. , as reported under GAAP, adjusted for the following: 1) Elimination of the effects of consolidating certain VIEs in order to present all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs. 2) Elimination of the after-tax non-credit impairment unrealized fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit losses. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. 3) Elimination of the after-tax fair value gains (losses) on the Company’s committed capital securities. Such amounts are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. 4) Elimination of the after-tax unrealized gains (losses) on the Company’s investments, that are recorded as a component of accumulated other comprehensive income (AOCI) (excluding foreign exchange revaluation). 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 will not recognize an economic loss. Operating return on equity (‘‘Operating ROE’’): Operating ROE represents operating income for a specified period divided by the average of operating shareholders’ equity at the beginning and the end of that period. Management believes that operating ROE is a useful measure to evaluate the Company’s return on invested capital. Many investors, analysts and members of the financial news media use operating ROE to evaluate Assured Guaranty Ltd.’s share price and as the basis of their decision to recommend, buy or sell the Assured Guaranty Ltd. common shares. Quarterly and year-to-date operating ROE are calculated on an annualized basis. Adjusted Book Value: Management believes that adjusted book value is a useful measure because it enables an evaluation of the net present value of the Company’s in force premiums and revenues in addition to operating shareholders’ equity. The premiums and revenues included in adjusted book value will be earned in future periods, but actual earnings may differ materially from the estimated amounts used in determining current adjusted book value due to changes in, foreign exchange rates, refinancing or refunding activity, prepayment speeds, terminations, credit defaults and other factors. Many investors, analysts and financial news reporters use adjusted book value to evaluate Assured Guaranty Ltd.’s share price and as the basis of their decision to recommend, buy or sell the Assured Guaranty Ltd. common shares. Adjusted book value is operating shareholders’ equity, as defined above, further adjusted for the following: 1) Elimination of after-tax deferred acquisition costs. These amounts represent net deferred expenses that have already been paid or accrued that will be expensed in future accounting periods. 2) Addition of the after-tax net present value of estimated net future credit derivative revenue. See below. 3) Addition of the after-tax value of the unearned premium reserve on financial guaranty contracts in excess of net expected loss to be expensed, net of reinsurance. This amount represents the expected future net earned premiums, net of expected losses to be expensed, which are not reflected in GAAP equity. Net present value of estimated net future credit derivative revenue: Management believes that this amount is a useful measure because it enables an evaluation of the value of future estimated credit derivative revenue. There is no corresponding GAAP financial measure. This amount represents the present value of estimated future revenue from the Company’s credit derivative in-force book of business, net of reinsurance, ceding commissions and premium taxes in excess of expected losses, and is discounted at 6% (which represents the Company’s tax-equivalent pre-tax investment yield on its investment portfolio). Estimated net future credit derivative revenue may change from period to period due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults or other factors that affect par outstanding or the ultimate maturity of an obligation. PVP or present value of new business production: Management believes that PVP is a useful measure because it enables the evaluation of the value of new business production for Assured Guaranty by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as premium supplements and additional installment premium on existing contracts as to which the issuer has the right to call the insured obligation but has not exercised such right, whether in insurance or credit derivative contract form, which GAAP gross premiums written and the net credit derivative premiums received and receivable portion of net realized gains and other settlement on credit derivatives (“Credit Derivative Revenues”) do not adequately measure. PVP in respect of insurance and credit derivative contracts written in a specified period is defined as gross upfront and installment premiums received and the present value of gross estimated future installment premiums, in each case, discounted at 6% (the Company’s tax-equivalent pre-tax investment yield on its investment portfolio). For purposes of the PVP calculation, management discounts estimated future installment premiums on insurance contracts at 6%, while under GAAP, these amounts are discounted at a risk free rate. Additionally, under GAAP, management records future installment premiums on financial guaranty insurance contracts covering non-homogeneous pools of assets based on the contractual term of the transaction, whereas for PVP purposes, management records an estimate of the future installment premiums the Company expects to receive, which may be based upon a shorter period of time than the contractual term of the transaction. Actual future net earned or written premiums and credit derivative revenues may differ from PVP due to factors including, but not limited to, changes in foreign exchange rates, refinancing or refunding activity, prepayment speeds, terminations, credit defaults, or other factors that affect par outstanding or the ultimate maturity of an obligation. Page 37 |
Contacts: Equity Investors: Sabra Purtill Managing Director, Investor Relations and Corporate Communications (212) 408-6044 spurtill@assuredguaranty.com Ross Aron Assistant Vice President, Investor Relations (212) 261-5509 raron@assuredguaranty.com Assured Guaranty Ltd. Fixed Income Investors: 30 Woodbourne Avenue Robert Tucker Hamilton HM 08 Managing Director, Fixed Income Investor Relations Bermuda (212) 339-0861 (441) 279-5705 rtucker@assuredguaranty.com www.assuredguaranty.com Michael Walker Director, Fixed Income Investor Relations (212) 261-5575 mwalker@assuredguaranty.com Media: Ashweeta Durani Vice President, Corporate Communications (212) 408-6042 adurani@assuredguaranty.com |