Assured Guaranty Ltd.
June 30, 2016
Financial Supplement
Table of Contents | Page | ||||
Selected Financial Highlights | 1 | ||||
Consolidated Balance Sheets (unaudited) | 2 | ||||
Consolidated Statements of Operations (unaudited) | 3 | ||||
Net Income (Loss) Reconciliation to Operating Income | 4 | ||||
Selected Financial Highlights Non-GAAP Reconciliations | 6 | ||||
Operating Shareholders' Equity and Adjusted Book Value | 7 | ||||
Claims-Paying Resources | 8 | ||||
New Business Production | 9 | ||||
Gross Par Written | 10 | ||||
New Business Production by Quarter | 11 | ||||
Available-for-Sale Investment Portfolio and Cash | 12 | ||||
Estimated Net Exposure Amortization and Estimated Future Net Premium and Credit Derivative Revenues | 13 | ||||
Expected Amortization of Net Par Outstanding | 14 | ||||
Present Value of Net Expected Loss to be Expensed | 15 | ||||
Financial Guaranty Profile | 16 | ||||
Exposure to Puerto Rico | 20 | ||||
Direct Pooled Corporate Obligations Profile | 23 | ||||
Consolidated U.S. RMBS Profile | 24 | ||||
Below Investment Grade Exposures | 25 | ||||
Largest Exposures by Sector | 30 | ||||
Rollforward of Net Expected Loss and Loss Adjustment Expenses to be Paid After Benefit for R&W | 34 | ||||
Loss Measures | 35 | ||||
Summary of Financial and Statistical Data | 36 | ||||
Summary of Non-GAAP Financial Measures | 37 | ||||
Glossary | 39 | ||||
Non-GAAP Financial Measures | 42 |
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, 2015 and its Quarterly Report on Form 10-Q for the quarterly periods ended March 31, 2016 and June 30, 2016.
Some amounts in this financial supplement may not add due to rounding.
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. Assured Guaranty's forward looking statements could be affected by many events. These events include (1) rating agency action, including a ratings downgrade, a change in outlook, the placement of ratings on watch for downgrade, or a change in rating criteria, at any time, of AGL or any of its subsidiaries, and/or of any securities AGL or any of its subsidiaries have issued, and/or of transactions that AGL’s subsidiaries have insured; (2) reduction in the amount of available insurance opportunities and/or in the demand for Assured Guaranty's insurance; (3) developments in the world’s financial and capital markets that adversely affect obligors’ payment rates, Assured Guaranty’s loss experience, or its exposure to refinancing risk in transactions (which could result in substantial liquidity claims on its guarantees); (4) the possibility that budget or pension shortfalls or other factors will result in credit losses or impairments on obligations of state, territorial and local governments and their related authorities and public corporations that Assured Guaranty insures or reinsures; (5) the failure of Assured Guaranty to realize loss recoveries that are assumed in its expected loss estimates; (6) deterioration in the financial condition of Assured Guaranty’s reinsurers, the amount and timing of reinsurance recoverables actually received and the risk that reinsurers may dispute amounts owed to Assured Guaranty under its reinsurance agreements; (7) increased competition, including from new entrants into the financial guaranty industry; (8) rating agency action on obligors, including sovereign debtors, resulting in a reduction in the value of securities in Assured Guaranty’s investment portfolio and in collateral posted by and to Assured Guaranty; (9) the inability of Assured Guaranty to access external sources of capital on acceptable terms; (10) changes in the world’s credit markets, segments thereof, interest rates or general economic conditions; (11) the impact of market volatility on the mark-to-market of Assured Guaranty’s contracts written in credit default swap form; (12) changes in applicable accounting policies or practices; (13) changes in applicable laws or regulations, including insurance, bankruptcy and tax laws, or other governmental actions; (14) the impact of changes in the world’s economy and credit and currency markets and in applicable laws or regulations relating to the decision of the United Kingdom to exit the European Union;(15) difficulties with the execution of Assured Guaranty’s business strategy; (16) loss of key personnel; (17) the effects of mergers, acquisitions and divestitures; (18) natural or man-made catastrophes; (19) other risks and uncertainties that have not been identified at this time; (20) management’s response to these factors; and (21) other risk factors identified in AGL’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. Assured Guaranty undertakes no obligation to update publicly or review any forward looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Assured Guaranty Ltd.
Selected Financial Highlights
(dollars in millions, except per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | 146 | $ | 297 | $ | 205 | $ | 498 | ||||||||
Operating income (3) | 139 | 278 | 252 | 418 | ||||||||||||
Net income (loss) per diluted share | $ | 1.09 | $ | 1.96 | $ | 1.51 | $ | 3.23 | ||||||||
Operating income per diluted share (3) | 1.03 | 1.83 | 1.86 | 2.71 | ||||||||||||
Weighted average shares outstanding | ||||||||||||||||
Basic shares outstanding | 134.0 | 150.6 | 135.1 | 153.2 | ||||||||||||
Diluted shares outstanding (1) | 134.8 | 151.6 | 135.9 | 154.1 | ||||||||||||
Effect of refundings and terminations, net on: | ||||||||||||||||
Net earned premiums | $ | 117 | $ | 96 | $ | 206 | $ | 137 | ||||||||
Net change in fair value of credit derivatives | 67 | 2 | 78 | 13 | ||||||||||||
Net income effect | 151 | 67 | 238 | 102 | ||||||||||||
Net income per diluted share | 1.12 | 0.44 | 1.75 | 0.66 | ||||||||||||
Operating net earned premiums | 116 | 96 | 205 | 137 | ||||||||||||
Credit derivative revenues | 20 | 2 | 20 | 13 | ||||||||||||
Operating income effect | 118 | 68 | 198 | 103 | ||||||||||||
Operating income per diluted share | 0.87 | 0.44 | 1.45 | 0.67 | ||||||||||||
Effective tax rate on net income | 26.9 | % | 27.5 | % | 22.8 | % | 26.2 | % | ||||||||
Effective tax rate on operating income (5) | 27.4 | % | 25.4 | % | 24.4 | % | 24.3 | % | ||||||||
Return on equity (ROE) calculations (2)(6): | ||||||||||||||||
GAAP ROE | 9.5 | % | 20.5 | % | 6.7 | % | 17.2 | % | ||||||||
ROE, excluding unrealized gain (loss) on investment portfolio | 10.1 | % | 21.7 | % | 7.1 | % | 18.2 | % | ||||||||
Operating ROE | 9.3 | % | 18.7 | % | 8.4 | % | 14.0 | % | ||||||||
New business: | ||||||||||||||||
Gross written premiums (GWP) | $ | 36 | $ | 22 | $ | 55 | $ | 54 | ||||||||
Present value of new business production (PVP) (3) | 41 | 26 | 79 | 62 | ||||||||||||
Gross par written | 4,775 | 5,581 | 7,524 | 8,289 | ||||||||||||
As of | ||||||||||||||||
June 30, | December 31, | |||||||||||||||
2016 | 2015 | |||||||||||||||
Shareholders' equity | $ | 6,250 | $ | 6,063 | ||||||||||||
Operating shareholders' equity | 6,011 | 5,946 | ||||||||||||||
Adjusted book value | 8,215 | 8,439 | ||||||||||||||
Shares outstanding at the end of period | 132.8 | 137.9 | ||||||||||||||
Shareholders' equity per share | $ | 47.06 | $ | 43.96 | ||||||||||||
Operating shareholders' equity per share | 45.26 | 43.11 | ||||||||||||||
Adjusted book value per share | 61.86 | 61.18 | ||||||||||||||
Net debt service outstanding | $ | 488,362 | $ | 536,341 | ||||||||||||
Net par outstanding | 329,864 | 358,571 | ||||||||||||||
Claims-paying resources (4) | 11,938 | 12,306 |
1) | Non-GAAP diluted shares outstanding were the same as GAAP diluted shares since both net income and operating income were positive for all periods. |
2) | Quarterly ROE calculations represent annualized returns. |
3) | Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement. |
4) | See page 8 for additional detail on claims-paying resources. |
5) | Represents the ratio of non-GAAP operating provision for income taxes to operating income before income taxes. See pages 4 and 5. |
6) | See page 6 for additional information on calculation. |
1
Assured Guaranty Ltd.
Consolidated Balance Sheets (unaudited)
(dollars in millions)
As of: | ||||||||
June 30, | December 31, | |||||||
2016 | 2015 | |||||||
Assets: | ||||||||
Investment portfolio: | ||||||||
Fixed maturity securities, available-for-sale, at fair value | $ | 9,960 | $ | 10,627 | ||||
Short-term investments, at fair value | 585 | 396 | ||||||
Other invested assets | 170 | 169 | ||||||
Total investment portfolio | 10,715 | 11,192 | ||||||
Cash | 190 | 166 | ||||||
Premiums receivable, net of commissions payable | 623 | 693 | ||||||
Ceded unearned premium reserve | 228 | 232 | ||||||
Deferred acquisition costs | 110 | 114 | ||||||
Reinsurance recoverable on unpaid losses | 82 | 69 | ||||||
Salvage and subrogation recoverable | 323 | 126 | ||||||
Credit derivative assets | 36 | 81 | ||||||
Deferred tax asset, net | 235 | 276 | ||||||
Current income tax receivable | — | 40 | ||||||
Financial guaranty variable interest entities (FG VIE) assets, at fair value | 814 | 1,261 | ||||||
Funds restricted for CIFG acquisition | 451 | — | ||||||
Other assets | 285 | 294 | ||||||
Total assets | $ | 14,092 | $ | 14,544 | ||||
Liabilities and shareholders' equity: | ||||||||
Liabilities: | ||||||||
Unearned premium reserve | $ | 3,617 | $ | 3,996 | ||||
Loss and loss adjustment expense reserve | 1,268 | 1,067 | ||||||
Reinsurance balances payable, net | 56 | 51 | ||||||
Long-term debt | 1,303 | 1,300 | ||||||
Credit derivative liabilities | 432 | 446 | ||||||
Current income tax payable | 19 | — | ||||||
FG VIE liabilities with recourse, at fair value | 790 | 1,225 | ||||||
FG VIE liabilities without recourse, at fair value | 115 | 124 | ||||||
Other liabilities | 242 | 272 | ||||||
Total liabilities | 7,842 | 8,481 | ||||||
Shareholders' equity: | ||||||||
Common stock | 1 | 1 | ||||||
Additional paid-in capital | 1,213 | 1,342 | ||||||
Retained earnings | 4,648 | 4,478 | ||||||
Accumulated other comprehensive income | 383 | 237 | ||||||
Deferred equity compensation | 5 | 5 | ||||||
Total shareholders' equity | 6,250 | 6,063 | ||||||
Total liabilities and shareholders' equity | $ | 14,092 | $ | 14,544 |
2
Assured Guaranty Ltd.
Consolidated Statements of Operations (unaudited)
(dollars in millions, except per share amounts)
Three Months Ended | Six Months Ended | |||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Revenues: | ||||||||||||||||||||
Net earned premiums | $ | 214 | $ | 219 | $ | 397 | $ | 361 | ||||||||||||
Net investment income | 98 | 98 | 197 | 199 | ||||||||||||||||
Net realized investment gains (losses) | 10 | (9 | ) | (3 | ) | 7 | ||||||||||||||
Net change in fair value of credit derivatives: | ||||||||||||||||||||
Realized gains (losses) and other settlements | 24 | 8 | 32 | 29 | ||||||||||||||||
Net unrealized gains (losses) | 39 | 82 | (29 | ) | 185 | |||||||||||||||
Net change in fair value of credit derivatives | 63 | 90 | 3 | 214 | ||||||||||||||||
Fair value gains (losses) on committed capital securities (CCS) | (11 | ) | 23 | (27 | ) | 25 | ||||||||||||||
Fair value gains (losses) on FG VIEs | 4 | 5 | 22 | (2 | ) | |||||||||||||||
Bargain purchase gain and settlement of pre-existing relationships | — | 214 | — | 214 | ||||||||||||||||
Other income (loss) | 18 | 55 | 52 | 46 | ||||||||||||||||
Total revenues | 396 | 695 | 641 | 1,064 | ||||||||||||||||
Expenses: | ||||||||||||||||||||
Loss and loss adjustment expenses (LAE) | 102 | 188 | 192 | 206 | ||||||||||||||||
Amortization of deferred acquisition costs | 5 | 6 | 9 | 10 | ||||||||||||||||
Interest expense | 25 | 26 | 51 | 51 | ||||||||||||||||
Other operating expenses | 63 | 66 | 123 | 122 | ||||||||||||||||
Total expenses | 195 | 286 | 375 | 389 | ||||||||||||||||
Income (loss) before income taxes | 201 | 409 | 266 | 675 | ||||||||||||||||
Provision (benefit) for income taxes | 55 | 112 | 61 | 177 | ||||||||||||||||
Net income (loss) | $ | 146 | $ | 297 | $ | 205 | $ | 498 | ||||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | $ | 1.09 | $ | 1.97 | $ | 1.52 | $ | 3.25 | ||||||||||||
Diluted | $ | 1.09 | $ | 1.96 | $ | 1.51 | $ | 3.23 | ||||||||||||
3
Assured Guaranty Ltd.
Net Income (Loss) Reconciliation to Operating Income (1 of 2)
(dollars in millions)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||||||||||||||
GAAP Income Statement Line Items As Reported | Less: Operating Income Adjustments | Non-GAAP Operating Income Components | GAAP Income Statement Line Items As Reported | Less: Operating Income Adjustments | Non-GAAP Operating Income Components | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Net earned premiums | $ | 214 | $ | (3 | ) | (1) | $ | 217 | $ | 219 | $ | (5 | ) | (1) | $ | 224 | ||||||||
Net investment income | 98 | 5 | (1) | 93 | 98 | (1 | ) | (1) | 99 | |||||||||||||||
Net realized investment gains (losses) | 10 | 10 | (2) | — | (9 | ) | (9 | ) | (2) | 0 | ||||||||||||||
Net change in fair value of credit derivatives: | ||||||||||||||||||||||||
Realized gains (losses) and other settlements | 24 | 24 | — | 8 | 8 | — | ||||||||||||||||||
Net unrealized gains (losses) | 39 | 44 | (5 | ) | 82 | 82 | — | |||||||||||||||||
Credit derivative revenues | — | (31 | ) | 31 | — | (35 | ) | 35 | ||||||||||||||||
Net change in fair value of credit derivatives | 63 | 37 | (2) | 26 | 90 | 55 | (2) | 35 | ||||||||||||||||
Fair value gains (losses) on CCS | (11 | ) | (11 | ) | (3) | — | 23 | 23 | (3) | — | ||||||||||||||
Fair value gains (losses) on FG VIEs | 4 | 4 | (1) | — | 5 | 5 | (1) | — | ||||||||||||||||
Bargain purchase gain and settlement of pre-existing relationships | — | — | — | 214 | (35 | ) | (1)(2) | 249 | ||||||||||||||||
Other income (loss) | 18 | (18 | ) | (1)(4) | 36 | 55 | 13 | (1)(4) | 42 | |||||||||||||||
Total revenues | 396 | 24 | 372 | 695 | 46 | 649 | ||||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Loss and LAE: | ||||||||||||||||||||||||
Financial guaranty insurance | 102 | 3 | (1) | 99 | 188 | (1 | ) | (1) | 189 | |||||||||||||||
Credit derivatives | — | 11 | (2) | (11 | ) | — | 9 | (2) | (9 | ) | ||||||||||||||
Amortization of deferred acquisition costs | 5 | 0 | 5 | 6 | 0 | 6 | ||||||||||||||||||
Interest expense | 25 | — | 25 | 26 | — | 26 | ||||||||||||||||||
Other operating expenses | 63 | 0 | 63 | 66 | 1 | 65 | ||||||||||||||||||
Total expenses | 195 | 14 | 181 | 286 | 9 | 277 | ||||||||||||||||||
Income (loss) before income taxes | 201 | 10 | 191 | 409 | 37 | 372 | ||||||||||||||||||
Provision (benefit) for income taxes | 55 | 3 | (5) | 52 | 112 | 18 | (5) | 94 | ||||||||||||||||
Net income (loss) | $ | 146 | $ | 7 | $ | 139 | $ | 297 | $ | 19 | $ | 278 | ||||||||||||
Effective tax rate | 26.9 | % | 27.4 | % | 27.5 | % | 25.4 | % |
1) | Include adjustments related to elimination of the effects of consolidating FG VIEs. |
2) | Adjustments to eliminate non-economic fair value gains (losses) on credit derivatives and reclassification to revenues and loss expense. |
3) | Adjustments to eliminate fair value gain (loss) on CCS. |
4) | Include adjustments related to elimination of foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves. |
5) | Tax effect of the above adjustments. |
Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
4
Assured Guaranty Ltd.
Net Income (Loss) Reconciliation to Operating Income (2 of 2)
(dollars in millions)
Six Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||||||||||||||
GAAP Income Statement Line Items As Reported | Less: Operating Income Adjustments | Non-GAAP Operating Income Components | GAAP Income Statement Line Items As Reported | Less: Operating Income Adjustments | Non-GAAP Operating Income Components | |||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Net earned premiums | $ | 397 | $ | (8 | ) | (1) | $ | 405 | $ | 361 | $ | (10 | ) | (1) | $ | 371 | ||||||||
Net investment income | 197 | 1 | (1) | 196 | 199 | (2 | ) | (1) | 201 | |||||||||||||||
Net realized investment gains (losses) | (3 | ) | (3 | ) | (2) | — | 7 | 7 | (2) | 0 | ||||||||||||||
Net change in fair value of credit derivatives: | ||||||||||||||||||||||||
Realized gains (losses) and other settlements | 32 | 32 | — | 29 | 29 | — | ||||||||||||||||||
Net unrealized gains (losses) | (29 | ) | (9 | ) | (20 | ) | 185 | 185 | — | |||||||||||||||
Credit derivative revenues | — | (41 | ) | 41 | — | (59 | ) | 59 | ||||||||||||||||
Net change in fair value of credit derivatives | 3 | (18 | ) | (2) | 21 | 214 | 155 | (2) | 59 | |||||||||||||||
Fair value gains (losses) on CCS | (27 | ) | (27 | ) | (3) | — | 25 | 25 | (3) | — | ||||||||||||||
Fair value gains (losses) on FG VIEs | 22 | 22 | (1) | — | (2 | ) | (2 | ) | (1) | — | ||||||||||||||
Bargain purchase gain and settlement of pre-existing relationships | — | — | — | 214 | (35 | ) | (1)(2) | 249 | ||||||||||||||||
Other income (loss) | 52 | (20 | ) | (1)(4) | 72 | 46 | — | (1)(4) | 46 | |||||||||||||||
Total revenues | 641 | (53 | ) | 694 | 1,064 | 138 | 926 | |||||||||||||||||
Expenses: | ||||||||||||||||||||||||
Loss and LAE: | ||||||||||||||||||||||||
Financial guaranty insurance | 192 | (4 | ) | (1) | 196 | 206 | (7 | ) | (1) | 213 | ||||||||||||||
Credit derivatives | — | 17 | (2) | (17 | ) | — | 21 | (2) | (21 | ) | ||||||||||||||
Amortization of deferred acquisition costs | 9 | 0 | 9 | 10 | 0 | 10 | ||||||||||||||||||
Interest expense | 51 | — | 51 | 51 | — | 51 | ||||||||||||||||||
Other operating expenses | 123 | 1 | 122 | 122 | 1 | 121 | ||||||||||||||||||
Total expenses | 375 | 14 | 361 | 389 | 15 | 374 | ||||||||||||||||||
Income (loss) before income taxes | 266 | (67 | ) | 333 | 675 | 123 | 552 | |||||||||||||||||
Provision (benefit) for income taxes | 61 | (20 | ) | (5) | 81 | 177 | 43 | (5) | 134 | |||||||||||||||
Net income (loss) | $ | 205 | $ | (47 | ) | $ | 252 | $ | 498 | $ | 80 | $ | 418 | |||||||||||
Effective tax rate | 22.8 | % | 24.4 | % | 26.2 | % | 24.3 | % |
1) | Include adjustments related to elimination of the effects of consolidating FG VIEs. |
2) | Adjustments to eliminate non-economic fair value gains (losses) on credit derivatives and reclassification to revenues and loss expense. |
3) | Adjustments to eliminate fair value gain (loss) on CCS. |
4) | Include adjustments related to elimination of foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves. |
5) | Tax effect of the above adjustments. |
Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
5
Assured Guaranty Ltd.
Selected Financial Highlights Non-GAAP Reconciliations
(dollars in millions, except per share amounts)
Operating Income Reconciliation | Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net income (loss) | $ | 146 | $ | 297 | $ | 205 | $ | 498 | ||||||||
Less pre-tax adjustments: | ||||||||||||||||
Realized gains (losses) on investments | 9 | (12 | ) | (5 | ) | 4 | ||||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives | 32 | 10 | (28 | ) | 101 | |||||||||||
Fair value gains (losses) on CCS | (11 | ) | 22 | (27 | ) | 24 | ||||||||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves | (17 | ) | 13 | (19 | ) | 0 | ||||||||||
Effect of consolidating FG VIEs | (3 | ) | 4 | 12 | (6 | ) | ||||||||||
Total pre-tax adjustments | 10 | 37 | (67 | ) | 123 | |||||||||||
Less tax effect on pre-tax adjustments | (3 | ) | (18 | ) | 20 | (43 | ) | |||||||||
Operating income | $ | 139 | $ | 278 | $ | 252 | $ | 418 | ||||||||
Per diluted share: | ||||||||||||||||
Net income (loss) | $ | 1.09 | $ | 1.96 | $ | 1.51 | $ | 3.23 | ||||||||
Less pre-tax adjustments: | ||||||||||||||||
Realized gains (losses) on investments | 0.06 | (0.08 | ) | (0.04 | ) | 0.02 | ||||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives | 0.23 | 0.07 | (0.21 | ) | 0.66 | |||||||||||
Fair value gains (losses) on CCS | (0.08 | ) | 0.15 | (0.20 | ) | 0.16 | ||||||||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves | (0.12 | ) | 0.08 | (0.14 | ) | 0.00 | ||||||||||
Effect of consolidating FG VIEs | (0.03 | ) | 0.02 | 0.09 | (0.04 | ) | ||||||||||
Total pre-tax adjustments | 0.06 | 0.24 | (0.50 | ) | 0.80 | |||||||||||
Less tax effect on pre-tax adjustments | 0.00 | (0.11 | ) | 0.15 | (0.28 | ) | ||||||||||
Operating income | $ | 1.03 | $ | 1.83 | $ | 1.86 | $ | 2.71 | ||||||||
ROE Reconciliation and Calculation | As of | |||||||||||||||||||||||
June 30, | March 31, | December 31, | June 30, | March 31, | December 31, | |||||||||||||||||||
2016 | 2016 | 2015 | 2015 | 2015 | 2014 | |||||||||||||||||||
Shareholders' equity | $ | 6,250 | $ | 6,113 | $ | 6,063 | $ | 5,806 | $ | 5,786 | $ | 5,758 | ||||||||||||
Unrealized gain (loss) on investment portfolio, pre-tax | 598 | 485 | 376 | 347 | 558 | 534 | ||||||||||||||||||
Less: tax effect | 171 | 141 | 116 | 104 | 163 | 161 | ||||||||||||||||||
Unrealized gain (loss) on investment portfolio, after-tax | 427 | 344 | 260 | 243 | 395 | 373 | ||||||||||||||||||
Shareholders' equity, excluding unrealized gain (loss) on investment portfolio | 5,823 | 5,769 | 5,803 | 5,563 | 5,391 | 5,385 | ||||||||||||||||||
Operating shareholders' equity | 6,011 | 5,954 | 5,946 | 6,011 | 5,876 | 5,933 | ||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||
Net income (loss) | $ | 146 | $ | 297 | $ | 205 | $ | 498 | ||||||||||||||||
Operating income | 139 | 278 | 252 | 418 | ||||||||||||||||||||
Average shareholders' equity | $ | 6,182 | $ | 5,796 | $ | 6,157 | $ | 5,782 | ||||||||||||||||
Average shareholders' equity, excluding unrealized gain (loss) on investment portfolio | 5,796 | 5,477 | 5,813 | 5,474 | ||||||||||||||||||||
Average operating shareholders' equity | 5,983 | 5,944 | 5,979 | 5,972 | ||||||||||||||||||||
GAAP ROE (1) | 9.5 | % | 20.5 | % | 6.7 | % | 17.2 | % | ||||||||||||||||
ROE, excluding unrealized gain (loss) on investment portfolio(1) | 10.1 | % | 21.7 | % | 7.1 | % | 18.2 | % | ||||||||||||||||
Operating ROE(1) | 9.3 | % | 18.7 | % | 8.4 | % | 14.0 | % | ||||||||||||||||
1) | Quarterly ROE calculations represent annualized returns. |
6
Assured Guaranty Ltd.
Operating Shareholders' Equity and Adjusted Book Value
(dollars in millions, except per share amounts)
As of: | |||||||||||||||
June 30, | December 31, 2015 | ||||||||||||||
Total | Per Share | Total | Per Share | ||||||||||||
Reconciliation of shareholders' equity to adjusted book value: | |||||||||||||||
Shareholders' equity | $ | 6,250 | $ | 47.06 | $ | 6,063 | $ | 43.96 | |||||||
Less pre-tax adjustments: | |||||||||||||||
Effect of consolidating FG VIEs | (18 | ) | (0.13 | ) | (35 | ) | (0.25 | ) | |||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives | (265 | ) | (2.00 | ) | (241 | ) | (1.75 | ) | |||||||
Fair value gains (losses) on CCS | 35 | 0.26 | 62 | 0.45 | |||||||||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect | 598 | 4.50 | 376 | 2.73 | |||||||||||
Taxes | (111 | ) | (0.83 | ) | (45 | ) | (0.33 | ) | |||||||
Operating shareholders' equity | 6,011 | 45.26 | 5,946 | 43.11 | |||||||||||
Pre-tax adjustments: | |||||||||||||||
Less: Deferred acquisition costs | 110 | 0.83 | 114 | 0.83 | |||||||||||
Plus: Net present value of estimated net future credit derivative revenue | 93 | 0.70 | 169 | 1.23 | |||||||||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed | 3,073 | 23.14 | 3,417 | 24.77 | |||||||||||
Taxes | (852 | ) | (6.41 | ) | (979 | ) | (7.10 | ) | |||||||
Adjusted book value | $ | 8,215 | $ | 61.86 | $ | 8,439 | $ | 61.18 |
Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
7
Assured Guaranty Ltd.
Claims-Paying Resources
(dollars in millions)
As of June 30, 2016 | ||||||||||||||||||||||||
Assured Guaranty Municipal Corp. | Assured Guaranty Corp. | Municipal Assurance Corp. | Assured Guaranty Re Ltd. (8) | Eliminations(3) | Consolidated | |||||||||||||||||||
Claims-paying resources | ||||||||||||||||||||||||
Policyholders' surplus | $ | 2,441 | $ | 1,435 | $ | 379 | $ | 1,075 | $ | (623 | ) | $ | 4,707 | |||||||||||
Contingency reserve(1) | 1,400 | 913 | 298 | — | (298 | ) | 2,313 | |||||||||||||||||
Qualified statutory capital | 3,841 | 2,348 | 677 | 1,075 | (921 | ) | 7,020 | |||||||||||||||||
Unearned premium reserve(1) | 1,459 | 573 | 400 | 746 | (400 | ) | 2,778 | |||||||||||||||||
Loss and LAE reserves (1) | 333 | 177 | — | 342 | — | 852 | ||||||||||||||||||
Total policyholders' surplus and reserves | 5,633 | 3,098 | 1,077 | 2,163 | (1,321 | ) | 10,650 | |||||||||||||||||
Present value of installment premium(1) | 239 | 156 | 2 | 133 | (2 | ) | 528 | |||||||||||||||||
CCS | 200 | 200 | — | — | — | 400 | ||||||||||||||||||
Excess of loss reinsurance facility (2) | 360 | 360 | 360 | — | (720 | ) | 360 | |||||||||||||||||
Total claims-paying resources (including proportionate MAC ownership for AGM and AGC) | 6,432 | 3,814 | 1,439 | 2,296 | (2,043 | ) | 11,938 | |||||||||||||||||
Adjustment for MAC (4) | 655 | 424 | — | — | (1,079 | ) | — | |||||||||||||||||
Total claims-paying resources (excluding proportionate MAC ownership for AGM and AGC) | $ | 5,777 | $ | 3,390 | $ | 1,439 | $ | 2,296 | $ | (964 | ) | $ | 11,938 | |||||||||||
Statutory net par outstanding (5) | $ | 123,873 | $ | 38,178 | $ | 52,001 | $ | 81,407 | $ | (953 | ) | $ | 294,506 | |||||||||||
Equity method adjustment (4) | 31,564 | 20,437 | — | — | (52,001 | ) | — | |||||||||||||||||
Adjusted statutory net par outstanding (1) | $ | 155,437 | $ | 58,615 | $ | 52,001 | $ | 81,407 | $ | (52,954 | ) | $ | 294,506 | |||||||||||
Net debt service outstanding (5) | $ | 191,278 | $ | 56,528 | $ | 76,721 | $ | 127,909 | $ | (2,391 | ) | $ | 450,045 | |||||||||||
Equity method adjustment (4) | 46,570 | 30,151 | — | — | (76,721 | ) | — | |||||||||||||||||
Adjusted net debt service outstanding (1) | $ | 237,848 | $ | 86,679 | $ | 76,721 | $ | 127,909 | $ | (79,112 | ) | $ | 450,045 | |||||||||||
Ratios: | ||||||||||||||||||||||||
Adjusted net par outstanding to qualified statutory capital | 40:1 | 25:1 | 77:1 | 76:1 | 42:1 | |||||||||||||||||||
Capital ratio (6) | 62:1 | 37:1 | 113:1 | 119:1 | 64:1 | |||||||||||||||||||
Financial resources ratio (7) | 37:1 | 23:1 | 53:1 | 56:1 | 38:1 |
1) | The numbers shown for Assured Guaranty Municipal Corp. (AGM) and Assured Guaranty Corp. (AGC) have been adjusted to include (i) their 100% share of their respective United Kingdom insurance subsidiaries and (ii) their indirect share of Municipal Assurance Corp. (MAC). AGM and AGC own 60.7% and 39.3%, respectively, of the outstanding stock of Municipal Assurance Holdings Inc., which owns 100% of the outstanding common stock of MAC. Amounts include financial guaranty insurance and credit derivatives. |
2) | Represents an aggregate $360 million excess-of-loss reinsurance facility for the benefit of AGC, AGM and MAC, which became effective January 1, 2016. The facility terminates on January 1, 2018, unless AGC, AGM and MAC choose to extend it. |
3) | Eliminations are primarily for (i) intercompany surplus notes between AGM and AGC, and (ii) MAC amounts, whose proportionate share are included in AGM and AGC based on ownership percentages. Net par and net debt service outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary, and net par related to intercompany cessions from AGM and AGC to MAC. |
4) | Represents adjustments for AGM's and AGC's interest and indirect ownership of MAC. |
5) | Net par outstanding and net debt service outstanding are presented on a statutory basis. |
6) | The capital ratio is calculated by dividing adjusted net debt service outstanding by qualified statutory capital. |
7) | The financial resources ratio is calculated by dividing adjusted net debt service outstanding by total claims-paying resources (including MAC adjustment for AGM and AGC). |
8) | Assured Guaranty Re Ltd. (AG Re) numbers represent the Company's estimate of U.S. statutory accounting practices prescribed or permitted by insurance regulatory authorities, except for contingency reserves. |
Please refer to the Glossary for an explanation of changes in the presentation of net debt service and net par outstanding.
8
Assured Guaranty Ltd.
New Business Production
(dollars in millions)
Reconciliation of PVP to GWP for the Three Months Ended June 30, 2016 and June 30, 2015
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||||||||||||||||||||||||||||||
Public Finance | Structured Finance | Public Finance | Structured Finance | |||||||||||||||||||||||||||||||||||||
U.S. | Non - U.S. | U.S. | Non - U.S. | Total | U.S. | Non - U.S. | U.S. | Non - U.S. | Total | |||||||||||||||||||||||||||||||
PVP | $ | 33 | $ | 7 | $ | 1 | $ | — | $ | 41 | $ | 25 | $ | — | $ | 1 | $ | — | $ | 26 | ||||||||||||||||||||
Less: PVP of non-financial guaranty insurance | — | — | 1 | — | 1 | — | — | 0 | — | 0 | ||||||||||||||||||||||||||||||
Less: Financial guaranty installment premium PVP | — | 7 | — | — | 7 | — | — | 1 | — | 1 | ||||||||||||||||||||||||||||||
Plus: Installment GWP and other GAAP adjustments(1) | 0 | 7 | (3 | ) | (1 | ) | 3 | (2 | ) | (1 | ) | 0 | 0 | (3 | ) | |||||||||||||||||||||||||
Total GWP | $ | 33 | $ | 7 | $ | (3 | ) | $ | (1 | ) | $ | 36 | $ | 23 | $ | (1 | ) | $ | 0 | $ | 0 | $ | 22 | |||||||||||||||||
Gross par written | $ | 4,366 | $ | 406 | $ | 3 | $ | — | $ | 4,775 | $ | 5,581 | $ | — | $ | — | $ | — | $ | 5,581 |
Reconciliation of PVP to GWP for the Six Months Ended June 30, 2016 and June 30, 2015
Six Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||||
June 30, 2016 | June 30, 2015 | |||||||||||||||||||||||||||||||||||||||
Public Finance | Structured Finance | Public Finance | Structured Finance | |||||||||||||||||||||||||||||||||||||
U.S. | Non - U.S. | U.S. | Non - U.S. | Total | U.S. | Non - U.S. | U.S. | Non - U.S. | Total | |||||||||||||||||||||||||||||||
PVP | $ | 64 | $ | 14 | $ | 1 | $ | — | $ | 79 | $ | 38 | $ | — | $ | 19 | $ | 5 | $ | 62 | ||||||||||||||||||||
Less: PVP of non-financial guaranty insurance | — | — | 1 | — | 1 | — | — | 1 | 5 | 6 | ||||||||||||||||||||||||||||||
Less: Financial guaranty installment premium PVP | — | 14 | — | — | 14 | — | — | 18 | — | 18 | ||||||||||||||||||||||||||||||
Plus: Installment GWP and other GAAP adjustments(1) | (16 | ) | 15 | (6 | ) | (2 | ) | (9 | ) | (2 | ) | (1 | ) | 19 | 0 | 16 | ||||||||||||||||||||||||
Total GWP | $ | 48 | $ | 15 | $ | (6 | ) | $ | (2 | ) | $ | 55 | $ | 36 | $ | (1 | ) | $ | 19 | $ | 0 | $ | 54 | |||||||||||||||||
Gross par written | $ | 7,115 | $ | 406 | $ | 3 | $ | — | $ | 7,524 | $ | 8,022 | $ | — | $ | 261 | $ | 6 | $ | 8,289 |
1) | Includes present value of new business on installment policies discounted at the prescribed GAAP discount rates, gross written premium adjustments on existing installment policies due to changes in assumptions, any cancellations of assumed reinsurance contracts, and other GAAP adjustments. |
Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
9
Assured Guaranty Ltd.
Gross Par Written
(dollars in millions)
Gross Par Written by Asset Type
Three Months Ended | Six Months Ended | |||||||||||
June 30, 2016 | June 30, 2016 | |||||||||||
Gross Par Written | Avg. Internal Rating | Gross Par Written | Avg. Internal Rating | |||||||||
Sector: | ||||||||||||
U.S. public finance | ||||||||||||
General obligation | $ | 2,194 | A- | $ | 3,492 | A- | ||||||
Tax backed | 613 | A | 1,316 | A- | ||||||||
Transportation | 757 | BBB | 919 | BBB | ||||||||
Municipal utilities | 536 | A- | 831 | A- | ||||||||
Higher education | 244 | A | 316 | A | ||||||||
Housing | 21 | BBB | 155 | BBB | ||||||||
Infrastructure finance | — | — | 9 | A | ||||||||
Other public finance | 1 | A- | 77 | AA- | ||||||||
Total U.S. public finance | 4,366 | A- | 7,115 | A- | ||||||||
Non-U.S. public finance: | ||||||||||||
Regulated utilities | 406 | BBB+ | 406 | BBB+ | ||||||||
Total non-U.S. public finance | 406 | BBB+ | 406 | BBB+ | ||||||||
Total public finance | $ | 4,772 | A- | $ | 7,521 | A- | ||||||
U.S. structured finance: | ||||||||||||
Other structured finance | $ | 3 | A- | $ | 3 | A- | ||||||
Total U.S. structured finance | 3 | A- | 3 | A- | ||||||||
Non-U.S. structured finance: | ||||||||||||
Total non-U.S. structured finance | — | — | — | — | ||||||||
Total structured finance | $ | 3 | A- | $ | 3 | A- | ||||||
Total gross par written | $ | 4,775 | A- | $ | 7,524 | A- |
Please refer to the Glossary for a description of internal ratings and sectors.
10
Assured Guaranty Ltd.
New Business Production by Quarter
(dollars in millions)
Six Months | ||||||||||||||||||||||||||||||||
1Q-15 | 2Q-15 | 3Q-15 | 4Q-15 | 1Q-16 | 2Q-16 | 2015 | 2016 | |||||||||||||||||||||||||
PVP: | ||||||||||||||||||||||||||||||||
Public finance - U.S. | $ | 13 | $ | 25 | $ | 41 | $ | 45 | $ | 31 | $ | 33 | $ | 38 | $ | 64 | ||||||||||||||||
Public finance - non-U.S. | — | — | — | 27 | 7 | 7 | — | 14 | ||||||||||||||||||||||||
Structured finance - U.S. | 18 | 1 | 0 | 3 | — | 1 | 19 | 1 | ||||||||||||||||||||||||
Structured finance - non-U.S. | 5 | — | — | 1 | — | — | 5 | — | ||||||||||||||||||||||||
Total PVP | $ | 36 | $ | 26 | $ | 41 | $ | 76 | $ | 38 | $ | 41 | $ | 62 | $ | 79 | ||||||||||||||||
Reconciliation of PVP to GWP: | ||||||||||||||||||||||||||||||||
Total PVP | $ | 36 | $ | 26 | $ | 41 | $ | 76 | $ | 38 | $ | 41 | $ | 62 | $ | 79 | ||||||||||||||||
Less: PVP of non-financial guaranty insurance | 6 | 0 | 1 | 0 | 0 | 1 | 6 | 1 | ||||||||||||||||||||||||
Less: Financial guaranty installment premium PVP | 17 | 1 | (1 | ) | 29 | 7 | 7 | 18 | 14 | |||||||||||||||||||||||
Plus: Installment GWP and other GAAP adjustments | 19 | (3 | ) | (1 | ) | 40 | (12 | ) | 3 | 16 | (9 | ) | ||||||||||||||||||||
Total GWP | $ | 32 | $ | 22 | $ | 40 | $ | 87 | $ | 19 | $ | 36 | $ | 54 | $ | 55 | ||||||||||||||||
Gross par written: | ||||||||||||||||||||||||||||||||
Public finance - U.S. | $ | 2,441 | $ | 5,581 | $ | 4,703 | $ | 3,652 | $ | 2,749 | $ | 4,366 | $ | 8,022 | $ | 7,115 | ||||||||||||||||
Public finance - non-U.S. | — | — | — | 567 | — | 406 | — | 406 | ||||||||||||||||||||||||
Structured finance - U.S. | 261 | — | — | 66 | — | 3 | 261 | 3 | ||||||||||||||||||||||||
Structured finance - non-U.S. | 6 | — | — | 59 | — | — | 6 | — | ||||||||||||||||||||||||
Total | $ | 2,708 | $ | 5,581 | $ | 4,703 | $ | 4,344 | $ | 2,749 | $ | 4,775 | $ | 8,289 | $ | 7,524 |
Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
11
Assured Guaranty Ltd.
Available-for-Sale Investment Portfolio and Cash
As of June 30, 2016
(dollars in millions)
Amortized Cost | Pre-Tax Book Yield | After-Tax Book Yield | Fair Value | Annualized Investment Income (1) | ||||||||||||||||||
Investment portfolio, available-for-sale: | ||||||||||||||||||||||
Fixed maturity securities: | ||||||||||||||||||||||
Obligations of states and political subdivisions(4) | $ | 4,735 | 3.98 | % | 3.67 | % | $ | 5,151 | $ | 189 | ||||||||||||
Insured obligations of state and political subdivisions (2)(4) | 408 | 4.89 | 4.54 | 452 | 20 | |||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | 165 | 2.24 | 1.64 | 177 | 4 | |||||||||||||||||
Agency obligations | 134 | 4.88 | 4.13 | 149 | 7 | |||||||||||||||||
Corporate securities (4) | 1,402 | 3.93 | 3.10 | 1,443 | 55 | |||||||||||||||||
Mortgage-backed securities (MBS): | ||||||||||||||||||||||
Residential MBS (RMBS) (3)(4) | 1,037 | 4.64 | 3.54 | 1,062 | 48 | |||||||||||||||||
Commercial MBS (CMBS) | 505 | 3.50 | 2.83 | 539 | 18 | |||||||||||||||||
Asset-backed securities (4) | 745 | 2.99 | 2.04 | 730 | 22 | |||||||||||||||||
Foreign government securities | 270 | 2.37 | 1.54 | 257 | 6 | |||||||||||||||||
Total fixed maturity securities | 9,401 | 3.92 | 3.34 | 9,960 | 369 | |||||||||||||||||
Short-term investments | 585 | 0.03 | 0.03 | 585 | 0 | |||||||||||||||||
Cash (5) | 190 | — | — | 190 | — | |||||||||||||||||
Total | $ | 10,176 | 3.69 | % | 3.15 | % | $ | 10,735 | $ | 369 | ||||||||||||
Ratings (6): | Fair Value | % of Portfolio | ||||||||||||||||||||
U.S. Treasury securities and obligations of U.S. government agencies | $ | 177 | 1.8 | % | ||||||||||||||||||
Agency obligations | 149 | 1.5 | ||||||||||||||||||||
AAA/Aaa | 1,120 | 11.3 | ||||||||||||||||||||
AA/Aa | 5,458 | 54.8 | ||||||||||||||||||||
A/A | 1,774 | 17.8 | ||||||||||||||||||||
BBB | 100 | 1.0 | ||||||||||||||||||||
Below investment grade (BIG) (7) | 1,140 | 11.4 | ||||||||||||||||||||
Not rated | 42 | 0.4 | ||||||||||||||||||||
Total fixed maturity securities, available-for-sale | $ | 9,960 | 100.0 | % | ||||||||||||||||||
Duration of fixed maturity securities and short-term investments (in years): | 5.2 | |||||||||||||||||||||
Average ratings of fixed maturity securities and short-term investments | A+ |
1) | Represents annualized investment income based on amortized cost and pre-tax book yields. |
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 Ratings Services (S&P) or Moody's Investors Service, Inc. (Moody's), average A+. Includes fair value of $149 million insured by AGC and AGM. |
3) | Includes fair value of $237 million in subprime RMBS, which has an average rating of BIG. |
4) | Includes securities purchased or obtained as part of loss mitigation or other risk management strategies. |
5) | Cash is not included in the yield calculation. |
6) | Ratings are represented by the lower of the Moody's and S&P classifications except for bonds purchased for loss mitigation (loss mitigation bonds) or other risk management strategies which use internal ratings classifications. |
7) | Includes below investment grade securities that were purchased or obtained as part of loss mitigation or other risk management strategies of $1,959 million in par with carrying value of $1,139 million. |
12
Assured Guaranty Ltd.
Estimated Net Exposure Amortization(1) and Estimated Future Net Premium
and Credit Derivative Revenues
(dollars in millions)
Financial Guaranty Insurance (2) | |||||||||||||||||||||||||||||
Estimated Net Debt Service Amortization | Estimated Ending Net Debt Service Outstanding | Expected PV Net Earned Premiums | Accretion of Discount | Future Operating Net Premiums Earned | Future Credit Derivative Revenues | Total | |||||||||||||||||||||||
2016 (as of June 30) | $ | 488,362 | |||||||||||||||||||||||||||
2016 Q3 | $ | 14,540 | 473,822 | $ | 93 | $ | 4 | $ | 97 | $ | 8 | $ | 105 | ||||||||||||||||
2016 Q4 | 12,596 | 461,226 | 89 | 4 | 93 | 7 | 100 | ||||||||||||||||||||||
2017 | 50,131 | 411,095 | 326 | 16 | 342 | 19 | 361 | ||||||||||||||||||||||
2018 | 35,241 | 375,854 | 298 | 15 | 313 | 9 | 322 | ||||||||||||||||||||||
2019 | 28,825 | 347,029 | 266 | 14 | 280 | 7 | 287 | ||||||||||||||||||||||
2020 | 23,961 | 323,068 | 243 | 13 | 256 | 6 | 262 | ||||||||||||||||||||||
2016-2020 | 165,294 | 323,068 | 1,315 | 66 | 1,381 | 56 | 1,437 | ||||||||||||||||||||||
2021-2025 | 110,728 | 212,340 | 943 | 48 | 991 | 29 | 1,020 | ||||||||||||||||||||||
2026-2030 | 85,848 | 126,492 | 601 | 29 | 630 | 18 | 648 | ||||||||||||||||||||||
2031-2035 | 60,921 | 65,571 | 362 | 15 | 377 | 15 | 392 | ||||||||||||||||||||||
After 2035 | 65,571 | — | 288 | 11 | 299 | 13 | 312 | ||||||||||||||||||||||
Total | $ | 488,362 | $ | 3,509 | $ | 169 | $ | 3,678 | $ | 131 | $ | 3,809 |
Reconciliation of future operating net premiums earned to future GAAP net premiums earned
Future GAAP Net Premiums Earned | Future Operating Net Premiums Earned related to FG VIEs | Future Operating Net Premiums Earned | |||||||||||
2016 Q3 | $ | 93 | $ | 4 | $ | 97 | |||||||
2016 Q4 | 89 | 4 | 93 | ||||||||||
2017 | 328 | 14 | 342 | ||||||||||
2018 | 302 | 11 | 313 | ||||||||||
2019 | 271 | 9 | 280 | ||||||||||
2020 | 249 | 7 | 256 | ||||||||||
2016-2020 | 1,332 | 49 | 1,381 | ||||||||||
2021-2025 | 969 | 22 | 991 | ||||||||||
2026-2030 | 617 | 13 | 630 | ||||||||||
2031-2035 | 365 | 12 | 377 | ||||||||||
After 2035 | 294 | 5 | 299 | ||||||||||
Total | $ | 3,577 | $ | 101 | $ | 3,678 |
1) | Represents the future expected amortization of current debt service outstanding (principal and interest), assuming no advance refundings, as of June 30, 2016. 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. |
2) | See page 15 for ‘‘Present Value of Financial Guaranty Insurance Net Expected Loss to be Expensed.’’ |
13
Assured Guaranty Ltd.
Expected Amortization of Net Par Outstanding
(dollars in millions)
Structured Finance
Estimated Net Par Amortization | |||||||||||||||||||||||||
U.S. and Non-U.S. Pooled Corporate | U.S. RMBS | Financial Products | Other Structured Finance | Total | Estimated Ending Net Par Outstanding | ||||||||||||||||||||
2016 (as of June 30) | $ | 29,622 | |||||||||||||||||||||||
2016 Q3 | $ | 735 | $ | 262 | $ | 56 | $ | 225 | $ | 1,278 | 28,344 | ||||||||||||||
2016 Q4 | 1,112 | 288 | (13 | ) | 439 | 1,826 | 26,518 | ||||||||||||||||||
2017 | 9,200 | 893 | 56 | 482 | 10,631 | 15,887 | |||||||||||||||||||
2018 | 991 | 800 | (22 | ) | 604 | 2,373 | 13,514 | ||||||||||||||||||
2019 | 474 | 908 | 9 | 557 | 1,948 | 11,566 | |||||||||||||||||||
2020 | 72 | 647 | (3 | ) | 321 | 1,037 | 10,529 | ||||||||||||||||||
2016-2020 | 12,584 | 3,798 | 83 | 2,628 | 19,093 | 10,529 | |||||||||||||||||||
2021-2025 | 372 | 1,528 | 175 | 2,328 | 4,403 | 6,126 | |||||||||||||||||||
2026-2030 | 260 | 410 | 899 | 807 | 2,376 | 3,750 | |||||||||||||||||||
2031-2035 | 512 | 111 | 497 | 930 | 2,050 | 1,700 | |||||||||||||||||||
After 2035 | 717 | 235 | 155 | 593 | 1,700 | — | |||||||||||||||||||
Total structured finance | $ | 14,445 | $ | 6,082 | $ | 1,809 | $ | 7,286 | $ | 29,622 |
Public Finance
Estimated Net Par Amortization | Estimated Ending Net Par Outstanding | ||||||||
2016 (as of June 30) | $ | 300,242 | |||||||
2016 Q3 | $ | 9,721 | 290,521 | ||||||
2016 Q4 | 7,208 | 283,313 | |||||||
2017 | 26,226 | 257,087 | |||||||
2018 | 20,785 | 236,302 | |||||||
2019 | 15,691 | 220,611 | |||||||
2020 | 12,396 | 208,215 | |||||||
2016-2020 | 92,027 | 208,215 | |||||||
2021-2025 | 62,743 | 145,472 | |||||||
2026-2030 | 54,361 | 91,111 | |||||||
2031-2035 | 41,611 | 49,500 | |||||||
After 2035 | 49,500 | — | |||||||
Total public finance | $ | 300,242 |
Net par outstanding (end of period)
1Q-15 | 2Q-15 | 3Q-15 | 4Q-15 | 1Q-16 | 2Q-16 | ||||||||||||||||||||
Public finance - U.S. | $ | 313,444 | $ | 312,182 | $ | 300,732 | $ | 291,866 | $ | 282,055 | $ | 272,114 | |||||||||||||
Public finance - non-U.S. | 29,619 | 32,319 | 30,103 | 29,577 | 29,385 | 28,128 | |||||||||||||||||||
Structured finance - U.S. | 38,430 | 38,906 | 35,435 | 31,770 | 30,452 | 25,562 | |||||||||||||||||||
Structured finance - non-U.S. | 7,606 | 6,977 | 6,091 | 5,358 | 5,123 | 4,060 | |||||||||||||||||||
Net par outstanding | $ | 389,099 | $ | 390,384 | $ | 372,361 | $ | 358,571 | $ | 347,015 | $ | 329,864 |
Please refer to the Glossary for an explanation of the presentation of net par outstanding and of the various sectors.
14
Assured Guaranty Ltd.
Present Value (PV) of Net Expected Loss to be Expensed
As of June 30, 2016
(dollars in millions)
Net Expected Loss to be Expensed (1) | |||||||||
GAAP(2) | Operating(2) | ||||||||
2016 Q3 | $ | 9 | $ | 11 | |||||
2016 Q4 | 8 | 11 | |||||||
2017 | 30 | 39 | |||||||
2018 | 28 | 35 | |||||||
2019 | 29 | 34 | |||||||
2020 | 27 | 32 | |||||||
2016-2020 | 131 | 162 | |||||||
2021-2025 | 103 | 120 | |||||||
2026-2030 | 71 | 79 | |||||||
2031-2035 | 40 | 52 | |||||||
After 2035 | 19 | 23 | |||||||
Total expected PV of net expected loss to be expensed | 364 | 436 | |||||||
Future accretion | 199 | 216 | |||||||
Total expected future loss and LAE | $ | 563 | $ | 652 |
1) | The present value of net expected loss to be paid is discounted using weighted-average risk free rates ranging from 0.0% to 2.46% for U.S. dollar denominated obligations. |
2) | Net expected loss to be expensed for GAAP reported income is different than operating income, a non-GAAP financial measure, by the amount related to consolidated FG VIEs and credit derivatives. |
15
Assured Guaranty Ltd.
Financial Guaranty Profile (1 of 4)
(dollars in millions)
Net Par Outstanding and Average Rating by Asset Type
June 30, 2016 | December 31, 2015 | |||||||||||||
Net Par Outstanding | Avg. Internal Rating | Net Par Outstanding | Avg. Internal Rating | |||||||||||
U.S. public finance: | ||||||||||||||
General obligation | $ | 118,551 | A | $ | 126,255 | A | ||||||||
Tax backed | 54,876 | A | 58,062 | A | ||||||||||
Municipal utilities | 42,959 | A | 45,936 | A | ||||||||||
Transportation | 22,383 | A- | 23,454 | A | ||||||||||
Healthcare | 13,636 | A | 15,006 | A | ||||||||||
Higher education | 10,787 | A | 11,936 | A | ||||||||||
Infrastructure finance | 3,096 | BBB | 4,993 | BBB | ||||||||||
Housing | 1,845 | A- | 2,037 | A | ||||||||||
Investor-owned utilities | 902 | A- | 916 | A- | ||||||||||
Other public finance | 3,079 | A | 3,271 | A | ||||||||||
Total U.S. public finance | 272,114 | A | 291,866 | A | ||||||||||
Non-U.S. public finance: | ||||||||||||||
Infrastructure finance | 12,008 | BBB | 12,728 | BBB | ||||||||||
Regulated utilities | 9,535 | BBB+ | 10,048 | BBB+ | ||||||||||
Pooled infrastructure | 1,637 | AA | 1,879 | AA | ||||||||||
Other public finance | 4,948 | A | 4,922 | A | ||||||||||
Total non-U.S. public finance | 28,128 | BBB+ | 29,577 | BBB+ | ||||||||||
Total public finance | $ | 300,242 | A | $ | 321,443 | A | ||||||||
U.S. structured finance: | ||||||||||||||
Pooled corporate obligations | $ | 11,913 | AAA | $ | 16,008 | AAA | ||||||||
RMBS | 6,082 | BBB- | 7,067 | BBB- | ||||||||||
Insurance securitizations | 2,439 | A+ | 3,000 | A+ | ||||||||||
Consumer receivables | 1,905 | A- | 2,099 | A- | ||||||||||
Financial products | 1,809 | AA- | 1,906 | AA- | ||||||||||
CMBS and other commercial real estate related exposures | 387 | AAA | 533 | AAA | ||||||||||
Commercial receivables | 362 | BBB | 427 | BBB+ | ||||||||||
Other structured finance | 665 | AA | 730 | AA- | ||||||||||
Total U.S. structured finance | 25,562 | AA- | 31,770 | AA- | ||||||||||
Non-U.S. structured finance: | ||||||||||||||
Pooled corporate obligations | 2,532 | AA- | 3,645 | AA | ||||||||||
RMBS | 484 | BBB | 492 | BBB | ||||||||||
Commercial receivables | 441 | BBB | 600 | BBB+ | ||||||||||
Other structured finance | 603 | AA- | 621 | AA- | ||||||||||
Total non-U.S. structured finance | 4,060 | A+ | 5,358 | AA- | ||||||||||
Total structured finance | $ | 29,622 | A+ | $ | 37,128 | AA- | ||||||||
Total | $ | 329,864 | A | $ | 358,571 | A |
Please refer to the Glossary for an explanation of the presentation of net par outstanding and the Company's internal rating approach, and of the various sectors.
16
Assured Guaranty Ltd.
Financial Guaranty Profile (2 of 4)
As of June 30, 2016
(dollars in millions)
Distribution by Ratings of Financial Guaranty Portfolio
Public Finance - U.S. | Public Finance - Non-U.S. | Structured Finance - U.S. | Structured Finance - Non-U.S. | Total | |||||||||||||||||||||||||||
Ratings: | Net Par Outstanding | % | Net Par Outstanding | % | Net Par Outstanding | % | Net Par Outstanding | % | Net Par Outstanding | % | |||||||||||||||||||||
AAA | $ | 2,376 | 0.9 | % | $ | 695 | 2.5 | % | $ | 11,362 | 44.4 | % | $ | 1,628 | 40.1 | % | $ | 16,061 | 4.9 | % | |||||||||||
AA | 59,310 | 21.8 | 1,775 | 6.3 | 6,719 | 26.3 | 149 | 3.7 | 67,953 | 20.6 | |||||||||||||||||||||
A | 142,028 | 52.2 | 6,440 | 22.9 | 2,008 | 7.9 | 457 | 11.2 | 150,933 | 45.7 | |||||||||||||||||||||
BBB | 60,132 | 22.1 | 17,840 | 63.4 | 920 | 3.6 | 1,235 | 30.4 | 80,127 | 24.3 | |||||||||||||||||||||
BIG | 8,268 | 3.0 | 1,378 | 4.9 | 4,553 | 17.8 | 591 | 14.6 | 14,790 | 4.5 | |||||||||||||||||||||
Net Par Outstanding (1) | $ | 272,114 | 100.0 | % | $ | 28,128 | 100.0 | % | $ | 25,562 | 100.0 | % | $ | 4,060 | 100.0 | % | $ | 329,864 | 100.0 | % |
1) | Excludes $1.4 billion of loss mitigation securities insured and held by the Company as of June 30, 2016, which are primarily BIG. |
Please refer to the Glossary for an explanation of the presentation of net par outstanding and the Company's internal rating approach, and of the various sectors.
17
Assured Guaranty Ltd.
Financial Guaranty Profile (3 of 4)
As of June 30, 2016
(dollars in millions)
Geographic Distribution of Financial Guaranty Portfolio
Net Par Outstanding | % of Total | |||||||||
U.S.: | ||||||||||
U.S. public finance: | ||||||||||
California | $ | 47,147 | 14.3 | % | ||||||
Pennsylvania | 22,360 | 6.8 | ||||||||
Texas | 22,009 | 6.7 | ||||||||
New York | 21,075 | 6.4 | ||||||||
Illinois | 19,279 | 5.8 | ||||||||
Florida | 15,320 | 4.6 | ||||||||
New Jersey | 13,252 | 4.0 | ||||||||
Michigan | 9,768 | 3.0 | ||||||||
Georgia | 6,792 | 2.1 | ||||||||
Ohio | 6,346 | 1.9 | ||||||||
Other states | 88,766 | 26.9 | ||||||||
Total public finance | 272,114 | 82.5 | ||||||||
U.S. structured finance: | 25,562 | 7.7 | ||||||||
Total U.S. | 297,676 | 90.2 | ||||||||
Non-U.S.: | ||||||||||
United Kingdom | 16,702 | 5.1 | ||||||||
Australia | 3,330 | 1.0 | ||||||||
Canada | 2,866 | 0.9 | ||||||||
France | 2,516 | 0.8 | ||||||||
Italy | 1,266 | 0.4 | ||||||||
Other | 5,508 | 1.6 | ||||||||
Total non-U.S. | 32,188 | 9.8 | ||||||||
Total net par outstanding | $ | 329,864 | 100.0 | % |
Please refer to the Glossary for an explanation of the presentation of net par outstanding and of the various sectors.
18
Assured Guaranty Ltd.
Financial Guaranty Profile (4 of 4)
As of June 30, 2016
(dollars in millions)
Net Direct Economic Exposure to Selected European Countries (1)
Hungary | Italy | Portugal | Spain | Turkey (4) | Total | ||||||||||||||||||
Sub-sovereign exposure (2) | $ | 265 | $ | 793 | $ | 80 | $ | 366 | $ | — | $ | 1,504 | |||||||||||
Non-sovereign exposure (3) | 174 | 432 | — | — | 204 | 810 | |||||||||||||||||
Total | $ | 439 | $ | 1,225 | $ | 80 | $ | 366 | $ | 204 | $ | 2,314 | |||||||||||
Total BIG | $ | 369 | $ | — | $ | 80 | $ | 366 | $ | — | $ | 815 |
1) | While the Company’s exposures are shown in U.S. dollars, the obligations the Company insures are in various currencies, primarily Euros. |
2) | Sub-sovereign exposure in Selected European Countries includes transactions backed by receivables from or supported by sub-sovereigns, which are governmental or government-backed entities other than the ultimate governing body of the country. |
3) | Non-sovereign exposure in Selected European Countries includes debt of regulated utilities, RMBS and diversified payment rights (DPR) securitizations. |
4) | The $204 million net insured par exposure in Turkey is to DPR securitizations sponsored by a major Turkish bank. These DPR securitizations were established outside of Turkey and involve payment orders in U.S. dollars, pounds sterling and Euros from persons outside of Turkey to beneficiaries in Turkey who are customers of the sponsoring bank. The sponsoring bank's correspondent banks have agreed to remit all such payments to a trustee-controlled account outside Turkey, where debt service payments for the DPR securitization are given priority over payments to the sponsoring bank. |
Please refer to the Glossary for an explanation of the Company's net par outstanding, internal rating approach and of the various sectors.
19
Assured Guaranty Ltd.
Exposure to Puerto Rico (1 of 3)
As of June 30, 2016
(dollars in millions)
Exposure to Puerto Rico
Gross Par Outstanding | Net Par Outstanding | Gross Debt Service Outstanding | Net Debt Service Outstanding | ||||||||||||
Total | $ | 5,756 | $ | 5,054 | $ | 9,483 | $ | 8,466 |
Net Exposure to Puerto Rico by Risk(1)
Net Par Outstanding | |||||||||||||||||||||||
AGM | AGC | AG Re | Eliminations (2) | Total Net Par Outstanding (3) | Gross Par Outstanding | ||||||||||||||||||
Commonwealth Constitutionally Guaranteed | |||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds (5) | $ | 720 | $ | 415 | $ | 480 | $ | — | $ | 1,615 | $ | 1,738 | |||||||||||
Puerto Rico Public Buildings Authority (PBA)(5) | 13 | 137 | 38 | — | 188 | 194 | |||||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback(4) | |||||||||||||||||||||||
Puerto Rico Highways and Transportation Authority (PRHTA) (Transportation revenue) | 289 | 476 | 225 | (80 | ) | 910 | 937 | ||||||||||||||||
PRHTA (Highways revenue) | 219 | 100 | 50 | — | 369 | 574 | |||||||||||||||||
Puerto Rico Convention Center District Authority (PRCCDA) | — | 82 | 82 | — | 164 | 164 | |||||||||||||||||
Puerto Rico Infrastructure Financing Authority (PRIFA)(5) | — | 10 | 8 | — | 18 | 18 | |||||||||||||||||
Other Public Corporations | |||||||||||||||||||||||
Puerto Rico Electric Power Authority (PREPA) | 431 | 74 | 239 | — | 744 | 902 | |||||||||||||||||
Puerto Rico Aqueduct and Sewer Authority (PRASA) | — | 296 | 92 | — | 388 | 388 | |||||||||||||||||
Puerto Rico Municipal Finance Agency (MFA) | 206 | 65 | 116 | — | 387 | 570 | |||||||||||||||||
Puerto Rico Sales Tax Financing Corporation (COFINA) | 262 | — | 8 | — | 270 | 270 | |||||||||||||||||
University of Puerto Rico | — | 1 | — | — | 1 | 1 | |||||||||||||||||
Total net exposure to Puerto Rico | $ | 2,140 | $ | 1,656 | $ | 1,338 | $ | (80 | ) | $ | 5,054 | $ | 5,756 |
1) | The general obligation bonds of Puerto Rico and various obligations of its related authorities and public corporations are rated triple-C or below. |
2) | Net par outstanding eliminations relate to second-to-pay policies under which an Assured Guaranty insurance subsidiary guarantees an obligation already insured by another Assured Guaranty insurance subsidiary. |
3) | Includes exposure to capital appreciation bonds with a current aggregate net par outstanding of $34 million and a fully accreted net par at maturity of $67 million. Of these amounts, current net par of $18 million and fully accreted net par at maturity of $50 million relate to the Puerto Rico Sales Tax Financing Corporation, current net par of $10 million and fully accreted net par at maturity of $11 million relate to the PRHTA, and current net par of $5 million and fully accreted net par at maturity of $5 million relate to the Commonwealth General Obligation Bonds. |
4) | The Governor issued executive orders on November 30, 2015, and December 8, 2015, directing the Puerto Rico Department of Treasury and the Puerto Rico Tourism Company to retain or transfer certain taxes and revenues pledged to secure the payment of bonds issued by PRHTA, PRIFA and PRCCDA. On January 7, 2016 the Company sued various Puerto Rico governmental officials in the United States District Court, District of Puerto Rico asserting that this attempt to “claw back” pledged taxes and revenues is unconstitutional, and demanding declaratory and injunctive relief. |
5) | As of the date of this filing, the Company has paid claims on these credits. |
20
Assured Guaranty Ltd.
Exposure to Puerto Rico (2 of 3)
As of June 30, 2016
(dollars in millions)
Amortization Schedule of Net Par Outstanding of Puerto Rico(1)
2016 (3Q) | 2016 (4Q) | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 -2030 | 2031 -2035 | 2036 -2040 | 2041 -2045 | 2046 -2047 | Total | |||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed | |||||||||||||||||||||||||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds | $ | 142 | $ | 0 | $ | 95 | $ | 75 | $ | 82 | $ | 137 | $ | 16 | $ | 37 | $ | 14 | $ | 73 | $ | 68 | $ | 255 | $ | 475 | $ | 146 | $ | — | $ | — | $ | 1,615 | |||||||||||||||||
PBA | 8 | — | 30 | — | 5 | 10 | 12 | 0 | 7 | 0 | 8 | 53 | 39 | 16 | — | — | 188 | ||||||||||||||||||||||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback | |||||||||||||||||||||||||||||||||||||||||||||||||||
PRHTA (Transportation revenue) | 33 | 0 | 36 | 42 | 28 | 23 | 18 | 19 | 21 | 1 | 26 | 150 | 228 | 240 | 45 | — | 910 | ||||||||||||||||||||||||||||||||||
PRHTA (Highways revenue) | 19 | — | 10 | 10 | 21 | 22 | 26 | 6 | 8 | 8 | 8 | 27 | 167 | 37 | — | — | 369 | ||||||||||||||||||||||||||||||||||
PRCCDA | 11 | — | — | — | — | — | — | — | — | — | — | 19 | 105 | 29 | — | — | 164 | ||||||||||||||||||||||||||||||||||
PRIFA | — | — | — | 2 | — | — | — | — | 2 | — | — | — | — | 10 | 4 | — | 18 | ||||||||||||||||||||||||||||||||||
Other Public Corporations | |||||||||||||||||||||||||||||||||||||||||||||||||||
PREPA | 20 | 0 | 5 | 4 | 25 | 42 | 22 | 22 | 81 | 78 | 52 | 309 | 84 | 0 | — | — | 744 | ||||||||||||||||||||||||||||||||||
PRASA | 15 | — | — | — | — | — | — | — | — | 2 | 25 | 84 | — | 2 | 92 | 168 | 388 | ||||||||||||||||||||||||||||||||||
MFA | 55 | — | 47 | 47 | 44 | 37 | 33 | 33 | 16 | 12 | 11 | 52 | — | — | — | — | 387 | ||||||||||||||||||||||||||||||||||
COFINA | (1 | ) | 0 | (1 | ) | (1 | ) | (1 | ) | (1 | ) | (2 | ) | (2 | ) | 1 | 0 | (2 | ) | (6 | ) | 32 | 99 | 155 | — | 270 | |||||||||||||||||||||||||
University of Puerto Rico | 0 | — | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | — | — | — | 1 | ||||||||||||||||||||||||||||||||||
Total net par for Puerto Rico | $ | 302 | $ | 0 | $ | 222 | $ | 179 | $ | 204 | $ | 270 | $ | 125 | $ | 115 | $ | 150 | $ | 174 | $ | 196 | $ | 943 | $ | 1,131 | $ | 579 | $ | 296 | $ | 168 | $ | 5,054 |
1) | Includes exposure to capital appreciation bonds with a current aggregate net par outstanding of $34 million and a fully accreted net par at maturity of $67 million. Of these amounts, current net par of $18 million and fully accreted net par at maturity of $50 million relate to the Puerto Rico Sales Tax Financing Corporation, current net par of $10 million and fully accreted net par at maturity of $11 million relate to the PRHTA, and current net par of $5 million and fully accreted net par at maturity of $5 million relate to the Commonwealth General Obligation Bonds. |
21
Assured Guaranty Ltd.
Exposure to Puerto Rico (3 of 3)
As of June 30, 2016
(dollars in millions)
Amortization Schedule of Net Debt Service Outstanding of Puerto Rico(1)
2016 (3Q) | 2016 (4Q) | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 -2030 | 2031 -2035 | 2036 -2040 | 2041 -2045 | 2046 -2047 | Total | |||||||||||||||||||||||||||||||||||
Commonwealth Constitutionally Guaranteed | |||||||||||||||||||||||||||||||||||||||||||||||||||
Commonwealth of Puerto Rico - General Obligation Bonds | $ | 184 | $ | 0 | $ | 171 | $ | 146 | $ | 150 | $ | 201 | $ | 72 | $ | 93 | $ | 69 | $ | 127 | $ | 117 | $ | 459 | $ | 605 | $ | 161 | $ | — | $ | — | $ | 2,555 | |||||||||||||||||
PBA | 13 | — | 39 | 8 | 12 | 18 | 20 | 6 | 14 | 6 | 14 | 72 | 49 | 16 | — | — | 287 | ||||||||||||||||||||||||||||||||||
Public Corporations - Certain Revenues Potentially Subject to Clawback | |||||||||||||||||||||||||||||||||||||||||||||||||||
PRHTA (Transportation revenue) | 57 | 0 | 82 | 86 | 69 | 63 | 57 | 57 | 58 | 37 | 61 | 309 | 348 | 288 | 47 | — | 1,619 | ||||||||||||||||||||||||||||||||||
PRHTA (Highways revenue) | 29 | — | 29 | 29 | 39 | 39 | 42 | 20 | 21 | 21 | 21 | 87 | 203 | 38 | — | — | 618 | ||||||||||||||||||||||||||||||||||
PRCCDA | 15 | — | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 7 | 51 | 127 | 30 | — | — | 286 | ||||||||||||||||||||||||||||||||||
PRIFA | 0 | — | 1 | 3 | 1 | 1 | 1 | 1 | 3 | 0 | 1 | 4 | 3 | 13 | 4 | — | 36 | ||||||||||||||||||||||||||||||||||
Other Public Corporations | |||||||||||||||||||||||||||||||||||||||||||||||||||
PREPA | 35 | 2 | 38 | 37 | 58 | 74 | 52 | 50 | 109 | 102 | 73 | 366 | 92 | 0 | — | — | 1,088 | ||||||||||||||||||||||||||||||||||
PRASA | 25 | — | 19 | 19 | 19 | 19 | 19 | 19 | 20 | 21 | 45 | 160 | 68 | 70 | 159 | 181 | 863 | ||||||||||||||||||||||||||||||||||
MFA | 64 | — | 64 | 62 | 56 | 47 | 40 | 39 | 21 | 16 | 15 | 57 | — | — | — | — | 481 | ||||||||||||||||||||||||||||||||||
COFINA | 6 | 0 | 13 | 13 | 13 | 13 | 13 | 13 | 16 | 15 | 12 | 68 | 103 | 164 | 170 | — | 632 | ||||||||||||||||||||||||||||||||||
University of Puerto Rico | 0 | — | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | — | — | — | 1 | ||||||||||||||||||||||||||||||||||
Total net par for Puerto Rico | $ | 428 | $ | 2 | $ | 463 | $ | 410 | $ | 424 | $ | 482 | $ | 323 | $ | 305 | $ | 338 | $ | 352 | $ | 366 | $ | 1,633 | $ | 1,599 | $ | 780 | $ | 380 | $ | 181 | $ | 8,466 |
1) | Includes exposure to capital appreciation bonds with a current aggregate net par outstanding of $34 million and a fully accreted net par at maturity of $67 million. Of these amounts, current net par of $18 million and fully accreted net par at maturity of $50 million relate to the Puerto Rico Sales Tax Financing Corporation, current net par of $10 million and fully accreted net par at maturity of $11 million relate to the PRHTA, and current net par of $5 million and fully accreted net par at maturity of $5 million relate to the Commonwealth General Obligation Bonds. |
22
Assured Guaranty Ltd.
Direct Pooled Corporate Obligations Profile
As of June 30, 2016
(dollars in millions)
Distribution of Direct Pooled Corporate Obligations by Ratings
Net Par Outstanding | % of Total | Avg. Initial Credit Enhancement | Avg. Current Credit Enhancement | ||||||||||||
Ratings: | |||||||||||||||
AAA | $ | 9,840 | 68.8 | % | 23.4 | % | 29.7 | % | |||||||
AA | 2,029 | 14.2 | 44.9 | 54.1 | |||||||||||
A | 977 | 6.8 | 44.3 | 47.3 | |||||||||||
BBB | 601 | 4.2 | 39.0 | 37.8 | |||||||||||
BIG | 855 | 6.0 | 39.7 | 23.6 | |||||||||||
Total exposures | $ | 14,302 | 100.0 | % | 29.1 | % | 34.4 | % |
Distribution of Direct Pooled Corporate Obligations by Asset Class
Net Par Outstanding | % of Total | Avg. Initial Credit Enhancement | Avg. Current Credit Enhancement | Avg. Rating | |||||||||||||
Asset class: | |||||||||||||||||
Synthetic investment grade pooled corporates | $ | 7,116 | 49.7 | % | 21.7 | % | 19.4 | % | AAA | ||||||||
CBOs/CLOs | 3,275 | 22.9 | 29.3 | 55.1 | AAA | ||||||||||||
Trust preferred | |||||||||||||||||
Banks and insurance | 2,199 | 15.4 | 45.3 | 46.6 | A | ||||||||||||
U.S. mortgage and real estate investment trusts | 560 | 3.9 | 49.5 | 51.6 | BBB | ||||||||||||
European mortgage and real estate investment trusts | 496 | 3.5 | 36.4 | 37.6 | BBB | ||||||||||||
Other pooled corporates | 656 | 4.6 | — | — | BB | ||||||||||||
Total exposures | $ | 14,302 | 100.0 | % | 29.1 | % | 34.4 | % | AA+ |
Please refer to the Glossary for an explanation of internal ratings, performance indicators and sectors.
23
Assured Guaranty Ltd.
Consolidated U.S. RMBS Profile
As of June 30, 2016
(dollars in millions)
Distribution of U.S. RMBS by Rating and Type of Exposure
Ratings: | Prime First Lien | Alt-A First Lien | Option ARMs | Subprime First Lien | Second Lien | Total Net Par Outstanding | ||||||||||||||||||
AAA | $ | 2 | $ | 197 | $ | 16 | $ | 1,510 | $ | 9 | $ | 1,736 | ||||||||||||
AA | 35 | 256 | 73 | 334 | 1 | 699 | ||||||||||||||||||
A | 14 | 8 | 2 | 46 | 0 | 70 | ||||||||||||||||||
BBB | 61 | 7 | — | 83 | 0 | 151 | ||||||||||||||||||
BIG | 124 | 622 | 96 | 1,220 | 1,366 | 3,427 | ||||||||||||||||||
Total exposures | $ | 236 | $ | 1,089 | $ | 186 | $ | 3,193 | $ | 1,376 | $ | 6,082 |
Distribution of U.S. RMBS by Year Insured and Type of Exposure
Year insured: | Prime First Lien | Alt-A First Lien | Option ARMs | Subprime First Lien | Second Lien | Total Net Par Outstanding | ||||||||||||||||||
2004 and prior | $ | 44 | $ | 49 | $ | 16 | $ | 1,003 | $ | 89 | $ | 1,202 | ||||||||||||
2005 | 114 | 414 | 34 | 170 | 302 | 1,034 | ||||||||||||||||||
2006 | 79 | 83 | 30 | 674 | 385 | 1,251 | ||||||||||||||||||
2007 | — | 543 | 107 | 1,279 | 600 | 2,528 | ||||||||||||||||||
2008 | — | — | — | 67 | — | 67 | ||||||||||||||||||
Total exposures | $ | 236 | $ | 1,089 | $ | 186 | $ | 3,193 | $ | 1,376 | $ | 6,082 |
Please refer to the Glossary for an explanation of the Company's presentation of net par outstanding and a description of performance indicators and sectors.
24
Assured Guaranty Ltd.
Below Investment Grade Exposures (1 of 5)
(dollars in millions)
BIG Exposures by Asset Exposure Type
BIG Net Par Outstanding | ||||||||||
June 30, 2016 | December 31, 2015 | |||||||||
U.S. public finance: | ||||||||||
General obligation | $ | 3,590 | $ | 2,964 | ||||||
Tax backed | 2,352 | 2,389 | ||||||||
Municipal utilities | 1,188 | 1,247 | ||||||||
Infrastructure finance | 404 | 403 | ||||||||
Healthcare | 303 | 350 | ||||||||
Higher education | 280 | 244 | ||||||||
Transportation | 86 | 86 | ||||||||
Housing | 19 | 19 | ||||||||
Other public finance | 46 | 82 | ||||||||
Total U.S. public finance | 8,268 | 7,784 | ||||||||
Non-U.S. public finance: | ||||||||||
Infrastructure finance | 1,054 | 1,053 | ||||||||
Other public finance | 324 | 325 | ||||||||
Total non-U.S. public finance | 1,378 | 1,378 | ||||||||
Total public finance | $ | 9,646 | $ | 9,162 | ||||||
U.S. structured finance: | ||||||||||
RMBS | $ | 3,427 | $ | 3,973 | ||||||
Pooled corporate obligations | 563 | 806 | ||||||||
Consumer receivables | 244 | 305 | ||||||||
Insurance securitizations | 216 | 216 | ||||||||
Commercial receivables | 87 | 75 | ||||||||
Other structured finance | 16 | 94 | ||||||||
Total U.S. structured finance | 4,553 | 5,469 | ||||||||
Non-U.S. structured finance: | ||||||||||
Pooled corporate obligations | 385 | 386 | ||||||||
RMBS | 105 | 103 | ||||||||
Commercial receivables | 101 | 63 | ||||||||
Total non-U.S. structured finance | 591 | 552 | ||||||||
Total structured finance | $ | 5,144 | $ | 6,021 | ||||||
Total BIG net par outstanding | $ | 14,790 | $ | 15,183 |
Please refer to the Glossary for an explanation of the Company's presentation of net par outstanding and a description of various sectors.
25
Assured Guaranty Ltd.
Below Investment Grade Exposures (2 of 5)
(dollars in millions)
Net Par Outstanding by BIG Category(1)
June 30, 2016 | December 31, 2015 | ||||||||||
Category 1 | |||||||||||
U.S. public finance | $ | 4,902 | $ | 4,765 | |||||||
Non-U.S. public finance | 863 | 875 | |||||||||
U.S. structured finance | 817 | 1,874 | |||||||||
Non-U.S. structured finance | 474 | 509 | |||||||||
Total Category 1 | 7,056 | 8,023 | |||||||||
Category 2 | |||||||||||
U.S. public finance | 3,191 | 2,883 | |||||||||
Non-U.S. public finance | 515 | 503 | |||||||||
U.S. structured finance | 746 | 700 | |||||||||
Non-U.S. structured finance | 117 | 43 | |||||||||
Total Category 2 | 4,569 | 4,129 | |||||||||
Category 3 | |||||||||||
U.S. public finance | 175 | 136 | |||||||||
Non-U.S. public finance | — | — | |||||||||
U.S. structured finance | 2,990 | 2,895 | |||||||||
Non-U.S. structured finance | — | — | |||||||||
Total Category 3 | 3,165 | 3,031 | |||||||||
BIG Total | $ | 14,790 | $ | 15,183 |
1) | Assured Guaranty's surveillance department is responsible for monitoring the Company's portfolio of credits and maintains a list of BIG credits. BIG Category 1: Below-investment-grade transactions showing sufficient deterioration to make future losses possible, but for which none are currently expected. BIG Category 2: Below-investment-grade transactions for which future losses are expected but for which no claims (other than liquidity claims which is a claim that the Company expects to be reimbursed within one year) have yet been paid. BIG Category 3: Below-investment-grade transactions for which future losses are expected and on which claims (other than liquidity claims) have been paid. |
Please refer to the Glossary for an explanation of the Company's internal rating approach, presentation of net par outstanding and a description of various sectors.
26
Assured Guaranty Ltd.
Below Investment Grade Exposures (3 of 5)
As of June 30, 2016
(dollars in millions)
Public Finance BIG Exposures with Revenue Sources Greater Than $50 Million
Net Par Outstanding | Internal Rating | ||||||||
Name or description | |||||||||
U.S. public finance: | |||||||||
Puerto Rico, General Obligation, Appropriations and Guarantees of the Commonwealth | $ | 1,821 | CCC | ||||||
Puerto Rico Highways & Transportation Authority | 1,279 | CCC- | |||||||
Puerto Rico Electric Power Authority (PREPA) | 744 | CC | |||||||
Puerto Rico Aqueduct & Sewer Authority (PRASA) | 388 | CCC | |||||||
Puerto Rico Municipal Finance Agency | 387 | CCC- | |||||||
Oyster Bay, New York | 370 | BB+ | |||||||
Louisville Arena Authority Inc. | 336 | BB | |||||||
Puerto Rico Sales Tax Financing Corporation (COFINA) | 270 | CCC+ | |||||||
Puerto Rico Convention Center District Authority | 164 | CCC- | |||||||
Woonsocket (City of), Rhode Island | 138 | BB | |||||||
Stockton Pension Obligation Bonds, California | 115 | D | |||||||
Penn Hills School District, Pennsylvania | 107 | BB | |||||||
Butler County General Authority, Pennsylvania | 105 | BB | |||||||
Detroit-Wayne County Stadium Authority, Michigan | 93 | BB- | |||||||
Ebert Metropolitan District, Colorado | 87 | B+ | |||||||
Orange County Tourist Development Tax, Florida | 85 | BB | |||||||
Atlantic City, New Jersey | 73 | BB | |||||||
West Mifflin Area School District, Pennsylvania | 72 | BB | |||||||
Knox Hills, LLC | 65 | B | |||||||
Pennsylvania Economic Development Financing Authority (Capitol Region Parking System) | 61 | BB | |||||||
Jennie Stuart Medical Center | 58 | BB+ | |||||||
Robert Wood Johnson Health Care Corporation at Hamilton | 54 | B+ | |||||||
Southlands Metropolitan District No. 1, Colorado | 52 | BB | |||||||
Pacific Lutheran University, Washington | 52 | BB+ | |||||||
University of the Arts, Pennsylvania | 51 | BB | |||||||
Total | $ | 7,027 | |||||||
Non-U.S. public finance: | |||||||||
Reliance Rail Finance Pty Limited | $ | 513 | BB | ||||||
M6 Duna Autopalya Koncesszios Zartkoruen Mukodo Reszvenytarsasag | 265 | BB- | |||||||
Valencia Fair | 243 | BB- | |||||||
Autovia de la Mancha, S.A. | 116 | BB- | |||||||
CountyRoute (A130) plc | 96 | BB- | |||||||
Metropolitano de PortoLease and Sublease of Railroad Equipment | 54 | B+ | |||||||
Total | $ | 1,287 | |||||||
Total | $ | 8,314 |
Please refer to the Glossary for an explanation of the Company's internal rating approach, presentation of net par outstanding and a description of various sectors.
27
Assured Guaranty Ltd.
Below Investment Grade Exposures (4 of 5)
As of June 30, 2016
(dollars in millions)
Structured Finance BIG Exposures Greater Than $50 Million
BIG Net Par Outstanding | Internal Rating | Current Credit Enhancement | 60+ Day Delinquencies | |||||||
Name or description | ||||||||||
U.S. structured finance: | ||||||||||
RMBS: | ||||||||||
Option One 2007-FXD2 | $ | 256 | CCC | 0.0% | 20.7% | |||||
Countrywide HELOC 2006-I | 213 | B | 0.0% | 2.6% | ||||||
MABS 2007-NCW | 185 | CCC | 0.0% | 37.4% | ||||||
Nomura Asset Accept. Corp. 2007-1 | 174 | CCC | 0.0% | 26.0% | ||||||
Soundview 2007-WMC1 | 167 | CCC | - | 41.2% | ||||||
Countrywide Home Equity Loan Trust 2007-D | 130 | CCC | 0.0% | 2.8% | ||||||
New Century 2005-A | 118 | CCC | 6.2% | 18.6% | ||||||
Countrywide Home Equity Loan Trust 2005-J | 116 | CCC | 0.1% | 4.6% | ||||||
Countrywide HELOC 2006-F | 113 | CCC | 0.0% | 5.3% | ||||||
Countrywide HELOC 2005-D | 108 | CCC | 0.0% | 5.0% | ||||||
Countrywide HELOC 2007-B | 101 | B | 0.0% | 2.8% | ||||||
Countrywide HELOC 2007-A | 101 | B | 0.0% | 3.8% | ||||||
IndyMac 2007-H1 HELOC | 84 | B | 0.0% | 1.6% | ||||||
Doral 2006-1 | 79 | B | 7.5% | 22.2% | ||||||
GMACM 2004-HE3 | 67 | CCC | 0.0% | 6.4% | ||||||
Soundview (Delta) 2008-1 | 67 | CCC | 1.8% | 24.5% | ||||||
Ace 2007-D1 | 55 | CCC | 3.6% | 26.7% | ||||||
Ace Home Equity Loan Trust 2007-SL1 | 55 | CCC | - | 6.4% | ||||||
IMPAC CMB Trust Series 2007-A | 50 | BB | 10.1% | 16.6% | ||||||
Total RMBS | $ | 2,239 |
Please refer to the Glossary for the Company's internal rating approach, presentation of net par outstanding and a description of performance indicators and sectors.
28
Assured Guaranty Ltd.
Below Investment Grade Exposures (5 of 5)
As of June 30, 2016
(dollars in millions)
Structured Finance BIG Exposures Greater Than $50 Million (continued)
BIG Net Par Outstanding | Internal Rating | Current Credit Enhancement | ||||||
Name or description | ||||||||
U.S. structured finance: | ||||||||
Non-RMBS: | ||||||||
Alesco Preferred Funding XVI, Ltd. | $ | 215 | BB | 19.9% | ||||
Ballantyne Re Plc | 175 | CC | N/A | |||||
Taberna Preferred Funding II, Ltd. | 147 | B | 31.5% | |||||
US Capital Funding IV, Ltd. | 127 | CCC | 11.7% | |||||
Taberna Preferred Funding VI, Ltd. | 74 | BB- | 38.8% | |||||
National Collegiate Trust Series 2006-2 | 68 | CCC | N/A | |||||
Subtotal non-RMBS | $ | 806 | ||||||
Subtotal U.S. structured finance | $ | 3,045 | ||||||
Non-U.S. structured finance: | ||||||||
Gleneagles Funding Ltd. | $ | 231 | BB | N/A | ||||
Private Pooled Corporate Transaction | 88 | BB | N/A | |||||
Blade Engine Securitization Ltd. Series 2006-1A-1 | 74 | CCC | N/A | |||||
FHB | 57 | BB- | N/A | |||||
Subtotal Non-U.S. structured finance | $ | 450 | ||||||
Total | $ | 3,495 |
Please refer to the Glossary for the Company's internal rating approach, presentation of net par outstanding and a description of performance indicators and sectors.
29
Assured Guaranty Ltd.
Largest Exposures by Sector (1 of 4)
As of June 30, 2016
(dollars in millions)
50 Largest U.S. Public Finance Exposures by Revenue Source
Credit Name: | Net Par Outstanding | Internal Rating | ||||
New Jersey (State of) | $ | 4,713 | BBB+ | |||
California (State of) | 2,242 | A | ||||
Illinois (State of) | 2,126 | BBB+ | ||||
New York (City of) New York | 1,948 | A+ | ||||
Puerto Rico, General Obligation, Appropriations and Guarantees of the Commonwealth | 1,821 | CCC | ||||
Massachusetts (Commonwealth of) | 1,771 | AA | ||||
New York (State of) | 1,756 | A+ | ||||
Los Angeles Unified School District, California | 1,615 | AA- | ||||
Pennsylvania (Commonwealth of) | 1,611 | A | ||||
Chicago (City of) Illinois | 1,606 | BBB+ | ||||
Philadelphia (City of) Pennsylvania | 1,510 | BBB+ | ||||
Wisconsin (State of) | 1,444 | A+ | ||||
Miami-Dade County Florida Aviation Authority - Miami International Airport | 1,401 | A | ||||
Puerto Rico Highways & Transportation Authority | 1,279 | CCC- | ||||
New York Metropolitan Transportation Authority | 1,275 | A | ||||
Chicago Public Schools, Illinois | 1,273 | BBB- | ||||
Massachusetts (Commonwealth of) Water Resources | 1,248 | AA | ||||
Georgia Board of Regents | 1,218 | A | ||||
Port Authority of New York and New Jersey | 1,200 | A+ | ||||
North Texas Tollway Authority Dallas, Texas | 1,171 | A | ||||
Michigan (State of) | 1,072 | A+ | ||||
Long Island Power Authority | 1,054 | BBB+ | ||||
Philadelphia School District, Pennsylvania | 1,037 | BBB | ||||
Great Lakes Water Authority (Sewerage), Michigan | 1,032 | BBB | ||||
Arizona (State of) | 1,019 | A+ | ||||
Chicago-O'Hare International Airport, Illinois | 1,002 | A- | ||||
Miami-Dade County School Board, Florida | 997 | A- | ||||
Great Lakes Water Authority (Water), Michigan | 878 | BBB | ||||
Atlanta Georgia Water & Sewer System | 870 | BBB+ | ||||
New York City Municipal Water Finance Authority | 864 | AA | ||||
Central Florida Expressway Authority, Florida | 845 | A+ | ||||
Washington (State of) | 809 | AA | ||||
San Diego Unified School District, California | 801 | AA | ||||
Kentucky (Commonwealth of) | 786 | A+ | ||||
Miami-Dade County, Florida Water & Sewer | 771 | A+ | ||||
District of Columbia | 771 | AA- | ||||
Houston, Texas Water and Sewer Authority | 764 | AA- | ||||
Illinois Toll Highway Authority | 750 | AA- | ||||
Puerto Rico Electric Power Authority (PREPA) | 744 | CC | ||||
Metro Washington Airport Authority | 729 | A+ | ||||
Oglethorpe Power Corporation, Georgia | 718 | BBB+ | ||||
Pennsylvania Turnpike Commission | 712 | A- | ||||
Miami-Dade County, Florida | 700 | A+ | ||||
Nassau County, New York | 698 | A- | ||||
Chicago Transit Authority, Illinois | 688 | AA- | ||||
San Jose Airport, California | 686 | BBB+ | ||||
Metropolitan Pier & Exposition Authority, Illinois | 681 | A | ||||
Garden State Preservation Trust (Open Space & Farmland), New Jersey | 642 | AA | ||||
Jefferson County Alabama Sewer | 637 | BBB- | ||||
San Francisco (City & County) Airport Commission, California | 635 | A | ||||
Total top 50 U.S. public finance exposures | $ | 58,620 |
Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.
30
Assured Guaranty Ltd.
Largest Exposures by Sector (2 of 4)
As of June 30, 2016
(dollars in millions)
50 Largest U.S. Structured Finance Exposures
Credit Name: | Net Par Outstanding | Internal Rating | Credit Enhancement | |||||
Private US Insurance Securitization | $ | 800 | AA | N/A | ||||
Synthetic Investment Grade Pooled Corporate CDO | 766 | AAA | 14.8% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 744 | AAA | 26.7% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 655 | AAA | 14.9% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 563 | AAA | 23.4% | |||||
Fortress Credit Opportunities I, LP. | 546 | AA | 50.7% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 516 | AAA | 14.3% | |||||
Private US Insurance Securitization | 500 | AA | N/A | |||||
Synthetic Investment Grade Pooled Corporate CDO | 450 | AAA | 17.7% | |||||
SLM Private Credit Student Trust 2007-A | 450 | A- | 18.1% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 440 | AAA | 21.2% | |||||
LIICA Holdings, LLC | 428 | AA | N/A | |||||
SLM Private Credit Student Loan Trust 2007-6 | 392 | AAA | 4.2% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 380 | AAA | 29.2% | |||||
SLM Private Credit Student Loan Trust 2006-C | 356 | A- | 21.3% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 346 | AAA | 16.3% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 311 | AAA | 14.2% | |||||
Cent CDO 15 Limited | 287 | AAA | 100.0% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 283 | AAA | 30.3% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 270 | AAA | 29.1% | |||||
Cent CDO 12 Limited | 258 | AAA | 25.1% | |||||
Option One 2007-FXD2 | 256 | CCC | 0.0% | |||||
Private US Insurance Securitization | 250 | AA | N/A | |||||
ALESCO Preferred Funding XIV | 227 | A+ | 43.7% | |||||
Alesco Preferred Funding XVI, Ltd. | 215 | BB | 19.9% | |||||
Countrywide HELOC 2006-I | 213 | B | 0.0% | |||||
Timberlake Financial, LLC Floating Insured Notes | 212 | BBB- | N/A | |||||
Synthetic Investment Grade Pooled Corporate CDO | 204 | AAA | 9.2% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 204 | AAA | 10.4% | |||||
MABS 2007-NCW | 185 | CCC | 0.0% | |||||
Ballantyne Re Plc | 175 | CC | N/A | |||||
Grayson CLO | 175 | AAA | 47.4% | |||||
Nomura Asset Accept. Corp. 2007-1 | 174 | CCC | 0.0% | |||||
Synthetic Investment Grade Pooled Corporate CDO | 170 | AAA | 27.6% | |||||
CWALT Alternative Loan Trust 2007-HY9 | 167 | A+ | 0.4% | |||||
Soundview 2007-WMC1 | 167 | CCC | - | |||||
CWABS 2007-4 | 157 | A | 2.5% | |||||
Taberna Preferred Funding II, Ltd. | 147 | B | 31.5% | |||||
Private Other Structured Finance Transaction | 144 | AAA | N/A | |||||
Trapeza CDO XI | 137 | A- | 47.6% | |||||
ALESCO Preferred Funding XIII, Ltd. | 137 | AA | 51.7% | |||||
Mountain View CLO II | 136 | AAA | 30.4% | |||||
Countrywide Home Equity Loan Trust 2007-D | 130 | CCC | 0.0% | |||||
US Capital Funding IV, Ltd | 127 | CCC | 11.7% | |||||
Private Other Structured Finance Transaction | 126 | AAA | N/A | |||||
Kingsland IV | 121 | AAA | 39.2% | |||||
Lime Street CLO, Ltd. | 120 | AAA | 100.0% | |||||
Countrywide 2007-13 | 119 | AA- | 19.6% | |||||
New Century 2005-A | 118 | CCC | 6.2% | |||||
Countrywide Home Equity Loan Trust 2005-J | 116 | CCC | 0.1% | |||||
Total top 50 U.S. structured finance exposures | $ | 14,570 |
Please refer to the Glossary for the Company's internal rating approach, presentation of net par outstanding and a description of various sectors.
31
Assured Guaranty Ltd.
Largest Exposures by Sector (3 of 4)
As of June 30, 2016
(dollars in millions)
25 Largest Non-U.S. Exposures by Revenue Source
Credit Name: | Country | Net Par Outstanding | Internal Rating | ||||
Hydro-Quebec, Province of Quebec | Canada | $ | 2,037 | A+ | |||
Thames Water Utility Finance PLC | United Kingdom | 1,045 | A- | ||||
HIT Finance B.V. | France | 996 | BBB+ | ||||
Channel Link Enterprises Finance PLC | France, United Kingdom | 830 | BBB | ||||
Capital Hospitals (Barts) | United Kingdom | 730 | BBB- | ||||
Artesian Finance II Plc (Southern) | United Kingdom | 661 | A- | ||||
Verbund - Lease and Sublease of Hydro-Electric Equipment | Austria | 660 | AAA | ||||
Southern Gas Networks PLC | United Kingdom | 598 | BBB | ||||
International Infrastructure Pool | United Kingdom | 585 | AA | ||||
Campania Region | Italy | 572 | BBB- | ||||
InspirED Education (South Lanarkshire) plc | Scotland | 562 | BBB- | ||||
A28 Motorway | France | 537 | BBB- | ||||
International Infrastructure Pool | United Kingdom | 526 | AA | ||||
International Infrastructure Pool | United Kingdom | 526 | AA | ||||
Reliance Rail Finance Pty Limited | Australia | 513 | BB | ||||
Southern Cross Airports Corporation Pty | Australia | 502 | BBB | ||||
Envestra Limited | Australia | 486 | BBB | ||||
Scotland Gas Networks Plc | United Kingdom | 460 | BBB | ||||
Central Nottinghamshire Hospitals PLC | United Kingdom | 457 | BBB | ||||
United Utilities Water PLC | United Kingdom | 432 | BBB+ | ||||
NewHospitals (St Helens & Knowsley) Finance PLC | United Kingdom | 424 | BBB | ||||
The Hospital Company (QAH Portsmouth) Limited | United Kingdom | 405 | BBB | ||||
Yorkshire Water Services Finance Plc | United Kingdom | 379 | A- | ||||
Integrated Accommodation Services PLC | United Kingdom | 368 | BBB+ | ||||
Northumbrian Water | United Kingdom | 367 | BBB+ | ||||
Total top 25 non-U.S. exposures | $ | 15,658 |
Please refer to the Glossary for an explanation of net par outstanding, internal ratings and sectors.
32
Assured Guaranty Ltd.
Largest Exposures by Sector (4 of 4)
As of June 30, 2016
(dollars in millions)
10 Largest U.S. Residential Mortgage Servicer Exposures
Servicer: | Net Par Outstanding | |||
Ocwen Loan Servicing, LLC (1) | $ | 1,880 | ||
Specialized Loan Servicing, LLC | 1,560 | |||
Bank of America, N.A. (2) | 1,344 | |||
Wells Fargo Bank N.A. | 531 | |||
JPMorgan Chase Bank | 228 | |||
Select Portfolio Servicing, Inc. | 145 | |||
Banco Popular de Puerto Rico | 79 | |||
Ditech Financial LLC | 55 | |||
Carrington Mortgage Services, LLC | 41 | |||
Citicorp Mortgage Securities, Inc. | 38 | |||
Total top 10 U.S. residential mortgage servicer exposures | $ | 5,901 |
1) Includes GMAC Mortgage LLC, Residential Funding Inc. and Homeward Residential Inc.
2) | Includes Countrywide Home Loans Servicing LP. |
10 Largest U.S. Healthcare Exposures
Credit Name: | Net Par Outstanding | Internal Rating | State | |||||
MultiCare Health System | $ | 409 | AA- | WA | ||||
Dignity Health, California | 370 | A | CA | |||||
Children's National Medical Center, District of Columbia | 365 | A- | DC | |||||
CHRISTUS Health | 364 | A | TX | |||||
Methodist Healthcare | 359 | A+ | TN | |||||
Bon Secours Health System Obligated Group | 323 | A- | MD | |||||
Carolina HealthCare System | 319 | AA- | NC | |||||
Palmetto Health Alliance, South Carolina | 274 | A- | SC | |||||
Columbus Regional Healthcare System Inc. | 272 | BBB- | GA | |||||
Catholic Health Partners | 272 | A+ | OH | |||||
Total top 10 U.S. healthcare exposures | $ | 3,327 |
Please refer to the Glossary for the Company's internal rating approach and presentation of net par outstanding.
33
Assured Guaranty Ltd.
Rollforward of Net Expected Loss and LAE to be Paid After Benefit for R&W
(dollars in millions)
Rollforward of Net Expected Loss and LAE to be Paid(1) After Benefit for R&W for the Three Months Ended June 30, 2016
Net Expected Loss to be Paid (Recovered) as of March 31, 2016 | Economic Loss Development During 2Q-16 | (Paid) Recovered Losses During 2Q-16 | Net Expected Loss to be Paid (Recovered) as of June 30, 2016 | |||||||||||||
Public Finance: | ||||||||||||||||
U.S. public finance | $ | 864 | $ | 111 | $ | (12 | ) | $ | 963 | |||||||
Non-U.S public finance | 39 | (2 | ) | — | 37 | |||||||||||
Public Finance | 903 | 109 | (12 | ) | 1,000 | |||||||||||
U.S. RMBS | ||||||||||||||||
First lien: | ||||||||||||||||
Prime first lien | (1 | ) | 0 | 4 | 3 | |||||||||||
Alt-A first lien | 36 | (38 | ) | (94 | ) | (96 | ) | |||||||||
Option ARMs | (47 | ) | (10 | ) | 1 | (56 | ) | |||||||||
Subprime first lien | 240 | (26 | ) | 13 | 227 | |||||||||||
Total first lien | 228 | (74 | ) | (76 | ) | 78 | ||||||||||
Second lien | 65 | (7 | ) | 56 | 114 | |||||||||||
Total U.S. RMBS (2) | 293 | (81 | ) | (20 | ) | 192 | ||||||||||
Triple-X life insurance transactions | 102 | (2 | ) | 0 | 100 | |||||||||||
Student loans | 32 | (1 | ) | 0 | 31 | |||||||||||
Other structured finance | 7 | (3 | ) | (1 | ) | 3 | ||||||||||
Structured Finance | 434 | (87 | ) | (21 | ) | 326 | ||||||||||
Total | $ | 1,337 | $ | 22 | $ | (33 | ) | $ | 1,326 |
Rollforward of Net Expected Loss and LAE to be Paid(1) After Benefit for R&W for the Six Months Ended June 30, 2016
Net Expected Loss to be Paid (Recovered) as of December 31, 2015 | Economic Loss Development During 2016 | (Paid) Recovered Losses During 2016 | Net Expected Loss to be Paid (Recovered) as of June 30, 2016 | |||||||||||||
Public Finance: | ||||||||||||||||
U.S. public finance | $ | 771 | $ | 209 | $ | (17 | ) | $ | 963 | |||||||
Non-U.S public finance | 38 | (1 | ) | — | 37 | |||||||||||
Public Finance | 809 | 208 | (17 | ) | 1,000 | |||||||||||
U.S. RMBS | ||||||||||||||||
First lien: | ||||||||||||||||
Prime first lien | (2 | ) | 0 | 5 | 3 | |||||||||||
Alt-A first lien | 127 | (54 | ) | (169 | ) | (96 | ) | |||||||||
Option ARMs | (28 | ) | (31 | ) | 3 | (56 | ) | |||||||||
Subprime first lien | 251 | (25 | ) | 1 | 227 | |||||||||||
Total first lien | 348 | (110 | ) | (160 | ) | 78 | ||||||||||
Second lien | 61 | (2 | ) | 55 | 114 | |||||||||||
Total U.S. RMBS (2) | 409 | (112 | ) | (105 | ) | 192 | ||||||||||
Triple-X life insurance transactions | 99 | 2 | (1 | ) | 100 | |||||||||||
Student loans | 54 | (15 | ) | (8 | ) | 31 | ||||||||||
Other structured finance | 20 | (2 | ) | (15 | ) | 3 | ||||||||||
Structured Finance | 582 | (127 | ) | (129 | ) | 326 | ||||||||||
Total | $ | 1,391 | $ | 81 | $ | (146 | ) | $ | 1,326 |
1) | Includes expected loss to be paid, economic loss development and paid (recovered) losses for all contracts (i.e. those accounted for as insurance, credit derivatives and FG VIEs). |
2) | Includes future net representations and warranties (R&W) recoverable (payable) of $79 million as of December 31, 2015, $47 million as of March 31, 2016 and $(58) million as of June 30, 2016. |
34
Assured Guaranty Ltd.
Loss Measures
As of June 30, 2016
(dollars in millions)
Total Net Par Outstanding for BIG Transactions | 2Q-16 Loss and LAE | 2Q-16 Operating Loss and LAE | 2016 Loss and LAE | 2016 Operating Loss and LAE | GAAP Net Expected Loss to be Expensed | Operating Net Expected Loss to be Expensed | |||||||||||||||||||||||||
Public Finance: | |||||||||||||||||||||||||||||||
U.S. public finance | $ | 8,268 | $ | 116 | $ | 116 | $ | 213 | $ | 213 | $ | 181 | $ | 181 | |||||||||||||||||
Non-U.S public finance | 1,378 | (1 | ) | (1 | ) | (1 | ) | (1 | ) | 13 | 13 | ||||||||||||||||||||
Public Finance | 9,646 | 115 | 115 | 212 | 212 | 194 | 194 | ||||||||||||||||||||||||
Structured Finance: | |||||||||||||||||||||||||||||||
U.S. RMBS: | |||||||||||||||||||||||||||||||
First lien: | |||||||||||||||||||||||||||||||
Prime first lien | 124 | (1 | ) | (1 | ) | (1 | ) | (1 | ) | $ | 0 | 0 | |||||||||||||||||||
Alt-A first lien | 621 | 3 | 2 | 10 | 10 | 24 | 34 | ||||||||||||||||||||||||
Option ARMs | 96 | (7 | ) | (8 | ) | (21 | ) | (24 | ) | 16 | 16 | ||||||||||||||||||||
Subprime | 1,220 | (9 | ) | (19 | ) | (5 | ) | (17 | ) | 57 | 61 | ||||||||||||||||||||
Total first lien | 2,061 | (14 | ) | (26 | ) | (17 | ) | (32 | ) | 97 | 111 | ||||||||||||||||||||
Second lien | 1,366 | 5 | 4 | 12 | 17 | 58 | 116 | ||||||||||||||||||||||||
Total U.S. RMBS | 3,427 | (9 | ) | (22 | ) | (5 | ) | (15 | ) | 155 | 227 | ||||||||||||||||||||
Triple-X life insurance transactions | 216 | (1 | ) | (1 | ) | 2 | 2 | 5 | 5 | ||||||||||||||||||||||
TruPS | 563 | 0 | 1 | 0 | 1 | — | — | ||||||||||||||||||||||||
Student loans | 110 | 0 | 0 | (14 | ) | (14 | ) | 1 | 1 | ||||||||||||||||||||||
Other structured finance | 828 | (3 | ) | (5 | ) | (3 | ) | (7 | ) | 9 | 9 | ||||||||||||||||||||
Structured Finance | 5,144 | (13 | ) | (27 | ) | (20 | ) | (33 | ) | 170 | 242 | ||||||||||||||||||||
Total | $ | 14,790 | $ | 102 | $ | 88 | $ | 192 | $ | 179 | $ | 364 | $ | 436 |
Reconciliation of GAAP to Non-GAAP operating loss measures
2Q-16 | 2016 | |||||||
Loss and LAE | $ | 102 | $ | 192 | ||||
Adjustments to add losses incurred related to: | ||||||||
Credit derivatives | $ | (11 | ) | $ | (17 | ) | ||
FG VIEs | (3 | ) | 4 | |||||
Operating loss and LAE | $ | 88 | $ | 179 |
As of June 30, 2016 | ||||
GAAP net expected loss to be expensed | $ | 364 | ||
Adjustments to add net expected loss to be expensed related to: | ||||
Credit derivatives | 0 | |||
FG VIEs | 72 | |||
Operating net expected loss to be expensed | $ | 436 | ||
GAAP future accretion | $ | 199 | ||
Adjustments to add future accretion related to: | ||||
Credit derivatives | 0 | |||
FG VIEs | 17 | |||
Operating future accretion | $ | 216 |
Please refer to the Glossary for an explanation of the presentation of net par outstanding and of the various sectors.
35
Assured Guaranty Ltd.
Summary of Financial and Statistical Data
(dollars in millions, except per share amounts)
As of and for Six Months Ended June 30, 2016 | Year Ended December 31, | |||||||||||||||||||||||
2015 | 2014 | 2013 | 2012 | |||||||||||||||||||||
GAAP Summary Income Statement Data | ||||||||||||||||||||||||
Net earned premiums | $ | 397 | $ | 766 | $ | 570 | $ | 752 | $ | 853 | ||||||||||||||
Net investment income | 197 | 423 | 403 | 393 | 404 | |||||||||||||||||||
Realized gains and other settlements on credit derivatives | 32 | (18 | ) | 23 | (42 | ) | (108 | ) | ||||||||||||||||
Total expenses | 375 | 776 | 463 | 466 | 822 | |||||||||||||||||||
Income (loss) before income taxes | 266 | 1,431 | 1,531 | 1,142 | 132 | |||||||||||||||||||
Net income (loss) | 205 | 1,056 | 1,088 | 808 | 110 | |||||||||||||||||||
Net income (loss) per diluted share | 1.51 | 7.08 | 6.26 | 4.30 | 0.57 | |||||||||||||||||||
GAAP Summary Balance Sheet Data | ||||||||||||||||||||||||
Total investments and cash | $ | 10,905 | $ | 11,358 | $ | 11,459 | $ | 10,969 | $ | 11,223 | ||||||||||||||
Total assets | 14,092 | 14,544 | 14,919 | 16,285 | 17,240 | |||||||||||||||||||
Unearned premium reserve | 3,617 | 3,996 | 4,261 | 4,595 | 5,207 | |||||||||||||||||||
Loss and LAE reserve | 1,268 | 1,067 | 799 | 592 | 601 | |||||||||||||||||||
Long-term debt | 1,303 | 1,300 | 1,297 | 814 | 834 | |||||||||||||||||||
Shareholders’ equity | 6,250 | 6,063 | 5,758 | 5,115 | 4,994 | |||||||||||||||||||
Shareholders’ equity per share | 47.06 | 43.96 | 36.37 | 28.07 | 25.74 | |||||||||||||||||||
Other Financial Information (GAAP Basis) | ||||||||||||||||||||||||
Net debt service outstanding (end of period) | $ | 488,362 | $ | 536,341 | $ | 609,622 | $ | 690,535 | $ | 780,356 | ||||||||||||||
Gross debt service outstanding (end of period) | 508,805 | 559,470 | 646,722 | 737,380 | 833,098 | |||||||||||||||||||
Net par outstanding (end of period) | 329,864 | 358,571 | 403,729 | 459,107 | 518,772 | |||||||||||||||||||
Gross par outstanding (end of period) | 342,888 | 373,192 | 426,705 | 487,895 | 550,908 | |||||||||||||||||||
Other Financial Information (Statutory Basis)(1) | ||||||||||||||||||||||||
Net debt service outstanding (end of period) | $ | 450,045 | $ | 502,331 | $ | 583,598 | $ | 663,797 | $ | 756,044 | ||||||||||||||
Gross debt service outstanding (end of period) | 469,116 | 524,104 | 619,475 | 709,000 | 807,420 | |||||||||||||||||||
Net par outstanding (end of period) | 294,506 | 327,306 | 379,714 | 434,597 | 496,237 | |||||||||||||||||||
Gross par outstanding (end of period) | 306,229 | 340,662 | 401,552 | 461,845 | 527,126 | |||||||||||||||||||
Claims-paying resources | ||||||||||||||||||||||||
Policyholders' surplus | $ | 4,707 | $ | 4,550 | $ | 4,142 | $ | 3,202 | $ | 3,579 | ||||||||||||||
Contingency reserve | 2,313 | 2,263 | 2,330 | 2,934 | 2,364 | |||||||||||||||||||
Qualified statutory capital | 7,020 | 6,813 | 6,472 | 6,136 | 5,943 | |||||||||||||||||||
Unearned premium reserve | 2,778 | 3,045 | 3,299 | 3,545 | 3,833 | |||||||||||||||||||
Loss and LAE reserves | 852 | 1,043 | 852 | 773 | 512 | |||||||||||||||||||
Total policyholders' surplus and reserves | 10,650 | 10,901 | 10,623 | 10,454 | 10,288 | |||||||||||||||||||
Present value of installment premium | 528 | 645 | 716 | 858 | 1,005 | |||||||||||||||||||
CCS and standby line of credit | 400 | 400 | 400 | 400 | 600 | |||||||||||||||||||
Excess of loss reinsurance facility | 360 | 360 | 450 | 435 | 435 | |||||||||||||||||||
Total claims-paying resources | $ | 11,938 | $ | 12,306 | $ | 12,189 | $ | 12,147 | $ | 12,328 | ||||||||||||||
Ratios: | ||||||||||||||||||||||||
Net par outstanding to qualified statutory capital | 42 | :1 | 48 | :1 | 59 | :1 | 71 | :1 | 83:1 | |||||||||||||||
Capital ratio(2) | 64 | :1 | 74 | :1 | 90 | :1 | 108 | :1 | 127:1 | |||||||||||||||
Financial resources ratio(2) | 38 | :1 | 41 | :1 | 48 | :1 | 55 | :1 | 61:1 | |||||||||||||||
Par and Debt Service Written | ||||||||||||||||||||||||
Gross debt service written: | ||||||||||||||||||||||||
Public finance - U.S. | $ | 11,103 | $ | 25,832 | $ | 20,804 | $ | 15,559 | $ | 25,252 | ||||||||||||||
Public finance - non-U.S. | 543 | 2,054 | 233 | 674 | 40 | |||||||||||||||||||
Structured finance - U.S. | 3 | 355 | 423 | 297 | 623 | |||||||||||||||||||
Structured finance - non-U.S. | — | 69 | 387 | — | — | |||||||||||||||||||
Total gross debt service written | $ | 11,649 | $ | 28,310 | $ | 21,847 | $ | 16,530 | $ | 25,915 | ||||||||||||||
Net debt service written | $ | 11,649 | $ | 28,310 | $ | 21,847 | $ | 16,497 | $ | 25,915 | ||||||||||||||
Net par written | 7,524 | 17,336 | 13,171 | 9,331 | 16,816 | |||||||||||||||||||
Gross par written | 7,524 | 17,336 | 13,171 | 9,350 | 16,816 |
1) Statutory amounts prepared on a consolidated basis. The National Association of Insurance Commissioners Annual Statements for U.S. Domiciled Insurance Subsidiaries are prepared on a stand-alone basis.
2) | See page 8 for additional detail on claims-paying resources. |
Please refer to the explanation of Non-GAAP Financial Measures set forth at the end of this Financial Supplement.
Please refer to the Glossary for an explanation of the presentation of net debt service and net par outstanding and of the various sectors.
36
Assured Guaranty Ltd.
Summary of Non-GAAP Financial Measures (1 of 2)
(dollars in millions, except per share amounts)
Six Months Ended June 30, 2016 | Year Ended December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | |||||||||||||||||
PVP: | ||||||||||||||||||||
Public finance - U.S. | $ | 64 | $ | 124 | $ | 128 | $ | 116 | $ | 166 | ||||||||||
Public finance - non-U.S. | 14 | 27 | 7 | 18 | 1 | |||||||||||||||
Structured finance - U.S. | 1 | 22 | 24 | 7 | 43 | |||||||||||||||
Structured finance - non-U.S. | — | 6 | 9 | — | — | |||||||||||||||
Total PVP | 79 | 179 | 168 | 141 | 210 | |||||||||||||||
Less: PVP of non-financial guaranty insurance | 1 | 7 | — | — | — | |||||||||||||||
Less: Financial guaranty installment premium PVP | 14 | 46 | 42 | 26 | 45 | |||||||||||||||
Plus: Installment GWP and other GAAP adjustments (1) | (9 | ) | 55 | (22 | ) | 8 | 88 | |||||||||||||
Total GWP | $ | 55 | $ | 181 | $ | 104 | $ | 123 | $ | 253 | ||||||||||
Operating income reconciliation: | ||||||||||||||||||||
Net income (loss) | $ | 205 | $ | 1,056 | $ | 1,088 | $ | 808 | $ | 110 | ||||||||||
Less pre-tax adjustments: | ||||||||||||||||||||
Realized gains (losses) on investments | (5 | ) | (37 | ) | (51 | ) | 54 | (7 | ) | |||||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives | (28 | ) | 505 | 687 | (49 | ) | (672 | ) | ||||||||||||
Fair value gains (losses) on CCS | (27 | ) | 27 | (11 | ) | 10 | (18 | ) | ||||||||||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves | (19 | ) | (15 | ) | (21 | ) | (1 | ) | 21 | |||||||||||
Effect of consolidating FG VIEs | 12 | 25 | 235 | 296 | 95 | |||||||||||||||
Total pre-tax adjustments | (67 | ) | 505 | 839 | 310 | (581 | ) | |||||||||||||
Less tax effect on pre-tax adjustments | 20 | (148 | ) | (242 | ) | (111 | ) | 156 | ||||||||||||
Operating income | $ | 252 | $ | 699 | $ | 491 | $ | 609 | $ | 535 | ||||||||||
Operating income per diluted share reconciliation: | ||||||||||||||||||||
Net income (loss) per diluted share | $ | 1.51 | $ | 7.08 | $ | 6.26 | $ | 4.30 | $ | 0.57 | ||||||||||
Less pre-tax adjustments: | ||||||||||||||||||||
Realized gains (losses) on investments | (0.04 | ) | (0.25 | ) | (0.29 | ) | 0.29 | (0.04 | ) | |||||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives | (0.21 | ) | 3.39 | 3.95 | (0.26 | ) | (3.53 | ) | ||||||||||||
Fair value gains (losses) on CCS | (0.20 | ) | 0.18 | (0.06 | ) | 0.05 | (0.09 | ) | ||||||||||||
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves | (0.14 | ) | (0.10 | ) | (0.12 | ) | (0.01 | ) | 0.11 | |||||||||||
Effect of consolidating FG VIEs | 0.09 | 0.17 | 1.35 | 1.58 | 0.50 | |||||||||||||||
Total pre-tax adjustments | (0.50 | ) | 3.39 | 4.83 | 1.65 | (3.05 | ) | |||||||||||||
Less tax effect on pre-tax adjustments | 0.15 | (1.00 | ) | (1.40 | ) | (0.60 | ) | 0.81 | ||||||||||||
Operating income per diluted share | $ | 1.86 | $ | 4.69 | $ | 2.83 | $ | 3.25 | $ | 2.81 | ||||||||||
1) | Includes present value of new business on installment policies discounted at the prescribed GAAP discount rates, gross written premium adjustments on existing installment policies due to changes in assumptions, any cancellations of assumed reinsurance contracts, and other GAAP adjustments. |
37
Assured Guaranty Ltd.
Summary of Non-GAAP Financial Measures (2 of 2)
(dollars in millions, except per share amounts)
As of June 30, 2016 | As of December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | |||||||||||||||||
Adjusted book value reconciliation: | ||||||||||||||||||||
Shareholders' equity | $ | 6,250 | $ | 6,063 | $ | 5,758 | $ | 5,115 | $ | 4,994 | ||||||||||
Less pre-tax adjustments: | ||||||||||||||||||||
Effect of consolidating FG VIEs | (18 | ) | (35 | ) | (68 | ) | (265 | ) | (545 | ) | ||||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives | (265 | ) | (241 | ) | (741 | ) | (1,447 | ) | (1,346 | ) | ||||||||||
Fair value gains (losses) on CCS | 35 | 62 | 35 | 46 | 35 | |||||||||||||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect | 598 | 376 | 534 | 208 | 664 | |||||||||||||||
Taxes | (111 | ) | (45 | ) | 65 | 409 | 356 | |||||||||||||
Operating shareholders' equity | 6,011 | 5,946 | 5,933 | 6,164 | 5,830 | |||||||||||||||
Pre-tax adjustments: | ||||||||||||||||||||
Less: Deferred acquisition costs | 110 | 114 | 121 | 124 | 116 | |||||||||||||||
Plus: Net present value of estimated net future credit derivative revenue | 93 | 169 | 159 | 214 | 317 | |||||||||||||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed | 3,073 | 3,417 | 3,497 | 3,880 | 4,407 | |||||||||||||||
Taxes | (852 | ) | (979 | ) | (973 | ) | (1,101 | ) | (1,287 | ) | ||||||||||
Adjusted book value | $ | 8,215 | $ | 8,439 | $ | 8,495 | $ | 9,033 | $ | 9,151 | ||||||||||
Adjusted book value per share reconciliation: | ||||||||||||||||||||
Shareholders' equity per share | $ | 47.06 | $ | 43.96 | $ | 36.37 | $ | 28.07 | $ | 25.74 | ||||||||||
Less pre-tax adjustments: | ||||||||||||||||||||
Effect of consolidating FG VIEs | (0.13 | ) | (0.25 | ) | (0.43 | ) | (1.45 | ) | (2.81 | ) | ||||||||||
Non-credit impairment unrealized fair value gains (losses) on credit derivatives | (2.00 | ) | (1.75 | ) | (4.68 | ) | (7.94 | ) | (6.94 | ) | ||||||||||
Fair value gains (losses) on CCS | 0.26 | 0.45 | 0.22 | 0.25 | 0.18 | |||||||||||||||
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect | 4.50 | 2.73 | 3.37 | 1.14 | 3.42 | |||||||||||||||
Taxes | (0.83 | ) | (0.33 | ) | 0.41 | 2.24 | 1.84 | |||||||||||||
Operating shareholders' equity per share | 45.26 | 43.11 | 37.48 | 33.83 | 30.05 | |||||||||||||||
Pre-tax adjustments: | ||||||||||||||||||||
Less: Deferred acquisition costs | 0.83 | 0.83 | 0.76 | 0.68 | 0.60 | |||||||||||||||
Plus: Net present value of estimated net future credit derivative revenue | 0.70 | 1.23 | 1.00 | 1.17 | 1.63 | |||||||||||||||
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed | 23.14 | 24.77 | 22.09 | 21.30 | 22.72 | |||||||||||||||
Taxes | (6.41 | ) | (7.10 | ) | (6.15 | ) | (6.04 | ) | (6.63 | ) | ||||||||||
Adjusted book value per share | $ | 61.86 | $ | 61.18 | $ | 53.66 | $ | 49.58 | $ | 47.17 | ||||||||||
38
Glossary
Net Par Outstanding and Internal Ratings
Net par outstanding is insured par exposure, net of reinsurance cessions. Unless otherwise indicated, GAAP net par outstanding amounts exclude amounts related to securities the Company has purchased for loss mitigation purposes.
Internal Rating utilizes the Company’s ratings scale, which is similar to that used by the nationally recognized statistical rating organizations; however, the ratings in the tables may not be the same as ratings assigned by any such rating agency.
Statutory Net Par and Net Debt Service Outstanding. Under statutory accounting, net par and net debt service outstanding would be reduced both when an outstanding issue is legally defeased (i.e., an issuer has legally discharged its obligations with respect to a municipal security by satisfying conditions set forth in defeasance provisions contained in transaction documents and is no longer responsible for the payment of debt service with respect to such obligations) and when such issue is economically defeased (i.e., transaction documents for a municipal security do not contain defeasance provisions but the issuer establishes an escrow account with United States (U.S.) government securities in amounts sufficient to pay the refunded bonds when due; the refunded bonds are not considered paid and continue to be outstanding under the transaction documents and the issuer remains responsible to pay debt service when due to the extent monies on deposit in the escrow account are insufficient for such purpose).
Performance Indicators
The performance information described below is obtained from third parties and/or provided by the trustee and may be subject to revision as updated or additional information are obtained:
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 divided by current collateral balance.
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 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. Some asset classes may not have subordinated tranches so they are excluded from the weighted averages.
Sectors
Below are brief descriptions of selected types of public and structured finance obligations that the Company insures and reinsures. For a more complete description, please refer to Assured Guaranty Ltd.’s Annual Report on Form 10-K for the year ended December 31, 2015.
Public Finance:
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.
39
Glossary (continued)
Sectors (continued)
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.
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.
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.
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 United Kingdom.
Pooled Infrastructure Obligations are synthetic asset-backed obligations that take the form of credit default swap 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 transactions, which includes excess of loss reinsurance on portfolios of municipal credits.
Structured Finance:
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 (TruPS). 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) are obligations backed by closed-end and open-end first and second lien mortgage loans on one-to-four family residential properties, including condominiums and cooperative apartments. First lien 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.
Additional insured obligations within RMBS include Home Equity Lines of Credit (HELOCs), which refers to a type of residential mortgage-backed transaction backed by second-lien loan collateral consisting of home equity lines of credit. U.S. Prime First Lien is a type of residential mortgage-backed securities transaction backed primarily by prime first-lien loan collateral plus an insignificant amount of other miscellaneous RMBS transactions.
CBOs/CLOs (collateralized bond obligations and collateralized loan obligations) are asset-backed securities largely backed by non-investment grade/high yield collateral.
Commercial Mortgage-Backed Securities (CMBS) are obligations backed by pools of commercial mortgages. The collateral supporting CMBS include office, multifamily, retail, hotel, industrial and other specialized or mixed-use properties.
Financial Products Business is how the Company refers to the guaranteed investment contracts (GICs) portion of a line of business previously conducted by Assured Guaranty Municipal Holdings Inc. (AGMH) that the Company did not acquire when it purchased AGMH in 2009 from Dexia SA and that is being run off. That line of business was comprised of AGMH's GICs business, its medium term notes business and the equity payment agreements associated with AGMH's leveraged lease business. Assured Guaranty is indemnified by Dexia SA and certain of its affiliates against loss from the former Financial Products Business.
40
Glossary (continued)
Sectors (continued)
Consumer Receivables Securities are obligations backed by non-mortgage consumer receivables, such as student loans, automobile loans and leases, manufactured home loans and other consumer receivables.
Commercial Receivables Securities are obligations backed by equipment loans or leases, aircraft and aircraft engine 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 Obligations 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 Obligations 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.
41
Non-GAAP Financial Measures
The Company discloses both financial measures determined in accordance with accounting principles generally accepted in the United States of America (GAAP) and financial measures not determined in accordance with GAAP (non-GAAP financial measures).
Financial measures identified as non-GAAP should not be considered substitutes for GAAP financial measures. The primary limitation of non-GAAP financial measures is the potential lack of comparability to financial measures of other companies, which may define non-GAAP financial measures differently than Assured Guaranty.
Management and the Board of Directors use non-GAAP financial measures, as well as GAAP financial measures and other factors, to evaluate the Company’s results of operations, financial condition and progress towards long-term goals. By disclosing non-GAAP financial measures, the Company gives investors, analysts and financial news reporters access to some of the same information that management and the Board of Directors review internally. Assured Guaranty believes its presentation of non-GAAP financial measures is consistent with how analysts calculate their estimates of Assured Guaranty’s financial results in their research reports on Assured Guaranty and with how investors, analysts and the financial news media evaluate Assured Guaranty’s financial results.
Many investors, analysts and financial news reporters use operating shareholders’ equity as the principal financial measure for valuing AGL’s current share price or projected share price and also as the basis of their decision to recommend, buy or sell AGL’s common shares. Many of the Company’s fixed income investors also use operating shareholders’ equity to evaluate the Company’s capital adequacy. Many investors, analysts and financial news reporters also use adjusted book value to evaluate AGL’s share price and as the basis of their decision to recommend, buy or sell the AGL common shares. Operating income enables investors and analysts to evaluate the Company’s financial results as compared with the consensus analyst estimates distributed publicly by financial databases. Two non-GAAP financial measures, growth in adjusted book value per share and operating income, are key measures used to help determine compensation.
The following paragraphs define each non-GAAP financial measure disclosed by the Company and describe why it is useful. A reconciliation of the non-GAAP financial measure and the most directly comparable GAAP financial measure is presented within this financial supplement.
Operating Income: Management believes that operating income is a useful measure because it presents the results of operations of the Company with all financial guaranty contracts accounted for on a consistent basis and excludes fair value adjustments that are not expected to result in economic gain or loss, which clarifies the understanding of the underwriting results and financial condition of the Company. Operating income is defined as net income (loss) attributable to AGL, as reported under GAAP, adjusted for the following:
1) Elimination of realized gains (losses) on the Company’s investments, except for gains and losses on securities classified as trading. The timing of realized gains and losses, which depends largely on market credit cycles, can vary considerably across periods. The timing of sales is largely subject to the Company’s discretion and influenced by market opportunities, as well as the Company’s tax and capital profile.
2) Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss. Additionally, this adjustment presents all financial guaranty contracts on a more consistent basis of accounting, whether or not they are subject to derivative accounting rules.
3) Elimination of fair value gains (losses) on the Company’s CCS. Such amounts are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.
4) Elimination of foreign exchange gains (losses) on remeasurement of net premium receivables and loss and LAE reserves. Long-dated receivables and loss and LAE reserves represent the present value of future contractual or expected cash flows. Therefore, the current period’s foreign exchange remeasurement gains (losses) are not necessarily indicative of the total foreign exchange gains (losses) that the Company will ultimately recognize.
5) Elimination of the effects of consolidating FG VIEs. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs. This adjustment presents all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation.
6) Elimination of the tax effects related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
Operating Shareholders’ Equity: Management believes that operating shareholders’ equity is a useful measure because it presents the equity of the Company with all financial guaranty contracts accounted for on a consistent basis and excludes fair value adjustments that are not expected to result in economic gain or loss, which clarifies the understanding of the underwriting results and financial condition of the Company. Operating shareholders’ equity is the basis of the calculation of adjusted book value (see below). Operating shareholders’ equity is defined as shareholders’ equity attributable to AGL, as reported under GAAP, adjusted for the following:
42
Non-GAAP Financial Measures (continued)
Operating Shareholders’ Equity (continued):
1) Elimination of the effects of consolidating FG VIEs in order to present all financial guaranty contracts on a more consistent basis of accounting, whether or not GAAP requires consolidation. GAAP requires the Company to consolidate certain VIEs that have issued debt obligations insured by the Company even though the Company does not own such VIEs.
2) Elimination of non-credit-impairment unrealized fair value gains (losses) on credit derivatives, which is the amount in excess of the present value of the expected estimated economic credit losses, and non-economic payments. Such fair value adjustments are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.
3) Elimination of fair value gains (losses) on the Company’s CCS. Such amounts are heavily affected by, and in part fluctuate with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.
4) Elimination of unrealized gains (losses) on the Company’s investments that are recorded as a component of accumulated other comprehensive income (AOCI) (excluding foreign exchange remeasurement). The AOCI component of the fair value adjustment on the investment portfolio is not deemed economic because the Company generally holds these investments to maturity and therefore should not recognize an economic gain or loss.
5) Elimination of the tax asset or liability related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
Adjusted Book Value: Management uses adjusted book value to measure the intrinsic value of the Company, excluding franchise value. Growth in adjusted book value per share is one of the key financial measures used in determining the amount of certain long term compensation to management and employees and used by rating agencies and investors. Management believes that adjusted book value is a useful measure because it enables an evaluation of the net present value of the Company’s in-force premiums and revenues net of expected losses. Adjusted book value is operating shareholders’ equity, as defined above, further adjusted for the following:
1) Elimination of deferred acquisition costs, net. These amounts represent net deferred expenses that have already been paid or accrued and will be expensed in future accounting periods.
2) Addition of the net present value of estimated net future credit derivative revenue. See below.
3) Addition of the deferred premium revenue on financial guaranty contracts in excess of expected loss to be expensed, net of reinsurance. This amount represents the expected future net earned premiums, net of expected losses to be expensed, which are not reflected in GAAP equity.
4) Elimination of the tax asset or liability related to the above adjustments, which are determined by applying the statutory tax rate in each of the jurisdictions that generate these adjustments.
The premiums and revenues included in adjusted book value will be earned in future periods, but actual earnings may differ materially from the estimated amounts used in determining current adjusted book value due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults and other factors.
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 AGL’s share price and as the basis of their decision to recommend, buy or sell the AGL common shares. Quarterly and year-to-date operating ROE are calculated on an annualized basis. Operating ROE is one of the key financial measures used in determining the amount of certain long-term compensation to management and employees and used by rating agencies and investors.
Net Present Value of Estimated Net Future Credit Derivative Revenue: Management believes that this amount is a useful measure because it enables an evaluation of the value of future estimated credit derivative revenue. There is no corresponding GAAP financial measure. This amount represents the present value of estimated future revenue from the Company’s credit derivative in-force book of business, net of reinsurance, ceding commissions and premium taxes, for contracts without expected economic losses, and is discounted at 6%. Estimated net future credit derivative revenue may change from period to period due to changes in foreign exchange rates, prepayment speeds, terminations, credit defaults or other factors that affect par outstanding or the ultimate maturity of an obligation.
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Non-GAAP Financial Measures (continued)
PVP or Present Value of New Business Production: Management believes that PVP is a useful measure because it enables the evaluation of the value of new business production for the Company by taking into account the value of estimated future installment premiums on all new contracts underwritten in a reporting period as well as premium supplements and additional installment premium on existing contracts as to which the issuer has the right to call the insured obligation but has not exercised such right, whether in insurance or credit derivative contract form, which GAAP gross written premiums and the net credit derivative premiums received and receivable portion of net realized gains and other settlements on credit derivatives (Credit Derivative Revenues) do not adequately measure. PVP in respect of financial guaranty contracts written in a specified period is defined as gross upfront and installment premiums received and the present value of gross estimated future installment premiums, in each case, discounted at 6%. For purposes of the PVP calculation, management discounts estimated future installment premiums on insurance contracts at 6%, while under GAAP, these amounts are discounted at a risk free rate. Additionally, under GAAP, management records future installment premiums on financial guaranty insurance contracts covering non-homogeneous pools of assets based on the contractual term of the transaction, whereas for PVP purposes, management records an estimate of the future installment premiums the Company expects to receive, which may be based upon a shorter period of time than the contractual term of the transaction. Actual future net earned or written premiums and Credit Derivative Revenues may differ from PVP due to factors including, but not limited to, changes in foreign exchange rates, prepayment speeds, terminations, credit defaults, or other factors that affect par outstanding or the ultimate maturity of an obligation.
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Assured Guaranty Ltd.
30 Woodbourne Avenue
Hamilton HM 08
Bermuda
(441) 279-5705
www.assuredguaranty.com
Contacts:
Equity and Fixed Income Investors:
Robert Tucker
Senior Managing Director, Investor Relations and Corporate Communications
(212) 339-0861
rtucker@assuredguaranty.com
Michael Walker
Managing Director, Fixed Income Investor Relations
(212) 261-5575
mwalker@assuredguaranty.com
Andre Thomas
Managing Director, Equity Investor Relations
(212) 339-3551
athomas@assuredguaranty.com
Media:
Ashweeta Durani
Vice President, Corporate Communications
(212) 408-6042
adurani@assuredguaranty.com