EX-99.2 3 a06-10930_1ex99d2.htm FIRST QUARTER 2006 FINANCIAL SUPPLEMENT

Exhibit 99.2

 

 

Assured Guaranty Ltd.

Financial Supplement

First Quarter 2006

March 31, 2006

 

Table of Contents

 

Page

Assured Guaranty Ltd.

 

 

Selected Financial Highlights

 

1

Consolidated GAAP Income Statements

 

2

Consolidated GAAP Balance Sheets

 

3

Segment Consolidation

 

4

Financial Guaranty Direct Segment

 

5-6

Financial Guaranty Reinsurance Segment

 

7-8

Mortgage Guaranty Segment

 

9

Other Segment

 

10

Loss and LAE Reserves

 

11

Investment Portfolio

 

12

Financial Guaranty Profile

 

13-15

Non-Investment Grade Exposures

 

16

Closely Monitored Credits

 

17

Largest Exposures by Sector

 

18-19

Consolidated Capital and Claims Paying Resources

 

20

Summary Financial and Statistical Data

 

21

 

This supplement should be read in conjunction with documents filed by Assured Guaranty Ltd. (the “Company”) with the Securities and Exchange Commission, including our 10-Q’s dated March 31, 2005, June 30, 2005 and September 30, 2005 and our 10-K for the year ended December 31, 2005.

 

Cautionary Statement Regarding Forward-Looking Statements:

 

Any forward-looking statements made in this supplement reflect the Company’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements.  For example, the Company’s forward looking statements, including its statements regarding PVP and net present value of estimated future installment premiums in force, could be affected by a significant reduction in the amount of reinsurance ceded by one or more of our principal ceding companies, rating agency action such as a ratings downgrade, difficulties with the execution of the Company’s business strategy, contract cancellations, developments in the world’s financial and capital markets, more severe or frequent losses associated with products affecting the adequacy of the Company’s loss reserve, changes in regulation or tax laws, governmental actions, natural catastrophes, the Company’s dependence on customers, decreased demand or increased competition, loss of key personnel, technological developments, the effects of mergers, acquisitions and divestitures, changes in accounting policies or practices, changes in general economic conditions, other risks and uncertainties that have not been identified at this time, management’s response to these factors, and other risk factors identified in the Company’s filings with the Securities and Exchange Commission.  Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the dates on which they are made.  The Company undertakes no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

 


 

Assured Guaranty Ltd.

Selected Financial Highlights

(dollars and shares in millions except per share amounts)

 

 

 

Quarter Ended

 

% Change

 

 

 

March 31,

 

versus

 

 

 

2006

 

2005

 

1Q-05

 

Gross written premiums (GWP) analysis:

 

 

 

 

 

 

 

Present value of financial guaranty & mortgage guaranty GWP (PVP) (a)

 

$

61.8

 

$

82.6

 

(25

)%

Less: Installment premium PVP

 

44.2

 

47.9

 

(8

)%

Upfront financial guaranty & mortgage guaranty GWP

 

17.6

 

34.7

 

(49

)%

Plus: Installment GWP

 

34.0

 

42.5

 

(20

)%

Financial guaranty & mortgage guaranty GWP

 

51.6

 

77.2

 

(33

)%

Plus: Other segment GWP

 

3.8

 

0.9

 

322

%

Total GWP

 

$

55.4

 

$

78.1

 

(29

)%

 

 

 

 

 

 

 

 

Net income

 

$

34.9

 

$

44.3

 

(21

)%

Less: After-tax realized (losses) gains on investments

 

(0.6

)

1.5

 

N

MF 

Less: After-tax unrealized (losses) gains on derivatives

 

(0.1

)

1.5

 

N

MF

Operating income (b)

 

$

35.6

 

$

41.3

 

(14

)%

 

 

 

 

 

 

 

 

Book value

 

$

1,673.4

 

$

1,537.7

 

9

%

Plus: Net unearned premium reserve less DAC, after-tax (1)

 

284.8

 

265.8

 

7

%

Plus: Net present value of estimated future installment premiums in-force, after-tax (d)

 

340.6

 

296.3

 

15

%

Adjusted book value (c)

 

$

2,298.9

 

$

2,099.7

 

9

%

 

 

 

 

 

 

 

 

ROE, excluding AOCI

 

8.5

%

12.1

%

 

 

Less: After-tax realized (losses) gains on investments

 

-0.2

%

0.4

%

 

 

Less: After-tax unrealized (losses) gains on derivatives

 

—

 

0.4

%

 

 

Operating ROE, excluding AOCI (b)

 

8.7

%

11.3

%

 

 

 

 

 

 

 

 

 

 

Per diluted share:

 

 

 

 

 

 

 

Net income

 

$

0.47

 

$

0.59

 

(20

)%

Less: After-tax realized (losses) gains on investments

 

(0.01

)

0.02

 

N

MF

Less: After-tax unrealized (losses) gains on derivatives

 

—

 

0.02

 

N

MF 

Operating income (b)

 

$

0.48

 

$

0.55

 

(13

)%

 

 

 

 

 

 

 

 

Book value

 

$

22.67

 

$

20.45

 

11

%

Plus: Net unearned premium reserve less DAC, after-tax (1)

 

3.86

 

3.53

 

9

%

Plus: Net present value of estimated future installment premiums in-force, after-tax (d)

 

4.62

 

3.94

 

17

%

Adjusted book value (c)

 

$

31.15

 

$

27.92

 

12

%

 

 

 

 

 

 

 

 

Additional information:

 

 

 

 

 

 

 

Shares outstanding at the end of period (2)

 

73.8

 

75.2

 

(2

)%

Weighted average basic shares outstanding

 

73.8

 

74.5

 

(1

)%

Weighted average diluted shares outstanding

 

74.9

 

74.9

 

0

% 

 

 

 

 

 

 

 

 

Consolidated net debt service outstanding

 

$

150,631

 

$

138,160

 

9

%

Consolidated net par outstanding

 

106,917

 

96,394

 

11

%

Consolidated claims-paying resources

 

3,125

 

2,926

 

7

%

Gross par written

 

8,129

 

5,438

 

49

%

 

(1)  Unearned premium reserve (UPR) less pre-paid reinsurance premiums and deferred acquisition costs (DAC), all after-tax

 

(2)  3/31/06 shares outstanding excludes 1.4 million of nonvested restricted stock, which is considered not issued under FAS 123R. 12/31/05 shares outstanding includes 1.0 million of nonvested restricted stock.

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), adjusted book value (c), and net present value of estimated future installment premiums in force (d)].

 

1


 

Assured Guaranty Ltd.

Consolidated GAAP Income Statements

(in millions, except per share amounts)

 

 

 

Quarter Ended

 

% Change

 

 

 

March 31,

 

versus

 

 

 

2006

 

2005

 

1Q-05

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Gross written premiums

 

$

55.4

 

$

78.1

 

(29

)%

 

 

 

 

 

 

 

 

Net written premiums

 

50.8

 

76.5

 

(34

)%

 

 

 

 

 

 

 

 

Net earned premiums

 

48.1

 

48.1

 

0

%

Net investment income

 

26.2

 

23.1

 

13

%

Other income

 

—

 

0.3

 

N

MF

Total revenues

 

74.3

 

71.5

 

4

%

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(0.4

)

(9.4

)

(96

)%

Profit commission expense

 

1.3

 

1.0

 

30

%

Acquisition costs

 

10.8

 

10.2

 

6

%

Other operating expenses

 

17.2

 

14.5

 

19

%

Other expenses

 

4.0

 

3.3

 

21

%

Total expenses

 

32.9

 

19.6

 

68

%

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

41.4

 

51.9

 

(20

)%

 

 

 

 

 

 

 

 

Total provision for income taxes

 

5.8

 

10.6

 

(46

)%

 

 

 

 

 

 

 

 

Operating income (b)

 

35.6

 

41.3

 

(14

)%

 

 

 

 

 

 

 

 

After-tax realized (losses) gains on investments

 

(0.6

)

1.5

 

N

MF

After-tax unrealized (losses) gains on derivatives

 

(0.1

)

1.5

 

N

MF

 

 

 

 

 

 

 

 

Net income

 

$

34.9

 

$

44.3

 

(21

)%

 

 

 

 

 

 

 

 

Per diluted share

 

 

 

 

 

 

 

Operating income (b)

 

$

0.48

 

$

0.55

 

(13

)%

After-tax realized (losses) gains on investments

 

(0.01

)

0.02

 

N

MF

After-tax unrealized (losses) gains on derivatives

 

—

 

0.02

 

N

MF 

Net income

 

$

0.47

 

$

0.59

 

(20

)%

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in millions)

 

 

 

 

 

 

 

Basic shares outstanding

 

73.8

 

74.5

 

(1

)%

Plus: effect of options

 

0.6

 

0.1

 

500

%

Plus: effect of restricted stock

 

0.5

 

0.4

 

25

%

Diluted shares outstanding

 

74.9

 

74.9

 

0

%

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].

 

Some amounts may not foot due to rounding.

 

2


 

Assured Guaranty Ltd.

Consolidated GAAP Balance Sheets

(dollars in millions)

 

 

 

As of :

 

 

 

March 31,

 

December 31,

 

 

 

2006

 

2005

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Fixed maturity securities, at fair value

 

$

2,114.1

 

$

2,134.0

 

Short-term investments, at cost which approximates fair value

 

135.0

 

115.8

 

Total investments

 

2,249.1

 

2,249.8

 

 

 

 

 

 

 

Cash and cash equivalents

 

3.7

 

6.2

 

Accrued investment income

 

21.8

 

22.7

 

Deferred acquisition costs

 

195.9

 

193.4

 

Prepaid reinsurance premiums

 

13.3

 

12.5

 

Reinsurance recoverable on ceded losses

 

12.2

 

12.4

 

Premiums receivable

 

27.0

 

33.0

 

Goodwill

 

85.4

 

85.4

 

Unrealized gains on derivative financial instruments

 

52.2

 

53.0

 

Current income taxes receivable

 

3.1

 

3.0

 

Other assets

 

14.3

 

17.7

 

Total assets

 

$

2,678.0

 

$

2,689.1

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Unearned premium reserves

 

$

540.7

 

$

537.1

 

Reserves for losses and loss adjustment expenses

 

117.2

 

121.2

 

Profit commissions payable

 

28.0

 

53.0

 

Reinsurance balances payable

 

9.1

 

3.7

 

Deferred income taxes

 

25.4

 

26.6

 

Funds held by Company under reinsurance contracts

 

22.0

 

19.2

 

Unrealized losses on derivative financial instruments

 

11.8

 

12.7

 

Long-term debt

 

197.4

 

197.3

 

Other liabilities

 

53.1

 

56.7

 

Total liabilities

 

1,004.6

 

1,027.6

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock

 

0.7

 

0.7

 

Additional paid-in capital

 

870.4

 

882.0

 

Unearned stock grant compensation

 

—

 

(14.8

)

Retained earnings

 

779.9

 

747.7

 

Accumulated other comprehensive income

 

22.3

 

45.8

 

Total shareholders’ equity

 

1,673.4

 

1,661.5

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

2,678.0

 

$

2,689.1

 

 

3


 

Assured Guaranty Ltd.

Segment Consolidation

(dollars in millions)

 

 

 

Quarter Ended March 31, 2006

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance(1)

 

Guaranty

 

Guaranty

 

Other

 

Total

 

Present value of financial guaranty gross written premiums (PVP): (a)

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

8.5

 

$

8.5

 

$

—

 

$

16.9

 

 

 

$

16.9

 

U.S. structured finance

 

27.6

 

3.4

 

—

 

30.9

 

 

 

30.9

 

International

 

5.6

 

8.3

 

—

 

13.9

 

 

 

13.9

 

Total PVP

 

$

41.6

 

$

20.1

 

$

—

 

$

61.8

 

 

 

$

61.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

30.2

 

$

18.8

 

$

2.6

 

$

51.6

 

$

3.8

 

$

55.4

 

Net written premiums

 

29.7

 

18.5

 

2.6

 

50.8

 

—

 

50.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

20.7

 

23.3

 

4.2

 

48.1

 

—

 

48.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(1.8

)

2.8

 

(0.2

)

0.8

 

(1.2

)

(0.4

)

Profit commission expense

 

—

 

0.4

 

0.9

 

1.3

 

—

 

1.3

 

Acquisition costs

 

1.8

 

8.7

 

0.3

 

10.8

 

—

 

10.8

 

Operating expenses

 

13.4

 

3.4

 

0.3

 

17.2

 

—

 

17.2

 

Total underwriting expenses

 

$

13.5

 

$

15.3

 

$

1.3

 

$

30.2

 

$

(1.2

)

$

29.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

7.2

 

$

8.0

 

$

2.8

 

$

18.0

 

$

1.2

 

$

19.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

-8.7

%

12.0

%

-3.7

%

1.8

%

 

 

-0.7

%

Expense ratio

 

73.8

%

53.6

%

36.1

%

61.1

%

 

 

61.1

%

Combined ratio

 

65.1

%

65.6

%

32.4

%

62.9

%

 

 

60.4

%

 

 

 

Quarter Ended March 31, 2005

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance(1)

 

Guaranty

 

Guaranty

 

Other

 

Total

 

PVP:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

1.6

 

$

18.9

 

$

—

 

$

20.5

 

 

 

$

20.5

 

U.S. structured finance

 

31.0

 

3.1

 

—

 

34.0

 

 

 

34.0

 

International

 

4.9

 

10.1

 

13.1

 

28.0

 

 

 

28.0

 

Total PVP

 

$

37.5

 

$

32.1

 

$

13.1

 

$

82.6

 

 

 

$

82.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

23.8

 

$

34.0

 

$

19.4

 

$

77.2

 

$

0.9

 

$

78.1

 

Net written premiums

 

23.1

 

34.0

 

19.4

 

76.5

 

—

 

76.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

20.4

 

23.0

 

4.6

 

48.1

 

—

 

48.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(1.5

)

(7.1

)

0.2

 

(8.4

)

(1.1

)

(9.4

)

Profit commission expense

 

—

 

—

 

1.0

 

1.0

 

—

 

1.0

 

Acquisition costs

 

1.5

 

8.1

 

0.5

 

10.2

 

—

 

10.2

 

Operating expenses

 

11.4

 

2.8

 

0.3

 

14.5

 

—

 

14.5

 

Total underwriting expenses

 

$

11.4

 

$

3.8

 

$

2.0

 

$

17.3

 

$

(1.1

)

$

16.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

9.0

 

$

19.2

 

$

2.6

 

$

30.8

 

$

1.1

 

$

31.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

-7.1

%

-30.9

%

4.3

%

-17.4

%

 

 

-19.6

%

Expense ratio

 

63.2

%

47.4

%

39.1

%

53.5

%

 

 

53.5

%

Combined ratio

 

56.1

%

16.5

%

43.4

%

36.1

%

 

 

33.9

%

 

(1)  Due to the timing of receipts of reports prepared by our ceding companies, present value of treaty financial guaranty gross written premiums (PVP) for installment premiums, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a one-quarter lag.  PVP of facultative financial guaranty gross written premiums for installment premiums, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a current quarter basis.

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].

 

4


 

Assured Guaranty Ltd.

Financial Guaranty Direct Segment (1 of 2)

(dollars in millions)

 

 

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

Full Year
2004

 

Full Year
2005

 

Present value of gross written premiums (PVP) (a)

 

$

14.4

 

$

7.9

 

$

39.6

 

$

37.5

 

$

22.7

 

$

39.4

 

$

46.0

 

$

41.6

 

$

69.7

 

$

145.5

 

Less: Present value of installment premiums (a)

 

14.4

 

7.9

 

33.9

 

35.8

 

17.6

 

33.0

 

38.7

 

33.2

 

64.0

 

125.1

 

Upfront gross written premiums (GWP)

 

—

 

—

 

5.7

 

1.7

 

5.1

 

6.3

 

7.3

 

8.5

 

5.7

 

20.3

 

Plus:  Installment GWP

 

17.7

 

16.1

 

15.6

 

22.1

 

15.8

 

18.6

 

19.3

 

21.8

 

75.1

 

75.8

 

Financial guaranty direct GWP

 

$

17.7

 

$

16.1

 

$

21.3

 

$

23.8

 

$

20.9

 

$

24.9

 

$

26.6

 

$

30.2

 

$

80.8

 

$

96.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

17.7

 

$

16.1

 

$

21.3

 

$

23.8

 

$

20.9

 

$

24.9

 

$

26.6

 

$

30.2

 

$

80.8

 

$

96.2

 

Net written premiums

 

17.3

 

14.1

 

20.9

 

23.1

 

20.4

 

24.2

 

26.3

 

29.7

 

77.7

 

93.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

—

 

—

 

0.1

 

0.1

 

0.4

 

0.7

 

1.5

 

1.1

 

0.1

 

2.7

 

Structured finance

 

16.1

 

16.5

 

15.4

 

20.3

 

15.6

 

17.6

 

18.3

 

19.6

 

88.7

 

71.8

 

Total net earned premiums

 

16.1

 

16.5

 

15.5

 

20.4

 

16.0

 

18.3

 

19.8

 

20.7

 

88.8

 

74.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

1.1

 

0.5

 

0.4

 

—

 

4.4

 

—

 

0.4

 

(1.6

)

27.1

 

4.8

 

Portfolio

 

0.5

 

(1.7

)

0.6

 

(1.5

)

0.6

 

(4.0

)

(2.1

)

(0.2

)

(12.3

)

(7.0

)

Total loss and loss adjustment expenses

 

1.6

 

(1.2

)

1.0

 

(1.5

)

5.0

 

(4.0

)

(1.7

)

(1.8

)

14.8

 

(2.2

)

Profit commission expense

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

Acquisition costs

 

0.1

 

1.4

 

1.6

 

1.5

 

1.6

 

1.6

 

1.6

 

1.8

 

4.5

 

6.3

 

Operating expenses (1), (2)

 

12.1

 

11.1

 

11.5

 

11.4

 

9.5

 

11.9

 

11.5

 

13.4

 

41.8

 

44.3

 

Total expenses

 

$

13.8

 

$

11.3

 

$

14.1

 

$

11.4

 

$

16.1

 

$

9.5

 

$

11.4

 

$

13.5

 

$

61.1

 

$

48.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

2.3

 

$

5.2

 

$

1.4

 

$

9.0

 

$

(0.1

)

$

8.8

 

$

8.4

 

$

7.2

 

$

27.6

 

$

26.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

9.9

%

(7.3

)%

6.5

%

(7.1

)%

31.3

%

(21.9

)%

(8.6

)%

(8.7

)%

16.7

%

(2.9

)%

Expense ratio

 

75.7

%

75.5

%

84.6

%

63.2

%

69.1

%

73.7

%

66.3

%

73.8

%

52.2

%

67.8

%

Combined ratio

 

85.6

%

68.2

%

91.1

%

56.1

%

100.4

%

51.8

%

57.7

%

65.1

%

68.9

%

64.9

%

 

(1)  2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.

 

(2)  During 2006 the Company implemented a new operating expense methodology to more closely apply expenses to the individual operating segments. This new methodology was based on a comprehensive study and is based on departmental time estimates and headcount. 2005 and 2004 amounts have been restated to show this new methodology on a comparative basis.

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), adjusted book value (c), and net present value of estimated future installment premiums in force (d)].

 

5


 

Assured Guaranty Ltd.

Financial Guaranty Direct Segment (2 of 2)

(dollars in millions)

 

 

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

Full Year
2004

 

Full Year
2005

 

PVP (a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

—

 

$

—

 

$

5.7

 

$

1.6

 

$

5.1

 

$

6.3

 

$

7.0

 

$

8.5

 

$

5.7

 

$

20.0

 

U.S. structured finance

 

11.1

 

7.9

 

28.9

 

31.0

 

16.1

 

25.3

 

20.5

 

27.6

 

52.1

 

92.9

 

International

 

3.2

 

—

 

5.0

 

4.9

 

1.5

 

7.7

 

18.4

 

5.6

 

11.9

 

32.6

 

Total

 

$

14.4

 

$

7.9

 

$

39.6

 

$

37.5

 

$

22.7

 

$

39.4

 

$

46.0

 

$

41.6

 

$

69.7

 

$

145.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par written:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

1

 

$

—

 

$

194

 

$

77

 

$

262

 

$

224

 

$

383

 

$

283

 

$

195

 

$

947

 

U.S. structured finance

 

2,396

 

854

 

7,163

 

1,173

 

2,159

 

4,635

 

4,966

 

4,446

 

11,848

 

12,933

 

International

 

293

 

508

 

100

 

265

 

102

 

353

 

2,569

 

648

 

953

 

3,288

 

Total

 

$

2,691

 

$

1,361

 

$

7,457

 

$

1,515

 

$

2,524

 

$

5,212

 

$

7,918

 

$

5,377

 

$

12,997

 

$

17,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

2,036

 

$

1,991

 

$

2,189

 

$

2,238

 

$

2,421

 

$

2,641

 

$

3,022

 

$

3,250

 

$

2,189

 

$

3,022

 

U.S. structured finance

 

22,063

 

22,192

 

25,166

 

24,589

 

23,873

 

26,781

 

28,917

 

31,559

 

25,166

 

28,917

 

International

 

1,676

 

2,274

 

4,257

 

3,763

 

3,725

 

3,975

 

6,400

 

7,215

 

4,257

 

6,400

 

Total

 

$

25,775

 

$

26,457

 

$

31,612

 

$

30,590

 

$

30,019

 

$

33,397

 

$

38,338

 

$

42,024

 

$

31,612

 

$

38,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net present value of installment premiums in force: (d)

 

$

219.7

 

$

218.9

 

$

231.0

 

$

238.3

 

$

216.4

 

$

230.4

 

$

249.6

 

$

265.7

 

$

231.0

 

$

249.6

 

Unearned premium reserve net of ceded reinsurance

 

17.1

 

14.7

 

20.3

 

23.0

 

27.0

 

33.2

 

39.6

 

48.6

 

20.3

 

39.6

 

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), adjusted book value (c), and net present value of estimated future installment premiums in force (d)].

 

6


 

Assured Guaranty Ltd.

Financial Guaranty Reinsurance Segment (1) (1 of 2)

(dollars in millions)

 

 

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

Full Year
2004

 

Full Year
2005

 

Present value of gross written premiums (PVP) (a)

 

$

40.1

 

$

38.9

 

$

35.7

 

$

32.1

 

$

35.2

 

$

22.5

 

$

37.9

 

$

20.1

 

$

192.8

 

$

127.8

 

Less: Present value of installment premiums (a)

 

17.2

 

14.5

 

11.6

 

12.1

 

20.7

 

7.2

 

18.5

 

11.0

 

83.3

 

58.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upfront gross written premiums (GWP)

 

22.9

 

24.5

 

24.1

 

20.0

 

14.6

 

15.3

 

19.4

 

9.1

 

109.5

 

69.2

 

Less:  Upfront premium due to novations (2)

 

—

 

—

 

—

 

—

 

18.4

 

—

 

—

 

—

 

—

 

18.4

 

Plus:  Installment GWP (3)

 

12.9

 

11.1

 

12.4

 

14.0

 

12.0

 

12.0

 

9.1

 

9.7

 

50.8

 

47.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial guaranty reinsurance GWP

 

$

35.8

 

$

35.6

 

$

36.5

 

$

34.0

 

$

8.2

 

$

27.3

 

$

28.5

 

$

18.8

 

$

160.3

 

$

98.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treaty

 

$

42.1

 

$

25.3

 

$

32.1

 

$

13.4

 

$

4.3

 

$

21.0

 

$

24.6

 

$

12.0

 

$

135.8

 

$

63.3

 

Facultative

 

(6.3

)

10.3

 

4.4

 

20.6

 

3.9

 

6.3

 

3.9

 

6.8

 

24.5

 

34.7

 

Total gross written premiums

 

$

35.8

 

$

35.6

 

$

36.5

 

$

34.0

 

$

8.2

 

$

27.3

 

$

28.5

 

$

18.8

 

$

160.3

 

$

98.0

 

Net written premiums

 

35.8

 

35.6

 

36.3

 

34.0

 

8.0

 

27.3

 

28.5

 

18.5

 

160.1

 

97.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled net earned premiums

 

21.1

 

26.7

 

31.5

 

21.6

 

23.6

 

27.2

 

21.3

 

19.7

 

97.0

 

93.5

 

Net earned premiums from refundings

 

4.4

 

5.2

 

5.0

 

1.4

 

3.6

 

4.8

 

2.2

 

3.6

 

17.4

 

12.1

 

Total net earned premiums

 

25.5

 

31.9

 

36.5

 

23.0

 

27.2

 

32.0

 

23.5

 

23.3

 

114.4

 

105.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

(0.2

)

1.4

 

1.2

 

(7.5

)

(60.4

)

(0.2

)

4.0

 

2.3

 

3.2

 

(64.1

)

Portfolio

 

(0.7

)

9.4

 

0.4

 

0.4

 

(3.7

)

4.5

 

1.6

 

0.5

 

12.2

 

2.8

 

Total loss and loss adjustment expenses

 

(0.9

)

10.8

 

1.6

 

(7.1

)

(64.1

)

4.3

 

5.6

 

2.8

 

15.4

 

(61.3

)

Profit commission expense

 

0.3

 

(0.2

)

0.9

 

—

 

2.3

 

1.1

 

1.4

 

0.4

 

1.1

 

4.8

 

Acquisition costs

 

6.7

 

12.1

 

13.0

 

8.1

 

9.5

 

11.0

 

8.3

 

8.7

 

38.8

 

36.9

 

Operating expenses (4), (5)

 

2.9

 

2.7

 

2.8

 

2.8

 

4.7

 

2.9

 

3.4

 

3.4

 

10.1

 

13.8

 

Total expenses

 

$

9.0

 

$

25.4

 

$

18.2

 

$

3.8

 

$

(47.6

)

$

19.2

 

$

18.7

 

$

15.3

 

$

65.4

 

$

(5.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

16.5

 

$

6.5

 

$

18.2

 

$

19.2

 

$

74.8

 

$

12.8

 

$

4.8

 

$

8.0

 

$

49.0

 

$

111.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

(3.5

)%

33.9

%

4.4

%

(30.9

)%

(235.7

)%

13.3

%

23.9

%

12.0

%

13.5

%

(58.1

)%

Expense ratio

 

38.8

%

45.6

%

45.6

%

47.4

%

60.7

%

46.8

%

55.8

%

53.6

%

43.7

%

52.5

%

Combined ratio

 

35.3

%

79.5

%

50.0

%

16.5

%

(175.0

)%

60.1

%

79.7

%

65.6

%

57.2

%

(5.6

)%

 

(1)  Due to the timing of receipts of reports prepared by our ceding companies, present value of treaty financial guaranty gross written premiums (PVP) for installment premiums, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a one-quarter lag.  PVP of facultative financial guaranty gross written premiums for installment premiums, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a current quarter basis.

 

(2) Relates to reassumption by FSA of approximately $820 million par value of healthcare related business.

 

(3)  Installment gross written premiums includes the reclassification of certain deals originally recorded as installment that were discovered during 3Q-04 to be upfront premiums.  As a result, prior period amounts have been restated.  This reclass had an immaterial impact on our QTD and YTD results of operations and financial condition.

 

(4)  2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.

 

(5)  During 2006 the Company implemented a new operating expense methodology to more closely apply expenses to the individual operating segments. This new methodology was based on a comprehensive study and is based on departmental time estimates and headcount. 2005 and 2004 amounts have been restated to show this new methodology on a comparative basis.

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].

 

7


 

Assured Guaranty Ltd.

Financial Guaranty Reinsurance Segment (1)(2 of 2)

(dollars in millions)

 

 

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

Full Year
2004

 

Full Year
2005

 

PVP(a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

21.8

 

$

25.5

 

$

21.6

 

$

18.9

 

$

15.4

 

$

16.5

 

$

23.1

 

$

8.5

 

$

102.6

 

$

74.0

 

U.S. structured finance

 

7.1

 

4.1

 

7.5

 

3.1

 

4.9

 

2.3

 

8.7

 

3.4

 

38.0

 

18.9

 

International

 

11.2

 

9.4

 

6.6

 

10.1

 

15.0

 

3.7

 

6.1

 

8.3

 

52.3

 

34.9

 

Total

 

$

40.1

 

$

38.9

 

$

35.7

 

$

32.1

 

$

35.2

 

$

22.5

 

$

37.9

 

$

20.1

 

$

192.8

 

$

127.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par written:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

1,336

 

$

2,015

 

$

1,373

 

$

1,965

 

$

265

 

$

1,155

 

$

1,710

 

$

1,631

 

$

6,344

 

$

5,095

 

U.S. structured finance

 

556

 

421

 

682

 

1,718

 

308

 

309

 

616

 

$

444

 

2,327

 

2,951

 

International

 

326

 

333

 

249

 

241

 

418

 

186

 

260

 

677

 

1,707

 

1,106

 

Total

 

$

2,219

 

$

2,769

 

$

2,304

 

$

3,924

 

$

991

 

$

1,650

 

$

2,586

 

$

2,752

 

$

10,378

 

$

9,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

49,243

 

$

49,843

 

$

48,218

 

$

49,318

 

$

47,878

 

$

47,696

 

$

47,748

 

$

48,309

 

$

48,218

 

$

47,748

 

U.S. structured finance

 

10,435

 

10,125

 

9,814

 

10,404

 

10,325

 

9,686

 

9,661

 

9,387

 

9,814

 

9,661

 

International

 

5,898

 

6,042

 

5,948

 

6,082

 

6,645

 

6,540

 

6,719

 

7,196

 

5,948

 

6,719

 

Total

 

$

65,575

 

$

66,010

 

$

63,980

 

$

65,804

 

$

64,848

 

$

63,922

 

$

64,127

 

$

64,893

 

$

63,980

 

$

64,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net present value of installment premiums in force (d)

 

$

147.2

 

$

138.0

 

$

138.9

 

$

142.9

 

$

152.3

 

$

147.4

 

$

156.1

 

$

153.8

 

$

138.9

 

$

156.1

 

Unearned premium reserve net of ceded reinsurance

 

441.0

 

444.2

 

443.8

 

454.8

 

435.6

 

430.9

 

436.0

 

431.2

 

443.8

 

436.0

 

 

(1)  Due to the timing of receipts of reports prepared by our ceding companies, present value of treaty financial guaranty gross written premiums (PVP) for installment premiums, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a one-quarter lag.  PVP of facultative financial guaranty gross written premiums for installment premiums, par written and par outstanding in our Financial Guaranty Reinsurance segment are reported on a current quarter basis.

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), adjusted book value (c), and net present value of estimated future installment premiums in force (d)].

 

8


 

Assured Guaranty Ltd.

Mortgage Guaranty Segment

(dollars in millions)

 

 

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

Full Year
2004

 

Full Year
2005

 

Present value of gross written premiums (PVP) (a)

 

$

—

 

$

1.1

 

$

6.9

 

$

13.1

 

$

—

 

$

—

 

$

—

 

$

—

 

$

27.1

 

$

13.1

 

Less: Present value of installment premiums (a)

 

—

 

1.1

 

6.9

 

—

 

—

 

—

 

—

 

—

 

16.9

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upfront gross written premiums (GWP)

 

—

 

—

 

—

 

13.1

 

—

 

—

 

—

 

—

 

10.3

 

13.1

 

Plus:  Installment GWP

 

0.9

 

5.3

 

4.2

 

6.3

 

1.9

 

1.7

 

2.7

 

2.6

 

14.1

 

12.6

 

Mortgage guaranty GWP

 

$

0.9

 

$

5.3

 

$

4.2

 

$

19.4

 

$

1.9

 

$

1.7

 

$

2.7

 

$

2.6

 

$

24.4

 

$

25.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

0.9

 

$

5.3

 

$

4.2

 

$

19.4

 

$

1.9

 

$

1.7

 

$

2.7

 

$

2.6

 

$

24.4

 

$

25.7

 

Net written premiums

 

0.9

 

5.3

 

4.2

 

19.4

 

1.9

 

1.7

 

2.7

 

2.6

 

24.4

 

25.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

15.0

 

5.1

 

5.2

 

4.6

 

5.1

 

4.3

 

4.6

 

4.2

 

33.7

 

18.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

—

 

0.2

 

(0.2

)

0.1

 

(0.1

)

0.2

 

(0.2

)

—

 

—

 

—

 

Portfolio and IBNR

 

(3.3

)

(5.6

)

(1.8

)

0.1

 

0.1

 

0.1

 

(4.0

)

(0.2

)

(11.9

)

(3.7

)

Total loss and loss adjustment expenses

 

(3.3

)

(5.4

)

(2.0

)

0.2

 

—

 

0.3

 

(4.2

)

(0.2

)

(11.9

)

(3.7

)

Profit commission expense

 

4.3

 

1.3

 

3.5

 

1.0

 

1.0

 

0.9

 

5.1

 

0.9

 

14.1

 

8.0

 

Acquisition costs

 

1.7

 

0.5

 

0.6

 

0.5

 

0.6

 

0.4

 

0.4

 

0.3

 

3.7

 

2.0

 

Operating expenses (1), (2)

 

0.3

 

0.3

 

0.3

 

0.3

 

0.3

 

0.3

 

0.3

 

0.3

 

1.1

 

1.2

 

Total expenses

 

$

3.0

 

$

(3.3

)

$

2.4

 

$

2.0

 

$

1.9

 

$

1.9

 

$

1.7

 

$

1.3

 

$

7.0

 

$

7.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

12.0

 

$

8.4

 

$

2.8

 

$

2.6

 

$

3.2

 

$

2.4

 

$

2.9

 

$

2.8

 

$

26.7

 

$

11.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

(22.0

)%

(105.9

)%

(37.8

)%

4.3

%

—

 

6.9

%

(92.1

)%

(3.7

)%

(35.2

)%

(19.9

)%

Expense ratio

 

42.0

%

40.8

%

84.2

%

38.8

%

37.5

%

37.5

%

129.1

%

36.1

%

56.0

%

60.3

%

Combined ratio

 

20.0

%

(65.1

)%

46.4

%

43.1

%

37.5

%

44.4

%

37.0

%

32.4

%

20.8

%

40.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk in force

 

$

2,394

 

$

2,437

 

$

2,325

 

$

2,582

 

$

2,547

 

$

2,389

 

$

2,332

 

$

1,970

 

$

2,325

 

$

2,332

 

Risk written

 

—

 

136

 

271

 

419

 

—

 

—

 

—

 

—

 

643

 

419

 

Unearned premium reserve net of ceded reinsurance

 

43.5

 

43.7

 

42.7

 

57.5

 

54.2

 

51.5

 

49.7

 

48.1

 

42.7

 

49.7

 

 

(1)  2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.

 

(2)  During 2006 the Company implemented a new operating expense methodology to more closely apply expenses to the individual operating segments. This new methodology was based on a comprehensive study and is based on departmental time estimates and headcount. 2005 and 2004 amounts have been restated to show this new methodology on a comparative basis.

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [PVP (a), operating income and operating ROE (b), and adjusted book value (c)].

 

9


 

Assured Guaranty Ltd.

Other Segment

(dollars in millions)

 

 

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

Full Year
2004

 

Full Year

2005

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

10.0

 

$

5.2

 

$

3.8

 

$

0.9

 

$

9.5

 

$

21.6

 

$

0.4

 

$

3.8

 

$

(74.6

)

$

32.2

 

Net written premiums

 

(84.0

)

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(182.5

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

(66.0

)

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(48.9

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(57.4

)

—

 

(0.4

)

(1.1

)

—

 

(1.3

)

—

 

(1.2

)

(50.3

)

(2.4

)

Profit commission expense

 

0.2

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

0.3

 

—

 

Acquisition costs

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

3.9

 

—

 

Operating expenses (1)

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

3.9

 

—

 

Total expenses

 

$

(57.2

)

$

—

 

$

(0.4

)

$

(1.1

)

$

—

 

$

(1.3

)

$

—

 

$

(1.2

)

$

(42.2

)

$

(2.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

(8.8

)

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

1.2

 

$

(6.7

)

$

2.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

87.0

%

—

 

—

 

—

 

—

 

—

 

—

 

—

 

102.8

%

—

 

Expense ratio

 

-0.3

%

—

 

—

 

—

 

—

 

—

 

—

 

—

 

-16.6

%

—

 

Combined ratio

 

86.7

%

—

 

—

 

—

 

—

 

—

 

—

 

—

 

86.2

%

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity layer credit protection

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

5.4

 

$

—

 

Trade credit reinsurance

 

(34.6

)

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(25.3

)

—

 

Title reinsurance

 

0.8

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

3.2

 

—

 

Auto residual value reinsurance

 

(32.2

)

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(32.2

)

—

 

Total net earned premiums

 

$

(66.0

)

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

(48.9

)

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity layer credit protection

 

$

0.5

 

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

1.2

 

$

3.1

 

$

2.4

 

Trade credit reinsurance

 

(4.2

)

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(2.9

)

—

 

Title reinsurance

 

0.3

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

1.0

 

—

 

Auto residual value reinsurance

 

(5.4

)

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(7.9

)

—

 

Total underwriting gain

 

$

(8.8

)

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

1.2

 

$

(6.7

)

$

2.4

 

 

(1)  2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.

 

10


 

Assured Guaranty Ltd.

Loss and LAE Reserves by Segment and Type

(dollars in millions)

 

 

 

As of

 

As of

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

 

 

 

 

 

Reserves by segment:

 

2006

 

2005

 

 

 

 

 

 

 

 

 

Financial guaranty direct

 

$

8.0

 

$

13.1

 

 

 

 

 

 

 

 

 

Financial guaranty reinsurance

 

87.8

 

86.3

 

 

 

 

 

 

 

 

 

Mortgage guaranty

 

6.7

 

7.0

 

 

 

 

 

 

 

 

 

Other

 

14.7

 

14.8

 

 

 

 

 

 

 

 

 

Total

 

$

117.2

 

$

121.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

 

 

 

 

 

Reserves by type:

 

2006

 

2005

 

 

 

 

 

 

 

 

 

Case

 

$

43.1

 

$

45.9

 

 

 

 

 

 

 

 

 

IBNR

 

11.6

 

11.6

 

 

 

 

 

 

 

 

 

Portfolio

 

62.5

 

63.7

 

 

 

 

 

 

 

 

 

Total

 

$

117.2

 

$

121.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2006

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

Reserves by segment and type:

 

Direct

 

Reinsurance

 

Guaranty

 

Guaranty

 

Other

 

Total

 

Case

 

$

(0.7

)

$

36.4

 

$

0.2

 

$

35.9

 

$

7.2

 

$

43.1

 

IBNR

 

—

 

—

 

4.1

 

4.1

 

7.5

 

11.6

 

Portfolio

 

8.7

 

51.4

 

2.4

 

62.5

 

—

 

62.5

 

Total

 

$

8.0

 

$

87.8

 

$

6.7

 

$

102.5

 

$

14.7

 

$

117.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2005

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

Reserves by segment and type:

 

Direct

 

Reinsurance

 

Guaranty

 

Guaranty

 

Other

 

Total

 

Case

 

$

4.5

 

$

33.8

 

$

0.3

 

$

38.6

 

$

7.3

 

$

45.9

 

IBNR

 

—

 

—

 

4.1

 

4.1

 

7.5

 

11.6

 

Portfolio

 

8.6

 

52.5

 

2.6

 

63.7

 

—

 

63.7

 

Total

 

$

13.1

 

$

86.3

 

$

7.0

 

$

106.4

 

$

14.8

 

$

121.2

 

 

11


 

Assured Guaranty Ltd.

Investment Portfolio

as of March 31, 2006

(dollars in millions)

 

 

 

 

 

Pre-Tax

 

 

 

Annualized

 

 

 

Amortized

 

Book

 

 

 

Investment

 

 

 

Cost

 

Yield

 

Fair Value

 

Income

 

Fixed maturity securities available for sale:

 

 

 

 

 

 

 

 

 

U.S. Treasury securities and obligations of U.S. government agencies

 

$

193.0

 

4.5

%

$

192.2

 

$

8.7

 

Agency obligations

 

154.9

 

5.4

%

157.2

 

8.4

 

Foreign government securities

 

18.2

 

4.9

%

18.3

 

0.9

 

Obligations of states and political subdivisions

 

316.2

 

4.7

%

327.0

 

14.9

 

Insured obligations of state and political subdivisions

 

486.9

 

5.0

%

512.7

 

24.3

 

Corporate securities

 

129.3

 

5.7

%

131.5

 

7.4

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Pass-thrus

 

531.4

 

5.1

%

518.7

 

27.1

 

PACs

 

67.3

 

4.6

%

65.1

 

3.1

 

Asset-backed securities

 

192.9

 

4.7

%

191.4

 

9.1

 

Total fixed maturity securities available for sale

 

2,090.1

 

5.0

%

2,114.1

 

103.8

 

Short-term investments

 

135.0

 

4.2

%

135.0

 

5.7

 

Total investments

 

$

2,225.1

 

4.9

%

$

2,249.1

 

$

109.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratings distribution(1):

 

Fair Value

 

%

 

 

 

 

 

Treasury and U.S. government obligations

 

$

192.2

 

9.1

%

 

 

 

 

Agency obligations

 

157.2

 

7.4

%

 

 

 

 

AAA/Aaa

 

1,435.3

 

67.9

%

 

 

 

 

AA/Aa

 

240.2

 

11.4

%

 

 

 

 

A/A

 

89.2

 

4.2

%

 

 

 

 

BBB/Baa

 

—

 

—

 

 

 

 

 

Total

 

$

2,114.1

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Duration of investment portfolio (in years):

 

 

 

4.4

 

 

 

 

 

 

(1) Ratings are represented by the lower of the Moody’s Investor Services and Standard & Poor’s classifications.

 

12


 

Assured Guaranty Ltd.

Financial Guaranty Profile (1 of 3)

(dollars in millions)

 

 

 

Gross Par
Written

 

As of March 31, 2006:

 

Sector

 

1Q 2006

 

Net Par
Outstanding

 

%

 

Avg. Rating (7)

 

U.S. public finance

 

 

 

 

 

 

 

 

 

General obligation

 

$

324

 

$

12,049

 

11.3

%

A+

 

Tax backed

 

789

 

11,315

 

10.6

%

A+

 

Municipal utilities

 

281

 

10,408

 

9.7

%

A+

 

Transportation

 

3

 

6,292

 

5.9

%

A

 

Healthcare

 

362

 

6,230

 

5.8

%

A

 

Investor-owned utilities

 

60

 

1,438

 

1.3

%

A-

 

Higher education

 

79

 

1,228

 

1.1

%

A

 

Housing

 

2

 

1,140

 

1.1

%

AA-

 

Structured municipal (1)

 

—

 

719

 

0.7

%

AAA

 

Other public finance (2)

 

15

 

740

 

0.7

%

A

 

Total U.S. public finance

 

$

1,914

 

$

51,560

 

48.2

%

A+

 

 

 

 

 

 

 

 

 

 

 

U.S. structured finance

 

 

 

 

 

 

 

 

 

CDOs (3)

 

$

3,532

 

$

23,308

 

21.8

%

AAA

 

Mortgage-backed and home equity

 

261

 

8,971

 

8.4

%

A+

 

Commercial receivables (4)

 

9

 

3,822

 

3.6

%

AA-

 

Consumer receivables (5)

 

1,036

 

3,151

 

2.9

%

A+

 

Other structured finance (6)

 

52

 

1,693

 

1.6

%

AA

 

Single name corporate CDS

 

—

 

1

 

—

 

AAA

 

Total U.S. structured finance

 

$

4,890

 

$

40,946

 

38.3

%

AA

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

Other structured finance

 

$

6

 

$

5,562

 

5.2

%

A+

 

Project finance/PFI/PPP

 

486

 

3,403

 

3.2

%

BBB+

 

CDOs (3)

 

424

 

3,019

 

2.8

%

AAA

 

Public finance

 

409

 

2,428

 

2.3

%

A

 

Total international

 

$

1,325

 

$

14,411

 

13.5

%

A+

 

 

 

 

 

 

 

 

 

 

 

Total exposures

 

$

8,129

 

$

106,917

 

100.0

%

AA-

 

 

 

 

 

 

 

 

 

 

 

Mortgage guaranty risk in force

 

$

—

 

$

1,970

 

NA

 

NA

 

 

(1)  Structured municipal: includes excess of loss reinsurance on portfolios of municipal credits where the Company attached in excess of the AAA rating level.

 

(2)  Other public finance: primarily includes student loans and government-sponsored project finance.

 

(3)  Collateralized debt obligations (CDOs) are structured financings backed by a pool of debt obligations. These financings are typically structured in multiple tranches (layers) from equity (first loss) through super senior (high excess). Losses on defaulted pool assets are allocated successively first to the equity tranche then to higher rated tranches.

 

(4)  Commercial receivables: principally includes equipment leases and commercial mortgage-backed securities.

 

(5)  Consumer receivables: principally includes auto loan receivables and credit card receivables.

 

(6)  Other structured finance: predominantly trade receivable securitization, secured structured lending, and future flow transactions.

 

(7)  Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.

 

13


 

Assured Guaranty Ltd.

Financial Guaranty Profile (2 of 3)

(dollars in millions)

 

Distribution by ratings of financial guaranty portfolio

 

 

 

March 31, 2006

 

December 31, 2005

 

 

 

Net Par

 

 

 

Net Par

 

 

 

Ratings (1)

 

Outstanding

 

%

 

Outstanding

 

%

 

AAA/Aaa

 

$

37,609

 

35.2

%

$

34,492

 

33.7

%

AA/Aa

 

20,820

 

19.5

%

19,978

 

19.5

%

A/A

 

30,849

 

28.9

%

30,258

 

29.5

%

BBB/Baa

 

16,308

 

15.3

%

16,405

 

16.0

%

Below investment grade

 

1,331

 

1.2

%

1,332

 

1.3

%

Total exposures

 

$

106,917

 

100.0

%

$

102,465

 

100.0

%

 

Distribution by ratings of CDO exposure

 

 

 

March 31, 2006

 

December 31, 2005

 

 

 

Net Par

 

 

 

Net Par

 

 

 

Ratings (1)

 

Outstanding

 

%

 

Outstanding

 

%

 

AAA/Aaa

 

$

23,070

 

87.6

%

$

19,615

 

85.3

%

AA/Aa

 

2,779

 

10.6

%

2,800

 

12.2

%

A/A

 

263

 

1.0

%

326

 

1.4

%

BBB/Baa

 

158

 

0.6

%

189

 

0.8

%

Below investment grade

 

57

 

0.2

%

63

 

0.3

%

Total exposures

 

$

26,327

 

100.0

%

$

22,993

 

100.0

%

 

Distribution of CDOs by year of issue as of March 31, 2006

 

 

 

Net Par

 

 

 

 

 

Outstanding

 

%

 

2000 and prior

 

$

588

 

2.2

%

2001

 

3,930

 

14.9

%

2002

 

4,035

 

15.3

%

2003

 

3,574

 

13.6

%

2004

 

1,534

 

5.8

%

2005

 

9,454

 

35.9

%

2006 year to date

 

3,212

 

12.2

%

 

 

$

26,327

 

100.0

%

 

Distribution of CDOs by underlying asset type as of March 31, 2006

 

 

 

Net Par

 

 

 

Asset Type

 

Outstanding

 

%

 

Pooled Corporate Debt Obligations

 

$

24,346

 

92.5

%

CDO of ABS

 

1,873

 

7.1

%

Emerging Market

 

107

 

0.4

%

 

 

$

26,327

 

100.0

%

 

(1)  Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.

 

14


 

Assured Guaranty Ltd.

Financial Guaranty Profile (3 of 3)

(dollars in millions)

 

Geographic distribution of financial guaranty portfolio, as of March 31, 2006

 

 

 

Net Par

 

 

 

 

 

Outstanding

 

%

 

U.S.:

 

 

 

 

 

California

 

$

7,562

 

7.1

%

New York

 

5,761

 

5.4

%

Texas

 

3,361

 

3.1

%

Illinois

 

3,143

 

2.9

%

Massachusetts

 

2,698

 

2.5

%

Florida

 

2,565

 

2.4

%

Pennsylvania

 

2,273

 

2.1

%

New Jersey

 

2,231

 

2.1

%

Washington

 

1,917

 

1.8

%

Puerto Rico

 

1,596

 

1.5

%

Other states

 

18,455

 

17.3

%

Mortgage and structured (multiple states)

 

40,946

 

38.3

%

Total U.S.

 

$

92,506

 

86.5

%

 

 

 

 

 

 

International:

 

 

 

 

 

United Kingdom

 

$

8,961

 

8.4

%

Australia

 

924

 

0.9

%

Turkey

 

488

 

0.5

%

Ireland

 

423

 

0.4

%

Germany

 

358

 

0.3

%

Other

 

3,256

 

3.0

%

Total International

 

$

14,411

 

13.5

%

 

 

 

 

 

 

Total exposures

 

$

106,917

 

100.0

%

 

15


 

Assured Guaranty Ltd.

Non-Investment Grade Exposures

as of March 31, 2006

(dollars in millions)

 

Non-Investment Grade Exposures by:

 

Weighted Average

 

Net Par

 

Average

 

Asset Type

 

Remaining Life

 

Outstanding

 

Rating (1)

 

 

 

 

 

 

 

 

 

Public finance

 

 

 

 

 

 

 

Project Finance / PPI / PPP

 

11.9

 

$

233.3

 

CCC+

 

Transportation

 

20.3

 

221.9

 

B

 

Tax backed

 

13.8

 

77.8

 

B+

 

Healthcare

 

11.6

 

36.8

 

BB

 

Municipal utilities

 

10.3

 

13.4

 

C

 

General obligation

 

9.8

 

9.6

 

CCC

 

Investor-owned utilities

 

17.4

 

8.7

 

BB+

 

Housing

 

11.4

 

4.6

 

B-

 

Other public finance

 

21.6

 

3.5

 

D

 

Total public finance

 

15.2

 

$

609.5

 

B-

 

 

 

 

 

 

 

 

 

Structured finance

 

 

 

 

 

 

 

Commercial receivables

 

9.2

 

$

278.5

 

B

 

Consumer receivables

 

5.3

 

213.5

 

BB

 

Mortgage-backed and home equity

 

12.9

 

165.3

 

CCC-

 

CDOs

 

3.3

 

57.0

 

B+

 

Other structured finance

 

4.2

 

7.6

 

CC

 

Total structured finance

 

8.4

 

$

721.8

 

B

 

 

 

 

 

 

 

 

 

Total non-investment grade exposures

 

11.5

 

$

1,331.3

 

B

 

 

Top Ten Non-Investment Grade Exposures as of March 31, 2006

 

Name or Description

 

Average Rating

 

Weighted
Average
Remaining Life

 

Net Par
Outstanding

 

Public Finance International Infrastructure Transaction (2)

 

CCC+

 

20.9

 

$

 198

 

Public Finance Domestic Infrastructure Transaction

 

B

 

21.6

 

169

 

Structured Finance Domestic EETC Transaction (3)

 

BB

 

8.1

 

131

 

Structured Finance Domestic Credit Card Transaction (4)

 

BB

 

3.3

 

126

 

Structured Finance Domestic Credit Card Transaction (5)

 

BB+

 

2.4

 

79

 

Structured Finance Domestic Manufactured Housing Transaction (6)

 

CC

 

6.3

 

70

 

Structured Finance Domestic EETC Transaction (7)

 

D

 

9.0

 

66

 

International Airport Facility

 

BB

 

7.6

 

35

 

Public Finance Domestic Tax Backed Transaction

 

B

 

16.8

 

29

 

Public Finance Domestic Tax Backed Transaction

 

BB

 

11.9

 

29

 

Total

 

B

 

12.5

 

$

933

 

 

(1)               Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.

 

(2)               Exposure comprised of four series:  $133.4 million rated ‘B-’, $34.2 million rated ‘CC’, $6.4 million rated ‘CC’, and $24.3 million rated ‘C’.

 

(3)               Exposure comprised of three series: $42.3 million, $16.0 million, and $73.1million - all rated ‘BB’.

 

(4)               Exposure comprised of three series: $25.0 million, $1.3 million, $99.3 million - all rated ‘BB’.

 

(5)               Exposure comprised of two series, one in the amount of $22.5 million rated ‘BB+’ and the other for $56.0 million rated ‘BB+’.

 

(6)               Exposure comprised of seven series: $0.7 million, $1.5 million rated ‘BB’, $1.6 million rated ‘B’, $6.1 million, $8.4 million rated ‘B-’, and $23.7 million, $28.1million - rated ‘D’.

 

(7)               Exposure comprised of two series, one in the amount of $14.5 million and the other for $51.5 million - both rated ‘D’.

 

16


 

Assured Guaranty Ltd.

Closely Monitored Credits (“CMC”)

(dollars in millions)

 

Net par outstanding by credit monitoring category (1)

 

 

 

March 31, 2006

 

Description

 

Net Par
Outstanding

 

%

 

Number of Credits
in Category

 

Fundamentally sound risk

 

$

105,480

 

98.7

%

 

 

 

 

 

 

 

 

 

 

Closely monitored credits:

 

 

 

 

 

 

 

Category 1

 

786

 

0.7

%

35

 

Category 2

 

369

 

0.4

%

20

 

Category 3

 

213

 

0.2

%

19

 

Category 4

 

23

 

—

 

11

 

CMC Total

 

1,391

 

1.3

%

85

 

 

 

 

 

 

 

 

 

Other below investment grade risk

 

46

 

—

 

80

 

Total

 

$

106,917

 

100.0

%

 

 

 

 

 

December 31, 2005

 

Description

 

Net Par
Outstanding

 

%

 

Number of Credits
in Category

 

Fundamentally sound risk

 

$

100,951

 

98.6

%

 

 

 

 

 

 

 

 

 

 

Closely monitored credits:

 

 

 

 

 

 

 

Category 1

 

872

 

0.9

%

36

 

Category 2

 

433

 

0.4

%

22

 

Category 3

 

131

 

0.1

%

15

 

Category 4

 

23

 

—

 

11

 

CMC Total

 

1,459

 

1.4

%

84

 

 

 

 

 

 

 

 

 

Other below investment grade risk

 

55

 

—

 

103

 

Total

 

$

102,465

 

100.0

%

 

 

 

(1)  Our surveillance department is responsible for monitoring our portfolio of credits and maintains a list of closely monitored credits. The closely monitored credits are divided into four categories: Category 1 (low priority; fundamentally sound, greater than normal risk); Category 2 (medium priority; weakening credit profile, may result in loss); Category 3 (high priority; claim/default probable, case reserve established); Category 4 (claim paid, case reserve established for future payments). The closely monitored credits include all below investment grade (BIG) exposures where there is a material amount of exposure (generally greater than $10.0 million) or a material risk of the Company incurring a loss greater than $0.5 million. The closely monitored credits also include investment grade (IG) risks where credit quality is deteriorating and where, in the view of the Company, there is significant potential that the risk quality will fall below investment grade.

 

17


 

Assured Guaranty Ltd.

Largest Exposures by Sector (Part 1 of 2)

as of March 31, 2006

(dollars in millions)

 

10 Largest U.S. Public Finance Exposures

 

 

 

Net Par

 

 

 

Revenue Source

 

Outstanding

 

Rating(1)

 

California State General Obligation & Leases

 

$

893

 

A

 

New Jersey State General Obligation & Leases

 

761

 

AA-

 

Long Island Power Authority

 

700

 

A-

 

Chicago Illinois General Obligation

 

685

 

A+

 

New York City General Obligation

 

644

 

A+

 

Denver Colorado Airport System

 

620

 

A

 

New York City Municipal Water Finance Authority

 

579

 

AA

 

Jefferson County Alabama Sewer

 

578

 

A

 

Massachusetts State General Obligation & Bay Transportation

 

567

 

AA-

 

Houston Texas Water & Sewer System

 

549

 

A+

 

Total top 10 public finance exposures

 

$

6,576

 

 

 

 

10 Largest U.S. Structured Finance Exposures

 

 

 

Net Par

 

 

 

Revenue Source

 

Outstanding

 

Rating(1)

 

Structured Finance Corporate Pool

 

$

781

 

AAA

 

Synthetic CDO - IG Corporate

 

740

 

AAA

 

Park Place 2004-MHQ1 Class A-1

 

717

 

AAA

 

Countrywide Home Equity Loan Trust 2005-J CL 1-A

 

709

 

BBB-

 

Countrywide Home Equity Loan Trust 2005-J CL 2-A

 

706

 

BBB-

 

Synthetic CDO - IG ABS

 

594

 

AAA

 

Synthetic CDO - IG Corporate

 

559

 

AAA

 

Synthetic CDO - HY Corporate

 

546

 

AAA

 

Field Point I & II, Limited

 

535

 

AA-

 

Field Point III & IV, Limited

 

518

 

AA-

 

Total top 10 structured finance exposures

 

$

6,405

 

 

 

 

(1)  Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.

 

18


 

Assured Guaranty Ltd.

Largest Exposures by Sector (Part 2 of 2)

as of March 31, 2006

(dollars in millions)

 

10 Largest Healthcare Exposures

 

 

 

Net Par

 

 

 

 

 

Revenue Source

 

Outstanding(2)

 

Rating(1)

 

State

 

Public Finance Domestic Hospital System

 

$

148

 

AA

 

MO

 

Public Finance Domestic Hospital System

 

147

 

A+

 

TX

 

Public Finance Domestic Hospital System

 

147

 

A-

 

CA

 

Public Finance Domestic Hospital System

 

130

 

AA-

 

CA

 

Public Finance Domestic Hospital System

 

116

 

A+

 

PA

 

Public Finance Domestic Hospital System

 

110

 

BBB

 

MD

 

Public Finance Domestic Hospital System

 

108

 

BBB

 

NJ

 

Public Finance Domestic Hospital - Stand Alone

 

102

 

A+

 

TX

 

Public Finance Domestic Hospital System

 

100

 

A+

 

TX

 

Public Finance Domestic Hospital System

 

99

 

A

 

FL

 

Total top 10 healthcare exposures

 

$

1,206

 

 

 

 

 

 

10 Largest International Exposures

 

 

 

Net Par

 

 

 

Revenue Source

 

Outstanding

 

Rating(1)

 

Synthetic - International Mortgage Backed Securities

 

$

1,044

 

AAA

 

Stichting Profile Securitisation I

 

600

 

AAA

 

Synthetic CDO - IG ABS

 

571

 

AAA

 

Synthetic CDO - IG Corporate

 

500

 

AAA

 

Orkney Re II, PLC Floating Rate Notes

 

423

 

A-

 

Synthetic CDO - HY Corporate

 

421

 

AAA

 

International Whole Business Securitization

 

276

 

BBB+

 

International Investor Owned Utility

 

260

 

AAA

 

International Water and Sewer Transaction

 

190

 

BBB+

 

International Equipment Lease Transaction

 

187

 

AA

 

Total top 10 international exposures

 

$

4,472

 

 

 

 

(1)  Assured Guaranty internal rating. Our scale is comparable to that of the nationally recognized rating agencies.

 

(2)  Excludes net par in force for transactions insured by a AAA monoline financial guaranty company.

 

19


 

Assured Guaranty Ltd.

Consolidated Capital and Claims Paying Resources

(dollars in millions)

 

 

 

As of March 31, 2006

 

As of December 31, 2005

 

 

 

AGC

 

AG Re (1)

 

Consolidated

 

AGC

 

AG Re (1)

 

Consolidated

 

Statutory surplus and reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

Unearned premium reserve (2)

 

$

234

 

$

360

 

$

594

 

$

234

 

$

356

 

$

590

 

Contingency reserve

 

618

 

—

 

618

 

598

 

—

 

598

 

Policyholders’ surplus

 

260

 

715

 

975

 

256

 

691

 

947

 

Loss & loss adjustment expense reserves (3)

 

23

 

21

 

44

 

21

 

26

 

47

 

Total policyholders’ surplus & reserves

 

$

1,135

 

$

1,096

 

$

2,231

 

$

1,110

 

$

1,073

 

$

2,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Claims paying resources

 

 

 

 

 

 

 

 

 

 

 

 

 

Policyholders’ surplus

 

$

260

 

$

715

 

$

975

 

$

256

 

$

691

 

$

947

 

Contingency reserve

 

618

 

—

 

618

 

598

 

—

 

598

 

Qualified statutory capital

 

878

 

715

 

1,593

 

855

 

691

 

1,545

 

Unearned premium reserve (2)

 

234

 

360

 

594

 

234

 

356

 

590

 

Loss & loss adjustment expense reserves (3)

 

23

 

21

 

44

 

21

 

26

 

47

 

Total policyholders’ surplus & reserves

 

1,135

 

1,096

 

2,231

 

1,110

 

1,073

 

2,182

 

Present value of installment premium (d)

 

247

 

192

 

439

 

254

 

174

 

428

 

Standby line of credit/stop loss

 

455

 

—

 

455

 

455

 

—

 

455

 

Total claims paying resources

 

$

1,837

 

$

1,288

 

$

3,125

 

$

1,819

 

$

1,247

 

$

3,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net par insured outstanding

 

$

54,596

 

$

52,321

 

$

106,917

 

$

52,659

 

$

49,806

 

$

102,465

 

Net debt service outstanding

 

$

72,319

 

$

78,312

 

$

150,631

 

$

70,769

 

$

74,925

 

$

145,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net par insured to statutory capital

 

62:1

 

73:1

 

67:1

 

62:1

 

72:1

 

66:1

 

Capital ratio (4)

 

82:1

 

110:1

 

95:1

 

83:1

 

108:1

 

94:1

 

Financial resources ratio (5)

 

39:1

 

61:1

 

48:1

 

39:1

 

60:1

 

48:1

 

 

(1)  AG Re numbers are our estimate of U.S. statutory as the company files Bermuda statutory financial statements.

(2)  Unearned premium reserve for AG Re is U.S. GAAP based and net of prepaid reinsurance premiums.

(3)  Loss & loss adjustment reserves for AG Re is U.S. GAAP based and net of reinsurance recoverable and portfolio reserves.

(4)  Capital ratio is net par and interest insured divided by qualified statutory capital.

(5)  Financial resources ratio is calculated by dividing net par and interest insured by total claims paying resources.

 

Note: Please refer to endnotes for explanation of non-GAAP financial measures [net present value of estimated future installment premiums in force (d)]

 

20


 

Assured Guaranty Ltd.

Summary Financial and Statistical Data

(dollars in millions, except per share amounts)

 

 

 

 

 

Year Ended December 31,

 

 

 

YTD 2006

 

2005

 

2004

 

2003

 

2002

 

2001

 

GAAP Summary Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

55.4

 

$

252.1

 

$

190.9

 

$

349.2

 

$

417.2

 

$

442.9

 

Net earned premiums

 

48.1

 

198.7

 

187.9

 

310.9

 

247.4

 

293.5

 

Net investment income

 

26.2

 

96.8

 

94.8

 

96.3

 

97.2

 

99.5

 

Total expenses

 

32.9

 

64.9

 

114.6

 

266.1

 

218.8

 

282.8

 

Income before provision for income taxes

 

40.5

 

229.6

 

233.3

 

246.2

 

83.2

 

110.1

 

Net income

 

34.9

 

188.4

 

182.8

 

214.5

 

72.6

 

63.8

 

Operating income

 

35.6

 

190.0

 

141.1

 

127.3

 

115.7

 

96.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

0.47

 

$

2.53

 

$

2.44

 

$

2.86

 

$

0.97

 

$

0.85

 

Operating income per diluted share

 

$

0.48

 

$

2.55

 

$

1.88

 

$

1.70

 

$

1.54

 

$

1.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and LAE ratio

 

-0.7

%

-35.0

%

-17.0

%

46.5

%

48.6

%

60.5

%

Expense ratio

 

61.1

%

58.9

%

65.4

%

37.2

%

35.5

%

30.6

%

Combined ratio

 

60.4

%

23.9

%

48.4

%

83.7

%

84.1

%

91.1

%

GAAP Summary Balance Sheet Data (end of period)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments and cash

 

$

2,252.8

 

$

2,256.0

 

$

2,157.9

 

$

2,222.1

 

$

2,061.9

 

$

1,710.8

 

Total assets

 

2,678.0

 

2,689.1

 

2,694.0

 

2,857.9

 

2,719.9

 

2,322.1

 

Unearned premium reserves

 

540.7

 

537.1

 

521.3

 

625.4

 

613.3

 

500.3

 

Loss and LAE reserves

 

117.2

 

121.2

 

226.5

 

522.6

 

458.8

 

401.1

 

Long-term debt

 

197.4

 

197.3

 

197.4

 

75.0

 

75.0

 

150.0

 

Shareholders’ equity

 

1,673.4

 

1,661.5

 

1,527.6

 

1,437.6

 

1,257.2

 

1,061.6

 

Book value per share

 

$

22.67

 

$

22.22

 

$

20.19

 

$

19.17

 

$

16.76

 

$

14.15

 

Other Financial Information

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt service outstanding (end of period)

 

$

150,631

 

$

145,694

 

$

136,120

 

$

130,047

 

$

124,082

 

$

117,909

 

Net par outstanding (end of period)

 

106,917

 

102,465

 

95,592

 

87,524

 

80,394

 

75,249

 

Gross par outstanding (end of period)

 

108,727

 

105,258

 

98,221

 

90,366

 

83,067

 

79,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated qualified statutory capital

 

1,593

 

1,545

 

1,351

 

1,216

 

1,133

 

1,095

 

Consolidated policyholders’ surplus & reserves

 

2,231

 

2,182

 

1,990

 

2,238

 

1,931

 

1,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

Par insured to statutory capital

 

67:1

 

66:1

 

71:1

 

72:1

 

71:1

 

69:1

 

Capital ratio(1)

 

95:1

 

94:1

 

101:1

 

107:1

 

110:1

 

108:1

 

Financial resources ratio(2)

 

48:1

 

48:1

 

51:1

 

45:1

 

41:1

 

52:1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt service written:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

3,382

 

$

13,335

 

$

11,943

 

$

9,628

 

$

12,957

 

$

7,304

 

U.S. structured finance

 

5,041

 

16,724

 

15,131

 

9,718

 

12,495

 

11,893

 

International

 

1,768

 

5,729

 

3,897

 

3,822

 

2,069

 

2,125

 

Total debt service written

 

$

10,191

 

$

35,788

 

$

30,970

 

$

23,168

 

$

27,522

 

$

21,321

 

 

(1)  Capital ratio is net par and interest insured divided by qualified statutory capital.

(2)  Financial resources ratio is calculated by dividing net par and interest insured by total claims paying resources.

 

21


 

Explanation of Non-GAAP Financial Measures:

 

The following section describes why the non-GAAP financial measures presented in this press release are useful for investors.

 

(a) PVP, which is a non-GAAP financial measure, is an estimate of the after-tax value of financial guaranty and mortgage guaranty gross premiums and fees associated with new policies or transactions written in the current period. This measure includes both upfront and installment premiums received and the present value of estimated future installment premiums, discounted at 6% per year, on contracts written in the current period. We use 6% as the present value discount, because it is the approximate taxable equivalent yield on our investment portfolio for the periods presented. We believe PVP is a useful measure for management, equity analysts and investors because it permits the evaluation of the value of new business production for Assured Guaranty by taking into account the value of estimated future installment premiums on new contracts underwritten in a reporting period, which the GAAP gross premiums written does not adequately measure. Actual future net earned or written premiums may differ from PVP due to factors such as prepayments, amortizations, refundings, contract terminations or defaults that may or may not be influenced by market interest rates, refinancing or refunding activity, pre-payment speeds, policy changes or terminations, credit defaults, or other factors that management cannot control or predict.

 

(b) Operating income, which is a non-GAAP financial measure, is defined as net income excluding after-tax realized gains (losses) on investments and after-tax unrealized gains (losses) on derivative financial instruments. We believe the presentation of operating income enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude net realized gains (losses) on investments and net unrealized gains (losses) on derivative financial instruments because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, market interest rates, credit spreads and other factors that management cannot control or predict. This measure should not be viewed as a substitute for net income determined in accordance with GAAP.

 

(c) Adjusted book value, which is a non-GAAP financial measure, is defined as shareholders’ equity (book value) plus the after-tax value of the financial guaranty and mortgage guaranty unearned premium reserve net of prepaid reinsurance premiums and deferred acquisition costs plus the net present value of estimated future installment premiums in force after-tax (discounted at 6%). The premiums described above will be earned in future periods, but may differ materially from the estimated amounts used in determining current estimated adjusted book value due to changes in market interest rates, refinancing or refunding activity, pre-payment speeds, policy changes or terminations, credit defaults, and other factors that management cannot control or predict. Management, investors and analysts use the calculation of adjusted book value to evaluate the net present value of the Company’s in-force premiums and capital base.

 

(d) Net present value of estimated future installment premiums in force, which is a non-GAAP financial measure, is an estimate of the value of future financial guaranty and mortgage guaranty premiums on our in-force book of installment premium business. There is no comparable GAAP financial measure. Estimated future premiums may change from period to period due to changes in par outstanding, maturity or other factors that management cannot control or predict that result from market conditions, interest rates, early terminations or other factors. It is calculated net of reinsurance ceded and using a discount rate of 6%. We believe net present value of estimated future installment premiums in force is a useful measure for management, equity analysts and investors because it permits the evaluation of future estimated installment premiums.

 


 

 

 

 

Contacts:

 

 

 

 

 

Equity investors and media

 

 

Sabra Purtill

 

 

Managing Director, Investor Relations

 

 

(212) 408-6044

 

 

spurtill@assuredguaranty.com

 

 

 

 

 

Chris McNamee

 

 

Assistant Vice President, Investor Relations

 

 

(212) 261-5509

 

 

cmcnamee@assuredguaranty.com

 

 

 

 

 

Fixed income investors

 

 

Patrick Early

 

 

Director, Fixed Income Investor Relations

 

 

(212) 408 6043

 

 

pearly@assuredguaranty.com

 

 

 

Assured Guaranty Ltd.

 

Michael Walker

30 Woodbourne Avenue

 

Director, Fixed Income Investor Relations

Hamilton HM 08

 

(212) 261-5575

Bermuda

 

mwalker@assuredguaranty.com

www.assuredguaranty.com