EX-99.2 3 a06-17030_1ex99d2.htm EX-99

Exhibit 99.2

Assured Guaranty Ltd.
Financial Supplement
Second Quarter 2006
June 30, 2006

 

 

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, September 30, 2005 and March 31, 2006 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 calculations of adjusted book value, PVP and net present value of estimated future installment premiums in force, and statements regarding ratings improvement and the growth of the direct business could be affected by many events. These events include 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

 

Six Months Ended

 

% Change

 

 

 

June 30,

 

versus

 

June 30,

 

versus

 

 

 

2006

 

2005

 

2Q-05

 

2006

 

2005

 

YTD 2005

 

Gross written premiums (GWP) analysis:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

148.4

 

$

57.9

 

156

%

$

210.2

 

$

140.5

 

50

%

Less: Installment premium PVP

 

70.8

 

38.3

 

85

%

115.0

 

86.1

 

34

%

Upfront financial guaranty & mortgage guaranty GWP

 

77.6

 

19.6

 

296

%

95.2

 

54.4

 

75

%

Less: Upfront premium due to novations

 

—

 

18.4

 

NMF

 

—

 

18.4

 

NMF

 

Plus: Installment GWP

 

33.8

 

29.8

 

13

%

67.8

 

72.2

 

(6

)%

Financial guaranty & mortgage guaranty GWP

 

111.4

 

31.0

 

259

%

163.0

 

108.2

 

51

%

Plus: Other segment GWP

 

0.1

 

9.5

 

(99

)%

3.9

 

10.4

 

(63

)%

Total GWP

 

$

111.5

 

$

40.5

 

175

%

$

166.9

 

$

118.6

 

41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

44.5

 

$

66.8

 

(33

)%

$

79.4

 

$

111.1

 

(29

)%

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

 

(0.8

)

1.2

 

NMF

 

(1.4

)

2.7

 

NMF

 

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

 

4.3

 

(9.7

)

NMF

 

4.2

 

(8.1

)

NMF

 

Operating income(b)

 

$

41.0

 

$

75.2

 

(45

)%

$

76.7

 

$

116.6

 

(34

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value

 

$

1,682.8

 

$

1,619.5

 

4

%

 

 

 

 

 

 

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

 

330.0

 

279.8

 

18

%

 

 

 

 

 

 

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

 

365.9

 

300.6

 

22

%

 

 

 

 

 

 

Adjusted book value(c)

 

$

2,378.7

 

$

2,199.9

 

8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ROE, excluding AOCI

 

10.7

%

17.7

%

 

 

9.6

%

14.9

%

 

 

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

 

(0.2

)%

0.3

%

 

 

(0.2

)%

0.4

%

 

 

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

 

1.0

%

(2.6

)%

 

 

0.5

%

(1.1

)%

 

 

Operating ROE, excluding AOCI(b)

 

9.9

%

19.9

%

 

 

9.3

%

15.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per diluted share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.60

 

$

0.90

 

(33

)%

$

1.06

 

$

1.49

 

(29

)%

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

 

(0.01

)

0.02

 

NMF

 

(0.02

)

0.04

 

NMF

 

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

 

0.06

 

(0.13

)

NMF

 

0.06

 

(0.11

)

NMF

 

Operating income(b)

 

$

0.55

 

$

1.02

 

(46

)%

$

1.03

 

$

1.56

 

(34

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value

 

$

22.98

 

$

21.63

 

6

%

 

 

 

 

 

 

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

 

4.51

 

3.74

 

21

%

 

 

 

 

 

 

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

 

5.00

 

4.01

 

25

%

 

 

 

 

 

 

Adjusted book value(c)

 

$

32.48

 

$

29.38

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional information:

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding at the end of period(2)

 

73.2

 

74.9

 

(2

)%

 

 

 

 

 

 

Weighted average basic shares outstanding

 

73.6

 

73.8

 

(0.3

)%

73.7

 

74.1

 

(1

)%

Weighted average diluted shares outstanding

 

74.4

 

74.1

 

0.4

%

74.6

 

74.5

 

0.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net debt service outstanding

 

$

160,388

 

$

137,104

 

17

%

 

 

 

 

 

 

Consolidated net par outstanding

 

115,611

 

94,867

 

22

%

 

 

 

 

 

 

Consolidated claims-paying resources

 

3,206

 

3,028

 

6

%

 

 

 

 

 

 

Gross par written

 

15,283

 

3,515

 

335

%

23,412

 

8,953

 

161

%

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

(2)             6/30/06 shares outstanding excludes 1.2 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

(dollars and shares in millions, except per share amounts)

 

 

 

Quarter Ended

 

% Change

 

Six Months Ended

 

% Change

 

 

 

June 30,

 

versus

 

June 30,

 

versus

 

 

 

2006

 

2005

 

2Q-05

 

2006

 

2005

 

YTD 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

111.5

 

$

40.5

 

175

%

$

166.9

 

$

118.6

 

41

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

110.3

 

30.2

 

265

%

161.1

 

106.6

 

51

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

48.2

 

48.3

 

(0.2

)%

96.2

 

96.4

 

(0.2

)%

Net investment income

 

27.3

 

23.7

 

15

%

53.5

 

46.8

 

14

%

Other income

 

—

 

(0.2

)

NMF

 

—

 

0.1

 

NMF

 

Total revenues

 

75.5

 

71.8

 

5

%

149.7

 

143.3

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(6.5

)

(59.1

)

(89

)%

(6.9

)

(68.5

)

(90

)%

Profit commission expense

 

1.7

 

3.3

 

(48

)%

3.0

 

4.3

 

(30

)%

Acquisition costs

 

11.3

 

11.7

 

(3

)%

22.1

 

21.9

 

1

%

Other operating expenses

 

15.6

 

14.5

 

8

%

32.8

 

29.0

 

13

%

Other expenses

 

4.1

 

5.9

 

(31

)%

8.0

 

9.2

 

(13

)%

Total expenses

 

26.2

 

(23.7

)

NMF

 

59.0

 

(4.1

)

NMF

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

49.3

 

95.5

 

(48

)%

90.7

 

147.4

 

(38

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total provision for income taxes

 

8.3

 

20.3

 

(59

)%

14.0

 

30.8

 

(55

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income(b)

 

41.0

 

75.2

 

(45

)%

76.7

 

116.6

 

(34

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax realized (losses) gains on investments

 

(0.8

)

1.2

 

NMF

 

(1.4

)

2.7

 

NMF

 

After-tax unrealized gains (losses) on derivatives

 

4.3

 

(9.7

)

NMF

 

4.2

 

(8.1

)

NMF

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

44.5

 

$

66.8

 

(33

)%

$

79.4

 

$

111.1

 

(29

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per diluted share

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income(b)

 

$

0.55

 

$

1.02

 

(46

)%

$

1.03

 

$

1.56

 

(34

)%

After-tax realized (losses) gains on investments

 

(0.01

)

0.02

 

NMF

 

(0.02

)

0.04

 

NMF

 

After-tax unrealized gains (losses) on derivatives

 

0.06

 

(0.13

)

NMF

 

0.06

 

(0.11

)

NMF

 

Net income

 

$

0.60

 

$

0.90

 

(33

)%

$

1.06

 

$

1.49

 

(29

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares outstanding

 

73.6

 

73.8

 

(0.3

)%

73.7

 

74.1

 

(1

)%

Plus: effect of options

 

0.5

 

0.2

 

150

%

0.5

 

0.1

 

400

%

Plus: effect of restricted stock

 

0.3

 

0.1

 

200

%

0.4

 

0.2

 

100

%

Diluted shares outstanding

 

74.4

 

74.1

 

0.4

%

74.6

 

74.5

 

0.1

%

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

Some amounts may not foot due to rounding.

2



 

 

Assured Guaranty Ltd.

Consolidated GAAP Balance Sheets

(dollars in millions)

 

 

 

As of :

 

 

 

June 30,

 

December 31,

 

 

 

2006

 

2005

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Fixed maturity securities, at fair value

 

$

2,069.2

 

$

2,134.0

 

Short-term investments, at cost which approximates fair value

 

170.7

 

115.8

 

Total investments

 

2,239.9

 

2,249.8

 

 

 

 

 

 

 

Cash and cash equivalents

 

29.2

 

6.2

 

Accrued investment income

 

22.7

 

22.7

 

Deferred acquisition costs

 

205.3

 

193.4

 

Prepaid reinsurance premiums

 

12.4

 

12.5

 

Reinsurance recoverable on ceded losses

 

11.3

 

12.4

 

Premiums receivable

 

42.2

 

33.0

 

Goodwill

 

85.4

 

85.4

 

Unrealized gains on derivative financial instruments

 

52.3

 

53.0

 

Current income taxes receivable

 

7.6

 

3.0

 

Receivables for securities sold

 

9.7

 

1.0

 

Other assets

 

17.4

 

16.7

 

Total assets

 

$

2,735.4

 

$

2,689.1

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Unearned premium reserves

 

$

601.9

 

$

537.1

 

Reserves for losses and loss adjustment expenses

 

114.6

 

121.2

 

Profit commissions payable

 

29.6

 

53.0

 

Reinsurance balances payable

 

1.4

 

3.7

 

Deferred income taxes

 

24.3

 

26.6

 

Funds held by Company under reinsurance contracts

 

20.3

 

19.2

 

Unrealized losses on derivative financial instruments

 

6.2

 

12.7

 

Long-term debt

 

197.4

 

197.3

 

Liability for tax basis step-up adjustment

 

19.8

 

20.1

 

Payables for securities purchased

 

12.1

 

0.8

 

Other liabilities

 

24.9

 

35.8

 

Total liabilities

 

1,052.6

 

1,027.6

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock

 

0.7

 

0.7

 

Additional paid-in capital

 

855.3

 

882.0

 

Unearned stock grant compensation

 

—

 

(14.8

)

Retained earnings

 

821.8

 

747.7

 

Accumulated other comprehensive income

 

5.0

 

45.8

 

Total shareholders’ equity

 

1,682.8

 

1,661.5

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

2,735.4

 

$

2,689.1

 

 

3



Assured Guaranty Ltd.

Segment Consolidation (1 of 2)

(dollars in millions)

 

 

 

Quarter Ended June 30, 2006

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance(1)

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

6.0

 

$

29.7

 

$

—

 

$

35.7

 

 

 

$

35.7

 

U.S. structured finance

 

41.0

 

2.0

 

—

 

43.0

 

 

 

43.0

 

International

 

51.8

 

17.9

 

—

 

69.7

 

 

 

69.7

 

Total PVP

 

$

98.8

 

$

49.6

 

$

—

 

$

148.4

 

 

 

$

148.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

68.4

 

$

41.7

 

$

1.2

 

$

111.4

 

$

0.1

 

$

111.5

 

Net written premiums

 

67.8

 

41.3

 

1.2

 

110.3

 

—

 

110.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

21.2

 

23.1

 

3.7

 

48.2

 

—

 

48.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(2.5

)

5.7

 

0.4

 

3.6

 

(10.1

)

(6.5

)

Profit commission expense

 

—

 

1.0

 

0.7

 

1.7

 

—

 

1.7

 

Acquisition costs

 

2.3

 

8.5

 

0.3

 

11.3

 

—

 

11.3

 

Operating expenses

 

12.0

 

3.4

 

0.3

 

15.6

 

—

 

15.6

 

Total underwriting expenses

 

$

11.8

 

$

18.5

 

$

1.7

 

$

32.2

 

$

(10.1

)

$

22.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

9.4

 

$

4.6

 

$

2.0

 

$

16.0

 

$

10.1

 

$

26.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio 

 

(11.7

)%

24.6

%

9.4

%

7.4

%

 

 

(13.5

)%

Expense ratio

 

67.4

%

55.4

%

36.4

%

59.3

%

 

 

59.3

%

Combined ratio

 

55.7

%

80.0

%

45.8

%

66.7

%

 

 

45.8

%

 

 

 

 

Quarter Ended June 30, 2005

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance(1)

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

PVP:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

5.1

 

$

15.4

 

$

—

 

$

20.5

 

 

 

$

20.5

 

U.S. structured finance

 

16.1

 

4.9

 

—

 

21.0

 

 

 

21.0

 

International

 

1.5

 

15.0

 

—

 

16.4

 

 

 

16.4

 

Total PVP

 

$

22.7

 

$

35.2

 

$

—

 

$

57.9

 

 

 

$

57.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

20.9

 

$

8.2

 

$

1.9

 

$

31.0

 

$

9.5

 

$

40.5

 

Net written premiums

 

20.4

 

8.0

 

1.9

 

30.2

 

—

 

30.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

16.0

 

27.2

 

5.1

 

48.3

 

—

 

48.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

5.0

 

(64.1

)

—

 

(59.1

)

—

 

(59.1

)

Profit commission expense

 

—

 

2.3

 

1.0

 

3.3

 

—

 

3.3

 

Acquisition costs

 

1.6

 

9.5

 

0.6

 

11.7

 

—

 

11.7

 

Operating expenses

 

9.5

 

4.7

 

0.3

 

14.5

 

—

 

14.5

 

Total underwriting expenses

 

$

16.1

 

$

(47.6

)

$

1.9

 

$

(29.6

)

$

—

 

$

(29.6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting (loss) gain

 

$

(0.1

)

$

74.8

 

$

3.2

 

$

77.9

 

$

—

 

$

77.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

31.3

%

(235.7

)%

—

 

(122.4

)%

 

 

(122.4

)%

Expense ratio

 

69.1

%

60.7

%

37.5

%

61.0

%

 

 

61.0

%

Combined ratio

 

100.4

%

(175.0

)%

37.5

%

(61.4

)%

 

 

(61.4

)%

(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.

Segment Consolidation (2 of 2)

(dollars in millions)

 

 

 

Six Months Ended June 30, 2006

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance(1)

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

14.4

 

$

38.2

 

$

—

 

$

52.7

 

 

 

$

52.7

 

U.S. structured finance

 

68.6

 

5.3

 

—

 

73.9

 

 

 

73.9

 

International

 

57.5

 

26.2

 

—

 

83.6

 

 

 

83.6

 

Total PVP

 

$

140.5

 

$

69.7

 

$

—

 

$

210.2

 

 

 

$

210.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

98.6

 

$

60.5

 

$

3.8

 

$

163.0

 

$

3.9

 

$

166.9

 

Net written premiums

 

97.5

 

59.8

 

3.8

 

161.1

 

—

 

161.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

41.9

 

46.4

 

7.9

 

96.2

 

—

 

96.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(4.3

)

8.5

 

0.2

 

4.4

 

(11.3

)

(6.9

)

Profit commission expense

 

—

 

1.4

 

1.6

 

3.0

 

—

 

3.0

 

Acquisition costs

 

4.2

 

17.2

 

0.6

 

22.1

 

—

 

22.1

 

Operating expenses

 

25.4

 

6.8

 

0.6

 

32.8

 

—

 

32.8

 

Total underwriting expenses

 

$

25.3

 

$

33.8

 

$

3.1

 

$

62.3

 

$

(11.3

)

$

51.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

16.6

 

$

12.6

 

$

4.8

 

$

33.9

 

$

11.3

 

$

45.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio 

 

(10.2

)%

18.3

%

2.5

%

4.6

%

 

 

(7.2

)%

Expense ratio

 

70.6

%

54.5

%

36.2

%

60.2

%

 

 

60.2

%

Combined ratio

 

60.4

%

72.8

%

38.7

%

64.8

%

 

 

53.0

%

 

 

 

 

Six Months Ended June 30, 2005

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance(1)

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

PVP:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

6.7

 

$

34.4

 

$

—

 

$

41.0

 

 

 

$

41.0

 

U.S. structured finance

 

47.1

 

7.9

 

—

 

55.0

 

 

 

55.0

 

International

 

6.4

 

25.0

 

13.1

 

44.5

 

 

 

44.5

 

Total PVP

 

$

60.1

 

$

67.3

 

$

13.1

 

$

140.5

 

 

 

$

140.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

44.7

 

$

42.2

 

$

21.3

 

$

108.2

 

$

10.4

 

$

118.6

 

Net written premiums

 

43.5

 

42.0

 

21.3

 

106.6

 

—

 

106.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

36.4

 

50.2

 

9.7

 

96.4

 

—

 

96.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

3.5

 

(71.2

)

0.2

 

(67.5

)

(1.1

)

(68.5

)

Profit commission expense

 

—

 

2.3

 

2.0

 

4.3

 

—

 

4.3

 

Acquisition costs

 

3.1

 

17.6

 

1.1

 

21.9

 

—

 

21.9

 

Operating expenses

 

20.9

 

7.5

 

0.6

 

29.0

 

—

 

29.0

 

Total underwriting expenses

 

$

27.5

 

$

(43.8

)

$

3.9

 

$

(12.4

)

$

(1.1

)

$

(13.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

8.9

 

$

94.0

 

$

5.8

 

$

108.8

 

$

1.1

 

$

109.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

9.7

%

(141.8

)%

2.1

%

(70.0

)%

 

 

(71.1

)%

Expense ratio

 

65.8

%

54.6

%

38.1

%

57.2

%

 

 

57.2

%

Combined ratio

 

75.5

%

(87.2

)%

40.2

%

(12.8

)%

 

 

(13.9

)%

(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)].

5



 

Assured Guaranty Ltd.
Financial Guaranty Direct Segment (1 of 2)
(dollars in millions)

 

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

2Q-06

 

Six Months
2004

 

Six Months
2005

 

Six Months
2006

 

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

 

$

7.9

 

$

39.6

 

$

37.5

 

$

22.7

 

$

39.4

 

$

46.0

 

$

41.6

 

$

98.8

 

$

22.2

 

$

60.1

 

$

140.5

 

Less: Present value of installment premiums(a)

 

7.9

 

33.9

 

35.8

 

17.6

 

33.0

 

38.7

 

33.2

 

53.1

 

22.2

 

53.4

 

86.3

 

Upfront gross written premiums (GWP)

 

—

 

5.7

 

1.7

 

5.1

 

6.3

 

7.3

 

8.5

 

45.7

 

—

 

6.8

 

54.2

 

Plus: Installment GWP

 

16.1

 

15.6

 

22.1

 

15.8

 

18.6

 

19.3

 

21.8

 

22.7

 

43.3

 

37.9

 

44.4

 

Financial guaranty direct GWP

 

$

16.1

 

$

21.3

 

$

23.8

 

$

20.9

 

$

24.9

 

$

26.6

 

$

30.2

 

$

68.4

 

$

43.3

 

$

44.7

 

$

98.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

16.1

 

$

21.3

 

$

23.8

 

$

20.9

 

$

24.9

 

$

26.6

 

$

30.2

 

$

68.4

 

$

43.3

 

$

44.7

 

$

98.6

 

Net written premiums

 

14.1

 

20.9

 

23.1

 

20.4

 

24.2

 

26.3

 

29.7

 

67.8

 

42.6

 

43.5

 

97.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

—

 

0.1

 

0.1

 

0.4

 

0.7

 

1.5

 

1.1

 

1.7

 

—

 

0.5

 

2.8

 

Structured finance

 

16.5

 

15.4

 

20.3

 

15.6

 

17.6

 

18.3

 

19.6

 

19.5

 

56.8

 

35.9

 

39.1

 

Total net earned premiums

 

16.5

 

15.5

 

20.4

 

16.0

 

18.3

 

19.8

 

20.7

 

21.2

 

56.8

 

36.4

 

41.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

0.5

 

0.4

 

—

 

4.4

 

—

 

0.4

 

(1.6

)

(0.4

)

26.2

 

4.4

 

(2.0

)

Portfolio

 

(1.7

)

0.6

 

(1.5

)

0.6

 

(4.0

)

(2.1

)

(0.2

)

(2.1

)

(11.2

)

(0.9

)

(2.3

)

Total loss and loss adjustment expenses

 

(1.2

)

1.0

 

(1.5

)

5.0

 

(4.0

)

(1.7

)

(1.8

)

(2.5

)

15.0

 

3.5

 

(4.3

)

Profit commission expense

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

Acquisition costs

 

1.4

 

1.6

 

1.5

 

1.6

 

1.6

 

1.6

 

1.8

 

2.3

 

1.5

 

3.1

 

4.2

 

Operating expenses(1)

 

11.1

 

11.5

 

11.4

 

9.5

 

11.9

 

11.5

 

13.4

 

12.0

 

19.3

 

20.9

 

25.4

 

Total expenses

 

$

11.3

 

$

14.1

 

$

11.4

 

$

16.1

 

$

9.5

 

$

11.4

 

$

13.5

 

$

11.8

 

$

35.8

 

$

27.5

 

$

25.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain (loss)

 

$

5.2

 

$

1.4

 

$

9.0

 

$

(0.1

)

$

8.8

 

$

8.4

 

$

7.2

 

$

9.4

 

$

21.0

 

$

8.9

 

$

16.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

(7.3

)%

6.5

%

(7.1

)%

31.3

%

(21.9

)%

(8.6

)%

(8.7

)%

(11.7

)%

26.4

%

9.7

%

(10.2

)%

Expense ratio

 

75.5

%

84.6

%

63.2

%

69.1

%

73.7

%

66.3

%

73.8

%

67.4

%

36.6

%

65.8

%

70.6

%

Combined ratio

 

68.2

%

91.1

%

56.1

%

100.4

%

51.8

%

57.7

%

65.1

%

55.7

%

63.0

%

75.5

%

60.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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)].

 

6



 

Assured Guaranty Ltd.
Financial Guaranty Direct Segment (2 of 2)
(dollars in millions)

 

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

2Q-06

 

Six
Months
2004

 

Six
Months
2005

 

Six
Months
2006

 

PVP(a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

—

 

$

5.7

 

$

1.6

 

$

5.1

 

$

6.3

 

$

7.0

 

$

8.5

 

$

6.0

 

$

0.0

 

$

6.7

 

$

14.4

 

U.S. structured finance

 

7.9

 

28.9

 

31.0

 

16.1

 

25.3

 

20.5

 

27.6

 

41.0

 

15.3

 

47.1

 

68.6

 

International

 

—

 

5.0

 

4.9

 

1.5

 

7.7

 

18.4

 

5.6

 

51.8

 

6.9

 

6.4

 

57.5

 

Total

 

$

7.9

 

$

39.6

 

$

37.5

 

$

22.7

 

$

39.4

 

$

46.0

 

$

41.6

 

$

98.8

 

$

22.2

 

$

60.1

 

$

140.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par written:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

—

 

$

194

 

$

77

 

$

262

 

$

224

 

$

383

 

$

283

 

$

326

 

$

1

 

$

339

 

$

609

 

U.S. structured finance

 

854

 

7,163

 

1,173

 

2,159

 

4,635

 

4,966

 

4,446

 

10,943

 

3,831

 

3,332

 

15,389

 

International

 

508

 

100

 

265

 

102

 

353

 

2,569

 

648

 

2,210

 

346

 

367

 

2,858

 

Total

 

$

1,361

 

$

7,457

 

$

1,515

 

$

2,524

 

$

5,212

 

$

7,918

 

$

5,377

 

$

13,479

 

$

4,178

 

$

4,038

 

$

18,856

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

1,991

 

$

2,189

 

$

2,238

 

$

2,421

 

$

2,641

 

$

3,022

 

$

3,250

 

$

2,471

 

$

2,036

 

$

2,421

 

$

2,471

 

U.S. structured finance

 

22,192

 

25,166

 

24,589

 

23,873

 

26,781

 

28,917

 

31,559

 

38,847

 

22,063

 

23,873

 

38,847

 

International

 

2,274

 

4,257

 

3,763

 

3,725

 

3,975

 

6,400

 

7,215

 

9,806

 

1,676

 

3,725

 

9,806

 

Total

 

$

26,457

 

$

31,612

 

$

30,590

 

$

30,019

 

$

33,397

 

$

38,338

 

$

42,024

 

$

51,124

 

$

25,775

 

$

30,019

 

$

51,124

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

218.9

 

$

231.0

 

$

238.3

 

$

216.4

 

$

230.4

 

$

249.6

 

$

265.7

 

$

300.5

 

$

219.7

 

$

216.4

 

$

300.5

 

Unearned premium reserve net of ceded reinsurance

 

14.7

 

20.3

 

23.0

 

27.0

 

33.2

 

39.6

 

48.6

 

95.2

 

17.1

 

27.0

 

95.2

 

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)].

 

7



 

Assured Guaranty Ltd.

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

(dollars in millions)

 

 

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

2Q-06

 

Six
Months
2004

 

Six
Months
2005

 

Six
Months
2006

 

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

 

$

38.9

 

$

35.7

 

$

32.1

 

$

35.2

 

$

22.5

 

$

37.9

 

$

20.1

 

$

49.6

 

$

118.2

 

$

67.3

 

$

69.7

 

Less: Present value of installment premiums(a)

 

14.5

 

11.6

 

12.1

 

20.7

 

7.2

 

18.5

 

11.0

 

17.7

 

57.2

 

32.8

 

28.7

 

Upfront gross written premiums (GWP)

 

24.5

 

24.1

 

20.0

 

14.6

 

15.3

 

19.4

 

9.1

 

31.9

 

61.0

 

34.5

 

41.0

 

Less: Upfront premium due to novations(2)

 

—

 

—

 

—

 

18.4

 

—

 

—

 

—

 

—

 

—

 

18.4

 

—

 

Plus: Installment GWP(3)

 

11.1

 

12.4

 

14.0

 

12.0

 

12.0

 

9.1

 

9.7

 

9.8

 

27.2

 

26.1

 

19.5

 

Financial guaranty reinsurance GWP

 

$

35.6

 

$

36.5

 

$

34.0

 

$

8.2

 

$

27.3

 

$

28.5

 

$

18.8

 

$

41.7

 

$

88.2

 

$

42.2

 

$

60.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treaty

 

$

25.3

 

$

32.1

 

$

13.4

 

$

4.3

 

$

21.0

 

$

24.6

 

$

12.0

 

$

29.1

 

$

78.4

 

$

17.7

 

$

41.1

 

Facultative

 

10.3

 

4.4

 

20.6

 

3.9

 

6.3

 

3.9

 

6.8

 

12.6

 

9.8

 

24.5

 

19.4

 

Total gross written premiums

 

$

35.6

 

$

36.5

 

$

34.0

 

$

8.2

 

$

27.3

 

$

28.5

 

$

18.8

 

$

41.7

 

$

88.2

 

$

42.2

 

$

60.5

 

Net written premiums

 

35.6

 

36.3

 

34.0

 

8.0

 

27.3

 

28.5

 

18.5

 

41.3

 

88.2

 

42.0

 

59.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled net earned premiums

 

26.7

 

31.5

 

21.6

 

23.6

 

27.2

 

21.3

 

19.7

 

21.4

 

38.7

 

45.2

 

41.2

 

Net earned premiums from refundings

 

5.2

 

5.0

 

1.4

 

3.6

 

4.8

 

2.2

 

3.6

 

1.7

 

7.3

 

5.0

 

5.3

 

Total net earned premiums

 

31.9

 

36.5

 

23.0

 

27.2

 

32.0

 

23.5

 

23.3

 

23.1

 

46.0

 

50.2

 

46.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

1.4

 

1.2

 

(7.5

)

(60.4

)

(0.2

)

4.0

 

2.3

 

1.8

 

0.6

 

(67.9

)

4.1

 

Portfolio

 

9.4

 

0.4

 

0.4

 

(3.7

)

4.5

 

1.6

 

0.5

 

3.9

 

2.4

 

(3.3

)

4.4

 

Total loss and loss adjustment expenses

 

10.8

 

1.6

 

(7.1

)

(64.1

)

4.3

 

5.6

 

2.8

 

5.7

 

3.0

 

(71.2

)

8.5

 

Profit commission expense

 

(0.2

)

0.9

 

—

 

2.3

 

1.1

 

1.4

 

0.4

 

1.0

 

0.4

 

2.3

 

1.4

 

Acquisition costs

 

12.1

 

13.0

 

8.1

 

9.5

 

11.0

 

8.3

 

8.7

 

8.5

 

13.7

 

17.6

 

17.2

 

Operating expenses(4)

 

2.7

 

2.8

 

2.8

 

4.7

 

2.9

 

3.4

 

3.4

 

3.4

 

4.7

 

7.5

 

6.8

 

Total expenses

 

$

25.4

 

$

18.2

 

$

3.8

 

$

(47.6

)

$

19.2

 

$

18.7

 

$

15.3

 

$

18.5

 

$

21.8

 

$

(43.8

)

$

33.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

6.5

 

$

18.2

 

$

19.2

 

$

74.8

 

$

12.8

 

$

4.8

 

$

8.0

 

$

4.6

 

$

24.2

 

$

94.0

 

$

12.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

33.9

%

4.4

%

(30.9

)%

(235.7

)%

13.3

%

23.9

%

12.0

%

24.6

%

6.5

%

(141.8

)%

18.3

%

Expense ratio

 

45.6

%

45.6

%

47.4

%

60.7

%

46.8

%

55.8

%

53.6

%

55.4

%

40.8

%

54.6

%

54.5

%

Combined ratio

 

79.5

%

50.0

%

16.5

%

(175.0

)%

60.1

%

79.7

%

65.6

%

80.0

%

47.3

%

(87.2

)%

72.8

%

(1)             Due to the timing of receiving 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)             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)].

 

8



 

Assured Guaranty Ltd.
Financial Guaranty Reinsurance Segment(1) (2 of 2)
(dollars in millions)

 

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

2Q-06

 

Six
Months
2004

 

Six
Months
2005

 

Six
Months
2006

 

PVP(a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

25.5

 

$

21.6

 

$

18.9

 

$

15.4

 

$

16.5

 

$

23.1

 

$

8.5

 

$

29.7

 

$

55.5

 

$

34.4

 

$

38.2

 

U.S. structured finance

 

4.1

 

7.5

 

3.1

 

4.9

 

2.3

 

8.7

 

3.4

 

2.0

 

26.4

 

7.9

 

5.3

 

International

 

9.4

 

6.6

 

10.1

 

15.0

 

3.7

 

6.1

 

8.3

 

17.9

 

36.3

 

25.0

 

26.2

 

Total

 

$

38.9

 

$

35.7

 

$

32.1

 

$

35.2

 

$

22.5

 

$

37.9

 

$

20.1

 

$

49.6

 

$

118.2

 

$

67.3

 

$

69.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par written:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

2,015

 

$

1,373

 

$

1,965

 

$

265

 

$

1,155

 

$

1,710

 

$

1,631

 

$

718

 

$

2,955

 

$

2,230

 

$

2,350

 

U.S. structured finance

 

421

 

682

 

1,718

 

308

 

309

 

616

 

444

 

251

 

1,225

 

2,026

 

695

 

International

 

333

 

249

 

241

 

418

 

186

 

260

 

677

 

835

 

1,125

 

659

 

1,512

 

Total

 

$

2,769

 

$

2,304

 

$

3,924

 

$

991

 

$

1,650

 

$

2,586

 

$

2,752

 

$

1,804

 

$

5,305

 

$

4,915

 

$

4,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

49,843

 

$

48,218

 

$

49,318

 

$

47,878

 

$

47,696

 

$

47,748

 

$

48,309

 

$

48,316

 

$

49,243

 

$

47,878

 

$

48,316

 

U.S. structured finance

 

10,125

 

9,814

 

10,404

 

10,325

 

9,686

 

9,661

 

9,387

 

8,314

 

10,435

 

10,325

 

8,314

 

International

 

6,042

 

5,948

 

6,082

 

6,645

 

6,540

 

6,719

 

7,196

 

7,857

 

5,898

 

6,645

 

7,857

 

Total

 

$

66,010

 

$

63,980

 

$

65,804

 

$

64,848

 

$

63,922

 

$

64,127

 

$

64,893

 

$

64,487

 

$

65,575

 

$

64,848

 

$

64,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net present value of installment premiums in force(d)

 

$

138.0

 

$

138.9

 

$

142.9

 

$

152.3

 

$

147.4

 

$

156.1

 

$

153.8

 

$

158.9

 

$

147.2

 

$

152.3

 

$

158.9

 

Unearned premium reserve net of ceded reinsurance

 

444.2

 

443.8

 

454.8

 

435.6

 

430.9

 

436.0

 

431.2

 

449.4

 

441.0

 

435.6

 

449.4

 

(1)             Due to the timing of receiving 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)].

9



 

Assured Guaranty Ltd.
Mortgage Guaranty Segment
(dollars in millions)

 

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

2Q-06

 

Six
Months
2004

 

Six
Months
2005

 

Six
Months
2006

 

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

 

$

1.1

 

$

6.9

 

$

13.1

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

19.2

 

$

13.1

 

$

—

 

Less: Present value of installment premiums(a)

 

1.1

 

6.9

 

—

 

—

 

—

 

—

 

—

 

—

 

8.9

 

—

 

—

 

Upfront gross written premiums (GWP)

 

—

 

—

 

13.1

 

—

 

—

 

—

 

—

 

—

 

10.3

 

13.1

 

—

 

Plus: Installment GWP

 

5.3

 

4.2

 

6.3

 

1.9

 

1.7

 

2.7

 

2.6

 

1.2

 

4.6

 

8.2

 

3.8

 

Mortgage guaranty GWP

 

$

5.3

 

$

4.2

 

$

19.4

 

$

1.9

 

$

1.7

 

$

2.7

 

$

2.6

 

$

1.2

 

$

14.9

 

$

21.3

 

$

3.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

5.3

 

$

4.2

 

$

19.4

 

$

1.9

 

$

1.7

 

$

2.7

 

$

2.6

 

$

1.2

 

$

14.9

 

$

21.3

 

$

3.8

 

Net written premiums

 

5.3

 

4.2

 

19.4

 

1.9

 

1.7

 

2.7

 

2.6

 

1.2

 

14.9

 

21.3

 

3.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

5.1

 

5.2

 

4.6

 

5.1

 

4.3

 

4.6

 

4.2

 

3.7

 

23.4

 

9.7

 

7.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

0.2

 

(0.2

)

0.1

 

(0.1

)

0.2

 

(0.2

)

—

 

0.1

 

—

 

—

 

0.1

 

Portfolio and IBNR

 

(5.6

)

(1.8

)

0.1

 

0.1

 

0.1

 

(4.0

)

(0.2

)

0.3

 

(4.5

)

0.2

 

0.1

 

Total loss and loss adjustment expenses

 

(5.4

)

(2.0

)

0.2

 

—

 

0.3

 

(4.2

)

(0.2

)

0.4

 

(4.5

)

0.2

 

0.2

 

Profit commission expense

 

1.3

 

3.5

 

1.0

 

1.0

 

0.9

 

5.1

 

0.9

 

0.7

 

9.3

 

2.0

 

1.6

 

Acquisition costs

 

0.5

 

0.6

 

0.5

 

0.6

 

0.4

 

0.4

 

0.3

 

0.3

 

2.6

 

1.1

 

0.6

 

Operating expenses(1)

 

0.3

 

0.3

 

0.3

 

0.3

 

0.3

 

0.3

 

0.3

 

0.3

 

0.5

 

0.6

 

0.6

 

Total expenses

 

$

(3.3

)

$

2.4

 

$

2.0

 

$

1.9

 

$

1.9

 

$

1.7

 

$

1.3

 

$

1.7

 

$

7.9

 

$

3.9

 

$

3.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

8.4

 

$

2.8

 

$

2.6

 

$

3.2

 

$

2.4

 

$

2.9

 

$

2.8

 

$

2.0

 

$

15.5

 

$

5.8

 

$

4.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

(105.9

)%

(37.8

)%

4.3

%

—

 

6.9

%

(92.1

)%

(3.7

)%

9.4

%

(19.2

)%

2.1

%

2.5

%

Expense ratio

 

40.8

%

84.2

%

39.1

%

37.5

%

37.5

%

129.1

%

36.1

%

36.4

%

53.1

%

38.1

%

36.2

%

Combined ratio

 

(65.1

)%

46.4

%

43.4

%

37.5

%

44.4

%

37.0

%

32.4

%

45.8

%

33.9

%

40.2

%

38.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk in force

 

$

2,437

 

$

2,325

 

$

2,582

 

$

2,547

 

$

2,389

 

$

2,332

 

$

1,970

 

$

1,960

 

$

2,394

 

$

2,547

 

$

1,960

 

Risk written

 

136

 

271

 

419

 

—

 

—

 

—

 

—

 

—

 

237

 

419

 

—

 

Unearned premium reserve net of ceded reinsurance

 

43.7

 

42.7

 

57.5

 

54.2

 

51.5

 

49.7

 

48.1

 

45.6

 

43.5

 

54.2

 

45.6

 

(1)             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)].

10



 

Assured Guaranty Ltd.
Other Segment
(dollars in millions)

 

 

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

1Q-06

 

2Q-06

 

Six
Months
2004

 

Six
Months
2005

 

Six
Months
2006

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

5.2

 

$

3.8

 

$

0.9

 

$

9.5

 

$

21.6

 

$

0.4

 

$

3.8

 

$

0.1

 

$

(83.6

)

$

10.4

 

$

3.9

 

Net written premiums

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(182.5

)

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(48.9

)

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

—

 

(0.4

)

(1.1

)

—

 

(1.3

)

—

 

(1.2

)

(10.1

)

(49.9

)

(1.1

)

(11.3

)

Profit commission expense

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

0.6

 

—

 

—

 

Acquisition costs

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

3.7

 

—

 

—

 

Operating expenses

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

3.5

 

—

 

—

 

Total expenses

 

$

—

 

$

(0.4

)

$

(1.1

)

$

—

 

$

(1.3

)

$

—

 

$

(1.2

)

$

(10.1

)

$

(42.0

)

$

(1.1

)

$

(11.3

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain (loss)

 

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

1.2

 

$

10.1

 

$

(7.1

)

$

1.1

 

$

11.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

102.0

%

—

 

—

 

Expense ratio

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(16.1

)%

—

 

—

 

Combined ratio

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

85.9

%

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity layer credit protection

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

5.4

 

$

—

 

$

—

 

Trade credit reinsurance

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(25.3

)

—

 

—

 

Title reinsurance

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

3.3

 

—

 

—

 

Auto residual value reinsurance

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(32.2

)

—

 

—

 

Total net earned premiums

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

(48.9

)

$

—

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity layer credit protection

 

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

1.2

 

$

10.1

 

$

3.0

 

$

1.1

 

$

11.3

 

Trade credit reinsurance

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(2.8

)

—

 

—

 

Title reinsurance

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

1.0

 

—

 

—

 

Auto residual value reinsurance

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

(7.9

)

—

 

—

 

Total underwriting gain (loss)

 

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

1.2

 

$

10.1

 

$

(7.1

)

$

1.1

 

$

11.3

 

 

11



 

Assured Guaranty Ltd.
Loss and LAE Reserves by Segment and Type
(dollars in millions)

 

As of

 

As of

 

 

 

June 30,

 

December 31,

 

 

 

2006

 

2005

 

Reserves by segment:

 

 

 

 

 

Financial guaranty direct

 

$

6.6

 

$

13.1

 

Financial guaranty reinsurance

 

86.2

 

86.3

 

Mortgage guaranty

 

7.0

 

7.0

 

Other

 

14.8

 

14.8

 

Total

 

$

114.6

 

$

121.2

 

 

 

As of

 

As of

 

 

 

June 30,

 

December 31,

 

 

 

2006

 

2005

 

Reserves by type:

 

 

 

 

 

Case

 

$

38.4

 

$

45.9

 

IBNR

 

11.6

 

11.6

 

Portfolio

 

64.6

 

63.7

 

Total

 

$

114.6

 

$

121.2

 

 

 

 

As of June 30, 2006

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

Reserves by segment and type:

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

—

 

$

30.9

 

$

0.3

 

$

31.2

 

$

7.2

 

$

38.4

 

IBNR

 

—

 

—

 

4.0

 

4.0

 

7.6

 

11.6

 

Portfolio

 

6.6

 

55.3

 

2.7

 

64.6

 

—

 

64.6

 

Total

 

$

6.6

 

$

86.2

 

$

7.0

 

$

99.8

 

$

14.8

 

$

114.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio reserves associated with CMC credits

 

$

0.9

 

$

33.4

 

—

 

$

34.3

 

—

 

$

34.3

 

 

 

 

As of December 31, 2005

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

Reserves by segment and type:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio reserves associated with CMC credits

 

$

0.6

 

$

25.7

 

—

 

$

26.4

 

$

—

 

$

26.4

 

 

12



 

Assured Guaranty Ltd.
Investment Portfolio
as of June 30, 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

 

$

135.3

 

5.0

%

$

133.3

 

$

6.8

 

Agency obligations

 

154.6

 

5.4

%

155.2

 

8.3

 

Foreign government securities

 

21.4

 

4.8

%

21.3

 

1.0

 

Obligations of states and political subdivisions

 

324.6

 

4.8

%

331.4

 

15.6

 

Insured obligations of state and political subdivisions

 

474.2

 

5.0

%

494.0

 

23.7

 

Corporate securities

 

137.1

 

5.7

%

137.7

 

7.8

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Pass-thrus

 

539.9

 

5.2

%

520.9

 

28.1

 

PACs

 

66.7

 

4.6

%

63.7

 

3.1

 

Asset-backed securities

 

213.7

 

4.9

%

211.7

 

10.5

 

Total fixed maturity securities available for sale

 

2,067.5

 

5.1

%

2,069.2

 

104.9

 

Short-term investments

 

170.7

 

4.8

%

170.7

 

8.2

 

Total investments

 

$

2,238.2

 

5.1

%

$

2,239.9

 

$

113.1

 

 

 

Ratings distribution(1):

 

Fair Value

 

%

 

Treasury and U.S. government obligations

 

$

133.3

 

6.4

%

Agency obligations

 

155.2

 

7.5

%

AAA/Aaa

 

1,423.2

 

68.8

%

AA/Aa

 

250.7

 

12.1

%

A/A

 

106.8

 

5.2

%

BBB/Baa

 

—

 

 

 

Total

 

$

2,069.2

 

100.0

%

 

 

 

 

 

 

Duration of investment portfolio (in years):

 

 

 

4.3

 

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

 

13



 

Assured Guaranty Ltd.
Financial Guaranty Profile (1 of 3)
(dollars in millions)

 

 

 

Gross Par
Written

 

As of June 30, 2006:

 

Sector

 

2Q 2006

 

Net Par
Outstanding

 

%

 

Avg. Rating(7)

 

U.S. public finance

 

 

 

 

 

 

 

 

 

General obligation

 

$

391

 

$

12,203

 

10.6

%

A+

 

Tax backed

 

129

 

11,112

 

9.6

%

A+

 

Municipal utilities

 

116

 

9,890

 

8.6

%

A

 

Transportation

 

70

 

6,263

 

5.4

%

A

 

Healthcare

 

160

 

5,944

 

5.1

%

A

 

Investor-owned utilities

 

73

 

1,502

 

1.3

%

A-

 

Higher education

 

105

 

1,302

 

1.1

%

A

 

Housing

 

1

 

1,122

 

1.0

%

AA-

 

Structured municipal(1)

 

—

 

713

 

0.6

%

AAA

 

Other public finance(2)

 

—

 

737

 

0.6

%

A

 

Total U.S. public finance

 

$

1,044

 

$

50,787

 

43.9

%

A+

 

 

 

 

 

 

 

 

 

 

 

U.S. structured finance

 

 

 

 

 

 

 

 

 

CDOs(3)

 

$

5,163

 

$

25,340

 

21.9

%

AAA

 

Mortgage-backed and home equity

 

3,874

 

11,564

 

10.0

%

AA-

 

Commercial receivables(4)

 

1,958

 

5,743

 

5.0

%

AA

 

Consumer receivables(5)

 

24

 

2,778

 

2.4

%

AA-

 

Other structured finance(6)

 

175

 

1,734

 

1.5

%

AA

 

Single name corporate CDS

 

—

 

1

 

—

 

AAA

 

Total U.S. structured finance

 

$

11,195

 

$

47,160

 

40.8

%

AA+

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

Other structured finance

 

$

704

 

$

6,140

 

5.3

%

A+

 

Public finance

 

1,628

 

5,105

 

4.4

%

A

 

Infrastructure

 

87

 

3,299

 

2.9

%

A-

 

CDOs(3)

 

626

 

3,119

 

2.7

%

AAA

 

Total international

 

$

3,045

 

$

17,663

 

15.3

%

A+

 

 

 

 

 

 

 

 

 

 

 

Total exposures

 

$

15,283

 

$

115,611

 

100.0

%

AA-

 

 

 

 

 

 

 

 

 

 

 

Mortgage guaranty risk in force

 

$

—

 

$

1,960

 

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.

14



Assured Guaranty Ltd.
Financial Guaranty Profile (2 of 3)
(dollars in millions)

Distribution by ratings of financial guaranty portfolio

 

 

 

June 30, 2006

 

December 31, 2005

 

 

 

Net Par

 

 

 

Net Par

 

 

 

Ratings(1)

 

Outstanding

 

%

 

Outstanding

 

%

 

AAA/Aaa

 

$

43,737

 

37.8

%

$

34,492

 

33.7

%

AA/Aa

 

21,036

 

18.2

%

19,978

 

19.5

%

A/A

 

32,151

 

27.8

%

30,258

 

29.5

%

BBB/Baa

 

17,278

 

14.9

%

16,405

 

16.0

%

Below investment grade

 

1,409

 

1.3

%

1,332

 

1.3

%

Total exposures

 

$

115,611

 

100.0

%

$

102,465

 

100.0

%

 

Distribution by ratings of CDO exposure

 

 

 

 

June 30, 2006

 

December 31, 2005

 

Ratings(1)

 

Net Par
Outstanding

 

%

 

Net Par
Outstanding

 

%

 

AAA/Aaa

 

$

25,253

 

88.7

%

$

19,615

 

85.3

%

AA/Aa

 

2,948

 

10.4

%

2,800

 

12.2

%

A/A

 

146

 

0.5

%

326

 

1.4

%

BBB/Baa

 

59

 

0.2

%

189

 

0.8

%

Below investment grade

 

53

 

0.2

%

63

 

0.3

%

Total exposures

 

$

28,459

 

100.0

%

$

22,993

 

100.0

%

 

 

Distribution of CDOs by year of issue as of June 30, 2006

 

 

 

 

Net Par

 

 

 

 

 

Outstanding

 

%

 

2000 and prior

 

$

569

 

2.0

%

2001

 

2,221

 

7.8

%

2002

 

3,861

 

13.6

%

2003

 

3,453

 

12.1

%

2004

 

1,532

 

5.4

%

2005

 

7,947

 

27.9

%

2006 year to date

 

8,877

 

31.2

%

 

 

$

28,459

 

100.0

%

 

Distribution of CDOs by underlying asset type as of June 30, 2006

 

 

 

Net Par

 

 

 

Asset Type

 

Outstanding

 

%

 

Pooled Corporate Debt Obligations

 

$

26,511

 

93.2

%

CDO of ABS

 

1,841

 

6.5

%

Emerging Market

 

107

 

0.3

%

 

 

$

28,459

 

100.0

%

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

15



 

Assured Guaranty Ltd.
Financial Guaranty Profile (3 of 3)
(dollars in millions)

Geographic distribution of financial guaranty portfolio, as of June 30, 2006

 

Net Par

 

 

 

U.S.:

 

Outstanding

 

%

 

California

 

$

7,567

 

6.5

%

New York

 

5,722

 

4.9

%

Texas

 

3,323

 

2.9

%

Illinois

 

3,168

 

2.7

%

Florida

 

2,687

 

2.3

%

Massachusetts

 

2,574

 

2.2

%

Pennsylvania

 

2,213

 

1.9

%

New Jersey

 

2,039

 

1.8

%

Washington

 

1,760

 

1.5

%

Puerto Rico

 

1,654

 

1.4

%

Other states

 

18,080

 

15.6

%

Mortgage and structured (multiple states)

 

47,160

 

40.8

%

Total U.S.

 

$

97,947

 

84.7

%

 

 

 

 

 

 

International:

 

 

 

 

 

United Kingdom

 

$

11,463

 

9.9

%

Australia

 

954

 

0.8

%

Turkey

 

484

 

0.4

%

Ireland

 

423

 

0.4

%

Germany

 

360

 

0.3

%

Other

 

3,979

 

3.4

%

Total International

 

$

17,663

 

15.3

%

 

 

 

 

 

 

Total exposures

 

$

115,611

 

100.0

%

 

16



 

Assured Guaranty Ltd.
Non-Investment Grade Exposures
as of June 30, 2006

(dollars in millions)

Non-Investment Grade Exposures by:

 

Weighted Average

 

Net Par

 

Average

 

Asset Type

 

Remaining Life

 

Outstanding

 

Rating(1)

 

 

 

 

 

 

 

 

 

Public finance

 

 

 

 

 

 

 

Infrastructure

 

15.2

 

$

241.0

 

CC

 

Transportation

 

20.0

 

221.9

 

B

 

General obligation

 

16.7

 

103.8

 

BB

 

Tax backed

 

16.6

 

77.7

 

B+

 

Healthcare

 

11.1

 

60.5

 

BB

 

Municipal utilities

 

10.9

 

13.4

 

C

 

Investor-owned utilities

 

15.2

 

7.9

 

BB

 

Housing

 

12.9

 

4.5

 

B-

 

Other public finance

 

16.3

 

3.5

 

D

 

Total public finance

 

16.6

 

$

734.1

 

B-

 

 

 

 

 

 

 

 

 

Structured finance

 

 

 

 

 

 

 

Commercial receivables

 

9.6

 

$

277.5

 

B

 

Consumer receivables

 

2.6

 

182.4

 

BB

 

Mortgage-backed and home equity

 

9.9

 

156.2

 

CCC-

 

CDOs

 

4.6

 

52.8

 

B+

 

Other structured finance

 

4.5

 

6.2

 

D

 

Total structured finance

 

7.3

 

$

675.1

 

B-

 

 

 

 

 

 

 

 

 

Total non-investment grade exposures

 

12.2

 

$

1,409.2

 

B

 

Top Ten Non-Investment Grade Exposures as of June 30, 2006

Name or Description

 

Average Rating

 

Weighted
Average
Remaining Life

 

Net Par
Outstanding

 

Eurotunnel - Fixed-Link Finance & Fixed-Link Finance 2(2)

 

C

 

16.4

 

$

205

 

Public Finance Domestic Infrastructure Transaction

 

B

 

21.7

 

169

 

Structured Finance Domestic EETC Transactions(3)

 

BB

 

8.1

 

131

 

Metris Master Credit Card Trust

 

BB

 

2.8

 

99

 

Puerto Rico Public Finance Corporation

 

BB+

 

17.4

 

96

 

Providian Gateway Master Trust(4)

 

BB+

 

2.4

 

79

 

Structured Finance Domestic Manufactured Housing Transactions(5)

 

CC

 

7.3

 

68

 

Northwest Airlines EETC Transactions(6)

 

D

 

9.1

 

66

 

International Airport Facility

 

BB

 

7.6

 

35

 

Structured Finance Domestic Franchise Loan Receivable Transactions(7)

 

B

 

14.5

 

34

 

Total

 

B-

 

12.3

 

$

982

 

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

(2)             Exposure comprised of four series:  $137.7 million, $36.0 million, $25.1 million, and $6.7 million - all rated ‘C’.

(3)             Exposure comprised of three series: $42.3 million, $16.1 million, and $73.1million - all rated ‘BB’.

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

(5)             Exposure comprised of seven series: $0.6 million, $1.6 million rated ‘BB’, $1.6 million rated ‘B’, $5.9 million, $8.0 million rated  ‘B-’, and $22.9 million, $27.1 million - rated ‘D’.

(6)             Exposure comprised of two series, one in the amount of $14.3 million and the other for $51.5 million both rated ‘D’.

(7)             Exposure comprised of two series, one in the amount of $16.2 million and the other for $17.7 million both rated ‘B’.

 

17



Assured Guaranty Ltd.

Closely Monitored Credits (“CMC”)

(dollars in millions)

Net par outstanding by credit monitoring category(1)

 

 

June 30, 2006

 

Description

 

Net Par
Outstanding

 

%

 

Number of
Credits in
Category

 

Fundamentally sound risk

 

$

114,102

 

98.7

%

 

 

 

 

 

 

 

 

 

 

Closely monitored credits:

 

 

 

 

 

 

 

Category 1

 

874

 

0.8

%

38

 

Category 2

 

370

 

0.4

%

19

 

Category 3

 

201

 

0.2

%

17

 

Category 4

 

25

 

—

 

12

 

CMC Total

 

1,470

 

1.3

%

86

 

 

 

 

 

 

 

 

 

Other below investment grade risk

 

39

 

—

 

76

 

Total

 

$

115,611

 

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.

 

18



 

Assured Guaranty Ltd.
Largest Exposures by Sector (Part 1 of 2)
as of June 30, 2006
(dollars in millions)

10 Largest U.S. Public Finance Exposures

 

Net Par

 

 

 

Revenue Source

 

Outstanding(2)

 

Rating(1)

 

California State General Obligation & Leases

 

$

884

 

A

 

New Jersey State General Obligation & Leases

 

760

 

AA-

 

New York City General Obligation

 

694

 

A+

 

Chicago Illinois General Obligation

 

685

 

A+

 

Long Island Power Authority

 

683

 

A-

 

Denver Colorado Airport System

 

620

 

A

 

Jefferson County Alabama Sewer

 

578

 

A

 

New York City Municipal Water Finance Authority

 

570

 

AA

 

Massachusetts State General Obligation & Bay Transportation

 

561

 

AA-

 

Houston Texas Water & Sewer System

 

548

 

A+

 

Total top 10 public finance exposures

 

$

6,582

 

 

 

10 Largest U.S. Structured Finance Exposures

 

Net Par

 

 

 

Revenue Source

 

Outstanding(2)

 

Rating(1)

 

 Structured Finance Corporate Pool

 

$

914

 

AAA

 

 Synthetic CDO - IG Corporate

 

740

 

AAA

 

 Sandelman Finance 2006-1 Limited

 

722

 

AA

 

 Field Point III & IV, Limited

 

650

 

AA-

 

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

 

639

 

BBB-

 

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

 

637

 

BBB-

 

 Park Place 2004-MHQ1 Class A-1

 

595

 

AAA

 

 Synthetic CDO - IG ABS

 

594

 

AAA

 

 Private - CLO

 

546

 

AAA

 

 Private - Mortgage Backed Transaction

 

500

 

A

 

Total top 10 structured finance exposures

 

$

6,537

 

 

 

(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.

Largest Exposures by Sector (Part 2 of 2)
as of June 30, 2006
(dollars in millions)

10  Largest Healthcare Exposures

 

Net Par

 

 

 

 

 

Revenue Source

 

Outstanding(2)

 

Rating(1)

 

State

 

Ascension Health Credit Group

 

$

148

 

AA

 

MO

 

Texas Health Resources

 

147

 

A+

 

TX

 

Catholic Healthcare West

 

137

 

A-

 

CA

 

Catholic Healthcare Partners

 

137

 

AA-

 

OH

 

Sutter Health Obligated Group

 

117

 

AA-

 

CA

 

Medstar Health Inc.

 

110

 

BBB

 

MD

 

St. Barnabas Health Care System

 

108

 

BBB

 

NJ

 

Methodist Hospital

 

102

 

A+

 

TX

 

Christus Health System

 

100

 

A+

 

TX

 

Adventist / Sunbelt Health System

 

99

 

A+

 

FL

 

Total top 10 healthcare exposures

 

$

1,206

 

 

 

 

 

 

10 Largest International Exposures

 

 

Net Par

 

 

 

 

 

Revenue Source

 

Outstanding(2)

 

Rating(1)

 

 

 

Graphite Mortgages PLC Provide Graphite 2005-2

 

$

1,163

 

AAA

 

 

 

Stichting Profile Securitisation I

 

636

 

AAA

 

 

 

Synthetic CDO - IG ABS

 

602

 

AAA

 

 

 

Northumbrian Water PLC

 

568

 

BBB+

 

 

 

Synthetic CDO - IG Corporate

 

500

 

AAA

 

 

 

Ballantyne Re PLC Class A-2 Floating Rate Notes

 

500

 

A-

 

 

 

Private - CLO

 

444

 

AAA

 

 

 

Orkney Re II, PLC Floating Rate Notes

 

423

 

A-

 

 

 

National Grid Group PLC

 

420

 

A

 

 

 

Private - Whole Business Securitization

 

276

 

BBB+

 

 

 

Total top 10 international exposures

 

$

5,532

 

 

 

 

 

 

(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.

20



Assured Guaranty Ltd.
Consolidated Capital and Claims Paying Resources
(dollars in millions)

 

 

 

As of June 30, 2006

 

As of December 31, 2005

 

 

 

AGC

 

AG Re(1)

 

Consolidated

 

AGC

 

AG Re(1)

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statutory surplus and reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

Unearned premium reserve(2)

 

$

252

 

$

402

 

$

654

 

$

234

 

$

356

 

$

590

 

Contingency reserve

 

602

 

—

 

602

 

559

 

—

 

559

 

Policyholders’ surplus

 

276

 

703

 

979

 

296

 

691

 

987

 

Loss & loss adjustment expense reserves(3)

 

17

 

22

 

39

 

21

 

26

 

47

 

Total policyholders’ surplus & reserves

 

$

1,147

 

$

1,127

 

$

2,274

 

$

1,110

 

$

1,073

 

$

2,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Claims paying resources

 

 

 

 

 

 

 

 

 

 

 

 

 

Policyholders’ surplus

 

$

276

 

$

703

 

$

979

 

$

296

 

$

691

 

$

987

 

Contingency reserve

 

602

 

—

 

602

 

559

 

—

 

559

 

Qualified statutory capital

 

878

 

703

 

1,581

 

855

 

691

 

1,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unearned premium reserve(2)

 

252

 

402

 

654

 

234

 

356

 

590

 

Loss & loss adjustment expense reserves(3)

 

17

 

22

 

39

 

21

 

26

 

47

 

Total policyholders’ surplus & reserves

 

1,147

 

1,127

 

2,274

 

1,110

 

1,073

 

2,182

 

Present value of installment premium(d)

 

288

 

189

 

477

 

254

 

174

 

428

 

Standby line of credit/stop loss

 

455

 

—

 

455

 

455

 

—

 

455

 

Total claims paying resources

 

$

1,890

 

$

1,316

 

$

3,206

 

$

1,819

 

$

1,247

 

$

3,065

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net par insured outstanding

 

$

60,594

 

$

55,017

 

$

115,611

 

$

52,659

 

$

49,806

 

$

102,465

 

Net debt service outstanding

 

$

78,250

 

$

82,138

 

$

160,388

 

$

70,769

 

$

74,925

 

$

145,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net par insured to statutory capital

 

69:1

 

78:1

 

73:1

 

62:1

 

72:1

 

66:1

 

Capital ratio(4)

 

89:1

 

117:1

 

101:1

 

83:1

 

108:1

 

94:1

 

Financial resources ratio(5)

 

41:1

 

62:1

 

50:1

 

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)].

 

21



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

 

$

166.9

 

$

252.1

 

$

190.9

 

$

349.2

 

$

417.2

 

$

442.9

 

Net earned premiums

 

96.2

 

198.7

 

187.9

 

310.9

 

247.4

 

293.5

 

Net investment income

 

53.5

 

96.8

 

94.8

 

96.3

 

97.2

 

99.5

 

Total expenses

 

59.0

 

64.9

 

114.6

 

266.1

 

218.8

 

282.8

 

Income before provision for income taxes

 

94.5

 

229.6

 

233.3

 

246.2

 

83.2

 

110.1

 

Net income

 

79.4

 

188.4

 

182.8

 

214.5

 

72.6

 

63.8

 

Operating income

 

76.7

 

190.0

 

141.1

 

127.3

 

115.7

 

96.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

1.06

 

$

2.53

 

$

2.44

 

$

2.86

 

$

0.97

 

$

0.85

 

Operating income per diluted share

 

$

1.03

 

$

2.55

 

$

1.88

 

$

1.70

 

$

1.54

 

$

1.28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and LAE ratio

 

(7.2

)%

(35.0

)%

(17.0

)%

46.5

%

48.6

%

60.5

%

Expense ratio

 

60.2

%

58.9

%

65.4

%

37.2

%

35.5

%

30.6

%

Combined ratio

 

53.0

%

23.9

%

48.4

%

83.7

%

84.1

%

91.1

%

GAAP Summary Balance Sheet Data (end of period)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments and cash

 

$

2,269.1

 

$

2,256.0

 

$

2,157.9

 

$

2,222.1

 

$

2,061.9

 

$

1,710.8

 

Total assets

 

2,735.4

 

2,689.1

 

2,694.0

 

2,857.9

 

2,719.9

 

2,322.1

 

Unearned premium reserves

 

601.9

 

537.1

 

521.3

 

625.4

 

613.3

 

500.3

 

Loss and LAE reserves

 

114.6

 

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

 

1,682.8

 

1,661.5

 

1,527.6

 

1,437.6

 

1,257.2

 

1,061.6

 

Book value per share

 

$

22.98

 

$

22.22

 

$

20.19

 

$

19.17

 

$

16.76

 

$

14.15

 

Other Financial Information

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt service outstanding (end of period)

 

$

160,388

 

$

145,694

 

$

136,120

 

$

130,047

 

$

124,082

 

$

117,909

 

Net par outstanding (end of period)

 

115,611

 

102,465

 

95,592

 

87,524

 

80,394

 

75,249

 

Gross par outstanding (end of period)

 

116,447

 

105,258

 

98,221

 

90,366

 

83,067

 

79,883

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated qualified statutory capital

 

1,581

 

1,545

 

1,351

 

1,216

 

1,133

 

1,095

 

Consolidated policyholders’ surplus & reserves

 

2,274

 

2,182

 

1,990

 

2,238

 

1,931

 

1,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

Par insured to statutory capital

 

73:1

 

66:1

 

71:1

 

72:1

 

71:1

 

69:1

 

Capital ratio(1)

 

101:1

 

94:1

 

101:1

 

107:1

 

110:1

 

108:1

 

Financial resources ratio(2)

 

50:1

 

48:1

 

51:1

 

45:1

 

41:1

 

52:1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt service written:

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. public finance

 

$

5,432

 

$

13,335

 

$

11,943

 

$

9,628

 

$

12,957

 

$

7,304

 

U.S. structured finance

 

16,290

 

16,724

 

15,131

 

9,718

 

12,495

 

11,893

 

International

 

4,929

 

5,729

 

3,897

 

3,822

 

2,069

 

2,125

 

Total debt service written

 

$

26,651

 

$

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.

22



 

Endnotes related to non-GAAP financial measures discussed in the financial supplement:

(a) Present value of financial guaranty and mortgage guaranty gross premiums or PVP, which is a non-GAAP financial measure, is defined as gross upfront and installment premiums received and the present value of gross estimated future installment premiums, on contracts written in the current period, discounted at 6% per year. 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 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. This measure should not be viewed as a substitute for gross written premiums determined in accordance with GAAP.

(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 operating income is a useful measure for management, equity analysts and investors because the presentation of operating income enhances the understanding of our results of operating 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, less future ceding commissions, after-tax, discounted at 6%. We believe adjusted book value is a useful measure for management equity analysts and investors because the calculation of adjusted book value permits an evaluation of the net present value of the Company’s in-force premiums and capital base. The premiums described above will be earned in future periods, but may differ materially from the estimated amounts used in determining current 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. This measure should not be viewed as a substitute for book value determined in accordance with GAAP.

(d) Net present value of estimated future installment premiums in force, which is a non-GAAP financial measure, is defined as the present value of estimated future financial guaranty and mortgage guaranty installment premiums from our in-force book of business, net of reinsurance and discounted at 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 an evaluation of the value of future estimated installment premiums. 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 interest rates, refinancing or refunding activity, pre-payment speeds, policy changes or terminations, credit defaults, or other factors. There is no comparable GAAP financial measure.

For adjusted book value, net present value of estimated future installment premiums in force and present value of financial guaranty and mortgage guaranty gross written premiums or PVP we use 6% as the present value discount rate because it is the approximate taxable equivalent yield on our investment portfolio for the periods presented.

 



 

 

 

 

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.

 

 

30 Woodbourne Avenue

 

Michael Walker

Hamilton HM 08

 

Director, Fixed Income Investor Relations

Bermuda

 

(212) 261-5575

www.assuredguaranty.com

 

mwalker@assuredguaranty.com