-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ADxJea5duX3FTAzde5DlAo+JqBMuk+EocpHRCUwp5QEwvYuNcSwMqlIs0wiQhRea UvYUdXGx46xlmZNfU/vzlg== 0001104659-05-020940.txt : 20050506 0001104659-05-020940.hdr.sgml : 20050506 20050505203906 ACCESSION NUMBER: 0001104659-05-020940 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20050505 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050506 DATE AS OF CHANGE: 20050505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASSURED GUARANTY LTD CENTRAL INDEX KEY: 0001273813 STANDARD INDUSTRIAL CLASSIFICATION: SURETY INSURANCE [6351] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-32141 FILM NUMBER: 05805252 MAIL ADDRESS: STREET 1: 30 WOOD BOURNE AVE CITY: HAMILTON BERMUDA STATE: D0 ZIP: 0000 FORMER COMPANY: FORMER CONFORMED NAME: AGR LTD DATE OF NAME CHANGE: 20040122 FORMER COMPANY: FORMER CONFORMED NAME: AGC HOLDINGS LTD DATE OF NAME CHANGE: 20031218 8-K 1 a05-7642_38k.htm 8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

Current Report
Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported)—May 5, 2005

 

 

ASSURED GUARANTY LTD.

(Exact name of registrant as specified in its charter)

 

Bermuda

 

001-32141

 

98-0429991

(State or other jurisdiction of
incorporation or organization)

 

(Commission File Number)

 

(I.R.S. Employer Identification No.)

 

Assured Guaranty Ltd.
30 Woodbourne Avenue
Hamilton HM 08 Bermuda

(Address of principal executive offices)

 

Registrant’s telephone number, including area code:  (441) 296-4004

 

Not Applicable

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

(Former name or former address, if changed since last report)

 

 


 

Item 2.02       Results of Operations and Financial Condition.

 

On May 5, 2005, Assured Guaranty Ltd. issued a press release reporting its first quarter 2005 results and the availability of its first quarter financial supplement.  The press release and the financial supplement are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are hereby incorporated herein by reference.

 

Item 9.01       Financial Statements, Pro Forma Financial Information and Exhibits.

 

(c)   Exhibits.

 

Exhibit
Number

 

Description

 

 

 

99.1

 

Press release, dated May 5, 2005, reporting first quarter results

 

 

 

99.2

 

First quarter 2005 Financial Supplement

 

2


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

ASSURED GUARANTY LTD.

 

 

 

By:

/S/ Robert B. Mills

 

 

 

Robert B. Mills

 

 

Chief Financial Officer

DATE:  May 5, 2005

 

 

3

 EX-99.1 2 a05-7642_3ex99d1.htm EX-99.1

Exhibit 99.1

 

 

Assured Guaranty Ltd.
30 Woodbourne Avenue – 5th Floor
Hamilton Bermuda HM 08
441-299-9375
www.assuredguaranty.com

 

Press Release
 

Assured Guaranty Ltd. Reports First Quarter 2005 Net Income of $44.3 Million

 

Hamilton, Bermuda, May 5, 2005 – Assured Guaranty Ltd. (NYSE: AGO) reported net income of $44.3 million, or $0.59 per diluted share, for the first quarter ended March 31, 2005, a decrease of 6% compared with net income of $46.9 million, or $0.63 per diluted share, earned in the first quarter of 2004.

 

The Company’s change in strategy associated with its April 2004 initial public offering (“IPO”) resulted in numerous changes in the Company’s lines of business, underwriting focus, expense base and capital structure (“IPO-related transactions”), many of which occurred in the first and second quarters of 2004.  These IPO-related transactions affect the comparability of the Company’s first quarter 2005 results to its first quarter 2004 results.  The Company’s management generally evaluates the Company’s financial results excluding the impact of these IPO-related transactions, as they principally resulted from businesses that were sold or discontinued, or one-time expenses associated with the Company’s IPO.  To assist analysts and investors, this press release also presents the Company’s financial results excluding the impact of these transactions.

 

Analysis of Net Income

($ in millions)

 

 

 

1Q-05

 

1Q-04

 

%
Change

 

Net income

 

$

44.3

 

$

46.9

 

(6

)%

Less: After-tax realized gains on investments

 

1.5

 

—

 

NMF

 

Less: After-tax unrealized gains on derivatives

 

1.5

 

3.1

 

(52

)%

Operating income(1)

 

$

41.3

 

$

43.7

 

(5

)%

 

Per Diluted Share

 

 

 

1Q-05

 

1Q-04

 

%
Change

 

Net income

 

$

0.59

 

$

0.63

 

(6

)%

Less: After-tax realized gains on investments

 

0.02

 

—

 

NMF

 

Less: After-tax unrealized gains on derivatives

 

0.02

 

0.04

 

(50

)%

Operating income(1)

 

$

0.55

 

$

0.58

 

(5

)%

 

* The adjusted financial results constitute “non-GAAP financial measures” as defined in Regulation G under the U.S. Securities Exchange Act of 1934, as amended, and can be identified by the use of the term “excluding IPO-related transactions.”  In each case, the most directly comparable GAAP financial measure is presented and a reconciliation of the non-GAAP financial measure and such GAAP measure is provided.

 


 

Operating income(1), a non-GAAP financial measure, was $41.3 million, or $0.55 per diluted share, in the first quarter of 2005, a decrease of 5% from $43.7 million or $0.58 per diluted share, in the first quarter of 2004.  Investors, analysts and others, including management, use operating income to evaluate our results of operations, as this measure highlights the underlying profitability of our business.  First quarter 2004 operating income included $11.1 million, or $0.15 per diluted share, in after-tax IPO-related transaction income.  Assured Guaranty’s first quarter 2005 operating income included $4.4 million, or $0.06 per diluted share, in after-tax loss salvage income, principally for a loss incurred in 1998.  Management evaluates the Company’s first quarter 2005 financial results excluding this item as it resulted from a significant litigation recovery.**  Excluding these items in each respective quarter, Assured Guaranty’s first quarter 2005 operating income increased 13% over the prior year period, reflecting premium growth and improved underwriting results in its three financial guaranty segments.

 

Dominic Frederico, President and Chief Executive Officer of Assured Guaranty Ltd., commented,  “This was a very good quarter for Assured Guaranty.  We received a AAA insurer financial strength rating from Fitch Ratings for Assured Guaranty Corp., our U.S. direct financial guaranty company, while achieving the highest level of new business production since our IPO.”

 

Net Written Premiums by Segment

($ in millions)

 

 

 

1Q-05

 

1Q-04

 

%
Change

 

Financial guaranty direct

 

$

23.1

 

$

25.3

 

(9

)%

Mortgage guaranty

 

19.4

 

14.0

 

39

%

Financial guaranty reinsurance

 

34.0

 

52.4

 

(35

)%

Total financial guaranty

 

76.5

 

91.7

 

(17

)%

Other

 

—

 

(98.5

)

NMF

 

Total

 

$

76.5

 

$

(6.9

)

NMF

 

 

Net written premiums in the financial guaranty direct segment were $23.1 million, up 55% over the prior year period after excluding $10.4 million of first quarter 2004 IPO-related transactions.  Mortgage guaranty net written premiums rose 39% over the first quarter of 2004, reflecting the receipt of premiums from new business written in the quarter.

 

Net written premiums in the financial guaranty reinsurance segment were $34.0 million, a decline of 35% over the prior year period, as the 2004 reporting period included premium cessions on two contracts that are no longer in force as well as a high volume of public finance cessions from one client.

 

** The adjusted financial results constitute “non-GAAP financial measures” as defined in Regulation G under the U.S. Securities Exchange Act of 1934, as amended, and can be identified by the use of the term “excluding loss salvage.”  In each case, the most directly comparable GAAP financial measure is presented and a reconciliation of the non-GAAP financial measure and such GAAP measure is provided.

 

2


 

The other segment, which includes businesses sold or discontinued as part of our IPO, has not generated net written or earned premiums since the second quarter of 2004.  The $(98.5) million of net written premiums in the first quarter of 2004 reflects the impact of IPO-related transactions.

 

Net Earned Premiums by Segment

($ in millions)

 

 

 

1Q-05

 

1Q-04

 

%
Change

 

Financial guaranty direct

 

$

20.4

 

$

40.7

 

(50

)%

Mortgage guaranty

 

4.6

 

8.4

 

(45

)%

Financial guaranty reinsurance

 

23.0

 

20.4

 

13

%

Total financial guaranty

 

48.1

 

69.5

 

(31

)%

Other

 

—

 

17.2

 

NMF

 

Total

 

$

48.1

 

$

86.7

 

(45

)%

 

Financial guaranty direct net earned premiums were $20.4 million in the first quarter of 2005 compared with $40.7 million in the first quarter of 2004, which included $24.2 million of IPO-related transaction net earned premiums.  Excluding IPO-related transaction net earned premiums, financial guaranty direct premiums increased 24% over the first quarter of 2004.  Net earned premiums from our single name corporate credit default swap (CDS) book of business, which was sold in the first quarter of 2005, were $4.4 million in the current quarter and $2.1 million in the first quarter of 2004.

 

Mortgage guaranty net earned premiums declined to $4.6 million in the first quarter of 2005 from $8.4 million in the first quarter of 2004 due to the run-off of the Company’s quota share mortgage guaranty reinsurance treaties.

 

Financial guaranty reinsurance net earned premiums including municipal bond refundings were up 13% over the first quarter of 2004, reflecting the growth in the segment’s book of business since the beginning of 2004 and were partially offset by lower municipal bond refunding premiums.  Municipal bond refunding net earned premiums, which are included in the financial guaranty reinsurance segment, were $1.4 million ($0.01 per diluted share) in the current period compared with $2.9 million ($0.02 per diluted share) in the first quarter of 2004.

 

Underwriting Results

($ in millions)

 

 

 

1Q-05

 

1Q-04

 

%
Change

 

Underwriting gain:

 

 

 

 

 

 

 

Financial guaranty direct

 

$

11.0

 

$

20.4

 

(46

)%

Mortgage guaranty

 

2.2

 

3.1

 

(29

)%

Financial guaranty reinsurance

 

17.6

 

6.3

 

179

%

Total financial guaranty

 

30.9

 

29.7

 

4

%

Other

 

1.1

 

2.1

 

(48

)%

Total

 

$

31.9

 

$

31.9

 

—

 

 

3


 

Assured Guaranty reported a consolidated underwriting gain of $31.9 million in the first quarter of 2005 compared to an underwriting gain of $31.9 million in the first quarter of 2004.  Excluding $6.8 million (pre-tax) of first quarter 2005 loss salvage income and $14.1 million (pre-tax) of underwriting gains associated with first quarter 2004 IPO-related transactions, the Company’s underwriting gain increased 41% over the prior year period.  The effect of the underwriting gain increase on first quarter 2005 operating income was largely offset by higher interest expenses and lower investment income since the IPO, thereby resulting in a lower percentage growth in operating income than in underwriting income compared to the first quarter of 2004.

 

The underwriting gain for the financial guaranty direct segment was $11.0 million in the first quarter of 2005, down 46% compared to the first quarter of 2004, which included a $10.8 million gain due to IPO-related transactions.  Excluding IPO-related transactions, the underwriting gain in the financial guaranty direct segment rose 15%, reflecting the growth in earned premium and favorable credit conditions.

 

The mortgage guaranty segment’s underwriting gain declined 29% in the first quarter of 2005 to $2.2 million from $3.1 million in the first quarter of 2004 due to the run-off of the Company’s quota share mortgage guaranty reinsurance treaties.

 

The underwriting gain for the financial guaranty reinsurance segment in the first quarter of 2005 rose 179% to $17.6 million, including $6.8 million of loss salvage recoveries.  Excluding this loss salvage recovery, the segment’s underwriting gain rose 71% compared to the $6.3 million underwriting gain reported in the prior period, reflecting the growth in earned premiums and favorable credit conditions.

 

At March 31, 2005, the Company’s book value per share was $20.45, an increase of only 1% over the book value of $20.19 reported at December 31, 2004 due to the impact of the mark-to-market on the investment portfolio.  During the quarter, the Company repurchased 0.8 million shares of stock at an average cost of $18.87 per share.  Since the end of the quarter, the Company has completed its $25 million share repurchase program, purchasing 1.3 million shares at an average cost of $18.69.

 

Adjusted book value(2) per share, a non-GAAP measure, was $28.12 at March 31, 2005, up 2% from December 31, 2004.  Investors, analysts and others, including management, use the calculation of adjusted book value to estimate the net present value of the Company’s in-force premium and capital base.

 

Robert Mills, Chief Financial Officer of Assured Guaranty Ltd., commented, “Assured Guaranty’s balance sheet strength and earnings power grew during the quarter, reflecting both our new business production as well as strategic transactions, such as the sale of our single name CDS book, the agreement to

 

4


 

reinsure FSA’s book of ceded reinsurance to Assured Guaranty Re in Bermuda and Assured Guaranty Corp.’s new $200 million soft capital facility.”

 

Analysis of Present Value of Gross Written Premiums (“PVP”)3

($ in millions)

 

 

 

1Q-05

 

1Q-04

 

%
Change

 

Financial guaranty direct

 

$

37.5

 

$

7.9

 

375

%

Mortgage guaranty

 

13.1

 

19.2

 

(32

)%

Financial guaranty reinsurance(4)

 

37.7

 

78.1

 

(52

)%

PVP

 

$

88.3

 

$

105.1

 

(16

)%

 

Financial guaranty direct segment generated $37.5 million of present value of gross premiums written (“PVP”)(3), a non-GAAP financial measure, in the quarter, a 375% increase over first quarter 2004 PVP of $7.9 million, and reflects the expansion of the Company’s direct financial guaranty market presence since the IPO.  Investors, analysts and others, including management, use PVP to estimate the value of new financial guaranty and mortgage guaranty business production in a period, as the GAAP gross written premiums measure includes installment premiums on contracts underwritten in previous periods and excludes installment premiums expected to be received in future periods.  See the “Financial Highlights” table for a reconciliation of PVP to gross written premiums.

 

Mortgage guaranty PVP declined 32% compared to the prior year period, reflecting the variability of new business production in this segment, which has large, multi-year contracts.

 

Financial guaranty reinsurance’s first quarter 2005 PVP was $37.7 million, a decrease of 52% from the segment’s first quarter 2004 PVP of $78.1 million.  Excluding the two reinsurance contracts included in 2004 that are no longer in force, first quarter 2005 PVP declined 15% compared with first quarter 2004, due to lower cessions from one reinsurance client in the first quarter of 2005.

 

Shareholders Meeting Held:  Assured Guaranty held its first Annual General Meeting of Shareholders this morning in Bermuda.  Shareholders approved all of the items submitted for shareholder approval in the proxy.

 

Walter Scott Elected as Chairman of the Board:   Walter Scott was elected Chairman of Assured Guaranty Ltd.’s Board of Directors at the Company’s regularly scheduled meeting on May 5, 2005.

 

Cash Dividend Declared:  On May 5, 2005, the Board of Directors also declared the regular quarterly cash dividend of U.S. $0.03 per share of common stock.  The dividend is payable on June 1, 2005 to shareholders of record at the close of business on May 17, 2005.

 

5


 

Investor Conference Call:  The Company will host a conference call for investors at 8:00 a.m. EDT (9:00 a.m. ADT) on Friday, May 6, 2005.  The earnings conference call will be available via live and archived webcast in the Investor Information section of the Company’s website at http://www.assuredguaranty.com or by dialing 1-800-901-5241 (in the U.S.) or 1-617-786-2963 (International), passcode 89441975.  A replay of the call will be available from May 6, 2005 until June 6, 2005.  To listen to the replay dial: 1-888-286-8010 (in the U.S.) or 1-617-801-6888 (International), passcode 21847564.

 

Please refer to the Assured Guaranty Financial Supplement – March 31, 2005, which is posted on the Company’s website at http://www.assuredguaranty.com/investor/supplement.html for more detailed information on individual segment performance, together with additional disclosure on our financial guaranty portfolio and investment portfolio.

 

Assured Guaranty Ltd. is a Bermuda-based holding company. Its operating subsidiaries provide credit enhancement products to the U.S. and international public finance, structured finance and mortgage markets.  More information can be found at www.assuredguaranty.com.

 

6


 

Assured Guaranty Ltd.

Consolidated Income Statements

 

 

 

Quarter Ended

 

 

 

March 31,

 

 

 

2005

 

2004

 

 

 

(dollars in millions)

 

Revenues

 

 

 

 

 

Gross written premiums

 

$

78.1

 

$

(1.5

)

Net written premiums

 

76.5

 

(6.9

)

 

 

 

 

 

 

Net earned premiums

 

48.1

 

86.7

 

 

 

 

 

 

 

Net investment income

 

23.1

 

24.4

 

Other income

 

0.3

 

0.5

 

Total revenues

 

71.5

 

111.6

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

Loss and loss adjustment expenses

 

(9.4

)

23.7

 

Profit commission expense

 

1.0

 

5.5

 

Acquisition costs

 

10.2

 

13.1

 

Other operating expenses

 

14.5

 

12.6

 

Goodwill impairment

 

—

 

1.6

 

Interest expense

 

3.3

 

1.4

 

Total expenses

 

19.6

 

58.0

 

 

 

 

 

 

 

Income before provision for income taxes

 

51.9

 

53.6

 

 

 

 

 

 

 

Total provision for income taxes

 

10.6

 

9.9

 

 

 

 

 

 

 

Operating income (1)

 

41.3

 

43.7

 

 

 

 

 

 

 

After-tax net realized investment gains

 

1.5

 

—

 

After-tax unrealized gains on derivative financial instruments

 

1.5

 

3.1

 

 

 

 

 

 

 

Net income

 

$

44.3

 

$

46.9

 

 

7


 

Assured Guaranty Ltd.

Consolidated Balance Sheets

 

 

 

As of:

 

 

 

March 31,

 

December 31,

 

 

 

2005

 

2004

 

 

 

(dollars in millions)

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Fixed maturity securities, at fair value

 

$

2,083.4

 

$

1,965.1

 

Short-term investments, at cost which approximates market

 

63.5

 

175.8

 

Total investments

 

2,146.9

 

2,140.9

 

 

 

 

 

 

 

Cash and cash equivalents

 

21.7

 

17.0

 

Accrued investment income

 

23.1

 

21.9

 

Deferred acquisition costs

 

192.2

 

186.4

 

Prepaid reinsurance premiums

 

14.3

 

15.2

 

Reinsurance recoverable on ceded losses

 

118.3

 

120.2

 

Premiums receivable

 

42.7

 

40.8

 

Goodwill

 

85.4

 

85.4

 

Unrealized gains on derivative financial instruments

 

47.0

 

43.9

 

Other assets

 

18.0

 

22.3

 

Total assets

 

$

2,709.7

 

$

2,694.0

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Unearned premium reserves

 

$

548.7

 

$

521.3

 

Reserves for losses and loss adjustment expenses

 

218.4

 

226.5

 

Profit commissions payable

 

43.9

 

61.7

 

Reinsurance balances payable

 

29.0

 

25.1

 

Deferred income taxes

 

39.8

 

40.1

 

Funds held by Company under reinsurance contracts

 

52.4

 

50.8

 

Long-term debt

 

197.3

 

197.4

 

Other liabilities

 

42.4

 

43.7

 

Total liabilities

 

1,172.0

 

1,166.4

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock

 

0.8

 

0.8

 

Treasury stock

 

(7.9

)

(7.9

)

Additional paid-in capital

 

889.0

 

894.2

 

Unearned stock grant compensation

 

(11.2

)

(6.7

)

Retained earnings

 

610.3

 

568.3

 

Accumulated other comprehensive income

 

56.7

 

79.0

 

Total shareholders’ equity

 

1,537.7

 

1,527.6

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

2,709.7

 

$

2,694.0

 

 

8


 

Assured Guaranty Ltd.

Financial Highlights

(amounts in millions except per share data)

 

 

 

Quarter Ended

 

 

 

March 31,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Premium analysis:

 

 

 

 

 

Gross written premiums (GWP) analysis:

 

 

 

 

 

Present value of financial guaranty & mortgage guaranty GWP (PVP) (3)

 

$

88.3

 

$

105.1

 

Less: Installment premium PVP

 

53.5

 

56.8

 

Upfront financial guaranty & mortgage guaranty GWP

 

34.7

 

48.3

 

Plus: Installment GWP

 

42.5

 

43.7

 

Financial guaranty & mortgage guaranty GWP

 

77.2

 

92.0

 

Other segment GWP

 

0.9

 

(93.6

)

Total gross written premiums

 

$

78.1

 

$

(1.5

)

 

 

 

 

 

 

Weighted average shares outstanding (in millions):

 

 

 

 

 

Basic

 

74.5

 

75.0

 

Diluted

 

74.9

 

75.0

 

 

 

 

 

 

 

Per diluted share:

 

 

 

 

 

Net income

 

$

0.59

 

$

0.63

 

After-tax realized gains on investments

 

0.02

 

—

 

After-tax unrealized gains on derivatives

 

0.02

 

0.04

 

Operating income(1)

 

$

0.55

 

$

0.58

 

 

 

 

 

 

 

 

 

As of

 

 

 

March 31,

 

December 31,

 

 

 

2005

 

2004

 

Book value

 

$

1,537.7

 

$

1,527.6

 

Net UPR less DAC - after-tax(5)

 

277.0

 

268.6

 

Net present value of installment premiums in-force - after-tax

 

300.3

 

297.1

 

Adjusted book value(2)

 

$

2,115.0

 

$

2,093.3

 

 

 

 

 

 

 

Shares outstanding at the end of period (in millions)

 

75.2

 

75.7

 

 

 

 

 

 

 

Book value per share outstanding:

 

 

 

 

 

Book value

 

$

20.45

 

$

20.19

 

Net UPR less DAC - after-tax(5)

 

3.68

 

3.55

 

Net present value of installment premiums in-force - after-tax

 

3.99

 

3.93

 

Adjusted book value(2)

 

$

28.12

 

$

27.67

 

 

9


 

Endnotes:

 

1. Operating income, which is a non-GAAP financial measure, is defined as net income excluding after-tax realized gains (losses) on investments and after-tax unrealized gains (losses) on derivative financial instruments.  Operating ROE represents operating income as a percentage of average shareholders’ equity, excluding accumulated other comprehensive income (AOCI).  We believe the presentation of operating income and operating ROE enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.  We exclude net realized gains (losses) on investments and net unrealized gains (losses) on derivative financial instruments because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, 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 generally accepted accounting principles (GAAP).

 

2. Adjusted book value, which is a non-GAAP financial measure, is derived by beginning with shareholders’ equity (book value) and adding or subtracting the after-tax value of: the financial guaranty and mortgage guaranty net unearned premium reserve; deferred acquisition costs and the present value of estimated net future installment premiums (discounted at 6%).  The adjustments described above will not be realized until future periods and may differ materially from the amounts used in determining adjusted book value.  Management, investors and analysts use the calculation of adjusted book value to evaluate the net present value of the Company’s in-force premium and capital base.

 

3. PVP, which is a non-GAAP financial measure, represents gross premiums and fees related to financial guaranty and mortgage guaranty contracts written in the current period, including upfront and installment premiums received on contracts written in the current period and the present value of estimated future installment premiums, discounted at 6% per year.   We use 6% as the present value discount because it is the approximate taxable equivalent yield on our investment portfolio for the periods presented.  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 installment premiums on new contracts underwritten in a reporting period, which the GAAP gross premiums written does not adequately measure.

 

4. Due to reporting lags by our ceding companies, PVP for installment premiums from our financial guaranty reinsurance segment is reported on a one-quarter lag.

 

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

 

10


 

Cautionary Statement Regarding Forward-Looking Statements:

 

Any forward-looking statements made in this press release 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 ROE, 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, the Company’s dependence on customers, decreased demand or increased competition, loss of key personnel, the effects of mergers, acquisitions and divestitures, changes in accounting policies or practices, and changes in general economic conditions, as well as management’s response to these factors, and other risk factors identified in the Company’s filings with the Securities and Exchange Commission.  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.

 

Contact Information:

 

Equity Investors and Media

 

Sabra Purtill

Managing Director, Investor Relations

212-408-6044

441-278-6665

spurtill@assuredguaranty.com

 

Christopher McNamee

Assistant Vice President, Investor Relations

212-261-5509

cmcnamee@assuredguaranty.com

 

Assured Guaranty Corp. Fixed Income Investors

 

Patrick Early

Director, Fixed Income Investor Relations

212-408-6043

pearly@assuredguaranty.com

 

11

 

 EX-99.2 3 a05-7642_3ex99d2.htm EX-99.2

Exhibit 99.2

 

 

Financial Supplement

First Quarter 2005

March 31, 2005

 

Table of Contents

 

Assured Guaranty Ltd.

 

 

Selected Financial Highlights

 

 

Consolidated GAAP Income Statements

 

 

Consolidated GAAP Balance Sheets

 

 

Segment Consolidation

 

 

Financial Guaranty Direct Segment

 

 

Financial Guaranty Reinsurance Segment

 

 

Mortgage Guaranty Segment

 

 

Other Segment

 

 

Loss and LAE Reserves

 

 

Investment Portfolio

 

 

Financial Guaranty Profile

 

 

Non-Investment Grade Exposures

 

 

Closely Monitored Credits

 

 

25 Largest Public Finance Exposures

 

 

25 Largest Structured Finance Exposures

 

 

Consolidated Capital and Claims Paying Resources

 

 

Summary Financial and Statistical Data

 

 

 

 

Assured Guaranty Corp.

 

 

Consolidated GAAP Income Statements

 

 

Consolidated GAAP Balance Sheets

 

 

Loss and LAE Reserves

 

 

Investment Portfolio

 

 

Financial Guaranty Profile

 

 

Non-Investment Grade Exposures

 

 

Closely Monitored Credits

 

 

25 Largest Public Finance Exposures

 

 

25 Largest Structured Finance Exposures

 

 

Capital and Claims Paying Resources

 

 

Summary Financial and Statistical Data

 

 

 

 

Assured Guaranty Re Ltd.

 

 

Consolidated GAAP Income Statements

 

 

Consolidated GAAP Balance Sheets

 

 

Loss and LAE Reserves

 

 

Financial Guaranty Profile

 

 

Capital and Claims Paying Resources

 

 

 

 

 


 

This supplement should be read in conjunction with documents filed by Assured Guaranty Ltd. (the “Company”) with the Securities and Exchange Commission, including our IPO prospectus dated April 22, 2004, our 10-Q’s dated March 31, 2004, June 30, 2004 and September 30, 2004 and our 10-K for the year ended December 31, 2004.

 

Cautionary Statement Regarding Forward-Looking Statements:

 

Any forward-looking statements made in this supplement reflect the Company’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

 

Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements.  For example, the Company’s forward-looking statements, such as its statements regarding PVP, could be affected by a significant reduction in the amount of reinsurance ceded by one or more of our principal ceding companies, rating agency action such as a ratings downgrade, difficulties with the execution of the Company’s business strategy, contract cancellations, developments in the world’s financial and capital markets, more severe losses or more frequent losses associated with products affecting the adequacy of the Company’s loss reserve, changes in regulation or tax laws, the Company’s dependence on customers, decreased demand or increased competition, loss of key personnel, the effects of mergers, acquisitions and divestitures, changes in accounting policies or practices, and changes in general economic conditions, as well as management’s response to these factors, and other risk factors identified in the Company’s filings with the Securities and Exchange Commission.

 

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 in millions except per share amounts)

 

 

 

Quarter Ended
March 31,

 

% Change
versus

 

 

 

2005

 

2004

 

1Q-04

 

 

 

 

 

 

 

 

 

Gross written premiums (GWP) analysis:

 

 

 

 

 

 

 

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

 

$

88.3

 

$

105.1

 

-16

%

Less: Installment premium PVP

 

53.5

 

56.8

 

-6

%

Upfront financial guaranty & mortgage guaranty GWP

 

34.7

 

48.3

 

-28

%

Plus: Installment GWP

 

42.5

 

43.7

 

-3

%

Financial guaranty & mortgage guaranty GWP

 

77.2

 

92.0

 

-16

%

Plus: Other segment GWP

 

0.9

 

(93.6

)

NMF

 

Total GWP

 

$

78.1

 

$

(1.5

)

NMF

 

 

 

 

 

 

 

 

 

Net income

 

$

44.3

 

$

46.9

 

-6

%

Less: After-tax realized gains on investments

 

1.5

 

—

 

NMF

 

Less: After-tax unrealized gains on derivatives

 

1.5

 

3.1

 

-52

%

Operating income (b)

 

$

41.3

 

$

43.7

 

-5

%

 

 

 

 

 

 

 

 

Book value

 

$

1,537.7

 

$

1,510.1

 

2

%

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

 

277.0

 

247.5

 

12

%

Net present value of installment premiums in-force, after-tax

 

300.3

 

282.0

 

6

%

Adjusted book value (c)

 

$

2,115.0

 

$

2,039.6

 

4

%

 

 

 

 

 

 

 

 

ROE, excluding AOCI

 

12.1

%

13.6

%

 

 

Less: After-tax realized gains on investments

 

0.4

%

0.0

%

 

 

Less: After-tax unrealized gains on derivatives

 

0.4

%

0.9

%

 

 

Operating ROE, excluding AOCI (b)

 

11.3

%

12.6

%

 

 

 

 

 

 

 

 

 

 

Shares outstanding at the end of period (in millions)

 

75.2

 

75.0

 

—

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in millions):

 

 

 

 

 

 

 

Basic (2)

 

74.5

 

75.0

 

-1

%

Diluted

 

74.9

 

75.0

 

—

 

 

 

 

 

 

 

 

 

Per diluted share:

 

 

 

 

 

 

 

Net income

 

$

0.59

 

$

0.63

 

-6

%

Less: After-tax realized gains on investments

 

0.02

 

—

 

NMF

 

Less: After-tax unrealized gains on derivatives

 

0.02

 

0.04

 

-50

%

Operating income (b)

 

$

0.55

 

$

0.58

 

-5

%

 

 

 

 

 

 

 

 

Book value

 

$

20.45

 

$

20.13

 

2

%

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

 

3.68

 

3.30

 

12

%

Plus: Net present value of installment premiums in-force, after-tax

 

3.99

 

3.76

 

6

%

Adjusted book value (c)

 

$

28.12

 

$

27.19

 

3

%

 

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

 

(2).  Historical amounts represent shares issued upon the IPO closing

 

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

 

1


 

Assured Guaranty Ltd.

Consolidated GAAP Income Statements

(dollars in millions)

 

 

 

Quarter Ended
March 31,

 

% Change
versus

 

 

 

2005

 

2004

 

1Q-04

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Gross written premiums

 

$

78.1

 

$

(1.5

)

NMF

 

Net written premiums

 

76.5

 

(6.9

)

NMF

 

 

 

 

 

 

 

 

 

Net earned premiums

 

48.1

 

86.7

 

-45

%

 

 

 

 

 

 

 

 

Net investment income

 

23.1

 

24.4

 

-5

%

Other income

 

0.3

 

0.5

 

-40

%

Total revenues

 

$

71.5

 

$

111.6

 

-36

%

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(9.4

)

23.7

 

NMF

 

Profit commission expense

 

1.0

 

5.5

 

-82

%

Acquisition costs

 

10.2

 

13.1

 

-22

%

Other operating expenses

 

14.5

 

12.6

 

15

%

Goodwill impairment

 

—

 

1.6

 

NMF

 

Interest expense

 

3.3

 

1.4

 

136

%

Total expenses

 

$

19.6

 

$

58.0

 

-66

%

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

51.9

 

53.6

 

-3

%

 

 

 

 

 

 

 

 

Total provision for income taxes

 

10.6

 

9.9

 

7

%

 

 

 

 

 

 

 

 

Operating income (b)

 

$

41.3

 

$

43.7

 

-5

%

 

 

 

 

 

 

 

 

After-tax net realized gains on investments

 

1.5

 

—

 

NMF

 

After-tax unrealized gains on derivative instruments

 

1.5

 

3.1

 

-52

%

 

 

 

 

 

 

 

 

Net income

 

$

44.3

 

$

46.9

 

-6

%

 

 

 

 

 

 

 

 

Per diluted share

 

 

 

 

 

 

 

Operating income (b)

 

$

0.55

 

$

0.58

 

-5

%

After-tax net realized gains on investments

 

0.02

 

—

 

NMF

 

After-tax unrealized gains on derivative instruments

 

0.02

 

0.04

 

-50

%

Net income

 

$

0.59

 

$

0.63

 

-6

%

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in thousands)

 

 

 

 

 

 

 

Basic shares outstanding

 

74,458

 

75,000

 

-1

%

Plus: effect of options

 

57

 

—

 

—

 

Plus: effect of restricted stock

 

388

 

—

 

—

 

Diluted shares outstanding

 

74,903

 

75,000

 

—

 

 

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

 

2


 

Assured Guaranty Ltd.

Consolidated GAAP Balance Sheets

(dollars in millions)

 

 

 

As of :

 

 

 

March 31,
2005

 

December 31,
2004

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Fixed maturity securities, at fair value

 

$

2,083.4

 

$

1,965.1

 

Short-term investments, at cost which approximates fair value

 

63.5

 

175.8

 

Total investments

 

2,146.9

 

2,140.9

 

 

 

 

 

 

 

Cash and cash equivalents

 

21.7

 

17.0

 

Accrued investment income

 

23.1

 

21.9

 

Deferred acquisition costs

 

192.2

 

186.4

 

Prepaid reinsurance premiums

 

14.3

 

15.2

 

Reinsurance recoverable on ceded losses

 

118.3

 

120.2

 

Premiums receivable

 

42.7

 

40.8

 

Goodwill

 

85.4

 

85.4

 

Unrealized gains on derivative financial instruments

 

47.0

 

43.9

 

Other assets

 

18.0

 

22.3

 

Total assets

 

$

2,709.7

 

$

2,694.0

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Unearned premium reserves

 

$

548.7

 

$

521.3

 

Reserves for losses and loss adjustment expenses

 

218.4

 

226.5

 

Profit commissions payable

 

43.9

 

61.7

 

Reinsurance balances payable

 

29.0

 

25.1

 

Deferred income taxes

 

39.8

 

40.1

 

Funds held by Company under reinsurance contracts

 

52.4

 

50.8

 

Long-term debt

 

197.3

 

197.4

 

Other liabilities

 

42.4

 

43.7

 

Total liabilities

 

1,172.0

 

1,166.4

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock

 

0.8

 

0.8

 

Treasury stock

 

(7.9

)

(7.9

)

Additional paid-in capital

 

889.0

 

894.2

 

Unearned stock grant compensation

 

(11.2

)

(6.7

)

Retained earnings

 

610.3

 

568.3

 

Accumulated other comprehensive income

 

56.7

 

79.0

 

Total shareholders’ equity

 

1,537.7

 

1,527.6

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

2,709.7

 

$

2,694.0

 

 

3


 

Assured Guaranty Ltd.

Segment Consolidation

(dollars in millions)

 

 

 

Quarter Ended March 31, 2005

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance(1)

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

1.6

 

$

34.7

 

$

—

 

$

36.3

 

 

 

$

36.3

 

Structured finance

 

35.9

 

3.1

 

13.1

 

52.0

 

 

 

52.0

 

Total PVP

 

$

37.5

 

$

37.7

 

$

13.1

 

$

88.3

 

 

 

$

88.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

9.4

 

4.4

 

0.7

 

14.5

 

—

 

14.5

 

Total underwriting expenses

 

$

9.4

 

$

5.4

 

$

2.4

 

$

17.3

 

$

(1.1

)

$

16.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

11.0

 

$

17.6

 

$

2.2

 

$

30.9

 

$

1.1

 

$

31.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

-7.1

%

-30.9

%

4.3

%

-17.4

%

 

 

-19.6

%

Expense ratio

 

53.1

%

54.3

%

47.4

%

53.3

%

 

 

53.3

%

Combined ratio

 

46.0

%

23.4

%

51.7

%

35.9

%

 

 

33.7

%

 

 

 

 

Quarter Ended March 31, 2004

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance(1)

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PVP:

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

—

 

$

45.8

 

$

—

 

$

45.8

 

 

 

$

45.8

 

Structured finance

 

7.9

 

32.3

 

19.2

 

59.3

 

 

 

59.3

 

Total PVP

 

$

7.9

 

$

78.1

 

$

19.2

 

$

105.1

 

 

 

$

105.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

25.6

 

$

52.4

 

$

14.0

 

$

92.0

 

$

(93.6

)

$

(1.5

)

Net written premiums

 

25.3

 

52.4

 

14.0

 

91.7

 

(98.5

)

(6.9

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

40.7

 

20.4

 

8.4

 

69.5

 

17.2

 

86.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

13.4

 

3.9

 

(1.2

)

16.1

 

7.5

 

23.7

 

Profit commission expense

 

—

 

0.1

 

5.0

 

5.1

 

0.4

 

5.5

 

Acquisition costs

 

1.4

 

7.1

 

0.9

 

9.4

 

3.6

 

13.1

 

Operating expenses

 

5.5

 

3.0

 

0.6

 

9.1

 

3.5

 

12.6

 

Total underwriting expenses

 

$

20.3

 

$

14.1

 

$

5.3

 

$

39.7

 

$

15.1

 

$

54.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

20.4

 

$

6.3

 

$

3.1

 

$

29.7

 

$

2.1

 

$

31.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

32.9

%

19.1

%

-14.3

%

23.2

%

43.6

%

27.3

%

Expense ratio

 

17.0

%

50.0

%

77.6

%

34.0

%

44.0

%

36.0

%

Combined ratio

 

49.9

%

69.1

%

63.3

%

57.2

%

87.6

%

63.3

%

 

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

 

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

 

4


 

Assured Guaranty Ltd.

Financial Guaranty Direct Segment

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

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

 

$

7.9

 

$

14.4

 

$

7.9

 

$

39.6

 

$

37.5

 

less: Present value of installment premiums (a)

 

(7.9

)

(14.4

)

(7.9

)

(33.9

)

(35.8

)

Upfront gross written premiums

 

—

 

—

 

—

 

5.7

 

1.7

 

plus: Installment gross written premiums

 

25.6

 

17.7

 

16.2

 

15.6

 

22.1

 

Financial guaranty direct gross written premiums

 

$

25.6

 

$

17.7

 

$

16.2

 

$

21.3

 

$

23.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

25.6

 

$

17.7

 

$

16.2

 

$

21.3

 

$

23.8

 

Net written premiums

 

25.3

 

17.3

 

14.2

 

20.9

 

23.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

40.7

 

16.1

 

16.5

 

15.5

 

20.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

13.4

 

1.6

 

(1.2

)

1.0

 

(1.5

)

Profit commission expense

 

—

 

—

 

—

 

—

 

—

 

Acquisition costs

 

1.4

 

0.1

 

1.4

 

1.6

 

1.5

 

Operating expenses (1)

 

5.5

 

9.1

 

8.5

 

8.6

 

9.4

 

Total expenses

 

$

20.3

 

$

10.8

 

$

8.7

 

$

11.3

 

$

9.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

20.4

 

$

5.3

 

$

7.8

 

$

4.2

 

$

11.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

32.9

%

9.9

%

-7.3

%

6.5

%

-7.1

%

Expense ratio

 

17.0

%

57.1

%

59.8

%

66.3

%

53.1

%

Combined ratio

 

49.9

%

67.0

%

52.5

%

72.8

%

46.0

%

 

 

 

 

 

 

 

 

 

 

 

 

PVP:

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

—

 

$

2.9

 

$

—

 

$

5.7

 

$

1.6

 

Structured finance

 

7.9

 

11.4

 

7.9

 

33.9

 

35.9

 

Total

 

$

7.9

 

$

14.4

 

$

7.9

 

$

39.6

 

$

37.5

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

4.2

 

$

11.1

 

$

7.9

 

$

34.6

 

$

32.5

 

Non-U.S.

 

3.7

 

3.2

 

—

 

5.0

 

4.9

 

Total

 

$

7.9

 

$

14.4

 

$

7.9

 

$

39.6

 

$

37.5

 

 

 

 

 

 

 

 

 

 

 

 

 

Par written:

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

—

 

$

246

 

$

508

 

$

194

 

$

77

 

Structured finance

 

1,488

 

2,444

 

854

 

7,263

 

1,438

 

Total

 

$

1,488

 

$

2,691

 

$

1,361

 

$

7,457

 

$

1,515

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

1,435

 

$

2,345

 

$

508

 

$

6,504

 

$

1,250

 

Non-U.S.

 

53

 

346

 

853

 

953

 

265

 

Total

 

$

1,488

 

$

2,691

 

$

1,361

 

$

7,457

 

$

1,515

 

 

 

 

 

 

 

 

 

 

 

 

 

Par outstanding:

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

2,112

 

$

2,321

 

$

2,852

 

$

3,144

 

$

3,146

 

Structured finance

 

21,737

 

23,454

 

23,605

 

28,468

 

27,444

 

Total

 

$

23,849

 

$

25,775

 

$

26,457

 

$

31,612

 

$

30,590

 

 

 

 

 

 

 

 

 

 

 

 

 

Present value of installment premiums in force: (a)

 

$

220.6

 

$

219.7

 

$

218.9

 

$

231.0

 

$

238.3

 

Net unearned premium reserve (2)

 

16.0

 

17.1

 

14.7

 

20.3

 

23.0

 

 

(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).  Unearned premium reserve net of reinsurance

 

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

 

5


 

Assured Guaranty Ltd.

Financial Guaranty Reinsurance Segment (1)

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

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

 

$

78.1

 

$

40.1

 

$

38.9

 

$

35.7

 

$

37.7

 

less: Present value of installment premiums (a)

 

(40.0

)

(17.2

)

(14.5

)

(11.6

)

(17.8

)

Upfront gross written premiums

 

38.1

 

22.9

 

24.5

 

24.1

 

20.0

 

plus: Installment gross written premiums (2)

 

14.3

 

12.9

 

11.1

 

12.4

 

14.0

 

Financial guaranty reinsurance gross written premiums

 

$

52.4

 

$

35.8

 

$

35.6

 

$

36.5

 

$

34.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

52.4

 

$

35.8

 

$

35.6

 

$

36.5

 

$

34.0

 

Net written premiums

 

52.4

 

35.8

 

35.6

 

36.3

 

34.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

20.4

 

25.6

 

31.9

 

36.5

 

23.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

3.9

 

(0.9

)

10.8

 

1.6

 

(7.1

)

Profit commission expense

 

0.1

 

0.3

 

(0.2

)

0.9

 

—

 

Acquisition costs

 

7.1

 

6.6

 

12.1

 

13.0

 

8.1

 

Operating expenses (3)

 

3.0

 

5.0

 

4.7

 

4.8

 

4.4

 

Total expenses

 

$

14.1

 

$

11.0

 

$

27.4

 

$

20.2

 

$

5.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

6.3

 

$

14.6

 

$

4.5

 

$

16.2

 

$

17.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

19.1

%

-3.5

%

33.9

%

4.4

%

-30.9

%

Expense ratio

 

50.0

%

46.5

%

51.9

%

51.1

%

54.3

%

Combined ratio

 

69.1

%

43.0

%

85.8

%

55.5

%

23.4

%

 

 

 

 

 

 

 

 

 

 

 

 

PVP:

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

45.8

 

$

31.2

 

$

33.9

 

$

26.4

 

$

34.7

 

Structured finance

 

32.3

 

8.9

 

5.0

 

9.3

 

3.1

 

Total

 

$

78.1

 

$

40.1

 

$

38.9

 

$

35.7

 

$

37.7

 

 

 

 

 

 

 

 

 

 

 

 

 

Par written:

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

1,932

 

$

1,590

 

$

2,262

 

$

1,443

 

$

2,206

 

Structured finance

 

1,154

 

629

 

507

 

861

 

1,718

 

Total

 

$

3,086

 

$

2,219

 

$

2,769

 

$

2,304

 

$

3,924

 

 

 

 

 

 

 

 

 

 

 

 

 

Par outstanding:

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

51,806

 

$

52,061

 

$

52,926

 

$

51,324

 

$

52,579

 

Structured finance

 

13,935

 

13,514

 

13,084

 

12,656

 

13,225

 

Total

 

$

65,741

 

$

65,575

 

$

66,010

 

$

63,980

 

$

65,804

 

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned from refundings

 

$

2.9

 

$

4.4

 

$

5.2

 

$

5.0

 

$

1.4

 

Present value of installment premiums in force: (a)

 

140.3

 

147.2

 

138.0

 

138.9

 

146.9

 

Net unearned premium reserve (4)

 

436.4

 

441.0

 

444.2

 

443.8

 

454.8

 

 

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

 

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

 

(3).  2Q-04 excludes the allocation of $11.3 million of consolidated operating expenses related to the accelerated vesting of stock awards at the IPO date.

 

(4). Unearned premium reserve net of ceded reinsurance

 

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

 

6


 

Assured Guaranty Ltd.

Mortgage Guaranty Segment

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

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

 

$

19.2

 

$

—

 

$

1.1

 

$

6.9

 

$

13.1

 

less: Present value of installment premiums (a)

 

(8.9

)

—

 

(1.1

)

(6.9

)

—

 

Upfront gross written premiums

 

10.3

 

—

 

—

 

—

 

13.1

 

plus: Installment gross written premiums

 

3.7

 

0.9

 

5.3

 

4.2

 

6.3

 

Mortgage guaranty gross written premiums

 

$

14.0

 

$

0.9

 

$

5.3

 

$

4.2

 

$

19.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

14.0

 

$

0.9

 

$

5.3

 

$

4.2

 

$

19.4

 

Net written premiums

 

14.0

 

0.9

 

5.3

 

4.2

 

19.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

8.4

 

15.0

 

5.1

 

5.2

 

4.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(1.2

)

(3.3

)

(5.4

)

(2.0

)

0.2

 

Profit commission expense

 

5.0

 

4.3

 

1.3

 

3.5

 

1.0

 

Acquisition costs

 

0.9

 

1.7

 

0.5

 

0.6

 

0.5

 

Operating expenses (1)

 

0.6

 

1.1

 

1.0

 

1.0

 

0.7

 

Total expenses

 

$

5.3

 

$

3.8

 

$

(2.6

)

$

3.2

 

$

2.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

3.1

 

$

11.2

 

$

7.7

 

$

2.0

 

$

2.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

-14.3

%

-22.0

%

-105.9

%

-37.8

%

4.3

%

Expense ratio

 

77.6

%

47.5

%

55.5

%

98.5

%

47.4

%

Combined ratio

 

63.3

%

25.5

%

-50.4

%

60.7

%

51.7

%

 

 

 

 

 

 

 

 

 

 

 

 

Risk in force

 

$

2,201

 

$

2,394

 

$

2,437

 

$

2,325

 

$

2,582

 

Risk written

 

237

 

—

 

136

 

271

 

419

 

Net unearned premium reserve (2)

 

57.6

 

43.5

 

43.7

 

42.7

 

57.5

 

 

(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).  Unearned premium reserve net of pre-paid reinsurance

 

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

 

7


 

Assured Guaranty Ltd.

Other Segment

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

(93.6

)

$

10.0

 

$

5.2

 

$

3.8

 

$

0.9

 

Net written premiums

 

(98.5

)

(84.0

)

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

17.2

 

(66.0

)

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

7.5

 

(57.4

)

—

 

(0.4

)

(1.1

)

Profit commission expense

 

0.4

 

0.2

 

—

 

—

 

—

 

Acquisition costs

 

3.6

 

—

 

—

 

—

 

—

 

Operating expenses (1)

 

3.5

 

—

 

—

 

—

 

—

 

Total expenses

 

$

15.1

 

$

(57.2

)

$

—

 

$

(0.4

)

$

(1.1

)

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain (loss)

 

$

2.1

 

$

(8.8

)

$

—

 

$

0.4

 

$

1.1

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

43.6

%

87.0

%

—

 

—

 

—

 

Expense ratio

 

44.0

%

-0.3

%

—

 

—

 

—

 

Combined ratio

 

87.6

%

86.7

%

—

 

—

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

Equity layer credit protection

 

$

5.4

 

$

—

 

$

—

 

$

—

 

$

—

 

Trade credit reinsurance

 

9.3

 

(34.6

)

—

 

—

 

—

 

Title reinsurance

 

2.5

 

0.8

 

—

 

—

 

—

 

Auto residual value reinsurance

 

—

 

(32.2

)

—

 

—

 

—

 

Total net earned premiums

 

$

17.2

 

$

(66.0

)

$

—

 

$

—

 

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain (loss): (1)

 

 

 

 

 

 

 

 

 

 

 

Equity layer credit protection

 

$

2.5

 

$

0.5

 

$

—

 

$

0.4

 

$

1.1

 

Trade credit reinsurance

 

1.4

 

(4.2

)

—

 

—

 

—

 

Title reinsurance

 

0.7

 

0.3

 

—

 

—

 

—

 

Auto residual value reinsurance

 

(2.5

)

(5.4

)

—

 

—

 

—

 

Total underwriting gain (loss)

 

$

2.1

 

$

(8.8

)

$

—

 

$

0.4

 

$

1.1

 

 

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

 

8


 

Assured Guaranty Ltd.

Loss and LAE Reserves by Segment, Type of Reserve and by Segment and Type of Reserve

(dollars in millions)

 

 

 

As of
March 31,
2005

 

As of
December 31,
2004

 

Loss and LAE reserves by segment:

 

 

 

 

 

Financial guaranty direct

 

$

18.4

 

$

19.9

 

Financial guaranty reinsurance

 

76.1

 

78.8

 

Mortgage guaranty

 

11.2

 

11.2

 

Other

 

112.7

 

116.6

 

Total

 

$

218.4

 

$

226.5

 

 

 

 

As of
March 31,
2005

 

As of
December 31,
2004

 

Loss and LAE reserves by type:

 

 

 

 

 

Case

 

$

52.2

 

$

53.5

 

IBNR

 

100.0

 

105.8

 

Portfolio

 

66.2

 

67.2

 

Total

 

$

218.4

 

$

226.5

 

 

 

 

As of March 31, 2005

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

By segment and type of loss and LAE reserve:

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

4.3

 

$

26.0

 

$

0.7

 

$

31.0

 

$

21.2

 

$

52.2

 

IBNR

 

—

 

—

 

8.5

 

8.5

 

91.5

 

100.0

 

Portfolio

 

14.1

 

50.1

 

2.0

 

66.2

 

—

 

66.2

 

Total

 

$

18.4

 

$

76.1

 

$

11.2

 

$

105.7

 

$

112.7

 

$

218.4

 

 

 

 

 

As of December 31, 2004

 

 

 

Financial
Guaranty
Direct

 

Financial
Guaranty
Reinsurance

 

Mortgage
Guaranty

 

Total
Financial
Guaranty

 

Other

 

Total

 

By segment and type of loss and LAE reserve:

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

4.3

 

$

29.1

 

$

0.8

 

$

34.2

 

$

19.3

 

$

53.5

 

IBNR

 

—

 

—

 

8.5

 

8.5

 

97.3

 

105.8

 

Portfolio

 

15.6

 

49.7

 

1.9

 

67.2

 

—

 

67.2

 

Total

 

$

19.9

 

$

78.8

 

$

11.2

 

$

109.9

 

$

116.6

 

$

226.5

 

 

9


 

Assured Guaranty Ltd.

Investment Portfolio

as of March 31, 2005

(dollars in millions)

 

 

 

Amortized
Cost

 

Pre-Tax
Book
Yield

 

Fair Value

 

Annualized
Investment
Income

 

Fixed maturity securities available for sale:

 

 

 

 

 

 

 

 

 

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

 

$

176.2

 

3.9

%

$

178.3

 

$

6.9

 

Agency obligations

 

206.4

 

5.2

%

212.3

 

10.7

 

Foreign government securities

 

18.3

 

4.9

%

18.4

 

0.9

 

Obligations of states and political subdivisions

 

319.4

 

4.6

%

333.7

 

14.8

 

Insured obligations of state and political subdivisions

 

498.1

 

4.9

%

530.1

 

24.5

 

Corporate securities

 

180.3

 

5.6

%

186.7

 

10.1

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Pass-thrus

 

469.0

 

4.9

%

470.7

 

23.0

 

PACs

 

76.7

 

4.6

%

76.1

 

3.6

 

Asset-backed securities

 

76.9

 

3.5

%

77.1

 

2.7

 

Total fixed maturity securities available for sale

 

2,021.3

 

4.8

%

2,083.4

 

97.0

 

Short-term investments

 

63.5

 

2.4

%

63.5

 

1.5

 

Total investments

 

$

2,084.8

 

4.7

%

$

2,146.9

 

$

98.5

 

 

 

 

 

Fair Value

 

%

 

 

 

 

 

Ratings distribution(1):

 

 

 

 

 

 

 

 

 

Treasury and U.S. government obligations

 

$

178.3

 

8.6

%

 

 

 

 

Agency obligations

 

212.3

 

10.2

%

 

 

 

 

AAA/Aaa

 

1,315.4

 

63.1

%

 

 

 

 

AA/Aa

 

261.5

 

12.6

%

 

 

 

 

A/A

 

115.0

 

5.5

%

 

 

 

 

BBB/Baa

 

0.9

 

—

 

 

 

 

 

Total

 

$

2,083.4

 

100.0

%

 

 

 

 

 

(1).  Ratings are represented by the lower of the Moody’s and S&P classifications.

 

 

 

 

Fair Value

 

%

 

 

 

 

 

Maturity schedule:

 

 

 

 

 

 

 

 

 

Due within one year

 

$

16.8

 

0.8

%

 

 

 

 

Due after one year through five years

 

381.3

 

18.3

%

 

 

 

 

Due after five years through ten years

 

352.7

 

16.9

%

 

 

 

 

Due after ten years

 

785.8

 

37.7

%

 

 

 

 

Mortgage-backed securities

 

546.8

 

26.3

%

 

 

 

 

Total

 

$

2,083.4

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Duration of investment portfolio:

 

 

 

4.6

 

 

 

 

 

 

10


 

Assured Guaranty Ltd.

Financial Guaranty Profile (1 of 3)

(dollars in millions)

 

 

 

 

 

 

 

As of March 31, 2005:

 

 

 

Gross Par Written

 

Net Par

 

 

 

 

 

Sector

 

1Q 2005

 

1Q 2004

 

Outstanding

 

%

 

Avg. Rating (7)

 

Public finance

 

 

 

 

 

 

 

 

 

 

 

General obligation

 

$

592

 

$

415

 

$

13,090

 

13.6

%

A+

 

Municipal utilities

 

345

 

161

 

11,206

 

11.6

%

A+

 

Tax backed

 

676

 

407

 

10,878

 

11.3

%

A+

 

Transportation

 

185

 

46

 

6,946

 

7.2

%

A

 

Healthcare

 

186

 

507

 

6,732

 

7.0

%

A

 

Investor-owned utilities

 

31

 

214

 

2,210

 

2.3

%

A-

 

Housing

 

69

 

76

 

1,383

 

1.4

%

AA-

 

Other public finance (1)

 

138

 

22

 

1,217

 

1.3

%

A-

 

Structured municipal (2)

 

—

 

—

 

1,050

 

1.1

%

AAA

 

Higher education

 

61

 

84

 

1,014

 

1.1

%

A+

 

Total public finance

 

2,283

 

1,933

 

55,726

 

57.8

%

A+

 

 

 

 

 

 

 

 

 

 

 

 

 

Structured finance

 

 

 

 

 

 

 

 

 

 

 

CDOs (3)

 

745

 

67

 

17,989

 

18.7

%

AA+

 

Mortgage-backed and home equity

 

1,593

 

1,830

 

12,150

 

12.6

%

AA

 

Commercial receivables (4)

 

210

 

292

 

4,834

 

5.0

%

AA-

 

Consumer receivables (5)

 

79

 

207

 

3,007

 

3.1

%

A-

 

Other structured finance (6)

 

528

 

246

 

2,657

 

2.8

%

A+

 

Single name corporate CDS

 

—

 

—

 

31

 

0.0

%

A+

 

Total structured finance

 

3,156

 

2,641

 

40,668

 

42.2

%

AA

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exposures

 

$

5,438

 

$

4,574

 

$

96,394

 

100.0

%

AA-

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage guaranty risk in force

 

$

419

 

$

237

 

$

2,582

 

NA

 

NA

 

 

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

 

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

 

(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 the nationally recognized rating agencies.

 

11


 

Assured Guaranty Ltd.

Financial Guaranty Profile (2 of 3)

(dollars in millions)

 

Distribution by ratings of financial guaranty portfolio

 

 

 

March 31, 2005

 

December 31, 2004

 

Ratings (1)

 

Net Par
Outstanding

 

%

 

Net Par
Outstanding

 

%

 

AAA/Aaa

 

$

29,652

 

30.8

%

$

29,696

 

31.1

%

AA/Aa

 

19,557

 

20.3

%

19,856

 

20.8

%

A/A

 

32,471

 

33.7

%

31,393

 

32.8

%

BBB/Baa

 

13,372

 

13.9

%

13,137

 

13.7

%

Below investment grade

 

1,342

 

1.4

%

1,509

 

1.6

%

Total exposures

 

$

96,394

 

100

%

$

95,592

 

100

%

 

Distribution by ratings of CDO exposure

 

 

 

 

March 31, 2005

 

December 31, 2004

 

Ratings 1

 

Net Par
Outstanding

 

%

 

Net Par
Outstanding

 

%

 

AAA/Aaa

 

$

13,515

 

75.1

%

$

12,975

 

75.2

%

AA/Aa

 

3,022

 

16.8

%

2,784

 

16.1

%

A/A

 

1,136

 

6.3

%

1,155

 

6.7

%

BBB/Baa

 

200

 

1.1

%

216

 

1.3

%

Below investment grade

 

117

 

0.6

%

116

 

0.7

%

Total exposures

 

$

17,989

 

100

%

$

17,246

 

100

%

 

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

 

12


 

Assured Guaranty Ltd.

Financial Guaranty Profile (3 of 3)

(dollars in millions)

 

Geographic distribution of financial guaranty portfolio, as of March 31, 2005

 

U.S.:

 

Net Par
Outstanding

 

%

 

California

 

$

7,737

 

8.0

%

New York

 

5,803

 

6.0

%

Texas

 

3,225

 

3.3

%

Illinois

 

2,801

 

2.9

%

Florida

 

2,748

 

2.9

%

New Jersey

 

2,459

 

2.6

%

Massachusetts

 

2,242

 

2.3

%

Pennsylvania

 

2,196

 

2.3

%

Puerto Rico

 

1,800

 

1.9

%

Washington

 

1,708

 

1.8

%

Other states

 

18,838

 

19.5

%

Mortgage and structured (multiple states)

 

34,992

 

36.3

%

Total U.S.

 

$

86,549

 

89.8

%

 

International:

 

Net Par
Outstanding

 

%

 

United Kingdom

 

$

5,321

 

5.5

%

Germany

 

913

 

0.9

%

Australia

 

568

 

0.6

%

Brazil

 

352

 

0.4

%

Italy

 

269

 

0.3

%

Other

 

2,422

 

2.5

%

Total International

 

$

9,845

 

10.2

%

 

 

 

 

 

 

Total exposures

 

$

96,394

 

100

%

 

 

 

1Q 2005

 

1Q 2004

 

Gross par written:

 

 

 

 

 

U.S.

 

$

4,933

 

$

3,730

 

International

 

506

 

844

 

Total

 

$

5,438

 

$

4,574

 

 

 

 

 

 

 

Gross premium written:

 

 

 

 

 

U.S.

 

$

54.2

 

$

(26.6

)

International

 

23.9

 

25.1

 

Total

 

$

78.1

 

$

(1.5

)

 

13


 

Assured Guaranty Ltd.

Non-Investment Grade Exposures

as of March 31, 2005

(dollars in millions)

 

Asset Type

 

Weighted Average
Remaining Life

 

Net Par
Outstanding

 

Average
Rating (6)

 

 

 

 

 

 

 

 

 

Public finance

 

 

 

 

 

 

 

Transportation

 

19.7

 

$

365.4

 

BB

 

Healthcare

 

12.8

 

89.4

 

BB

 

General obligation

 

11.4

 

66.2

 

BB+

 

Other public finance (1)

 

26.4

 

15.7

 

B+

 

Investor-owned utilities

 

16.2

 

15.2

 

BB-

 

Municipal utilities

 

11.2

 

13.6

 

C

 

Tax backed

 

9.7

 

9.5

 

BB

 

Housing

 

8.3

 

3.3

 

B

 

Higher education

 

11.7

 

1.0

 

BB+

 

Total public finance

 

17.4

 

$

579.3

 

BB

 

 

 

 

 

 

 

 

 

Structured finance

 

 

 

 

 

 

 

Consumer receivables (2)

 

2.9

 

$

375.3

 

BB

 

Mortgage-backed and home equity

 

6.4

 

139.6

 

B-

 

Commercial receivables (3)

 

7.0

 

124.4

 

B

 

CDOs (4)

 

3.0

 

116.7

 

B+

 

Other structured finance (5)

 

4.9

 

6.7

 

BB-

 

Total structured finance

 

4.2

 

$

762.8

 

BB-

 

 

 

 

 

 

 

 

 

Total exposures

 

9.9

 

$

1,342.1

 

BB-

 

 

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

 

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

 

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

 

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

 

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

 

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

 

14


 

Assured Guaranty Ltd.

Closely Monitored Credits

(dollars in millions)

 

Net par outstanding by credit monitoring category (1)

 

 

 

March 31, 2005

 

December 31, 2004

 

Description

 

Net Par Outstanding

 

%

 

Number of credits in category

 

Net Par
Outstanding

 

%

 

Number of
credits in
category

 

Fundamentally sound, normal risk

 

$

94,840

 

98.4

%

 

 

$

93,855

 

98.2

%

 

 

Closely monitored:

 

 

 

 

 

 

 

 

 

 

 

 

 

Category 1

 

1,159

 

1.2

%

29

 

1,490

 

1.6

%

35

 

Category 2

 

316

 

0.3

%

9

 

165

 

0.2

%

9

 

Category 3

 

67

 

0.1

%

16

 

70

 

0.1

%

16

 

Category 4

 

12

 

—

 

8

 

12

 

—

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

1,554

 

1.6

%

62

 

1,737

 

1.8

%

68

 

Total

 

$

96,394

 

100

%

 

 

$

95,592

 

100

%

 

 

 

(1).  Our risk management department is responsible for monitoring our portfolio of credits and maintains a list of closely monitored credits. The closely monitored credits are divided into four categories: Category 1 (low priority; fundamentally sound, greater than normal risk); Category 2 (medium priority; weakening credit profile, may result in loss); Category 3 (high priority; claim/default probable, case reserve established); Category 4 (claim paid, case reserve established for future payments). Credits that are not included in the closely monitored credit list are categorized as fundamentally sound, normal risk.

 

15


 

Assured Guaranty Ltd.

25 Largest Public Finance Exposures

as of March 31, 2005

(dollars in millions)

 

Revenue Source

 

Net Par
Outstanding

 

Rating(1)

 

New Jersey State General Obligation & Leases

 

$

845

 

AA-

 

California State General Obligation & Leases

 

834

 

A-

 

Long Island Power Authority

 

711

 

A-

 

New York City General Obligation & Leases

 

693

 

A

 

Massachusetts State General Obligation & Bay

 

691

 

AA-

 

Jefferson County Alabama Sewer

 

660

 

A

 

New York City Municipal Water Finance Authority

 

640

 

AA+

 

Denver Colorado Airport System

 

626

 

A

 

Chicago Illinois General Obligation

 

569

 

A+

 

Puerto Rico Electric Power Authority

 

544

 

A-

 

New York State Metro Trans Auth - Transportation Revenue

 

535

 

A

 

Houston Texas Water & Sewer System

 

504

 

A+

 

Puerto Rico General Obligation & Leases

 

487

 

A-

 

Energy Northwest

 

481

 

AA-

 

San Francisco California Airport

 

477

 

A

 

New York State General Obligation

 

423

 

AA

 

Los Angeles County Metro Trans - Sales Tax

 

356

 

AA

 

Mental Health Services Facilities - New York

 

355

 

A

 

Santee Cooper Revenue Bonds - South Carolina

 

341

 

AA-

 

Port Authority of New York & New Jersey

 

337

 

AA-

 

Dade County Florida Water & Sewer System

 

324

 

A

 

Chicago Illinois Public Building - Board of Education

 

307

 

A+

 

Pennsylvania State General Obligation

 

303

 

AA

 

Illinois State General Obligation

 

288

 

AA

 

District of Columbia General Obligation

 

278

 

A

 

 

 

 

 

 

 

Total top 25 public finance exposures

 

$

12,606

 

 

 

 

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

 

16


 

Assured Guaranty Ltd.

25 Largest Structured Finance Exposures

as of March 31, 2005

(dollars in millions)

 

Revenue Source

 

Net Par
Outstanding

 

Rating (1)

 

Park Place (Ameriquest) PPSI 2004-MHQ1 Class A-1

 

$

1,466

 

AAA

 

Ameriquest Mortgage Securities Inc. 2004-R10 A-1

 

1,016

 

AAA

 

Argent Securities Inc. 2004-W11 Class A-1

 

920

 

AAA

 

Structured Finance Corporate Pool

 

884

 

AAA

 

Field Point I & II, Limited Class A1 & A2

 

780

 

AA-

 

Synthetic CDO - IG Corporate

 

740

 

AAA

 

Bear Stearns ABS I Trust 2004-FR3 2-A

 

664

 

AAA

 

Synthetic CDO - IG ABS

 

616

 

AAA

 

Synthetic CDO - IG Corporate

 

603

 

A+

 

Synthetic CDO - IG ABS

 

594

 

AAA

 

Synthetic Credit Card Master Trust

 

550

 

AAA

 

Synthetic CDO - IG Corporate

 

500

 

AAA

 

Synthetic CDO - IG Corporate

 

470

 

AA

 

Synthetic CDO - IG Corporate

 

440

 

AAA

 

Synthetic CDO - IG Corporate

 

440

 

AAA

 

Argent Securities Inc. 2003-W6

 

435

 

BBB+

 

Synthetic CDO - IG Corporate

 

430

 

AAA

 

Synthetic CDO - IG Corporate

 

410

 

AAA

 

Southfork CLO Ltd. Series 2005-A1

 

400

 

AAA

 

Synthetic Sub-Prime RMBS

 

391

 

AAA

 

Synthetic CDO - IG Corporate

 

360

 

AAA

 

Synthetic CDO - IG Corporate

 

360

 

AAA

 

Providian Gateway Master Trust

 

359

 

IG/NIG(2)

 

Synthetic CDO - IG Corporate

 

347

 

AAA

 

Synthetic CDO - IG Corporate

 

311

 

BBB+

 

 

 

 

 

 

 

Total top 25 structured finance exposures

 

$

14,485

 

 

 

 

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

 

(2).  $280 million of the net par for this credit has investment grade rating ranging from BBB- to BBB+ and $79 million of the net par has non-investment grade rating of BB+.

 

17


 

Assured Guaranty Ltd.

Consolidated Capital and Claims Paying Resources

(dollars in millions)

 

 

 

As of March 31, 2005

 

As of December 31, 2004

 

 

 

AGC

 

AGR (1)

 

Consolidated

 

AGC

 

AGR (1)

 

Consolidated

 

Statutory surplus and reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

Unearned premium reserve (2)

 

$

404

 

$

220

 

$

624

 

$

406

 

$

186

 

$

592

 

Contingency reserve

 

531

 

—

 

531

 

518

 

—

 

518

 

Policyholders’ surplus

 

244

 

615

 

859

 

237

 

596

 

833

 

Loss & loss adjustment expense reserves

 

30

 

219

 

249

 

32

 

103

 

135

 

Total policyholders’ surplus & reserves

 

$

1,209

 

$

1,054

 

$

2,263

 

$

1,193

 

$

885

 

$

2,078

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Claims paying resources

 

 

 

 

 

 

 

 

 

 

 

 

 

Policyholders’ surplus

 

$

244

 

$

615

 

$

859

 

$

237

 

$

596

 

$

833

 

Contingency reserve

 

531

 

—

 

531

 

518

 

—

 

518

 

Statutory capital

 

775

 

615

 

1,390

 

755

 

596

 

1,351

 

Unearned premium reserve (2)

 

404

 

220

 

624

 

406

 

186

 

592

 

Loss & loss adjustment expense reserves

 

30

 

219

 

249

 

32

 

103

 

135

 

Total policyholders’ surplus & reserves

 

1,209

 

1,054

 

2,263

 

1,193

 

885

 

2,078

 

Present value of installment premium

 

278

 

134

 

412

 

268

 

132

 

400

 

Standby line of credit/stop loss

 

255

 

—

 

255

 

255

 

—

 

255

 

Total claims paying resources

 

$

1,742

 

$

1,188

 

$

2,930

 

$

1,716

 

$

1,017

 

$

2,733

 

 

(1).  AGR numbers are our estimate of US statutory as the company files Bermuda statutory financial statements.

 

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

 

18


 

Assured Guaranty Ltd.

Summary Financial and Statistical Data

(dollars in millions, expect per share amounts)

 

 

 

1Q-05

 

2004

 

2003

 

2002

 

2001

 

2000

 

GAAP Summary Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

78.1

 

$

190.9

 

$

349.2

 

$

417.2

 

$

442.9

 

$

206.0

 

Net earned premiums

 

48.1

 

187.9

 

310.9

 

247.4

 

293.5

 

140.7

 

Net investment income

 

23.1

 

94.8

 

96.3

 

97.2

 

99.5

 

98.1

 

Total expenses

 

19.6

 

114.6

 

266.1

 

218.8

 

282.8

 

131.8

 

Income before provision for income taxes

 

56.8

 

233.3

 

246.2

 

83.2

 

110.1

 

118.1

 

Net income

 

44.3

 

182.8

 

214.5

 

72.6

 

63.8

 

93.2

 

Operating income

 

41.3

 

141.1

 

127.3

 

115.7

 

96.1

 

87.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

0.59

 

$

2.44

 

$

2.86

 

$

0.97

 

$

0.85

 

$

1.24

 

Operating income per diluted share

 

$

0.55

 

$

1.88

 

$

1.70

 

$

1.54

 

$

1.28

 

$

1.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and LAE ratio

 

-19.6

%

-17.0

%

46.5

%

48.6

%

60.5

%

21.6

%

Expense ratio

 

53.3

%

65.4

%

37.2

%

35.5

%

30.6

%

61.2

%

Combined ratio

 

33.7

%

48.4

%

83.7

%

84.1

%

91.1

%

82.8

%

GAAP Summary Balance Sheet Data (end of period)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments and cash

 

$

2,168.6

 

$

2,157.9

 

$

2,222.1

 

$

2,061.9

 

$

1,710.8

 

$

1,549.6

 

Total assets

 

2,709.7

 

2,694.0

 

2,857.9

 

2,719.9

 

2,322.1

 

1,913.7

 

Unearned premium reserves

 

548.7

 

521.3

 

625.4

 

613.3

 

500.3

 

444.6

 

Loss and LAE reserves

 

218.4

 

226.5

 

522.6

 

458.8

 

401.1

 

171.0

 

Long-term debt

 

197.3

 

197.4

 

75.0

 

75.0

 

150.0

 

150.0

 

Shareholders’ equity

 

1,537.7

 

1,527.6

 

1,437.6

 

1,257.2

 

1,061.6

 

994.5

 

Book value per share

 

$

20.45

 

$

20.19

 

$

19.17

 

$

16.76

 

$

14.15

 

$

13.26

 

Other Financial Information

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt service outstanding (end of period)

 

$

138,160

 

$

136,120

 

$

130,047

 

$

124,082

 

$

117,909

 

$

102,744

 

Net par amount outstanding (end of period)

 

96,394

 

95,592

 

87,524

 

80,394

 

75,249

 

65,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt service written:

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

4,134

 

$

14,493

 

$

12,130

 

$

14,312

 

$

8,694

 

$

7,385

 

Structured Finance

 

3,383

 

16,477

 

11,038

 

13,210

 

12,627

 

9,054

 

Total debt service written

 

$

7,517

 

$

30,970

 

$

23,168

 

$

27,522

 

$

21,321

 

$

16,439

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

6,740

 

$

27,073

 

$

19,346

 

$

25,453

 

$

19,196

 

$

15,451

 

International

 

777

 

3,897

 

3,822

 

2,069

 

2,125

 

988

 

Total debt service written

 

$

7,517

 

$

30,970

 

$

23,168

 

$

27,522

 

$

21,321

 

$

16,439

 

 

19


 

Assured Guaranty Corp.

Consolidated GAAP Income Statements

(dollars in millions)

 

 

 

Quarter Ended

 

% Change

 

 

 

March 31,

 

versus

 

 

 

2005

 

2004

 

1Q-04

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Gross written premiums

 

$

32.4

 

$

47.5

 

-32

%

Net written premiums

 

25.5

 

47.1

 

-46

%

 

 

 

 

 

 

 

 

Net earned premiums

 

30.6

 

37.5

 

-18

%

 

 

 

 

 

 

 

 

Net investment income

 

13.3

 

12.6

 

6

%

Total revenues

 

$

43.9

 

$

50.1

 

-12

%

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(1.8

)

8.7

 

NMF

 

Profit commission expense

 

—

 

0.3

 

NMF

 

Acquisition costs

 

8.1

 

9.2

 

-12

%

Other operating expenses

 

7.9

 

10.8

 

-27

%

Goodwill impairment

 

—

 

1.6

 

NMF

 

Total expenses

 

$

14.1

 

$

30.6

 

-54

%

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

29.8

 

19.5

 

53

%

 

 

 

 

 

 

 

 

Total provision for income taxes

 

7.7

 

4.7

 

64

%

 

 

 

 

 

 

 

 

Operating income (b)

 

$

22.1

 

$

14.8

 

49

%

 

 

 

 

 

 

 

 

After-tax net realized gains on investments

 

0.1

 

—

 

NMF

 

After-tax unrealized gains on derivative instruments

 

3.2

 

6.5

 

-51

%

 

 

 

 

 

 

 

 

Net income

 

$

25.4

 

$

21.3

 

19

%

 

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

 

20


 

Assured Guaranty Corp.

Consolidated GAAP Balance Sheets

(dollars in millions)

 

 

 

As of

 

 

 

March 31,

 

December 31,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Fixed maturity securities, at fair value

 

$

1,171.8

 

$

1,172.3

 

Short-term investments, at cost which approximates fair value

 

30.7

 

66.1

 

Total investments

 

1,202.5

 

1,238.4

 

 

 

 

 

 

 

Cash and cash equivalents

 

11.1

 

2.8

 

Accrued investment income

 

15.2

 

14.5

 

Deferred acquisition costs

 

140.0

 

140.3

 

Prepaid reinsurance premiums

 

49.0

 

49.7

 

Reinsurance recoverable on ceded losses

 

33.4

 

36.4

 

Premiums receivable

 

33.8

 

48.9

 

Goodwill

 

85.4

 

85.4

 

Unrealized gains on derivative financial instruments

 

34.4

 

29.4

 

Other assets

 

10.7

 

10.7

 

Total assets

 

$

1,615.2

 

$

1,656.5

 

 

 

 

 

 

 

Liabilities and shareholder’s equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Unearned premium reserves

 

$

363.5

 

$

369.3

 

Reserves for losses and loss adjustment expenses

 

109.9

 

118.4

 

Profit commissions payable

 

4.2

 

4.2

 

Reinsurance balances payable

 

27.6

 

64.9

 

Deferred income taxes

 

57.4

 

58.3

 

Funds held by Company under reinsurance contracts

 

5.9

 

5.8

 

Other liabilities

 

23.1

 

28.1

 

Total liabilities

 

591.5

 

649.0

 

 

 

 

 

 

 

Shareholder’s equity

 

 

 

 

 

Common stock

 

15.0

 

15.0

 

Additional paid-in capital

 

390.5

 

386.4

 

Unearned stock grant compensation

 

(7.9

)

(5.8

)

Retained earnings

 

594.7

 

569.2

 

Accumulated other comprehensive income

 

31.5

 

42.7

 

Total shareholder’s equity

 

1,023.7

 

1,007.5

 

 

 

 

 

 

 

Total liabilities and shareholder’s equity

 

$

1,615.2

 

$

1,656.5

 

 

21


 

Assured Guaranty Corp.

Loss and LAE Reserves by Segment, Type of Reserve and by Segment and Type of Reserve

(dollars in millions)

 

 

 

As of

 

As of

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Loss and LAE reserves by segment:

 

 

 

 

 

 

 

 

 

 

 

Financial guaranty direct

 

$

17.8

 

$

19.0

 

 

 

 

 

 

 

Financial guaranty reinsurance

 

72.2

 

75.6

 

 

 

 

 

 

 

Other

 

19.9

 

23.8

 

 

 

 

 

 

 

Total

 

$

109.9

 

$

118.4

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Loss and LAE reserves by type:

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

34.5

 

$

38.6

 

 

 

 

 

 

 

IBNR

 

14.9

 

17.0

 

 

 

 

 

 

 

Portfolio

 

60.5

 

62.8

 

 

 

 

 

 

 

Total

 

$

109.9

 

$

118.4

 

 

 

 

 

 

 

 

 

 

As of March 31, 2005

 

 

 

Financial

 

Financial

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance

 

Guaranty

 

Other

 

Total

 

By segment and type of loss and LAE reserve:

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

4.3

 

$

25.2

 

$

29.5

 

$

5.0

 

$

34.5

 

IBNR

 

—

 

—

 

—

 

14.9

 

14.9

 

Portfolio

 

13.5

 

47.0

 

60.5

 

—

 

60.5

 

Total

 

$

17.8

 

$

72.2

 

$

90.0

 

$

19.9

 

$

109.9

 

 

 

 

As of December 31, 2004

 

 

 

Financial

 

Financial

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance

 

Guaranty

 

Other

 

Total

 

By segment and type of loss and LAE reserve:

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

4.3

 

$

27.5

 

$

31.8

 

$

6.8

 

$

38.6

 

IBNR

 

—

 

—

 

—

 

17.0

 

17.0

 

Portfolio

 

14.7

 

48.1

 

62.8

 

—

 

62.8

 

Total

 

$

19.0

 

$

75.6

 

$

94.6

 

$

23.8

 

$

118.4

 

 

22


 

Assured Guaranty Corp.

Investment Portfolio

as of March 31, 2005

(dollars in millions)

 

 

 

Amortized
Cost

 

Pre-Tax
Book
Yield

 

Fair Value

 

Annualized
Investment
Income

 

Fixed maturity securities available for sale:

 

 

 

 

 

 

 

 

 

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

 

$

31.3

 

3.8

%

$

31.3

 

$

1.2

 

Agency obligations

 

28.6

 

4.3

%

29.1

 

1.2

 

Foreign government securities

 

18.1

 

4.9

%

18.3

 

0.9

 

Obligations of states and political subdivisions

 

308.8

 

4.6

%

322.5

 

14.2

 

Insured obligations of state and political subdivisions

 

465.5

 

5.0

%

497.0

 

23.1

 

Corporate securities

 

65.5

 

5.1

%

67.1

 

3.4

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Pass-thrus

 

180.3

 

4.9

%

180.0

 

8.8

 

PACs

 

6.0

 

3.9

%

5.9

 

0.2

 

Asset-backed securities

 

20.5

 

3.1

%

20.6

 

0.6

 

Total fixed maturity securities available for sale

 

$

1,124.6

 

4.8

%

$

1,171.8

 

$

53.6

 

Short-term investments

 

30.7

 

2.4

%

30.7

 

0.7

 

Total investments

 

$

1,155.3

 

4.7

%

$

1,202.5

 

$

54.3

 

 

 

 

Fair Value

 

%

 

 

 

 

 

Ratings distribution(1):

 

 

 

 

 

 

 

 

 

Treasury and government obligations

 

$

31.3

 

2.7

%

 

 

 

 

Agency obligations

 

29.1

 

2.5

%

 

 

 

 

AAA/Aaa

 

838.3

 

71.5

%

 

 

 

 

AA/Aa

 

199.3

 

17.0

%

 

 

 

 

A/A

 

73.8

 

6.3

%

 

 

 

 

BBB/Baa

 

—

 

—

 

 

 

 

 

Total

 

$

1,171.8

 

100.0

%

 

 

 

 

 

(1).  Ratings are represented by the lower of the Moody’s and S&P classifications.

 

 

 

Fair Value

 

%

 

 

 

 

 

Maturity schedule:

 

 

 

 

 

 

 

 

 

 

Due within one year

 

$

7.8

 

0.7

%

 

 

 

 

Due after one year through five years

 

143.8

 

12.3

%

 

 

 

 

Due after five years through ten years

 

204.4

 

17.4

%

 

 

 

 

Due after ten years

 

629.9

 

53.7

%

 

 

 

 

Mortgage-backed securities

 

185.9

 

15.9

%

 

 

 

 

Total

 

$

1,171.8

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Duration of investment portfolio:

 

 

 

5.1

 

 

 

 

 

 

23


 

Assured Guaranty Corp.

Financial Guaranty Profile (1 of 3)

(dollars in millions)

 

 

 

As of March 31, 2005:

 

Sector

 

Net Par
Outstanding

 

%

 

Avg. Rating (7)

 

Public finance

 

 

 

 

 

 

 

General obligation

 

$

9,588

 

13.1

%

A+

 

Municipal utilities

 

8,487

 

11.6

%

A+

 

Tax backed

 

8,442

 

11.5

%

A+

 

Transportation

 

5,700

 

7.8

%

A

 

Healthcare

 

3,926

 

5.3

%

A

 

Investor-owned utilities

 

1,669

 

2.3

%

BBB+

 

Housing

 

1,154

 

1.6

%

AA-

 

Other public finance (1)

 

894

 

1.2

%

A

 

Higher education

 

847

 

1.2

%

A+

 

Structured municipal (2)

 

783

 

1.1

%

AAA

 

Total public finance

 

41,492

 

56.5

%

A+

 

 

 

 

 

 

 

 

 

Structured finance

 

 

 

 

 

 

 

CDOs (3)

 

14,988

 

20.4

%

AA+

 

Mortgage-backed & home equity

 

8,276

 

11.3

%

AA

 

Commercial receivables (4)

 

4,169

 

5.7

%

AA-

 

Consumer receivables (5)

 

2,635

 

3.6

%

A-

 

Other structured finance (6)

 

1,875

 

2.6

%

A+

 

Total structured finance

 

31,943

 

43.5

%

AA

 

 

 

 

 

 

 

 

 

Total net par outstanding

 

$

73,435

 

100.0

%

AA-

 

 

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

 

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

 

(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 the nationally recognized rating agencies.

 

24


 

Assured Guaranty Corp.

Financial Guaranty Profile (2 of 3)

(dollars in millions)

 

Distribution by ratings of financial guaranty portfolio

 

 

 

March 31, 2005

 

December 31, 2004

 

Ratings (1)

 

Net Par
Outstanding

 

%

 

Net Par
Outstanding

 

%

 

AAA/Aaa

 

$

22,509

 

30.7

%

$

22,726

 

30.7

%

AA/Aa

 

15,209

 

20.7

%

15,969

 

21.6

%

A/A

 

24,679

 

33.6

%

23,741

 

32.1

%

BBB/Baa

 

9,763

 

13.3

%

10,122

 

13.7

%

Below investment grade

 

1,275

 

1.7

%

1,443

 

2.0

%

Total exposures

 

$

73,435

 

100

%

$

74,001

 

100

%

 

Distribution by ratings of CDO exposure

 

 

 

March 31, 2005

 

December 31, 2004

 

Ratings (1)

 

Net Par
Outstanding

 

%

 

Net Par
Outstanding

 

%

 

AAA/Aaa

 

$

10,864

 

72.5

%

$

10,469

 

72.6

%

AA/Aa

 

2,756

 

18.4

%

2,543

 

17.6

%

A/A

 

1,117

 

7.5

%

1,136

 

7.9

%

BBB/Baa

 

151

 

1.0

%

167

 

1.2

%

Below investment grade

 

100

 

0.7

%

99

 

0.7

%

Total exposures

 

$

14,988

 

100

%

$

14,415

 

100

%

 

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

 

25


 

Assured Guaranty Corp.

Financial Guaranty Profile (3 of 3)

(dollars in millions)

 

Geographic distribution of financial guaranty portfolio, as of March 31, 2005

 

U.S.:

 

Net Par
Outstanding

 

%

 

California

 

$

5,899

 

8.0

%

New York

 

4,175

 

5.7

%

Texas

 

2,485

 

3.4

%

Illinois

 

2,291

 

3.1

%

Florida

 

2,215

 

3.0

%

New Jersey

 

1,920

 

2.6

%

Pennsylvania

 

1,704

 

2.3

%

Massachusetts

 

1,577

 

2.1

%

Puerto Rico

 

1,416

 

1.9

%

Washington

 

1,208

 

1.6

%

Other states

 

13,614

 

18.5

%

Mortgage and structured (multiple states)

 

27,228

 

37.1

%

Total U.S.

 

$

65,732

 

89.5

%

 

International:

 

Net Par
Outstanding

 

%

 

United Kingdom

 

$

4,034

 

5.5

%

Germany

 

742

 

1.0

%

Australia

 

459

 

0.6

%

Brazil

 

318

 

0.4

%

Italy

 

219

 

0.3

%

Other

 

1,931

 

2.6

%

Total International

 

$

7,702

 

10.5

%

 

 

 

 

 

 

Total exposures

 

$

73,435

 

100

%

 

 

 

1Q 2005

 

1Q 2004

 

Gross par written:

 

 

 

 

 

U.S.

 

$

2,093

 

$

2,536

 

International

 

375

 

477

 

Total

 

$

2,468

 

$

3,013

 

 

 

 

 

 

 

Gross premium written:

 

 

 

 

 

U.S.

 

$

29.9

 

$

43.1

 

International

 

2.5

 

4.4

 

Total

 

$

32.4

 

$

47.5

 

 

26


 

Assured Guaranty Corp.

Non-Investment Grade Exposures

as of March 31, 2005

(dollars in millions)

 

Asset Type

 

Weighted Average
Remaining Life

 

Net Par
Outstanding

 

Average
Rating (6)

 

 

 

 

 

 

 

 

 

Public Finance

 

 

 

 

 

 

 

Transportation

 

19.7

 

$

365.4

 

BB

 

Healthcare

 

12.5

 

76.2

 

BB

 

General obligation

 

11.7

 

44.6

 

BB+

 

Other public finance (1)

 

26.4

 

15.7

 

B+

 

Investor-owned utilities

 

16.2

 

15.2

 

BB-

 

Municipal utilities

 

11.2

 

13.6

 

C

 

Tax backed

 

9.9

 

7.6

 

BB-

 

Housing

 

8.3

 

3.3

 

B

 

Higher education

 

11.7

 

1.0

 

BB+

 

Total public finance

 

17.7

 

$

542.5

 

BB

 

 

 

 

 

 

 

 

 

Structured Finance

 

 

 

 

 

 

 

Consumer receivables (2)

 

2.9

 

$

375.3

 

BB

 

Mortgage-backed and home equity

 

6.0

 

125.5

 

CCC+

 

Commercial receivables (3)

 

7.0

 

124.4

 

B

 

CDOs (4)

 

3.3

 

100.3

 

B+

 

Other structured finance (5)

 

4.9

 

6.7

 

BB-

 

Total structured finance

 

4.2

 

$

732.2

 

BB-

 

 

 

 

 

 

 

 

 

Total exposures

 

10.0

 

$

1,274.7

 

BB-

 

 

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

 

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

 

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

 

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

 

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

 

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

 

27


 

Assured Guaranty Corp.

Closely Monitored Credits

(dollars in millions)

 

Net par outstanding by credit monitoring category (1)

 

 

 

March 31, 2005

 

December 31, 2004

 

Description

 

Net Par
Outstanding

 

%

 

Number of
credits in
category

 

Net Par
Outstanding

 

%

 

Number of
credits in
category

 

Fundamentally sound, normal risk

 

$

71,918

 

97.9

%

 

 

$

72,289

 

97.7

%

 

 

Closely monitored:

 

 

 

 

 

 

 

 

 

 

 

 

 

Category 1

 

1,122

 

1.5

%

27

 

1,465

 

2.0

%

35

 

Category 2

 

316

 

0.4

%

9

 

165

 

0.2

%

9

 

Category 3

 

67

 

0.1

%

16

 

70

 

0.1

%

16

 

Category 4

 

12

 

0.1

%

8

 

12

 

—

 

8

 

Subtotal

 

1,517

 

2.1

%

60

 

1,712

 

2.3

%

68

 

Total

 

$

73,435

 

100

%

 

 

$

74,001

 

100

%

 

 

 

(1).  Our risk management department is responsible for monitoring our portfolio of credits and maintains a list of closely monitored credits. The closely monitored credits are divided into four categories: Category 1 (low priority; fundamentally sound, greater than normal risk); Category 2 (medium priority; weakening credit profile, may result in loss); Category 3 (high priority; claim/default probable, case reserve established); Category 4 (claim paid, case reserve established for future payments). Credits that are not included in the closely monitored credit list are categorized as fundamentally sound, normal risk.

 

28


 

Assured Guaranty Corp.

25 Largest Public Finance Exposures

as of March 31, 2005

(dollars in millions)

 

Revenue Source

 

Net Par
Outstanding

 

Rating(1)

 

New Jersey State General Obligation & Leases

 

$

755

 

AA-

 

California State General Obligation & Leases

 

578

 

A-

 

New York State Metro Trans Auth - Transportation Revenue

 

476

 

A

 

Denver Colorado Airport System

 

466

 

A

 

Puerto Rico Electric Power Authority

 

464

 

A-

 

Long Island Power Authority

 

457

 

A-

 

Chicago Illinois General Obligation

 

456

 

A+

 

Puerto Rico General Obligation & Leases

 

451

 

A-

 

Jefferson County Alabama Sewer

 

439

 

A

 

San Francisco California Airport

 

422

 

A

 

Massachusetts State General Obligation & Bay Transportation

 

409

 

AA-

 

Energy Northwest

 

390

 

AA-

 

New York State General Obligation

 

390

 

AA

 

New York City Municipal Water Finance Authority

 

383

 

AA+

 

New York City General Obligation

 

341

 

A

 

Los Angeles County Metro Trans - Sales Tax

 

314

 

AA

 

Houston Texas Water & Sewer System

 

293

 

A+

 

Illinois State General Obligation & Leases

 

282

 

AA

 

Massachusetts State Turnpike Authority Metro

 

266

 

A-

 

Dade County Florida Water & Sewer System

 

261

 

A

 

Santee Cooper Revenue Bonds - South Carolina

 

257

 

AA-

 

Intermountain Power Agency

 

243

 

A+

 

Chicago Illinois Public Building - Board of Education

 

237

 

A+

 

Los Angeles California Unified School District

 

235

 

AA

 

Pennsylvania State General Obligation

 

229

 

AA

 

 

 

 

 

 

 

Total top 25 public finance exposures

 

$

9,494

 

 

 

 

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

 

29


 

Assured Guaranty Corp.

25 Largest Structured Finance Exposures

as of March 31, 2005

(dollars in millions)

 

Revenue Source

 

Net Par
Outstanding

 

Rating(1)

 

Park Place (Ameriquest) PPSI 2004-MHQ1 Class A-1

 

$

1,100

 

AAA

 

Ameriquest Mortgage Securities Inc. 2004-R10 A-1

 

762

 

AAA

 

Argent Securities Inc. 2004-W11 Class A-1

 

690

 

AAA

 

Structured Finance Corporate Pool

 

663

 

AAA

 

Synthetic CDO - IG ABS

 

616

 

AAA

 

Synthetic CDO - IG Corporate

 

603

 

A+

 

Synthetic CDO - IG ABS

 

594

 

AAA

 

Field Point I & II, Limited

 

585

 

AA-

 

Synthetic Credit Card Master Trust

 

550

 

AAA

 

Synthetic CDO - IG Corporate

 

540

 

AAA

 

Synthetic CDO - IG Corporate

 

500

 

AAA

 

Bear Stearns ABS I Trust 2004-FR3 2-A

 

498

 

AAA

 

Synthetic CDO - IG Corporate

 

470

 

AA

 

Synthetic CDO - IG Corporate

 

440

 

AAA

 

Argent Securities Inc. 2003-W6

 

435

 

BBB+

 

Synthetic CDO - IG Corporate

 

430

 

AAA

 

Synthetic CDO - IG Corporate

 

417

 

AAA

 

Synthetic CDO - IG Corporate

 

360

 

AAA

 

Synthetic CDO - IG Corporate

 

350

 

AAA

 

Synthetic CDO - IG Corporate

 

347

 

AAA

 

Synthetic CDO - IG Corporate

 

344

 

AAA

 

Synthetic CDO - IG Corporate

 

311

 

BBB+

 

Providian Gateway Master Trust

 

302

 

IG/NIG(2)

 

Southfork CLO Ltd. Series 2005-A1

 

300

 

AAA

 

Synthetic Sub-Prime RMBS

 

293

 

AAA

 

 

 

 

 

 

 

Total top 25 structured finance exposures

 

$

12,499

 

 

 

 

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

 

(2).  $224 million of the net par for this credit has investment grade rating ranging from BBB- to BBB+ and $79 million of the net par has non-investment grade rating of BB+.

 

30


 

Assured Guaranty Corp.

Capital and Claims Paying Resources

(dollars in millions)

 

 

 

As of:

 

 

 

March 31,

 

December 31,

 

 

 

2005

 

2004

 

Statutory surplus and reserves

 

 

 

 

 

Unearned premium reserve

 

$

404

 

$

406

 

Contingency reserve

 

531

 

518

 

Policyholders’ surplus

 

244

 

237

 

Loss & loss adjustment expense reserves

 

30

 

32

 

Total policyholders’ surplus & reserves

 

$

1,209

 

$

1,193

 

 

 

 

 

 

 

Claims paying resources

 

 

 

 

 

Policyholders’ surplus

 

$

244

 

$

237

 

Contingency reserve

 

531

 

518

 

Statutory capital

 

775

 

755

 

Unearned premium reserve

 

404

 

406

 

Loss & loss adjustment expense reserves

 

30

 

32

 

Total policyholders’ surplus & reserves

 

1,209

 

1,193

 

Present value of installment premium

 

278

 

268

 

Standby line of credit/stop loss

 

255

 

255

 

Total claims paying resources

 

$

1,742

 

$

1,716

 

 

31


 

Assured Guaranty Corp.

Summary Financial and Statistical Data

(dollars in millions)

 

 

 

1Q-05

 

2004

 

2003

 

2002

 

2001

 

2000

 

Statutory Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

21.3

 

$

103.2

 

$

66.6

 

$

46.2

 

$

44.9

 

$

60.5

 

Policyholders’ surplus

 

244.4

 

236.7

 

255.6

 

287.0

 

334.0

 

323.4

 

Contingency reserve

 

530.9

 

518.4

 

400.0

 

307.0

 

223.1

 

180.6

 

Statutory capital

 

775.3

 

755.1

 

655.6

 

594.0

 

557.2

 

504.0

 

Unearned premium reserve

 

403.8

 

405.8

 

466.7

 

369.9

 

351.5

 

330.2

 

Present value of installment premiums

 

277.8

 

267.8

 

293.3

 

220.4

 

149.2

 

89.1

 

Premium resources

 

681.6

 

673.6

 

760.0

 

590.3

 

500.7

 

419.3

 

Loss and LAE reserves

 

29.5

 

31.8

 

55.0

 

40.8

 

20.5

 

15.0

 

Standby line of credit / stop loss

 

255.0

 

255.0

 

255.0

 

415.0

 

450.0

 

250.0

 

Total claims-paying resources

 

$

1,741.5

 

$

1,715.5

 

$

1,725.6

 

$

1,640.1

 

$

1,528.4

 

$

1,188.3

 

Statutory Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and LAE ratio

 

-1.3

%

-8.4

%

25.9

%

35.4

%

18.3

%

-0.7

%

Expense ratio

 

59.1

%

107.4

%

32.0

%

46.0

%

50.9

%

46.7

%

Combined ratio

 

57.8

%

99.0

%

57.9

%

81.4

%

69.2

%

46.0

%

Other Financial Information (end of period)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt service outstanding

 

$

105,117

 

$

105,831

 

$

117,406

 

$

113,074

 

$

108,135

 

$

87,363

 

Net par amount outstanding

 

73,435

 

74,001

 

78,399

 

72,259

 

69,178

 

56,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt service written:

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

1,032

 

$

7,210

 

$

9,428

 

$

14,282

 

$

8,694

 

$

7,363

 

Structured Finance

 

2,072

 

13,520

 

10,013

 

12,151

 

11,688

 

8,789

 

Total debt service written

 

$

3,104

 

$

20,730

 

$

19,441

 

$

26,433

 

$

20,382

 

$

16,153

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

2,600

 

$

18,218

 

$

16,378

 

$

24,516

 

$

18,551

 

$

15,429

 

International

 

504

 

2,512

 

3,063

 

1,917

 

1,831

 

724

 

Total debt service written

 

$

3,104

 

$

20,730

 

$

19,441

 

$

26,433

 

$

20,382

 

$

16,153

 

 

32


 

Assured Guaranty Re Ltd.

Consolidated GAAP Income Statements

(dollars in millions)

 

 

 

Quarter Ended
March 31

 

% Change
versus

 

 

 

2005

 

2004

 

1Q-04

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

Gross written premiums

 

$

52.8

 

$

(47.4

)

NMF

 

Net written premiums

 

50.5

 

(54.4

)

NMF

 

 

 

 

 

 

 

 

 

Net earned premiums

 

17.0

 

48.7

 

-65

%

 

 

 

 

 

 

 

 

Net investment income

 

9.8

 

11.6

 

-16

%

Other income

 

0.3

 

0.6

 

-50

%

Total revenues

 

$

27.1

 

$

60.9

 

-56

%

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(7.6

)

15.0

 

NMF

 

Profit commission expense

 

1.0

 

5.2

 

-81

%

Acquisition costs

 

2.2

 

3.9

 

-44

%

Other operating expenses

 

2.1

 

1.8

 

17

%

Total expenses

 

$

(2.3

)

$

25.8

 

NMF

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

29.4

 

35.1

 

-16

%

 

 

 

 

 

 

 

 

Total provision for income taxes

 

4.2

 

5.4

 

-22

%

 

 

 

 

 

 

 

 

Operating income  (b)

 

$

25.2

 

$

29.7

 

-15

%

 

 

 

 

 

 

 

 

After-tax net realized gains on investments

 

1.4

 

—

 

NMF

 

After-tax unrealized losses on derivative instruments

 

(1.7

)

(3.4

)

50

%

 

 

 

 

 

 

 

 

Net income

 

$

24.9

 

$

26.4

 

-6

%

 

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

 

33


 

Assured Guaranty Re Ltd.

Consolidated GAAP Balance Sheets

(dollars in millions)

 

 

 

As of

 

 

 

March 31,
2005

 

December 31,
2004

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Fixed maturity securities, at fair value

 

$

904.6

 

$

785.7

 

Short-term investments, at cost which approximates fair value

 

23.4

 

103.3

 

Total investments

 

928.0

 

889.0

 

 

 

 

 

 

 

Cash and cash equivalents

 

4.8

 

3.4

 

Accrued investment income

 

7.8

 

7.4

 

Deferred acquisition costs

 

52.4

 

46.0

 

Premiums receivable

 

27.7

 

56.9

 

Prepaid reinsurance premiums

 

8.3

 

9.1

 

Reinsurance recoverable on ceded losses

 

88.7

 

88.4

 

Deferred tax asset

 

17.3

 

17.9

 

Current income tax receivable

 

2.8

 

4.9

 

Unrealized gains on derivative financial instruments

 

12.4

 

14.3

 

Funds held under reinsurance contracts

 

5.7

 

5.7

 

Other assets

 

1.9

 

4.2

 

Total assets

 

$

1,157.9

 

$

1,147.3

 

 

 

 

 

 

 

Liabilities and shareholder’s equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Unearned premium reserves

 

$

228.2

 

$

195.5

 

Reserves for losses and loss adjustment expenses

 

111.9

 

112.3

 

Profit commissions payable

 

39.7

 

57.5

 

Reinsurance balances payable

 

10.5

 

13.1

 

Funds held by Company under reinsurance contracts

 

51.6

 

50.0

 

Other liabilities

 

13.4

 

25.9

 

Total liabilities

 

455.3

 

454.3

 

 

 

 

 

 

 

Shareholder’s equity

 

 

 

 

 

Common stock

 

1.4

 

1.4

 

Additional paid-in capital

 

388.0

 

388.0

 

Unearned stock grant compensation

 

(1.6

)

(1.1

)

Retained earnings

 

301.9

 

280.9

 

Accumulated other comprehensive income

 

12.9

 

23.8

 

Total shareholder’s equity

 

702.6

 

693.0

 

 

 

 

 

 

 

Total liabilities and shareholder’s equity

 

$

1,157.9

 

$

1,147.3

 

 

34


 

Assured Guaranty Re Ltd.

Loss and LAE Reserves by Segment, Type of Reserve and by Segment and Type of Reserve

(dollars in millions)

 

 

 

As of

 

As of

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 

 

 

 

 

 

 

Loss and LAE reserves by segment:

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial guaranty direct

 

$

2.9

 

$

4.2

 

 

 

 

 

 

 

 

 

Financial guaranty reinsurance

 

5.0

 

4.1

 

 

 

 

 

 

 

 

 

Mortgage guaranty

 

11.2

 

11.2

 

 

 

 

 

 

 

 

 

Other

 

92.8

 

92.8

 

 

 

 

 

 

 

 

 

Total

 

$

111.9

 

$

112.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 

 

 

 

 

 

 

Loss and LAE reserves by type:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

17.7

 

$

14.9

 

 

 

 

 

 

 

 

 

IBNR

 

85.1

 

88.8

 

 

 

 

 

 

 

 

 

Portfolio

 

9.1

 

8.6

 

 

 

 

 

 

 

 

 

Total

 

$

111.9

 

$

112.3

 

 

 

 

 

 

 

 

 

 

 

 

As of March 31, 2005

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance

 

Guaranty

 

Guaranty

 

Other

 

Total

 

By segment and type of loss and LAE reserve:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

—

 

$

0.8

 

$

0.7

 

$

1.5

 

$

16.2

 

$

17.7

 

IBNR

 

—

 

—

 

8.5

 

8.5

 

76.6

 

85.1

 

Portfolio

 

2.9

 

4.2

 

2.0

 

9.1

 

—

 

9.1

 

Total

 

$

2.9

 

$

5.0

 

$

11.2

 

$

19.1

 

$

92.8

 

$

111.9

 

 

 

 

As of December 31, 2004

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance

 

Guaranty

 

Guaranty

 

Other

 

Total

 

By segment and type of loss and LAE reserve:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Case

 

$

—

 

$

1.6

 

$

0.8

 

$

2.4

 

$

12.5

 

$

14.9

 

IBNR

 

—

 

—

 

8.5

 

8.5

 

80.3

 

88.8

 

Portfolio

 

4.2

 

2.5

 

1.9

 

8.6

 

—

 

8.6

 

Total

 

$

4.2

 

$

4.1

 

$

11.2

 

$

19.5

 

$

92.8

 

$

112.3

 

 

35


 

Assured Guaranty Re Ltd.

Financial Guaranty Profile (1 of 3 )

(dollars in millions)

 

 

 

As of March 31, 2005:

 

Sector

 

Net Par
Outstanding

 

%

 

Avg. Rating (7)

 

Public finance

 

 

 

 

 

 

 

General obligation

 

$

3,502

 

15.3

%

A+

 

Healthcare

 

2,806

 

12.2

%

A+

 

Municipal utilities

 

2,719

 

11.8

%

AA-

 

Tax backed

 

2,436

 

10.6

%

AA-

 

Transportation

 

1,245

 

5.4

%

A+

 

Investor-owned utilities

 

540

 

2.4

%

A-

 

Other public finance (1)

 

323

 

1.4

%

A-

 

Structured municipal (2)

 

267

 

1.2

%

AAA

 

Housing

 

229

 

1.0

%

A+

 

Higher education

 

167

 

0.7

%

AA-

 

Total public finance

 

14,234

 

62.0

%

A+

 

 

 

 

 

 

 

 

 

Structured finance

 

 

 

 

 

 

 

Mortgage-backed & home equity

 

3,874

 

16.9

%

AA-

 

CDOs (3)

 

3,001

 

13.1

%

AAA

 

Other structured finance (4)

 

782

 

3.4

%

A+

 

Commercial receivables (5)

 

664

 

2.9

%

A-

 

Consumer receivables (6)

 

372

 

1.6

%

BBB

 

Single name corporate CDS

 

31

 

0.1

%

A+

 

Total structured finance

 

8,725

 

38.0

%

AA-

 

 

 

 

 

 

 

 

 

Total net par outstanding

 

$

22,959

 

100.0

%

AA-

 

 

 

 

 

 

 

 

 

Total debt service outstanding

 

$

33,042

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage guaranty risk in force

 

$

2,582

 

NA

 

NA

 

 

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

 

(2).  Structured municipal: includes excess of loss reinsurance on portfolios of municipal credits where the Company attached in

excess of the AAA rating level.

 

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

 

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

 

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

 

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

 

36


 

Assured Guaranty Re Ltd.

Financial Guaranty Profile (2 of 3 )

(dollars in millions)

 

Distribution by ratings of financial guaranty portfolio

 

 

 

March 31, 2005

 

December 31, 2004

 

Ratings (1)

 

Net Par
Outstanding

 

%

 

Net Par
Outstanding

 

%

 

AAA/Aaa

 

$

7,143

 

31.1

%

$

6,971

 

32.3

%

AA/Aa

 

4,349

 

18.9

%

3,887

 

18.0

%

A/A

 

7,792

 

33.9

%

7,652

 

35.4

%

BBB/Baa

 

3,609

 

15.7

%

3,015

 

14.0

%

Below investment grade

 

67

 

0.3

%

66

 

0.3

%

Total exposures

 

$

22,959

 

100

%

$

21,590

 

100

%

 

Distribution by ratings of CDO exposure

 

 

 

March 31, 2005

 

December 31, 2004

 

Ratings (1)

 

Net Par
Outstanding

 

%

 

Net Par
Outstanding

 

%

 

AAA/Aaa

 

$

2,651

 

88.3

%

$

2,506

 

88.5

%

AA/Aa

 

267

 

8.9

%

241

 

8.5

%

A/A

 

19

 

0.6

%

19

 

0.7

%

BBB/Baa

 

48

 

1.6

%

49

 

1.7

%

Below investment grade

 

16

 

0.5

%

16

 

0.6

%

Total exposures

 

$

3,001

 

100

%

$

2,831

 

100

%

 

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

 

37


 

Assured Guaranty Re Ltd.

Financial Guaranty Profile (3 of 3 )

(dollars in millions)

 

Geographic distribution of financial guaranty portfolio, as of March 31, 2005

 

U.S.:

 

Net Par
Outstanding

 

%

 

California

 

$

1,838

 

8.0

%

New York

 

1,628

 

7.1

%

Texas

 

741

 

3.2

%

Massachusetts

 

665

 

2.9

%

Ohio

 

564

 

2.5

%

New Jersey

 

538

 

2.3

%

Florida

 

533

 

2.3

%

Illinois

 

510

 

2.2

%

Washington

 

500

 

2.2

%

Pennsylvania

 

492

 

2.1

%

Other states

 

5,044

 

22.0

%

Mortgage and structured (multiple states)

 

7,763

 

33.8

%

Total U.S.

 

$

20,817

 

90.7

%

 

 

 

 

 

 

 

 

Net Par

 

 

 

International:

 

Outstanding

 

%

 

United Kingdom

 

$

1,287

 

5.6

%

Germany

 

171

 

0.7

%

Australia

 

109

 

0.5

%

Switzerland

 

64

 

0.3

%

Turkey

 

52

 

0.2

%

Other

 

459

 

2.0

%

Total International

 

$

2,142

 

9.3

%

 

 

 

 

 

 

Total exposures

 

$

22,959

 

100

%

 

 

 

 

 

 

 

 

1Q 2005

 

1Q 2004

 

Gross par written:

 

 

 

 

 

U.S.

 

$

3,341

 

$

1,194

 

International

 

221

 

367

 

Total

 

$

3,562

 

$

1,561

 

 

 

 

 

 

 

Gross premium written:

 

 

 

 

 

U.S.

 

$

33.0

 

$

(66.4

)

International

 

19.8

 

19.0

 

Total

 

$

52.8

 

$

(47.4

)

 

38


 

Assured Guaranty Re Ltd.

Capital and Claims Paying Resources (1)

(dollars in millions)

 

 

 

As of:

 

 

 

March 31,

 

December 31,

 

 

 

2005

 

2004

 

Statutory surplus and reserves

 

 

 

 

 

 

 

 

 

 

 

Unearned premium reserve (2)

 

$

220

 

$

186

 

Contingency reserve

 

—

 

—

 

Policyholders’ surplus

 

615

 

596

 

Loss & loss adjustment expense reserves

 

219

 

103

 

Total policyholders’ surplus & reserves

 

$

1,054

 

$

885

 

 

 

 

 

 

 

Claims paying resources

 

 

 

 

 

Policyholders’ surplus

 

$

615

 

$

596

 

Contingency reserve

 

—

 

—

 

Statutory capital

 

615

 

596

 

Unearned premium reserve(2)

 

220

 

186

 

Loss & loss adjustment expense reserves

 

219

 

103

 

Total policyholders’ surplus & reserves

 

1,054

 

885

 

Present value of installment premium

 

134

 

132

 

Standby line of credit/stop loss

 

—

 

—

 

Total claims paying resources

 

$

1,188

 

$

1,017

 

 

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

 

(2).  Unearned premium reserve for AGR is GAAP based and net of prepaid reinsurance premiums.

 

39


 

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

 

(a) PVP, which is a non-GAAP financial measure, represents gross premiums and fees related to financial guaranty and mortgage guaranty contracts written in the current period, including upfront and installment premiums received on contracts written in the current period and the present value of estimated future installment premiums, discounted at 6% per year.   We use 6% as the present value discount because it is the approximate taxable equivalent yield on our investment portfolio for the periods presented.  Present value of installment premiums in-force, which is a non-GAAP financial measure, represents our future premiums on our in-force book of installment premium business in our financial guaranty direct and financial guaranty reinsurance segments. It is calculated net of reinsurance ceded and using a discount rate of 6%. We believe PVP and Present value of installment premiums in-force are useful measures for management, equity analysts and investors because they permit the evaluation of the value of new business production for Assured Guaranty by taking into account the value of installment premiums on new contracts underwritten in a reporting period, which the GAAP gross premiums written does not adequately measure.

 

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

 

(c) Adjusted book value, which is a non-GAAP financial measure, is derived by beginning with shareholder’s equity (book value) and adding or subtracting the after-tax value of: the financial guaranty and mortgage guaranty net unearned premium reserve; deferred acquisition costs and the present value of estimated net future installment premiums (discounted at 6%).  The adjustments described above will not be realized until future periods and may differ materially from the amounts used in determining adjusted book value.  Management, investors and analysts use the calculation of adjusted book value to evaluate the net present value of the Company’s in-force premium and capital base.

 

40


 

 

 

 

 

Contacts:

 

 

 

 

 

Equity investors and media

 

 

Sabra Purtill

 

 

Managing Director, Investor Relations

 

 

(212) 408-6044

 

 

spurtill@assuredguaranty.com

 

 

 

 

 

Chris McNamee

 

 

Assistant Vice President, Investor Relations

 

 

(212) 261-5509

 

 

cmcnamee@assuredguaranty.com

 

 

 

 

 

Fixed income investors

Assured Guaranty Ltd.

 

Patrick Early

30 Woodbourne Avenue

 

Director, Fixed Income Investor Relations

Hamilton HM 08 Bermuda

 

(212) 408 6043

www.assuredguaranty.com

 

pearly@assuredguaranty.com

 

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