EX-99.2 3 a06-3902_1ex99d2.htm EXHIBIT 99

Exhibit 99.2

 

 

Assured Guaranty Ltd.

Financial Supplement

Fourth Quarter 2005

December 31, 2005

 

Table of Contents

 

Page

Assured Guaranty Ltd.

 

 

 

Selected Financial Highlights

 

1

 

Consolidated GAAP Income Statements

 

2

 

Consolidated GAAP Balance Sheets

 

3

 

Segment Consolidation

 

4-5

 

Financial Guaranty Direct Segment

 

6-7

 

Financial Guaranty Reinsurance Segment

 

8-9

 

Mortgage Guaranty Segment

 

10

 

Other Segment

 

11

 

Loss and LAE Reserves

 

12

 

Investment Portfolio

 

13

 

Financial Guaranty Profile

 

14-16

 

Non-Investment Grade Exposures

 

17

 

Closely Monitored Credits

 

18

 

Largest Exposures by Sector

 

19-20

 

Consolidated Capital and Claims Paying Resources

 

21

 

Summary Financial and Statistical Data

 

22

 

This supplement should be read in conjunction with documents filed by Assured Guaranty Ltd. (the “Company”) with the Securities and Exchange Commission, including our 10-Q’s dated March 31, 2005, June 30, 2005 and September 30, 2005 and our 10-K for the year ended December 31, 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, including its statements regarding PVP and present value of estimated future installment premiums, could be affected by a significant reduction in the amount of reinsurance ceded by one or more of our principal ceding companies, rating agency action such as a ratings downgrade, difficulties with the execution of the Company’s business strategy, contract cancellations, developments in the world’s financial and capital markets, more severe or frequent losses associated with products affecting the adequacy of the Company’s loss reserve, changes in regulation or tax laws, governmental actions, 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 and shares in millions except per share amounts)

 

 

 

Quarter Ended

 

% Change

 

Year Ended

 

% Change

 

 

 

December 31,

 

versus

 

December 31,

 

versus

 

 

 

2005

 

2004

 

4Q-04

 

2005

 

2004

 

YTD 2004

 

Gross written premiums (GWP) analysis:

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

83.9

 

$

82.2

 

2

%

$

286.3

 

$

289.6

 

-1

%

Less: Installment premium PVP

 

57.2

 

52.4

 

9

%

183.6

 

164.1

 

12

%

Upfront financial guaranty & mortgage guaranty GWP

 

26.7

 

29.8

 

-10

%

102.7

 

125.5

 

-18

%

Less: Upfront premium due to novations

 

—

 

—

 

—

 

18.4

 

—

 

NMF

 

Plus: Installment GWP

 

30.9

 

32.2

 

-4

%

135.6

 

140.0

 

-3

%

Financial guaranty & mortgage guaranty GWP

 

57.6

 

62.0

 

-7

%

219.9

 

265.5

 

-17

%

Plus: Other segment GWP

 

0.4

 

3.8

 

-89

%

32.2

 

(74.6

)

NMF

 

Total GWP

 

$

58.0

 

$

65.8

 

-12

%

$

252.1

 

$

190.9

 

32

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

42.1

 

$

48.3

 

-13

%

$

192.3

 

$

182.8

 

5

%

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

 

(1.0

)

0.6

 

NMF

 

1.8

 

7.7

 

-77

%

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

 

4.6

 

11.8

 

-61

%

(3.3

)

34.0

 

NMF

 

Operating income  (b)

 

$

38.5

 

$

35.9

 

7

%

$

193.9

 

$

141.1

 

37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value

 

$

1,665.4

 

$

1,527.6

 

9

%

 

 

 

 

 

 

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

 

283.5

 

246.4

 

15

%

 

 

 

 

 

 

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

 

327.3

 

297.1

 

10

%

 

 

 

 

 

 

Adjusted book value (c) (2)

 

$

2,276.2

 

$

2,071.1

 

10

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ROE, excluding AOCI

 

10.5

%

13.5

%

 

 

12.5

%

13.0

%

 

 

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

 

-0.3

%

0.2

%

 

 

0.1

%

0.6

%

 

 

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

 

1.2

%

3.3

%

 

 

-0.2

%

2.4

%

 

 

Operating ROE, excluding AOCI (b)

 

9.6

%

10.0

%

 

 

12.6

%

10.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per diluted share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

0.56

 

$

0.64

 

-13

%

$

2.58

 

$

2.44

 

6

%

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

 

(0.01

)

0.01

 

NMF

 

0.02

 

0.10

 

-80

%

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

 

0.06

 

0.16

 

-63

%

(0.04

)

0.45

 

NMF

 

Operating income (b)

 

$

0.52

 

$

0.48

 

8

%

$

2.60

 

$

1.88

 

38

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value

 

$

22.28

 

$

20.19

 

10

%

 

 

 

 

 

 

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

 

3.79

 

3.26

 

16

%

 

 

 

 

 

 

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

 

4.38

 

3.93

 

11

%

 

 

 

 

 

 

Adjusted book value (c) (2)

 

$

30.45

 

$

27.38

 

11

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional information:

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding at the end of period

 

74.8

 

75.7

 

-1

%

74.8

 

75.7

 

-1

%

Weighted average basic shares outstanding

 

73.8

 

74.9

 

-1

%

74.0

 

75.0

 

-1

%

Weighted average diluted shares outstanding

 

74.5

 

75.0

 

-1

%

74.5

 

75.0

 

-1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net debt service outstanding

 

$

145,670

 

$

136,120

 

7

%

 

 

 

 

 

 

Consolidated net par outstanding

 

102,449

 

95,592

 

7

%

 

 

 

 

 

 

Consolidated claims-paying resources

 

3,063

 

2,645

 

16

%

 

 

 

 

 

 

 

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

(2) In the fourth quarter of 2005, the Company amended the adjusted book value calculation to include the portion of deferred acquisition costs related to operating expenses.

 

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

 


 

Assured Guaranty Ltd.

Consolidated GAAP Income Statements

(in millions, except per share amounts)

 

 

 

Quarter Ended

 

% Change

 

Year Ended

 

% Change

 

 

 

December 31,

 

versus

 

December 31,

 

versus

 

 

 

2005

 

2004

 

4Q-04

 

2005

 

2004

 

YTD 2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

58.0

 

$

65.8

 

-12

%

$

252.1

 

$

190.9

 

32

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net written premiums

 

57.5

 

61.4

 

-6

%

217.3

 

79.6

 

173

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

47.8

 

57.1

 

-16

%

198.7

 

187.9

 

6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

25.7

 

23.7

 

8

%

96.8

 

94.8

 

2

%

Other income

 

—

 

0.3

 

-100

%

0.2

 

0.8

 

-75

%

Total revenues

 

$

73.5

 

$

81.1

 

-9

%

$

295.7

 

$

283.5

 

4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(6.2

)

0.2

 

NMF

 

(75.6

)

(32.0

)

136

%

Profit commission expense

 

6.5

 

4.2

 

55

%

12.9

 

15.5

 

-17

%

Acquisition costs

 

10.4

 

15.1

 

-31

%

45.3

 

50.9

 

-11

%

Other operating expenses

 

15.1

 

14.5

 

4

%

59.0

 

67.8

 

-13

%

Other expenses

 

4.0

 

3.4

 

18

%

17.3

 

12.3

 

41

%

Total expenses

 

$

29.7

 

$

37.4

 

-21

%

$

58.9

 

$

114.6

 

-49

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before provision for income taxes

 

43.8

 

43.7

 

0

%

236.8

 

168.9

 

40

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total provision for income taxes

 

5.3

 

7.8

 

-32

%

42.9

 

27.8

 

54

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (b)

 

$

38.5

 

$

35.9

 

7

%

$

193.9

 

$

141.1

 

37

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

After-tax net realized (losses) gains on investments

 

(1.0

)

0.6

 

NMF

 

1.8

 

7.7

 

-77

%

After-tax unrealized gains (losses) on derivative instruments

 

4.6

 

11.8

 

-61

%

(3.3

)

34.0

 

NMF

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

42.1

 

$

48.3

 

-13

%

$

192.3

 

$

182.8

 

5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Per diluted share

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (b)

 

$

0.52

 

$

0.48

 

8

%

$

2.60

 

$

1.88

 

38

%

After-tax net realized (losses) gains on investments

 

(0.01

)

0.01

 

NMF

 

0.02

 

0.10

 

-80

%

After-tax unrealized gains (losses) on derivative instruments

 

0.06

 

0.16

 

-63

%

(0.04

)

0.45

 

NMF

 

Net income

 

$

0.56

 

$

0.64

 

-13

%

$

2.58

 

$

2.44

 

6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding (in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic shares outstanding

 

73.8

 

74.9

 

-1

%

74.0

 

75.0

 

-1

%

Plus: effect of options

 

0.4

 

—

 

NMF

 

0.2

 

—

 

NMF

 

Plus: effect of restricted stock

 

0.3

 

0.1

 

200

%

0.3

 

—

 

NMF

 

Diluted shares outstanding

 

74.5

 

75.0

 

-1

%

74.5

 

75.0

 

-1

%

 

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

 

Some amounts may not foot due to rounding.

 

3


 

Assured Guaranty Ltd.

Consolidated GAAP Balance Sheets

(dollars in millions)

 

 

 

As of :

 

 

 

December 31,

 

December 31,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Assets

 

 

 

 

 

Fixed maturity securities, at fair value

 

$

2,134.0

 

$

1,965.1

 

Short-term investments, at cost which approximates fair value

 

115.8

 

175.8

 

Total investments

 

2,249.8

 

2,140.9

 

 

 

 

 

 

 

Cash and cash equivalents

 

6.2

 

17.0

 

Accrued investment income

 

22.7

 

21.9

 

Deferred acquisition costs

 

193.4

 

186.4

 

Prepaid reinsurance premiums

 

12.5

 

15.2

 

Reinsurance recoverable on ceded losses

 

12.4

 

120.2

 

Premiums receivable

 

33.0

 

40.8

 

Goodwill

 

85.4

 

85.4

 

Unrealized gains on derivative financial instruments

 

40.4

 

43.9

 

Other assets

 

17.7

 

22.3

 

Total assets

 

$

2,673.5

 

$

2,694.0

 

 

 

 

 

 

 

Liabilities and shareholders’ equity

 

 

 

 

 

Liabilities

 

 

 

 

 

Unearned premium reserves

 

$

537.1

 

$

521.3

 

Reserves for losses and loss adjustment expenses

 

115.2

 

226.5

 

Profit commissions payable

 

53.0

 

61.7

 

Reinsurance balances payable

 

3.7

 

25.1

 

Current income taxes

 

0.6

 

—

 

Deferred income taxes

 

25.1

 

40.1

 

Funds held by Company under reinsurance contracts

 

19.2

 

50.8

 

Long-term debt

 

197.3

 

197.4

 

Other liabilities

 

56.7

 

43.7

 

Total liabilities

 

1,008.1

 

1,166.4

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock

 

0.7

 

0.8

 

Treasury stock

 

—

 

(7.9

)

Additional paid-in capital

 

882.0

 

894.2

 

Unearned stock grant compensation

 

(14.8

)

(6.7

)

Retained earnings

 

751.6

 

568.3

 

Accumulated other comprehensive income

 

45.8

 

79.0

 

Total shareholders’ equity

 

1,665.4

 

1,527.6

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

2,673.5

 

$

2,694.0

 

 

4


 

Assured Guaranty Ltd.

Segment Consolidation

(dollars in millions)

 

 

 

Quarter Ended December 31, 2005

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance(1)

 

Guaranty

 

Guaranty

 

Other

 

Total

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

10.6

 

$

26.3

 

$

—

 

$

36.9

 

 

 

$

36.9

 

Structured finance

 

35.3

 

11.7

 

—

 

47.0

 

 

 

47.0

 

Total PVP

 

$

46.0

 

$

37.9

 

$

—

 

$

83.9

 

 

 

$

83.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

26.6

 

$

28.5

 

$

2.7

 

$

57.6

 

$

0.4

 

$

58.0

 

Net written premiums

 

26.3

 

28.5

 

2.7

 

57.5

 

—

 

57.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

19.8

 

23.5

 

4.6

 

47.8

 

—

 

47.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(1.7

)

(0.4

)

(4.2

)

(6.2

)

—

 

(6.2

)

Profit commission expense

 

—

 

1.4

 

5.1

 

6.5

 

—

 

6.5

 

Acquisition costs

 

1.6

 

8.3

 

0.4

 

10.4

 

—

 

10.4

 

Operating expenses

 

9.2

 

5.1

 

0.8

 

15.1

 

—

 

15.1

 

Total underwriting expenses

 

$

9.2

 

$

14.4

 

$

2.2

 

$

25.8

 

$

—

 

$

25.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

10.6

 

$

9.1

 

$

2.4

 

$

22.0

 

$

—

 

$

22.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

-8.6

%

-1.7

%

-92.1

%

-13.0

%

 

 

-13.0

%

Expense ratio

 

54.8

%

63.1

%

139.6

%

67.0

%

 

 

67.0

%

Combined ratio

 

46.2

%

61.4

%

47.5

%

54.0

%

 

 

54.0

%

 

 

 

Quarter Ended December 31, 2004

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance(1)

 

Guaranty

 

Guaranty

 

Other

 

Total

 

PVP:

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

5.7

 

$

26.4

 

$

—

 

$

32.1

 

 

 

$

32.1

 

Structured finance

 

33.9

 

9.3

 

6.9

 

50.1

 

 

 

50.1

 

Total PVP

 

$

39.6

 

$

35.7

 

$

6.9

 

$

82.2

 

 

 

$

82.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

21.3

 

$

36.5

 

$

4.2

 

$

62.0

 

$

3.8

 

$

65.8

 

Net written premiums

 

20.9

 

36.3

 

4.2

 

61.4

 

—

 

61.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

15.5

 

36.5

 

5.2

 

57.1

 

—

 

57.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

1.0

 

1.6

 

(2.0

)

0.6

 

(0.4

)

0.2

 

Profit commission expense

 

—

 

0.9

 

3.5

 

4.2

 

—

 

4.2

 

Acquisition costs

 

1.6

 

13.0

 

0.6

 

15.1

 

—

 

15.1

 

Operating expenses

 

8.6

 

4.8

 

1.0

 

14.5

 

—

 

14.5

 

Total underwriting expenses

 

$

11.3

 

$

20.2

 

$

3.2

 

$

34.4

 

$

(0.4

)

$

34.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

4.2

 

$

16.2

 

$

2.0

 

$

22.7

 

$

0.4

 

$

23.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

6.5

%

4.4

%

-37.8

%

1.1

%

 

 

0.3

%

Expense ratio

 

66.3

%

51.1

%

98.5

%

59.2

%

 

 

59.2

%

Combined ratio

 

72.8

%

55.5

%

60.7

%

60.3

%

 

 

59.5

%

 

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

 

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

 

5


 

Assured Guaranty Ltd.

Segment Consolidation

(dollars in millions)

 

 

 

Year Ended December 31, 2005

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance(1)

 

Guaranty

 

Guaranty

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

24.9

 

$

91.3

 

$

—

 

$

116.2

 

 

 

$

116.2

 

Structured finance

 

120.6

 

36.5

 

13.1

 

170.1

 

 

 

170.1

 

Total PVP

 

$

145.5

 

$

127.8

 

$

13.1

 

$

286.3

 

 

 

$

286.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

96.2

 

$

98.0

 

$

25.7

 

$

219.9

 

$

32.2

 

$

252.1

 

Net written premiums

 

93.9

 

97.8

 

25.7

 

217.3

 

—

 

217.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

74.5

 

105.6

 

18.6

 

198.7

 

—

 

198.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(2.2

)

(67.3

)

(3.7

)

(73.2

)

(2.4

)

(75.6

)

Profit commission expense

 

—

 

4.8

 

8.0

 

12.9

 

—

 

12.9

 

Acquisition costs

 

6.3

 

36.9

 

2.0

 

45.3

 

—

 

45.3

 

Operating expenses

 

36.9

 

19.5

 

2.7

 

59.0

 

—

 

59.0

 

Total underwriting expenses

 

$

41.0

 

$

(6.1

)

$

9.0

 

$

44.0

 

$

(2.4

)

$

41.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

33.5

 

$

111.7

 

$

9.6

 

$

154.7

 

$

2.4

 

$

157.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

-2.9

%

-63.8

%

-19.9

%

-36.8

%

 

 

-38.0

%

Expense ratio

 

57.9

%

58.0

%

68.1

%

58.9

%

 

 

58.9

%

Combined ratio

 

55.0

%

-5.8

%

48.2

%

22.1

%

 

 

20.9

%

 

 

 

Year Ended December 31, 2004

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

 

 

Direct

 

Reinsurance(1)

 

Guaranty

 

Guaranty

 

Other

 

Total

 

PVP:

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

8.6

 

$

137.3

 

$

—

 

$

145.9

 

 

 

$

145.9

 

Structured finance

 

61.1

 

55.5

 

27.1

 

143.8

 

 

 

143.8

 

Total PVP

 

$

69.7

 

$

192.8

 

$

27.1

 

$

289.6

 

 

 

$

289.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

80.8

 

$

160.3

 

$

24.4

 

$

265.5

 

$

(74.6

)

$

190.9

 

Net written premiums

 

77.7

 

160.1

 

24.4

 

262.2

 

(182.5

)

79.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

88.8

 

114.4

 

33.7

 

236.8

 

(48.9

)

187.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

14.8

 

15.4

 

(11.9

)

18.3

 

(50.3

)

(32.0

)

Profit commission expense

 

—

 

1.1

 

14.1

 

15.2

 

0.3

 

15.5

 

Acquisition costs

 

4.5

 

38.8

 

3.7

 

47.0

 

3.9

 

50.9

 

Operating expenses (2)

 

31.7

 

17.4

 

3.8

 

52.6

 

3.9

 

56.5

 

Total underwriting expenses

 

$

51.0

 

$

72.7

 

$

9.7

 

$

133.1

 

$

(42.2

)

$

90.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain (loss)

 

$

37.7

 

$

41.7

 

$

24.0

 

$

103.7

 

$

(6.7

)

$

97.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

16.7

%

13.5

%

-35.2

%

7.7

%

102.8

%

-17.0

%

Expense ratio

 

40.8

%

50.1

%

64.1

%

48.5

%

-16.6

%

65.4

%

Combined ratio

 

57.5

%

63.6

%

28.9

%

56.2

%

86.2

%

48.4

%

 

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

 

(2) YTD 2004 excludes $11.3 million of operating expenses, related to accelerated vesting of stock awards at the IPO date.

 

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

 

6


 

Assured Guaranty Ltd.

Financial Guaranty Direct Segment

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

YTD 2004

 

YTD 2005

 

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

 

$

7.9

 

$

14.4

 

$

7.9

 

$

39.6

 

$

37.5

 

$

22.7

 

$

39.4

 

$

46.0

 

$

69.7

 

$

145.5

 

Less: Present value of installment premiums (a)

 

7.9

 

14.4

 

7.9

 

33.9

 

35.8

 

17.6

 

33.0

 

38.7

 

64.0

 

125.1

 

Upfront gross written premiums (GWP)

 

—

 

—

 

—

 

5.7

 

1.7

 

5.1

 

6.3

 

7.3

 

5.7

 

20.3

 

Plus: Installment GWP

 

25.6

 

17.7

 

16.1

 

15.6

 

22.1

 

15.8

 

18.6

 

19.3

 

75.1

 

75.8

 

Financial guaranty direct GWP

 

$

25.6

 

$

17.7

 

$

16.1

 

$

21.3

 

$

23.8

 

$

20.9

 

$

24.9

 

$

26.6

 

$

80.8

 

$

96.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

25.6

 

$

17.7

 

$

16.1

 

$

21.3

 

$

23.8

 

$

20.9

 

$

24.9

 

$

26.6

 

$

80.8

 

$

96.2

 

Net written premiums

 

25.3

 

17.3

 

14.1

 

20.9

 

23.1

 

20.4

 

24.2

 

26.3

 

77.7

 

93.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

—

 

—

 

—

 

0.1

 

0.1

 

0.4

 

0.7

 

1.5

 

0.1

 

2.7

 

Structured finance

 

40.7

 

16.1

 

16.5

 

15.4

 

20.3

 

15.6

 

17.6

 

18.3

 

88.7

 

71.8

 

Total net earned premiums

 

40.7

 

16.1

 

16.5

 

15.5

 

20.4

 

16.0

 

18.3

 

19.8

 

88.8

 

74.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

13.4

 

1.6

 

(1.2

)

1.0

 

(1.5

)

5.0

 

(4.0

)

(1.7

)

14.8

 

(2.2

)

Profit commission expense

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

Acquisition costs

 

1.4

 

0.1

 

1.4

 

1.6

 

1.5

 

1.6

 

1.6

 

1.6

 

4.5

 

6.3

 

Operating expenses (1)

 

5.5

 

9.1

 

8.5

 

8.6

 

9.4

 

8.4

 

9.9

 

9.2

 

31.7

 

36.9

 

Total expenses

 

$

20.3

 

$

10.8

 

$

8.7

 

$

11.3

 

$

9.4

 

$

15.0

 

$

7.5

 

$

9.2

 

$

51.0

 

$

41.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

20.4

 

$

5.3

 

$

7.8

 

$

4.2

 

$

11.0

 

$

1.1

 

$

10.8

 

$

10.6

 

$

37.7

 

$

33.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

32.9

%

9.9

%

-7.3

%

6.5

%

-7.1

%

31.3

%

-21.9

%

-8.6

%

16.7

%

-2.9

%

Expense ratio

 

17.0

%

57.1

%

59.8

%

66.3

%

53.1

%

62.2

%

62.9

%

54.8

%

40.8

%

57.9

%

Combined ratio

 

49.9

%

67.0

%

52.5

%

72.8

%

46.0

%

93.5

%

41.0

%

46.2

%

57.5

%

55.0

%

 

(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.

 

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

 

7


 

Assured Guaranty Ltd.

Financial Guaranty Direct Segment

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

YTD 2004

 

YTD 2005

 

PVP (a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

—

 

$

2.9

 

$

—

 

$

5.7

 

$

1.6

 

$

6.3

 

$

6.3

 

$

10.6

 

$

8.6

 

$

24.9

 

Structured finance

 

7.9

 

11.4

 

7.9

 

33.9

 

35.9

 

16.4

 

33.0

 

35.3

 

61.1

 

120.6

 

Total

 

$

7.9

 

$

14.4

 

$

7.9

 

$

39.6

 

$

37.5

 

$

22.7

 

$

39.4

 

$

46.0

 

$

69.7

 

$

145.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

4.2

 

$

11.1

 

$

7.9

 

$

34.6

 

$

32.5

 

$

21.2

 

$

31.6

 

$

27.5

 

$

57.8

 

$

112.9

 

International

 

3.7

 

3.2

 

—

 

5.0

 

4.9

 

1.5

 

7.7

 

18.4

 

11.9

 

32.6

 

Total

 

$

7.9

 

$

14.4

 

$

7.9

 

$

39.6

 

$

37.5

 

$

22.7

 

$

39.4

 

$

46.0

 

$

69.7

 

$

145.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par written:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

—

 

$

246

 

$

508

 

$

194

 

$

77

 

$

386

 

$

224

 

$

748

 

$

948

 

$

1,435

 

Structured finance

 

1,488

 

2,444

 

854

 

7,263

 

1,438

 

2,137

 

4,987

 

7,170

 

12,049

 

15,733

 

Total

 

$

1,488

 

$

2,691

 

$

1,361

 

$

7,457

 

$

1,515

 

$

2,524

 

$

5,212

 

$

7,918

 

$

12,997

 

$

17,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

1,435

 

$

2,397

 

$

854

 

$

7,357

 

$

1,250

 

$

2,422

 

$

4,859

 

$

5,350

 

$

12,043

 

$

13,881

 

International

 

53

 

293

 

508

 

100

 

265

 

102

 

353

 

2,569

 

953

 

3,288

 

Total

 

$

1,488

 

$

2,691

 

$

1,361

 

$

7,457

 

$

1,515

 

$

2,524

 

$

5,212

 

$

7,918

 

$

12,997

 

$

17,169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

2,112

 

$

2,321

 

$

2,852

 

$

3,144

 

$

3,146

 

$

3,463

 

$

3,647

 

$

4,407

 

$

3,144

 

$

4,407

 

Structured finance

 

21,737

 

23,454

 

23,605

 

28,468

 

27,444

 

26,556

 

29,751

 

33,931

 

28,468

 

33,931

 

Total

 

$

23,849

 

$

25,775

 

$

26,457

 

$

31,612

 

$

30,590

 

$

30,019

 

$

33,397

 

$

38,338

 

$

31,612

 

$

38,338

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Present value of installment premiums in force: (a)

 

$

220.6

 

$

219.7

 

$

218.9

 

$

231.0

 

$

238.3

 

$

216.4

 

$

230.4

 

$

249.6

 

$

231.0

 

$

249.6

 

Unearned premium reserve net of ceded reinsurance

 

16.0

 

17.1

 

14.7

 

20.3

 

23.0

 

27.0

 

33.2

 

39.6

 

20.3

 

39.6

 

 

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

 

8


 

Assured Guaranty Ltd.

Financial Guaranty Reinsurance Segment (1)

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

YTD 2004

 

YTD 2005

 

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

 

$

78.1

 

$

40.1

 

$

38.9

 

$

35.7

 

$

32.1

 

$

35.2

 

$

22.5

 

$

37.9

 

$

192.8

 

$

127.8

 

Less: Present value of installment premiums (a)

 

40.0

 

17.2

 

14.5

 

11.6

 

12.1

 

20.7

 

7.2

 

18.5

 

83.3

 

58.5

 

Upfront gross written premiums (GWP)

 

38.1

 

22.9

 

24.5

 

24.1

 

20.0

 

14.6

 

15.3

 

19.4

 

109.5

 

69.2

 

Less: Upfront premium due to novations (4)

 

—

 

—

 

—

 

—

 

—

 

18.4

 

—

 

—

 

—

 

18.4

 

Plus: Installment GWP (2)

 

14.3

 

12.9

 

11.1

 

12.4

 

14.0

 

12.0

 

12.0

 

9.1

 

50.8

 

47.2

 

Financial guaranty reinsurance GWP

 

$

52.4

 

$

35.8

 

$

35.6

 

$

36.5

 

$

34.0

 

$

8.2

 

$

27.3

 

$

28.5

 

$

160.3

 

$

98.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

52.4

 

$

35.8

 

$

35.6

 

$

36.5

 

$

34.0

 

$

8.2

 

$

27.3

 

$

28.5

 

$

160.3

 

$

98.0

 

Net written premiums

 

52.4

 

35.8

 

35.6

 

36.3

 

34.0

 

8.0

 

27.3

 

28.5

 

160.1

 

97.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Scheduled net earned premiums

 

17.5

 

21.1

 

26.7

 

31.5

 

21.6

 

23.6

 

27.2

 

21.3

 

97.0

 

93.5

 

Net earned premiums from refundings

 

2.9

 

4.4

 

5.2

 

5.0

 

1.4

 

3.6

 

4.8

 

2.2

 

17.4

 

12.1

 

Total net earned premiums

 

20.4

 

25.5

 

31.9

 

36.5

 

23.0

 

27.2

 

32.0

 

23.5

 

114.4

 

105.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

3.9

 

(0.9

)

10.8

 

1.6

 

(7.1

)

(64.1

)

4.3

 

(0.4

)

15.4

 

(67.3

)

Profit commission expense

 

0.1

 

0.3

 

(0.2

)

0.9

 

—

 

2.3

 

1.1

 

1.4

 

1.1

 

4.8

 

Acquisition costs

 

7.1

 

6.7

 

12.1

 

13.0

 

8.1

 

9.5

 

11.0

 

8.3

 

38.8

 

36.9

 

Operating expenses (3)

 

3.0

 

5.0

 

4.7

 

4.8

 

4.4

 

5.7

 

4.3

 

5.1

 

17.4

 

19.5

 

Total expenses

 

$

14.1

 

$

11.1

 

$

27.4

 

$

20.2

 

$

5.4

 

$

(46.6

)

$

20.7

 

$

14.4

 

$

72.7

 

$

(6.1

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

6.3

 

$

14.4

 

$

4.5

 

$

16.2

 

$

17.6

 

$

73.8

 

$

11.3

 

$

9.1

 

$

41.7

 

$

111.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

19.1

%

-3.5

%

33.9

%

4.4

%

-30.9

%

-235.7

%

13.3

%

-1.7

%

13.5

%

-63.8

%

Expense ratio

 

50.0

%

47.1

%

51.9

%

51.1

%

54.3

%

64.3

%

51.4

%

63.1

%

50.1

%

58.0

%

Combined ratio

 

69.1

%

43.6

%

85.8

%

55.5

%

23.4

%

-171.4

%

64.7

%

61.4

%

63.6

%

-5.8

%

 

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

 

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

 

9


 

Assured Guaranty Ltd.

Financial Guaranty Reinsurance Segment (1)

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

YTD 2004

 

YTD 2005

 

PVP (a):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

45.8

 

$

31.2

 

$

33.9

 

$

26.4

 

$

29.0

 

$

15.8

 

$

20.2

 

$

26.3

 

$

137.3

 

$

91.3

 

Structured finance

 

32.3

 

8.9

 

5.0

 

9.3

 

3.1

 

19.4

 

2.3

 

11.7

 

55.5

 

36.5

 

Total

 

$

78.1

 

$

40.1

 

$

38.9

 

$

35.7

 

$

32.1

 

$

35.2

 

$

22.5

 

$

37.9

 

$

192.8

 

$

127.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par written:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

1,932

 

$

1,590

 

$

2,262

 

$

1,443

 

$

2,206

 

$

287

 

$

1,410

 

$

1,852

 

$

7,227

 

$

5,755

 

Structured finance

 

1,154

 

629

 

507

 

861

 

1,718

 

704

 

240

 

734

 

3,151

 

3,396

 

Total

 

$

3,086

 

$

2,219

 

$

2,769

 

$

2,304

 

$

3,924

 

$

991

 

$

1,650

 

$

2,586

 

$

10,378

 

$

9,151

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Par outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

51,806

 

$

52,061

 

$

52,926

 

$

51,324

 

$

52,579

 

$

51,039

 

$

51,110

 

$

51,263

 

$

51,324

 

$

51,263

 

Structured finance

 

13,935

 

13,514

 

13,084

 

12,656

 

13,225

 

13,809

 

12,812

 

12,848

 

12,656

 

12,848

 

Total

 

$

65,741

 

$

65,575

 

$

66,010

 

$

63,980

 

$

65,804

 

$

64,848

 

$

63,922

 

$

64,112

 

$

63,980

 

$

64,112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Present value of installment premiums in force (a)

 

$

140.3

 

$

147.2

 

$

138.0

 

$

138.9

 

$

142.9

 

$

152.3

 

$

147.4

 

$

156.1

 

$

138.9

 

$

156.1

 

Unearned premium reserve net of ceded reinsurance

 

436.4

 

441.0

 

444.2

 

443.8

 

454.8

 

435.6

 

430.9

 

436.0

 

443.8

 

436.0

 

 

(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 financial measures [PVP (a), operating income and operating ROE (b), and present value of installment premiums in force adjusted book value (c)].

 

10


 

Assured Guaranty Ltd.

Mortgage Guaranty Segment

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

YTD 2004

 

YTD 2005

 

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

 

$

19.2

 

$

—

 

$

1.1

 

$

6.9

 

$

13.1

 

$

—

 

$

—

 

$

—

 

$

27.1

 

$

13.1

 

less: Present value of installment premiums (a)

 

8.9

 

—

 

1.1

 

6.9

 

—

 

—

 

—

 

—

 

16.9

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Upfront gross written premiums (GWP)

 

10.3

 

—

 

—

 

—

 

13.1

 

—

 

—

 

—

 

10.3

 

13.1

 

plus: Installment GWP

 

3.7

 

0.9

 

5.3

 

4.2

 

6.3

 

1.9

 

1.7

 

2.7

 

14.1

 

12.6

 

Mortgage guaranty GWP

 

$

14.0

 

$

0.9

 

$

5.3

 

$

4.2

 

$

19.4

 

$

1.9

 

$

1.7

 

$

2.7

 

$

24.4

 

$

25.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

14.0

 

$

0.9

 

$

5.3

 

$

4.2

 

$

19.4

 

$

1.9

 

$

1.7

 

$

2.7

 

$

24.4

 

$

25.7

 

Net written premiums

 

14.0

 

0.9

 

5.3

 

4.2

 

19.4

 

1.9

 

1.7

 

2.7

 

24.4

 

25.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

8.4

 

15.0

 

5.1

 

5.2

 

4.6

 

5.1

 

4.3

 

4.6

 

33.7

 

18.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

(1.2

)

(3.3

)

(5.4

)

(2.0

)

0.2

 

—

 

0.3

 

(4.2

)

(11.9

)

(3.7

)

Profit commission expense

 

5.0

 

4.3

 

1.3

 

3.5

 

1.0

 

1.0

 

0.9

 

5.1

 

14.1

 

8.0

 

Acquisition costs

 

0.9

 

1.7

 

0.5

 

0.6

 

0.5

 

0.6

 

0.4

 

0.4

 

3.7

 

2.0

 

Operating expenses (1)

 

0.6

 

1.1

 

1.0

 

1.0

 

0.7

 

0.4

 

0.8

 

0.8

 

3.8

 

2.7

 

Total expenses

 

$

5.3

 

$

3.8

 

$

(2.6

)

$

3.2

 

$

2.4

 

$

2.0

 

$

2.4

 

$

2.2

 

$

9.7

 

$

9.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain

 

$

3.1

 

$

11.2

 

$

7.7

 

$

2.0

 

$

2.2

 

$

3.1

 

$

1.9

 

$

2.4

 

$

24.0

 

$

9.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

-14.3

%

-22.0

%

-105.9

%

-37.8

%

4.3

%

—

 

6.9

%

-92.1

%

-35.2

%

-19.9

%

Expense ratio

 

77.6

%

47.5

%

55.5

%

98.5

%

47.4

%

39.6

%

48.5

%

139.6

%

64.1

%

68.1

%

Combined ratio

 

63.3

%

25.5

%

-50.4

%

60.7

%

51.7

%

39.6

%

55.4

%

47.5

%

28.9

%

48.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk in force

 

$

2,201

 

$

2,394

 

$

2,437

 

$

2,325

 

$

2,582

 

$

2,547

 

$

2,389

 

$

2,332

 

$

2,325

 

$

2,332

 

Risk written

 

237

 

—

 

136

 

271

 

419

 

—

 

—

 

—

 

643

 

419

 

Unearned premium reserve net of ceded reinsurance

 

57.6

 

43.5

 

43.7

 

42.7

 

57.5

 

54.2

 

51.5

 

49.7

 

42.7

 

49.7

 

 

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

 

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

 

11


 

Assured Guaranty Ltd.

Other Segment

(dollars in millions)

 

 

 

1Q-04

 

2Q-04

 

3Q-04

 

4Q-04

 

1Q-05

 

2Q-05

 

3Q-05

 

4Q-05

 

YTD 2004

 

YTD 2005

 

Income statement:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross written premiums

 

$

(93.6

)

$

10.0

 

$

5.2

 

$

3.8

 

$

0.9

 

$

9.5

 

$

21.6

 

$

0.4

 

$

(74.6

)

$

32.2

 

Net written premiums

 

(98.5

)

(84.0

)

—

 

—

 

—

 

—

 

—

 

—

 

(182.5

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

17.2

 

(66.0

)

—

 

—

 

—

 

—

 

—

 

—

 

(48.9

)

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses

 

7.5

 

(57.4

)

—

 

(0.4

)

(1.1

)

—

 

(1.3

)

—

 

(50.3

)

(2.4

)

Profit commission expense

 

0.4

 

0.2

 

—

 

—

 

—

 

—

 

—

 

—

 

0.3

 

—

 

Acquisition costs

 

3.6

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

3.9

 

—

 

Operating expenses (1)

 

3.5

 

—

 

—

 

—

 

—

 

—

 

—

 

—

 

3.9

 

—

 

Total expenses

 

$

15.1

 

$

(57.2

)

$

—

 

$

(0.4

)

$

(1.1

)

$

—

 

$

(1.3

)

$

—

 

$

(42.2

)

$

(2.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain (loss)

 

$

2.1

 

$

(8.8

)

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

(6.7

)

$

2.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expense ratio

 

43.6

%

87.0

%

—

 

—

 

—

 

—

 

—

 

—

 

102.8

%

—

 

Expense ratio

 

44.0

%

-0.3

%

—

 

—

 

—

 

—

 

—

 

—

 

-16.6

%

—

 

Combined ratio

 

87.6

%

86.7

%

—

 

—

 

—

 

—

 

—

 

—

 

86.2

%

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity layer credit protection

 

$

5.4

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

5.4

 

$

—

 

Trade credit reinsurance

 

9.3

 

(34.6

)

—

 

—

 

—

 

—

 

—

 

—

 

(25.3

)

—

 

Title reinsurance

 

2.5

 

0.8

 

—

 

—

 

—

 

—

 

—

 

—

 

3.2

 

—

 

Auto residual value reinsurance

 

—

 

(32.2

)

—

 

—

 

—

 

—

 

—

 

—

 

(32.2

)

—

 

Total net earned premiums

 

$

17.2

 

$

(66.0

)

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

—

 

$

(48.9

)

$

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Underwriting gain (loss): (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity layer credit protection

 

$

2.5

 

$

0.5

 

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

3.1

 

$

2.4

 

Trade credit reinsurance

 

1.4

 

(4.2

)

—

 

—

 

—

 

—

 

—

 

—

 

(2.9

)

—

 

Title reinsurance

 

0.7

 

0.3

 

—

 

—

 

—

 

—

 

—

 

—

 

1.0

 

—

 

Auto residual value reinsurance

 

(2.5

)

(5.4

)

—

 

—

 

—

 

—

 

—

 

—

 

(7.9

)

—

 

Total underwriting gain (loss)

 

$

2.1

 

$

(8.8

)

$

—

 

$

0.4

 

$

1.1

 

$

—

 

$

1.3

 

$

—

 

$

(6.7

)

$

2.4

 

 

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

 

12


 

Assured Guaranty Ltd.

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

(dollars in millions)

 

 

 

As of

 

As of

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

 

 

 

 

 

 

Reserves by segment:

 

2005

 

2004

 

 

 

 

 

 

 

 

 

Financial guaranty direct

 

$

13.1

 

$

19.9

 

 

 

 

 

 

 

 

 

Financial guaranty reinsurance

 

80.3

 

78.8

 

 

 

 

 

 

 

 

 

Mortgage guaranty

 

7.0

 

11.2

 

 

 

 

 

 

 

 

 

Other

 

14.8

 

116.6

 

 

 

 

 

 

 

 

 

Total

 

$

115.2

 

$

226.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of

 

As of

 

 

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

 

 

 

 

 

 

 

Reserves by type:

 

2005

 

2004

 

 

 

 

 

 

 

 

 

Case

 

$

35.5

 

$

53.5

 

 

 

 

 

 

 

 

 

IBNR

 

11.6

 

105.8

 

 

 

 

 

 

 

 

 

Portfolio

 

68.1

 

67.2

 

 

 

 

 

 

 

 

 

Total

 

$

115.2

 

$

226.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2005

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

Reserves by segment and type:

 

Direct

 

Reinsurance

 

Guaranty

 

Guaranty

 

Other

 

Total

 

Case

 

$

4.5

 

$

23.4

 

$

0.3

 

$

28.2

 

$

7.3

 

$

35.5

 

IBNR

 

—

 

—

 

4.1

 

4.1

 

7.5

 

11.6

 

Portfolio

 

8.6

 

56.9

 

2.6

 

68.1

 

—

 

68.1

 

Total

 

$

13.1

 

$

80.3

 

$

7.0

 

$

100.4

 

$

14.8

 

$

115.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2004

 

 

 

Financial

 

Financial

 

 

 

Total

 

 

 

 

 

 

 

Guaranty

 

Guaranty

 

Mortgage

 

Financial

 

 

 

 

 

Reserves by segment and type:

 

Direct

 

Reinsurance

 

Guaranty

 

Guaranty

 

Other

 

Total

 

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

 

 

13


 

Assured Guaranty Ltd.

Investment Portfolio

as of December 31, 2005

(dollars in millions)

 

 

 

 

 

Pre-Tax

 

 

 

Annualized

 

 

 

Amortized

 

Book

 

 

 

Investment

 

 

 

Cost

 

Yield

 

Fair Value

 

Income

 

Fixed maturity securities available for sale:

 

 

 

 

 

 

 

 

 

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

 

$

174.5

 

4.3

%

$

177.3

 

$

7.5

 

Agency obligations

 

158.2

 

5.4

%

163.0

 

8.6

 

Foreign government securities

 

18.2

 

4.9

%

18.4

 

0.9

 

Obligations of states and political subdivisions

 

309.7

 

4.8

%

324.2

 

14.7

 

Insured obligations of state and political subdivisions

 

509.8

 

4.9

%

540.5

 

24.9

 

Corporate securities

 

127.2

 

5.7

%

132.3

 

7.3

 

Mortgage-backed securities:

 

 

 

 

 

 

 

 

 

Pass-thrus

 

567.3

 

5.1

%

562.8

 

29.2

 

PACs

 

75.9

 

4.6

%

74.8

 

3.5

 

Asset-backed securities

 

141.6

 

4.4

%

140.7

 

6.2

 

Total fixed maturity securities available for sale

 

2,082.4

 

4.9

%

2,134.0

 

102.8

 

Short-term investments

 

115.8

 

3.8

%

115.8

 

4.4

 

Total investments

 

$

2,198.2

 

4.9

%

$

2,249.8

 

$

107.2

 

 

 

 

 

 

 

 

 

 

 

Ratings distribution(1):

 

Fair Value

 

%

 

 

 

 

 

Treasury and U.S. government obligations

 

$

177.3

 

8.3

%

 

 

 

 

Agency obligations

 

163.0

 

7.6

%

 

 

 

 

AAA/Aaa

 

1,472.0

 

69.0

%

 

 

 

 

AA/Aa

 

228.5

 

10.7

%

 

 

 

 

A/A

 

93.2

 

4.4

%

 

 

 

 

BBB/Baa

 

—

 

—

 

 

 

 

 

Total

 

$

2,134.0

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Duration of investment portfolio (in years):

 

 

 

4.4

 

 

 

 

 

 

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

 

14


 

Assured Guaranty Ltd.

Financial Guaranty Profile

(dollars in millions)

 

 

 

Gross Par Written

 

As of December 31, 2005:

 

Sector

 

4Q 2005

 

4Q 2004

 

Net Par
Outstanding

 

%

 

Avg. Rating (7)

 

U.S. public finance

 

 

 

 

 

 

 

 

 

 

 

General obligation

 

$

532

 

$

192

 

$

11,965

 

11.7

%

A+

 

Tax backed

 

647

 

589

 

10,656

 

10.4

%

A+

 

Municipal utilities

 

67

 

350

 

10,378

 

10.1

%

A+

 

Transportation

 

386

 

58

 

6,407

 

6.3

%

A

 

Healthcare

 

273

 

250

 

6,003

 

5.9

%

A

 

Investor-owned utilities

 

56

 

13

 

1,431

 

1.4

%

A-

 

Higher education

 

81

 

11

 

1,177

 

1.1

%

A

 

Housing

 

12

 

70

 

1,148

 

1.1

%

AA-

 

Structured municipal (1)

 

—

 

—

 

829

 

0.8

%

AAA

 

Other public finance (2)

 

39

 

35

 

759

 

0.7

%

A

 

Total U.S. public finance

 

$

2,093

 

$

1,568

 

$

50,753

 

49.5

%

A+

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. structured finance

 

 

 

 

 

 

 

 

 

 

 

CDOs (3)

 

$

2,827

 

$

1,818

 

$

20,270

 

19.8

%

AAA

 

Mortgage-backed and home equity

 

2,112

 

5,972

 

9,847

 

9.6

%

A+

 

Commercial receivables (4)

 

213

 

34

 

4,358

 

4.3

%

AA-

 

Consumer receivables (5)

 

344

 

16

 

2,413

 

2.4

%

A

 

Other structured finance (6)

 

87

 

5

 

1,688

 

1.6

%

AA

 

Single name corporate CDS

 

—

 

—

 

1

 

—

 

AAA

 

Total U.S. structured finance

 

$

5,583

 

$

7,845

 

$

38,578

 

37.7

%

AA

 

 

 

 

 

 

 

 

 

 

 

 

 

International

 

 

 

 

 

 

 

 

 

 

 

Structured finance

 

$

2,322

 

$

280

 

$

8,202

 

8.0

%

AA-

 

Project finance/PFI/PPP

 

402

 

66

 

3,617

 

3.5

%

A-

 

Public finance

 

105

 

3

 

1,299

 

1.3

%

A-

 

Total international

 

$

2,829

 

$

349

 

$

13,118

 

12.8

%

A+

 

 

 

 

 

 

 

 

 

 

 

 

 

Total exposures

 

$

10,505

 

$

9,762

 

$

102,449

 

100.0

%

AA-

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage guaranty risk in force

 

$

—

 

$

271

 

$

2,332

 

NA

 

NA

 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

15


 

Assured Guaranty Ltd.

Financial Guaranty Profile

(dollars in millions)

 

Distribution by ratings of financial guaranty portfolio

 

 

 

December 31, 2005

 

December 31, 2004

 

 

 

Net Par

 

 

 

Net Par

 

 

 

Ratings (1)

 

Outstanding

 

%

 

Outstanding

 

%

 

AAA/Aaa

 

$

34,492

 

33.7

%

$

29,696

 

31.1

%

AA/Aa

 

19,978

 

19.5

%

19,856

 

20.8

%

A/A

 

30,258

 

29.5

%

31,393

 

32.8

%

BBB/Baa

 

16,405

 

16.0

%

13,137

 

13.7

%

Below investment grade

 

1,316

 

1.3

%

1,509

 

1.6

%

Total exposures

 

$

102,449

 

100.0

%

$

95,592

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Distribution by ratings of CDO exposure

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2005

 

December 31, 2004

 

 

 

Net Par

 

 

 

Net Par

 

 

 

Ratings (1)

 

Outstanding

 

%

 

Outstanding

 

%

 

AAA/Aaa

 

$

19,615

 

85.3

%

$

12,975

 

75.2

%

AA/Aa

 

2,800

 

12.2

%

2,784

 

16.1

%

A/A

 

326

 

1.4

%

1,155

 

6.7

%

BBB/Baa

 

189

 

0.8

%

216

 

1.3

%

Below investment grade

 

63

 

0.3

%

116

 

0.7

%

Total exposures

 

$

22,993

 

100.0

%

$

17,246

 

100.0

%

 

 

 

 

 

 

 

 

 

 

Distribution of CDOs by year of issue as of December 31, 2005

 

 

 

 

 

 

 

 

 

 

 

 

Net Par

 

 

 

 

 

 

 

 

 

Outstanding

 

%

 

 

 

 

 

2000 and prior

 

$

651

 

2.8

%

 

 

 

 

2001

 

3,668

 

16.0

%

 

 

 

 

2002

 

4,096

 

17.8

%

 

 

 

 

2003

 

3,581

 

15.6

%

 

 

 

 

2004

 

1,457

 

6.3

%

 

 

 

 

2005

 

9,178

 

39.9

%

 

 

 

 

2006 year to date

 

362

 

1.6

%

 

 

 

 

 

 

$

22,993

 

100.0

%

 

 

 

 

 

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

 

16


 

Assured Guaranty Ltd.

Financial Guaranty Profile

(dollars in millions)

 

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

 

 

 

Net Par

 

 

 

 

 

Outstanding

 

%

 

U.S.:

 

 

 

 

 

California

 

$

7,258

 

7.1

%

New York

 

5,593

 

5.5

%

Texas

 

3,431

 

3.3

%

Illinois

 

3,092

 

3.0

%

Florida

 

2,670

 

2.6

%

Massachusetts

 

2,626

 

2.6

%

New Jersey

 

2,282

 

2.2

%

Pennsylvania

 

2,230

 

2.2

%

Washington

 

1,952

 

1.9

%

Puerto Rico

 

1,593

 

1.6

%

Other states

 

18,026

 

17.5

%

Mortgage and structured (multiple states)

 

38,578

 

37.7

%

Total U.S.

 

$

89,331

 

87.2

%

 

 

 

 

 

 

International:

 

 

 

 

 

United Kingdom

 

$

7,502

 

7.3

%

Australia

 

890

 

0.9

%

Turkey

 

503

 

0.5

%

Ireland

 

423

 

0.4

%

Germany

 

365

 

0.4

%

Other

 

3,435

 

3.3

%

Total International

 

$

13,118

 

12.8

%

 

 

 

 

 

 

Total exposures

 

$

102,449

 

100.0

%

 

17


 

Assured Guaranty Ltd.

Non-Investment Grade Exposures

as of December 31, 2005

(dollars in millions)

 

Non-Investment Grade Exposures by:

 

Weighted Average

 

Net Par

 

Average

 

Asset Type

 

Remaining Life

 

Outstanding

 

Rating (6)

 

 

 

 

 

 

 

 

 

Public finance

 

 

 

 

 

 

 

Transportation

 

19.5

 

$

228.4

 

B

 

Healthcare

 

10.5

 

23.5

 

BB-

 

General obligation

 

9.7

 

10.4

 

B

 

Other public finance (1)

 

16.3

 

3.4

 

D

 

Investor-owned utilities

 

15.2

 

8.3

 

BB

 

Municipal utilities

 

10.0

 

14.3

 

CC

 

Tax backed

 

13.9

 

62.6

 

B

 

Housing

 

11.4

 

4.3

 

B+

 

Project Finance / PPI / PPP

 

15.3

 

203.3

 

B+

 

Total public finance

 

16.4

 

$

558.5

 

B

 

 

 

 

 

 

 

 

 

Structured finance

 

 

 

 

 

 

 

Consumer receivables (2)

 

2.7

 

$

241.7

 

BB

 

Mortgage-backed and home equity

 

10.4

 

155.8

 

CCC+

 

Commercial receivables (3)

 

8.8

 

292.7

 

B

 

CDOs (4)

 

4.5

 

62.4

 

B+

 

Other structured finance (5)

 

4.3

 

6.3

 

D

 

Total structured finance

 

6.8

 

$

758.9

 

B+

 

 

 

 

 

 

 

 

 

Total non-investment grade exposures

 

10.8

 

$

1,317.4

 

B+

 

 

 

 

 

 

 

 

 

Top Ten Non-Investment Grade Exposures as of December 31, 2005

 

Name or Description

 

Average Rating

 

Weighted
Average
Remaining Life

 

Net Par
Outstanding

 

Public Finance Domestic Project Finance Transaction

 

B

 

20.9

 

$

176

 

Public Finance International Project Finance Transaction (7)

 

B

 

16.8

 

170

 

Structured Finance Domestic Credit Card Transaction (8)

 

BB

 

2.9

 

149

 

Structured Finance Domestic EETC Transaction (9)

 

B+

 

8.0

 

144

 

Structured Finance Domestic Credit Card Transaction (10)

 

BB+

 

2.4

 

79

 

Structured Finance Domestic EETC Transaction (11)

 

B-

 

9.0

 

66

 

Structured Finance Domestic Manufactured Housing Transaction (12)

 

CC

 

6.2

 

54

 

International Airport Facility

 

BB

 

7.1

 

34

 

Public Finance Domestic Transportation Transaction

 

BB+

 

12.4

 

28

 

Structured Finance International Equipment Lease Transaction

 

B-

 

8.0

 

25

 

Total

 

B+

 

10.9

 

$

925

 

 

(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 that of the nationally recognized rating agencies.

 

(7)     Exposure comprised of four series: $117.7 million rated ‘B’, $26.5 million rated ‘BB-’, $5.3 million rated ‘BB-’, and $20 million rated ‘CCC+’.

 

(8)     Exposure comprised of four series: $10.4 million, $37.5 million, $1.3 million, and $99.3 million, all rated ‘BB’.

 

(9)     Exposure comprised of three series: $75.7 million rated ‘B+’, $25.4 million rated ‘BB+’, $42.9 million rated ‘B’.

 

(10)   Exposure comprised of two series, one in the amount of $22.5 million rated ‘BB+’ and the other for $56 million rated ‘BB+’.

 

(11)   Exposure comprised of two series, one in the amount of $51.5 million rated ‘B’ and the other for $14.5 million rated ‘CCC’.

 

(12)   Exposure comprised of two series, one in the amount of $29.2 million rated ‘D’ and the other for $24.6 million rated ‘CCC’.

 

18


 

Assured Guaranty Ltd.

Closely Monitored Credits (“CMC”)

(dollars in millions)

 

Net par outstanding by credit monitoring category (1)

 

 

 

December 31, 2005

 

Description

 

Net Par
Outstanding

 

%

 

Number of Credits
in Category

 

Fundamentally sound risk

 

$

100,963

 

98.6

%

 

 

 

 

 

 

 

 

 

 

Closely monitored credits:

 

 

 

 

 

 

 

Category 1

 

872

 

0.9

%

36

 

Category 2

 

417

 

0.4

%

22

 

Category 3

 

131

 

0.1

%

15

 

Category 4

 

11

 

—

 

11

 

CMC Total

 

1,431

 

1.4

%

84

 

 

 

 

 

 

 

 

 

Other below investment grade risk

 

55

 

—

 

103

 

Total

 

$

102,449

 

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2004

 

Description

 

Net Par
Outstanding

 

%

 

Number of Credits
in Category

 

Fundamentally sound risk

 

$

93,602

 

97.9

%

 

 

 

 

 

 

 

 

 

 

Closely monitored credits:

 

 

 

 

 

 

 

Category 1

 

1,490

 

1.6

%

35

 

Category 2

 

165

 

0.2

%

9

 

Category 3

 

70

 

0.1

%

16

 

Category 4

 

12

 

—

 

8

 

CMC Total

 

1,737

 

1.8

%

68

 

 

 

 

 

 

 

 

 

Other below investment grade risk

 

253

 

0.3

%

144

 

Total

 

$

95,592

 

100.0

%

 

 

 

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

 

19


 

Assured Guaranty Ltd.

Largest Exposures by Sector (Part 1 of 2)

as of December 31, 2005

(dollars in millions)

 

10 Largest U.S. Public Finance Exposures

 

 

 

Net Par

 

 

 

Revenue Source

 

Outstanding

 

Rating(1)

 

California State General Obligation & Leases

 

$

887

 

A-

 

New Jersey State General Obligation & Leases

 

766

 

AA-

 

Long Island Power Authority

 

700

 

A-

 

New York City General Obligation

 

647

 

A

 

Denver Colorado Airport System

 

620

 

A

 

New York City Municipal Water Finance Authority

 

608

 

AA+

 

Chicago Illinois General Obligation

 

587

 

A+

 

Massachusetts State General Obligation & Bay Transportation

 

580

 

AA-

 

Jefferson County Alabama Sewer

 

578

 

A

 

Houston Texas Water & Sewer System

 

549

 

A+

 

Total top 10 public finance exposures

 

$

6,522

 

 

 

 

10 Largest U.S. Structured Finance Exposures

 

 

 

Net Par

 

 

 

Revenue Source

 

Outstanding

 

Rating(1)

 

Park Place 2004-MHQ1 Class A-1

 

$

846

 

AAA

 

Structured Finance Corporate Pool

 

781

 

AAA

 

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

 

750

 

BBB-

 

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

 

750

 

BBB-

 

Synthetic CDO - IG Corporate

 

740

 

AAA

 

Synthetic CDO - IG ABS

 

594

 

AAA

 

Synthetic CDO - IG Corporate

 

551

 

AAA

 

Ameriquest Mortgage Inc. 2004-R10 A-1

 

550

 

AAA

 

Synthetic CDO - IG Corporate

 

546

 

AAA

 

Argent Securities Inc. 2004-W11 A-1

 

504

 

AAA

 

Total top 10 structured finance exposures

 

$

6,612

 

 

 

 

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

 

20


 

Assured Guaranty Ltd.

Largest Exposures by Sector (Part 2 of 2)

as of December 31, 2005

(dollars in millions)

 

10 Largest Healthcare Exposures

 

 

 

Net Par

 

 

 

 

 

Revenue Source

 

Outstanding(2)

 

Rating(1)

 

State

 

Public Finance Domestic Hospital System

 

$

185

 

A+

 

TX

 

Public Finance Domestic Hospital System

 

149

 

A-

 

CA

 

Public Finance Domestic Hospital System

 

148

 

AA

 

MO

 

Public Finance Domestic Hospital System

 

130

 

AA-

 

CA

 

Public Finance Domestic Hospital System

 

116

 

A+

 

PA

 

Public Finance Domestic Hospital System

 

110

 

BBB

 

MD

 

Public Finance Domestic Hospital System

 

108

 

BBB+

 

NJ

 

Public Finance Domestic Hospital - Stand Alone

 

102

 

AA

 

TX

 

Public Finance Domestic Hospital System

 

98

 

BBB+

 

MN

 

Public Finance Domestic Hospital - Stand Alone

 

84

 

BBB+

 

PA

 

Total top 10 healthcare exposures

 

$

1,230

 

 

 

 

 

 

10 Largest International Exposures

 

 

 

Net Par

 

 

 

 

 

Revenue Source

 

Outstanding

 

Rating(1)

 

 

 

Synthetic - International Mortgage Backed Securities

 

$

1,102

 

AAA

 

 

 

Stichting Profile Securitisation I

 

602

 

AAA

 

 

 

Synthetic CDO - IG ABS

 

563

 

AAA

 

 

 

Synthetic CDO - IG Corporate

 

500

 

AAA

 

 

 

Orkney Re II, PLC Floating Rate Notes

 

423

 

A-

 

 

 

International Whole Business Securitization

 

276

 

BBB+

 

 

 

International Project Finance Transaction

 

260

 

AAA

 

 

 

International Equipment Lease Transaction

 

225

 

A

 

 

 

International Water and Sewer Transaction

 

190

 

BBB+

 

 

 

Dekania Europe CDO I PLC

 

185

 

AAA

 

 

 

Total top 10 international exposures

 

$

4,326

 

 

 

 

 

 

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

 

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

 

21


 

Assured Guaranty Ltd.

Consolidated Capital and Claims Paying Resources

(dollars in millions)

 

 

 

As of December 31, 2005

 

As of December 31, 2004

 

 

 

AGC

 

AG Re (1)

 

Consolidated

 

AGC

 

AG Re (1)

 

Consolidated

 

Statutory surplus and reserves

 

 

 

 

 

 

 

 

 

 

 

 

 

Unearned premium reserve (2)

 

$

234

 

$

356

 

$

590

 

$

406

 

$

186

 

$

592

 

Contingency reserve

 

616

 

—

 

616

 

518

 

—

 

518

 

Policyholders’ surplus

 

246

 

691

 

937

 

237

 

596

 

833

 

Loss & loss adjustment expense reserves (3)

 

11

 

26

 

37

 

32

 

15

 

47

 

Total policyholders’ surplus & reserves

 

$

1,107

 

$

1,073

 

$

2,180

 

$

1,193

 

$

797

 

$

1,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Claims paying resources

 

 

 

 

 

 

 

 

 

 

 

 

 

Policyholders’ surplus

 

$

246

 

$

691

 

$

937

 

$

237

 

$

596

 

$

833

 

Contingency reserve

 

616

 

—

 

616

 

518

 

—

 

518

 

Qualified statutory capital

 

862

 

691

 

1,553

 

755

 

596

 

1,351

 

Unearned premium reserve (2)

 

234

 

356

 

590

 

406

 

186

 

592

 

Loss & loss adjustment expense reserves (3)

 

11

 

26

 

37

 

32

 

15

 

47

 

Total policyholders’ surplus & reserves

 

1,107

 

1,073

 

2,180

 

1,193

 

797

 

1,990

 

Present value of installment premium

 

254

 

174

 

428

 

268

 

132

 

400

 

Standby line of credit/stop loss

 

455

 

—

 

455

 

255

 

—

 

255

 

Total claims paying resources

 

$

1,816

 

$

1,247

 

$

3,063

 

$

1,716

 

$

929

 

$

2,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net par insured outstanding

 

$

52,643

 

$

49,806

 

$

102,449

 

$

74,001

 

$

21,590

 

$

95,592

 

Net debt service outstanding

 

$

70,746

 

$

74,925

 

$

145,670

 

$

105,831

 

$

30,288

 

$

136,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net par insured to statutory capital

 

61:1

 

72:1

 

66:1

 

98:1

 

36:1

 

71:1

 

Capital ratio (4)

 

82:1

 

108:1

 

94:1

 

140:1

 

51:1

 

101:1

 

Financial resources ratio (5)

 

39:1

 

60:1

 

48:1

 

62:1

 

33:1

 

51:1

 

 

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

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

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

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

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

 

22


 

Assured Guaranty Ltd.

Summary Financial and Statistical Data

(dollars in millions, except per share amounts)

 

 

 

Year Ended December 31,

 

 

 

2005

 

2004

 

2003

 

2002

 

2001

 

2000

 

GAAP Summary Income Statement Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

252.1

 

$

190.9

 

$

349.2

 

$

417.2

 

$

442.9

 

$

206.0

 

Net earned premiums

 

198.7

 

187.9

 

310.9

 

247.4

 

293.5

 

140.7

 

Net investment income

 

96.8

 

94.8

 

96.3

 

97.2

 

99.5

 

98.1

 

Total expenses

 

58.9

 

114.6

 

266.1

 

218.8

 

282.8

 

131.8

 

Income before provision for income taxes

 

235.6

 

233.3

 

246.2

 

83.2

 

110.1

 

118.1

 

Net income

 

192.3

 

182.8

 

214.5

 

72.6

 

63.8

 

93.2

 

Operating income

 

193.9

 

141.1

 

127.3

 

115.7

 

96.1

 

87.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

2.58

 

$

2.44

 

$

2.86

 

$

0.97

 

$

0.85

 

$

1.24

 

Operating income per diluted share

 

$

2.60

 

$

1.88

 

$

1.70

 

$

1.54

 

$

1.28

 

$

1.17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss and LAE ratio

 

-38.0

%

-17.0

%

46.5

%

48.6

%

60.5

%

21.6

%

Expense ratio

 

58.9

%

65.4

%

37.2

%

35.5

%

30.6

%

61.2

%

Combined ratio

 

20.9

%

48.4

%

83.7

%

84.1

%

91.1

%

82.8

%

GAAP Summary Balance Sheet Data (end of period)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total investments and cash

 

$

2,256.0

 

$

2,157.9

 

$

2,222.1

 

$

2,061.9

 

$

1,710.8

 

$

1,549.6

 

Total assets

 

2,673.5

 

2,694.0

 

2,857.9

 

2,719.9

 

2,322.1

 

1,913.7

 

Unearned premium reserves

 

537.1

 

521.3

 

625.4

 

613.3

 

500.3

 

444.6

 

Loss and LAE reserves

 

115.2

 

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

 

1,665.4

 

1,527.6

 

1,437.6

 

1,257.2

 

1,061.6

 

994.5

 

Book value per share

 

$

22.28

 

$

20.19

 

$

19.17

 

$

16.76

 

$

14.15

 

$

13.26

 

Other Financial Information

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt service outstanding (end of period)

 

$

145,670

 

$

136,120

 

$

130,047

 

$

124,082

 

$

117,909

 

$

102,744

 

Net par outstanding (end of period)

 

102,449

 

95,592

 

87,524

 

80,394

 

75,249

 

65,756

 

Gross par outstanding (end of period)

 

105,242

 

98,221

 

90,366

 

83,067

 

79,883

 

67,730

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated qualified statutory capital

 

1,553

 

1,351

 

1,216

 

1,133

 

1,095

 

1,004

 

Consolidated policyholders’ surplus & reserves

 

2,180

 

1,990

 

2,238

 

1,931

 

1,664

 

1,474

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios:

 

 

 

 

 

 

 

 

 

 

 

 

 

Par insured to statutory capital

 

66:1

 

71:1

 

72:1

 

71:1

 

69:1

 

66:1

 

Capital ratio(1)

 

94:1

 

101:1

 

107:1

 

110:1

 

108:1

 

102:1

 

Financial resources ratio(2)

 

48:1

 

51:1

 

45:1

 

41:1

 

52:1

 

57:1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt service written:

 

 

 

 

 

 

 

 

 

 

 

 

 

Public finance

 

$

15,350

 

$

14,493

 

$

12,130

 

$

14,312

 

$

8,694

 

$

7,385

 

Structured finance

 

20,438

 

16,477

 

11,038

 

13,210

 

12,627

 

9,054

 

Total debt service written

 

$

35,788

 

$

30,970

 

$

23,168

 

$

27,522

 

$

21,321

 

$

16,439

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

30,059

 

$

27,073

 

$

19,346

 

$

25,453

 

$

19,196

 

$

15,451

 

International

 

5,729

 

3,897

 

3,822

 

2,069

 

2,125

 

988

 

Total debt service written

 

$

35,788

 

$

30,970

 

$

23,168

 

$

27,522

 

$

21,321

 

$

16,439

 

 

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

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

 

23


 

Endnotes related to non-GAAP financial measures discussed in the financial 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 estimated future installment premiums, which is a non-GAAP financial measure, represents our estimated future premiums on our in-force book of installment premium business in our financial guaranty direct, financial guaranty reinsurance and mortgage guaranty segments. It is calculated net of reinsurance ceded and using a discount rate of 6%. We believe PVP and present value of estimated future installment premiums 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 unearned premium reserve net of prepaid reinsurance premiums and deferred acquisition costs and the after-tax value of the present value of estimated future installment premiums (discounted at 6%), net of reinsurance.  The adjustments described above will be realized in future periods, but may differ materially from the amounts used in determining current estimated adjusted book value due to changes in market interest rates, refunding activity, pre-payment speeds and other factors that managment cannot control or predict.  Management, investors and analysts use the calculation of adjusted book value to evaluate the net present value of the Company’s in-force premium and capital base.

 


 

 

 

 

 

Contacts:

 

 

 

Equity investors and media

 

Sabra Purtill

 

Managing Director, Investor Relations

 

(212) 408-6044

 

spurtill@assuredguaranty.com

 

 

 

Chris McNamee

 

Assistant Vice President, Investor Relations

 

(212) 261-5509

 

cmcnamee@assuredguaranty.com

 

 

 

Fixed income investors

 

Patrick Early

 

Director, Fixed Income Investor Relations

 

(212) 408 6043

 

pearly@assuredguaranty.com

 

 

Assured Guaranty Ltd.

Michael Walker

30 Woodbourne Avenue

Director, Fixed Income Investor Relations

Hamilton HM 08 Bermuda

(212) 261-5575

www.assuredguaranty.com

mwalker@assuredguaranty.com