Fourth Quarter 2022
GAAP Highlights: Net income attributable to Assured Guaranty Ltd. was $94 million, or $1.52 per share(1), for fourth quarter 2022. Shareholders’ equity attributable to Assured Guaranty Ltd. per share was $85.80 as of December 31, 2022.
Non-GAAP Highlights: Adjusted operating income(2) was $14 million, or $0.22 per share, for fourth quarter 2022. Adjusted operating shareholders’ equity(2) per share and adjusted book value (ABV)(2) per share were $93.92 and $141.98, respectively, as of December 31, 2022.
Return of Capital to Shareholders: Fourth quarter 2022 capital returned to shareholders was $115 million, consisting of the repurchase of 1.7 million shares for $100 million, and dividends of $15 million.
Insurance Segment
Insurance segment adjusted operating income was $66 million for fourth quarter 2022.
Gross written premiums (GWP) were $131 million for fourth quarter 2022.
Present value of new business production (PVP)(2) was $135 million for fourth quarter 2022.
Asset Management Segment
Asset Management segment adjusted operating loss was $3 million and assets under management (AUM) inflows were $23 million for fourth quarter 2022.
Full Year (FY) 2022
GAAP Highlights: Net income attributable to Assured Guaranty Ltd. was $124 million, or $1.92 per share, for FY 2022.
Non-GAAP Highlights: Adjusted operating income was $267 million, or $4.14 per share, for FY 2022.
Return of Capital to Shareholders: FY 2022 capital returned to shareholders was $567 million, consisting of the repurchase of 8.8 million shares (or approximately 13% of shares outstanding at the beginning of 2022) for $503 million, and dividends of $64 million.
Insurance Segment
Insurance segment adjusted operating income was $413 million for FY 2022.
GWP were $360 million for FY 2022.
PVP was $375 million for FY 2022.
Asset Management Segment
Asset Management segment adjusted operating loss was $6 million and AUM inflows were $1.4 billion(3) for FY 2022.
Assured Guaranty Ltd. (NYSE:AGO) (AGL and, together with its consolidated entities, Assured Guaranty or the Company) announced today its financial results for the three-month period ended December 31, 2022 (fourth quarter 2022) and the year ended December 31, 2022 (FY 2022).
“Assured Guaranty performed well in 2022,” said Dominic Frederico, President and CEO. “Our insurance business saw a solid performance from our U.S public, international infrastructure and global structured finance sectors, producing $360 million in gross written premiums, or $375 million of total PVP, making 2022 the fifth consecutive year in which we generated more than $350 million of GWP and PVP.
“We reached settlement agreements for all but one of the defaulting Puerto Rico entities in our insured portfolio, and our Puerto Rico insured exposure in total decreased by $2.2 billion. Additionally, we continued to demonstrate thoughtful capital management, while returning $567 million to shareholders through share repurchases and dividends. The share repurchases reduced our shares outstanding by almost 13% from shares outstanding at year-end 2021.”
(1)
All per share information for net income and adjusted operating income is based on diluted shares.
(2)
Please see “Explanation of Non-GAAP Financial Measures.”
(3)
Net of transfers between funds managed by Assured Investment Management LLC and its investment management affiliates (AssuredIM Funds).
Summary Financial Results
(in millions, except per share amounts)
Quarter Ended
Year Ended
December 31,
December 31,
2022
2021
2022
2021
GAAP
Net income (loss) attributable to AGL
$
94
$
263
$
124
$
389
Net income (loss) attributable to AGL
per diluted share
$
1.52
$
3.74
$
1.92
$
5.23
Weighted average diluted shares
61.0
70.4
63.9
74.3
Non-GAAP
Adjusted operating income (loss) (1)
$
14
$
273
$
267
$
470
Adjusted operating income per diluted share (1)
$
0.22
$
3.88
$
4.14
$
6.32
Weighted average diluted shares
61.0
70.4
63.9
74.3
Gain (loss) related to FG VIE and CIV consolidation(2) included in adjusted operating income
$
(13
)
$
30
$
(6
)
$
30
Gain (loss) related to FG VIE and CIV consolidation included in adjusted operating income per share
$
(0.22
)
$
0.43
$
(0.10
)
$
0.41
Components of total adjusted operating income (loss)
Insurance segment
$
66
$
277
$
413
$
722
Asset Management segment
(3
)
(3
)
(6
)
(19
)
Corporate division
(36
)
(31
)
(134
)
(263
)
Other
(13
)
30
(6
)
30
Adjusted operating income (loss)
$
14
$
273
$
267
$
470
As of
December 31, 2022
December 31, 2021
Amount
Per Share
Amount
Per Share
Shareholders’ equity attributable to AGL
$
5,064
$
85.80
$
6,292
$
93.19
Adjusted operating shareholders’ equity (1)
5,543
93.92
5,991
88.73
ABV (1)
8,379
141.98
8,823
130.67
Common Shares Outstanding
59.0
67.5
(1)
Please see “Explanation of Non-GAAP Financial Measures” at the end of this press release.
(2)
The effect of consolidating financial guaranty (FG) variable interest entities (VIEs) (FG VIEs) and consolidated investment vehicles (CIVs).
On a per share basis, shareholders’ equity attributable to AGL was $85.80 as of December 31, 2022, which was lower than shareholders’ equity attributable to AGL of $93.19 as of December 31, 2021, primarily due to unrealized losses on the investment portfolio that resulted from rising interest rates.
On a per share basis, adjusted operating shareholders’ equity increased to $93.92 as of December 31, 2022, from $88.73 as of December 31, 2021, and ABV increased to $141.98 as of December 31, 2022 from $130.67 as of December 31, 2021, primarily due to the accretive effect of the share repurchase program, and in the case of ABV, net premiums written and favorable loss development. See “Common Share Repurchases” on page 15.
Fourth Quarter 2022
Insurance Segment
The Insurance segment primarily consists of the Company’s insurance subsidiaries that provide credit protection products to the United States (U.S.) and non-U.S. public finance (including infrastructure) and structured finance markets.
Insurance Segment Results
(in millions)
Quarter Ended
December 31,
2022
2021
Segment revenues
Net earned premiums and credit derivative revenues
$
111
$
111
Net investment income
80
67
Fair value gains (losses) on trading securities
(4
)
—
Foreign exchange gains (losses) on remeasurement and other income (loss)
6
4
Total segment revenues
193
182
Segment expenses
Loss expense (benefit)
44
(161
)
Amortization of deferred acquisition costs (DAC)
3
4
Employee compensation and benefit expenses
41
37
Other operating expenses
24
22
Total segment expenses
112
(98
)
Equity in earnings (losses) of investees
(5
)
44
Segment adjusted operating income (loss) before income taxes
76
324
Less: Provision (benefit) for income taxes
10
47
Segment adjusted operating income (loss)
$
66
$
277
Insurance segment adjusted operating income was $66 million in fourth quarter 2022, compared with $277 million in the three-month period ended December 31, 2021 (fourth quarter 2021). The variance was primarily attributable to loss expense and changes in net asset values of alternative investments reported in “equity in earnings (losses) of investees”, as shown in the table above. The components of premiums, losses and income from the investment portfolio are presented below.
Insurance Segment Net Earned Premiums and Credit Derivative Revenues
Insurance Segment
Net Earned Premiums and Credit Derivative Revenues
(in millions)
Quarter Ended
December 31,
2022
2021
Scheduled net earned premiums and credit derivative revenues
$
77
$
91
Accelerations – Puerto Rico
29
—
Accelerations
5
20
Total
$
111
$
111
Net earned premiums attributable to accelerations increased in fourth quarter 2022 compared with fourth quarter 2021 primarily due to the resolution of Puerto Rico Highways and Transportation Authority exposures, offset by declines in scheduled net earned premiums due to the effect of terminations and refundings since the fourth quarter of 2021 on recurring net earned premiums.
Insurance Segment Loss Expense (Benefit) and the Rollforward of Expected Losses
The table below presents the loss expense (benefit) recognized in the Insurance segment’s adjusted operating income.
Insurance Segment
Loss Expense (Benefit)
(in millions)
Quarter Ended
December 31,
2022
2021
Public finance
$
58
$
(153
)
U.S. residential mortgage-backed securities (RMBS)
(16
)
(16
)
Other structured finance
2
8
Total
$
44
$
(161
)
The table below presents the rollforward of expected losses for fourth quarter 2022.
Roll Forward of Net Expected Loss to be Paid (Recovered)(1)
(in millions)
Net Expected Loss to
be Paid (Recovered)
as of September 30,
2022
Economic Loss
Development
(Benefit)
Net (Paid)
Recovered
Losses
Net Expected Loss to
be Paid (Recovered)
as of December 31,
2022
Public finance
$
632
$
39
$
(259
)
$
412
U.S. RMBS
52
(16
)
30
66
Other structured finance
43
—
1
44
Total
$
727
$
23
$
(228
)
$
522
(1)
Economic loss development (benefit) represents the change in net expected loss to be paid (recovered) attributable to the effects of changes in the economic performance of insured transactions, changes in assumptions based on observed market trends, changes in discount rates, accretion of discount and the economic effects of loss mitigation efforts, each net of reinsurance. Economic loss development (benefit) is the principal measure that the Company uses to evaluate the loss experience in its insured portfolio. Expected loss to be paid (recovered) includes all transactions insured by the Company, regardless of the accounting model prescribed under accounting principles generally accepted in the United States of America (GAAP) and without consideration of deferred premium revenue.
Loss expense (benefit) is a function of economic loss development (benefit), as well as the amortization of deferred premium revenue. In fourth quarter 2022 loss expense in the public finance sector was $58 million and the economic development was a loss of $39 million. Public finance economic development was primarily due to certain Puerto Rico exposures. The difference between public finance loss expense and public finance economic development was primarily attributable to the release of deferred premium revenue associated with extinguished Puerto Rico policies.
The economic benefit in fourth quarter 2022 for U.S. RMBS was $16 million, primarily attributable to higher recoveries on previously charged-off loans and improved performance in certain transactions.
In fourth quarter 2021 the Company sold a portion of its salvage and subrogation recoverables associated with certain matured Puerto Rico exposures, and increased its assumptions for the value of recoveries to be received in 2022 in connection with the resolution of general obligation bonds of the Commonwealth of Puerto Rico and obligations of its related authorities and public corporations, the Public Buildings Authority, the Convention Center District Authority, the Infrastructure Financing Authority and the Highways and Transportation Authority under the Puerto Rico Oversight, Management, and Economic Stability Act (2022 Puerto Rico Resolutions) resulting in a benefit in loss expenses.
Insurance Segment Income from Investment Portfolio
Insurance Segment
Income from Investment Portfolio
(in millions)
Quarter Ended
December 31,
2022
2021
Net investment income
$
80
$
67
Fair value gains (losses) on trading securities (1)
(4
)
—
Equity in earnings (losses) of investees:
AssuredIM Funds
3
10
Other alternative investments
(8
)
34
Total
$
71
$
111
(1)
Contingent value instruments (CVIs) issued by Puerto Rico that were received as part of the 2022 Puerto Rico Resolutions are classified as trading securities with changes in fair value reported in the consolidated statements of operations.
Net investment income, which represents interest income on fixed-maturity debt securities and short-term investments, increased to $80 million in fourth quarter 2022 from $67 million in fourth quarter 2021, primarily due to rising interest rates on short-term investments.
In the Insurance segment, investments in AssuredIM Funds are recorded at net asset value (NAV), with the change in NAV reported in “equity in earnings (losses) of investees.” Equity in earnings of AssuredIM Funds is mainly generated by healthcare, collateralized loan obligations (CLOs) and asset-based funds. As of December 31, 2022, the Insurance segment had invested $569 million (at fair value) in AssuredIM Funds, and inception-to-date realized and unrealized gains on AssuredIM Funds totaled $110 million. Equity in earnings of other alternative investments was a loss in fourth quarter 2022, primarily attributable to a private equity fund.
Equity in earnings of AssuredIM Funds was a gain of $10 million in fourth quarter 2021, primarily attributable to higher valuations of assets held in the asset-based fund that was launched in 2021. Equity in earnings of other alternative investments was a gain of $34 million in fourth quarter 2021, mainly attributable to a large fair value gain on a specific investment in a private equity fund.
Equity in earnings of investees is more volatile than net investment income on fixed-maturity securities and short-term investments. To the extent that the amounts invested in AssuredIM Funds and other alternative investments increase and available-for-sale fixed-maturity securities decrease, net investment income may decline and mark-to-market volatility may increase.
Insurance Segment New Business Production
PVP, a non-GAAP financial measure, measures the value of the Insurance segment’s new business production for all contracts regardless of form or GAAP accounting model. See “Explanation of Non-GAAP Financial Measures” at the end of this press release.
Insurance Segment
New Business Production
(in millions)
Quarter Ended December 31,
2022
2021
GWP
PVP (1)
Gross Par
Written (1)
GWP
PVP (1)
Gross Par
Written (1)
Public finance – U.S.
$
88
$
94
$
5,819
$
71
$
70
$
5,947
Public finance – non-U.S.
9
1
—
19
16
—
Structured finance – U.S.
33
40
971
8
10
375
Structured finance – non-U.S.
1
—
245
2
2
164
Total
$
131
$
135
$
7,035
$
100
$
98
$
6,486
(1)
PVP and Gross Par Written in the table above are based on “close date,” when the transaction settles.
U.S. public finance GWP and PVP in fourth quarter 2022, was higher than the comparable GWP and PVP in fourth quarter 2021, primarily due to several large transactions in the healthcare and infrastructure sector in fourth quarter 2022. The Company’s direct par written represented 70% of the total U.S. municipal market insured issuance in fourth quarter 2022, compared with 61% in fourth quarter 2021, and the Company’s penetration of all municipal issuance increased to 6.1% in fourth quarter 2022 from 4.6% in fourth quarter 2021.
Fourth quarter 2022 structured finance GWP and PVP were primarily attributable to insurance securitization transactions, and commercial real estate and pooled corporate obligations.
Asset Management Segment
In the Asset Management segment, the Company provides investment advisory services, which include the management of CLOs and opportunity funds, as well as certain legacy hedge and opportunity funds now subject to an orderly wind-down. The Asset Management segment was affected by the challenging global economy and financial markets and the widening of CLO spreads, as well as the runoff of our legacy funds and certain strategic limitations during the year.
The Company is exploring alternative accretive growth strategies for its asset management business, with the goal of maximizing the value of this business for its stakeholders. The Company remains committed to growing asset management-related earnings and is pursuing strategies that would provide it with an avenue for such growth. Discussions regarding alternative accretive growth strategies are ongoing and there can be no assurance that such discussions will result in any transaction.
Asset Management Segment Results
(in millions)
Quarter Ended
December 31,
2022
2021
Segment revenues
Management fees:
CLOs (1)
$
12
$
12
Opportunity funds and liquid strategies
6
7
Wind-down funds
1
2
Total management fees
19
21
Performance fees
1
—
Foreign exchange gains (losses) on remeasurement and other income (loss)
4
2
Total segment revenues
24
23
Segment expenses
Employee compensation and benefit expenses
18
14
Interest expense
1
1
Other operating expenses (2)
9
11
Total segment expenses
28
26
Segment adjusted operating income (loss) before income taxes
(4
)
(3
)
Less: Provision (benefit) for income taxes
(1
)
—
Segment adjusted operating income (loss)
$
(3
)
$
(3
)
(1)
CLO fees are the net management fees that AssuredIM retains after rebating the portion of these fees that pertains to the CLO equity that is held directly by AssuredIM Funds.
(2)
Includes amortization of intangible assets of $3 million in both fourth quarter 2022 and fourth quarter 2021.
Roll Forward of Assets Under Management
(in millions)
CLOs
Opportunity
Funds
Liquid
Strategies
Wind-Down
Funds
Total
AUM, September 30, 2022
$
14,951
$
2,018
$
367
$
208
$
17,544
Inflows – third party
—
23
—
—
23
Inflows – intercompany
—
—
—
—
—
Outflows:
Redemptions
—
—
—
—
—
Distributions
(14
)
(100
)
(127
)
(10
)
(251
)
Total outflows
(14
)
(100
)
(127
)
(10
)
(251
)
Net flows
(14
)
(77
)
(127
)
(10
)
(228
)
Change in value
213
(57
)
8
(16
)
148
AUM, December 31, 2022
$
15,150
$
1,884
$
248
$
182
$
17,464
