Assured Guaranty Ltd. (NYSE:AGO) (“AGL” and, together with its subsidiaries, “Assured Guaranty” or the “Company”) announced today its financial results for the three-month period ended June 30, 2012 (“second quarter 2012”). The Company reported operating income for second quarter 2012 of $114.0 million, or $0.61 per diluted share, bringing year-to-date operating income for the six-month period ended June 30, 2012 ("six months 2012") to $185.2 million, or $0.99 per diluted share. This compares with operating income of $143.4 million, or $0.76 per diluted share for the three-month period ended June 30, 2011 ("second quarter 2011") and $390.8 million, or $2.09 per diluted share, for the six-month period ended June 30, 2011 ("six months 2011"). Second quarter 2012 net income of $376.5 million, or $2.01 per share, includes non-economic net fair value gains 1 of $263.6 million. Second quarter 2011 net loss of $43.1 million, or $0.23 per diluted share, includes non-economic net fair value losses of $187.5 million. Six months 2012 net loss of $106.5 million, or $0.58 per share, includes non-economic net fair value losses of $296.4 million. Six months 2011 net income of $96.2 million, or $0.51 per share, includes non-economic net fair value losses of $306.7 million.
Interest rates, which were already at historically low levels, declined further in second quarter 2012, which resulted in a net increase in expected losses, that does not represent additional credit impairment, but rather a change in the risk-free rates used to discount losses. See “Economic Loss Development.” The low interest rate environment also encouraged higher refundings of U.S. public finance insured obligations as issuers refinanced their obligations at more attractive rates, resulting in the acceleration of premium earnings. See “Second Quarter 2012 Operating Income Highlights.”
“Our positive second-quarter results reflect our strategic versatility and the strength of Assured Guaranty's business model,” said Dominic Frederico, President and CEO. “In U.S. public finance, we continued to honor our value proposition by providing protection to holders of insured bonds, including those of distressed municipalities such as Harrisburg, Jefferson County and Stockton.”
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