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Assured Guaranty Ltd. Reports Results For Second Quarter 2012

1. Operating shareholders’ equity and adjusted book value are non-GAAP financial measures. See the “Explanation of Non-GAAP Financial Measures” section of this press release.

Conference Call and Webcast Information:

The Company will host a conference call for investors at 9:00 a.m. Eastern Time (10:00 a.m. Atlantic Time) on Friday, August 10, 2012. The conference call will be available via live and archived webcast in the Investor Information section of the Company's website at http://www.assuredguaranty.com or by dialing 1-877-317-6789 (in the U.S.), 1-866-605-3852 (Canada) or 1-412-317-6789 (International). A replay of the call will be available until October 9, 2012. To listen to the replay, dial 1-877-344-7529 (in the U.S.) or 1-412-317-0088 (International), passcode 10016994. The replay will be available one hour after the conference call ends.

Please refer to Assured Guaranty’s June 30, 2012 Financial Supplement, which is posted on the Company’s website at http://www.assuredguaranty.com/investor-information/by-company/assured-guaranty-ltd/financial-information, for more information on the Company’s financial guaranty portfolios, investment portfolio and other items. The Company is also posting on the same page of its website:

  • “Public Finance Transactions in 2Q 2012,” which lists the new issue U.S. public finance transactions sold in second quarter 2012 that the Company has insured, and
  • “Structured Finance Transactions at June 30, 2012,” which lists the Company’s structured finance exposure as of that date.

In addition, the Company is posting at http://www.assuredguaranty.com/presentations the “June 30, 2012 Equity Investor Presentation.” Furthermore, when the Company’s separate-company subsidiary financial supplements and its Fixed Income Presentation for the current quarter are available to be posted on the Company’s website, those documents and the links to those documents on the Company’s website will be furnished in a Current Report on Form 8-K.

Assured Guaranty Ltd. is a publicly traded (NYSE: AGO) Bermuda-based holding company. Its operating subsidiaries provide credit enhancement products to the U.S. and international public finance, infrastructure and structured finance markets. More information on Assured Guaranty Ltd. and its subsidiaries can be found at www.assuredguaranty.com.

Assured Guaranty Ltd.

Consolidated Statements of Operations
(amounts in millions)
  Quarter Ended

June 30,

  2012       2011  
 
Revenues:
Net earned premiums $ 219.3 $ 230.0
Net investment income 101.6 102.6
Net realized investment gains (losses) (3.1 ) (5.1 )
Net change in fair value of credit derivatives:
Realized gains (losses) and other settlements (22.7 ) (10.8 )
Net unrealized gains (losses)   283.4     (54.0 )
Net change in fair value of credit derivatives 260.7 (64.8 )
Fair value gain (loss) on CCS 4.3 0.6
Fair value gains (losses) on FG VIEs 172.4 (174.3 )
Other income   4.3     27.3  
Total revenues 759.5 116.3
 
Expenses:
Loss and LAE 122.5 123.9
Amortization of deferred acquisition costs 4.5 5.8
Interest expense 25.4 24.7
Other operating expenses   53.5     53.2  
Total expenses 205.9 207.6
   
Income (loss) before income taxes 553.6

(91.3

)

Provision (benefit) for income taxes   177.1     (48.2 )
Net income (loss) 376.5 (43.1 )
Less after-tax adjustments:
Realized gains (losses) on investments (4.8 ) (2.8 )
Non-credit impairment unrealized fair value gains (losses) on credit derivatives 159.4 (73.6 )
Fair value gains (losses) on CCS 2.9 0.4
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves 3.7 3.8
Effect of consolidating FG VIEs   101.3     (114.3 )
Operating income $ 114.0   $ 143.4  
 

Assured Guaranty Ltd.

Consolidated Balance Sheets
(amounts in millions)
  As of
June 30,

2012

  December 31,

2011

Assets
Investment portfolio:
Fixed maturity securities, available-for-sale, at fair value $ 10,207.5 $ 10,141.9
Short-term investments, at fair value 919.8 734.0
Other invested assets   194.4   222.9
Total investment portfolio 11,321.7 11,098.8
 
Cash 175.3 214.5
Premiums receivable, net of ceding commissions payable 964.1 1,002.9
Ceded unearned premium reserve 590.8 708.9
Deferred acquisition costs 126.8 132.4
Reinsurance recoverable on unpaid losses 170.5 69.3
Salvage and subrogation recoverable 376.8 367.7
Credit derivative assets 429.9 468.9
Deferred tax asset, net 815.1 803.5
Current income tax receivable 63.2 76.4
FG VIE assets, at fair value 2,726.0 2,819.1
Other assets   314.3   262.3
Total assets $ 18,074.5 $ 18,024.7
 
Liabilities and shareholders' equity
Liabilities
Unearned premium reserve $ 5,583.4 $ 5,962.8
Loss and LAE reserve 995.2 679.0
Reinsurance balances payable, net 186.7 171.0
Long-term debt 846.4 1,038.3
Credit derivative liabilities 2,095.9 1,772.8
FG VIE liabilities with recourse, at fair value 2,239.0 2,396.9
FG VIE liabilities without recourse, at fair value 1,042.3 1,061.5
Other liabilities   361.5   290.8
Total liabilities 13,350.4 13,373.1
 
Shareholders' equity
Common stock 1.9 1.8
Additional paid-in capital 2,720.0 2,569.9
Retained earnings 1,568.4 1,708.0
Accumulated other comprehensive income 429.4 367.5
Deferred equity compensation   4.4   4.4
Total shareholders' equity 4,724.1 4,651.6
   
Total liabilities and shareholders' equity $ 18,074.5 $ 18,024.7
 

Explanation of Non-GAAP Financial Measures:

The Company references financial measures that are not in accordance with GAAP. Assured Guaranty’s management and board of directors utilize non-GAAP measures in evaluating the Company’s financial performance and as a basis for determining senior management incentive compensation. By providing these non-GAAP financial measures, investors, analysts and financial news reporters have access to the same information that management reviews internally. In addition, Assured Guaranty’s presentation of non-GAAP financial measures is consistent with how analysts calculate their estimates of Assured Guaranty’s financial results in their research reports on Assured Guaranty and with how investors, analysts and the financial news media evaluate Assured Guaranty’s financial results.

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