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Assured Guaranty Ltd. Reports Results For Third Quarter 2012

Book Value Measurements

The primary drivers of the year-to-date increase in shareholders' equity, operating shareholders' equity and adjusted book value were the issuance of common shares as described below, and the reassumption of previously ceded unearned premium reserve and related commutation gains, both of which were offset in part by loss development, dividends and share repurchases. Shareholders' equity was also affected by net fair value losses on credit derivatives and gains related to FG VIEs, which do not affect operating shareholders' equity or adjusted book value. The present value of new business development, as well as the additional future earnings from the reassumptions of previously ceded books of business in the first quarter 2012, increased adjusted book value, which includes the estimated future earnings on the Company's in-force book of business.

Per share amounts were affected by an additional 13.4 million common shares outstanding following the issuance of common shares to settle the forward purchase contracts that constituted a portion of the Company's 2009 equity units. The purchase price was $12.85 per share, for a total of $173 million. This was offset in part by the repurchase of 2.1 million common shares at an average price of $11.76 per share, or $24 million.
Table 5: Reconciliation of Shareholders' Equity to

Operating Shareholders' Equity and Adjusted Book Value (1)

(amounts in millions, except per share amounts)
 
 
  As of
September 30, 2012   December 31, 2011
 
Shareholders' equity $ 4,952 $ 4,652
Less after-tax adjustments:
Effect of consolidating FG VIEs (335 ) (405 )
Non-credit impairment unrealized fair value gains (losses) on credit derivatives (901 ) (498 )
Fair value gains (losses) on CCS 27 35
Unrealized gain (loss) on investment portfolio excluding foreign exchange effect 496   319  
Operating shareholders' equity 5,665 5,201
After-tax adjustments:
Less: Deferred acquisition costs 169 174
Plus: Net present value of estimated net future credit derivative revenue 246 302
Plus: Net unearned premium reserve on financial guaranty contracts in excess of expected loss to be expensed 3,392   3,658  
Adjusted book value $ 9,134   $ 8,987  
 
Shares outstanding at the end of the period 194.0 182.2
 
Per share:
Shareholders' equity $ 25.53 $ 25.52
Operating shareholders' equity $ 29.20 $ 28.54
Adjusted book value $ 47.09 $ 49.32

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