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Assured Guaranty Ltd. Reports Results For Third 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 the press release.

Conference Call and Webcast Information:

The Company will host a conference call for investors at 7:00 a.m. Eastern Time (8:00 a.m. Atlantic Time) on Friday, November 9, 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 through January 10, 2013. To listen to the replay, dial 1-877-344-7529 (in the U.S.) or 1-412-317-0088 (International), and enter the number 10020353. The replay will be available one hour after the conference call ends.

Please refer to Assured Guaranty's September 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 3Q 2012,” which lists the new issue U.S. public finance transactions sold in third quarter 2012 that the Company has insured, and
  • “Structured Finance Transactions at September 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 “September 30, 2012 Equity Investor Presentation.” Furthermore, the Company's separate-company subsidiary financial supplements and its Fixed Income Presentation for the current quarter will be posted on the Company's website when available. Those documents and the links to those documents 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 (unaudited)

(amounts in millions)

 
  Quarter Ended September 30,
2012   2011
Revenues:
Net earned premiums $ 222 $ 211
Net investment income 102 95
Net realized investment gains (losses) 2 (11 )
Net change in fair value of credit derivatives:
Realized gains (losses) and other settlements 2
Net unrealized gains (losses) (38 ) 1,156  
Net change in fair value of credit derivatives (36 ) 1,156
Fair value gain (loss) on CCS (2 ) 2
Fair value gains (losses) on FG VIEs 38 (99 )
Other income 16   (9 )
Total revenues 342 1,345
 

Expenses:

Loss and LAE 90 215
Amortization of deferred acquisition costs 4 4
Interest expense 21 25
Other operating expenses 48   46  
Total expenses 163 290
   
Income (loss) before income taxes 179 1,055
Provision (benefit) for income taxes 37   294  
Net income (loss) 142 761
Less after-tax adjustments:
Realized gains (losses) on investments 0 (13 )
Non-credit impairment unrealized fair value gains (losses) on credit derivatives (37 ) 800
Fair value gains (losses) on CCS (2 ) 2
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves 4 (15 )
Effect of consolidating FG VIEs 11   (51 )
Operating income $ 166   $ 38  
 
Assured Guaranty Ltd.

Consolidated Balance Sheets (unaudited)

(amounts in millions)

 
As of
September 30, 2012   December 31, 2011
Assets
Investment portfolio:
Fixed maturity securities, available-for-sale, at fair value $ 10,318 $ 10,142
Short-term investments, at fair value 564 734
Other invested assets 205   223
Total investment portfolio 11,087 11,099
 
Cash 133 215
Premiums receivable, net of ceding commissions payable 944 1,003
Ceded unearned premium reserve 550 709
Deferred acquisition costs 127 132
Reinsurance recoverable on unpaid losses 56 69
Salvage and subrogation recoverable 430 368
Credit derivative assets 450 469
Deferred tax asset, net 729 804
Current income tax receivable 78 76
FG VIE assets, at fair value 2,693 2,819
Other assets 286   262
Total assets $ 17,563   $ 18,025
 
Liabilities and shareholders' equity
Liabilities
Unearned premium reserve $ 5,332 $ 5,963
Loss and LAE reserve 594 679
Reinsurance balances payable, net 185 171
Long-term debt 840 1,038
Credit derivative liabilities 2,151 1,773
FG VIE liabilities with recourse, at fair value 2,169 2,397
FG VIE liabilities without recourse, at fair value 1,018 1,061
Other liabilities 322   291
Total Liabilities 12,611 13,373
 
Shareholders' equity
Common stock 2 2
Additional paid-in capital 2,722 2,570
Retained earnings 1,693 1,708
Accumulated other comprehensive income 531 368
Deferred equity compensation 4   4
Total shareholders' equity 4,952   4,652
Total liabilities and shareholders' equity $ 17,563   $ 18,025
 

Explanation of Non-GAAP Financial Measures:

The Company references financial measures that are not in accordance with GAAP. Management and the 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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