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Assured Guaranty Ltd. Reports Results For Fourth Quarter 2012

Stocks in this article: AGO

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 December 31, 2012 (“fourth quarter 2012”) and the year ended December 31, 2012 (“FY 2012”).

The Company reported operating income for fourth quarter 2012 of $184 million, or $0.95 per diluted share. This represents a 7% increase compared with the three-month period ended December 31, 2011 ("fourth quarter 2011"), due primarily to higher terminations of structured finance exposures, and refundings of public finance exposures. Operating income for FY 2012 was $535 million, or $2.81 per diluted share, compared with $601 million, or $3.24 per diluted share, for the year ended December 31, 2011 ("FY 2011"). The decrease in operating income for FY 2012 compared with FY 2011 was due primarily to the increase in loss expense on Greek sovereign exposures. The Company no longer has exposure to Greek sovereign debt.

Fourth quarter 2012 net income was $74 million, or $0.38 per diluted share, compared with fourth quarter 2011 net loss of $84 million, or $0.46 per diluted share. FY 2012 net income was $110 million, or $0.57 per diluted share, compared with FY 2011 net income of $773 million, or $4.16 per diluted share. The main driver of the changes for the fourth quarter and the full year compared with the respective prior periods was the non-economic net unrealized fair value changes, which are expected to reverse by contract maturity.

1 These are financial measures that are not in accordance with accounting principles generally accepted in the United States of America (“GAAP”) (“non-GAAP financial measures”). Please see the “Explanation of Non-GAAP Financial Measures” and the tables reconciling the non-GAAP measures to GAAP measures in this press release.

2 Insured leverage is ratio of statutory-basis net par outstanding to qualified statutory capital.

“During 2012, Assured Guaranty generated $535 million of operating income and brought operating shareholders' equity per share to a record level,” said Dominic Frederico, President and CEO. “In a difficult operating environment, we created shareholder value through our successful execution of strategic objectives including new direct business production, assumed reinsurance, reassumption of ceded business, R&W recoveries, insurance terminations and purchases of our insured securities for loss mitigation. In addition, in February 2012 we doubled our quarterly dividend to $0.09 per share and further raised it to $0.10 per share in the first quarter of 2013, a total increase of 122% in the last 12 months.”

Table 1: Reconciliation of Net Income (Loss) to Operating Income 1

(amounts in millions, except per share amounts)
       
Quarter Ended December 31, Year Ended December 31,
2012   2011 2012   2011
 
Net income (loss) $ 74 $ (84 ) $ 110 $ 773
Less after-tax adjustments:
Realized gains (losses) on investments 1 (6 ) (4 ) (20 )
Non-credit impairment unrealized fair value gains (losses) on credit derivatives (92 ) (265 ) (486 ) 244
Fair value gains (losses) on committed capital securities ("CCS") (4 ) 21 (12 ) 23
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and loss adjustment expense ("LAE") reserves 1 (1 ) 15 (3 )
Effect of consolidating financial guaranty variable interest entities ("FG VIEs") (16 ) (5 ) 62   (72 )
Operating income $ 184   $ 172   $ 535   $ 601  
 
Net income (loss) per diluted share $ 0.38 $ (0.46 ) $ 0.57 $ 4.16
Operating income per diluted share $ 0.95 $ 0.94 $ 2.81 $ 3.24
 
Diluted shares outstanding-GAAP 194.7 182.2 190.7 185.5
Diluted shares outstanding-operating 194.7 183.2 190.7 185.6

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