DEF 14A: Assured Guaranty Reports Strong 2023 Performance, Driven by Strategic Initiatives

Assured Guaranty's 2023 results showcase significant growth in net income and adjusted operating income per share, reaching historic highs due to long-term strategic initiatives.

Summary

• Assured Guaranty Ltd. had an excellent year in 2023, with U.S. GAAP net income attributable to Assured Guaranty Ltd. per share more than six times that of 2022.
• Adjusted operating income per share was more than two and one-half times that of 2022, reaching the highest levels in the company's history.
• Shareholders' equity attributable to Assured Guaranty Ltd. per share grew to a new high of $101.63.
• Adjusted operating shareholders' equity per share reached $106.54, and adjusted book value per share reached $155.92, both new highs.
• The share price rose over 20% from $62.26 at the end of 2022 to $74.83 at the end of 2023.
• Total shareholder return (TSR) for the year was over 22%, nearly double the one-year TSR of the S&P 500 Financials Sector Index and the Russell Midcap Financial Services Index.
• The company transformed its asset management strategy by contributing substantially all of its asset management business to Sound Point Capital Management, LP, for an approximately 30% interest in the combined entity.
• This transaction resulted in a $222 million pre-tax gain, net of expenses, in 2023.
• New business production in the insurance segment (PVP) was over $400 million, the second time since 2009, with a total PVP of $404 million for 2023, nearly 8% over the previous year's total.
• In U.S. public finance, the company insured 5.4% of all new municipal bond issues by par, the highest penetration rate since 2011.
• The company produced $109 million of PVP in global structured finance insurance, a nearly 118% increase over last year.
• The company produced $83 million of PVP in non-U.S. public finance insurance, a 22% increase over last year.
• The company returned $267 million to shareholders through share repurchases and dividends.
• The company repurchased 3.2 million of its shares, reducing the share count from the end of 2022 by 4.7%.
• The company issued $350 million of 5-year senior unsecured debt with a coupon of 6.125%, using the proceeds to redeem $330 million of 10-year debt due July 1, 2024.

Sentiment

Score: 9

Explanation: The document expresses a highly positive sentiment due to the company's strong financial performance, strategic achievements, and shareholder returns.

Positives

• The company's U.S. GAAP net income attributable to Assured Guaranty Ltd. per share was more than six times that of 2022.
• Adjusted operating income per share was more than two and one-half times that of 2022.
• Shareholders' equity attributable to Assured Guaranty Ltd. per share grew to a new high of $101.63.
• Adjusted operating shareholders' equity per share reached $106.54, and adjusted book value per share reached $155.92, both new highs.
• The share price rose over 20% from $62.26 at the end of 2022 to $74.83 at the end of 2023.
• Total shareholder return (TSR) for the year was over 22%, nearly double the one-year TSR of the S&P 500 Financials Sector Index and the Russell Midcap Financial Services Index.
• The company transformed its asset management strategy by contributing substantially all of its asset management business to Sound Point Capital Management, LP, for an approximately 30% interest in the combined entity.
• This transaction resulted in a $222 million pre-tax gain, net of expenses, in 2023.
• New business production in the insurance segment (PVP) was over $400 million, the second time since 2009, with a total PVP of $404 million for 2023, nearly 8% over the previous year's total.
• In U.S. public finance, the company insured 5.4% of all new municipal bond issues by par, the highest penetration rate since 2011.
• The company produced $109 million of PVP in global structured finance insurance, a nearly 118% increase over last year.
• The company produced $83 million of PVP in non-U.S. public finance insurance, a 22% increase over last year.
• The company returned $267 million to shareholders through share repurchases and dividends.
• The company repurchased 3.2 million of its shares, reducing the share count from the end of 2022 by 4.7%.
• The company issued $350 million of 5-year senior unsecured debt with a coupon of 6.125%, using the proceeds to redeem $330 million of 10-year debt due July 1, 2024.

Risks

• The company faces the risk that its obligors' ability to pay debt service will be impaired by the impact of climate-related perils.
• The company faced pricing competition in certain segments of the U.S. public finance financial guaranty market from another financial guaranty insurer.

Future Outlook

The company is positioned for further growth in the asset management segment in the future.

Management Comments

• We had an excellent year in 2023.
• We take great pride in our 2023 accomplishments.

Industry Context

Despite new issuance volume in U.S. public finance remaining relatively low, Assured Guaranty achieved new business production due to its strategic decision to pursue financial guaranty business in markets other than the U.S. public finance market, while its only monoline financial guaranty competitor chose to limit itself to the U.S. public finance market.

Comparison to Industry Standards

• Assured Guaranty's total shareholder return (TSR) for the year was over 22%, nearly double the one-year TSR of the S&P 500 Financials Sector Index and the Russell Midcap Financial Services Index.
• In U.S. public finance, Assured Guaranty insured 5.4% of all new municipal bond issues by par, its highest penetration rate since 2011, when it had no other active financial guarantor competitors.

Related Party Transactions

• In 2023, the company incurred expenses of approximately $1.4 million related to its investment management agreement with Wellington Management.
• BlackRock supplies the company's investment reporting module, and in 2023 the company incurred expenses of approximately $500,000 with respect to that module.

Stakeholder Impact

• Shareholders benefited from increased share price and total shareholder return.
• Shareholders benefited from the return of $267 million through share repurchases and dividends.
• Employees benefited from enhanced human capital management initiatives, including employee engagement surveys and professional development opportunities.

Next Steps

• The Annual General Meeting of shareholders will be held on Thursday, May 2, 2024, at 9:30 a.m. London time, at 6 Bevis Marks, London, EC3A 7BA.

Key Dates

Keywords

financial guaranty, asset management, shareholder value, executive compensation, proxy statement, corporate governance, insurance, investment, directors