Fourth Quarter 2023
- GAAP Highlights: Net income attributable to Assured Guaranty Ltd. (AGL) was $376 million, or $6.40 per share(1), for fourth quarter 2023. Shareholders’ equity attributable to AGL per share was $101.63 as of December 31, 2023.
- Non-GAAP Highlights: Adjusted operating income(2) was $338 million, or $5.75 per share, for fourth quarter 2023. Adjusted operating shareholders’ equity(2) per share and adjusted book value (ABV)(2) per share were $106.54 and $155.92, respectively, as of December 31, 2023.
- New Business: Gross written premiums (GWP) were $136 million for fourth quarter 2023. Present value of new business production (PVP)(2) was $155 million for fourth quarter 2023.
- Bermuda corporate income tax: The enactment of a new Bermuda corporate income tax resulted in the establishment of a deferred tax asset, and corresponding tax benefit to income, of $189 million.
- Return of Capital to Shareholders: Fourth quarter 2023 capital returned to shareholders was $126 million, consisting of the repurchase of 1.7 million shares for $109 million, and dividends of $17 million.
Full Year (FY) 2023
- GAAP Highlights: Net income attributable to AGL was $739 million, or $12.30 per share, for FY 2023.
- Non-GAAP Highlights: Adjusted operating income was $648 million, or $10.78 per share, for FY 2023.
- New Business: GWP were $357 million and PVP was $404 million for FY 2023.
- Sound Point and AHP Transactions(3): Gain on Sound Point and AHP transactions(3) of $222 million (pre-tax, net of transaction expenses).
- Return of Capital to Shareholders: FY 2023 capital returned to shareholders was $267 million, consisting of the repurchase of 3.2 million shares for $199 million, and dividends of $68 million.
HAMILTON, Bermuda–(BUSINESS WIRE)–Assured Guaranty Ltd. (NYSE: AGO) (AGL and, together with its consolidated entities, Assured Guaranty or the Company) announced today its financial results for the three-month period ended December 31, 2023 (fourth quarter 2023) and the year ended December 31, 2023 (FY 2023).
“Finishing with a strong fourth quarter, Assured Guaranty reported outstanding results for 2023,” said Dominic Frederico, President and CEO. “Our key per-share measures – GAAP shareholders’ equity, adjusted operating shareholders’ equity and adjusted book value – each ended the year at a record high. In terms of earnings, we produced more than six times 2022’s GAAP net income per share and more than two-and-a-half times that year’s adjusted operating income per share. Our share price rose by 20% during the year.
“2023 GWP and PVP were $357 million and $404 million, respectively. Our diversified production strategy continued to demonstrate its value, as global structured finance produced 73% more GWP and more than double the PVP it wrote in 2022, reaching its highest annual direct GWP and PVP amounts in a decade; non-U.S. public finance saw a 9% annual increase in GWP and a 22% increase in PVP; and while new issuance volume in the municipal bond market was relatively low, we led the industry in new-issue insured par sold with a 61% market share, and U.S. public finance continued to produce more than half of both annual GWP and PVP.
“During 2023, we completed our strategic transaction with Sound Point and a separate transaction involving other AssuredIM assets, which resulted in pre-tax gains for the year of $222 million, net of expenses. The transaction with Sound Point furthers our asset management strategy, as we now own approximately 30% of the combined entity. Additionally, in the fourth quarter, enactment of a new Bermuda tax law resulted in the establishment of a deferred tax asset, and corresponding benefit to income of $189 million.”
|
(1) |
|
All per share information for net income and adjusted operating income is based on diluted shares. |
|
(2) |
|
Please see “Explanation of Non-GAAP Financial Measures.” |
|
(3) |
|
Sound Point Capital Management, LP and certain of its investment management affiliates (Sound Point) and Assured Healthcare Partners LLC (AHP) transactions closed in July 2023. |
|
Summary Financial Results |
||||||||||||||||
|
(in millions, except per share amounts) |
||||||||||||||||
|
|
|
|
|
|||||||||||||
|
|
|
Quarter Ended |
Year Ended |
|||||||||||||
|
|
|
December 31, |
|
December 31, |
||||||||||||
|
|
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
GAAP (1) |
|
|
|
|
|
|
|
|
||||||||
|
Net income (loss) attributable to AGL |
|
$ |
376 |
|
|
$ |
94 |
|
|
$ |
739 |
|
|
$ |
124 |
|
|
Net income (loss) attributable to AGL per diluted share |
|
$ |
6.40 |
|
|
$ |
1.52 |
|
|
$ |
12.30 |
|
|
$ |
1.92 |
|
|
Weighted average diluted shares |
|
|
58.3 |
|
|
|
61.0 |
|
|
|
59.6 |
|
|
|
63.9 |
|
|
Non-GAAP |
|
|
|
|
|
|
|
|
||||||||
|
Adjusted operating income (loss) (2) |
|
$ |
338 |
|
|
$ |
14 |
|
|
$ |
648 |
|
|
$ |
267 |
|
|
Adjusted operating income per diluted share (2) |
|
$ |
5.75 |
|
|
$ |
0.22 |
|
|
$ |
10.78 |
|
|
$ |
4.14 |
|
|
Weighted average diluted shares |
|
|
58.3 |
|
|
|
61.0 |
|
|
|
59.6 |
|
|
|
63.9 |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gain (loss) related to FG VIE and CIV consolidation(3) included in adjusted operating income |
|
$ |
9 |
|
|
$ |
(13 |
) |
|
$ |
(21 |
) |
|
$ |
(6 |
) |
|
Gain (loss) related to FG VIE and CIV consolidation included in adjusted operating income per share |
|
$ |
0.15 |
|
|
$ |
(0.22 |
) |
|
$ |
(0.35 |
) |
|
$ |
(0.10 |
) |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Components of total adjusted operating income (loss) |
|
|
|
|
|
|
|
|
||||||||
|
Insurance segment |
|
$ |
339 |
|
|
$ |
66 |
|
|
$ |
621 |
|
|
$ |
413 |
|
|
Asset Management segment |
|
|
6 |
|
|
|
(3 |
) |
|
|
3 |
|
|
|
(6 |
) |
|
Corporate division |
|
|
(16 |
) |
|
|
(36 |
) |
|
|
45 |
|
|
|
(134 |
) |
|
Other |
|
|
9 |
|
|
|
(13 |
) |
|
|
(21 |
) |
|
|
(6 |
) |
|
Adjusted operating income (loss) |
|
$ |
338 |
|
|
$ |
14 |
|
|
$ |
648 |
|
|
$ |
267 |
|
|
|
As of |
|||||||||||||||
|
|
December 31, 2023 |
|
December 31, 2022 |
|||||||||||||
|
|
Amount |
|
Per Share |
|
Amount |
|
Per Share |
|||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Shareholders’ equity attributable to AGL |
$ |
5,713 |
|
|
$ |
101.63 |
|
|
$ |
5,064 |
|
|
$ |
85.80 |
|
|
|
Adjusted operating shareholders’ equity (2) |
|
5,990 |
|
|
|
106.54 |
|
|
|
5,543 |
|
|
|
93.92 |
|
|
|
ABV (2) |
|
8,765 |
|
|
|
155.92 |
|
|
|
8,379 |
|
|
|
141.98 |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Common Shares Outstanding |
|
56.2 |
|
|
|
|
|
59.0 |
|
|
|
|||||
|
(1) |
|
Generally accepted accounting principles in the United States of America. |
|
(2) |
|
Please see “Explanation of Non-GAAP Financial Measures” at the end of this press release. |
|
(3) |
|
The effect of consolidating financial guaranty variable interest entities (FG VIEs) and consolidated investment vehicles (CIVs). |
GAAP net income in fourth quarter 2023 increased compared with fourth quarter 2022 net income, primarily due to a $189 million benefit as a result of the establishment of a deferred tax asset related to a new Bermuda tax law, lower loss expense, as well as fair value gains on CIVs and trading securities. GAAP net income in FY 2023 also benefited from the significant gain associated with the Sound Point and AHP transactions, foreign exchange gains on remeasurement, fair value gains on credit derivatives and higher net investment income, partially offset by lower net earned premiums accelerations, and higher loss and loss adjustment expense (LAE).
The tax benefit in fourth quarter 2023 resulted from legislation enacted in December of 2023 implementing a corporate income tax in Bermuda beginning in 2025, which affects the Company’s Bermuda insurance subsidiaries. The new law allows an economic transition adjustment (ETA) equal to the difference between the fair market value and the carrying value of assets and liabilities of each of the Company’s Bermuda insurance subsidiaries as of September 30, 2023. The ETA resulted in the establishment of a deferred tax asset of $189 million that was reported as a tax benefit in fourth quarter 2023 GAAP net income and adjusted operating income. The deferred tax asset is expected to be utilized over 10 to 15 years, depending on the nature of each component of the deferred tax asset, beginning in 2025.
On a per share basis, shareholders’ equity attributable to AGL increased 18.4% during 2023 primarily due to net income and unrealized gains in the investment portfolio, partially offset by dividends. On a per share basis, adjusted operating shareholders’ equity increased 13.4% in 2023, and ABV increased 9.8%, primarily due to adjusted operating income, new business production, partially offset by loss development and dividends. See “Common Share Repurchases” on page 12.
Fourth Quarter 2023
Insurance Segment
The Insurance segment primarily consists of the Company’s insurance subsidiaries that provide credit protection products to the United States (U.S.) and non-U.S. public finance (including infrastructure) and structured finance markets.
|
Insurance Segment Results |
|||||||
|
(in millions) |
|||||||
|
|
|
||||||
|
|
Quarter Ended |
||||||
|
|
December 31, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
Segment revenues |
|
|
|
||||
|
Net earned premiums and credit derivative revenues |
$ |
86 |
|
|
$ |
111 |
|
|
Net investment income |
|
97 |
|
|
|
80 |
|
|
Fair value gains (losses) on trading securities |
|
32 |
|
|
|
(4 |
) |
|
Foreign exchange gains (losses) on remeasurement and other income (loss) |
|
18 |
|
|
|
6 |
|
|
Total segment revenues |
|
233 |
|
|
|
193 |
|
|
|
|
|
|
||||
|
Segment expenses |
|
|
|
||||
|
Loss expense (benefit) |
|
7 |
|
|
|
44 |
|
|
Amortization of deferred acquisition costs (DAC) |
|
3 |
|
|
|
3 |
|
|
Employee compensation and benefit expenses |
|
42 |
|
|
|
41 |
|
|
Other operating expenses |
|
29 |
|
|
|
24 |
|
|
Total segment expenses |
|
81 |
|
|
|
112 |
|
|
Equity in earnings (losses) of investees |
|
22 |
|
|
|
(5 |
) |
|
Segment adjusted operating income (loss) before income taxes |
|
174 |
|
|
|
76 |
|
|
Less: Provision (benefit) for income taxes |
|
(165 |
) |
|
|
10 |
|
|
Segment adjusted operating income (loss) |
$ |
339 |
|
|
$ |
66 |
|
Insurance segment adjusted operating income was $339 million in fourth quarter 2023, compared with $66 million in the three-month period ended December 31, 2022 (fourth quarter 2022). The increase was primarily due to the establishment of a deferred tax asset attributable to Bermuda tax law changes enacted in fourth quarter 2023, lower loss expense, and fair value gains on trading securities, partially offset by lower net earned premiums and credit derivative revenues. The components of premiums, losses and income from the investment portfolio are presented below.
Insurance Segment Net Earned Premiums and Credit Derivative Revenues
|
Insurance Segment |
|||||
|
Net Earned Premiums and Credit Derivative Revenues |
|||||
|
(in millions) |
|||||
|
|
|
||||
|
|
Quarter Ended |
||||
|
|
December 31, |
||||
|
|
|
2023 |
|
|
2022 |
|
Scheduled net earned premiums and credit derivative revenues |
$ |
83 |
|
$ |
77 |
|
Accelerations |
|
3 |
|
|
34 |
|
Total |
$ |
86 |
|
$ |
111 |
Insurance Segment Loss Expense (Benefit) and the Roll Forward of Expected Losses
Loss expense is a function of net economic loss development (benefit) and deferred premium revenue.
|
Insurance Segment |
|||||||
|
Loss Expense (Benefit) |
|||||||
|
(in millions) |
|||||||
|
|
|
||||||
|
|
Quarter Ended |
||||||
|
|
December 31, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
Public finance |
$ |
7 |
|
|
$ |
58 |
|
|
U.S. residential mortgage-backed securities (RMBS) |
|
(1 |
) |
|
|
(16 |
) |
|
Other structured finance |
|
1 |
|
|
|
2 |
|
|
Total |
$ |
7 |
|
|
$ |
44 |
|
The table below presents the roll forward of net expected losses for fourth quarter 2023.
Roll Forward of Net Expected Loss to be Paid (Recovered)(1)
(in millions)
|
|
|
Net Expected Loss to |
|
Net Economic Loss |
|
Net (Paid) |
|
Net Expected Loss to |
||||||
|
|
|
|
|
|
|
|
|
|
||||||
|
Public finance |
|
$ |
408 |
|
$ |
19 |
|
|
$ |
(9 |
) |
|
$ |
418 |
|
U.S. RMBS |
|
|
38 |
|
|
(4 |
) |
|
|
9 |
|
|
|
43 |
|
Other structured finance |
|
|
44 |
|
|
2 |
|
|
|
(2 |
) |
|
|
44 |
|
Total |
|
$ |
490 |
|
$ |
17 |
|
|
$ |
(2 |
) |
|
$ |
505 |
|
(1) |
|
Net economic loss development (benefit) represents the change in net expected loss to be paid (recovered) attributable to the effects of changes in the economic performance of insured transactions, changes in assumptions based on observed market trends, changes in discount rates, accretion of discount and the economic effects of loss mitigation efforts, each net of reinsurance. Net economic loss development (benefit) is the principal measure that the Company uses to evaluate the loss experience in its insured portfolio. Expected loss to be paid (recovered) includes all transactions insured by the Company, regardless of the accounting model prescribed under GAAP and without consideration of deferred premium revenue. |
The net economic loss development in fourth quarter 2023 of $17 million was mainly attributable to changes in discount rates across all sectors of $11 million.
Insurance Segment Income from Investment Portfolio
|
Insurance Segment |
||||||
|
Income from Investment Portfolio |
||||||
|
(in millions) |
||||||
|
|
|
|||||
|
|
Quarter Ended |
|||||
|
|
December 31, |
|||||
|
|
|
2023 |
|
|
2022 |
|
|
Net investment income |
$ |
97 |
|
$ |
80 |
|
|
Fair value gains (losses) on trading securities (1) |
|
32 |
|
|
(4 |
) |
|
Equity in earnings (losses) of investees (2) |
|
22 |
|
|
(5 |
) |
|
Total |
$ |
151 |
|
$ |
71 |
|
|
(1) |
|
Represents contingent value instruments issued by Puerto Rico that are classified as trading securities with changes in fair value reported in the consolidated statements of operations. |
|
(2) |
|
Equity in earnings (losses) of investees primarily relates to funds managed by Sound Point and AHP, and certain other managers, as well as, prior to July 1, 2023, AssuredIM. Investments in funds are reported on a one-quarter lag. |
Net investment income, which represents interest income on available-for-sale fixed-maturity debt securities and short-term investments, increased to $97 million in fourth quarter 2023 from $80 million in fourth quarter 2022, primarily due to higher short-term interest rates, higher average balances in the short-term investment portfolio, and accelerated accretion on certain loss mitigation securities.
Insurance Segment New Business Production
|
Insurance Segment |
|||||||||||||||||
|
New Business Production |
|||||||||||||||||
|
(in millions) |
|||||||||||||||||
|
|
|
||||||||||||||||
|
|
Quarter Ended December 31, |
||||||||||||||||
|
|
2023 |
|
2022 |
||||||||||||||
|
|
GWP |
|
PVP (1) |
|
Gross Par |
|
GWP |
|
PVP (1) |
|
Gross Par |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Public finance – U.S. |
$ |
82 |
|
$ |
83 |
|
$ |
6,712 |
|
$ |
88 |
|
$ |
94 |
|
$ |
5,819 |
|
Public finance – non-U.S. |
|
42 |
|
|
45 |
|
|
874 |
|
|
9 |
|
|
1 |
|
|
— |
|
Structured finance – U.S. |
|
11 |
|
|
26 |
|
|
785 |
|
|
33 |
|
|
40 |
|
|
971 |
|
Structured finance – non-U.S. |
|
1 |
|
|
1 |
|
|
304 |
|
|
1 |
|
|
— |
|
|
245 |
|
Total |
$ |
136 |
|
$ |
155 |
|
$ |
8,675 |
|
$ |
131 |
|
$ |
135 |
|
$ |
7,035 |
|
(1) |
|
PVP, a non-GAAP financial measure, measures the value of the Insurance segment’s new business production for all contracts regardless of form or GAAP accounting model. See “Explanation of Non-GAAP Financial Measures” at the end of this press release. PVP and Gross Par Written in the table above are based on “close date,” when the transaction settles. PVP was discounted at 4.0% and 2.5% in fourth quarter 2023 and fourth quarter 2022, respectively. |
Total U.S. public finance GWP and PVP both declined in fourth quarter 2023 compared with fourth quarter 2022 primarily due to a decline in secondary market activity due to less market opportunity in 2023 compared with 2022. However, in the primary U.S. public finance market, GWP increased from $65 million in fourth quarter 2022 to $78 million in fourth quarter 2023, and PVP increased from $71 million in fourth quarter 2022 to $79 million in fourth quarter 2023. The insured U.S. municipal bond market penetration, based on par written, was 9.6% in fourth quarter 2023, compared with 8.7% in fourth quarter 2022.
Non-U.S. public finance GWP and PVP also increased in fourth quarter 2023 compared with fourth quarter 2022. New business closed in fourth quarter 2023 included guarantees of transactions in the airport, university housing, regulated utility and transportation sectors.
Structured finance GWP and PVP in fourth quarter 2023 was primarily attributable to insurance securitizations.
Business activity in the non-U.S. public finance and structured finance sectors often has long lead times and therefore may vary from period to period.
Asset Management Segment
Upon the effective date of the Sound Point and AHP transactions in July 2023, the Company participates in the asset management business through its ownership interest in Sound Point. Sound Point’s results are reported on a one quarter lag and included in “equity in earnings (losses) of investees” in the table below. The Company reported its first quarter of earnings from its interest in Sound Point in fourth quarter 2023.
|
Asset Management Segment Results |
||||||
|
(in millions) |
||||||
|
|
|
|||||
|
|
Quarter Ended |
|||||
|
|
December 31, |
|||||
|
|
|
2023 |
|
|
2022 |
|
|
Segment revenues |
$ |
5 |
|
$ |
24 |
|
|
Segment expenses |
|
3 |
|
|
28 |
|
|
Equity in earnings (losses) of investees |
|
5 |
|
|
— |
|
|
Segment adjusted operating income (loss) before income taxes |
|
7 |
|
|
(4 |
) |
|
Less: Provision (benefit) for income taxes |
|
1 |
|
|
(1 |
) |
|
Segment adjusted operating income (loss) |
$ |
6 |
|
$ |
(3 |
) |
Corporate Division
|
Corporate Division Results |
|||||||
|
(in millions) |
|||||||
|
|
|
||||||
|
|
Quarter Ended |
||||||
|
|
December 31, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
Revenues |
|
|
|
||||
|
Gain on sale of asset management subsidiaries |
$ |
7 |
|
|
$ |
— |
|
|
Other |
|
5 |
|
|
|
1 |
|
|
Total revenues |
|
12 |
|
|
|
1 |
|
|
Expenses |
|
|
|
||||
|
Interest expense |
|
26 |
|
|
|
23 |
|
|
Employee compensation and benefit expenses |
|
10 |
|
|
|
10 |
|
|
Other operating expenses |
|
15 |
|
|
|
6 |
|
|
Total expenses |
|
51 |
|
|
|
39 |
|
|
Adjusted operating income (loss) before income taxes |
|
(39 |
) |
|
|
(38 |
) |
|
Less: Provision (benefit) for income taxes |
|
(23 |
) |
|
|
(2 |
) |
|
Adjusted operating income (loss) |
$ |
(16 |
) |
|
$ |
(36 |
) |
Corporate division adjusted operating loss primarily consists of interest expense on the debt of Assured Guaranty US Holdings Inc. and Assured Guaranty Municipal Holdings Inc., as well as other operating expenses attributed to holding company activities.
In fourth quarter 2023, the Company reported a $7 million adjustment to the pre-tax gain on the Sound Point transaction and a $19 million tax benefit attributable to a change in New York State tax law.
Other (Effect of FG VIE and CIV consolidation)
The effect of consolidating FG VIEs and CIVs was a gain of $9 million in fourth quarter 2023 compared with a loss of $13 million in fourth quarter 2022.
Reconciliation to GAAP
The following table presents a reconciliation of net income (loss) attributable to AGL to adjusted operating income (loss).
|
Reconciliation of Net Income (Loss) Attributable to AGL to |
|||||||||||||||
|
Adjusted Operating Income (Loss) |
|||||||||||||||
|
(in millions, except per share amounts) |
|||||||||||||||
|
|
|
||||||||||||||
|
|
Quarter Ended |
||||||||||||||
|
|
December 31, |
||||||||||||||
|
|
2023 |
|
|
2022 |
|
||||||||||
|
|
Total |
|
Per Diluted |
|
Total |
|
Per Diluted |
||||||||
|
Net income (loss) attributable to AGL |
$ |
376 |
|
|
$ |
6.40 |
|
|
$ |
94 |
|
|
$ |
1.52 |
|
|
Less pre-tax adjustments: |
|
|
|
|
|
|
|
||||||||
|
Realized gains (losses) on investments |
|
6 |
|
|
|
0.11 |
|
|
|
(17 |
) |
|
|
(0.29 |
) |
|
Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives |
|
(3 |
) |
|
|
(0.06 |
) |
|
|
28 |
|
|
|
0.47 |
|
|
Fair value gains (losses) on committed capital securities (CCS) |
|
— |
|
|
|
— |
|
|
|
12 |
|
|
|
0.19 |
|
|
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and LAE reserves |
|
42 |
|
|
|
0.71 |
|
|
|
70 |
|
|
|
1.13 |
|
|
Total pre-tax adjustments |
|
45 |
|
|
|
0.76 |
|
|
|
93 |
|
|
|
1.50 |
|
|
Less tax effect on pre-tax adjustments |
|
(7 |
) |
|
|
(0.11 |
) |
|
|
(13 |
) |
|
|
(0.20 |
) |
|
Adjusted operating income (loss) |
$ |
338 |
|
|
$ |
5.75 |
|
|
$ |
14 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gain (loss) related to FG VIE and CIV consolidation included in adjusted operating income |
$ |
9 |
|
|
$ |
0.15 |
|
|
$ |
(13 |
) |
|
$ |
(0.22 |
) |
Foreign exchange gains in both periods primarily relate to remeasurement of premiums receivable due to changes in the exchange rates relative to the U.S. dollar of the pound sterling and, to a lesser extent, the euro.
Full Year 2023
Insurance Segment
|
Insurance Segment Results |
|||||||
|
(in millions) |
|||||||
|
|
|
||||||
|
|
Year Ended |
||||||
|
|
December 31, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
Segment revenues |
|
|
|
||||
|
Net earned premiums and credit derivative revenues |
$ |
357 |
|
|
$ |
508 |
|
|
Net investment income |
|
370 |
|
|
|
278 |
|
|
Fair value gains (losses) on trading securities |
|
74 |
|
|
|
(34 |
) |
|
Foreign exchange gains (losses) on remeasurement and other income (loss) |
|
54 |
|
|
|
5 |
|
|
Total segment revenues |
|
855 |
|
|
|
757 |
|
|
|
|
|
|
||||
|
Segment expenses |
|
|
|
||||
|
Loss expense (benefit) |
|
161 |
|
|
|
12 |
|
|
Interest expense |
|
— |
|
|
|
1 |
|
|
Amortization of DAC |
|
13 |
|
|
|
14 |
|
|
Employee compensation and benefit expenses |
|
154 |
|
|
|
148 |
|
|
Other operating expenses |
|
107 |
|
|
|
84 |
|
|
Total segment expenses |
|
435 |
|
|
|
259 |
|
|
Equity in earnings (losses) of investees |
|
82 |
|
|
|
(51 |
) |
|
Segment adjusted operating income (loss) before income taxes |
|
502 |
|
|
|
447 |
|
|
Less: Provision (benefit) for income taxes |
|
(119 |
) |
|
|
34 |
|
|
Segment adjusted operating income (loss) |
$ |
621 |
|
|
$ |
413 |
|
Insurance segment adjusted operating income for FY 2023 was $621 million, compared with $413 million for the year ended December 31, 2022 (FY 2022). The increase was primarily due to the establishment of a deferred tax asset attributable to changes in Bermuda tax laws enacted in fourth quarter 2023, and higher income from the investment portfolio, partially offset by lower net earned premiums and credit derivative revenues and higher loss expense. The components of premiums, losses and income from the investment portfolio are presented below.
Insurance Segment Net Earned Premiums and Credit Derivative Revenues
|
Insurance Segment |
|||||
|
Net Earned Premiums and Credit Derivative Revenues |
|||||
|
(in millions) |
|||||
|
|
|
||||
|
|
Year Ended |
||||
|
|
December 31, |
||||
|
|
|
2023 |
|
|
2022 |
|
Scheduled net earned premiums and credit derivative revenues |
$ |
327 |
|
$ |
327 |
|
Accelerations – Puerto Rico |
|
1 |
|
|
133 |
|
Accelerations |
|
29 |
|
|
48 |
|
Total |
$ |
357 |
|
$ |
508 |
Net earned premiums and credit derivative revenues decreased in FY 2023 primarily due to accelerations in FY 2022 related to defaulted Puerto Rico exposures that were resolved in 2022.
Insurance Segment Loss Expense (Benefit) and the Roll Forward of Expected Losses
|
Insurance Segment |
|||||||
|
Loss Expense (Benefit) |
|||||||
|
(in millions) |
|||||||
|
|
|
||||||
|
|
Year Ended |
||||||
|
|
December 31, |
||||||
|
|
|
2023 |
|
|
|
2022 |
|
|
Public finance |
$ |
191 |
|
|
$ |
128 |
|
|
U.S. RMBS |
|
(36 |
) |
|
|
(120 |
) |
|
Other structured finance |
|
6 |
|
|
|
4 |
|
|
Total |
$ |
161 |
|
|
$ |
12 |
|
|
Roll Forward of Net Expected Loss to be Paid (Recovered) |
||||||||||||||
|
(in millions) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
Net Expected Loss to |
|
Economic Loss |
|
Net (Paid) |
|
Net Expected Loss to |
||||||
|
|
|
|
|
|
|
|
|
|
||||||
|
Public finance |
|
$ |
412 |
|
$ |
212 |
|
|
$ |
(206 |
) |
|
$ |
418 |
|
U.S. RMBS |
|
|
66 |
|
|
(56 |
) |
|
|
33 |
|
|
|
43 |
|
Other structured finance |
|
|
44 |
|
|
8 |
|
|
|
(8 |
) |
|
|
44 |
|
Total |
|
$ |
522 |
|
$ |
164 |
|
|
$ |
(181 |
) |
|
$ |
505 |
Public finance economic loss development in FY 2023 was $212 million primarily attributable to the Company’s insured exposure to the Puerto Rico Electric Power Authority. The U.S. RMBS economic benefit of $56 million was primarily attributable to higher recoveries for secured second lien charged-off loans and improved performance of certain transactions, partially offset by loss development related to the return of certain previously received funds. The economic development attributable to changes in discount rates across all sectors was a loss of $3 million in FY 2023.
Insurance Segment Income from Investment Portfolio
|
Insurance Segment |
||||||
|
Income from Investment Portfolio |
||||||
|
(in millions) |
||||||
|
|
|
|||||
|
|
Year Ended |
|||||
|
|
December 31, |
|||||
|
|
|
2023 |
|
|
2022 |
|
|
Net investment income |
$ |
370 |
|
$ |
278 |
|
|
Fair value gains (losses) on trading securities |
|
74 |
|
|
(34 |
) |
|
Equity in earnings (losses) of investees (1) |
|
82 |
|
|
(51 |
) |
|
Total |
$ |
526 |
|
$ |
193 |
|
|
(1) |
|
Equity in earnings (losses) of investees relates to funds managed by Sound Point and AHP, and certain other managers, as well as, prior to July 1, 2023, AssuredIM. Investments in funds are reported on a one-quarter lag. |
Net investment income, which represents interest income on available-for-sale fixed-maturity debt securities and short-term investments, increased to $370 million in FY 2023 from $278 million in FY 2022, primarily due to higher short-term interest rates, higher average balances in the short-term portfolio, and accelerated accretion on certain loss mitigation securities.
As of December 31, 2023, the Insurance segment had $729 million in alternative investments, which had an annualized internal rate of return of approximately 13.8% for FY 2023.
In the Insurance segment, alternative investments consist primarily of funds managed by Sound Point, AHP and other managers, and are generally recorded at net asset value (NAV), with changes in NAV reported in “equity in earnings (losses) of investees.” Equity in earnings of investees is more volatile than net investment income on available-for-sale fixed-maturity securities and short-term investments. To the extent that the amounts invested in alternative fund investments increase and available-for-sale fixed-maturity securities decrease, net investment income may decline and mark-to-market volatility related to equity in earnings of investees may increase.
Insurance Segment New Business Production
|
Insurance Segment |
|||||||||||||||||
|
New Business Production |
|||||||||||||||||
|
(in millions) |
|||||||||||||||||
|
|
|
||||||||||||||||
|
|
Year Ended December 31, |
||||||||||||||||
|
|
2023 |
|
2022 |
||||||||||||||
|
|
GWP |
|
PVP (1) |
|
Gross Par |
|
GWP |
|
PVP (1) |
|
Gross Par |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Public finance – U.S. |
$ |
211 |
|
$ |
212 |
|
$ |
22,464 |
|
$ |
248 |
|
$ |
257 |
|
$ |
19,801 |
|
Public finance – non-U.S. |
|
82 |
|
|
83 |
|
|
1,544 |
|
|
75 |
|
|
68 |
|
|
624 |
|
Structured finance – U.S. |
|
59 |
|
|
68 |
|
|
1,886 |
|
|
37 |
|
|
43 |
|
|
1,077 |
|
Structured finance – non-U.S. |
|
5 |
|
|
41 |
|
|
3,066 |
|
|
— |
|
|
7 |
|
|
545 |
|
Total |
$ |
357 |
|
$ |
404 |
|
$ |
28,960 |
|
$ |
360 |
|
$ |
375 |
|
$ |
22,047 |
Contacts
Robert Tucker
Senior Managing Director, Investor Relations and Corporate Communications
212-339-0861
rtucker@agltd.com
Ashweeta Durani
Vice President, Media Relations
212-408-6042
adurani@agltd.com
