- GAAP Highlights: Net loss attributable to Assured Guaranty Ltd. was $47 million, or $0.74 per share, for second quarter 2022, which includes after-tax losses of: $63 million related to foreign exchange remeasurement, $27 million on alternative investments, $25 million on available-for-sale investments, and $15 million on trading securities. Shareholders’ equity attributable to Assured Guaranty Ltd. per share was $84.89 as of June 30, 2022.
- Non-GAAP Highlights: Adjusted operating income(1) was $30 million, or $0.46 per share, for second quarter 2022, which includes after-tax losses of $27 million on alternative investments and $15 million on trading securities. Adjusted operating shareholders’ equity(1) per share and adjusted book value (ABV)(1) per share were $90.18 and $134.91, respectively, as of June 30, 2022.
-
Return of Capital to Shareholders: Second quarter 2022 capital returned to shareholders was $167 million, including the repurchase of 2.6 million shares for $151 million, and dividends of $16 million.
- As of June 30, 2022, 62.5 million common shares were outstanding.
- Share repurchase authorization was increased by $250 million on August 3, 2022.
-
Insurance Segment:
- Insurance segment adjusted operating income was $55 million for second quarter 2022, which includes after-tax losses of: $27 million on alternative investments, and $15 million on trading securities
- Gross written premiums (GWP) were $65 million for second quarter 2022.
- Present value of new business production (PVP)(2) was $76 million for second quarter 2022.
-
Asset Management Segment
- Asset Management segment adjusted operating results were breakeven for second quarter 2022.
- Assets under management (AUM) inflows were $1.3 billion(2) for second quarter 2022.
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 June 30, 2022 (second quarter 2022).
“While Assured Guaranty’s June 30 shareholders’ equity per share was impacted by unrealized losses in the investment portfolio due largely to the rising interest rate environment, we achieved the highest per-share levels of adjusted operating shareholders’ equity and adjusted book value in our history.
“New business production in our insurance segment remained strong during both the first half and second quarter, resulting in $135 million of first half gross written premiums and $145 million of first half PVP, derived from all three of our market sectors. We again led the U.S. municipal bond insurance market, where industry penetration reached 8.9% of new-issue par sold in second quarter and 8.8% year-to-date,” said President and CEO Dominic Frederico.
|
(1) |
|
Please see “Explanation of Non-GAAP Financial Measures.” |
|
(2) |
|
Net of transfers between funds managed by Assured Investment Management LLC and its investment management affiliates (AssuredIM Funds). |
|
Summary Financial Results |
|||||||
|
(in millions, except per share amounts) |
|||||||
|
|
|
||||||
|
|
Quarter Ended |
||||||
|
|
June 30, |
||||||
|
|
|
2022 |
|
|
|
2021 |
|
|
|
|
|
|
||||
|
GAAP |
|
|
|
||||
|
Net income (loss) attributable to AGL |
$ |
(47 |
) |
|
$ |
98 |
|
|
Net income (loss) attributable to AGL per diluted share |
$ |
(0.74 |
) |
|
$ |
1.29 |
|
|
Weighted average diluted shares (1) |
|
63.8 |
|
|
|
76.0 |
|
|
Non-GAAP |
|
|
|
||||
|
Adjusted operating income (loss) (2) |
$ |
30 |
|
|
$ |
120 |
|
|
Adjusted operating income per diluted share(2) |
$ |
0.46 |
|
|
$ |
1.59 |
|
|
Weighted average diluted shares |
|
65.0 |
|
|
|
76.0 |
|
|
|
|
|
|
||||
|
Components of total adjusted operating income (loss) |
|
|
|
||||
|
Insurance segment |
$ |
55 |
|
|
$ |
152 |
|
|
Asset Management segment |
|
— |
|
|
|
(2 |
) |
|
Corporate division |
|
(35 |
) |
|
|
(34 |
) |
|
Other |
|
10 |
|
|
|
4 |
|
|
Adjusted operating income (loss) |
$ |
30 |
|
|
$ |
120 |
|
|
|
As of |
||||||||||
|
|
June 30, 2022 |
|
December 31, 2021 |
||||||||
|
|
Amount |
|
Per Share |
|
Amount |
|
Per Share |
||||
|
|
|
|
|
|
|
|
|
||||
|
Shareholders’ equity attributable to AGL |
$ |
5,304 |
|
$ |
84.89 |
|
$ |
6,292 |
|
$ |
93.19 |
|
Adjusted operating shareholders’ equity (2) |
|
5,634 |
|
|
90.18 |
|
|
5,991 |
|
|
88.73 |
|
ABV (2) |
|
8,428 |
|
|
134.91 |
|
|
8,823 |
|
|
130.67 |
|
|
|
|
|
|
|
|
|
||||
|
Common Shares Outstanding |
|
62.5 |
|
|
|
|
67.5 |
|
|
||
|
(1) |
|
In periods where the Company recognized a net loss, the impact of potentially dilutive outstanding stock-based awards was excluded from the calculation of diluted loss per share as their inclusion would have an antidilutive effect. |
|
(2) |
|
Please see “Explanation of Non-GAAP Financial Measures” at the end of this press release. |
On a per share basis, shareholders’ equity attributable to AGL was $84.89 as of June 30, 2022, which was lower than shareholders’ equity attributable to AGL of $93.19 as of December 31, 2021, primarily due to unrealized losses on the investment portfolio caused largely by rising interest rates. On a per share basis, adjusted operating shareholders’ equity and ABV reached record highs primarily due to the accretive effect of the share repurchase program, and in the case of ABV, favorable loss development and net written premiums. See “Common Share Repurchases” on page 10.
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 |
||||||
|
|
June 30, |
||||||
|
|
|
2022 |
|
|
|
2021 |
|
|
Segment revenues |
|
|
|
||||
|
Net earned premiums and credit derivative revenues |
$ |
86 |
|
|
$ |
106 |
|
|
Net investment income |
|
66 |
|
|
|
71 |
|
|
Fair value gains (losses) on trading securities |
|
(18 |
) |
|
|
— |
|
|
Other income (loss) |
|
5 |
|
|
|
5 |
|
|
Total segment revenues |
|
139 |
|
|
|
182 |
|
|
|
|
|
|
||||
|
Segment expenses |
|
|
|
||||
|
Loss expense (benefit) |
|
(17 |
) |
|
|
(12 |
) |
|
Amortization of deferred acquisition costs (DAC) |
|
3 |
|
|
|
4 |
|
|
Employee compensation and benefit expenses |
|
35 |
|
|
|
34 |
|
|
Other operating expenses |
|
20 |
|
|
|
21 |
|
|
Total segment expenses |
|
41 |
|
|
|
47 |
|
|
Equity in earnings (losses) of investees |
|
(34 |
) |
|
|
48 |
|
|
Segment adjusted operating income (loss) before income taxes |
|
64 |
|
|
|
183 |
|
|
Less: Provision (benefit) for income taxes |
|
9 |
|
|
|
31 |
|
|
Segment adjusted operating income (loss) |
$ |
55 |
|
|
$ |
152 |
|
Insurance segment adjusted operating income decreased to $55 million in second quarter 2022 compared with $152 million in the three-month period ended June 30, 2021 (second quarter 2021), primarily due to lower net asset values for AssuredIM Funds reported in “equity in earnings (losses) of investees”, fair value losses on trading securities, and lower net earned premiums and credit derivative revenues, as shown in the table above. The components of premiums, losses and income from the investment portfolio are presented below.
The components of Insurance segment net earned premiums and credit derivative revenues are shown in the table below.
|
Insurance Segment |
|||||
|
Net Earned Premiums and Credit Derivative Revenues |
|||||
|
(in millions) |
|||||
|
|
|
||||
|
|
Quarter Ended |
||||
|
|
June 30, |
||||
|
|
|
2022 |
|
|
2021 |
|
Scheduled net earned premiums and credit derivative revenues |
$ |
81 |
|
$ |
91 |
|
Accelerations |
|
5 |
|
|
15 |
|
Total |
$ |
86 |
|
$ |
106 |
The decline in net earned premiums and credit derivative revenues was primarily attributable to lower accelerations and changes in debt service assumptions.
The components of Insurance segment loss expense (benefit) and the rollforward of expected losses are presented in the tables below.
|
Insurance Segment |
|||||||
|
Loss Expense (Benefit) |
|||||||
|
(in millions) |
|||||||
|
|
|
||||||
|
|
Quarter Ended |
||||||
|
|
June 30, |
||||||
|
|
|
2022 |
|
|
|
2021 |
|
|
Public finance |
$ |
11 |
|
|
$ |
3 |
|
|
U.S. residential mortgage-backed securities (RMBS) |
|
(28 |
) |
|
|
(22 |
) |
|
Other structured finance |
|
— |
|
|
|
7 |
|
|
Total |
$ |
(17 |
) |
|
$ |
(12 |
) |
Loss expense is a function of economic loss (benefit) development, as well as the amortization of deferred premium revenue. In second quarter 2022, the largest component of the U.S. public finance loss expense was attributable to Puerto Rico exposures. The benefit in U.S. RMBS in both periods presented is primarily related to second lien transactions.
|
Roll Forward of Net Expected Loss to be Paid (Recovered)(1) |
|||||||||||||
|
(in millions) |
|||||||||||||
|
|
Net Expected |
|
Economic Loss |
|
Net (Paid) |
|
Net Expected |
||||||
|
|
|
|
|
|
|
|
|
||||||
|
Public finance |
$ |
191 |
|
$ |
6 |
|
|
$ |
20 |
|
|
$ |
217 |
|
U.S. RMBS |
|
195 |
|
|
(39 |
) |
|
|
23 |
|
|
|
179 |
|
Other structured finance |
|
46 |
|
|
1 |
|
|
|
(1 |
) |
|
|
46 |
|
Total |
$ |
432 |
|
$ |
(32 |
) |
|
$ |
42 |
|
|
$ |
442 |
|
(1) |
|
Economic loss (benefit) development 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. 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, whether written in insurance or credit derivative form, regardless of the accounting model prescribed under accounting principles generally accepted in the United States of America (GAAP), and without consideration of unearned premium reserves. |
The economic benefit attributable to U.S. RMBS in second quarter 2022 was $39 million, which was mainly attributable to changes in discount rates, improved performance in certain transactions, higher recoveries for secured second lien charged-off loans, and lower initial severity assumptions for first lien U.S. RMBS transactions, partially offset by lower excess spread.
The components of income from the investment portfolio are presented in the table below.
|
Insurance Segment |
||||||
|
Income from Investment Portfolio |
||||||
|
(in millions) |
||||||
|
|
|
|||||
|
|
Quarter Ended |
|||||
|
|
June 30, |
|||||
|
|
|
2022 |
|
|
|
2021 |
|
Net investment income |
$ |
66 |
|
|
$ |
71 |
|
Fair value gains (losses) on trading securities |
|
(18 |
) |
|
|
— |
|
Equity in earnings (losses) of investees: |
|
|
|
|||
|
AssuredIM Funds |
|
(33 |
) |
|
|
37 |
|
Other alternative investments |
|
(1 |
) |
|
|
11 |
|
Total |
$ |
14 |
|
|
$ |
119 |
The total income from the investment portfolio decreased due primarily to (1) fair value losses from alternative investments, including investments in AssuredIM Funds, (2) fair value losses on trading securities, and (3) lower net investment income on available-for-sale fixed-maturity securities due to lower average balances, which declined as a result of dividends paid by the insurance subsidiaries and liquidity needs associated with the Puerto Rico claim payments in the first quarter of 2022.
Contingent value instruments issued by Puerto Rico and received in the first quarter of 2022 as part of the Puerto Rico resolutions are classified as trading securities with changes in fair value reported in the consolidated statements of operations. Fair value losses on trading securities were $18 million in second quarter 2022.
Equity in earnings of AssuredIM Funds was a loss of $33 million in second quarter 2022 primarily attributable to lower net asset values (NAV) of collateralized loan obligation (CLO) funds and a loss related to dilution from the rebalancing following a final fundraising close for the healthcare fund. Equity in earnings of AssuredIM Funds was a gain of $37 million in second quarter 2021 mainly due to an overall increase in the NAV of the CLO and healthcare funds.
As of June 30, 2022, the Insurance segment had invested $549 million (at fair value) in AssuredIM Funds. Inception to date realized and unrealized gains on AssuredIM Funds as of June 30, 2022 totaled $98 million.
In the Insurance segment, investments in AssuredIM Funds are recorded at NAV, with the change in NAV reported in “equity in earnings (losses) of investees.” The AssuredIM Funds include healthcare, CLOs, municipal bond and asset-based funds. Equity in earnings (losses) of investees also includes the Company’s proportionate interests in other alternative investments. To the extent that the amounts invested in AssuredIM Funds and other alternative investments increase and available-for-sale fixed-maturity securities decrease, net investment income may decline and mark-to-market volatility may increase.
New Business Production
PVP, a non-GAAP financial measure, measures the value of the Insurance segment’s new business production and includes upfront premiums and the present value of expected future installments on new business at the time of issuance, for all contracts regardless of form or GAAP accounting model. See “Explanation of Non-GAAP Financial Measures” at the end of this press release.
|
Insurance Segment |
|||||||||||||||||
|
New Business Production |
|||||||||||||||||
|
(in millions) |
|||||||||||||||||
|
|
|
||||||||||||||||
|
|
Quarter Ended June 30, |
||||||||||||||||
|
|
2022 |
|
2021 |
||||||||||||||
|
|
GWP |
|
PVP (1) |
|
Gross Par |
|
GWP |
|
PVP (1) |
|
Gross Par |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
Public finance – U.S. |
$ |
57 |
|
$ |
57 |
|
$ |
6,429 |
|
$ |
29 |
|
$ |
29 |
|
$ |
4,716 |
|
Public finance – non-U.S. |
|
6 |
|
|
18 |
|
|
207 |
|
|
44 |
|
|
43 |
|
|
961 |
|
Structured finance – U.S. |
|
1 |
|
|
— |
|
|
16 |
|
|
11 |
|
|
9 |
|
|
460 |
|
Structured finance – non-U.S. |
|
1 |
|
|
1 |
|
|
43 |
|
|
— |
|
|
— |
|
|
— |
|
Total |
$ |
65 |
|
$ |
76 |
|
$ |
6,695 |
|
$ |
84 |
|
$ |
81 |
|
$ |
6,137 |
|
(1) |
|
PVP and Gross Par Written in the table above are based on “close date,” when the transaction settles. |
U.S. public finance GWP and PVP in second quarter 2022 was higher than the comparable GWP and PVP in second quarter 2021, primarily due to an increase in secondary market transactions. The average rating of U.S. public finance par written was A in both second quarter 2022 and second quarter 2021. The Company’s direct par written represented 54% of the total U.S. municipal market insured issuance in second quarter 2022, compared with 52% in second quarter 2021, and the Company’s penetration of all municipal issuance was 4.8% in second quarter 2022 compared with 4.5% in second quarter 2021.
In second quarter 2022, non-U.S. public finance GWP and PVP were primarily attributable to a secondary market guarantee for an institutional investor.
Asset Management Segment
|
Asset Management Segment Results |
|||||||
|
(in millions) |
|||||||
|
|
|
||||||
|
|
Quarter Ended |
||||||
|
|
June 30, |
||||||
|
|
|
2022 |
|
|
|
2021 |
|
|
Segment revenues |
|
|
|
||||
|
Management fees: |
|
|
|
||||
|
CLOs (1) |
$ |
12 |
|
|
$ |
12 |
|
|
Opportunity funds and liquid strategies |
|
15 |
|
|
|
5 |
|
|
Wind-down funds |
|
— |
|
|
|
2 |
|
|
Total management fees |
|
27 |
|
|
|
19 |
|
|
Performance fees |
|
2 |
|
|
|
— |
|
|
Other income |
|
(1 |
) |
|
|
2 |
|
|
Total segment revenues |
|
28 |
|
|
|
21 |
|
|
|
|
|
|
||||
|
Segment expenses |
|
|
|
||||
|
Employee compensation and benefit expenses |
|
17 |
|
|
|
15 |
|
|
Other operating expenses (2) |
|
11 |
|
|
|
9 |
|
|
Total segment expenses |
|
28 |
|
|
|
24 |
|
|
Segment adjusted operating income (loss) before income taxes |
|
— |
|
|
|
(3 |
) |
|
Less: Provision (benefit) for income taxes |
|
— |
|
|
|
(1 |
) |
|
Segment adjusted operating income (loss) |
$ |
— |
|
|
$ |
(2 |
) |
|
(1) |
|
CLO fees are the net management fees that AssuredIM retains after rebating the portion of these fees that pertains to the CLO equity that is held directly by AssuredIM Funds. |
|
(2) |
|
Includes amortization of intangible assets of $3 million in both second quarter 2022 and second quarter 2021. |
Management fees from opportunity funds increased primarily due to higher third-party AUM in healthcare funds. Fees from the wind-down funds decreased as distributions to investors continued. As of June 30, 2022, AUM of the wind-down funds was $0.3 billion, compared with $1.2 billion as of June 30, 2021, and $0.6 billion as of December 31, 2021.
|
Roll Forward of |
|||||||||||||||||||
|
Assets Under Management |
|||||||||||||||||||
|
(in millions) |
|||||||||||||||||||
|
|
CLOs |
|
Opportunity |
|
Liquid |
|
Wind-Down |
|
Total |
||||||||||
|
AUM, March 31, 2022 |
$ |
14,282 |
|
|
$ |
1,874 |
|
|
$ |
375 |
|
|
$ |
459 |
|
|
$ |
16,990 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Inflows-third party |
|
1,049 |
|
|
|
200 |
|
|
|
21 |
|
|
|
— |
|
|
|
1,270 |
|
|
Inflows-intercompany |
|
50 |
|
|
|
— |
|
|
|
104 |
|
|
|
— |
|
|
|
154 |
|
|
Outflows: |
|
|
|
|
|
|
|
|
|
||||||||||
|
Redemptions |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Distributions |
|
(22 |
) |
|
|
(39 |
) |
|
|
(125 |
) |
|
|
(140 |
) |
|
|
(326 |
) |
|
Total outflows |
|
(22 |
) |
|
|
(39 |
) |
|
|
(125 |
) |
|
|
(140 |
) |
|
|
(326 |
) |
|
Net flows |
|
1,077 |
|
|
|
161 |
|
|
|
— |
|
|
|
(140 |
) |
|
|
1,098 |
|
|
Change in value |
|
(183 |
) |
|
|
15 |
|
|
|
(3 |
) |
|
|
20 |
|
|
|
(151 |
) |
|
AUM, June 30, 2022 |
$ |
15,176 |
|
|
$ |
2,050 |
|
|
$ |
372 |
|
|
$ |
339 |
|
|
$ |
17,937 |
|
|
(1) |
|
Opportunity funds inflows are primarily related to the healthcare strategy fund. Distributions from opportunity funds include $26 million related to the AssuredIM Funds created prior to the acquisition of BlueMountain Capital Management, LLC. As of June 30, 2022, AUM related to these funds was $114 million. |
|
(2) |
|
Liquid strategies inflows and outflows relate to the transfer of assets from an existing municipal bond fund to a new municipal relative value fund. |
|
Components of |
|||||
|
Assets Under Management (1) |
|||||
|
(in millions) |
|||||
|
|
|
||||
|
|
As of |
||||
|
|
June 30, |
|
March 31, |
||
|
|
|
|
|
||
|
Funded AUM |
$ |
17,046 |
|
$ |
16,249 |
|
Unfunded AUM |
|
891 |
|
|
741 |
|
|
|
|
|
||
|
Fee-earning AUM |
$ |
17,148 |
|
$ |
16,141 |
|
Non-fee earning AUM |
|
789 |
|
|
849 |
|
|
|
|
|
||
|
Intercompany AUM |
|
|
|
||
|
Funded AUM (2) |
$ |
1,100 |
|
$ |
1,124 |
|
Unfunded AUM |
|
241 |
|
|
229 |
|
(1) |
|
Please see “Definitions” at the end of this press release. |
|
(2) |
|
Includes assets managed by AssuredIM under an Investment Management Agreement with its insurance affiliates of $548 million in investment-grade CLO and liquid municipal strategies as of June 30, 2022 and of $564 million as of March 31, 2022. |
Corporate Division
The Corporate division 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. Adjusted operating loss for the corporate division was $35 million in second quarter 2022 compared with $34 million in second quarter 2021.
Other (Effect of FG VIE and CIV consolidation)
The effect of consolidating financial guaranty variable interest entities (FG VIEs) and consolidated investment vehicles (CIVs) was a gain of $10 million in second quarter 2022 compared with $4 million in second quarter 2021.
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 |
||||||||||||||
|
|
June 30, |
||||||||||||||
|
|
2022 |
|
|
2021 |
|
||||||||||
|
|
Total |
|
Per Diluted |
|
Total |
|
Per Diluted |
||||||||
|
Net income (loss) attributable to AGL |
$ |
(47 |
) |
|
$ |
(0.74 |
) |
|
$ |
98 |
|
|
$ |
1.29 |
|
|
Less pre-tax adjustments: |
|
|
|
|
|
|
|
||||||||
|
Realized gains (losses) on investments |
|
(28 |
) |
|
|
(0.43 |
) |
|
|
4 |
|
|
|
0.05 |
|
|
Non-credit impairment-related unrealized fair value gains (losses) on credit derivatives |
|
6 |
|
|
|
0.09 |
|
|
|
(31 |
) |
|
|
(0.40 |
) |
|
Fair value gains (losses) on committed capital securities (CCS) |
|
10 |
|
|
|
0.15 |
|
|
|
(6 |
) |
|
|
(0.08 |
) |
|
Foreign exchange gains (losses) on remeasurement of premiums receivable and loss and loss adjustment expense (LAE) reserves (1) |
|
(73 |
) |
|
|
(1.14 |
) |
|
|
5 |
|
|
|
0.06 |
|
|
Total pre-tax adjustments |
|
(85 |
) |
|
|
(1.33 |
) |
|
|
(28 |
) |
|
|
(0.37 |
) |
|
Less tax effect on pre-tax adjustments |
|
8 |
|
|
|
0.13 |
|
|
|
6 |
|
|
|
0.07 |
|
|
Adjusted operating income (loss) |
$ |
30 |
|
|
$ |
0.46 |
|
|
$ |
120 |
|
|
$ |
1.59 |
|
|
|
|
|
|
|
|
|
|
||||||||
|
Gain (loss) related to FG VIE and CIV consolidation included in adjusted operating income |
$ |
10 |
|
|
$ |
0.15 |
|
|
$ |
4 |
|
|
$ |
0.05 |
|
|
(1) |
|
Foreign exchange gains (losses) in both periods primarily relate to remeasurement of premiums receivable and are mainly due to changes in the exchange rate of the pound sterling and euro relative to the U.S. dollar. |
Non-credit impairment-related unrealized fair value gains on credit derivatives in second quarter 2022 were generated primarily as a result of the increased cost to buy protection on Assured Guaranty Corp. (AGC) as the market cost of AGC’s credit protection increased during the period, and changes in discount rates. These gains were partially offset by an increase in the credit spread of certain underlying reference obligations. In second quarter 2021, non-credit impairment-related unrealized fair value losses on credit derivatives were generated primarily as a result of the tightening of AGC spreads; these losses were partially offset by general price improvements of the underlying collateral. Except for underlying credit impairment, which is recognized as loss expense in the Insurance segment, the fair value adjustments on credit derivatives in the insured portfolio are non-economic adjustments that reverse to zero over the remaining term of that portfolio.
Fair value gains on CCS in second quarter 2022 were primarily due to a significant increase in London Interbank Offered Rate. Fair value losses on CCS in second quarter 2021 were primarily due to a tightening in market spreads during the quarter. Fair value of CCS is heavily affected by, and in part fluctuates with, changes in market interest rates, credit spreads and other market factors and are not expected to result in an economic gain or loss.
Common Share Repurchases
|
Summary of Share Repurchases |
|||||||
|
(in millions, except per share amounts) |
|||||||
|
|
|
|
|
|
|
||
|
|
Amount |
|
Number of Shares |
|
Average Price Per |
||
|
|
|
|
|
|
|
||
|
2022 (January 1 – March 31) |
$ |
155 |
|
2.74 |
|
$ |
56.62 |
|
2022 (April 1 – June 30) |
|
151 |
|
2.61 |
|
|
58.03 |
|
2022 (July 1 – August 3, 2022) |
|
35 |
|
0.62 |
|
|
55.89 |
|
Total 2022 |
$ |
341 |
|
5.97 |
|
57.16 |
|
From 2013 through August 3, 2022, the Company repurchased a total of 138 million common shares at an average price of $32.61, representing approximately 71% of the total shares outstanding at the beginning of the repurchase program in 2013. On August 3, 2022, the Board of Directors authorized the repurchase of an additional $250 million of its common shares. Under this and previous authorizations, as of August 3, 2022, the Company was authorized to purchase $365 million of its common shares. These repurchases can be made from time to time in the open market or in privately negotiated transactions.
The timing, form and amount of the share repurchases under the program are at the discretion of management and will depend on a variety of factors, including funds available at the parent company, other potential uses for such funds, market conditions, the Company’s capital position, legal requirements and other factors. The repurchase program may be modified, extended or terminated by the Board of Directors at any time. It does not have an expiration date.
Financial Statements
|
Condensed Consolidated Statements of Operations (unaudited) |
|||||||
|
(in millions) |
|||||||
|
|
|
||||||
|
|
Quarter Ended |
||||||
|
|
June 30, |
||||||
|
|
|
2022 |
|
|
|
2021 |
|
|
Revenues |
|
|
|
||||
|
Net earned premiums |
$ |
82 |
|
|
$ |
102 |
|
|
Net investment income |
|
62 |
|
|
|
68 |
|
|
Asset management fees |
|
21 |
|
|
|
21 |
|
|
Net realized investment gains (losses) |
|
(28 |
) |
|
|
4 |
|
|
Fair value gains (losses) on credit derivatives |
|
9 |
|
|
|
(33 |
) |
|
Fair value gains (losses) on CCS |
|
10 |
|
|
|
(6 |
) |
|
Fair value gains (losses) on FG VIEs |
|
10 |
|
|
|
8 |
|
|
Fair value gains (losses) on CIVs |
|
3 |
|
|
|
21 |
|
|
Foreign exchange gain (loss) on remeasurement |
|
(71 |
) |
|
|
5 |
|
|
Fair value gains (losses) on trading securities |
|
(18 |
) |
|
|
— |
|
|
Other income (loss) |
|
10 |
|
|
|
6 |
|
|
Total revenues |
|
90 |
|
|
|
196 |
|
|
Expenses |
|
|
|
||||
|
Loss and LAE (benefit) |
|
(11 |
) |
|
|
(16 |
) |
|
Interest expense |
|
20 |
|
|
|
23 |
|
|
Amortization of DAC |
|
3 |
|
|
|
4 |
|
|
Employee compensation and benefit expenses |
|
59 |
|
|
|
54 |
|
|
Other operating expenses |
|
41 |
|
|
|
40 |
|
|
Total expenses |
|
112 |
|
|
|
105 |
|
|
Income (loss) before income taxes and equity in earnings (losses) of investees |
|
(22 |
) |
|
|
91 |
|
|
Equity in earnings (losses) of investees |
|
— |
|
|
|
34 |
|
|
Income (loss) before income taxes |
|
(22 |
) |
|
|
125 |
|
|
Less: Provision (benefit) for income taxes |
|
3 |
|
|
|
23 |
|
|
Net income (loss) |
|
(25 |
) |
|
|
102 |
|
|
Less: Noncontrolling interests |
|
22 |
|
|
|
4 |
|
|
Net income (loss) attributable to AGL |
$ |
(47 |
) |
|
$ |
98 |
|
|
Condensed Consolidated Balance Sheets (unaudited) |
||||||
|
(in millions) |
||||||
|
|
|
|||||
|
|
As of |
|||||
|
|
June 30, 2022 |
|
December 31, 2021 |
|||
|
Assets |
|
|
|
|||
|
Investments: |
|
|
|
|||
|
Fixed-maturity securities available-for-sale, at fair value |
$ |
7,396 |
|
|
$ |
8,202 |
|
Fixed-maturity securities, trading, at fair value |
|
87 |
|
|
|
— |
|
Short-term investments, at fair value |
|
863 |
|
|
|
1,225 |
|
Other invested assets |
|
150 |
|
|
|
181 |
|
Total investments |
|
8,496 |
|
|
|
9,608 |
|
Cash |
|
138 |
|
|
|
120 |
|
Premiums receivable, net of commissions payable |
|
1,235 |
|
|
|
1,372 |
|
DAC |
|
139 |
|
|
|
131 |
|
Salvage and subrogation recoverable |
|
502 |
|
|
|
801 |
|
FG VIEs’ assets, at fair value |
|
264 |
|
|
|
260 |
|
Assets of CIVs |
|
5,456 |
|
|
|
5,271 |
|
Goodwill and other intangible assets |
|
169 |
|
|
|
175 |
|
Other assets |
|
561 |
|
|
|
470 |
|
Total assets |
$ |
16,960 |
|
|
$ |
18,208 |
|
|
|
|
|
|||
|
Liabilities |
|
|
|
|||
|
Unearned premium reserve |
$ |
3,585 |
|
|
$ |
3,716 |
|
Loss and LAE reserve |
|
716 |
|
|
|
869 |
|
Long-term debt |
|
1,674 |
|
|
|
1,673 |
|
Credit derivative liabilities, at fair value |
|
148 |
|
|
|
156 |
|
FG VIEs’ liabilities, at fair value |
|
282 |
|
|
|
289 |
|
Liabilities of CIVs |
|
4,568 |
|
|
|
4,436 |
|
Other liabilities |
|
419 |
|
|
|
569 |
|
Total liabilities |
|
11,392 |
|
|
|
11,708 |
|
|
|
|
|
|||
|
Redeemable noncontrolling interests |
|
21 |
|
|
|
22 |
|
|
|
|
|
|||
|
Shareholders’ equity |
|
|
|
|||
|
Common shares |
|
1 |
|
|
|
1 |
|
Retained earnings |
|
5,672 |
|
|
|
5,990 |
|
Accumulated other comprehensive income |
|
(370 |
) |
|
|
300 |
|
Deferred equity compensation |
|
1 |
|
|
|
1 |
|
Total shareholders’ equity attributable to AGL |
|
5,304 |
|
|
|
6,292 |
|
Nonredeemable noncontrolling interests |
|
243 |
|
|
|
186 |
|
Total shareholders’ equity |
|
5,547 |
|
|
|
6,478 |
|
Total liabilities, redeemable noncontrolling interests and shareholders’ equity |
$ |
16,960 |
|
|
$ |
18,208 |
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
