Assured Guaranty Ltd.

Good morning and welcome to the Assured Guarantee Limited first quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note that this event is being recorded. I would now like to turn the conference over to Robert Tucker, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead.

Robert Tucker Thank you, Operator, and thank you all for joining Assured Guarantee for our first quarter 2021 financial results conference call. Today's presentation is made pursuant to the State of Harvard provisions of the Private Securities Litigation Reform Act of 1995. The presentation may contain forward-looking statements about our new business and credit outlooks, market conditions, credit spreads, financial ratings, loss reserves, financial results, or other items that may affect our future results. These statements are subject to change due to information or future events. Therefore, you should not place undue reliance on them as we do not undertake any obligation to publicly update or revise them except as required by law. If you're listening to a replay of this call, or if you're reading the transcript of the call, please note that our statements made today may have been updated since this call. Please refer to the investor information section of our website for our most recent presentations and SBC filings, most current financial filings, and for the risk factors. This presentation also includes references to non-GAAP financial measures. We present the GAAP financial measures most directly comparable to the non-GAAP financial measures referenced in this presentation, along with a reconciliation between such GAAP and non-GAAP financial measures in our current financial supplement and equity investor presentation, which are on our website at AssuredGuaranteed.com. Turning to the presentation, our speakers today are Dominic Frederico, President and Chief Executive Officer Guaranty Limited, and Rob Bailenson, our Chief Financial Officer. After their remarks, we'll open the call to your questions. As the webcast is not enabled for Q&A, please dial into the call if you'd like to ask a question. I will now turn the call over to Dominic.

Thank you, Robert, and welcome to everyone joining today's call. I'm pleased to say that in the first quarter of 2021, we continue to benefit from the value proposition that our financial guarantee provides in challenging times, which was further recognized last year as well. Driven by our highest first quarter new business production in U.S. public finance since we acquired AGM in 2009, Assured Guarantee generated $86 million of PVP, 69% above last year's first quarter PVP, and more than in all but one first quarter since 2009. Key shareholder value measures also reached new highs at quarter end, of $79.44 for adjusted operating shareholders' equity per share and $116.56 for adjusted book value per share as we continued our successful capital management program. Additionally, adjusted operating income per share of 55 cents was 53 percent higher than in the first quarter of 2020. The first quarter of this year is the fourth consecutive quarter in which we saw our total net part outstanding increase. demonstrating fundamental organic growth in our core business. This is a positive sign for our effort to restore the size of our insured portfolio and the related predictable base of future earnings embedded in our insured transactions. We generally expect to see an upward trend in our portfolio size as quarterly runoff diminishes and we continue to originate new business. The U.S. municipal bond market was very strong in the first three months of 2021. PAR volume sold in the primary U.S. municipal bond market reached its highest first quarter level since the Great Recession, $104.5 billion, of which industry insured PAR neared $8.5 billion, setting a 12-year record for first quarter insured volume. Strong demand for bond insurance led to 76% more insured PAR sold than in the last year's first quarter, significantly outperforming the 19% increase in total municipal issuance. The insurance penetration rate of 8.1 percent during the first quarter of 2021 was higher than the 2020 full-year rate of 7.6 percent and higher than every first quarter and annual penetration rate since 2009. Assured Guaranty widened its lead in new issue market share during the first quarter. Our 65 percent share of insured municipal parcel was better than our market share in any quarter since 2014. The $5.5 billion of new-issue PAR sold with our insurance in the quarter was the highest amount we insured in any first quarter since 2010. It was almost 2.5 times our insured PAR in last year's first quarter, and our primary market transaction count of 252 was up 57%. These year-over-year quarterly comparisons were influenced by the pandemic-related market disruption in first quarter of 2020. But in what may be a more meaningful comparison, our first quarter insured par sold was almost 20% higher than in the fourth quarter of 2020. During this year's first quarter, we insured $100 million or more on eight different transactions, with aggregate insured par totaling $2.25 billion. Large transactions tend to attract institutional investors, and our leadership in this category reflects a growing appetite for assured guaranteed insurance in the institutional market. Even as there have been signs of recovering economy and better than expected municipal revenues, the persistence of the global pandemic and what it has taught the market about economic unpredictability have shown that investors have good reason to remain concerned about downgrade risk, trading value stability and liquidity, which our guarantee has the potential to address. We believe those concerns combined with an appreciation of our overall value proposition were behind our ability in the first quarter to ensure $1.5 billion of par on 27 transactions assigned AA underlying ratings by at least one of the two leading rating agencies. The stable outlooks on Assured Guaranty's own AA ratings provide an extra level of comfort for investors in these high-quality bonds. In international infrastructure finance during the first quarter, we executed two international transactions, neither of which created any new risk exposure. One transaction was an extension of the debt service reserve guarantee that we provided to Welsh Water in 2019 as a substitute for their bank liquidity facilities. The other involved converting a convention center project financing that we insured years ago into a direct obligation of a sub-sovereign. Additionally, we made progress on important new transactions, two of which have already closed since quarter end, generating over $23 million in of international PVP in the second quarter. While the pandemic delayed a number of projects, it also had the effect of widening credit spreads and therefore creating opportunities for us. We believe the UK and other governments' efforts to provide stimulus through infrastructure investment will require a significant amount of private financing to be fully successful, and that we will have a part to play in that. We have a robust pipeline of potential infrastructure opportunities and have been receiving an increased variety of new business inquiries. We also believe investor appetite for our product remains strong in our international markets. We've continued our efforts to maintain and expand our relationships. Our structured finance and international underwriting groups are collaborating on various portfolio guarantee transactions. We believe this is an area we can help institutions optimize the capital associated with their infrastructure portfolios using principles that could be applied to other asset types as well. Additionally, the Structured Finance Group is currently processing or in discussions for potential transactions in diverse categories, including real assets, trade receivables, life insurance, CLOs, equipment leases, and subscription finance facilities for private equity funds. Importantly, in relation to our financial strength and stability, our disciplined and diversified approach to writing new business, along with our loss mitigation activities, has helped to reduce the below-investment-grade percentage of our insured portfolio and to just 3.2 percent of net par outstanding. About half of our big exposures to Puerto Rico are Blagoors, and there have been considerable positive news out of Puerto Rico. As I mentioned on our last call, we conditionally agreed in February to support a revised GO and Public Buildings Authority plan support agreement with the oversight board and other creditors of the Commonwealth and PBA. We did so with the express understanding that the government parties would work with us to make that agreement part of a more comprehensive solution that also addressed related Puerto Rico credits, including what are known as the clawback credits, such as revenue bonds of the Highway and Transportation Authority and the Convention Center District Authority. A big step towards such a resolution took place on April 12th when we, the Oversight Board, and others agreed in principle to a framework for settling our insured exposures to the HTA and CCDA credits. subject to definitive documentation of an HTA-CCDA plan support agreement. We have now finalized that documentation, as announced on May 5th, and have reaffirmed our support for the GOPBA PSA. It will still be months until a plan of adjustment incorporating these PSAs and the PREPA RSA are approved and implemented. But with these settlements, we have agreed to terms on over 93 percent of our Puerto Rico NETPAR exposure. Outside of these agreements, the company has only $241 million of additional Puerto Rico net par exposure, almost all of which relates to credits that have not missed any principal or interest payments. Lastly, once again, we've reassessed the potential impact of COVID-19 on our insured portfolio, especially in light of the $1.9 trillion federal stimulus package enacted during the first quarter. And that review further indicated that the pandemic has not given us a reason to establish significant new loss reserves, and we do not expect any ultimate losses from first-time municipal bond insurance claims that arise specifically from COVID-19. In addition to having a great quarter in the financial guarantee business, we made good progress in the asset management business. The CLO market blossomed during the first quarter with total supply, including new issues, refis, resets, and reissues, setting quarterly records of $106.3 billion in the United States and 26 billion euros in Europe. Assured IM issued one CLO in each of those markets during the period. We also reset a CLO, which extended its life and therefore its fees, and we sold 71 million of CLO equity from our legacy funds. We reduced our total non-fee earning CLO AUM to 2.4 billion from the 3.6 billion three months earlier, while increasing total CLO AUM by almost half a billion dollars to $14.3 billion. CLO management fees for the quarter were more than double those of last year's first quarter. The outlook for this business is positive. We recently opened three CLO warehouses and remain focused on raising more third-party capital. I would like to take this opportunity to welcome three new directors to our board of directors, Michelle McCloskey, Lauren Radke, and Courtney Shea. They bring varied backgrounds as leaders in public finance, structured finance, and investment management, and their insights and wealth of experience will be of great value to our board's strategic decision-making. Looking towards the rest of the year, we expect strong investor demand for municipal bonds, exemplified by the approximate $30 billion of inflows that municipal bond mutual funds and ETFs took in during the first quarter. We believe high demand for municipal bonds is likely to be met by issuers' needs to raise more capital for infrastructure development in order to amplify the benefit of infrastructure funding likely to come from Washington, as well as by their desire to refinance and borrow while interest rates remain low. As long-term yields rise, long-term municipals may become an attractive and safer alternative to corporate bonds, especially for high net worth investors wary of potential tax increases. We believe this mix of market conditions will provide us with many public finance opportunities large and small. As finance activities revive around the world, we have already seen a pickup since quarter end in our international financial guaranteed business, and we expect to complete some large structure finance transactions as the year progresses. We also believe you will see significant growth in our asset management business. We have been through a lot in the last past 14 months. We believe the challenges of this period have made the market even more aware of the resilience of our business model, the dedication and professionalism of our employees, and the benefits of our financial guarantees. As always, we are committed to creating value on behalf of our shareholders, as well as for our clients and the investors who place their trust in our credit discipline and financial strength. I will now turn the call over to Rob.