Assured Guaranty Ltd.

Good morning and welcome to the Assured Guaranteed Limited Second 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. Please note this event is being recorded. And I'd like to turn the conference over to Robert Tucker, Senior Managing Director of Investor Relations and Corporate Communications.

Please go ahead. Thank you, Operator, and thank you all for joining Assured Guarantee for our second quarter of 2021. Financial Results Conference call. Today's presentation is made with the proper provision of the Private Security Litigation Form 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 new information or future events. Therefore, you should not place undue reliance on them. You do not undertake any obligation to publicly update or revise them except as required by law. If you are 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 SEC filings, both current financial filings and 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. to the presentation. Our speakers today are Dominic Franco, President and Chief Executive Officer with Guaranty Limited, and Rob Bailin, our Chief Financial Officer. After their remarks, we will 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. Having completed one of the best first halves for direct insurance production in over 10 years, key measures of insured guarantee shareholder value per share stood at record high levels as of June 30, 2021, including shareholders' equity at $87.74, adjusted operating shareholders' equity at $81.81, and adjusted book value at $119.72. During the first six months of this year, we earned $163 million of adjusted operating income, of which $120 million was earned in the second quarter. Additionally, we produced $167 million of PVP, almost half of which came in the second quarter. In contrast to the first quarter, when record U.S. public finance production generated the lion's share of PVP, New business production in the second quarter was well diversified, with strong international production and a solid contribution from our structured finance business, exemplifying again how our diversified strategy helps to support our new business production. At mid-year 2021, total part volume issued in the U.S. municipal bond market was outpacing the rate of issuance at the same point last year, which was an all-time record year. Both monetary and fiscal policy are driving economic recovery, which means more money to invest for retail investors and more revenue and improved credit strength for municipalities. Additionally, many high-net-worth individual investors have been anticipating higher tax rates, which has driven up demand for tax-exempt income. As a result, municipal interest rates have again been near historic lows, with the benchmark rate on June 30th at just 1.5% for 30-year AAA municipal bonds. Credit spreads trended tighter through the first half to levels not seen since before the Great Recession. In these market conditions, you would not expect municipal bond insurance to reach its highest first-half penetration rate in a decade, but that's exactly what happened. Assured guarantee led the municipal bond insurance industry to a market penetration of 8.4%. Year over year, the industry's total first-half insured part was up 34%, more than double the 15% rate of increase for total part issued in the markets. Taxable issues made up a quarter of the primary municipal bond market year to date based on par amount sold. Taxable municipal bonds are currently attractive relative to corporate bonds as they are generally providing a stronger credit for an equivalent yield. Taxable issues also attract corporate and fixed income investors who are less familiar with municipal credit and may want to know that the underlying obligations have been vetted by an experienced insurer. In the first half, bond insurance penetration of taxable parts sold reached 10%. Assured Guaranteed continued to see outstanding U.S. public finance production for the first six months of 2021, guaranteeing 58% of new issue insured parts sold. The $11.1 billion we insured in the primary market was 34% higher than in the first half of 2020. And looking back to a comparable period just before the pandemic, our new issue insured parts sold was 73% more than in the first half of 2019. In the second quarter, Assured Guaranteed continued to lead the bond insurance market with approximately 52% of primary market insured parts sold. We guaranteed 292 transactions for a total of $5.5 billion in insured parts sold. We also continue to see heightened demand for our insurance on larger transactions where high demand typically singles interest from institutional investors. During the first half of 2021, Assured Guarantee selectively insured 21 transactions of $100 million or more in insured PAR, 13 of which were sold in the second quarter. We also continued to add value on AA credits during the second quarter, insuring $809 million of PAR sold on 29 transactions assigned AA underlying ratings by at least one of the two leading rating agencies, bringing our first half production in this category to $2.3 billion on 56 deals. Additionally, we guaranteed $3.9 billion of taxable parceled, which is about two-thirds of the parceled worth of insurance in that portion of the market. U.S. public finance PVP totaled $29 million in the second quarter, which was exceeded by the $43 million we produced in international infrastructure finance, where we executed a variety of transactions. Among these were index-linked transactions in the U.K., including a well-received 327 million pound, 18 and a half year bond issue with Queens Alexandra Hospital in Portsmouth, and two secondary market transactions providing protections on bonds held by institutions. In Spain, Assured Guarantee Europe closed our fifth transaction in two years in the Spanish renewable industry. This 125 million euro, 17 year fixed rate bond issue refinanced 18 seasoned solar plants spread across a number of provinces, and all the facilities benefit from the Spanish electricity payments that subsidize a predetermined level of return. These issues were privately placed, but an application for a listing has been submitted to the Frankfurt Stock Exchange. In structured finance, we produced nine million of PVP in the second quarter, primarily from an insurance securitization and a whole business securitization. We have a nice pipeline of structured finance transactions that we consider highly likely to close. For our insurance segment as a whole, second quarter new business production offset amortization and other reductions of the insured portfolio, resulting in growth in net par outstanding for the fifth consecutive quarter. Total net par outstanding has increased by a half a billion dollars from March 31st to June 30th. Continuing to increase the par amount of our insured portfolio supports our predictable base of future earnings. As I noted on our last call, the below investment-grade portion of our insured portfolio is down to 3% of insured par outstanding. Additionally, more than 57% of net par exposure is classified as single-layer high. We are very comfortable with the credit quality and diversification of our insured portfolio and believe further fiscal stimulus and improved economic conditions are likely to strengthen it further. Our heightened surveillance activity after the COVID-19 pandemic struck has been fully reflected in our internal credit ratings and the loss projections we apply to those to our exposures. We have paid only relatively small first-time insurance claims we believe are due at least in part to credit stress arising specifically from COVID-19. We continue to project nearly full reimbursement of these relatively small claims. We had no net economic loss development in public finance during the second quarter, And overall, we actually had a net economic benefit of $20 million. Regarding our most significant below-investment-grade exposure, Puerto Rico and its public corporations, we view recent and continuing development as positive for both the Commonwealth and its creditors. As I discussed in our last earnings call, we and other creditors now have consensual agreements in place with the Puerto Rico Oversight Board that covers 94% of our net par outstanding of Assured Guarantees Puerto Rico exposures, and almost all the rest of those exposures are current under debt service payments. The Oversight Board has also announced that additional creditors have signed on to certain of these agreements, including the official committee of unsecured creditors and the additional monolines. The Oversight Board has voiced optimism that some of these agreements could be finalized as early as the end of this year. Meanwhile, the island's economic condition continues to improve with increased economic activity and revenues. and it remains eligible for billions more in federal aid on top of the funds it's already received. Last month, S&P Global Ratings affirmed our insurance company's AA stable outlook financial strength ratings and noted that in relation to our Puerto Rico exposure, its capital adequacy analysis includes a near-term loss assumption and a view of claims beyond 2024. After performing its rigorous capital adequacy analysis of our business, S&P stated that Assured Guarantee has excellent capital and earnings with a meaningful capital adequacy buffer at the current AA rating. It also noted our very strong business risk and financial risk profiles, as well as our well-defined diverse underwriting strategy. Turning to our asset management segment, assets under management reached $17.6 billion as of June 30th. In the first six months, we increased fee earning AUM from 75% of total AUM to 93%. Issuance in the CLO market continued to be strong in the second quarter, reflecting robust demand for CLO securities and plenty for loan supply for collateral. During the quarter, we executed our third CLO of the year, which issued approximately 40% of its equity to four different third-party investors. We also opened additional CLO warehouses and now have two warehouses in the United States and one in Europe. AGAS's healthcare exposure performed well with continued revenue and earnings growth, related to the portfolio of private investment exposures. The asset-based portfolio continues to perform well, as asset credit quality has improved due to the economic reopening and fiscal stimulus. Prospects for the rest of this year look good across both of our business segments. Economic growth has been impressive since vaccinations have allowed more public activity. However, investors will soon not forget how the virus came without warning to disrupt all aspects of life. and we believe the pandemic may prove to be a watershed event that favorably changes how the market perceives the value of financial guarantee insurance. Some of the current sources of economic uncertainty are the spread of the Delta variant, extreme weather events, and potentially volatile political polarization. We have the financial strength, insured portfolio diversification, underwriting and surveillance capabilities, and risk management discipline to safeguard our ability to protect investors and to create value for shareholders. In an uncertain world, many investors will demand the extra security of our financial guarantee. On a final note, we continued our capital management program and made some beneficial changes to our capital structure. To give you details on those changes and other performance data, I will now turn the call over to Rob.