Assured Guaranty Ltd.

Good morning and welcome to the Assured Guarantee Limited fourth quarter and year-end 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, sir.

Thank you, operator, and thank you all for joining Assured Guarantee for our fourth quarter and year-end 2021 financial results conference call. Today's presentation is made pursuant to the safe harbor provisions of the private Litigation Reform Act of 1985. The presentation may contain forward-looking statements about our credit outlook, marketing digits, 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, as we do not take 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 a 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, 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 the 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 assuredguarantee.com. Turning to the presentation, our speakers today are Dominic Frederico, President and Chief Executive Officer of Assured Guarantee Limited, and Rob Balanson, 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. Assured guarantees, insurance production, loss mitigation, and capital management strategies combine to deliver outstanding results in 2021. We had many notable accomplishments during the year. We earned $470 million of adjusted operating income, 84% more than in 2020. We more than doubled adjusted operating income per share to $6.32 per share. We brought all three of our measures of shareholder value to new highs. Over the year, shareholders' equity per share grew 9% to $93.19. Adjusted operating shareholders' equity per share increased 13% to $88.73 and adjusted book value per share rose 14% to $130.67. We repurchased 10.5 million common shares or approximately 14% of our shares outstanding at December 31st, 2020 at an average price of $47.19. Those repurchases totaled $496 million and with the addition of $66 million of dividends, we returned a total of $562 million to shareholders. Through strong new business production in each of our financial guarantee markets, U.S. public finance, international infrastructure finance, and global structure finance, we generated a total of $361 million of PVP in 2021. Direct PVP exceeded $350 million for the third consecutive year compared with an average annual direct PVP of $210 million from 2012 to 2018, making the last three years our best in more than a decade for direct new business production. With a more than 60% share of new issue insured parts sold, we led the US public finance bond insurance industry to its highest penetration, market penetration in a dozen years. And taking advantage of exceptionally low interest rates, our US holding company issued a total of $900 million, a 3.15% 10-year, and 3.60% 30-year senior debt to refinance $600 million of debt with higher coupons, ranging from 5% to almost 7%. As a result, annual debt service savings will be $5.2 million through the next maturity date. Our financial guarantee production was well diversified across all of our markets. U.S. public finance PVP of $235 million included in its second-best direct production in at least a decade. surpassed only by the previous year's result. Our $79 million of international infrastructure PVP marks the fourth year out of the last five that we have exceeded $75 million of direct PVP in that sector. Global structure finance PVP of $47 million was the second best in direct production since 2012. Our markets and economic environment offer both opportunities and challenges during 2021. Issuance of U.S. municipal bonds reached a record par amount of $457 billion in 2021. This partly reflected investors' increased demand for tax-exempt paper and expectation of higher tax rates and continued limitations on state and local tax deductions at the federal level. Additionally, issuers were eager to take advantage of extremely low municipal interest rates to refinance bonds issued in the past at higher rates. With the option to execute tax-exempt advanced refunding still off the table, many issuers also turned to the taxable market to replace higher coupon tax exempt debt. Total insured market volume increased to 18.2% of par issued, the highest annual rate over the past 12 years, and up from 7.6% during 2020 and 5.9% during 2019. We believe this increased penetration in 2021 indicates that the risk of unpredictable developments, which was brought home by the onset of the COVID-19 pandemic in 2020, has made a lasting impression on investors. We have also seen that Insured Guarantee has the underwriting and risk management skills to construct an insured portfolio that experienced minimal claims from the economic disruption caused by the pandemic, most of which have already been reimbursed. The $37.5 billion of insured power in 2021 represented a 10% annual increase on the heels of a 43% increase the prior year, resulting in a 57% growth of the insured market in just two years since 2019. Assured guarantees production was a leading force behind this growth, as we insured over 58% of new issue insured PAR sold in 2020 and more than 60% in 2021, our highest annual market share since 2013. Our $23 billion of insured new issue volume in 2021 was almost $3 billion more PAR than we insured in 2020 and was generated by more than 1,000 individual transactions. An important trend in recent years has been the use of our guarantee to help launch some of the municipal bond market's largest transaction, which indicates growing institutional demand for the security, relative price stability, and significant market liquidity our guarantee can provide. We guaranteed $100 million or more on each of 48 large issues launched in 2021, up from 39 transactions in 2020 and 22 in 2019. Significantly, We continue to add value on credits with underlying ratings in the AA category from one or both of S&P and Moody's, insuring 109 such AA transactions, totaling more than $3.5 billion of insured PAR. U.S. public finance forms the largest part of our uniquely diversified financial guarantee strategy. Our three-pronged strategy also targets insurable transactions in both infrastructure finance outside the United States and structured finance throughout the world. This helps us in times when one market or another shows temporary weaknesses, and it drives great results in years like 2021, when we are thriving in all three of our markets. Further demonstrating the diversity of our business, in 2021, we guaranteed financings of the Spanish solar power facilities and UK higher education and healthcare projects. Additionally, we worked with the UK water company to extend a debt service reserve guarantee, which is a unique product we developed as an alternative to bank liquidity facilities. We also provided a number of secondary market guarantees. Our European business was historically based in the UK, which previously allowed us to do business throughout the European Union. We have long been active and we continue to believe to have plentiful and diverse opportunities. Our Paris subsidiary, which we opened in 2020 to serve continental Europe more effectively, especially now that the UK has left the European Union, further grew its business originations in 2021. In global structured finance, an important part of our business is to provide institutions like banks and insurance companies with tools to optimize the capital utilization of their asset portfolios. During the year, we guaranteed large insurance securitizations and significantly increased our CLO activity. Our guarantees help CLOs attract new investors who might otherwise be discouraged by the higher capital requirements on uninsured CLOs. And we are seeing more opportunities to help investors reduce the capital consumed by both existing structured finance exposures and new investments. The new business we wrote across all of our markets in 2021 enabled us to increase the year-end net par amount of our insured portfolio for the first time in many years. We believe the trend going forward will be to continue increasing the par amount of our insured portfolio and increase our store of deferred premium revenue, which will further stabilize and grow our future earnings. We have continued to reduce the risk in our insured portfolio and believe we can continue to do so as we continue to write new investment-grade business. The below investment-grade portion of our insured portfolio declined to barely more than 3% as of December 31, 2021. Almost half of our below investment-grade net par exposure is to Puerto Rico, and we expect that with the quarter-proof settlements pertaining to the GEO and certain other credits scheduled to occur on March 15 of this year, that figure should drop below 2.5%. and continue to fall as more of our Puerto Rico settlements are executed. After years of twists and turns related to the restructuring of Puerto Rico debt, decisive progress occurred in 2021. We and the other creditors, along with the Commonwealth, agreed to support the final revision of the Oversight Board's restructuring plan for the central government, which the Title III Court approved in January of this year. As a result, the Commonwealth government's exit from bankruptcy is expected to begin in mid-March. The Title III Court also laid the groundwork for favorable consideration of additional agreements that support certain other Puerto Rico restructurings, such as for highways and transportation authority. All this means that Puerto Rico's long-awaited resolution of its unpaid debt is proceeding well, and the island is positioned for years of fiscal stability, according to the Oversight Board's latest fiscal plan. In addition to our success in the financial guarantee business in 2021, we also made significant progress towards our goals for the asset management business, Our overall investment performance was strong. As one of the top 25 collateralized loan obligation managers by assets under management, we were well positioned to participate in the CLO market that reached a record level of issuance. During 2021, we launched six new CLOs representing $2.5 billion of assets under management, more than double what we issued in 2020. And we converted non-fee earning AUM to fee earning AUM by selling substantially all the CLO equities still held by Assured IM legacy funds, where we had been rebating management fees. Through these efforts, we increased CLO management fees in 2021 to $48 million from $23 million in 2020. Additionally, we reset or refinanced 10 CLOs in the United States and Europe. In the asset-backed sector, we closed a continuation fund holding an auto finance investment. Additionally, the healthcare portfolio managed by Assured Healthcare Partners continued to grow as capital was deployed. Looking back on the year, we believe much of Assured's guaranteed success reflected the market's growing appreciation of the reliability of our financial strength and the security we provide investors, while also delivering financial benefits and first-class service to bond issuers and other clients. The responsibility embodied in our careful underwriting, disciplined risk management, and tireless loss mitigation. the proven resilience of our financial guarantee business model, and our strategic approach to capital management to protect policyholders and create value for shareholders. In our view, this heightened recognition of our guarantee's value could help to drive demand higher as interest rates rise. We expect market conditions in 2022 and beyond to be very different from those of 2021. As the Fed strives to contain inflation, the economic and social impact of the COVID-19 recedes, Developing geopolitical events continue to disrupt markets, and municipal governments prepare for the end of extraordinary federal support. Rising interest rates, widening credit spreads, and the accompanying volatility tend to increase financial guarantee demand. We believe assured guarantee is a better position for the long-term success than at any time in our history. Our financial strength has never been stronger. The credit challenges in our legacy insured portfolio are largely behind us. Our markets are large, our opportunities diverse, our human capital exceptional, and our business model proven through decades of economic cycles. We look forward to fulfilling the high expectations of our policyholders, clients, and shareholders. I will now turn the call over to Rob.