Assured Guaranty Ltd.

Good morning and welcome to the Assured Guarantee Limited first quarter 2022 earnings conference call. My name is Alex and I will be the operator for today's call. All participants will be in a listener only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. 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 our host, Robert Tucker, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead.

Thank you, Operator, and thank you all for joining Assured Guarantee for our first quarter 2022 financial results conference call. Today's presentation is made pursuant to the safe harbor 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 new 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 SEC filings, most current financial filings, and for the risk factors. The 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 of Assured Guarantee Limited, and Rob Ballenson, 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 Guarantee produced solid results in the first quarter of 2022. Adjusted operating income per share came in at $1.34, almost two and a half times the comparable result in the first quarter of 2021. Our key non-GAAP valuation measures reached new highs of $90.09 per share for adjusted operating shareholders' equity and $133.21 per share for adjusted book value. Shareholders' equity per share at year end, at quarter end rather, was $89.20, The modest decline during the quarter was due to the unrealized losses in the investment portfolio, which were caused mainly by rising interest rates. Total claims paying resources remained at approximately $11 billion. The signature event of the quarter occurred on March 15th, when several Puerto Rico debt settlements were consummated, distinguishing $1.3 billion of our exposure to Puerto Rico credits. Under those settlements, we paid claims to extinguish the vast majority of our insured exposure to the Commonwealth's general obligation of public buildings authority bonds, and to extinguish all of our exposure to the island's convention center district authority and infrastructure finance authority. These settlements reduced our exposure to below-investment grade credits by $1.3 billion, and our below-investment grade credits now represent only 2.4% of our insured portfolio. In completing these consensual settlements, we received cash and new GO bonds totaling approximately $1.2 billion, as well as contingent value instruments. As of March 31st, our insurance exposure to Puerto Rico credits is now less than 1% of our insured portfolio, and the majority of that remaining Puerto Rico exposure is subject to settlement agreements or is current on debt service payments. This past Monday, the Oversight Board filed the proposed plan of adjustment to restructure claims against the Highway and Transportation Authority, which we anticipate will gain federal court approval by the second half of this year. And while the Commonwealth, supported by the Oversight Board, terminated the third previously agreed restructuring support agreement for the Puerto Rico Electric Power Authority, the presiding judge has appointed a team of experienced federal bankruptcy judges to facilitate mediation on an expedited timetable. We have now entered a new stage in Assured Guarantees evolution, having proven again our commitment and ability to honor our policies while mitigating losses to our active participation in the restructuring process. this time in the largest municipal bankruptcy on record. Rob will provide more detail on the impact of the settlements on our financial results in a few minutes. The settlements were well received by the rating agencies, and in March, Moody's upgraded a short guarantee into subsidiaries AGM and AGUK to A1 and A2, from A2 respectfully, with a stable outlook. Moody's cited our improved credit profile following the settlements, and the limited expected volatility among our remaining Puerto Rico exposures. It also wrote that demand for financial guarantee insurance continues to trend favorably both in the United States and Europe, which supports the continued alignment of interest between Assured Guarantee shareholders and its policyholders and creditors. Turning to production, in what we all know is an unpredictable first quarter environment, Assured Guarantee performed well, producing new business worth more than $69 million in total PVP. Our international infrastructure and global structure finance businesses each increased PVP by 300% compared with their first quarter PVP last year. Our U.S. public finance first quarter PVP results were very good as well, exceeded in only two first quarters during the last decade. Inflation and the expectation of increased Fed action had a significant impact on the municipal bond market. In January alone, the AAA 30-year municipal benchmark index rose nearly 50 basis points. And for the first time since April of 2020, municipal bond funds experienced outflows. Over the entire quarter, that benchmark rose more than 100 basis points, and net outflows from UNI funds exceeded $25 billion. Total borrower volume of new issuance was down more than 7% when compared with the first quarter of last year. Insured penetration exceeded 8.5% of far-issued, the highest first quarter penetration in more than a dozen years, and above the PAR penetration rate of 8.2 for all of 2021, which was also the highest annual rate in 12 years. We led the municipal bond insurance industry again in new issue PAR insured with a 58% market share. Our $4.8 billion of insured PAR sold in the first quarter was the second highest in 11 years, In total, during the year's first quarter, Assured Guaranty sold U.S. public finance bond insurance on $5.1 billion of par in the primary and secondary markets. U.S. public finance PVP totaled $49 million for the quarter. We also continue to see issuers using our guarantee to improve the execution on some of the admissible bond market's largest transactions, which we believe is made possible by significant institutional demand for our guarantee and the relative price stability and increased market liquidity our insurance can provide. We guarantee par amounts of $100 million or more on several large transactions sold in the quarter, including $755 million of Metropolitan Washington Airport Dulles toll road revenue refunding bonds, $546 million of Los Angeles Department of Airport's revenue bonds for the LAX rental car facility project, and $272 million of possible revenue bonds for the University of Louisville. Among credits with underlying S&P or Moody's ratings in the AA category, AGM insured 26 transactions for a total of $535 million of insured PAR during the quarter, a sign that many in the market recognize the value of our guarantee can add to even highly rated credits. While transactions of this caliber command comparatively low premium rates, They also have lower rating agency capital charges and enhance the risk profile of the insured portfolio. In international infrastructure finance, we produced $12 million of PVP during the quarter. One UK transaction was a 170 million pound five-year debt service reserve guarantee that repays a bank liquidity facility within the Yorkshire Water Group securitization structure. The guarantee covers certain senior payment obligations due to bondholders and other senior creditors of Yorkshire Water Services Limited. This is the second time we have provided this type of debt service reserve guarantee in the UK water sector. Global structure finance contributed $8 million to PVP during the first quarter. Among other transactions, we guaranteed a highly over-collateralized portfolio of rental income cash flows for an insurance company. Our asset management segment improved its adjusted operating income to break even for the first quarter. We had an interim close on Assured Healthcare Partners Fund II during the quarter. and a final close in April, exceeding its original hard cap of $750 million. And although the CLO primary issuance market that boomed in 2021 slowed precipitously, Assured IM's strong debt investor relationships enabled it to reset one CLO and price a new CLO that closed in April. During the quarter, Assured IM navigated a challenging investment environment characterized by rising interest rates, a change in monetary policy, Market illiquidity and volatility reduced primary issuance and geopolitical conflict. In the floating rate loan market, credit fundamentals remained strong with few defaults, and there was demand for floating rate paper, yet the CLO market was volatile. Although the fundamental municipal credit picture is also quite good, municipal bond performance in the first quarter of 2022 was the market's worst since the 1980s because of rising rates, widening credit spreads, heavy outflows from municipal bond funds, and a lack of liquidity in the market. Current municipal valuations have now become more attractive, creating better investment opportunities. Our ABS portfolio continues to deliver great returns, notwithstanding the uncertain market conditions, in part because of a strong consumer balance sheet, and more specifically because auto loan securitizations benefited from the lack of new car supply and elevated used car prices. Before I conclude, I want to say that the tragic conditions in Ukraine and its refugee crisis have troubled us deeply at Assured Guarantee. Our employee-led corporate philanthropy committee quickly identified a number of capable and involved humanitarian charities to which donations from our employees are being matched by the company's $2 for every $1 donated. At the corporate level, we have directly contributed a total of $100,000 to these organizations. In total, including the additional contributions by our employees in the two-to-one corporate match, The short guarantee has raised nearly $300,000 for the release effort. We believe people throughout the world deserve to live in peace and safety. The war in the Ukraine is just one of the geopolitical and economic forces that continue to heighten uncertainty in today's capital markets. The exodus of retail investors from municipal bond funds has contributed to making municipal borrowing more expensive. Last month, we saw the 30-year municipal AAA yields exceed 3% for the first time since three days in March of 2020. a month notorious for its pandemic-induced liquidity crisis. We have seen credit spreads widen recently. All this should encourage issuers to look for the most competitive, cost-effective executions, which will frequently involve bond insurance. Similar dynamics are at play in the international and structured finance sectors. We could be entering the kind of interest rate and credit spread conditions that I have often said would allow for greater growth in our financial guarantee business. conditions that will likely give us more opportunities to add value and greater pricing leeway. The Fed's half-point increase this week came with an indication of more increases to come. The stock market soared on the news, then plummeted the next day, indicating recession fears have not gone away. Market volatility and recession fears tend to create investor demand for our product. Importantly, our business model has proven to be resilient in difficult times, protecting our company's financial strength and shareholder value, while we safeguard our policyholders and save money for issuers. We've been successful through a long period of challenging market conditions, and it looks like we may be entering a more favorable environment. We believe the emerging market conditions in the marketplace could be a springboard for our growth. I will now turn the call over to Rob.