Assured Guaranty Ltd.

Good morning and welcome to the insured guarantee limited fourth quarter and full year 2022 earnings conference call. My name is Lauren and I'll be the operator for today's call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing star then zero to your telephone keypad. After today's presentation, there'll 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 fourth quarter and year-end 2002 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. 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 assuredguarantee.com. Turning to the presentation, our speakers today are Dominic Frederico, President and Chief Executive Officer of Assured Guarantee Limited, and Rob Valenson, 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 performed exceptionally well in a very volatile 2022. Our U.S. public finance, international infrastructure finance, and global structure finance financial guarantee businesses combined to produce $375 million of total PVP in 2022, the fifth consecutive year in which new business production generated more than $350 million of PVP. We continue to lead the U.S. municipal bond insurance industry with our share of new issue insured par sold nearly equal to the previous year's record share of 60%. Our 364 trades in the secondary U.S. municipal bond market produced $3.3 billion of par insured up 650% year-over-year, and a par amount not seen in over a decade. During the year, we brought key measures of shareholder value per share to new year highs, even though shareholder equity per share declined 8% to $85.80 due to unrealized losses in the investment portfolio. Topping the previous record set in 2021, adjusted operating shareholders' equity per share increased 6%, to $93.92, and adjusted book value per share rose 9% to $141.98. We returned a total of $567 million to shareholders in share repurchases and dividends, which Rob will say more about. The share repurchases represented nearly 13% of our year-end 2021 shares outstanding. In addition, last week we declared a quarterly dividend of $0.28 per share which represents an increase of over 12% of our previously quarterly dividend of $25 per common share and the 12th consecutive year that our dividend has been increased. We reached settlement agreements for our exposure to the Commonwealth of Puerto Rico and to all but one of the defaulted Puerto Rico entities in our insured portfolio, which when combined with our normal public Puerto Rico amortization, eliminated $2.2 billion of below investment grade net insured power outstanding. We also sold or were paid off on a portion of the securities we received in the settlements. Our markets and the economic environment presented a new set of challenges during 2022, a year marked by inflation, rising interest rates, volatile financial and currency markets, uncertain economic trends, and geopolitical stress. For example, the rapid rise of interest rates led to unrealized losses in our fixed-income investment portfolio. It also caused refundings in the U.S. and municipal market to decrease significantly, which is an important reason that volume declined in both the overall primary market and its insured portion. For our non-U.S. business, the rapid strengthening of the U.S. dollar versus foreign currencies, especially U.K. pound sterling, reduced the dollar value of deferred premium revenue from foreign-denominated exposures. The earnings from memorization of those premiums and the amount of PVP we could record in dollars for a given amount of new international business. In the face of such headwinds, our $375 million of PVP was an impressive result, and it was well diversified across our public finance and structured finance markets. Issuance of U.S. municipal bonds totaled $360 billion in 2022, down 21% from a record par amount of $457 billion in 2021. Refunding activity was particularly impacted by higher rates. Nevertheless, the bond insurance industry penetration rate for the year reached 8% for the second consecutive year, which is well above pre-pandemic levels and indicates that investors and issuers who saw firsthand the value of bond insurance during COVID crisis continue to see its benefits in an unpredictable world. It is encouraging that in the fourth quarter of 2022, bond insurance penetration reached 8.7%, the industry's highest fourth quarter penetration rate since 2008, and the third highest penetration rate of all quarters since 2009. Shure guarantees production was a leading force behind the industry's performance in 2022 as we insured nearly 60% of new issue insured parts sold. We achieved a 70% market share for the fourth quarter of 2022. Additionally, as investors turned to the secondary market to make up for the comparative lack of new issue supply, the secondary market part we insured was 650% higher in 2021 than in 2021. As interest rates surged upward and bond prices fell, our secondary market insurance was useful for investors seeking market liquidity and portfolio management flexibility. In the combined primary and secondary markets, we sold insurance on municipal par of $20 billion. Our combined U.S. public finance PVP totaled $257 million. Our 2022 transactions included the Bond Buyers Healthcare Financing Deal of the Year, in which we insured both tax-exempt and taxable hospital revenue bonds issued for Louisville-based University of Louisville Health. We insured $272 million, or about two-thirds of the FAR issued in this transaction, whose proceeds are financing two major strategic projects. This healthcare issue was one of 31 issues launched in 2022, in which we insured at least $100 million of FAR. In one example, we insured all $608 million of tax-exempt green transmission project revenue bonds that the Power Authority of the State of New York issued to support construction and improvement of transmission projects. In another, we insured $572 million of private activity bonds issued as part of the $1.8 billion public-private partnership financing to support the Pennsylvania Department of Transportation's rehabilitation, reconstruction, and improvement of aging bridges. As increased federal spending provides impetus for large-scale infrastructure projects, this sector should present important opportunities for insured guarantee. We can bring not only our guarantee of timely principal and interest payments, but also our financial strength and capacity to ensure large project financing, as well as our years of experience underwriting infrastructure credits, including public-private partnerships. Moreover, 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 121 such AA transactions, up from 109 last year, and totaling $2.7 billion of insured PAR. Outside the United States, Our public finance business has become a consistent performer, producing more than $60 million of PVP for six years in a row. In 2022, we wrote $68 million of PVP in this business, and that is after the negative impacts of converting foreign currencies to US dollars. Among our notable accomplishments within non-US public finance were large secondary market transactions related to UK regulated utilities and a major airport. The pipeline of highly likely deals could lead to a strong first half of 2023. Our Paris subsidiary, which we opened in 2020 to serve continental Europe more effectively, further grew its business originations in 2022. In global structured finance, we wrote $50 million in PVP, which makes 2022 our second most productive year for direct structured finance activity since 2012. Providing institutions like banks and insurance companies tools to syndicate risk and optimize capital utilization continues to be an important focus for Assured Guarantee. During the year, we closed transactions in several sectors, including insurance risk transfer, commercial real estate, CLOs, and whole business securitizations. Also during the year, we made further inroads into subscription finance, where we work with banks to help them provide credit to private equity style funds collateralized by investors' funding commitments. Also during 2022, we further strengthened our high-quality, well-diversified insurance portfolio. And 2022 will be remembered as we finalized settlement agreements on our exposure to the bonds of the Commonwealth of Puerto Rico, its public buildings authority, its highway and transportation authority, and certain of its other public corporations. Although the settlement terms vary by credit, overall we were compensated in this settlement with a mix of cash and securities, including some contingent value instruments that have upside potential based on the performance of the Puerto Rico economy. We have sold some of the securities we received and continue to do so as the market opportunities arise. Our last remaining unsettled defaulted Puerto Rico exposure is the Electric Power Authority PREPA, which we believe could be resolved this year. Primarily as a result of substantially resolving our Puerto Rico PAR exposure, including $2 billion from the settlements plus $200 million from normal amortization, we have reduced the below-investment-grade portion of our net PAR outstanding to just 2.5%, the lowest level since we acquired AGM in 2009. The rating agencies look positively on our reduced exposure to Puerto Rico. Both S&P Global Ratings and Kroll Bond Rating Agencies cited it in their affirmations during 2022 of our AA ratings at S&P and AA plus ratings at KPRA, both with stable outlooks. In our asset management business, we are currently exploring strategic alternatives for this business to maximize value for our stakeholders. We are committed to our strategic objective for this business and to investing in alternative investments. and are seeking alternative and creative strategies to grow asset management-related earnings. Assured IM ended 2022 with $17.5 billion of assets under management, which was essentially flat to that of 2021. Third-party gross inflows were $1.4 billion, and as was typical for many asset managers, we were impacted by the challenging global economy and financial markets, and the widening of CLO spreads following the evasion of the Ukraine. as well as the runoff of our legacy funds and certain other limitations during the year. It is important to keep in mind that since acquiring Assured IM just three years ago, we have made important and successful course corrections to its business strategies. We increased the fee-earning AUM of Assured IM funds to $16.8 billion as of December 31, 2022, from only $8 billion on December 31, 2019. Additionally, in the wind-down funds, since the acquisition date, we have reduced AUM from $5.5 billion to 182 million a year in 2022. In our view, 2022 was a remarkable year. We saw interest rates rise from a prolonged period of historic lows to a more traditional normal. We believe sustainable levels, given us the potential to offer issuers even greater savings than we have in recent years, while originating more PVP. It became clear that the increased penetration of municipal bond insurance that began with the onset of COVID has been sustained, even with lower issuance. We believe this indicates more widespread understanding of our value proposition, which will support increased demand for our product in a world economic stage, showing no signs of becoming more stable. The United States began to experience the impact of the Bipartisan Infrastructure Act as it incentivizes municipalities to complement federal funding with their own investments, typically funded with bonds, which we can potentially insure. It encourages public-private partnership financings where we can add great value to our infrastructure finance experience analytical and due diligence capabilities, and financial strength. The success of our secondary market and municipal bond insurance business exemplified the growing awareness of the value and versatility of our bond insurance in volatile market conditions. Perhaps most importantly, we resolved most of our Puerto Rico exposure, demonstrating again the effectiveness of our loss mitigation strategies, our determination to act in the best interest of our stakeholders, our commitment to responsible engagement with our insured obligors, and the resilience of our business model. As we enter 2023, we are off to a solid start in new business production. Looking forward, we are well positioned for growth in the years ahead because we will do what we have always done, protect insured investors and shareholders through a discipline underwriting and risk management, produce savings and broaden opportunities for issuers, expand our markets, and actively and prudently manage our capital. I will now turn the call over to Rob.