Assured Guaranty Ltd. (AGO, Financial) filed Quarterly Report for the period ended 2009-03-31.
Assured Guaranty is a Bermuda-based holding company providing credit enhancement products to the municipal finance structured finance and mortgage markets. Assured Guaranty Ltd. has a market cap of $1.24 billion; its shares were traded at around $13.67 with a P/E ratio of 9.6 and P/S ratio of 2.5. The dividend yield of Assured Guaranty Ltd. stocks is 1.3%.
If a credit derivative is terminated, the Company could be required to make a mark-to-market payment as determined under the ISDA documentation. In some older credit derivative transactions, one such specified event is the failure of AGC to maintain specified financial strength ratings ranging from A or A2 to BBB- or Baa3. If a credit derivative is terminated the Company could be required to make a mark-to-market payment as determined under the ISDA documentation. For example, if AGCs ratings were downgraded to A- or A3, the CDS counterparties could terminate CDS covering $847.8 million par insured. If AGCs ratings are downgraded to levels between BBB+ or Baa1 and BB+ or Ba1, the CDS counterparties could terminate the CDS covering $10.9 billion par insured. Given current market conditions, the Company does not believe that it can accurately estimate the payments it would be required to make if AGC or AGRe were downgraded and the CDS counterparties terminated the CDS. These payments could have a material adverse effect on the Companys liquidity and financial condition. During May 2009 the Company entered into an agreement with a CDS counterparty, which had the right to terminate four CDS contracts if AGC was downgraded below AA- or Aa3. Under the agreement, the CDS counterpartys right to terminate the CDS contracts based on AGCs ratings was eliminated. In return, the Company agreed to post up to $250 million in collateral to secure its payment obligations under the CDS contracts covering $5.9 billion of par insured. The collateral posting would increase to up to $300 million if AGC were downgraded to below AA- or A2. The posting of this collateral has no impact on the Companys net income or shareholders equity under U.S. GAAP nor does it impact AGCs statutory surplus or net income.
On April 8, 2008, investment funds managed by WL Ross & Co. LLC (WL Ross) purchased 10,651,896 shares of the Companys common equity at a price of $23.47 per share, resulting in proceeds to the Company of $250.0 million. The Company contributed $150.0 million of these proceeds to its subsidiary, Assured Guaranty Re Ltd. In addition, the Company contributed $100.0 million of these proceeds to its subsidiary, Assured Guaranty US Holdings Inc., which in turn contributed the same amount to its subsidiary, AGC. The commitment to purchase these shares was previously announced on February 29, 2008. In addition, Wilbur L. Ross, Jr., President and Chief Executive Officer of WL Ross, has been elected as a Director of the Company with a term expiring at the Companys 2012 annual general meeting of shareholders.
The purchase price is $722 million (based upon the closing price of the Companys common shares on the NYSE on November 13, 2008 of $8.10), consisting of $361 million in cash and up to 44,567,901 of the Companys common shares. If, prior to the closing date under the stock purchase agreement, the Company issues new common shares (other than pursuant to an employee benefit plan) or other securities that are convertible into or exchangeable for or otherwise linked to the Companys common shares at a purchase price per share of less than $8.10, the Company has agreed to issue to Dexia on the closing date an additional number of the Companys common shares with an aggregate value as of the closing date (measured based on the average of the volume weighted average price per share for each day in the 20 NYSE trading day period ending three business days prior to the closing date) representing the amount of dilution as a result of such issuance. The amount of dilution is defined to mean (x) the number of the Companys common shares issued (or that upon conversion or exchange would be issuable) as a result of the dilutive issuance, multiplied by (y) the positive difference if any between $8.10 and the purchase (or reference, implied, conversion, exchange or comparable) price per share received by the Company in the dilutive issuance, multiplied by (z) the percentage of the issued and outstanding share capital of the Company represented by the Company common shares to be received by Dexia under the stock purchase agreement (without taking into account any additional Assured Guaranty Ltd.s common shares issued or issuable as a result of the anti-dilution provision).
In January 2009, AGC finalized an agreement with CIFG Assurance North America, Inc. (CIFG) to assume a diversified portfolio of financial guaranty contracts totaling approximately $13.3 billion of net par outstanding. AGC received $75.6 million, which included $85.7 million of upfront premiums net of ceding commissions and approximately $12.2 million of future installments related to this transaction.
approaches including roll rates and hybrid roll rate/CDR methods. As a result of this modeling and analysis, the Company incurred loss and loss adjustment expenses of $(4.9) million for its direct Countrywide transactions during the three months ended March 31,2009. The Companys cumulative incurred loss and loss adjustment expenses on the direct Countrywide transactions as of March 31, 2009 was $93.3 million ($73.0 million after-tax). During 2009, the Company paid losses and loss adjustment expenses for its direct Countrywide transactions of $35.5 million. The Companys cumulative paid losses and loss adjustment expenses for its direct Countrywide transactions are $205.5 million as of March 31, 2009, of which we expect to recover $112.2 million from the receipt of excess spread from future cash flows as well as funding of future draws and recoverables from breaches of representations and warranties with respect to the underlying collateral. This amount of $112.2 million is included in salvage recoverable on the balance sheet as of March 31, 2009.
Read the The complete ReportAGO is in the portfolios of Wilbur Ross.
Assured Guaranty is a Bermuda-based holding company providing credit enhancement products to the municipal finance structured finance and mortgage markets. Assured Guaranty Ltd. has a market cap of $1.24 billion; its shares were traded at around $13.67 with a P/E ratio of 9.6 and P/S ratio of 2.5. The dividend yield of Assured Guaranty Ltd. stocks is 1.3%.
Highlight of Business Operations:
With respect to a significant portion of our in-force financial guaranty reinsurance business, in the event that AG Re were downgraded from Aa3 to A1, subject to the terms of each reinsurance agreement, the ceding company may have the right to recapture business ceded to AG Re and assets representing substantially all of the statutory unearned premium and loss reserves (if any) associated with that business. As of March 31, 2009, the statutory unearned premium, which represents deferred revenue to the Company, subject to recapture is approximately $170 million. If this entire amount was recaptured, it would result in a corresponding one-time reduction to net income of approximately $15 million. With respect to one of AG Res ceding companies, the right to recapture business can only be exercised if AG Re were downgraded to the A category by more than one rating agency, or below A2 or A by any one rating agency. As of March 31, 2009, the statutory unearned premium subject to recapture by this ceding company is approximately $358 million. If this entire amount were recaptured, it would result in a corresponding one-time reduction to net income of approximately $42 million. Alternatively, the ceding company can increase the commissions it charges AG Re for cessions. Any such increase may be retroactive to the date of the cession. As of March 31, 2009, the potential increase in ceding commissions would result in a one-rime reduction to net income of approximately $40 million. The effect on net income under these scenarios is exclusive of any capital gains or losses that may be realized.If a credit derivative is terminated, the Company could be required to make a mark-to-market payment as determined under the ISDA documentation. In some older credit derivative transactions, one such specified event is the failure of AGC to maintain specified financial strength ratings ranging from A or A2 to BBB- or Baa3. If a credit derivative is terminated the Company could be required to make a mark-to-market payment as determined under the ISDA documentation. For example, if AGCs ratings were downgraded to A- or A3, the CDS counterparties could terminate CDS covering $847.8 million par insured. If AGCs ratings are downgraded to levels between BBB+ or Baa1 and BB+ or Ba1, the CDS counterparties could terminate the CDS covering $10.9 billion par insured. Given current market conditions, the Company does not believe that it can accurately estimate the payments it would be required to make if AGC or AGRe were downgraded and the CDS counterparties terminated the CDS. These payments could have a material adverse effect on the Companys liquidity and financial condition. During May 2009 the Company entered into an agreement with a CDS counterparty, which had the right to terminate four CDS contracts if AGC was downgraded below AA- or Aa3. Under the agreement, the CDS counterpartys right to terminate the CDS contracts based on AGCs ratings was eliminated. In return, the Company agreed to post up to $250 million in collateral to secure its payment obligations under the CDS contracts covering $5.9 billion of par insured. The collateral posting would increase to up to $300 million if AGC were downgraded to below AA- or A2. The posting of this collateral has no impact on the Companys net income or shareholders equity under U.S. GAAP nor does it impact AGCs statutory surplus or net income.
On April 8, 2008, investment funds managed by WL Ross & Co. LLC (WL Ross) purchased 10,651,896 shares of the Companys common equity at a price of $23.47 per share, resulting in proceeds to the Company of $250.0 million. The Company contributed $150.0 million of these proceeds to its subsidiary, Assured Guaranty Re Ltd. In addition, the Company contributed $100.0 million of these proceeds to its subsidiary, Assured Guaranty US Holdings Inc., which in turn contributed the same amount to its subsidiary, AGC. The commitment to purchase these shares was previously announced on February 29, 2008. In addition, Wilbur L. Ross, Jr., President and Chief Executive Officer of WL Ross, has been elected as a Director of the Company with a term expiring at the Companys 2012 annual general meeting of shareholders.
The purchase price is $722 million (based upon the closing price of the Companys common shares on the NYSE on November 13, 2008 of $8.10), consisting of $361 million in cash and up to 44,567,901 of the Companys common shares. If, prior to the closing date under the stock purchase agreement, the Company issues new common shares (other than pursuant to an employee benefit plan) or other securities that are convertible into or exchangeable for or otherwise linked to the Companys common shares at a purchase price per share of less than $8.10, the Company has agreed to issue to Dexia on the closing date an additional number of the Companys common shares with an aggregate value as of the closing date (measured based on the average of the volume weighted average price per share for each day in the 20 NYSE trading day period ending three business days prior to the closing date) representing the amount of dilution as a result of such issuance. The amount of dilution is defined to mean (x) the number of the Companys common shares issued (or that upon conversion or exchange would be issuable) as a result of the dilutive issuance, multiplied by (y) the positive difference if any between $8.10 and the purchase (or reference, implied, conversion, exchange or comparable) price per share received by the Company in the dilutive issuance, multiplied by (z) the percentage of the issued and outstanding share capital of the Company represented by the Company common shares to be received by Dexia under the stock purchase agreement (without taking into account any additional Assured Guaranty Ltd.s common shares issued or issuable as a result of the anti-dilution provision).
In January 2009, AGC finalized an agreement with CIFG Assurance North America, Inc. (CIFG) to assume a diversified portfolio of financial guaranty contracts totaling approximately $13.3 billion of net par outstanding. AGC received $75.6 million, which included $85.7 million of upfront premiums net of ceding commissions and approximately $12.2 million of future installments related to this transaction.
approaches including roll rates and hybrid roll rate/CDR methods. As a result of this modeling and analysis, the Company incurred loss and loss adjustment expenses of $(4.9) million for its direct Countrywide transactions during the three months ended March 31,2009. The Companys cumulative incurred loss and loss adjustment expenses on the direct Countrywide transactions as of March 31, 2009 was $93.3 million ($73.0 million after-tax). During 2009, the Company paid losses and loss adjustment expenses for its direct Countrywide transactions of $35.5 million. The Companys cumulative paid losses and loss adjustment expenses for its direct Countrywide transactions are $205.5 million as of March 31, 2009, of which we expect to recover $112.2 million from the receipt of excess spread from future cash flows as well as funding of future draws and recoverables from breaches of representations and warranties with respect to the underlying collateral. This amount of $112.2 million is included in salvage recoverable on the balance sheet as of March 31, 2009.
Read the The complete ReportAGO is in the portfolios of Wilbur Ross.
