Assured Guaranty Reports 2016 Gains

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Assured Guaranty Ltd. reported gains in operating earnings and shareholders' equity last year as it again led the municipal bond insurance industry in both par amount and number of deals.

Operating income for 2016 rose to $895 million, or $6.68 a share, from $710 million, or $4.76 a share in 2015, Assured said in a Feb. 23 press release. The results include, for the first time, a $16 million, or 12 cents per share, gain related to the effect of consolidating financial guaranty variable interest entities (FG VIE) in 2016. The 2015 figures were revised to include an $11 million, or $0.07 per share, gain related to FG VIE consolidation.

Net income for fiscal 2016 slipped to $881 million, or $6.56 per share, from $1,056 million, or $7.08 per share in fiscal 2015. Assured reported that the decrease was primarily attributable to lower fair value gains on credit derivatives, offset in part by higher net earned premiums.

"2016 was a very successful year, as Assured Guaranty continued to build on the solid foundation of our financial strength, strategic flexibility, disciplined risk management and robust business model to remain the proven leader in financial guaranty insurance," said Dominic Frederico, president and chief executive officer. In 2016, Assured insured $14.23 billion of bonds over the span of 902 transactions according to data from Thomson Reuters.

Assured said that non-general accepting accounting principles operating shareholders' equity per share and non-GAAP adjusted book value per share reached $49.89 and $66.46, respectively. These amounts now include net losses related to FG VIE consolidation of $0.06 per share on non-GAAP operating shareholder's equity, and $0.18 per share on non-GAAP adjusted book value.

Assured also reported that share repurchases totaled $116 million, or 3.3 million shares, in the fourth quarter, and $306 million, or 10.7 million shares, in fiscal 2016. On Feb. 22 the board of directors authorized an additional $300 million of share repurchases.

"We have built our success by solidly executing strategies designed for the prevailing business and economic conditions," Frederico said. "In recent years, this has meant dealing with the constraining effect of low interest rates on the new business activity of our financial guaranty subsidiaries."

In addition to being the only monoline to maintain an active presence in all three of its core financial guaranty markets – U.S. public finance, international infrastructure finance and structured finance – Assured focused strategically on managing capital efficiently, executing acquisitions and commutations, and mitigating losses, he said.

"These alternative strategies have helped us to increase both shareholder value and the company's financial strength for the long term," he said. "In this [low interested rate] environment, as we normally do, we carefully focused on opportunities that would generate the most attractive long-term returns on the capital we committed."

In the first quarter of 2017, Assured will report on the acquisition of MBIA UK, which has been renamed Assured Guaranty (London). The company is still working on the fair value analysis of MBIA UK's book of business and expects the acquisition to be accretive to key metrics, according to Robert Bailenson, Assured's chief financial officer.

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