Assured Guaranty Is Strongly Positioned to Manage Impact of COVID-19

March 20, 2020

As the world deals with the COVID-19 pandemic and its consequences, we offer our support and well wishes for the safety of all affected. Assured Guaranty is operating well remotely, as contemplated in the business continuity plan that we test regularly, and we are providing the services and communications we normally would. While the current new issue market is relatively inactive, we continue our underwriting activities in both primary and secondary markets.

We are well positioned and prepared to manage both the short and long term impacts of the current situation. Our business model, supported by significant excess capital and our highly liquid investment portfolio, is designed to withstand global economic disruptions. If an issuer defaults, we are only obligated to pay any shortfall in principal and interest on scheduled payment dates; our policy forbids acceleration of payments on bonds we insure without our consent.

The Company maintains a strong capital position, with claims-paying resources exceeding $11 billion. Our investment portfolio is predominantly in highly rated fixed income securities, with over 60% rated AA or higher. These investments provide a high level of liquidity and have, in the last five years, generated an average of $400 million of investment income per year.

Our portfolio of insured credits is granular and well diversified geographically and by sector. The insured portfolio is 96% investment grade, and our insured leverage (the ratio of exposure to claims-paying resources) has been reduced significantly and now stands at less than half the insured leverage we had in 2009.

U.S. municipalities represent 74% of our insured exposures, and they have a strong record of performance during economic downturns. As a class, municipal bonds are well structured to protect bondholders, with most of our transactions containing covenants that require issuers to increase tax rates, fees or charges to ensure there are adequate funds to meet debt service requirements, while many also require the maintenance of a debt service reserve fund with up to a year’s worth of debt service coverage. Assured Guaranty saw almost no municipal defaults in our insured portfolio during the Great Recession. Similarly, our international infrastructure business has performed exceedingly well. Only 5% of the insured portfolio consists of structured finance exposures, and these are widely diversified and structured with strong protections.   

We believe the benefits of our value proposition are clearly evident in the volatile market environment we are now experiencing. Through our unconditional and irrevocable guaranty of timely payment of principal and interest, we help investors gain greater confidence to invest and issuers to limit the interest cost of widening credit spreads. We have the financial strength to fulfill our commitments, and preserving that financial strength is our highest strategic priority.

 

Forward-Looking Statements
Any forward-looking statements made in this statement reflect Assured Guaranty’s current views with respect to future events and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. Assured Guaranty’s forward-looking statements, including but not limited to those about the future course and impact of the COVID-19 pandemic and its global consequences, Assured Guaranty’s ability to operate remotely in the future, the resilience of Assured Guaranty’s business model, the adequacy of Assured Guaranty’s capital and the quality of both its insured portfolio and investment portfolio, the future performance of municipal, international infrastructure and structured bonds insured by Assured Guaranty, and the attractiveness of Assured Guaranty’s value proposition in the current market, could be affected by a number of factors, including those identified in Assured Guaranty’s filings with the Securities and Exchange Commission, which are available on its website, the development and course of the COVID-19 pandemic and its global consequences, and other risks and uncertainties that have not been identified at this this time. Readers are cautioned not to place undue reliance on these forward-looking statements, which are made as of March 20, 2020. Assured Guaranty does not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.