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Assured Guaranty Presentation June 2013. Introduction. Assured Guaranty Ltd. (“AGL” and together with its subsidiaries “Assured Guaranty” or “the Company”) is the leading financial guaranty franchise

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  • Assured Guaranty Ltd. (“AGL” and together with its subsidiaries “Assured Guaranty” or “the Company”) is the leading financial guaranty franchise
    • Publicly traded holding company (NYSE: AGO) with extensive quarterly financial disclosures providing transparency to all investors
    • More than a quarter-century of experience in financial guaranty market
    • We are the only long-standing financial guaranty company writing new business today
  • Strong capital base
    • Consolidated claims-paying resources of $12.0 billion as of March 31, 2013
    • Consolidated investment portfolio of $10.9 billion as of March 31, 2013
    • Committed to maintaining strong financial strength ratings from Moody’s and S&P
      • AA- rating with a Stable Outlook from Standard & Poor’s
  • We are focused on building demand for our guaranties in the market
    • Assured Guaranty insured 1,160 transactions in Full Year 2012 in the primary market, representing $13.2 billion in Par
    • Assured Guaranty insured 230 transactions in 2013 YTD (through 5/31) in the primary market, representing $2.7 billion in Par
    • Currently insure nearly 11,000 unique municipal credits and nearly $500mm of our insured bonds trade each day on average
texas activity
Texas Activity
  • Assured wrapped $1.8 bn of Texas municipal bonds in 2012 across 287 transactions.
    • 23% of new issue transactions within the State of Texas, nearly 1 in 4, came with Assured’s insurance in 2012
  • Assured’s activity within Texas in 2012 included more than 200 Municipal Utility District transactions for $1.1 bn of par.
      • These MUDs ranged in underlying rating from A+ to BBB-.
      • Estimated spread savings of 10-25 bps on “A” rated MUDs and 25-50 bps on “BBB” rated MUDs
  • Assured insures the bonds of 380 separate and distinct MUDs with par outstanding of approximately $4.28 billion.
our approach to municipal utility districts
Our Approach to Municipal Utility Districts
  • Our analysis of perspective municipal utility districts for bond insurance primarily focuses on credit factors within the following five areas:
      • Legal Structure
      • Debt Characteristics
      • Local Economic Profile
      • District Composition
      • Financial Strength
legal structure and debt profile
Legal Structure and Debt Profile
  • Bonds are voter approved and secured by district’s general obligation, unlimited tax pledge.
  • Necessary bonding approvals are in place from State agencies and local municipalities responsible for oversight.
  • Debt load should be affordable for tax base – debt / assessed value should be manageable.
  • Capital improvement plan and borrowing capacity are considered, and should remain commensurate with district needs.
  • Debt service tax rates typically remain below $1.50 per $100 of assessed value.
local economic conditions
Local Economic Conditions

Insured districts are often located within relatively healthy economic regions characterized by:

  • Ample nearby employment opportunities (i.e. Houston MSA).
  • A tax base that is capable of supporting local tax rates.
  • Tax collection rates are typically high.
  • Property tax rates that are competitive with neighboring communities.
  • Tax base continues to grow as a result of recent development as well as demand for district housing.
  • Low foreclosure rates.
district composition
District Composition
  • Insurable districts typically are fairly well developed.
    • There is substantial residential development, and growth in assessed valuation.
    • Residential development with owner occupied homes is preferred.
    • Given the need for substantial development and investment grade ratings, Assured is not typically involved in a district’s first bond financing, but rather subsequent financings as district becomes built out.
    • Depending upon status of district development, assessed values will be either stable or growing from additional development or demand.
    • District tax base should be relatively diverse, with little concentration to a limited number of leading taxpayers.
financial operations
Financial Operations

Analysis of the General Fund and Debt Service Fund is conducted for perspective districts to determine financial strength and dependability.

  • Typically like to see the last three to five years of audited financial statements.
  • Both the General Fund and the Debt Service Fund should consistently exhibit healthy reserve levels and liquidity (unrestricted cash on hand).
  • This provides for cushion against unexpected expenses.
  • Consistent trend of balanced operations or surpluses without reliance on developer contributions is viewed favorably.
  • Monthly water charges should be competitive with neighboring districts.
  • We are the only-long standing financial guaranty company continuing to insure bonds today.
  • We have insured municipal utility districts in Texas for close to 20 years, and insured more than 200 district transactions in 2012 alone.
  • Our experienced underwriting team understands the various nuances in analyzing municipal utility districts.
  • District credit factors are analyzed in their entirety. Deficiencies in one area may be offset by positive credit attributes in another area.