Executive Summary

Q1 2019 produced solid underwriting but lower GAAP results: total revenues were $195M, net income $54M ($0.52 diluted EPS), and non-GAAP operating income $86M ($0.82 operating EPS), down year over year on higher Puerto Rico loss expense, fair value losses, and lower net earned premiums from fewer refundings .
Record per-share levels in capital metrics: shareholders’ equity per share reached $65.21; non-GAAP operating shareholders’ equity per share $62.00; and adjusted book value per share $86.95—all record highs, supported by strong claims-paying resources of $11.55B .
New business diversified: PVP of $42M across U.S. public finance ($32M), non-U.S. public finance ($4M), and structured finance ($6M total), with $2.71B gross par written; AGO led U.S. muni insurance by par and deal count .
Capital deployment remained a catalyst: $79.4M repurchases (1.91M shares; $41.62 avg) in Q1 and $39.5M post-quarter ($46.25 avg), leaving $279M authorization and ~$260M holding-company liquidity—supporting per-share value accretion .
Narrative catalysts: PREPA RSA participation with potential to insure exchange bonds (improving economics), continued Puerto Rico legal stance, and an innovative UK water debt service reserve guarantee (Welsh Water), expanding international infrastructure offerings .

What Went Well and What Went Wrong

What Went Well

Record per-share capital metrics: “new per share highs for shareholder equity, operating shareholder equity and adjusted book value” with Q1 per-share metrics at $65.21, $62.00, and $86.95 respectively .
Diversified new business: PVP generated in all three lines; AGO insured $2.4B of U.S. public finance par and executed the largest insured green bond to date for NY MTA ($180M) plus a notable Tufts Medical transaction ($81M) .
International product innovation: a £135M debt service reserve guarantee for Welsh Water—first-of-its-kind—signal to UK regulated utilities of long-term alternatives to bank facilities .

What Went Wrong

Lower GAAP results YoY: Revenues fell to $195M (from $293M), net income fell to $54M (from $197M), driven by higher loss and LAE (+$46M vs $(18)M), fair value losses on credit derivatives (−$22M vs +$34M), and lower net earned premiums ($118M vs $145M) due to fewer refundings .
Muni demand headwinds: Falling rates and tight A-to-AAA spreads (30-year spread ~43 bps, tightest in 11 years) reduced insurance penetration and premium rate capture, especially at long maturities .
Puerto Rico reserve build: Despite RMBS economic benefit (+$65M), AGO increased reserves for certain Puerto Rico exposures; special revenue rulings extending recovery timing drove reserve adjustments .

Financial Results

Metric	Q3 2018	Q4 2018	Q1 2019	Q1 2018
Total Revenues ($USD Millions)	—	—	$195	$293
Net Earned Premiums ($USD Millions)	$142	$125	$118	$145
Non-GAAP Operating Income ($USD Millions)	$161	$92	$86	$155
Net Income ($USD Millions)	—	—	$54	$197
Diluted EPS ($USD)	—	—	$0.52	$1.68
Non-GAAP Operating EPS ($USD)	$1.47	—	$0.82	$1.33
Loss and LAE ($USD Millions)	—	—	$46	$(18)

Drivers and notable items:

Fair value change on credit derivatives: Q1 2019 −$22M vs +$34M YoY .
Accelerations from refundings/terminations: Q1 2019 $26M vs $52M YoY in net earned premiums .

Segment/New Business Breakdown (Close-date)

Segment	Q1 2018 PVP ($M)	Q1 2018 GWP ($M)	Q1 2018 Gross Par ($M)	Q1 2019 PVP ($M)	Q1 2019 GWP ($M)	Q1 2019 Gross Par ($M)
Public Finance – U.S.	$35	$33	$2,004	$32	$30	$2,016
Public Finance – non-U.S.	$26	$39	$187	$4	$2	$176
Structured Finance – U.S.	$0	$1	$11	$5	$6	$494
Structured Finance – non-U.S.	$0	$0	$0	$1	$1	$21
Total	$61	$73	$2,202	$42	$39	$2,707

Key Performance Indicators

KPI	Q4 2018	Q1 2019
Shareholders’ equity per share ($)	$63.23	$65.21
Non-GAAP adjusted book value per share ($)	$86.06	$86.95
Claims-paying resources ($USD Billions)	$11.82	$11.55
Net Par Outstanding ($USD Billions)	$241.80	$237.33
Common share repurchases ($USD Millions)	$500 (FY18)	$79.4 Q1; $39.5 Apr–May
Gross Par Written ($USD Millions)	—	$2,707

Guidance Changes

AGO did not issue quantitative revenue or margin guidance in the Q1 2019 press release or call. Capital actions and liquidity updates were provided (repurchase authorization ~$279M; holding company liquidity ~$260M), but no explicit forward financial guidance ranges were issued .

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue/EPS/Margins	FY/Q2 2019	None	None	Maintained (no guidance)
Share Repurchases	2019	Authorization prior	$279M remaining as of May 9	Maintained/updated authorization
Dividend	2019	$0.18/qtr (raised in Q4 2018)	No change discussed in Q1 call	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2018)	Previous Mentions (Q4 2018)	Current Period (Q1 2019)	Trend
Puerto Rico (COFINA, PREPA, GO)	Progress on COFINA plan; positive economic indicators; push for receiver at PREPA	COFINA exchange implemented; strong stance against GO invalidation; continued consolidation strategy	PREPA amended RSA participation; reserve adjustments reflecting legal timelines; strong defense of GO validity	Toward consensual settlements; firm legal posture
Rates/Spreads & Muni Penetration	Tight spreads; low rates muted penetration; expectation of widening	Rising rates helped, but spreads tight; production outlook improving	Lower yields and tight spreads pressured premium capture; industry penetration ~5% par	Mixed; spreads remain tight
International infrastructure	12 consecutive quarters of premiums; Australia, UK transactions; new investor bases	Consolidation of European subs; strategy to expand	Welsh Water DSR guarantee; continued quarter streak; Brexit plans in place	Expanding, innovative products
Structured finance (CLO, ARVI, life)	CLO insurance; aviation/commercial real estate; Basel IV inquiries	Capital efficiency commentary; portfolio yield	U.S. CLO, aircraft residual value, life insurance opportunities	Growing pipeline
Capital management	Significant buybacks; record ABV/share	$500M repurchases FY18; $300M new authorization	$79M Q1 buybacks; $40M post-Q1; $279M remaining authorization	Continued accretive repurchases

Management Commentary

“Assured Guaranty once again established new per share highs for shareholder equity, operating shareholder equity and adjusted book value” highlighting capital strength despite market headwinds .
“On March 31, we announced an innovative £135 million debt service reserve guarantee for the Welsh Water group…a long-term alternative to bank liquidity facilities” underscoring product innovation in UK regulated utilities .
“We have and will still have significant excess capital that we will continue to manage through share buybacks and dividends” reinforcing capital-return strategy .
CFO: “Operating income was $86 million or $0.83 per share…Net earned premiums were $118 million…accelerations declined to $26 million” detailing YoY drivers and refunding dynamics .

Q&A Highlights

Puerto Rico reserves: Management adjusted probabilities after special revenue rulings increased recovery timelines; COFINA had no Q1 impact (done in Q4) .
PREPA RSA economics: Insuring exchange bonds could lower interest rates (e.g., 50–75 bps), increasing recoverable par and adding premiums—potentially reducing economic losses materially .
Production mix: Q1 primary vs secondary PVP was $10.1M vs $21.5M, par $1.678B vs $338M—secondary was strong .
Consolidation strategy: Puerto Rico resolutions could accelerate industry consolidation; AGO evaluates reinsurance-first structures to facilitate eventual acquisitions .
Voting thresholds: Title VI vs Title III voting mechanics may enable path to confirmation even without all parties; threshold flexibility noted .

Estimates Context

We attempted to retrieve S&P Global Wall Street consensus estimates (EPS and revenue for Q1 2019) but the SPGI service returned a daily limit error; therefore, consensus estimates were unavailable for comparison in this report [GetEstimates error].
Given unavailability, we cannot assess beat/miss vs consensus for Q1 2019. Future updates will include comparisons once access is restored.

Key Takeaways for Investors

Capital strength remains the anchor: record per-share equity/ABV and $11.55B claims-paying resources support downside protection and capital return capacity .
Near-term earnings volatility largely technical: fair value marks and Puerto Rico reserve timing drove YoY GAAP declines; core underwriting and PVP remain healthy across segments .
International growth vector: UK regulated utilities DSR guarantees and broader infrastructure finance provide differentiated, less competitive avenues for premium growth .
PREPA optionality: Wrapping exchange bonds could enhance recoveries and generate new premiums—monitor RSA progress and final terms for potential positive revisions .
Muni demand sensitive to rates/spreads: Tight spreads cap penetration and premium rates; any widening or rate normalization would be a positive volume/pricing catalyst .
Continued buybacks support per-share value accretion: $118.9M YTD repurchases through May 9 with $279M remaining authorization—short-term positive for EPS/ABV trajectory .
Medium-term thesis: Portfolio amortization slowing, diversified new business, and potential industry consolidation underpin a trajectory toward stabilized earnings and growing intrinsic value per share .

ASSURED GUARANTY LTD (AGO)·Q1 2019 Earnings Summary