S&P, KBRA and Moody’s Announce Assured Guaranty’s Financial Strength Is Unchanged Following Merger of Principal Subsidiaries; Assured Guaranty Municipal Bonds Now Carry Assured Guaranty Inc.’s Ratings

Rhea-AI Summary

Assured Guaranty (NYSE: AGO) announced that S&P Global Ratings, Kroll Bond Rating Agency (KBRA), and Moody's Ratings have indicated no change to Assured Guaranty's financial strength following the August 1, 2024 merger of Assured Guaranty Municipal Corp. (AGM) into Assured Guaranty Inc. (AG). Key points:

• S&P maintains AG's AA (stable) financial strength rating
• KBRA affirms AG's AA+ (stable) insurance financial strength rating
• Moody's affirms AG's A1 (stable) insurance financial strength rating
• All AGM-insured securities are now guaranteed by AG
• Agencies view the merger positively, citing enhanced capital efficiency, risk diversification, and market position

The merger is expected to create capital, operational, and regulatory efficiencies while strengthening Assured Guaranty's global platform and growth opportunities.

Positive

• Merger maintains strong financial strength ratings across all three major rating agencies
• S&P, KBRA, and Moody's view the merger positively, citing enhanced capital efficiency and risk diversification
• Merger expected to create capital, operational, and regulatory efficiencies
• Strengthens Assured Guaranty's global platform and growth opportunities
• Moody's notes moderate strengthening of the combined entity's credit profile

Negative

• Planned extraction of $300 million of capital through a special dividend following the merger

Insights

Financial Analyst

The merger of Assured Guaranty Municipal Corp. (AGM) into Assured Guaranty Inc. (AG) is a strategic move with neutral to slightly positive implications for the company's financial strength. Key takeaways:

• S&P, KBRA and Moody's maintain their ratings, indicating no material change in risk profile.
• The merger creates capital, operational and regulatory efficiencies, potentially enhancing Assured Guaranty's market position.
• Post-merger AG shows improved risk diversification and capital adequacy, despite a planned $300 million capital extraction.

For investors, this consolidation suggests a streamlined operation without compromising financial stability. The maintained ratings and positive agency comments indicate continued confidence in Assured Guaranty's business model and risk management practices.

Insurance Industry Expert

This merger represents a significant structural optimization in the financial guaranty insurance sector. Key points:

• Consolidation of AGM into AG enhances the global platform and scale of Assured Guaranty
• The move likely results in improved operational efficiency and reduced regulatory complexity.
• Maintained ratings across agencies suggest no increased risk to policyholders.

For the insurance market, this consolidation could lead to stronger competitive positioning for Assured Guaranty. The company's ability to maintain its financial strength ratings while streamlining operations is a positive signal for its adaptability in a challenging insurance landscape.

Risk Management Specialist

The merger's impact on Assured Guaranty's risk profile is nuanced:

• Enhanced risk diversification due to the larger combined insured portfolio.
• Reduced relative size of large single risk exposures compared to capital.
• Moody's assessment of stronger pro forma risk-adjusted capital adequacy for AG post-merger.

However, the planned $300 million capital extraction via special dividend warrants attention. While agencies seem comfortable with this, it slightly offsets the capital benefits of the merger. Overall, the risk management implications appear positive, with improved resilience to stress scenarios, but investors should monitor capital management decisions closely.

HAMILTON, Bermuda--(BUSINESS WIRE)-- Assured Guaranty Ltd. (NYSE: AGO) (AGL, together with its subsidiaries, Assured Guaranty) announced today that S&P Global Ratings (S&P), Kroll Bond Rating Agency (KBRA) and Moody’s Ratings (Moody’s) have indicated that they see no change to Assured Guaranty’s financial strength as a result of the August 1, 2024 merger of Assured Guaranty Municipal Corp. (AGM) into Assured Guaranty Inc. (AG).

S&P

S&P, which assigns a AA (stable) financial strength rating to AG, released a report on August 1, 2024, stating “there are no changes to the ratings of any of the S&P Global rated entities in the AGL group hierarchy.” Additionally, they wrote: “We expect no change in the company's business strategy or approach to risk management. When evaluating capital adequacy for the companies, we run a consolidated capital adequacy model and already considered the business being assumed by AG in our analysis.”

This followed a July 9, 2024 S&P bulletin stating that the merger “won't change its assessment of the Assured Guaranty group's business risk or financial risk positions.”

KBRA

KBRA issued a press release on August 1, 2024 about Assured Guaranty’s insurance financial strength ratings (IFSRs) after the merger was completed, in which it wrote: “The IFSRs of AG (AA+/Stable), AGUK (AA+/Stable), AGE (AA+/Stable), as well as the Issuer Rating (A+/Stable) and all outstanding Debt Ratings for Assured Guaranty US Holdings Inc., remain unchanged.”

KBRA had previously written, on July 8, 2024, that “there will be no rating changes to any KBRA-rated insured obligations currently insured by AGM, AGUK or AGE as a result of the merger,” adding that it “views the merger and the resultant simplification of the overall organizational structure as creating capital, operational, and regulatory efficiencies, as well as enhancing Assured Guaranty Ltd.'s overall global platform and scale as management continues to position its business to optimize its market position and future growth opportunities.”

Moody’s

A Moody’s press release issued on August 2, 2024, noted that “by operation of law, all securities that had been insured by Assured Guaranty Municipal Corp. are now guaranteed obligations of Assured Guaranty Inc.” and that the insurance financial strength (IFS) rating of AG is A1 (stable).

Previously, on July 10, 2024 in response to the announcement of the planned merger, Moody’s issued a press release affirming the A1 (stable) IFS ratings of AG, AGM and Assured Guaranty UK Limited, as well as the Baa1 (stable) senior debt ratings of Assured Guaranty US Holdings Inc., the Baa2(hyb) (stable) junior subordinated debt rating of Assured Guaranty Municipal Holdings Inc. and the Baa1 (stable) long-term issuer rating of AGL.

Moody’s wrote that its affirmation reflects the Assured Guaranty group’s “strong capital profile, conservative underwriting of US municipal, international infrastructure and structured finance risks and leading market position in the financial guaranty insurance sector.” They added that “Assured Guaranty’s ability to organically generate significant capital through premium and investment earnings make the credit profile of its operating subsidiaries resilient to a broad range of stress scenarios.” Moody’s stated that it believes the merger “results in a moderate strengthening of the combined entity’s credit profile relative to the current overall credit profiles of AGM and AG.”

Additionally, in Moody’s view, “The larger insured portfolio and claims paying resources of post-merger AG enhances risk diversification and reduces the size of large single risk exposures relative to capital. Despite the planned extraction of $300 million of capital through a special dividend following the merger, AG’s pro forma risk-adjusted capital adequacy will be stronger than AGM’s current capital adequacy.”

Procedural Rating Agency Merger Action

As AG is the surviving company of the merger, all three rating agencies withdrew their ratings of AGM, and bonds that had been insured by AGM now carry AG’s ratings.

Any forward-looking statements made in this press release, including those regarding growth opportunities for Assured Guaranty, demand for its product, and sustained economic conditions for increased new business, 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. These risks and uncertainties include, but are not limited to, difficulties executing Assured Guaranty’s business strategy; those risks and uncertainties resulting from changes in rating agency models or opinions; Assured Guaranty’s continued capital adequacy; adverse credit developments in Assured Guaranty’s insured portfolio and the impact of those developments on rating agency models and opinions; other risks and uncertainties that have not been identified at this time, management’s response to these factors, and other risk factors identified in Assured Guaranty’s filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which are made as of August 5, 2024. Assured Guaranty undertakes no obligation 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.

About Assured Guaranty Ltd.

Assured Guaranty Ltd. is a publicly traded (NYSE: AGO), Bermuda-based holding company. Through its subsidiaries, Assured Guaranty provides credit enhancement products to the U.S. and non-U.S. public finance, infrastructure and structured finance markets. Assured Guaranty also participates in the asset management business through its ownership interest in Sound Point Capital Management, LP and certain of its investment management affiliates. More information on Assured Guaranty can be found at: AssuredGuaranty.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240805817905/en/

Investor Relations:

Robert Tucker, 212-339-0861

Senior Managing Director, Investor Relations and Corporate

Communications rtucker@agltd.com

Media:

Ashweeta Durani, 212-408-6042

Director, Corporate

Communications

adurani@agltd.com

Source: Assured Guaranty Ltd.

FAQ

How does the merger of AGM into AG affect Assured Guaranty's (AGO) financial strength ratings?

The merger does not change Assured Guaranty's financial strength ratings. S&P maintains AG's AA (stable) rating, KBRA affirms AG's AA+ (stable) rating, and Moody's affirms AG's A1 (stable) rating.

What happens to bonds previously insured by AGM after the August 1, 2024 merger?

All securities previously insured by Assured Guaranty Municipal Corp. (AGM) are now guaranteed obligations of Assured Guaranty Inc. (AG) and carry AG's ratings.

How do rating agencies view the merger's impact on Assured Guaranty's (AGO) business?

Rating agencies view the merger positively, citing enhanced capital efficiency, risk diversification, and strengthened market position. They expect it to create capital, operational, and regulatory efficiencies while enhancing Assured Guaranty's global platform and growth opportunities.

What is the financial impact of the merger on Assured Guaranty (AGO)?

The merger is expected to create capital, operational, and regulatory efficiencies. However, there is a planned extraction of $300 million of capital through a special dividend following the merger. Despite this, Moody's believes AG's pro forma risk-adjusted capital adequacy will be stronger than AGM's current capital adequacy.