Assured Guaranty Q4 2017 results hit by expenses

23-02-2018

Assured Guaranty’s fourth quarter 2017 results reveal that its net income for the period came to $52 million, a 74 percent fall from the $197 million it posted for the same period of 2016.

Net income for the full year 2017 came to $730 million, down on the $881 million it made over 2016.

The company said that the fall in the fourth quarter results was primarily attributable to lower fair value gains, lower net earned premiums due mainly to lower refundings and terminations, the provisional tax expense related to the enactment of the 2017 Tax Cuts and Jobs Act (Tax Act), offset in part, by lower loss and loss adjustment expenses (LAE). According to Assured Guaranty the loss and LAE were $34 million in fourth quarter 2017, compared with $112 million in fourth quarter 2016. The expense in fourth quarter 2017 was due mainly to the increase in loss reserves on Puerto Rico exposures, partially offset by a gain on the settlement of a breach of representations and warranties (R&W) claim. The expense in fourth quarter 2016 was primarily related to an increase in Puerto Rico loss reserves and a reduction in excess spread on certain first-lien US residential mortgage-backed securities (RMBS) exposures, which were partially offset by a benefit due to an increase in discount rates.

“We continued to strengthen the enterprise in 2017 through our strategies of new business production, efficient capital management, alternative strategies including acquisitions and commutations, and determined loss mitigation,” said Dominic Frederico, president and chief executive officer. "The intrinsic value of an Assured Guaranty common share reached new heights, reflected in record non-GAAP adjusted book value per share, which increased 17 percent during the year. Our US public finance, international infrastructure and structured finance new business operations combined to produce more annual PVP than in any year since 2010."

Assured Guaranty stated that its results included a provisional tax expense of $61 million attributable to the estimated effect of tax reform under the Tax Act. This charge includes the net impact of the deemed repatriation of all previously untaxed unremitted earnings of controlled foreign corporations of $24 million, as well as the permanent write down of various tax attributes and other net deferred tax assets of $37 million for the reduction of the statutory corporate tax rate from 35 percent to 21 percent. Excluding the write down of tax attributes of non-GAAP adjustments, the estimated effect of tax reform on non-GAAP operating income was $35 million.

Assured Guaranty, Q4, 2017, results

Bermuda Re