Good morning and welcome to the Assured Guaranty Limited Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Robert Tucker, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead.

Thank you, operator, and thank you all for joining Assured Guaranty for our fourth quarter and Year End 2019 financial results conference call. Today’s presentation is made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The presentation may contain forward-looking statements about our new business and credit outlooks, market conditions, credit spreads, financial ratings, loss reserves, financial results or other items that may affect our future results. These statements are subject to change to the new information or future events. Therefore, you should not place undue reliance on them as we do not undertake any obligation to publicly update or revise them, except as required by law. If you’re listening to a replay of this call, or if you’re reading the transcript of the call, please note that our statements made today may have been updated since this call. Please refer to the Investor Information section of our website for our most recent presentations, and SEC filings, most current financial filings and for the risk factors. This presentation also includes references to non-GAAP financial measures. We present the GAAP financial measures, most directly comparable to the non-GAAP financial measures referenced in this presentation, along with a reconciliation between such GAAP and non-GAAP financial measures and our current financial supplement and equity investor presentation, which are on our website at assuredguaranty.com. Turning to the presentation, our speakers today are Dominic Frederico, President and Chief Executive Officer of Assured Guaranty Limited; and Rob Bailenson, our Chief Financial Officer. After their remarks, we’ll open the call to your questions. As the webcast is not enabled for Q&A, please dial into the call if you’d like to ask a question. I will now turn the call over to Dominic.

Thank you, Robert, and welcome to everyone joining today’s call. The year 2019 was both outstanding and transformative for Assured Guaranty. We wrote new financial guaranty business totaling $463 million in PVP, by far our best direct production result since 2009. Dramatic growth in our direct international infrastructure and global structured finance businesses drove a 65% year-over-year increase in total direct PVP. We set new records for key measures of shareholder value with yearend values per share of $71.18, $66.96 and $96.86 respectively for shareholders’ equity, adjusted operating shareholders’ equity and adjusted book value. Our value creation efforts including our effective capital management program resulted in a 13% growth in adjusted book value per share. The non-GAAP measure we believe best approximates the company’s intrinsic value per share. For the 5th time in the last 6 years, we repurchased $500 million or more of common shares. Rob will provide more detail on our capital management program in a few minutes. Our loss mitigation effort in Puerto Rico made progress. Major steps included the resolution of our COFINA exposure, our participation in a Restructuring Support Agreement for PREPA. However, the behavior of the Oversight Board and the government has continued to ignore creditor rights and the rule of law, and we oppose the current Plan Support Agreement, the Oversight Board has negotiated with certain general obligation bondholders. And most importantly, we fulfilled a long-held strategic diversification priority by acquiring an established asset management firm that has a complementary skill-set and target market. Our acquisition of BlueMountain Capital Management provides a new revenue stream from a platform we call Assured Investment Management. Assured Guaranty’s transformation into a dual financial guaranty and asset management company, diversify revenue by adding fee income in addition to our risk premium from insurance and opens new pathways…

Thank you Dominic, and good morning to everyone on the call. As Dominic mentioned, we had an exciting 2019. Before I review the quarter and year results, let me give you a brief summary of some reporting changes that you may have noticed in our earnings release and financial supplement. With the closing of the BlueMountain Acquisition and expansion into a fee-based asset management business, we have now changed our view and presentation of the financial results from a single consolidated segment, to a multi-segment approach that reflects the company’s diversified businesses. All prior periods have been presented on a consistent segmented basis for ease of comparison. Starting this quarter, we will be reporting our results for the insurance segment, asset management segment and corporate division separately. The insurance segment represents our long-established insurance business, and the asset management segment includes the newly acquired BlueMountain entities, which will operate within the Assured Investment Management platform. Both of these segments will be presented without the effect of consolidating FG VIEs and BlueMountain investment vehicles in which the insurance subsidiaries invest. Corporate results reflect the activities of our 3 holding companies: Assured Guaranty Limited; AG US Holdings; and Assured Guaranty Municipal Holdings. The Corporate division includes interest expense, losses on extinguishment of debt, costs for administrative expenses allocated from the operating companies and Board of Directors’ expenses. Our non-GAAP operating income, is what we now call adjusted operating income. We are reporting non-GAAP operating shareholders’ equity, which is now adjusted operating shareholders’ equity and adjusted book value, both of which are calculated in the same manner as they have always have been. When analyzing our consolidated adjusted operating income, you can easily identify the effect of VIE consolidation which is shown separately in a column labeled other. Internally, we analyze the results…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Bose George of KBW. Please go ahead.

Good morning. This is Tommy McJoynt on for Bose. I wanted to ask about the fact that, so you say that the level of new business production, it looks like it’s going to be sufficient this year to stabilize the book. Do you expect more of that growth to come in channels that are away from the U.S. public finance? And then, could you remind us how you think about the variability in returns between U.S. public finance versus the other businesses?

Well, if you look at this year, we were little bit surprised by the continued pace of refundings, because of the use of taxable executions to refund the tax exempts. So we thought we would have higher par at the end of the year than we started the year. But as I said, there was this kind of aberrational year, which will probably continue using taxables as a strategy to take advantage of the lower interest rates. However, if you look at the UPR, we’re up $200 million year-over-year. So we’re building the earnings to our – so even though the par lag this year, which we thought we’d have a little bit more success, the UPR has exactly the effect we thought, as we are now running more business than is actually amortizing off the book. If you look at the mix, our flow business is always going to be the U.S. public finance market, that has now been pretty consistent in that $200 million range. Obviously, where spreads and rates are today, they’re going to be once again hard pressed. But as we find new areas of opportunity, specifically in the healthcare field and other infrastructure projects, we still think we can maintain that pace. The real benefit or the real addition of our strategy is based on maintaining an international presence and a structured finance presence. As being the only guarantor out there, we take advantage fully of that market, as our guarantee has now become more accessible and it’s being used for purposes other than the saving financing cost, really capital arbitrage by transactions. That activity continues to really represent the differential maker in how we’re going to be able to continue to rate more par than we see amortizing off the book. As you know in typical terms, the U.S. structured finance business has a shorter useful life. So that business is becoming less of a percent of the total structured finance businesses. As the international infrastructure takes over bigger leads and has longer amortization, therefore that business will stay with us longer. So I think we’re able to be able to think in 2020 we will have par at the end of the year greater than beginning, and of course, the UPR will continue to build as well.

Okay, thank you. And then, turning, I guess, now that we are going to see some stabilization on the book, and perhaps even growth beyond that, and given the combined effect of the acquisition of BlueMountain, does that change your outlook for capital distribution, maybe not this year, but a few years down the road?

Well, I think you got to say, our goal has always been to be efficient capital managers and the goal was that if we can’t use it we’re going to return it to the extent allowable, by both available cash flow and what the regulators will approve in terms of further special dividend awards. That is still the mantra. And as we see BlueMountain and our Assured Investment Management continue to expand, and given the new businesses and attract more funds, we’ll then make the appropriate analysis with the use of capital at that time.

Okay and then just last one. Looking at the outlook for investment income this year, given obviously rates coming down, but potentially getting some offset from some yield benefit from allocating some capital to BlueMountain, how do you look at net investment income this year relative to 2019?

We think the opportunity that BlueMountain represents for Assured Investment Management is significant, is timely, it happens right at the perfect opportunity. So as you can see there is going to be pressure in the U.S., what I’ll call, fixed income and especially municipal and government markets. We believe having the alternative now and dedicating a percentage of the portfolio to BlueMountain management will be able to not only offset some of that decline, but actually show an increase year-over-year in investment income.

Okay, thank you.

The next question comes from [Michael Temple] [ph] a private investor. Please go ahead.

Good morning, gentlemen. A series of questions…

Good morning.

…some Puerto Rico to start, I know you can’t comment too much directly on negotiations, but I wonder if you could just address the situation with HTA bonds, where on the one hand we saw the PROMESA plan of a cram down of that class, perhaps as well as the $0.03 range, yet markets for those bonds are trading/quoted say in the mid-40s, and the fact that, despite the loss at the Supreme Court as to suspension of those payments, you still have rights and liens attached to those bonds. I just wonder if you could discuss for us how much of a – how you think of that process, since you have such a wide range outcome starting with a $0.03 cram down to the current $0.40 due to some people suggesting that recovery should be far, far greater given the liens that’s attached to those bonds?

Well, I guess you can start out looking at it in two different ways. One, if you think about our friends in Detroit and with the first offer there was on the tax-backed bonds in the Detroit bankruptcy, right. I think the first offer by Mr. [Jordan] [ph] company was in the $0.03 to $0.05 range, and which we ultimately get paid $0.78 – $0.74. So at the end of the day, I would love positioning in the marketplace from the standpoint of negotiation. Just like in Detroit, I believe our legal rights are incredibly strong. And if you really want to pursue that pace, God bless you. However, I never give the market that much credit for knowing more than they know. But obviously, you can see there is some difference of opinion. And remember, we also have this other strong line with relative to Puerto Rico, that if you tilt the revenues from the transportation bonds. The only reason and purpose, you could use that revenue for was to pay the general obligation bonds. There is no ambiguity over there. So I can’t imagine there is going to be a court that’s going to say, yeah, you’re right, there is some sort of vagueness or opaqueness to that statement. So we get paid one way or the other. You look at what the general obligation bonds started out in terms of an offer with the current deals on the table, and we believe that’ll get approved. So obviously, we’re very secure in our view that the settlement that you see out there are not going to be the settlements that ultimately agreed to, if they want to get into a litigation balance we do not believe is in their best interest. So be it, and I think the legal agreements that we have and the terms that we have are incredibly strong in our favor. The – also remember the 3% is the Control Board’s kind of offer relative to the clawback revenue, meaning the non-toll other direct revenue sources of transportation. So that would not represent the full settlement anyway. So I think the numbers are going to change, we do obviously have a lot more information in private negotiations that we’re not allowed this year. But we’re highly confident in our ability to maintain easily in any of our financial strength. We’re not having any significant impairment relative to the financial results of the company.

Okay. Thank you for that. Again, staying on topic with Puerto Rico, given the movement in negotiations, do you get a sense internally that with all that’s going on that a confirmation plan can be put in place by year-end? It may not fully close but agreements in principle and the process of dotting Is and crossing Ts, is year-end reasonable? Or why you shouldn’t get their hopes up that this could be concluded by Christmas of this year?

Well, remember, there’s 2 big caveats over that, right. Number 1 is the Supreme Court’s decision on the constitution of the Control Board, whether it’s legal or illegal. That’s a huge open issue that we hope to be resolved in the current session of the Supreme Court. So where that falls could have a dramatic impact on that. Number 2, I believe anything could be wrapped up very quickly if we get to a potential agreement. I mean, as you see on the job obligation, you’re starting to come up to a number that maybe people won’t be right up settle if you put some better topping on it. And at the end of the day, you can get a deal done. And transportation, we think it even easier, because you had enough revenue in the tolls and the oil tax that was awarded to transportation to pay their obligations. They can get that done. The government is sitting on $17 billion of cash. I mean at the end of the day, you could have made all that service for the last 3 years instead of leaving out a 100% to the market. I mean there are solutions out there that could easily be achieved in the current year, but you got to have people that are going to recognize the rule of law and come to the table and recognize legal rights. If they do that, even in some negotiated forum, this can probably get done pretty quickly. But as I said, first is Supreme Court, and two, we’ve got to have a change in the attitude of the control board.

Thanks. The next question comes from Geoffrey Dunn of Dowling & Partners. Please go ahead.

Thanks. Good morning.

Hi, Geoff.

Hi, Dominic. I wanted to follow-up on what you were just talking about, about the actual authority of the PROMESA Oversight Board right now, obviously, the appointments of the board members was ruled against last year. But they seem to be pushing forward more than ever. So I just don’t quite understand where the authority stands right now, particularly as you see them expand this attempted GO effort. So could you just kind of update us on where that all stands?

I’m sorry?

I’m sorry, I was just saying, could you update us on where that all stands, just to kind of catch us up on that?

I wish I could catch you up more, Geoff, but it really lays in the hands of the Supreme Court. I mean, I think the board is trying to show they’re going to get something done. If you really think about it, the COFINA settlement was done really by the Commonwealth and the COFINA agent without really the involvement of the Board, and then with us, the marketplace. So in the absence of the board, you got the largest settlement done. The process settlement has been done, but we can’t finally go through the approval and certification of the court. And I blame that on the court and the judge specifically. They keep delaying that hearing. These guys, I would think, would like to get something done before they’re either terms expire or they’re disbanded, yet, the way they’re going about it, they’re never going to be able to cram that down. I think us and there are other financial guarantors [that’d be] [ph] too big of a creditor pool to be ignored. And I think that if you don’t get to a consensual settlement, maybe they get disbanded, maybe they don’t. If they do get disbanded, remember, the next litigation is going to be on prior acts. So that could really have a heavy influence, but it doesn’t include COFINA, because that was court settled, as I said, not from the Title III of the Control Board. There’s a lot of open moving parts. If you want to get something done and therefore get around this, make the entire point move about the constitution of the Board. They get a consensual settlement and it’s finished. And as I said, on the GO side, you’re getting close to a consensual deal if you move up some of the numbers, and now it’s just about handling transportation, which we always felt is the easiest deal that handling the entire process, because there’s enough revenue out there. And the amount of funds that are currently sitting in government accounts where we can frame that even more.

Okay. The other question I had was on capital management. Is the company still committed this year to $500 million plus of buyback?

That’s part of our plan.

Okay. I had one more, but I’ll have to follow-up, I forgot it. Thanks.

No problem.

Thanks, Geoff.

This concludes our question-and-answer session. I would like to turn the conference back over to Robert Tucker for any closing remarks.

Thank you, operator, I’d like to thank everyone for joining us on today’s call. If you have additional questions, please feel free to give us a call. Thank you very much.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.