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Assured Guaranty's insurance production loss mitigation and capital management strategies combined to deliver outstanding results in 2021.
We had many notable accomplishments during the year, we earned $470 million of adjusted operating income, 84% more than in 2020.
We more than doubled adjusted operating income per share to $6.32 per share.
We brought all three of our measures of shareholder value to new highs.
Over the year, shareholder's equity per share grew 9% to $93.19.
Adjusted operating shareholder's equity per share increased 13% to $88.73, and adjusted book value per share rose 14% to $130.67.
We repurchased $10.5 million common shares, or approximately 14% of our shares outstanding at December 31, 2020, at an average price of $47.19.
Those repurchases totaled $496 million, with the addition of $66 million of dividends, we returned a total of $562 million to shareholders.
Through strong new business production in each of our financial guarantee markets, U.S. public finance, international infrastructure finance and global structure finance, we generated a total of $361 million of PVP in 2021.
Direct PVP exceeded $350 million for the third consecutive year, compared with an average annual direct PVP of $210 million from 2012 to 2018, making the last three years our best in more than a decade for direct new business production.
With a more than 60% share of new issue insured par sold, we led the U.S. public finance bond insurance industry to its highest penetration, market penetration in a dozen years.
And taking advantage of exceptionally low interest rates are U.S. holding company issued a total of $900 million, a 3.15% 10-year and 3.60% 30-year senior debt to refinance $600 million of debt with higher coupons ranging from 5% to almost 7%.
As a result, annual debt service savings will be $5.2 million through the next maturity date.
Our financial guarantee production was well-diversified across all of our markets.
U.S public finance PVP of $235 million included in its second best direct production in at least a decade, surpassed only by the previous year's result, or $79 million of international infrastructure PVP marks the fourth year out of the last five that we have exceeded 75 million of direct PVP in that sector.
Global structure finance PVP at $47 million was the second best and direct production since 2012.
Our markets and economic environment offered both opportunities and challenges during 2021, issuance of U.S. municipal bonds reached a record par amount of $457 billion in 2021.
This partly reflected investors increased demand for taxes on paper in expectation of higher tax rates and continued limitations on state and local tax deductions at the federal level.
Additionally, -- issuers were eager to take advantage of extremely low municipal interest rates to refinance bonds issued in the path of higher rates, with the option to execute tax exempt advance refunding still off the table.
Many issuers also turned to the taxable market to replace higher coupon tax exempt debt.
Total insured market volume increased to 8.2% of par issued, the highest annual rate over the past 12 years, and up from 7.6% during 2020 and 5.9% during 2019.
We believe this increased penetration in 2021 indicates that the risk of unpredictable developments, which is brought home by the onset of the COVID-19 pandemic in 2020, has made a lasting impression on investors.
We have also seen that Assured Guaranty has the underwriting and risk management skills to construct an insured portfolio that experienced minimal claims from the economic disruption caused by the pandemic, most of which have already been reimbursed.
The $37.5 billion of insured par in 2021 represented a 10% annual increase, on the heels of a 43% increase the prior year, resulting in a 57% growth of the insured market in just two years since 2019.
Assured Guaranty's production was a leading force behind this growth, as we enjoyed over 58% of new issue insured par sold in 2020, and more than 60% in 2021.
Our highest annual market share since 2013, Our $23 billion of insured new issue volume in 2021 was almost $3 billion more par than we insured in 2020, and was generated by more than 8,000 individual transaction.
An important trend in recent years has been the use of our guarantee to help launch some of the municipal bond markets largest transaction, which indicates growing institutional demand for the security, relative price stability and significant market liquidity our guarantee can provide.
We guaranteed $100 million or more on each of 48 large issues launched in 2021, up from 39 transactions in 2020 and 22 in 2019.
Significantly, we continue to add value on credits with underlying ratings in the double aid category from one or both of S&P and Moody's, ensuring a 109 such AA transactions totaling more than $3.5 billion of insured par.
U.S. public finance, forms the largest part of our uniquely diversified financial guarantee strategy.
Our three pronged strategy also targets insurable transactions in both infrastructure finance outside the United States and structured finance throughout the world.
This helps us in times when one market or another shows temporary weaknesses, and it drives great results in years like 2021, when we are thriving in all three of our markets.
Further demonstrating the diversity of our business, in 2021, we guaranteed financing of a Spanish solar power facilities and UK higher education and healthcare projects.
Additionally, we work with the UK water company to extend a debt service reserve guarantee, which is a unique product we developed as an alternative to bank liquidity facilities.
We also provided a number of secondary market guarantees.
Our European business was historically based in the UK, which previously allowed us to do business throughout the European Union.
We have long been active and where we continue to believe that plentiful and diverse opportunities.
Our Paris subsidiary, which we opened in 2020 to serve continental Europe more effectively, especially now that the UK has left the European Union, further grew its business around originations in 2021.
A global structured finance and important part of our business is to provide institutions like banks and insurance companies with tools to optimize the capital utilization of their asset portfolios.
During the year, we guarantee large insurance securitizations and significantly increase our CLO activity.
Our guarantees of CLOs attract new investors who might otherwise be discouraged by the higher capital requirements on uninsured Clos.
We are seeing more opportunities to help investors reduce the capital consume of both existing structured finance exposures and new investment.
The new business we rode across all of our markets in 2021, enabled us to increase the year-end net par amount of our insured portfolio for the first time in many years.
We believe the trend going forward will be to continue increasing the par amount of our insured portfolio, and increase our deferred premium revenue, which will further stabilize and grow our future earnings.
We have continued to reduce the risk in our insured portfolio, and believe we can continue to do so as we continue to write new investment grade business.
The below investment grade portion of our insured portfolio declined to barely more than 3% as of December 31, 2021.
Almost half of our below investment grade net par exposure is to Puerto Rico, and we expect that with the court approved settlements pertaining to the GO and certain other credit scheduled to occur on March 15th of this year, that figure should drop below 2.5%, and continue to fall as more of our Puerto Rico settlements are executed.
After years of twists and turns related to the restructuring of Puerto Rico debt, decisive progress occurred in 2021, we and the other creditors, along with the Commonwealth, agreed to support the final revision of the Oversight Boards restructuring plan for the central government, which the Title III court approved in January of this year.
As a result, the Commonwealth government's exit from bankruptcy is expected to begin in mid-March.
The Title III court also laid the groundwork for favorable consideration of additional agreements that support certain other Puerto Rico restructurings, such as for highways and transportation authority.
All this means that Puerto Rico's long awaited resolution of its unpaid debt is proceeding well, and the island is positioned for years of fiscal stability, according to the Oversight Board's latest fiscal plan.
In addition to our success in the financial guarantee business in 2021, we also made significant progress toward our goals for the asset manager business.
Our overall investment performance was strong as one of the top 25 collateralized loan obligation managers by assets under management.
We were well-positioned to participate in this CLO market that reached a record level of interest issuance.
During 2021, we launched six new CLOs representing $2.5 billion of assets under management, more than double what we issued in 2020, and we converted non-fee earning AUM to fee earning at AUM by selling substantially all this CLO equity still held by a Assured IM legacy funds, where we had been rebating management fees.
Through these efforts, we increased CLO management fees in 2021 to $48 million from $23 million in 2020.
Additionally, we reset a refinance 10 CLOs in the United States and Europe.
In the asset backed sector, we closed a continuation fund holding an auto finance investment.
Additionally, the healthcare portfolio managed by Assured healthcare partners continue to grow as capital was deployed.
Looking back on the year, we believe much of Assured Guaranty success reflected the market's growing appreciation of the reliability of our financial strength and the security we provide investors, while also delivering financial benefits and first class service to bond insurers and other clients, the responsibility embodied in our careful underwriting, discipline risk management, and tireless loss mitigation.
The proven resilience or financial guarantee business model and our strategic approach to capital management to protect policyholders and create value for shareholders.
In our view, this heightened recognition of our guarantees value could help to drive demand higher as interest rates rise.
We expect market conditions in 2022 and beyond to be very different from those of 2021, as the Fed strives to contain inflation, the economic and social impact of the COVID-19 recedes, developing geopolitical events continue to disrupt markets, and municipal governments prepare for the end of extraordinary federal support.
Rising interest rates, widening credit spreads, and the accompanying volatility tend to increase financial guarantee demand.
We believe Assured Guaranty is better positioned for the long-term success than in any time in our history.
Our financial strength has never been stronger.
The credit challenges in our legacy insured portfolio are largely behind us.
Our markets are large.
Our opportunities are diverse.
Our human capital exceptional.
And our business model proven through decades of economic cycles.
We look forward to fulfilling the high expectations of our policyholders, clients and shareholders.
I am very pleased to report that our fourth quarter 2021 adjusted operating income was $273 million, or $3.88 per share, a significant increase over the adjusted operating income of the fourth quarter of 2020, which was $56 million, or $0.69 per share.
The primary driver of the increase in fourth quarter 2021 total adjusted operating income was the insurance segment where adjusted operating income increased 134% over fourth quarter 2020 from $109 million to $277 million.
Much of this benefit came from our loss mitigation strategies, particular for our Puerto Rico exposure.
After many years of negotiation and other loss mitigation efforts, we are close to resolving $1.4 billion in gross par associated with our Puerto Rico GO, PBA, CCDA and PREPA exposures.
The increased certainty of the settlement and Puerto Rico's improved economic outlook, combined with the increased value of our actual and expected recoveries under the settlement agreements, were the primary drivers of the $186 million economic benefit in the fourth quarter of 2021.
During the fourth quarter of 2021, we sold a portion of our salvage and subrogation recovered bulls associated with certain matured Puerto Rico GO and PREPA exposures, resulting in proceeds of $383 million, thereby realigning some of our expected recoveries early.
In 2022, we continued to sell portions of our GO, PBA and PREPA salvage and subrogation recoverable, resulting in an additional proceeds of $133 million.
The prices at which we crystallized these recoveries, as well as observed market pricing for other similar instruments and the forward interest rate environment, are reflected in the updated assumptions of the value of the remaining recovery bonds and contingent value instrument that we project receiving in the various Puerto Rico settlements.
Other components of the insurance segment also performed well in the fourth quarter of 2021.
Total income from investments, which consists of net investment income on the fixed maturity portfolio and equity in earnings on short Im funds and other alternative investments, was $111 million, an increase from $94 million in the fourth quarter of 2020.
Collectively, the investments in Assured IM funds and alternative investments generated $44 million in equity in earnings of investees in the fourth quarter of 2021, compared with $24 million in the fourth quarter 2020.
With the increase mainly attributable to a large fair value gain on a specific investment in a private equity fund.
As a reminder, equity in earnings and investees is a function of mark-to-market movements attributable to the Assured IM funds and other alternative investments.
It is more volatile than the net investment income on the fixed maturity portfolio and will fluctuate from period-to-period.
Our fixed maturity and short-term investments account for the largest portion of the portfolio, generating net investment income of $67 million in the fourth quarter of 2021, compared with $70 million in the fourth quarter of 2020.
As we shift fixed maturity assets into alternative investments, net investment income from fixed maturities may decline, however, over the long-term, we are targeting enhanced returns on the alternative investment portfolio of over 10%, which exceeds our projected returns on a fixed maturity portfolio.
In terms of premiums, scheduled net earned premiums decreased slightly in the fourth quarter of 2021 to $91 million, compared with fourth quarter 2020 of $94 million.
Premium earnings due to refundings and terminations were $20 million in fourth quarter 2021, compared with $65 million in the fourth quarter of 2020, when two large transactions refunded.
The asset management segment adjusted operating loss was $3 million in the fourth quarter of 2021, compared with $20 million in the fourth quarter of 2020.
The improvement in asset management segment results is primarily attributable to increased management fees in the strategies we launched since the 2019 Blue Mountain acquisition, and a non-recurring impairment of a lease right of use asset of $13 million in 2020.
Asset management fees on a segment basis were $21 million in the fourth quarter of 2021, compared with $20 million in the fourth quarter of 2020.
Higher fees from healthcare opportunity funds and CLOs more than offset the decrease in fees from wind down funds as distributions to investors continue.
As of December 31, 2021, AUM of the wind down funds was $582 million, compared with $1.6 million as of December 31, 2020.
In the fourth quarter of 2021, the effective tax rate was 15.1%, compared with 12.7% in fourth quarter 2020, which included the release of a reserve for uncertain tax positions.
The overall effective tax rate on adjusted operating income fluctuate period-to-period based on the proportion of income in different texture jurisdictions.
Overall, the fourth quarter capped off a year of successful execution of our strategic initiatives.
These achievements are reflected in our 2021 full year adjusted operating income of $470 million, which includes a loss on extinguishment of debt of $175 million pre-tax, or $138 million after tax.
Despite the debt extinguishment charge, full year 2021 adjusted operating income represents an 84% increase compared with 2020 adjusted operating income of $256 million.
The primary driver of this increase was the insurance segment, with 722 adjusted operating income in 2021, compared with $421 million in 2020.
U.S public finance benefited from the increased recovery assumptions, the Puerto Rico exposures that I mentioned earlier and the U.S. RMBS benefit this primarily a function of home price appreciation.
Economic loss development, which excludes the effects of deferred premium revenue, was a benefit of $287 million in 2021.
Across the whole portfolio, loss expense in 2020 was $204 million, and was primarily attributable to Puerto Rico.
On a full year basis, total income from the investment portfolio was $424 million in 2021, compared with $371 million in 2020.
The investment returns on the portion of the portfolio invested in Assured IM funds demonstrates an important component of the benefits of the asset management segment, not only as a fee earning business but as an investment advisor for our insurance segments.
Assured IM funds in which the insurance subsidiaries invest generated gains of $80 million in 2021, compared with gains of $42 million in 2020.
The gains were across all strategies, particularly healthcare, CLOs, and asset based, and generated a year-to-date return of 20.8%.
The third party alternative investments also generated gains of $64 million in 2021, compared with $19 million in 2020.
These gains more than offset reduced net investment income on the available -- sale fixed maturity portfolio, which was $280 million in 2021, down from $310 million in 2020.
Lower average balances, the fixed maturity portfolio reinvestment yields an income -- loss mitigation securities were the primary drivers of the year-over-year variance.
Total net earned premiums in credit driven revenues were $438 million in 2021, compared with $540 million in 2020, including premium accelerations of $66 million and $130 million, respectively.
In the asset management segment, we have continued to make great progress in 2021.
We raised new third party capital in our CLO, healthcare and asset base strategies.
We increased for earning for CLO AUM to the issuance of $2.8 billion in CLOs and the sale of CLO equity out of the legacy funds, and we continue to liquidate assets in the wind down funds.
The improvement in the asset management segment operating loss from $50 million in 2020 to $90 million in 2021, was primarily attributable to an increase in management fees from $59 million in 2020 to $76 million in 2021.
Higher free -- fees from CLOs and -- turning funds more than offset the decline in fees from wind down funds.
The increase in -- opportunity fund fees was primarily attributable to the new healthcare funds launched in late 2020, which raise additional third party capital in late 2021.
The corporate division had adjusted operating loss of $253 million in 2021, including a loss on debt extinguishment of $175 million, or $138 million on an after tax basis.
Which resulted from a $600 million in debt redemptions that Dominic mentioned earlier, this charge is simply an acceleration of expenses that would have occurred over time.
In the prior year, corporate division adjusted operating loss was $111 million.
The debt redemptions were financed with the proceeds from the issuance of $900 million in new 10-year and 30-year debt, which resulted in a reduced average coupon and redeemed debt from 5.89% to 3.35%, and $170 million -- reduction in our 2024 debt refinancing needs.
In addition to debt refinancing has generated annual debt service savings of $5.2 million until the next maturity date and provided flexibility to continue share repurchases.
We were able to accomplish all of this without significantly affecting our debt leverage or interest coverage ratios, the additional $300 million of proceeds from the debt issuances were used primarily for share repurchases.
In the fourth quarter 2021, where we purchased $3.7 million shares for $192 million at an average price of $51.47 per share.
This brings full year 2021 purchases to $10.5 million shares, or $496 million, which represents 14% of the total shares outstanding at the beginning of the year.
The continued success of this program helped to drive by our per share book value metrics to record highs as of December 31, 2021.
Subsequent to the quarter close, we repurchased an additional $1.7 million shares for $91 million.
Since the beginning of our repurchase program in January 2013, we have returned $4.2 billion to shareholders under this program, resulting in a 69% reduction in total shares outstanding.
The cumulative effect of these purchases was a benefit of over $37 an adjusted operating shareholder's equity per share and $65 in adjusted book value per share, which helped drive these metrics to new record highs.
From a liquidity standpoint, the holding companies currently have cash and investments of approximately $274 million dollars, of which $124 million resides in AGL.
These funds are available for liquidity needs or for use in the pursuit of our strategic initiatives to [Inaudible] our business or repurchase shares to manage our capital.
This week, the Board of Directors authorized the repurchase of an additional $350 million of common shares.
Under this and previous authorizations, the company is now authorized to purchase $364 million of its common shares.
In addition, we declared a dividend of $0.27 per share, which represents an increase of 13.6% over the previous dividend of $0.22 per share.
As we look to 2022 and beyond, we are optimistic that our largest single BIG exposure, Puerto Rico, will be substantially resolved by the end of this year.
The interest rate environment will be more conducive to new insurance business production and that the asset management segment and alternative asset strategies will continue to contribute to the company's progress toward its long-term strategic goals.

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q4 adjusted non-gaap operating earnings per share $3.88.

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