Assured Guaranty (NYSE:AGO) Q3 2025 Earnings Call November 07, 2025 08:00 AM ET Speaker0Good morning and welcome to the Assured Guaranty Limited third quarter 2025 earnings conference call. My name is Becky, and I'll be your operator for today's call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing Star, then Zero on your telephone. After today's presentation, there will be an opportunity to ask questions. To ask a question, you m ...

Financial Data and Key Metrics Changes - Adjusted book value per share reached a record high of $176.95, and adjusted operating shareholders' equity per share also reached a record high of $120.11 at the end of Q2 2025 [6] - Adjusted operating income for Q2 2025 was $50 million or $1.1 per share, compared to $80 million or $1.44 per share in Q2 2024 [22][25] - Net earned premiums and net investment income increased, contributing to the earnings power of core earnings [22] Business Line Data and Key Metrics Changes - The company insured $14.1 billion of new issued par sold in the primary market, a 30% increase compared to the same period last year [13] - In the secondary market, the company wrote nearly $900 million of policies in the first half of 2025, with over $500 million in Q2 alone, representing a 150% increase compared to the total amount insured in all of 2024 [8][13] - The insurance segment contributed $76 million to adjusted operating income, while the asset management segment contributed $4 million [27] Market Data and Key Metrics Changes - US municipal issuance was 17% ahead of last year's record pace through June 30, 2025 [7] - The total market volume reached $278 billion by June 30, 2025, with forecasts suggesting that municipal issuance in 2025 could surpass $500 billion [20] Company Strategy and Development Direction - The company aims to maintain its leadership position in US municipal bond insurance while expanding and diversifying its global infrastructure and structured finance reach [12] - A share repurchase program with a target of $500 million for the year is in place, with $296 million already repurchased as of August 6, 2025 [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth trajectory in both US and non-US markets, citing a strong competitive position and excellent capital and earnings [11] - The company is well-positioned for the second half of the year, with many attractive opportunities in global infrastructure and structured finance [20] Other Important Information - The company received affirmations of its financial strength ratings from S&P Global Ratings and KBRA, both with stable outlooks [11] - A $250 million stock redemption by the US insurance subsidiary was approved, expected to be executed in 2025 [30] Q&A Session Summary Question: Impact of lower interest rates on AGO's opportunities - Management noted that a lower interest rate environment could depress premium volume but may also lead to more issuers in the market, balancing the impact [33][34][39] Question: Increase in big exposures and loss expenses - Management explained that the increase in loss expenses is due to additional reserves on certain UK regulated utility and US municipal revenue exposures, emphasizing their strong surveillance team [40][68] Question: Future of Puerto Rico Oversight Board and restructuring - Management expressed optimism that changes in the Puerto Rico Oversight Board could lead to improvements in restructuring processes, viewing it as a potential positive development [52][54] Question: Performance of contingent value instruments - The company holds approximately $117 million in contingent value securities, which have performed well, and expects continued improvement [58][60]

Financial Data and Key Metrics Changes - Adjusted operating income per share for Q1 2025 was $3.18, a 62% increase from $1.96 in Q1 2024 [6][19] - Adjusted operating shareholders' equity reached $117.4 and adjusted book value was $172.79 per share [6][23] - Total investment income from alternative investments was $59 million, the highest quarterly level to date [9] Business Line Data and Key Metrics Changes - New business production in Q1 2025 was $39 million of PVP, with U.S. Public Finance contributing approximately 65% [6][12] - Assured Guaranty captured 64% of the primary market insured par sold in U.S. Municipal bond insurance [13] - Insured par sold increased by 23% to $4.7 billion compared to Q1 2024 [14] Market Data and Key Metrics Changes - The average underlying credit quality of municipal transactions was rated single A, indicating higher credit quality [14] - Secondary market bond insurance activity increased significantly, producing $376 million of insured par, surpassing all of 2024 [15] Company Strategy and Development Direction - The company aims to increase fee-based earnings through its 30% ownership interest in SoundPoint [9] - There is a focus on modernizing processes and technology for secondary market business to build a consistent transaction pipeline [15][18] - The company is expanding its product offerings and presence in Continental Europe, as evidenced by a transaction in France [18] Management's Comments on Operating Environment and Future Outlook - The current volatile market environment is expected to drive increased demand for the company's guarantees [10] - Management expressed confidence in the strong demand for financing in the municipal market despite economic uncertainties [44] - The company anticipates that stronger credits will continue to enter the market, reflecting ongoing demand [45] Other Important Information - A pretax gain of $103 million was recognized from litigation with Lehman Brothers International [8][19] - The company repurchased 1.3 million shares for $120 million at an average price of $89.72 per share [23] Q&A Session Summary Question: What likelihood is placed on a haircut to the debt for Thames Water? - Management indicated that reserves are assessed based on various scenarios and probabilities, with a focus on being senior creditors [26][32] Question: How do tariffs potentially impact credits wrapped by the company? - Management noted that the situation is fluid and emphasized a wait-and-see approach, highlighting increased municipal issuance as a positive sign [34][35] Question: Does the higher-rated credit issuance in Q1 change the outlook for normalized PVP to par? - Management stated that the current market volatility led to higher-rated issuances, but it does not change the overall outlook for the year [41][42] Question: What is the competitive environment in the secondary market? - Management confirmed that there is one other competitor in the secondary market, but they focus on a smaller segment compared to Assured Guaranty [46] Question: What contributed to the stronger performance in the asset management segment? - Management explained that earnings in the asset management business are often back-end loaded, reflecting strong performance from SoundPoint in the previous quarter [49]