Assured Guaranty(US:AGO)2023-08-09 16:43Financial Data and Key Metrics Changes - Adjusted operating income for Q2 2023 increased to $36 million or $0.60 per share from $30 million or $0.46 per share in Q2 2022 [15] - Adjusted operating shareholders' equity per share reached $95.64 and adjusted book value per share reached $144.21, both at record levels [7][24] - Net investment income increased by $24 million, driven mainly by higher short-term interest rates and average balances [16] Business Line Data and Key Metrics Changes - Insurance segment contributed $106 million to adjusted operating income in Q2 2023, compared to $55 million in the prior year [15] - International Public Finance produced $36 million of PVP in the first half of 2023, up from $30 million in the same period of 2022 [10] - Global Structured Finance direct PVP was the largest first half amount since 2009, producing $68 million of PVP [11] Market Data and Key Metrics Changes - Assured's share of the insured primary municipal bond market increased to 63% in the first half of 2023, up from 56% in the same period of 2022 [8] - Total insured penetration for the second quarter was 10.1%, the highest rate since 2009 [9] - Market demand for bond insurance increased significantly in Q2 2023, up 72% from Q1 2023 [9] Company Strategy and Development Direction - The company is optimistic about growth opportunities across all business units, particularly in U.S. public finance and global structured finance [50][51] - The recent transactions with Sound Point Capital Management and the sale of Assured Healthcare Partners are expected to be immediately accretive to the bottom line [12][20] - The company plans to request special dividends from subsidiaries with excess capital following the completion of audits [27][29] Management's Comments on Operating Environment and Future Outlook - Management emphasized the company's resilience and ability to thrive in volatile market conditions, highlighting strong demand for bond insurance [14] - The company is committed to negotiating a fair settlement regarding Puerto Rico Electric Power Authority (PREPA) and views litigation as the necessary path forward [13][35] - Management expressed optimism about the future, citing strong pipelines in various sectors and the potential for growth [50][51] Other Important Information - The company resumed its share repurchase program in Q2 2023, with $158 million remaining in authorization [23] - The U.K. subsidiary paid a dividend of £100 million or $127 million to AGM, enhancing dividend capacity [24] - The company reported a fair value gain of $40 million on Puerto Rico contingent value instruments in Q2 2023, compared to losses in the prior year [16] Q&A Session Summary Question: Next steps toward requesting special dividends after clean audits - Management confirmed plans to proceed with requests for special dividends from subsidiaries with excess capital [27][29] Question: Annualized cash expenses at the holding company level - Annual net expenses are approximately $50 million, with annual dividend distributions of $66 million and debt service of $82 million [30] Question: Additional Puerto Rico loss development - Management indicated that the additional reserves are predominantly related to PREPA and are adjusting their models based on new information [35][36] Question: Capital buffer over AAA level - Management confirmed a capital buffer of approximately $1.8 billion above the AAA level, but noted that they are rated as a AA company [39][41] Question: Excess capital and ROE challenges - Management acknowledged that excess capital has impacted ROE and indicated a desire to be more aggressive in capital management following the audit clearance [42][44] Question: Pipeline of reinsurance opportunities - Management stated that they continue to look for opportunities across all markets, both direct and reinsurance, and are optimistic about the business pipeline [67]