Assured Guaranty(US:AGO)2019-03-04 04:33Financial Data and Key Metrics Changes - Assured Guaranty reported a record non-GAAP adjusted book value per share of $86.06, an 11% increase from the previous year [8] - Operating income for 2018 was $482 million, down from $661 million in 2017, which included gains from several large transactions [28] - The effective tax rate on operating income in Q4 2018 was 11.8%, significantly lower than 48.4% in Q4 2017 [27] Business Line Data and Key Metrics Changes - The company generated PVP of $663 million in 2018, a year-over-year increase of 129%, with contributions from U.S. public finance, international infrastructure finance, and structured finance [7] - In U.S. public finance, the company maintained a 57% market share of insured volume, despite a 22% decline in overall municipal issuance [11][12] - The international public finance operations generated PVP in each of the last 13 quarters, with $44 million of PVP produced in 2018 [14] Market Data and Key Metrics Changes - The U.S. public finance market saw a sharp decline in new issuance, particularly due to tax law changes, while insurance penetration increased slightly to approximately 6% [11] - The company’s primary market business declined only 18% to $11 billion, while total par insured during 2018 reached $19.4 billion due to the Syncora transaction [12] Company Strategy and Development Direction - The company aims to diversify revenue sources by investing in non-financial guaranteed businesses, exemplified by its minority interest in Rubicon Infrastructure Advisors [9] - Assured Guaranty continues to pursue strategic acquisitions and reinsurance opportunities, with a focus on the financial guaranty market [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company’s financial strength and its ability to withstand adverse conditions, as evidenced by stable ratings from rating agencies [16][17] - The company anticipates that the resolution of Puerto Rico's financial situation will accelerate acquisition opportunities [34] Other Important Information - The company returned $71 million in dividends to shareholders and approved a 12.5% increase in the quarterly dividend to $0.18 per share [29] - The company repurchased 13.2 million shares for $500 million in 2018, contributing to a 49% reduction in total shares outstanding since the inception of its capital management program [30][31] Q&A Session Summary Question: Outlook for acquisitions and reinsurance - Management indicated that resolution in Puerto Rico would significantly accelerate acquisition opportunities, while also highlighting the use of reinsurance for capital relief [34] Question: Increase in operating expenses - Management noted that the run rate for operating expenses should be similar to the previous quarter, with some one-time expenses not expected to recur [35] Question: Breakdown of municipal production - The company provided details on municipal production, with $74 million of PVP in primary markets for Q4 2018 and $160 million for the full year [44] Question: Recent ruling on the Oversight Board - Management expressed uncertainty about the future of the Oversight Board but emphasized the need for adherence to the rule of law in resolving disputes [46][47] Question: Impact of interest rates on new business - Management noted that a slowdown in the amortization of the existing portfolio and growth in new business could lead to a positive trend in the near future [52][54] Question: Potential consensual restructuring at PREPA - Management believes there is a deal to be made for PREPA and that recent court rulings could accelerate negotiations [61][64]