Assured Guaranty(AGO) - 2025 Q1 - Earnings Call Transcript

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][20] - Adjusted operating shareholders' equity per share reached over $117, and adjusted book value per share exceeded $172 [25] - Total first quarter investment income from alternative investments was $59 million, the highest quarterly level to date [10] 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][7] - Assured Guaranty captured 64% of the primary market insured par sold and 58% of the insured transaction count in U.S. Municipal bond insurance [14] - Insured par sold increased by 23% to $4.7 billion compared to Q1 2024 [15] Market Data and Key Metrics Changes - The average underlying credit quality of municipal transactions was rated single A, indicating higher credit quality and lower risk [15] - Secondary market bond insurance activity increased significantly, producing $376 million of insured par, surpassing all of 2024 [16] Company Strategy and Development Direction - The company aims to increase fee-based earnings through its 30% ownership in SoundPoint, which contributed $13 million to income in Q1 2025 [9][10] - The strategic focus includes expanding product applications and entering new territories, as evidenced by a recent transaction in France [19] 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 as investors seek reliable cash flow [11] - Management expressed confidence in the resilience of the business model and the potential for growth in both primary and secondary markets [11][45] Other Important Information - A pretax gain of $103 million was recognized from litigation with Lehman Brothers International, significantly impacting adjusted operating income [8][20] - The company repurchased 1.3 million shares for $120 million, reflecting strong capital management [25] Q&A Session Summary Question: Likelihood of a haircut to Thames Water debt - Management indicated that reserves are assessed based on various scenarios and probabilities, with a focus on strong creditor positions [28][34] Question: Impact of tariffs on credits - Management noted the fluid situation regarding tariffs and emphasized a wait-and-see approach, highlighting increased municipal issuance as a positive sign [35][36] Question: Outlook on normalized PVP to par - Management stated that the first quarter's higher-rated credit issuance does not change the outlook for the year, with expectations for continued strong demand [41][45] Question: Competition in the secondary market - There is one other competitor in the secondary market, but the company focuses on a larger segment of the market [47] Question: Performance of the asset management segment - The asset management segment's earnings are typically back-end loaded, with strong performance expected in the first quarter due to prior quarter activities [50]