Assured Guaranty (AGO) 10 May 232023 Q1 Earnings call transcript

Good morning, everyone, and welcome to the Assured Guaranty Ltd.

First Quarter 2023 Earnings Conference Call. My name is Bruno, and I'll be the operator of today. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. that is note recorded. Please Instructions] this being event [Operator

Corporate conference to to Managing I ahead. and like the Director, Please call Relations Senior would now Tucker, turn over go Robert our Investor Communications. host,

Reform credit you, outlooks, harbor for first Today's Act provisions Private Guaranty or presentation of The Thank joining and made our pursuant may new ratings, conference forward-looking financial Litigation financial our contain and the other all quarter thank may for operator, affect to results about conditions, Assured results of our statements is market XXXX loss future XXXX. call. you presentation that the Securities financial spreads, credit results. business reserves, items safe

future them you reliance publicly These as place by undue we events. as update not except required statements any subject information law. Therefore, or change are should obligation on to not due do undertake to them, to revise or new

of you're financial you replay If and most made or the the our since for our have that please today to and of reading presentations factors. this filings, of statements SEC may if section risk refer website been our are listening the Investor to current Please note recent for updated call, a this call. most call, Information the transcript filings

at a equity most website on with comparable financial supplement the along non-GAAP current to includes which This referenced investor assuredguaranty.com. financial between the GAAP this measures presentation presentation, are to and references non-GAAP presentation, non-GAAP directly our also financial financial financial present such and measures. our measures in We in GAAP measures reconciliation

your and and their are Officer our today Financial Rob Chief to open Executive questions. Limited; After Assured to Turning of presentation, the speakers we'll call Officer. Dominic Chief the Bailenson, Guaranty remarks, Frederico, our President

like webcast ask if not dial question. the Q&A, enabled a please for As you'd into to the is call

call will to I now Dominic. over turn the

joining today's to call. Thank and everyone welcome you, Robert,

the in production Guaranty’s was Assured first outstanding XXXX. quarter business new of

$XXX PVP of over it the and of the quarter up million first for quarter, successful our quarter quarter average XXXX We was PVP, first terms most XX first in years. of in the double from In closed a decade. previous XX%

the which both its to year largest five for We the amount drove in the the benefited PVP and quarter Finance, Finance, was over PVP best a Structured of Global start strong first first from International Public years. quarter decade; in

Adjusted operating at came share income per for in the quarter. $X.XX first

adjusted on equity XX, was at again at per $XX.XX March previous equity As our record levels to operating share shareholders' measures $XX.XX reached book of and valuation key of compared a quarter value for quarter. $XXX.X. the with adjusted $XX.X non-GAAP end Shareholders' share basis per

agreement asset X, and as April announced Management be expect we Sound portfolio the to CLO's implemented Point Point Sound will Capital when management reached with which, we Investment fifth Management, combine manager AUM. on by that the largest create asset Assured of to Significantly, an we market's what

finance three-pronged PVP million contribution markets. includes finance, properties. of first production business and quarter minimum the Global guarantee approach, insurance public finance, structured infrastructure subscription securitizations and promising and a PVP, the active Structured securitization contributed uniquely of a of build portfolio also of whole in which us. for execution came which We're real estate in an first international of U.S. strategic In new diversified from business market diversified largest our is the excess results Our primarily the amount $XX from a which Finance, loss to global rent of showed the in quarter,

regulated and transactions as Council. utility with International a by In generated of million sale well Public long-term City the $XX PVP Finance, financing several leaseback we Glasgow as guaranteeing

U.S. Aggregate volume during volume affected public low was of business first the U.S. by comparatively issuance XXXX. below new that was market finance first municipal XXXX. quarter XX% of adversely Our quarter

total all and of X% market to close bond XX-year the issued penetration X.X% XXXX However, of par significantly of of annual higher average remained for X.X%. insurance than the

U.S. insured the bond first to new billion insurance with municipal sold lead guaranteed with XX% in of insured par of par. market issues We quarter. transactions XXX the aggregate continue $X.X We

We institutional also continue from insurance on Guaranty's demand to benefit for transactions. investor Assured larger

insured Moody's the fact during AA transactions basis, In Assured testament insured category insured first million Guaranty to the a eight credits, on AA par default billion. credit Among market beyond an approximately XX the almost are benefits defined gain guarantee to for the million our the we or of protection and/or willing a more, $XXX the as quarter, transactions $X.X lower rate our an with in par a think totaled which those quarter. of uninsured insured primary investors of proposition breadth yield simply value We $XXX and that is protection. total of of accept S&P to

under global Point, numbers. third and with accretive portion year-end to The in we respect based believe will that fifth certain the will transaction regulatory agreement, CLO and the approval, on own ranked we closing to firm XX% create Related at closing. the return with book will share. among and earnings Under expected our managers share, that AUM per on an total and Sound with management of have value consents Sound AssuredIM be the combined approximately with subject entity quarter asset to the billion is assets were to per asset of $XX equity management combination immediately to management, agreement of Point is CLO

transaction. managed as of the are Sound of $X certain by also Investment as invest alternative that a closing, to Sound we investments over Point We AssuredIM transferred Point as will committed AGM and Management will AGC, currently to contribute with exceptions, commitments billion time and on manager sole being total billion total to $X investment After for alternative strategies investment includes That Point. our Sound be part will alternative by managed which engage to Sound Partners. Assured such Assured Healthcare to Point business

XXXX, the new this AGC nearly add AGM of of and platform give XXXX $XX.X further managed using were $XXX year-end by of will year-end To million AssuredIM. scale approximately alternative Sound investments amounts, Point a idea AUM from billion components AssuredIM you billion. diversification to a At billion asset to business. of of $XX should AssuredIM from management as Sound CLO total and our The $XX.X $XX.X $XX.X of year-end. strategic Point's billion, for advance billion This further arrangement the of

to the accelerate Point growth that the for earnings premiums. arrangement our our value generate We we're accretive to a We insurance asset managing a intend looking shareholders independent competitive distribution growing leadership management have our in business to growth and opportunities of We asset in business. from well-established said management. management focused for investment and strategies, business, firm management stable stream asset believe in success the strategies in for large-scale our growth advantages, of earning maximize essential jointly proven alternative, a will source with Sound capital alternative credit asset create to channels with including of the the

investment addition holding their its and to transaction Point to to the confidence on AGM funds Sound alternative as strengthen believe with subsidiaries. can ability capital and desire into attractive company to ability in returns LP of combined to the based and, well was Sound Sound to of this our Point and shareholders. profitability AssuredIM's commitments capacity Our further We produce investment enhance enter proven AUM the insurance to upstream returns. and This entity's increase AGC's Point's dividends as ultimately, support further our the would raise

the and as and effort confirmation has directed the Turning through Electric Authority, the settlement reach (ph) process. enforce before to to again PREPA. to our Puerto rights PROMESA necessary, We faith for bondholders The litigation unsettled negotiate with an a Power Rico, the Rico defaulted court engage and protect hearing reasonable But last good to three July. Puerto remain remaining PREPA. if our in agreement exposure we'll scheduled in federal late an plan committed is confirmation mediation parties fair

the and in bond last that market. Inflation year Looking the forward, the have pipelines infrastructure of businesses from and action our prospects I'm [indiscernible] the for on structured transaction that to continued of more our continue finance finance is business have and impact flow year municipal Fed to opportunities public beyond, U.S. a the good significant benefit and international about with steady market. should typical optimistic

year's the average year's Compared Index Municipal averaged this X%, quarter XX-year quarter last for the Benchmark AAA with first X.X%. when first was

more positive uncertainty volatility, to economic investor Additionally, not credit if to significantly can business, and remained important be product. business fears our tend demand forward. and factors greater quarter. to conducive XXXX should for going spreads, the during our We believe geopolitical first equally, Market for our and during be widened which steady recession these be

while believe and interest Conditions times, unpredictable would the market we that add while significant well our save chance, for model business guarantee flexibility. value Importantly, our is money a rate financial likely I've resiliency there stressful and often shareholder got good strength issuers. XX value business. company's credit increased has in as for I policyholders as years, and our sustained said our is us would pricing financial entering give for protecting economic growth allow opportunities that to spread the and kind in proven more of still conditions over its

are approach portfolio as ever, insured expect new be management our or and stronger highly we financial condition strong beneficial. and Our as than to asset

turn over the call to Rob. will now I

or call. report XXXX I adjusted that income year, net operating Rico a Thank with good adjusted to settlements income you, $XX quarter million share $XX last last the on and included This million quarter operating everyone in per per of the $XX $X.XX share. Dominic, the of benefit associated first to of morning compares which March. to am first or $X.XX Puerto million occurred pleased

segment, with of in million the operating last million first Insurance period income of $XXX adjusted adjusted quarter income of XXXX same the year. operating in component compared contributed was Largest the of $XXX which

and Rico asset for Excluding release a to litigation year's operating settlements due investment last accrual. higher Insurance increased adjusted the investments, higher net for of income alternative benefit Puerto segment the income results, from values

of were both income million the available-for-sale floating the million from XXXX, quarter total performed short-term balances first in of fixed assets increase. first investments first year. first as from $XX very of of portfolio results with $XXX investment as of interest up and the in portfolios average income rates XXXX. of from the primary XXXX, in generated The the income the rate million the Higher the with million in net portfolio last the drivers quarter Investment maturity quarter well $XX investment $XX quarter of from compared higher alternative and well in

long-term investments, and expectation the Annualized was first returns for our million million the quarter quarter loss for net from $XX first AssuredIM Equity in $X predominantly in line of of is a and generated investments. which of CLO the alternative with year. were XX.X%, these a by AssuredIM last XXXX compared gain in earnings the of Healthcare funds funds with

respect With premium accelerations in with of which $XXX variance of derivative to driven resulted Puerto the million and first in in net loss year, primarily $XXX in earned million. Rico premiums of of revenues impact last of XXXX, the earned items both of first was in is compared line year. the the -- March primarily losses, by settlements and credit premiums quarter million were $XX and expense Net $XX quarter million the last

effects the quarter and scheduled and Excluding derivative new amortization portfolio. businesses with net quarter-over-quarter Rico scheduled XXXX of credit the consistent insured in earned the relatively premiums kept refundings revenues settlements, pace as Puerto the were first

the compared approximately first the premium XXXX Rico has has it the Deferred quarter last steady refunding Non-Puerto revenue past billion, accelerations in year. at activity down million in as been where in first years. of for year, $XX $X were slowed quarter with of $X.X million recent remained

ran our million measures primary the expense losses. each These both $X driver primary severance was operating to $XX and respect in of first due first of affected normal rate economic in run quarter The adjusted of rates driver to the was division together from million. loss additional segments the and XXXX was than expenses, risk legal of to $XX were the U.K. unusual XXXX to and quarter Corporate discount increase million. related free approximately the of $XX transaction an corporate part the development used operating in in change the expenses With Loss division Point value-added Sound totaled $XX to the million. in million items which and higher tax,

Turning to segment. Management Asset the

year. we close Point to transaction, of committed in expect are We this the to quarter Sound which third the

for As sale AssuredIM transferring business Healthcare intangibles. balance the sheet stopped as held amortizing business as well a the result, we our designated related we have as have remaining on and

give to simplifying larger financial asset and transformation entity in to From a management expand our Management reporting our business Sound a alternative Guaranty to continues into structure minority our stake wholly-owned a reporting the perspective, based investments from of while on Assured Asset ability combined increases Point statements. fees, earnings a business ongoing and

of result Upon closing, one-line the that more CLOs in deconsolidate and accounting. if the we each will AssuredIM will of most, we straightforward, funds be using Sound and equity the not all, in expect investment Point funds. The of method

we've regulatory of in mentioned, agreed invest alternative approval. $XXX This almost and closing existing Sound investments AssuredIM CLO Point includes subject to and investments, billion Dominic Sound will funds that As million in to to commitments $X after managed asset-based Point. transfer commitment

investments Partners both gains, AGAS our is investment Sound Point strategy. is investment through Assured and distributed and inception-to-date available subsidiary, alternative our $XXX Adding investment authorization in current for the Healthcare vehicles for million

investment income fixed continue to of we securities shift decline. to the net As investment investments, may from maturity portfolio alternative more

we over portfolio. term, the the the fixed returns exceeds expect on projected which long the portfolio over XX%, returns alternative maturity of investment on However,

addition to objectives meeting and to on we alternative of continue shareholder accretive to Insurance and finance our the company other to structured with key two our of production focus segment, strategic Point Management sources book initiatives grow value enhance the Asset Sound the in public new In markets transaction, In and finance investments and key provide business in metrics. international the are diversified value. strong long-term

remaining in our year mitigation of insured instruments loss as divest received recovery majority benefit. of maximize continue strategically economic Puerto the resolution the of last front, the and value our the to contingent On part that exposures to Rico order we bonds we

resolution PREPA and our towards exposure. work of short to continue also We

the value in and portfolio. As of million million in contingent $XXX approximately we remaining portfolio, recovery have investment contingent of fair XX% in the May recovery on of bonds X, investment we value, Based in sold our XX% bonds value approximately the instruments. $XX instruments have

currently $XX or These of have manage In our we which and $XXX and potentially million, or operating expenses are repurchasing capital. million investments including approximately service in redeeming in debt corporate use company of resides liquidity, pursuit our the terms available debt of holding of AGL. funds cash to for initiatives, strategic and for shares refinancing

-- last have in million call currently of quarter, repurchases expect second year. As of we last half resume and remaining our in said the $XXX the authorization our we last to call share

even new strong book However, to $XXX new of results the all million, over repurchases, our value operating equity quarter XXXX, and $XX adjusted first share adjusted quarter, per share of reached business and due without positive in operating and for production records shareholders' demonstrating million of income respectively, the the value initiatives.

the for the I'll now to give over the to period. you turn Q&A call the you. operator instructions Thank

you. Thank

is We open. [Operator begin your first ahead. Thomas Our McJoynt Thomas, Instructions] go KBW. question-and-answer will the comes question from session. line now now from Please

morning, Thanks my guys. Hey. for Good taking questions.

costs. release, out the thanks, out You – yeah, like litigation did transaction of kind tax call number one-off of number you Point call accrual some a the did a seemingly of kind of and Sound the of assessment pieces U.K.

of them quantified. of pieces lot there, a weren't moving So some but

to So on as any of of those try put numbers the the kind we think the impact quarter? could magnitude of you just around

say, expenses, the million, and Tommy, $XX just litigation the was the million. release about are items would $XX looking of I one-time at accrual approximately

just you And like been the that's quarter? Got performance are anything a that kind most it. can in seasonally, Asset unique then first normally fees a of into just reminder, So Management you what loaded the the recognized Thanks. or of us, remind guys has there? higher the as case segment,

the they're tax don't time to you there's not Tommy. the recognize a asset. typically, something we for realize, then No, sell But distribution, distributions. them. then all, at have we that's recognize and recognize realized, any loaded they Whenever tax to Unless

Okay.

excess build in minimum of out on to called rent a loss also estate real on of properties. guarantee portfolio a diversified You

you it's have You, off of basically, Is a I've of branch transaction plan you transactions for types do I'm different sectors? And your guarantee new? as course, the of as you lot which before. as not right lend guys of to heard of mechanisms this look it price. into growth through type these new long sure

be In in now it old out those basically it's Remember, more credit our insurance. cards, and mortgage business, Tommy, auto go days, businesses becoming to the structured used loans, than standardized. bespoke finance, it's without

bit this, to creative. properties, other of subordinated protection including take opportunities transaction, like in portfolio. highly little space we got space. sorts rated is all office more really them. and industrial a If It's more deal. you be AA great an be So This of a a residential, internally we'd it's residential, happy multifamily the retail space, than mixture see And to

benefit client of lot the a And transactions, capital for relief. Tommy, these

the capital structural in finance. So transactions significant are relief

a for institutions. this done is And financial

Okay. Got of have could audit likely? half in still year timing if five-year opportunity sneak actually thinking think believe special it. Makes Do the be we about? completed? thinking Does second I it more becomes the your one, pursue that you just here. in Is right then sense. should that you And that last still should the that the to dividends

Yes.

dividend, we that issues were one call, will preparing dividend relative so this were blackout, to repurchasing anticipate Sound year. start. share clear things be then requested year on now and of uncertainty will One there, money availability be obligation and do two Separate share will special And dividend. repurchase. certain some based sometime transaction could holding we've amount We The special predicated to retire got over that we capital Tommy. because for, that special this other after we the for we of after that the Point now starting

in And we do expect the audit done to be July.

both. you Thank Great.

you. Thank

Point. comes Your from is ahead. Please go Bologna Compass Giuliano Our from line next open. question Giuliano,

is related a the about Blue flat, book will Hello. or deal. that the from perspective. not, equity intangibles if like exceeded to I'd this had it commentary One goodwill another and that implies should the (ph) -- on fair least exceed asset at Is to value congrats curious sounds it the to Mountain the Blue morning fair the quarter. goodwill assume be to transaction And deal? of management some meet Good a value thing Mountain related you be related the great positive stake intangibles

good Yeah. That's a assumption.

obviously, from And or income it investment, then the kind flow basis? sense it net a to another thinking partnership Is about timing just any on method you you annually? quarterly get if would would below line distributions there through equity the item line of the there? as just as that, an the of recognize related And earnings, or

be and Sound income, as from be investment income there’ll funds. in equity said, item. get will will in It our the one an holding company. our into Point Sound And equity investment Point, for And the I up we distributions

That’s jump Very I’ll and in helpful queue. great. the back

Thanks Giulio.

line Philadelphia Our next question ahead. Jordan your comes is from Please Financial. Jordan, open. go from now

Thanks, and my guys [indiscernible]. for taking question

may that said that ago You little on a to said quiet start last soon Can push the I to you would special be but still expect a period this year? as $XXX to more a the be near minute you Dominic that $XXX as do able not for call, without you in a special million the dividends plan million, do Is buyback. special dividend, you without ends. able buybacks quite

as on we've based be given other... think we can honest Jordan. based we will do with ever you, to much don't I Obviously, and availability on number, as a

have Well, and we year. capability close this dividend you that $XXX or in million in should that said the near paying to past,

debt want we merger money, to got Jordan. pay the balance sheet the other off in to with we've the for do up Point. to things Sound terms with the got whether debt and got truing ultimate do the refinancing. think Speakers] We've with the about We've refinancing some of we [Multiple got

as calls well. on other to some cash we've there's that at got So look

the So execution of then the and we as and capital. the will continue our retiring ex do special to with amount, strategy of our figure we start availability, out dividend,

these priority As back company. we dividend I back we're like we're other we've high clarity on buy said, be buy always that and factors shares. as said, this we've it's today, to some can predicated some still in at will got that we year And the And special we'll a considering. very the amount the start know, where

as said expect, back shares I our -- I do -- do of strategy. we to capital my And buy as in we do expect part management

And any the prediction series? of

so now we're was I last night. we're And say -- I'd Bermuda, ahead. in we're shocked

So I Can't to it Philadelphia it's was Philly, Eagles, last sports late the of they than get stay that. that's But was But up story. game. shocked for won Sixers. continuation now great a a for any the little night, better at sure.

your from Please line Our next open. question go is ahead. Brian comes Meredith UBS. Brian, now from

Thanks.

couple of here you. So a for them

First this rate expenses, out trying had at quarter. the just one-timers I'm onetime Insurance a . the the operations? million Insurance Just curious, that looking number? of is affect any figure the there there run in Did kind one, of to is operating we of $XX anything in or

line. on would there to is given eligible employees, acceleration thing acceleration be the One be him, the would in that retired the shares were expense based

And included also talked I total... onetime the expense in also items But that about. the VAT, value-added tax,

ops. [indiscernible] the insurance

Okay.

Yeah. total said, I in company But for onetime like million was items. $XX entire the of

trying to of the thinking I Thanks. profitability, you. of just kind was run a underwriting rate operations. figure out about Got Insurance kind

I'm respect investment guess, just Insurance count investment operations respect for, of regulatory to out does with test with to a income? income alternative more question, the on curious, perspective, dividends Second accounting I the

Yeah.

way, GAP it a higher to management this flow investment Insurance alternative the for investment are and free books, assets returns that's in companies' that insurance factor. on investments, increase income fees dividend The the limiting created of our So balance structures, increase the therefore, think those that's companies, if the the are sheet, the outside, that's company the company. capacity cash

capacity dividend the distribute, the investments the returns as AGUS, companies. As commitments, of alternative as distribution to from will increase up from said, -- Insurance Dominic that Insurance we the

far and plain And net does guess, settlement of Great. with here stuff? court the I could potentially it, you getting respect as be versus English on What that it then, revenues did talk Dominic, PREPA. for talk as question quickly us. May you mean just just and I mean to, last rights decision in helpful. revenues. here about some about That's

led the Remember, expenses, has basically So right? opportunity debt. to pay pay to any utility revenue you're net back their to

in remember stop sense. obviously the is Obviously, impairment. decisions there's they try expenses for the makes we're were of the seems get of Jefferson you resolve revenue the appeals, authority, it judge than a we and that matter of of we're sink any But court legal and legal about outside daylight our think water to in us basically the avenues fight time. to to when to that going have course action I here, comes to County, If able don't And and of confirmation litigation kind special mediation, into some as Commonwealth's pursue. bond this I rights the to without the day, the lot take. legal decisions, don't entity press That's other be which We to at They that's to the a more there's balances. the whole end protect of making fine. social for happy seeing so want to for not why seem kitchen

you -- audit this and It for thing -- simply comfortable correct? have special think guess, more PREPA to think getting to PREPA, Do sell I about talked it's so dividends, a you before. taking does in guess order you've done, get the I with this on you other don't just just I

Yeah.

we first as Brian, talked filed was bankruptcy. we were when dividend, Rico that just getting you when special about, If for Puerto remember,

defeat dividends I books, brainer economically grabs, get our believe relative it no buyer be down to which amount believe. to state, to makes really reserving able we exposure, process just one was may when for on to the we the up So were

Great. sense. Makes you. Thank

Thanks, Brian.

currently no We have further questions.

ahead. call go hand Robert Please I to back So the to would over Tucker. . like

on to like today's joining I'd operator. thank everyone you, us Thank call. for

free additional feel If a much. questions, you Thank to please very give us have you call.

concludes Ladies you this joining. and gentlemen, today's for call. Thank

you. You lines. may Thank now disconnect your