Assured Guaranty(AGO) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted operating income per share for Q2 2024 was $1.44, more than double the$0.60 reported in Q2 2023 [7][24] - Shareholders' equity rose 16%, adjusted operating shareholders' equity rose 15%, and adjusted book value rose 12% since June 30, 2023 [8] - The insurance segment contributed $116 million of adjusted operating income in Q2 2024, up from$106 million in Q2 2023 [24] Business Line Data and Key Metrics Changes - New business production for the first half of 2024 was $218 million, the largest amount since 2009, with strong diversification across U.S. public finance, international infrastructure, and global structured finance [8][17] - Bond insurance penetration was 8.2$10.8 billion of primary insurance, representing 56% of the insured par sold in the primary market for the first half of 2024, an 11% year-over-year increase [19] Market Data and Key Metrics Changes - The company maintained a market leadership position with a primary market share of 58% in Q2 2024, reflecting a 13% year-over-year increase in insured primary market par sold [19] - Non-U.S. public finance produced $34 million of PVP in the first half of 2024, consistent with the previous year [21] Company Strategy and Development Direction - The merger of Assured Guaranty Municipal into Assured Guaranty Inc. aims to achieve more efficient capital utilization and increase operational efficiencies [9][10] - The company remains committed to a share repurchase program with a target of$500 million for the year, having repurchased 7.2% of outstanding shares as of August 6, 2024 [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the favorable ruling in the restructuring case of Puerto Rico's Electric Power Authority, which is expected to positively impact future recoveries [14][32] - The company highlighted the importance of its insurance products in providing value to investors amid economic and geopolitical uncertainties [15][16] Other Important Information - The company reported no loss expense in Q2 2024 compared to $44 million in Q2 2023, with deferred premium revenue remaining strong at$3.9 billion [24][26] - The company has approximately $308 million in cash and investments, with$55 million residing in AGL [28] Q&A Session Summary Question: Impact of PREPA court ruling on loss reserves - Management acknowledged the ruling as favorable but noted the need for prudent reserving due to ongoing appeals and mediation processes [32][33] Question: Plans for excess liquidity after capital releases - Management indicated that excess liquidity would primarily be used for share repurchases, while also considering potential acquisition opportunities [34][35] Question: Long-term capital strategy - Management stated that the focus remains on executing the $500 million buyback strategy while evaluating other accretive opportunities [39][40] Question: Opportunities in structured finance and international markets - Management confirmed seeing significant opportunities in structured finance and international infrastructure, with early successes noted in Australia [41][43] Question: Health care issues and protections - Management discussed the pressures faced in health care deals due to COVID and inflation but expressed confidence in the protections and covenants in place [46][47] Question: ROE impact from excess capital - Management acknowledged that excess capital dilutes ROE but emphasized plans to address this over the near term through growth and capital management strategies [48][50]