Assured Guaranty's 2025 Q4 Call: Thames Water Exposure and Brightline Outlook Contradictions

Date of Call: Feb 27, 2026

Financials Results

• EPS: Q4: $2.32 per share, up 83% YOY; Full Year: $9.08 per share, up 28% YOY

Business Commentary:

Shareholder Value and Financial Performance:

• Assured Guaranty Ltd. reported record adjusted book value of $186.43 and adjusted operating shareholders' equity of $126.78 per share at year-end 2025. Adjusted operating income per share was $9.08, compared to $7.10 in 2024.
• The growth was driven by strong financial guarantee originations and successful legal and litigation resolutions, including a pretax gain of approximately $103 million from the defense of legal rights and loss mitigation efforts.

Municipal Bond Insurance and PVP Production:

• The company generated $286 million in present value of new business (PVP) in 2025, with $206 million from U.S. public finance. Insured over $27 billion of municipal par, a 16% increase compared to 2024.
• This was attributed to strong demand for U.S. municipal bond insurance, increased underwriting speed and capabilities due to technological improvements, and a focus on expanding the secondary market business.

Alternative Investments and Capital Management:

• Alternative investments produced an annualized inception-to-date internal rate of return of 13% through year-end 2025, contributing $160 million in pretax adjusted operating income for the full year.
• The growth in alternative investments was complemented by capital management initiatives, including a 12% increase in the quarterly dividend and share repurchases totaling $500 million in 2025.

Diversification and New Business Opportunities:

• Assured Guaranty completed the acquisition of Warwick Re Limited, renaming it Assured Life Reinsurance Limited, to enter the life and annuity reinsurance business.
• This strategic move diversifies revenue sources and leverages the company's experience in credit and structured finance, aiming to capitalize on new market opportunities in annuity reinsurance.

Loss Mitigation and Investment Returns:

• The company resolved several loss mitigation situations, including a $400 million reduction in below-investment-grade securities and the sale of a troubled asset, resulting in full recovery of losses.
• These efforts, along with successful alternative investments, demonstrate the strength of underwriting and innovative solutions in enhancing investment returns.

Sentiment Analysis:

Overall Tone: Positive

• CEO stated: 'We significantly advanced Assured Guaranty's key business strategies in 2025, positioning us for sustainable long-term growth.' CFO highlighted: '2025 was a big year for resolving several previously troubled exposures.' Management expressed being 'well positioned for growth in 2026 and beyond' and 'excited about the opportunity available.'

Q&A:

• Question from Ameeta Lobo Nelson (UBS): Last quarter, you noted that issuance in BBB credits had come back from prior lower levels. How did this look in the fourth quarter? And what are your thoughts for the mix into 2026?
  Response: BBB issuance has returned and they are off to a very good start in Q1 2026, with transactions closed in U.S. public finance and Europe; they are very excited about 2026.

• Question from Ameeta Lobo Nelson (UBS): Looking at the big exposures, could you give us an update on your outlook across the U.K. utilities and Brightline as well?
  Response: For U.K. water utilities, focus is now on Thames; they are part of the creditors committee and working with the U.K. government for a market-based solution. For Brightline, they remain confident in their thesis due to strong subordination and increasing ridership.

• Question from Thomas Mcjoynt-Griffith (KBW): A question on your alternative investment portfolio. I tend to remember that it's largely CLOs that are in there. But can you just talk about the exposure there? Is there anything in private credit that we should keep on the radar?
  Response: They do not take direct exposure to private credit; their alternative investments are largely in the CLO market, which is marked to market. They remain confident in the exposure's shape.

• Question from Thomas Mcjoynt-Griffith (KBW): To the extent that you guys allocate some capital into the annuity reinsurance market, would that preclude you from sticking with your $500 million annual buyback target? Or should we think of those as 2 independent opportunities?
  Response: Capital management opportunities, including stock buybacks and annuity reinsurance, are considered independent. The amount allocated to annuity reinsurance may affect the exact level of stock buybacks, but they remain committed to capital management and repurchasing.

Contradiction Point 1

Brightline Transportation Exposure Outlook

Shift from describing issues as "typical growing pains" to acknowledging specific financial and operational challenges requiring a market-based solution.

Ameeta Lobo Nelson (UBS Investment Bank, Research Division) - Ameeta Lobo Nelson (UBS Investment Bank, Research Division)

2025Q4: The company remains confident in its thesis for Brightline... The company is on the path to recovery, remaining committed to being part of any solution. - [Benjamin Rosenblum](CFO)

What is your current outlook for U.K. utilities and Brightline? - Ameeta Lobo Nelson (UBS Investment Bank)

2025Q3: Brightline is a new operation experiencing typical growing pains with route structure and car availability. - [Dominic Frederico](CEO)

Contradiction Point 2

Credit Position and Outlook for Thames Water (U.K. Utilities)

Contradiction on the severity and proximity to loss of the Thames Water exposure.

Ameeta Lobo Nelson (UBS Investment Bank, Research Division) - Ameeta Lobo Nelson (UBS Investment Bank, Research Division)

2025Q4: The company has reduced its BIG exposure... The primary remaining exposure is to Thames Water. Assured Guaranty is part of the creditors committee... hoping for an update soon. - [Benjamin Rosenblum](CFO)

What is your current outlook for U.K. utilities and Brightline? - Marissa Lobo (UBS)

2025Q2: For Thames Water (Tem): The company holds a position in the capital stack that is very remote from loss exposure. A legal plan has been filed with creditors, and the company is comfortable with its position, hopeful for approval and a resolution that cures the credit. - [Benjamin Rosenblum](CFO) and [Dominic Frederico](CEO)

Contradiction Point 3

Outlook on BBB Credit Issuance

Contradiction on the current level and recent trend of BBB credit issuance.

Ameeta Lobo Nelson (UBS Investment Bank, Research Division) - Ameeta Lobo Nelson (UBS Investment Bank, Research Division)

2025Q4: Issuance in BBB credits has returned and is continuing into the first quarter of 2026, with strong starts in both U.S. public finance and infrastructure finance in Europe. - [Robert Bailenson](COO)

How did BBB credit issuance trends evolve in Q4, and what is your outlook for the mix in 2026? - Marissa Lobo (UBS)

2025Q2: A lower interest rate environment... On the negative side, it decreases the premium calculation rate... On the positive side, it may encourage more issuers (especially BBB and A-rated) to enter the market... - [Dominic Frederico](CEO) and [Robert Bailenson](COO)

Contradiction Point 4

Capital Allocation and Buyback Commitment

Contradiction on the independence and commitment level of the $500 million annual stock buyback target amidst other capital opportunities.

What insights can you share regarding the company's financial performance? - Thomas Mcjoynt-Griffith (Keefe, Bruyette, & Woods, Inc., Research Division)

2025Q4: The capital stack is viewed as independent... The company is committed to both capital management and stock buybacks but will measure the balance... - [Dominic Frederico](CEO)

Does allocating capital to annuity reinsurance conflict with maintaining the $500 million annual buyback target, or are these independent strategies? - Tommy McJoynt (KBW)

2025Q1: Competition is minimal. The company has one other competitor in the secondary market... - [Dominic Frederico](CEO)

Contradiction Point 5

U.K. Utilities (Thames Water) Regulatory Timeline and Outlook

Contradiction on the expected duration and status of the regulatory process for resolving U.K. water company debt.

What are your key insights on the earnings results? - Ameeta Lobo Nelson (UBS Investment Bank, Research Division)

2025Q4: The company... is working with the U.K. government on a market-based solution, hoping for an update soon. - [Benjamin Rosenblum](CFO)

What is your current outlook for U.K. utilities and Brightline? - Marissa Lobo (UBS)

2025Q1: The regulatory process is expected to take 6 to 12 months. - [Ben Rosenblum](CFO)