Assured Guaranty (AGO) Q3 Earnings call transcript Nov 12, 2024

Assured Guaranty, a leading provider of financial guarantee insurance, showcased its robust financial health and growth strategies during its third-quarter 2024 earnings call. The company's executives, including Dominic Frederico, President and CEO, Robert Bailenson, COO, and Benjamin Rosenblum, CFO, provided insights into the company's operational performance, strategic initiatives, and market outlook.

Financial Highlights

Assured Guaranty reported strong financial results for the third quarter of 2024. The company's adjusted book value per share and adjusted operating shareholders' equity per share both reached record highs, reflecting the success of its business strategies and market positioning. New business production has been robust across the company's three market segments: U.S. public finance, non-U.S. public finance, and global structured finance. Year-to-date, Assured Guaranty has earned adjusted operating income of $5.80 per share, marking a 13% increase from the same period last year.

Strategic Initiatives and Growth Opportunities

Dominic Frederico highlighted the company's merger with AG, which has improved operational efficiency and capital utilization. The merger has been well-received by rating agencies, with S&P, Moody's, and KBRA affirming no change to AG's ratings post-merger. Assured Guaranty continues to focus on optimizing capital and business opportunities, with a target of $500 million for share repurchases in 2024. The company has already repurchased 10% of its outstanding shares, with an additional $250 million authorized for repurchase.

Strong Market Position

Assured Guaranty's leadership in the municipal bond insurance market was underscored by its strong production results, with $281 million in year-to-date PVP, up $32 million from the first three quarters of last year. The company insured some of the largest transactions in the municipal market, demonstrating its ability to provide liquidity and simplify credit stories for complex bond issues. This has led to a significant increase in the use of Assured Guaranty's insurance among AA-rated issuers, with 26% more AA par and 36% more AA transactions in the primary market.

International Expansion and Challenges

Assured Guaranty is expanding its international presence, particularly in the structured finance market, where it ensured a transaction for an Australian bank to manage its core lending portfolio more efficiently. The company aims to grow its international operations to mitigate pressure on the domestic market and tap into global opportunities. However, challenges remain, such as the ongoing mediation process for unresolved exposures, particularly in the U.K. water sector. Despite these challenges, Assured Guaranty remains committed to enforcing its rights as a secured creditor while seeking a fair and consensual resolution for all stakeholders.

Looking Ahead

The third quarter has seen a strong start for Assured Guaranty, with significant transactions insured in the U.S. public finance market, including a senior special facilities revenue bond for JMA Airport's Terminal 6 and a transaction for Thomas Cheson University in Philadelphia. The company expects a solid finish to the year, with demand for its product remaining strong.

Conclusion

Assured Guaranty's strong financial performance and strategic initiatives position the company well for future growth. The company's focus on optimizing capital and business opportunities, expanding into new markets, and maintaining a strong market position in the municipal bond insurance market highlight its strategic agility and resilience in a dynamic market environment. Despite challenges, such as ongoing mediation processes and market volatility, Assured Guaranty remains committed to delivering value to its shareholders and policyholders.