Assured Guaranty's Q1 2025: Unpacking Contradictions on Thames Water, Market Outlook, and Acquisition Strategies

Thames Water exposure and reserve provisions, insured penetration and market outlook, interest rate and tariff impact on credits, UK water exposures and Thames Water haircut, acquisition opportunities and strategy are the key contradictions discussed in Assured Guaranty's latest 2025Q1 earnings call.



Strong Financial Performance and Valuation Metrics:
- Assured Guaranty reported adjusted operating income per share of $3.18 for Q1 2025, up from $1.96 in the same period last year.
- Key valuation measures such as adjusted operating shareholders' equity and adjusted book value also reached new highs at quarter-end.
- The growth was driven by new business production, litigation gains, and the strategic approach to asset management.

New Business Production and Market Share:
- Assured Guaranty closed $39 million of PVP in Q1 2025, with $25 million from US public finance and $7 million each from non-US public finance and global structured finance.
- The company maintained its leadership position, capturing 64% of the primary market insured par sold and 58% of the insured transaction count in the US municipal bond insurance market.
- The high-quality business and strong market position were core drivers of this performance.

Secondary Market Bond Insurance Growth:
- Activity in the secondary market increased substantially, producing $376 million of insured par, more than the entire 2024.
- The increase was driven by investors seeking the company's guaranty to manage potential portfolio impacts from economic stress and market volatility.
- Modernization of processes and technology has enhanced the company's ability to execute secondary market transactions.

Alternative Investments and Asset Management:
- The investment portfolio generated a 13% annualized internal rate of return, with alternative investments contributing $59 million in Q1 2025.
- The strategic focus on increasing fee-based earnings from the 30% ownership interest in Sound Point contributed $13 million.
- The strong performance was due to attractive returns on alternative investments and strategic asset management.

Litigation and Default Resolution:
- Assured Guaranty recognized a pretax gain of $103 million from the conclusion of litigation with Lehman Brothers International.
- The determination to enforce legal rights and secure resolution in default cases, like that of Lehman Brothers, has positively impacted financial results.