Q3 2020 Assured Guaranty Ltd Earnings Call

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Okay. So be assured guaranty Corp. earnings conference call.

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Thank you operator, and thank you all for joining assured guaranty for our third quarter 2020 financial results Conference call.

This presentation is made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Doesn't change may contain forward looking statements about our new business and credit outlooks market conditions credit spreads financial ratings loss reserves financial results or other items that may affect our future results.

Statements are subject to change due to new information or future events.

Well you should not place undue reliance on them as we do not undertake any obligation to publicly update or revise them, except as required by law, if you're listening to a replay of this call or if you're reading the transcript of the call. Please note that our statements made today may have been updated since this call.

Please refer to the Investor information section of our web site for our most recent presentations in FCC filings.

Current financial filings and for the risk factors. This presentation also includes references to non-GAAP financial measures. We present, the GAAP financial measure most directly comparable to the non-GAAP financial measures referenced in this presentation, along with a reconciliation between such GAAP and non-GAAP financial measures in our.

<unk> financial supplement an equity investor presentation, which are on our website at assured guaranty Dot com.

Turning to the presentation our speakers today are Dominic frederico.

President and Chief Executive Officer of assured Guaranty limited and Rob Bailenson, Our Chief Financial Officer. After their remarks, we'll open the call to your questions as the webcast is not enabled for today. Please dial into the call if youd like to ask a question I will now turn the call over Dominic.

Thank you Robert and welcome to everyone joining today's call in our financial Guaranty business for.

Sure guarantees, having our best year for direct new business production more than a decade based on direct T.V.P. results since 2009 for both the third quarter and first nine months of 2020 did.

Additionally, on a per share basis assured guarantys adjusted book value shareholders equity and adjusted operating shareholders equity reached new highs.

As part of our capital management strategy, we have purchased more shares than nine months of this year than we did in all of 2019 and our board of directors authorized additional share repurchases of $250 million.

Also on October 1st that's a P. del Jones indices, and now that assured guaranty would become a component stock or the S&P Smallcap 600 index on October seven both.

Both the price and trading volume over shares increased on the news.

Presumably because index funds to meet yes, the trap yet to be 600, as well as actively managed funds benchmarked to the index began accumulating positions in our shares.

KBW estimate that passive funds the truck the EPS would be 600, well need to purchase 8.7 million shares.

I think it's safe to say that certain passive investors an active small cap mutual funds to meet yes, now form additional base of Agios shareholders. There are more than 2000 fonts in the small cap investment category.

Turning to you as part of the public Finance production, we wrote $93 million of P. BP in the third quarter more than double our third quarter 2019, Pvp and an 11 year record.

In terms of insured par sold we continue to lead the industry guaranteeing 64% of the 11.9 billion a primary market insured par sold in the third quarter, which was the industry's highest quarterly insured par amount since mid 2009, and 82% higher than in last year's third quarter Bonnie.

Bond insurance penetration reached 8.3% up from last year's third quarter penetration of 5.7%.

With 7%, 7.7% penetration for the first three quarters of the municipal bond insurance industry is likely to see that annual market penetration in insured par volume in over a decade and this is still at a very low interest rate environment. We.

We benefited from credit spreads that are were done at the beginning of the year, but this is still a market where AAA benchmark yields have been below 2% almost all year.

The Wall Street Journal is called this increase in penetration a renaissance in the municipal bond insurance industry.

Driven by the high demand for insurance combined with a 35 year over year increase in quarterly issuance assured guarantys third quarter originations totaled 7.5 billion a primary market par so essentially double the amount during the third quarter of 2019.

One of the new issues sold with our insurance and the third quarter was assured guaranty's largest U.S. public finance transactions since 2009.

$726 million of insured par for the Yankee Stadium project.

This transaction closed in October so it's pvp in par exposure will be reflected in the fourth quarter result, it refunded $335 million of our previous exposure. So our net exposure to this credit increased by $391 million. This was one of 19, new issues that utilize $100 million or more of.

Our insurance during the third quarter.

For the first nine months, we provided insurance went to $100 million or more par on 32 individual issue individual new issues more than in any full year over the past decade, our significant capital resources and strong trading value on larger transactions are important competitive advantages.

We believe two types of investors have driven our increase in larger transactions. The first our institutions investing in that traditional tax exempt market, which are attracted by our strong balance sheet and brought proficiency in credit analysis. The others are not traditional investors and the growing taxable municipal bond market, including international Investor.

Her zoo internal resources to evaluating surveil U.S. municipal credits may be limited.

Actual issuance, representing approximately 30% of the Muni markets total new issue for volumes during the first nine months of 2020, compared with 5% to 10% in recent years and 35% of our par insured on new issues sold in the period was taxable during those nine months the par amount, we insured on taxable new issues totaled 5.5 billion.

<unk> dollars compared with 1.5 billion in the first nine months of 2019.

In case of credit with underlying S&P or Moody's ratings and the double a category. We ensure to total of 806 million of car for the quarter and during the first nine months more than $2 billion for this year to date for volume is greater than our par volume as such doubly credits and all of 2019.

It reflects the strength of our value proposition and the markets view of our financial strength.

Year to date through September we provide any assurance on $15.7 billion of municipal new issue par, So, which 1 billion, which is 1 billion more than in all of 2019.

Combining primary and secondary market activity for the first nine months.

The guarantees 16.6 billion of municipal par 6.2 billion more than in the same period last year, a 60% increase in.

In International infrastructure Finance, we completed the best third quarter originations 2000, nines acquisition at AG, producing $24 million of Pvp, 52% more than in last years third quarter.

Our guarantee is now a mainstream solution and widely accepted option for sufficiently financing infrastructure development.

The slogan of transaction inquiries is much stronger than it was just a few years ago.

And little over a years time, we guarantee for solar power transactions in Spain, including the most recent one in August these.

These transactions are good examples of how our guarantee it makes the financing of renewable energy projects more cost efficient.

Another significant third quarter transaction was a 90 million pounds private placement to finance improvements the student accommodations, the Kingston University in the United Kingdom.

Hi, insured ratings and associated lower investment investor capital charges as well as the long tenor many infrastructure bonds, we guarantee makes them in attractive for institutions seeking to optimize long term asset liability matching.

The impact of COVID-19 as temporary slow the new issue transactions low there's also creating conditions that we expect to provide significant international opportunities, we believe downgrades or the potential for them could make or guarantee more valuable for even a broader range of essential investment grade infrastructure finances, such as air.

Upwards that are crucial for the region's Mcdonald's in the medium term, we expect the massive global policy initiative to invest in infrastructure and renewals.

Additionally, we see opportunities where guarantee has been underutilized in Australia. For example, we are ramping up our business development and advertising efforts and working with a local origination consultant to help us expand our network of relationships on the ground.

International in structure finance groups, often collaborate when it comes to bilateral risk transfer transactions that allow large large asset portfolios to be manage more efficiently whether from the perspective of capital efficiency capital management or risk mitigation.

Transactions are these types of our strategic focus of our structure finance underwriting fees.

These tend to be large transactions, requiring significant due diligence and their timing is you're right.

We have a number then in progress and expect to close in the fourth quarter or next year.

And other aspects of structure finance, we continue to explore opportunities I'd say to a variety of securitizations, including for example, those for whole business revenues to tax credits and consumer debt.

Now, let me provide some insight into the ability of onshore portfolio to weather today's unique economic circumstances. We have continued to take a deep dive analytically into our highly diversified universe of insured exposures, especially in the sectors. We view as the most potentially vulnerable the consequences of pandemic such.

Such as mass transit stadiums and hospitality among others. What we found is that the underwriting we did just let the credits we've insured and the structural protections we required in order to be able to guarantee those transactions have worked the way. They were intended we again modeled performance or transactions that vulnerable sectors under economic stress test.

Assuming no federal assistance beyond what was already authorized before September as well significant reductions in future revenues, having updated that analysis. We remain confident that we do not expect first time claims arising from the pandemic that will lead to material ultimate loss.

On some transactions that were already classified as low investment grade prior to the pandemic, we didn't make marginal reserve adjustments.

As of now we have paid no claims that we believe are due to credit stress or rising specifically from cobot Nike.

Last week KBR, a wrote that infuse the pandemic is primarily a potential liquidity event for assured Guaranty did express that view and its ratings affirmation every lease for our insurance companies last week, which were double a plus for AG en masse, and our UK and French subsidiaries and double A. for AGTC we.

We take an active role in managing risk at the transactional level. This year. We have worked with some of the war insured issuers to take advantage of low interest rates to reduce or defer their debt service over the near term through refinancings. These.

These transactions often also typically benefit us by accelerating our premium earnings and generating new premium on refunding bonds that we insure.

Well I'll say a lot about Puerto Rico today, because the new Commonwealth administration will be starting soon and the composition of the oversight board is influx sub.

It's up where members have resigned a new board members join and others may be reappointed or replace I'll, just repeat that achieving a consensual restructuring without further delay is the best thing that could happen for the people of Puerto Rico.

The recently announced release of $13 billion in federal assistance helped to improve the conditions for reaching such an agreement.

The integration of Blue Mountain capital, which we acquired last year as progress in September we rebranded it short investment management and rolled out the new branding on a newly launched investment manager website.

These changes reflect the close alignment of our investment management business with our overall corporate strategy short.

The short investment management currently manages $1 billion of our insured companies investable assets throughout the company. We are actively developing synergies between our insurance division credit underwriting and surveillance skills and the investment management, the division's ability to structure and marketing investment products, we want our investment management business to grow as we continue to leverage.

Our capital through this strategic business diversification.

I believe that assured guaranty is in good position both in the market and financially I expect a strong finish for 20, Twond, our U.S. public finance international infrastructure and global structured finance business is a strong pipeline of potential or originations assured guaranty is fortunate to be a company designed from the ground up to be.

Zillion and succeed in difficult times, which we proved during the previous recession.

As the effectiveness of our remote operations and the diligence and commitment of our employees that made it possible for us to perform well and operate safely and challenging times, allowing us to continue to working towards protecting investors in securities reinsured or an uncertain economy.

Assisting issuers in funding public services and manage their fiscal challenges.

And building a greater value for assured guaranty shareholders I'll now turn the call over to Rob.

Thank you Dominic and good morning to everyone on the call. This quarter, we have continued to make progress on our strategic initiatives.

Insurance segment I was shrunk, bringing production is replenishing our unearned premium reserve offsetting the amortization of the existing book of business, which will be which will be accretive to future earnings in terms of capital management year to date as ever 30 it.

We had already repurchased 11.4 million shares which is well over our initial plan of approximately 10 million shares.

As for our third quarter 2020 results adjusted operating income was $48 million or 58 cents per share. This consist primarily of $81 million of income from our insurance segment, a 12 million dollar loss from our asset management segment.

And an 18 billion dollar loss from corporate Division, where we would like the holding company interest expense as well as other corporate income and expense items starting.

Starting with the insurance segment adjusted operating income was $81 million compared to $107 million in third quarter 2019.

This includes net earned premiums and put a derivative revenues.

The $113 million compared with $129 million in the third quarter of 2019.

The decrease was primarily due to lower net earned premium accelerations from refundings and terminations.

Set in part by an increase in scheduled unearned premiums due to higher levels of premiums written in recent periods.

In total acceleration of net earned premiums were $18 million in the third quarter of 2020, compared with $38 million in the third quarter of 2019.

Net investment income for the insurance segment was $75 million compared with $89 million in the third quarter of 2019.

But do not include Mark to market gains related to our short investment management funds and other into alternative that investment.

As we shift to alternative investments and continue our share repurchase program.

Average balances in the fixed maturity portfolio have declined.

As of September Thirtyth 2020, the insurance companies that authorization to invest up to $500 million in funds managed by shorten best managed Oh.

Which over $350 million have been had been deployed.

Income related to our short investment management fund and other alternative investments are recorded at fair value in a separate line item from net investment income.

The change in fair value of our investment in a short investment funds was a $13 million gain in the third quarter 2020 across all strategies.

These gains were recorded in equity and earnings of them got D., along with an additional 7 million dollar gain on other not a short investment management alternative investments with a carrying value of almost $100 million.

This compares to only $1 billion in fair value gains in the third quarter of 2019.

Going forward, we expect adjusted operating income will be subject to more volatility in the past as we shift assets to alternative investments.

Loss expense in the insurance segment was $76 million in the third quarter 2020, and it was primarily related to economic loss development on certain Puerto Rico exposures.

In the third quarter 2019 loss expenses was $37 million also primarily related to Puerto Rico exposures, but was partially offset by a benefit in the U.S. RMBS transactions.

The net economic development in the third quarter 2020, with $70 million, which mostly consisted of $56 million in loss development for the U.S. public finance sector, principally Puerto Rico exposures.

Yes, the management segment adjusted operating income was a loss of $12 million the impact of the pandemic continues to challenge the timing of distributions out of 'em wind down funds.

And the news yellow issuance did.

Additionally, price volatility and downgrades have triggered overcollateralization provision in the yellow transactions that resulted in the third quarter 2020 management fee deferrals of approximately $3 million.

And the third quarter 2028.

Hey, Wayne inflows were mainly attributable to the additional funding of the CLS strategy under the intercompany investment management agreement.

Which we executed last quarter. These represent assets in our insurance company subsidiaries fixed maturity investment portfolios.

Our long term view of enhanced returns me in short investment management funds remains positive we.

We believe the ongoing effect of the pandemic on market conditions and.

An increased market volatility may present attractive opportunities for short investment management and for the alternative asset management industry as a whole.

Adjusted operating loss for the corporate Division was $18 million for the third quarter 2020, compared with $28 million for the third quarter of 2019.

It's mainly consist of interest expense on the U.S. holding company public month term debt as well as the intercompany debt to the insurance companies that was primarily used to fund the Blue Mountain acquisition.

It also includes board of directors and other corporate expenses in the third quarter of 2020 also included a 12 million dollar benefit in connection with the separation.

Oh, the former Chief investment officer, and head of asset management from the company.

From a liquidity standpoint, the holding company currently currently have cash and investments available for liquidity needs and capital management activities of approximately $82 million of which $20 million reside in NGL.

On a consolidated basis, the effective tax rate may fluctuate from period to period based on the proportion of income in different tax jurisdictions.

Third quarter 2020, the effective tax rate was a benefit of 32.7%.

Paired with a provision compared with a provision of 16.3% <unk> third quarter 2019.

The tax benefit in the third quarter of 2020 was primarily due to a $17 million relief.

As for uncertain tax positions.

Upon the closing of the 2016 on here.

Turning to our capital management strategy in the third quarter of 2020, we repurchased 1.9 million shares for $40 million for an average price of $21.72 per share.

Since the end of it or do we have purchased an additional 1.7 shares for $46 million, bringing our year to date share repurchases as of today to over 13 million shares.

Since January 2013, our successful capital management program has returned $3.6 billion to shareholders, resulting in a 61% reduction in total shares outstanding.

A cumulative effect of these repurchases was the benefit of approximately $25 or 43 cents per share and adjusted operating shareholders equity and approximately $45.48 and adjusted book value per share, which helped drive these important metrics to new record high of $73 and he says.

And adjusted operating shareholders equity per share over $108 of adjusted book value per share.

Finally in connection with the capitalization of AG M friendship City a French.

French subsidiary Agios third quarter 2020 investment income increased dividends received from its UK subsidiary.

Which increased aid yen 2020 give any capacity to its holding company parent.

However, as always future share repurchases are contingent on a ballot free cash our capital position and market conditions I'll.

I'll now turn the call over to the operator, you instructions to the Q and a period.

Thank you we will now begin the question answer session.

You asked a question press Star then one on your Touchtone phone.

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Well Jordan question. Please press Star then too.

First question comes from told me with George with KBW. Please go ahead.

Hey, good morning, guys. Thanks for taking my question. So you mentioned on I'm on slide seven and in your presentation that stress case scenario that you guys look out through January.

22, you walk through some of those assumptions in terms of how stressed out model gets and then how do you kind of think about beyond you know the next 14 months, perhaps as you.

I knew beyond January 2022.

Okay. So I'll start the answer so we looked at each of the various sub categories of the high risk and the medium rare. So you would break down transportation versus student accommodations and typically what we did was we took a look at 2019 revenues and then reduce them substantially for 2020.

Okay, and then depending on the credit like in airports and transportation further reduce them at 2021, having obviously not a clear view of where we expect the impact of families upside relative to the virus hopefully that sometime in the first quarter with the advent of a vaccination.

I think it was keyed off of 19 revenues reduction for 20 or in some cases further reductions in 2021, we assume no government intervention.

Intervention in terms of additional relief package is past.

And as we've always said as we looked at our credit portfolio in total in most cases the credits were in great shape prior to the pandemic. So they economy strong they were very healthy relative to revenues. They were funding the debt service and other obligations to we then further have protections in terms of debt service reserve those accounts.

Three as we've always said municipalities have many vehicles are many options that there are <unk>.

There are you know management in terms of how they handle their disbursement so things like capital expenditures can be defer maintenance projects could be deferred obviously, they can do things relative to staffing as well as raising revenues. So as we look across that analysis and as I said stress 20, and 21 again and even in some cases go.

I am 22, we're very comfortable with the quality of the underwriting we're very comfortable with the performance of the portfolio, we really expect no material losses whatsoever, and maybe some liquidity claims as we go through the next maybe six months.

Okay. That's helpful and then switching over what are you looking at the balance sheet.

It's a bit of it shouldnt be tricky topic, but when I think about what you guys have never been liability side kind of net of the salvage number declined about $260 million quarter over quarter.

Can you just remind him mechanically again kind of what drives the salvage and then just kind of how you think about that net reserves number and change in the quarter over quarter, and then just kind of reserve adequacy more broadly.

Well I could just start with that what drives the salvage it is based on our reserve assumptions and to the extent that we expect to receive.

Claims that we have already paid you're going to get a salvage asset that's just basically how that happens.

So predominantly the continued payment of the Puerto Rico debt service because the control board has authorized another that surface, where we'll call you know the general obligations of the of the Puerto Rico government itself minus what we believe is continued further deterioration in our reserving.

Based on the gap analysis of scenario analysis and probability weighting. So one is the payments going out each quarter or each year relative to Puerto Rico's they'd made absolutely no that service over four years minus what we think is going to be the true loss than we might have to realize relative value gap and makes us account for reserves.

For the rest of it kept us up Jason.

Okay. Okay that makes sense and then just last one switching over to investment income <unk>. So the addition of the alternative assets can change a little bit just from a modeling standpoint, how should we think about the run rate of investment from and <unk>.

Right to think about those alternative asset kind of fair value gains and losses will be a bit lumpy.

Rob do I'm, sorry, yeah, Yeah, sure well, yes, I would say the investment income line is the run rate I think is pretty similar to what you're seeing now. However, as you know interest rates are at historical low levels and as as some of our investments mature we have.

To reinvest at very low rates in our fixed income portfolio. So for now I think the run rate for investment income should be similar in addition to which you know why loss mitigation bonds that we bought in previously helped mitigate a reduction of investment income because we bought them and keep them as.

Investment and they actually generally have much higher yields.

With respect to the investment in alternative investments, you're absolutely correct that the fair value of those of becoming the fair value coming through that line equity Investees will be more lumpy. However over the long term, we expect returns and you know that low double digits.

Between 10, and 12% for all those strategies.

Yeah, but the volatility is going to be a little more because of the mark to market, but you got to look at the investment over the long term and we expect the realizations to be in terms of returns and as Rob said, except for the Muni strategies, we expect that low double digit return on the all the other strategies that we deployed and in short it doesn't matter.

Okay makes sense thanks, guys.

Yeah.

Next question comes from Brock Irwin Clubber Bernstein. Please go ahead.

Hi, guys. Thanks for taking my question.

[noise] I've been a longtime shareholder of the company and I would just like to say that overall.

I'm very pleased with the company's capital allocation strategy I do understand though that the buyback program in particular, it's contingent on the special dividend as Rob mentioned last quarter and about the share repurchase is slowing down that being said I'm sitting here looking at the financial position of the company and its strong.

Song and if anything I'd like to see share purchases repurchases accelerate not slow down I know you've been contemplating some alternative financing to fund the buyback program, but regardless of how you're able to.

Acquire the funds it seems like there should be a way that you can do that and maybe some ways you can get creative with that so and if you could comment on that that'd be great.

Well as we said and we agree with you share repurchases as the most accretive transaction the company get do especially as a rather unique value that the current shareholder or the stock is performing based on the true book value and they just book value of the company Youre exactly right that we have a certain amount of dividend capacity normally coming out to be.

Oh sure or the dividends coming out of the operating subsidiaries and we normally enhance that with special dividends that are.

So you need the state approvals or bone marrow or even murder in New York, obviously enough of it world with the uncertainty that that provides.

The special dividend.

So im not something being contemplated very readily by the regulators and at the same time, we're still paying Puerto Rico losses. So that also takes a dollar for dollar head of our capital we'd like to keep a cushion to make sure we protect the reins of the company having.

Having said that as you point out we are exploring other alternatives to the extent that we think we can get something accomplished creatively that would allow us to further enhance your buybacks, but with the limiting factors of Puerto Rico special dividends and with the other alternatives are and the impact they would have relative to ratings et cetera. So everything is being.

Considered we appreciate you know the comment we understand it obviously view with the exact same way and it just as we work through the various alternatives will come up with decisions in the near the you know short term.

And then they said earlier the capitalization about French subsidiary increased our investment income at H.M., which increased our dividend capacity for this year.

Thank you. Our next question comes from Giuliano Bono with Compass point. Please go ahead.

Good morning, and thanks for taking my questions I guess, you're starting out.

So there's a similar topic.

You've already deployed a fair amount of capital into some of the for guaranteed investment funds and you're going to continue deploying that capital.

You should have some nice upside to your investment income if you as you realize you know low double digit returns just trying think about the impact that that could have on dividend capacity and if and if that is credited towards investment income when it comes to the dividend test.

I'm actually a julianna until that money is is dividend up from the investment subsidiary called and gas as we call. It which is owned by the insurance companies. It will not increase the dividend capacity, but we're looking we're exploring as that investment income increases in those alternatives.

Strategies.

Dividending up from our investments in our investment subsidiaries to our insurance subsidiaries, which would increase the investment income capacity and therefore increased our dividend capacity.

That makes sense and is there a kind of a.

Standard schedule that that's going to roll through on or is it based on how the different vehicles that you're congrats again.

Well, what we're working on a dividend policy from that company right now and we happened we haven't determined yet what the number is going to be because right now we're still ramping up investing in those phones as well.

That makes sense and then to have a a little bit of a different.

The topic.

Obviously, when we look a lot of the revenue bond exposure is usually have him that servicers are funds that cover you for call. It 12 months or so obviously significant stress before you.

Would trigger claim payments for instance, if like what portion of the Muni portfolio has debt service reserve funds and kind of what the average debt service reserve on looks like from a duration perspective.

Well I think if you go through the disclosure, we show and composition of the portfolio by many credit basically think of anything with a oh.

ER revenue stream typically has reserve funds oil obviously general obligations typically don't.

That makes sense.

And Oh yeah.

Yeah. The only other thing I think from just from a just from a focus perspective. There are a lot of focus kind of goes back and forth in investment management and insurance company.

One of these I was curious what Scott just trying to think about the relative kind of capital allocation not <unk> not necessarily looking at the investment in the funds, but just looking at kind of the relative capital allocation. That's attributed to the investment management segment relative to the total capitalization of the business.

Well remember the total capitalization of the business was its purchase price you know from though it should be self funding relative to its capital needs. The other side of it is where the additional money we want to weigh in.

Fuse into the asset management, but as an investor like any other investor obviously the goal the EPS imagine because the diversify our revenue stream, we won't move away from basically risk revenue to risk free revenue fee income and at the same time enhance the returns of our portfolios, which were doing as you can see based on the current quarter.

And we expect that as we continue to deploy additional strategies, which we develop have not announced yet as we'll see the fruition of certain transactions as we continue to roll. This thing out further benefit the overall value that it provides to the company and then as well last week, the diversification or the opportunity that it provides us in the marketplace under the name.

Single branding I'm sure for both asset management and finish guarantee across the entire universe.

That makes sense and I think.

I was trying to think about was you know it.

Looking at investment management, you probably have him.

Somewhere in the ballpark of $200 million of capital that's invested which is just a nominal fraction of your total capital [laughter] from an investment perspective, that's that's from a focus perspective, just trying to think about the relative contribution yeah at least at this point, while your turnaround do not imagine platform. Obviously it has a nominal basis. So that's just trying to think about that yeah.

Okay. That's specific portion of the capital invested in SMS messaging dramatically and as you said kind of in the ability to those of the runoff portfolio as well as launching strategy, that's kind of delayed the asset management by about a year. So obviously, we look to look for profitable.

Already in 2021, I will look for profitability in 2022, that's kind of the metrics. We're looking at but in terms of capital really doesn't take additional capital and as you said you know we paid very little for the company got you know basically 18 billions of assets under management and new diversification of our business strategies, new opportunities to put our own portfolio.

Yeah, So our own resources, which were not being a third party for which is also kind of nice while we're still recognizing enhance yields.

That makes lot of sense well, thanks for answering my questions and I will jump back in the queue.

Absolutely Thanks Julien.

And gentlemen, as a reminder, if you want to ask a question. Please press Star then one our next question comes from Brian Meredith, Yes, that's right.

Yeah. Thanks, a couple of it but maybe we can simplify this a little bit I mean, there's a lot of things you guys are doing to try to get there just given the capacity out today.

Holding company for share buyback and maybe just simply what would it take to get back to your $500 million share repurchase level than 2021.

Especially the dividend you.

You need the special dividend well unless you do something <unk> offering issuing another type of share purchase there. Obviously there are other ways to get there, but principally the easiest way because we have excess capital in the operating companies is just to get to stay even Maryland, or New York grass Especial data.

I just saw Shamber, Brian that this year, we can because of the capitalization the French subsidiary, we're going to get closer to that number.

Because that that increased our dividend capacity by about $100 million.

Numbers got.

Gotcha, Gotcha, and and the 237 million sitting at AG re the restrictions around that or is that do you want to keep a certain amount of money. There. Yeah. You know, yes AG re is are you know when it comes to insurance leverage its the most levered and we do keep a significant amount of cushion because a lot of its assets or our comfort based upon.

Insurance Trust for the reinsurance spray G M an easy thing.

Got you that makes sense and then lastly, maybe dive a little bit more into kind of whats going on Puerto Rico. You did take your provisions up I know you commented a little bit more about it Dominic <unk> why the why the provision this quarter what was going on that kind of drove that and then maybe how many you can comment a little bit about you know the election did it go.

On right now and what would that could potentially mean for Puerto Rico.

Well I'd say, there's a whole lot of Ah different tributaries that river that's for sure. So in Puerto Rico in General remember, we're very focused on what we have to do from a GAAP perspective relative to setting scenarios and that probably waiting you did have the blow out of the control boards. Most recent offer that was rejected by that.

Creditor group, that's working with them to try to negotiate a settlement of general obligation. So.

So because of the blow out with once again showed no debt service, which we think push buttons and potential timing of recoveries. We have to look at our scenarios and then look at the probabilities and change them as we believe that that external third party verifiable information would provide so that's kind of where we get to relative to reserve. However that doesn't change our view that basically.

We've got very strong right, you've got had a real data real sport Oh, then for sort of the fringe you know kind of disputes and we're hoping that the.

The recent rather than rolling Thatll be appealed in October and hopefully hurt by the second circuit in first quarter of 2021 gets us some clarity and number two you do have the whole issue of the control board.

But obviously the last number of it by the president seems to be a person focused on constructive resolution and things that surface at some level, which is very different than the existing control words behavior and if you read the headlines of a week or so ago. He walked out of the meeting just so they didn't get a form they couldn't vote on something that was once again ignoring.

<unk> right. So I think that potentially has to resolve itself before a lot of any clue number three as you point out we've got elections that are too close to call both location and it does change a little bit you know the complexity and if the election goes one way you can say well Gee there should be good relative to further age the municipalities including.

Puerto Rico, there's this issue a state or whatever Puerto Rico, which we get if they do it they need to have to argue that the Medicaid and Medicare reimbursements Gotta go significantly, which really changes the complexity of the budget of the Commonwealth. So there's potential really good guy out there and number four remember we still that pharmaceutical built banging around which makes that.

Absolutely says he say even in a disputed world government. They should all be able to agree that we should bring all the manufacturing of both pharmaceuticals or pharmaceutical equipment. Once you with short so that we can ensure ourselves that the manufacturing of that when another crisis. It. So I think there's a lot of events out there in the election could flip them, one way or the other but I think.

There is a common stream there do we expect another.

Leave packet sure we do what does it look like who knows depending on who's going to bore you know if the Puerto Rico election gets resolved and there seems to be a more CRO statehood flavor to this election than it's been in the past with more of the citizenship voting that has a huge potential in fact as I said, we still believe in our strong legal rights, we are gonna still.

Obviously, its life, where our legal rights and the recognition of the you know the respecting of the constitutional priorities and contractual leans, which we think are critical to us getting a substantial amount of our money back and that's what we're going to continue to fight for it but you've got these other things that are flying around board litigation relief et cetera.

And and and elections that will swing this thing blepharitis sideways, but I think the path is still pretty much forward.

Makes sense. Thank you.

And ladies and gentlemen. This concludes the question answer session I would like to turn the conference Dr. Robert Tucker for any final remarks.

Thank you operator, I'd like to thank everyone for joining us on today's call. If you have additional questions. Please feel free to give us a call. Thank you very much.

[laughter] today's call.

Thank you all for some todays presentation you may now disconnect your lines have a wonderful day.