Q2 2021 Assured Guaranty Ltd Earnings Call
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After todays presentation, there will be and opportunity to ask questions. Please note. This event is being recorded and and I'd like to turn the conference over to Robert Tucker Senior managing director of Investor Relations and corporate Communications. Please go ahead.
Thank you operator, and thanks, all for joining assured guaranty for our second quarter 2021 financial.
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Factors.
This presentation also includes references to non-GAAP financial measures, we present, the GAAP financial measures 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 and our current financial supplement and equity investor presentation, which are on our <unk>.
Website at assured guaranty Dot com.
And the presentation. Our speakers today are Dominic <unk>, President and Chief Executive Officer with Guaranty limit.
And Bob Bailey, our Chief Financial Officer. After their remarks, we will open the call to your question.
Webcast is not enabled for Q&A. Please dial into the call if you'd like to ask a question I will now turn the call over to Dominic.
Yeah.
Thank you Robert and welcome to everyone joining today's call having.
Having completed 1 of the best for sales for direct insurance production and over 10 years key measures of assured guaranty shareholder value per share stood at <unk>.
Record high levels as of June 30, 'twenty, 'twenty, 1, including shareholders' equity at $87.74 and <unk>.
Adjusted operating shareholders' equity at $81.81 and adjusted book value at $119.72.
During the first 6 months of this year, we earned $163 million of adjusted operating income of which $120 million was earned in the second quarter.
Additionally, we produced $167 million of Pvp, almost half of which came in and second quarter.
In contrast to the first quarter when record U S. Public finance production generated the lion's share of Pvp, new business production and the second quarter was well diversified with strong and international production and a solid contribution from our structured finance business exemplify and again, how our diversified strategy helps to support our new business production.
And in midyear 2021, total par volume issue and the U S municipal bond market was LKQ outpacing the rate of issuance at the same point last year, which was an all time record year.
Monetary and fiscal policy are driving economic recovery, which means more money to invest for retail investors and more revenue and improved credit strength for municipalities and Additionally.
Many high net worth individual investors that had been anticipating higher attach rates, which is driving up demand for tax exempt income.
As a result municipal interest rates have again been near historic lows with the benchmark rate on June 30th and just 1.5 per cent for 30 year AAA and municipal bonds.
Credit's been credit spreads tightening trend and tighter through the first day to levels not seen since before the great recession.
And these market conditions, you would not expect municipal bond insurance reached its highest first half penetration rate and a decade, but that's exactly what happened.
Sure Guaranty led the municipal bond insurance industry, and walks and penetration of $8.4 per cent.
Year over year, the industry's 2 first half insured par was up 34% more than double the <unk> 15 per cent of rate of increase for total parts issued and the market.
Taxable issues made up a quarter of the primary and municipal bond market year to day base.
And so on par amount sold.
And with municipal bonds are currently attractive relative to Corp.
Is there a generally providing a stronger credit for and equivalent meal taxable issues also attract corporate and for fixed income investors.
Less familiar with municipal credits and.
And they want to know that the underlying obligations have been vetted by an experienced and sure.
And the first half bond insurance penetration of taxable Pars sold reached 10 per cent.
Assured guaranty continued to see outstanding U S public finance production floor and the first 6 months of 2020, 1 guarantee and 58 per cent of new issue insured par sold.
The 11th $1 billion, we insured and the primary market was 34% higher than in the first half of 2020 and looking back to a comparable period, just before the pandemic, our new issue and ensure a parcel with 73 per cent and more and.
And then and the first half of 2019.
And the second quarter assured guaranty continued to lead the bond insurance market with approximately 52 per cent of primary market insured par sold.
The Guaranty 292 transactions for a total of 5 point, it's $5 billion and insured par sold.
We also continue to see heightened demand for our insurance on larger transactions for high demand typically singles interest from institutional investors.
So in the first half of 2021 assured guaranty selectively insured 21 transactions and $100 million or more and insured par 13 of which were sold and the second quarter.
We also continue to add value and double any credits during the second quarter, ensuring $809 million of par sold on 29 transactions assigned double day underlying ratings by at least 1 of the 2 leading rating agencies, bringing our first half production and this category to $2.3 billion on 56 deal.
Additionally, we guaranteed $3.9 billion of taxable poor sold which was about 2 thirds of the par sold with insurance and that portion of the market.
U S public finance Pvp totaled 29 million and the second quarter, which was exceeded by the $43 million, we produced and international infrastructure.
Finance, where we executed a variety of transactions among those among these were index linked transactions and the U K and.
And well received 327 million pounds 18, and a half your bond issue with Queens Alexandra Hospital, and Portsmouth and.
And to secondary market transactions provided protection zone bonds held by institutions.
And Spain assured Guaranty Europe closed our fifth transaction and 2 years and the Spanish renewable industry.
125 million euros, and 17 year fixed rate bond it.
Issue.
Finance 18, seasoned solar plants and spread across a number of provinces and all of the facilities benefited from the Spanish electricity payments that subsidize a predetermined level of return.
These issues were privately placed.
But and application for listing has been submitted to the Frankfurt stock exchange.
And structured finance, we produced 9 million of P. B P and the second quarter, primarily from an insurance securitization and our whole business securitization.
Have a nice pipeline and structured finance transactions that we consider highly likely to close.
For our insurance segment as a whole second quarter, and new business production offset amortization and other reductions of the insured portfolio, resulting in growth and net par outstanding so their fifth consecutive quarter.
Total net par outstanding has increased by a half a billion dollars for March 31 to June 30, and continuing to increase the par amount of our insured portfolio supports our predictable base of future earnings.
As I noted on our last call the below investment grade portion of our insured portfolio was down to 3 per cent of insured par outstanding.
Additionally, more than 57 per cent of net par exposure is classified as single layer and hard.
We are very comfortable with the credit quality and diversification of our insured portfolio and believe further fiscal stimulus and improve economic conditions are likely to strengthen it further.
Our heightened surveillance activity after the COVID-19, pandemic struck and it's been fully reflected and our internal credit ratings and the loss protections, where you apply those to our exposures. We have probably we have paid only relatively small first time insurance claims. We believe are due at least in part the credit stress horizon and specifically from COVID-19.
We continue to project.
Full reimbursement would be relatively small claim we.
We had no net no we had no net economic loss development and public finance and the second quarter and overall, we actually had a net economic benefit of $20 million.
Regarding our most significant below investment grade exposure, Puerto Rico, and its public corporations, we view recent and and continuing developments as positive for both the Commonwealth and its creditors.
As I discussed on our last earnings call.
We and other we get other creditors now a consensual agreements in place with the Puerto Rico oversight Board that covers 94% of our net par outstanding of assured guaranty as Puerto Rico exposures and almost all of the rest of those exposures are current on their debt service payments.
They always say board has also announced that additional creditors have signed on and as certain of these agreements.
Moving the official committee of unsecured creditors and the additional amount of lines.
The oversight board has voiced optimism that some of these agreements could be finalized as early as the end of this year. Meanwhile, the island's economic condition continues to improve with increased economic activity and revenue.
And it remains eligible for billions more and federal aid on top of the funds it's already received.
Last month, S&P S&P global ratings affirmed our insurance companies double a stable outlook financial strength ratings and noted that related to our Puerto Rico exposure. Its capital adequacy analysis includes a near term loss assumption and a vision and a view of claims beyond 2020.4.
After performing its rigorous capital adequacy analysis of our business S&P stated that assured guaranty has excellent capital and earnings with a meaningful capital adequacy buffer at the current double a rated it also noted our very strong business risk and financial risk profiles as well as our well defined diverse underwriting strategy.
Turning to our asset management segment assets under management reached $17.6 billion as of June 30th So and the.
The first 6 months, we increased fee, earning AUM from 75 per cent of total U N 93 per cent.
Issuance and the CLO market continues to be strong and the second quarter, reflecting robust demand for CLO securities and plentiful loans supply for collateral during the quarter, we execute our third CLO of the year, which issued approximately 40% of its equity to 4 different third party investors.
We also opened additional CLO warehouses, and now have 2 warehouses and the United States and 1 in Europe.
I guess as health care exposure performed well with continued revenue and earnings growth related to the portfolio of private investment exposures and.
The asset based portfolio continues to perform well as asked and credit quality has improved due to the economic reopening and third fiscal stimulus.
Prospects for the rest of this year look good across both of our business segments.
And on the growth has been impressive since vaccinations have allowed more public activity.
However, investors will soon not forget how the virus came without warning to disrupt all aspects of life and.
And we believe the pandemic may prove to be a watershed event that forever favorably changes how the market perceives the value of financial Guaranty insurance.
Some of the current sources with economic uncertainty, our spread or the spread of the Delta variant.
Stream of weather events and potentially volatile political polarization we.
We have the financial strength and short portfolio diversification underwriting and surveillance capabilities and risk management discipline to safeguard our ability to protect investors and to create value for shareholders.
And and uncertain world, many investors will demand and the extra security are off and into guaranty.
And our final note, we continued our capital management program and made some beneficial changes to our capital structure to give you details on those changes and other performance data I will now turn the call over to Ralph.
Thank you Dominic and good morning to everyone on the call.
Picking up from Dominic last point I am pleased to report we had a very successful debt issuance and may raising $500 million and the form of 10 year notes and an attractive rate of 315%.
And July we used $200 million of those proceeds to redeem AGM H debt.
Including $100 million of notes due in 'twenty, 1 and 1 at 6 and 7 eights and $100 million of notes due in 'twenty, 1 O 2 at $6.2 5%.
The addition of $300 million and day after taking into consideration. The July redemptions resulted in incremental animal that surface of only $2.6 million.
The remaining proceeds will be used and the pursuit and our key business strategies, including share repurchases.
Demonstrating the success to date of the share repurchase program I'm happy to report that our book value metrics reached record highs on a per share basis and that and our adjusted operating income per share increased to $1 and 59 and the second quarter of 2021.
And $1 and 36 and the second quarter 2020.
Total adjusted operating income was $120 million and the second quarter of 2021, compared with $119 million and the second quarter of 2020.
Turning to our core business core.
Core business results and the insurance segment generated adjusted operating income of $152 million and the second quarter of 2021.
Paired with $154 million and the second quarter of 2020.
Strong investment results from our alternative investment strategies.
And with a lower loss expense on Puerto Rico substantially offset the decline and premium accelerations due to refundings.
And the prior year, a commutation gain and that did not recur in 2021.
Total income from the insurance segment investment portfolio, which includes net investment income from its fixed maturity portfolio and equity and earnings from alternative investments and such.
Be assured I am funds increased by $11 million or 10%.
Our fixed maturity and short term investments account for the largest portion of the portfolio generating net investment income of $71 million and the second quarter of 2021.
Compared with $82 million and the second quarter of 2020.
The decrease in net investment income was primarily due to lower average balances, which declined primarily due to dividends paid per reinsurance subsidiaries that were then used for AGL share repurchases and.
And lower reinvestment yields on short term investments.
Since the establishment of assured and I am.
And the insurance subsidiaries have invested $366 million and assured I am funds, which now have and net asset value of $433 million.
And what are you and earnings are assured I am funds generated a gain of $37 million and the second quarter of 2021.
Compared with $26 million and the second quarter of 2020.
The health care and CLO funds were the largest components of these games.
Our various other third party managed alternative investments generate gains of $11 million and the second quarter of 2021.
As a reminder, and.
What do you and earnings and Investees is a function of mark to market movements and attributable to the shore to the assured I am funds and other alternative investments. It is more volatile and the net investment income on the fixed maturity portfolio and will fluctuate from period to period.
As we shift fixed maturity assets into these alternative investments net investment income from fixed maturity Securities may decline.
However over the long term, we expect the enhanced returns on the alternative investment portfolio to be over 10%.
Which exceeds the expected returns on our fixed maturity portfolio.
Another driver of the quarter over quarter variance is the decline and loss expense, which was a benefit of $12 million and the second quarter of 2021.
Compared with a loss of $39 million and the second quarter of 2020.
The driver of loss expense and net economic loss development, which was a benefit of $20 million and second quarter 2021, and mainly consists of a $28 million benefit and U S Army as exposures, which benefited from higher excess spread improve recoveries on charged off loans.
And improved performance and certain transactions.
The economic development and attributable to changes in discount rates for all transactions was a loss of $15 million for the second quarter of 2021.
And the prior year second quarter economic development was primarily attributable to Puerto Rico exposures.
In terms of premiums.
Schedule net earned premiums were consistent relative to second quarter 2020, as new business production substantially offset the decline in earnings and structured finance transactions.
Celebrations due to refundings and terminations were down to $50 million in second quarter of 2021, compared with $32 million and the second quarter of 2020, driving the overall decline in net earned premiums from $125 million and the second quarter of $2020.206 million.
And the second quarter of 2021.
And the asset management segment.
We have continued to make great progress and advancing our strategic goals.
This quarter, we increased fee earnings CLO AUM through the issuance of $400 million and new Clo's and.
And the sale of CLO equity from legacy funds.
Which reduced the amount of prepaid fees.
Since the end of 2019, we have sold substantially all of the CLO equity and legacy funds, which helped increase fee, earning AUM.
And from $3.4 billion and at the end of 2019.214 billion.
And as of June 30th 2021.
As of June 32021, 96% of CLO and AUM is now fee, earning compared to 83% as of last quarter.
We also continued to liquidate assets and the wind down and science and now have $1.2 billion and AUM, which represents a 79 per cent decline since the Blue Mountain acquisition.
In addition, using assured I am investment management expertise with expanded investment strategies and the insurance segment and to date, we have recorded strong mark to market results on the fund established by assured I am.
The asset management segment, adjusted operating loss was $2 million and the second quarter of 2021.
And to $9 million and the second quarter of 2020.
[laughter] excuse me.
Asset management revenues increased 62% and second quarter 2021.
Compared with second quarter 2020, due mainly to the increase in fee, earning AUM as well as the recovery of deferred CLO fees.
The COVID-19, pandemic and downgrades and loan markets had figured overcollateralization provisions and Clo's and the second and third quarters of 2020, resulting in the deferral of CLO management fees. However, as of June 32021, there were no C O lows triggering overcollateralization.
And provisions and therefore, no CLO fees are being deferred.
The increase and management fees from Clo's and opportunity and liquid strategies more than offset the decline and fees from our wind down funds as our core strategies continue to increase our top line.
The corporate division, mainly consists of interest expense and the U S holding company debt as well as corporate expenses and board of directors fees.
Net loss for the corporate division of $34 million in second quarter of 2021 was higher than the loss of $26 million and the second quarter of 2020, mainly due to higher interest expense from the new debt issuance and higher state and local taxes.
And the third quarter, the redemption of AGM aged debt.
Well I think you mentioned that well result, and the acceleration of the unamortized discount of $66 million.
Or $52 million after tax.
And that'll be recorded as a loss on extinguishment of debt. This loss represents the difference between the amount paid to redeem the debt.
And the carrying value of the debt, which includes the unamortized fair value adjustments that were recorded upon acquisition of AGM H and 2009.
Prior to the redemption. This just can't always being accreted into interest expense over the next day to years, which represented the remaining contractual life of the debt.
The overall effective tax rate on adjusted operating income fluctuates from period to period based on the proportionate income and different tax jurisdictions.
And second quarter 2021, the effective tax rate was 18, 7% compared with 14, 2% and second quarter of 2020.
And as an update to our recent share repurchase activity in second quarter 2021, we repurchased 1.9 million shares for $88 million and an average price of $46 and 63 per share subs.
Subsequent to the quarter close we are continuing to program and repurchased an additional 1.2 million shares for $58 million.
Since the beginning of our repurchase program in January of 2013, we have returned $3.9 billion to shareholders under this program, resulting in a 65 per cent reduction and total shares outstanding.
The cumulative effect of these repurchases was a benefit of approximately $32 and adjusted operating shareholders' equity per share and over $55 and adjusted book value per share and <unk>.
Drive these metrics to new record highs of over $81 and adjusted operating shareholders' equity per share and over $119 and adjusted book value per share.
From a liquidity standpoint, the holding companies currently have cash and investments of approximately $356 million of which $70 million resides and AGL.
These funds are available for liquidity needs or or for use in the pursuit of our strategic initiatives to either expand or a business or a repurchase shares to manage our capital.
Finally earlier this week consistent with our longstanding capital management goals, our board of directors approved an additional $350 million and share repurchase authorization and.
In total as of today, we have $379 million and remaining share repurchase authorization.
I'll now turn the call over to the operator to give you the instructions for the Q&A period. Thank you.
We will now begin the question and answer session.
Ted a question you May Press Star then 1 on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then 2.
At this time, we will pause momentarily to assemble our roster.
Okay.
Our first question comes from Christopher Testa from Royce investment partners. Please go ahead.
Hi, Good morning, guys. Thank you for taking my question.
Just wanted to touch a bit on the asset management side.
And so see how low it was it's great to hear that Youre non tripping any junior Oc tests.
That's great News. My question is how are you looking to compete.
Gathering near a CLO assets and attracting and investors given the.
And the fierce competition among a lot of tier 1 collateral managers.
Do you think youre going to be able to gain market share and if so.
How do you expect to do that.
Well I think you know as a top 20 CLO manager, we have the network relationships and Investor appeal.
Allows us those opportunities and as you can see and the activity and the current year kind of supports the major player and that market standing we weighted.
We have good experienced people that have great market recognition and it's worked very very well and we continue to think that there will continue to run 1 of the leading CLO businesses and the marketplace.
Got it okay.
And I know you guys had mentioned and getting more investment income doing less and fixed income and.
And more into the alternative or the alternative pieces of the CLO equity you bet, you're managing or are they more along the lines of maybe you know double b or maybe single weighted.
And within those structures.
Well it really is a diversified portfolio.
And so it sort of being managed by assured I am for assured Guaranty operating company, so you're right.
And as CLO equity and the early days of the CLO prices, we did take certain tranche, a and C. O loans is just investment.
Investment specifically fund managed by our sometimes by third party that performed very very well and the remaining investments represent support of our existing strategy and health care and structured finance and spread across the board and no 1 dominated but where we are and CLO.
CLO equity side.
Got it and then let him know.
And just to be clear those are also the equity layer.
<unk>.
CLO that we manage.
Got it okay. Yeah. So those are those are strictly when youre buying equity those are all assured investment management activity.
Yes.
Okay great.
Beyond by assured investment man.
Okay.
And then.
And have you guys had I know I know you haven't meet as many fee rebates.
And you did but the legacy investments or are you anticipating and having to do for you.
Rebates that lower the traditional 50 bps, so far and all.
What are those.
<unk> more AUN or are you going to kind of hold steady there.
So and the legacy side and just the liquidation strategy through harvest period at this point and time, we don't charge management fees on those doesn't mean now are an absolute you know harvesting. So there is no magic and therefore, there's no rebate, obviously and you look to continue to grow the asset management business and part of the reason for the acquisition was to allow sure.
And put its capital next to third party capital to generate more management fees and that's kind of the strategy. That's the goal and that's kind of how we're heading.
Yeah.
Got it great and and last 1 for me and I'll hop back in the queue.
Dominic you had mentioned that you know something thats, driving muni demand and and I agree with you and it's Matt.
The fear of a higher federal taxes, obviously allows muni you said sort of shield that.
However, there was also no. There has also been an issue with.
Biden and bolt and the rest of it.
It was cohorts and Congress getting through the tax increases has that sort of abated at all in terms of investors not being as concerned or are you still seeing the same store.
Strong muni demand from investors that were initially concerned about that.
Well I guess the guests the best surge and you can look at is the flow of funds and and huge.
Oh fun I mean, the number today is just incredible I think we're going to set a record for the year in terms of fund flows into the taxes and mutual funds, but the funny thing is you bring up and an interesting point or current the contradiction and the market goes much money that's coming in.
And the creation of a tax increase we're also seeing and the search for yield more investors and she's interested in municipal taxable issues just to get yield. So you got to you know kind of forces out there that seem to be enough to direction, yeah, and it seems to be driving significant demand and the market, which we believe will help our penetration rate.
And they use and insurance going forward.
The next question comes from Tom and Mick joined from K B W. Please go ahead.
Hey, good morning, guys. Thanks for taking my question to you.
So yeah and good to see the the $500 million successful issue and so they are thinking.
And thinking about that and that $300 million and a crazy, but you still have.
Are you evaluating any.
Targets for every day in terms of the acquisition.
Obligations or anything or is the plan really do use a lot of that for Jeff on buybacks.
But as we say we continue to look at all the alternatives that are out there and the market for the investment of our money obviously today the.
Capital and management are the repurchasing of shares still represents the most accretive transaction, we can do but obviously, we pay a lot of attention to that and we saw something that really piqued our interest and we felt were that true value long term for the company, obviously, we'd look at that but remember when those sides of further.
And I'll say acquisitions, and typically not very capital intensive.
And so at the end of the day I think our strategy still sticks with capital management as a preeminent thing that we should be looking out and trying to execute all day after the company and its shareholders.
Okay, and so there is no restrictions on using the full $300 million share buyback.
But no no no.
Restriction.
Okay great.
And then just going back to the acquisition side and when we think about previous you know acquisitions are a reinsurance deals that you've done on some of the runoff books of business out there and insurance sector. What's like the main valuation metric that you guys look out at the most appropriate to look at potential purchase price multiple low GAAP book value.
Statutory capital or net our earnings power.
What do you kind of think about when you think about.
And how much you pay for some of those assets out there.
And it's all based on return on capital and return on the amount of investment and you know you've pointed out a good point that we use reinsurance and a lot and cases that actually allows us to really identify what portions of our portfolio that we like which ones and we think we can attract and we price and therefore absorbed into our risk portfolio and of course, the risk and we're willing to and stuff.
When you look at wholesale acquisitions, you really got to get comfortable with the entire portfolio and you know if you think of what's out there today and in terms of targets those portfolios and shrunk pretty dramatically.
And so if you look at them all the time and and I think for US reinsurance is as good a day.
Option, a and transaction that gets most of the benefits of an acquisition without some of the baggage that comes along with it.
Okay, and then that's something and I guess, just wondering when do you get comfortable around the reserve adequacy and potential targets, what's what's that process like.
Yeah.
Individually re underwrite every transaction and I mean, I think we can say that the company has demonstrated its credit capabilities and its credit analysis and surveillance.
Capabilities.
We take every credit through our process to make sure we're comfortable with.
With the creditors, if there was a reserve how attitudes and reserve and whats the premium on the book with the discount rate relative to the capital that would allow us to allocate additional premiums for the transaction to make sure we hit our return and horrible.
And it still gets back to that return on capital.
Okay. Thanks, and then just last 1 and what was the impact of the change and discount rate assumption on the loss and I'll, let you recall, it and our Puerto Rico exposures and their potential recoveries.
Good day.
We don't we don't disclose.
And what the discount is just the Puerto Rico, I mean, I said and my commentary with a total effect of discount rates work, which is on net for everything was $15 million.
And second quarter.
Okay got it thank you.
Yeah.
The next question comes from Michael is simple.
Private Investor. Please go ahead.
Good morning, gentlemen.
Quick questions.
As you kind of highlighted the penetration rate of the insured.
Product and a first quarter first half and how it's ticking up twice and you said and an 8.4% penetration.
Penetration rate can you remind us.
And again, maybe apples and oranges, but can you remind us of what the industry high market penetration was at and say the last decades again understanding that the dynamics and probably.
Sure.
Yep.
Let me dust off my old analysis, though and the old day, the market of insurers ensure and about 50 per cent of all issues, but that included AAA and double ways across the entire spectrum.
Obviously as we look at the market today.
Feel like that's 50 per cent range, however, and supply and to a different universe.
So today, we think because of the double a rating of the insurance industry and for financial Guaranty.
And our underwriting.
Criteria or appetite relative to certain large exposure to certain lower rated.
And ensures we think the insurable market today compared to that market a book that is only 50%.
So we think today based upon ratings credit appetite risk tolerance, we can only ensure and when we used to 50 per cent of what we used to ensure but I think on that 50 per cent under a normalized interest rate environment, we can still get to a 50% penetration and if you look at all and statistic.
A rated issues not par, we insured and 50% with the industry insurance typically over 50 per cent of AA rated issuance.
And you can get to 50 per cent of the 50% insurable market for <unk> 25 per cent of overall penetration rate. If you had normalized interest rates as we all know we do not live in an environment of low normalized interest rates and when will ever return. There is anybody's best guess my horrible. So I've been wrong every year, so I'm not going to make another 1 but you can't keep and you are.
You know 10 year Treasury and 1.25, and 1.5 whatever just a day.
Ultimately where that gets to a normalized position I think the upside you've all penetration and therefore our freedom.
And your model because remember we also get paid on debt service, which is part of the type of interest and so and interest rate increase not only generates a potential opportunity for higher penetration, but it results and a greater free new calculation for the company as well.
Very good thank you for that.
Switching gears to Puerto Rico.
Could you just remind us again of.
Hmm.
The major legal milestones that.
Lie ahead as we work towards.
I guess about 2020.2 resolution.
To the entire mishmash.
And I'm aware of the November Court case, but are there other confirmation tests, but are there other legal milestones that were you.
You should be aware of.
Most of the second half of the year here.
And you're calling it a mishmash and being kind to be honest.
Good day.
Well, we are and waking hours I guess watching my language.
Exactly wrong and PG rated channel so at the end.
Good day and everything that's left is really illegal.
So it's getting the disclosure is done which we just did for the G O and you know Commonwealth debt.
And as to the court for certification and and thank all of them are scheduled through the end of this year for the Geos P. B and early next year for each day and potentially PREPA, but once again these are trying to take or not absolute theyre not guaranty.
And anything can happen and as you can appreciate a lot of and.
And natural things that happened in Puerto Rico over time, but anywhere we're still very optimistic that things are moving very well. The fact that you have these other bedroom sign onto the G. L. P. D O deals and I think is a good sign and it gets us above the loveland necessarily pausing and founders to get the deal done.
And it's now more of a legal process and there was a calendar and it takes to stay basically mid year next year.
Very good thank you gentlemen for your answers.
Thank you and thank you.
The next question comes from Raw and Bodmin from capital returns and please go ahead.
Free cash.
Good morning, gentlemen.
Hum.
And had to.
2 sort of simple questions. Dominic you mentioned the company's market share I think 1 figure was 52% and another 1 was 58% I think depending upon sort of the time series.
And the balance of the insured market sort of piece and making up the remaining 48 and <unk> 42 per cent is that spread over a couple of or a multiple carriers or is it concentrated.
Across really just 1 off the carrier how distributed and the balance of the of the <unk>.
<unk> market.
And it's 1 other candidates and mutual company called build America mutual Okay, I'm familiar with it okay. Thanks, and Rob when you mentioned the refi and the 2 debt instruments, I think I misheard, but I can't imagine it's right. The second 1 I thought I heard you say that are retired debt instrument that was going to be due in <unk>.
1 O 2.
And I could have heard it wrong, but that just seems too far out there to be correct.
No that is correct.
Those were yesterday about 100 year debt.
And that product doesn't exist anymore, but was callable at par after 5 years and.
And we were able to take advantage of.
Of taking out high cost debt and and maintain flexibility at the holding company.
Hey, Thanks, guys best of luck hope all is well that's good.
The next question comes from Geoffrey Dunn from Dowling and partners. Please go ahead.
Thank you and good morning.
Good morning and get.
I had 2 questions first you know there was some noise and the news about Puerto Rico, a few weeks ago basically I think it was the Commonwealth lawyers.
Arguing for the pension years, and saying that you know how do you issue and debt and these agreements.
Without support from Puerto Rico.
So.
And what is the reality.
And he goes sway here.
And the potential ability to derail the agreements.
Well, it's a good question and I'm not the attorney and the room, but I'll play 1 just for the sake of argument and so the issue with pensions really gets to 2 issues right. So number 1 does the control board and have the authority to basically steam roll and the legislature.
It seems like they free snakes, if they do I am not the judge so I can't tell you, whether that's true or not but it seems like big day.
So that says okay, even though you wanted to see the pension is protected.
Do you have the sorry your capability to do that good question.
However against that and kind of backdrop, you've got to remember and bankruptcy. There's a statement and for me and said that says all countries of equal standing has to be trained and equally so to me. It's an impossible argument to say that pensioners and every other creditors taken and apparently don't taken and pen I don't know how long we passed muster.
Sure.
If you and especially a challenge because it's black and White you can't you know all creditors and legal training has to be treated fairly how can you preserve 1 classic how do you book.
And so and they're gonna get and 100 cents and the dollar you have all these other classes and then.
So, although the ronald to sabre and both of them around and favor I'm not so sure if he drove it and why because this is just position and he tried to reduce the amount of the discount.
Okay. Thank you and definitely the answer Joe.
Yeah actually yeah, I mean, directionally helps but who knows until it's all finalized right.
Alright.
The other question I had is on the future prospect for runoff book M&A.
Puerto Rico is obviously, putting us on hold but.
Let's go forward to the scenario, where the settlements are all done.
It does.
Puerto Rico still present and area of challenge given the C V I components of the settlements and a certain amount of that predicated on future speculation or or is that something you think you can.
Get comfortable went through the underwriting and putting putting no value on those instruments and I'm talking about acquire.
I think we can get very comfortable.
Okay perfect. Thank you.
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