Q2 2024 Assured Guaranty Ltd Earnings Call
Bruno: Good morning, everyone, and welcome to the Assured Guaranty Limited second quarter 2024 earnings conference call. My name is Bruno, and I'll be operating your call today. All participants will be in a listen-only mode.
Good morning, everyone and welcome to the assured Guaranty limited second quarter 2024 earnings Conference call.
Speaker Change: My name is <unk> and I'll be operating your call today.
Operator: All participants will be in a listen-only mode. Should you need any assistance, please signal a conference specialist by pressing the star, then zero on your telephone keypad.
Speaker Change: All participants will be listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero on your telephone keypad.
Bruno: Should you need any assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity for you to ask a question. To ask a question, you may press star then one on your telephone keypad. Do we understand your question? You may press the star followed by two. Please note, this event is being recorded. I would now like to turn the conference call over to our host, Robert Tucker, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead.
Speaker Change: After today's presentation there'll be an opportunity to ask a question.
Speaker Change: That's a good question.
Speaker Change: Then one on your telephone keypad.
Speaker Change: Can we draw. Your question you May press Star followed by two.
Speaker Change: Please note. This event is being recorded I would now like to turn the conference call over to our host Robert Tucker Senior managing director Investor Relations and corporate Communications. Please go ahead.
Robert Tucker: Thank you, operator. And thank you all for joining Assured Guaranty on our second quarter 2024 financial results conference call. Today's presentation is made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The presentation 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. These statements are subject to change due to new information or future events.
Robert Tucker: Thank you operator, and thank you all for joining assured guaranty for our second quarter 2024 financial results Conference call.
Robert Tucker: Therefore, 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 website, and the most recent presentations in SEC filings, our most current financial filings, and for the risk factors.
Unnamed Speaker: Today's presentation is made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 website.
Robert Tucker: 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 website at assuredguarantee.com.
Speaker Change: Today's presentation is made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
The presentation 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.
Speaker Change: These statements are subject to change due to new information or future events. Therefore, 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.
Speaker Change: If you are 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 website for our most recent presentations and SEC filings, most current financial filings and for the risk factors.
Speaker Change: 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.
Robert Tucker: Turning to the presentation, our speakers today are Dominic Frederico, President and Chief Executive Officer of Assured Guarantee Ltd., Rob Bailenson, our Chief Operating Officer, and Ben Rosenblum, our Chief Financial Officer. After the remarks, we will open the call to your questions. As the webcast is not enabled for Q&A, log into the call if you'd like to ask a question. I will now turn the call over to Dominic
Speaker Change: Patients, 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, Rob Bailenson, our Chief operating officer, and Ben Rosenbloom, Our Chief Financial Officer. After their remarks, we will open the call.
Speaker Change: To your questions as the 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.
Dominic Frederico: Thank you, Robert, and welcome to everyone joining today's call. Assured Guaranty had an exceptional second quarter and first half of 2024. Adjusted operating income per share came in at $1.44 for the second quarter of 2024 compared with 60 cents in the second quarter of last year. Our key shareholder evaluation measures again reached new per share highs. Since June 30th of 2023, on a per share basis, shareholders' equity rose 16%, adjusted operating shareholders' equity rose 15%, and adjusted book value rose 12%.
Dominic Frederico: Thank you Robert and welcome to everyone joining today's call.
Dominic Frederico: Assured guaranty had an exceptional second quarter and first half of 2024.
Speaker Change: Adjusted operating income per share came in at $1 44 for the second quarter of 2024 compared with <unk> 60.
Dominic Frederico: Third quarter of last year.
Dominic Frederico: Our key shareholder valuation measures again reached new per share highs since June 30 of 2023 on a per share basis shareholders equity rose, 16% adjusted operating shareholders' equity rose, 15% and adjusted book value Rose 12%.
Dominic Frederico: New business production for the first half remains strong, consistent with recent year's results, and was diversified across U.S. public finance, international infrastructure, and global structured finance. First half PVP of $218 million is more than in any first half since 2009, with the sole exception of first half 2018, where we assumed a large portfolio from another bond insurer. Rob will give you more production details in a few minutes.
Dominic Frederico: New business production for the first half remained strong consistent with recent years results. It was diversified across U S public finance international infrastructure and global structured finance Pvp.
Dominic Frederico: Pvp of $218 million more than in any first half since 2009 with the sole exception of first half 2018, we assumed a large portfolio from another bond insurer.
Dominic Frederico: Rob will give you more production details in a few minutes.
Dominic Frederico: But first, I want to discuss the merger we completed last week of Assured Guaranty Municipal into Assured Guaranty Inc., which is the same company you knew for many years as Assured Guaranty Corp. Those two companies have been our principal insurance operating subsidiaries since 2009 when Assured Guaranty purchased FSA, later renaming it AGM. Chanel Calabria and Separately no longer exist, and we Inc. is the surviving company, and its acronym is simply AG.
Speaker Change: But first I wanted to discuss the merger we completed last week of assured guaranty municipal into assured Guaranty, Inc, which is the same company you knew for many years as assured Guaranty Corp.
Dominic Frederico: Those two companies have been our principal insurance operating subsidiaries since 2009 when Assured Guaranty purchased FSA, later renaming it AGM. Chanel Collaborative separately no longer exists, and we see the merger as beneficial to all of our stakeholders.
Dominic Frederico: Those two companies had been our principal insurance operating subsidiaries since 2009, when assured guaranty purchased FSA later renaming at AGM.
Speaker Change: As you know Robert separately, no longer exist and we see the merger is beneficial to all of our stakeholders.
Speaker Change: Sure guaranteed Inc. As the surviving company and it's accurate as simply a G.
Dominic Frederico: This simplification of our brand marketing is only one of the many benefits of the primary objectives of the merger are to achieve more efficient utilization of the combined capital of the two companies and to increase operating efficiency. This includes having one principal U.S. regulator, Maryland.
Speaker Change: Simplification of our brand marketing is only one of the many benefits.
Speaker Change: Two of the primary objectives of the merger are to achieve more efficient utilization of the combined capital the two companies to increase operating efficiencies.
Merrill Lynch: This includes having one principal U S regulator Merrill Lynch.
Dominic Frederico: By aggregating the two platforms into a single insurance company, the merger enlarges the pool of capital and claims-paying resources available to support each insurance company's policies and results in further diversification of the single company's insured portfolio's credit profile. Both companies ensure portfolios that contain public and infrastructure finance exposures and structure finance exposures. The combined company will continue to serve the same market. To be clear, all obligations of AGM are now obligations of AG. In all other respects, the policies have the same terms as when they were issued.
Speaker Change: Aggregating the two platforms into a single insurance company merger and large is the pool of capital and claims paying resources available to support <unk> insurance companies policies resulted in further diversification of the single companies insured portfolios credit profile.
Speaker Change: Both companies insured portfolios that contain public and infrastructure finance exposures in structured finance exposures. The combined company will continue to serve the same markets.
Speaker Change: To be clear all obligations of AGM are now obligations of AG and all of the respects policies under the same terms as when they were issued.
Robert Tucker: AGM's UK and European subsidiaries are now subsidiaries of AGM, and it was authorized to repurchase an additional $275 million of its common share. In June of this year, we saw a favorable ruling in the restructuring case of Puerto Rico's Electric Power Authority, PREPA, our last remaining non-paying Puerto Rico exposure. The appeals court reversed several lower court findings, looking at whether the utility's bondholders had a perfected lien, not just on trust agreement accounts, but also on past, present, and future net revenues as well. Assured Guaranty has proven its reliability over the past four decades, consistently meeting our obligations at Six Capitals, who are shareholders.
Dominic Frederico: AGM's UK and European subsidiaries are now subsidiaries of AG. At the time of the merger, AG and AGM had identical financial strength ratings, AA plus at KBRA, AA at S&P, and A1 at Moody's, all with a stable outlook. All three rating agencies have indicated that they see no change to Assured Guaranty's financial strength rating as a result of the merger. KBRA wrote that it views the merger and the result in the simplification of the overall organization structure as creating capital, operational, and regulatory efficiency, as well as enhancing Assured Guaranty Limited's overall global platform and scale.
Speaker Change: <unk> U K and European subsidiaries are now subsidiaries of AG.
Speaker Change: At the time of the merger a G&A Jim had identical financial strength ratings double a plus of KBR, a double a at S&P and they wanted to Moody's all with stable outlooks.
Speaker Change: All three rating agencies have indicated that they see no change to assured guaranty's financial strength rating as a result of the merger.
Speaker Change: KBR a road that have used the merger and the resulting simplification of the overall organization structure is creating capital operational and regulatory efficiencies as well as enhancing assured guaranty limited overall global platform and scale.
Dominic Frederico: Rudy said it believes the merger resulted in a moderate strengthening of AG's credit profile relative to those of pre-merger AG and AGN. S&P has always rated our guarantees based on the capital adequacy of the entire group, so it was already taking both companies' exposures into account. For the merger, AGM and H.U. were each overcapitalized, and each has experienced a substantial reduction in its insured exposure since 2010, while their statutory capital increased materially during the same period.
Moody's: Moody's said it believes the merger resulted in a moderate strengthening of AG credit profile relative to those of pre merger a G&A jet.
Speaker Change: S&P is always ready to our guarantees based on the capital adequacy of the entire group. So it was already taking both companies' exposure into account.
Speaker Change: For the merger AGM and <unk> were each overcapitalized and each has experienced a substantial reduction in its.
Speaker Change: Insured exposure since 2010, while there are statutory capital increased materially during the same period in.
Speaker Change: In connection with the merger, we upstream $300 million special dividend technically a stock redemption that the Maryland insurance administration approved.
Speaker Change: And this followed the $100 million stock redemption by AGM during the second quarter rating agencies took these transfers into account when considering the combined company's ratings.
Dominic Frederico: There's more information about the combined company in a presentation on our website, where you can also find a Q&A with more detail on the merger, our press releases about both the merger and the rating agency decisions, and the full rating agency email. With the consolidation of the MERS subsidiaries, the new AG is very well positioned for future growth and efficient operational success, building on Assured Guaranty's excellent first half 2024 production and financial results.
Speaker Change: There is more information about the combined company and a presentation on our website, where you can also find a Q&A with more detail on the merger or press releases about both the merger and the rating agency decisions and the full rating agency announcements with.
Speaker Change: With the consolidation of the merged subsidiaries the new AG is very well positioned for future growth and efficient operational success built.
Speaker Change: Building on assured guaranty's excellent first half of 2020 for production and financial results.
Dominic Frederico: We remain committed to our share repurchase program with a target this year of $500 million. As of August 6th, 2024, the company had repurchased 7.2% of the shares that were outstanding on December 31st, 2023, and was authorized to repurchase an additional $275 million of its common shares. In June of this year, we saw a favorable ruling in the restructuring case of Puerto Rico's Electric Power Authority, PREPA, our last remaining non-paying Puerto Rico exposure.
Speaker Change: We remain committed to our share repurchase program with a target this year of $500 million.
Speaker Change: As of August six 2024, the company had repurchased seven 2% of the shares that were outstanding on December 31 2023.
Speaker Change: Is authorized to repurchase an additional $275 million of its common shares.
Speaker Change: In June of this year, we saw a favorable ruling in the restructuring case of Puerto Rico Electric power Authority PREPA, our last remaining nonpaying, Puerto Rico exposure.
Dominic Frederico: The appeals court reversed several lower court findings, looking at the utilities bondholders had a perfected lien, not just on trust agreement accounts, but also on past, present, and future net revenues as well. The appeals court also determined investors allowed claims to be the face amount of the utility bonds plus interest, about $8.5 billion, which is more than the prior $2.4 billion cap set by the lower court. The lower court has ordered the parties to resume mediation in light of the appeals court ruling, and we look forward to working with all parties to reach a fair resolution of the proper restructuring. I'm certainly this year's events about economic, geopolitical, and financial volatility have reminded investors why it's good to have investments that are protected by our insurance.
Speaker Change: Squirt reverse several lower court findings.
Speaker Change: The utilities bondholders that have perfected lean not just on trust agreement accounts, but also on past present and future net revenues as well.
Speaker Change: The Appeals court also determining investors allowed claims to be the face amount of the utility bonds plus interest about $8 5 billion, which is more than the prior $2 $4 billion cap set by the lower court.
Speaker Change: Hello.
Speaker Change: Ordered the parties to resume mediation in light of these appeals court ruling and we look forward to working with all parties to reach a fair resolution of the PREPA restructuring.
Speaker Change: Uncertainty this year about economic geopolitical and financial volatility reminded investors, but it's good to have investments that are protected by our insurance. Our guarantee is unique value to provide investors who need protection from what can't be predicted and bond issuers can reduce their financing cost by issuing bonds with the extra protection of our guarantee.
Dominic Frederico: Our guarantee has unique value for bond investors who need protection from what can't be predicted, and bond issuers can reduce their financing costs by issuing bonds with the extra protection of our guarantee. Assured Guaranty has proven its reliability over the past four decades, consistently meeting its obligations, this capital who are shareholders, a high level of financial strength, a base of predictable earnings, and market leadership. We have high potential for growth in our worldwide financial guarantee business, and with our new, more efficient organizational structure, we believe that we've never been better positioned to serve our clients, protect our policyholders, and create value for our shareholders. I will now turn the call over to Rob to discuss our production results.
Speaker Change: Sure guarantee has proven its reliability over the past four decades consistently meeting our obligations.
Speaker Change: Turning excess capital to our shareholders, while maintaining a high level of financial strength, the base of predictable earnings and market leadership.
Speaker Change: We have high potential for growth in our worldwide financial guarantee business.
Speaker Change: With our new more efficient organizational structure, we believe that we have never been better positioned to serve our clients protect our policyholders and create value for our shareholders I will now turn the call over to Rob to discuss our production results.
Rob Bailenson: Dominic, Assured Guarantee, and in particular U.S. Public Finance had very strong first half results for 2024. In fact, it was one of our strongest production halves since 2009.
Rob: Thank you Dominic.
Rob: <unk> guarantee and in particular U S public finance had a very strong first half results for 2024.
Rob: Fact, it was one of our strongest production half since 2009.
Rob: As Dominic mentioned, new business production for the first half continued to be diversified across U S public finance international infrastructure and global structured finance first half Pvp of $218 million was the largest amount of total first half Pvp since 2009.
Rob Bailenson: As Dominic mentioned, new business production for the first half continued to be diversified across U.S. public finance, international infrastructure, and global structured finance. First half PVP of $218 million was the largest amount of total first half PVP since 2009, with the exception of first half 2018. Assumption of a large portfolio from another insurer sharply increased our PVP results; bond insurance penetration remained comparatively high at 8.2% for the first half and 8.9% for the second quarter of 2024; a continuation of the increased demand for bond insurance that we've seen since 2020; bond insurance is increasingly being utilized across a variety of transactions ranging from very small to very large in size.
Speaker Change: With the exception of first half 2018, when our assumption of a large portfolio from another insurer sharply increased our PDP results.
Robert Tucker: bond insurance penetration remained comparatively high at 8.2% for the first half and 8.9% for the second quarter of 2024, a continuation of the increased demand for bond insurance that we have seen since 2020. Assured Guaranty continued its market leadership position in the first half of 2024. One driver of our production is the ongoing demand for our guarantee on larger transactions. We believe that investors see the extra protection of our guarantee as a mitigant of downgrade and market value risk. Global Structured Finance produced $25 million in first half TVP, a solid result. Thank you, Rob and Dominic, and good luck!
Speaker Change: Bond insurance penetration remained comparatively high at eight 2% for the first half and eight 9% for the second quarter of 2020 for a continuation of the increased demand for bond insurance. So we have seen since 2020.
Speaker Change: On insurance is increasingly being utilized across a variety of transactions ranging from very small to very large in size. We believe that more investors have realized that in addition to the security provides our bond insurance can potentially support price stability and market liquidity and that issuers are using it to obtain greater <unk>.
Rob Bailenson: We believe that more investors have realized that in addition to the security it provides, our bond insurance can potentially support price stability and market liquidity, and that issuers are using it to obtain greater certainty of execution in less predictable market environments, in addition to reducing finance continued to maintain its market leadership position for the first half of 2024. $5.8 billion of primary PAR, which represented 56% of the insured part sold in the primary market. Year over year for the first half of 2024, Assured Guaranty's primary market insured car increased by 11 percent. In the second quarter, Assured Guaranty's primary market share was 58% based on a 13% increase year-over-year in insured primary market PAR sold for a total of $7.2 billion.
Speaker Change: R&D of execution and less predictable market environment in addition to reducing financing costs.
Speaker Change: Short Guaranty continued its market leadership position for the first half of 2024.
Rob: $10 $8 billion of primary par, which represented 56%.
Rob: Of the insured par sold in the primary market.
Speaker Change: Year over year for the first half of 2020 for assured guaranty's primary market insured par increased by 11%.
Speaker Change: In the second quarter assured guaranty's primary market share was 58% based on a 13% increase year over year and ensured primary market parcels for a total of $7 2 billion.
Rob Bailenson: One driver of our production is the ongoing demand for our guarantee on larger transactions, which typically see interest from institutional investors. In the first half of 2024, Assured Guaranty insured 21 transactions that each utilized $100 million or more of Assured Guaranty insurance, 14 of which were in the second quarter. We saw significant opportunities in large, high-margin transactions during the first half. Three of the largest transactions sold in the municipal market during the first half of 2024 carried insurance from Assured Guarantee.
Rob: One driver of our production is the ongoing demand for our guarantee on larger transactions, which typically see interest from institutional investors.
Rob: For the first half of 2020 for assured guaranty insured 21 transactions at each utilized $100 million or more of assured guaranty insurance.
Rob: 14 of which were in the second quarter.
Rob: Significant opportunities in large high margin transactions during the first half three of the largest transaction. So in the municipal market. During the first half of 2024 karat insurance from assured guaranty.
Rob Bailenson: $1.1 billion of insurance for the Brightline Florida passenger rail project, where we insured a majority of the senior bonds, $800 million for the new Terminal 1 at John F. Kennedy Airport, and $831 million for a dormitory authority of the State of New York School District Revenue Bond Issue. The Bright Line Project is the first private sector passenger rail project built in the U.S. in over a century.
Speaker Change: $1 $1 billion of insurance for the <unk>.
Speaker Change: <unk>, Florida passenger rail project, where we ensure the majority of the senior bonds $800 million.
Speaker Change: For the new terminal one at John F. Kennedy Airport $831 million for a dormitory authority of the state of New York School District revenue bond issue.
Speaker Change: Bright line project is the first private sector passenger rail system built in the U S and over a century.
Rob Bailenson: The JFK project is the largest U.S. public private partnership transportation project, and the Dazzle issue helps 69 school districts finance capital. We were pleased to continue adding value on double A credits during the first half of 2020, but we were short $2.5 billion of par on 54 deals. We believe that investors see the extra protection of our guarantee as a mitigant of a downgrade in market value. Non-U.S. public finance produced $34 million of PVP in the first half of 2024, consistent with the $36 million in the first half of 2023.
Speaker Change: <unk> project is the largest U S public private partnership Transportation project and the Daphne issue helped 69 school districts Finance capital improvements.
Speaker Change: We were pleased to continue adding value on double H credits during the first half of 2024.
Speaker Change: As we insured $2 5 billion.
Speaker Change: A par on 54 deals.
Speaker Change: We believe that investors see the extra protection of our guarantee as the Michigan of downgrade and market value risk.
Speaker Change: Non U S public finance produced $34 million of Pvp during the first half of 2024.
Speaker Change: Assistant with a $36 million in the first half of 2023.
Rob Bailenson: Second quarter activity included primarily secondary market guarantees on several UK regulated utility and airport transactions. Our pipeline of potential international public finance transactions includes a significant number that we consider likely to close later in 2024. Global Structured Finance produced $25 million of first half TVP, a solid result. We continue to see opportunities with banks, insurance companies, pension funds, and asset-backed investor clients across sectors, including pooled corporate and fund finance.
Speaker Change: Second quarter activity included primarily secondary market guarantees of several UK regulated utility and airport transactions our pipeline of potential international public finance transactions includes a significant number that we considered likely to close later in 2024.
Speaker Change: Global structured finance produced $25 million of first half Pvp.
Speaker Change: Our results.
Speaker Change: We continue to see opportunities with banks insurance companies pension funds and asset backed investor clients across sectors, including pooled corporate and fund finance.
Ben Rosenblum: One additional note about the strength of our second quarter production. $155 million of second quarter PVP was $64 million higher than that of the second quarter 2023. And in terms of direct PVP production, the second quarter of 2024 was our best second quarter since 2009. We believe we can build on our impressive performance in the first two quarters to complete the year with strong production results. I will now turn the call over to Ben to talk more about our finances. Thank you, Rob and Dominic, and good morning.
Speaker Change: One additional note about the strength of our second quarter production, our $155 million of second quarter, Pvp was $64 million higher than that of the second quarter of 2023.
Speaker Change: And in terms of direct Pvp production the second quarter of 2024 was our best second quarter since 2009.
Speaker Change: We believe we can build on our impressive performance in the first two quarters to complete the year with strong production results I will now turn the call over to Ben to talk more about our financial results.
Ben Rosenblum: Thank you, Rob, and Dominic, and good morning. I am pleased to report second quarter 2024 adjusted operating income of $80 million, or $1.44 per share, which is more than double the $36 million or $0.60 per share reported in the second quarter of 2023. The insurance segment, which contributed $116 million of adjusted operating income in the second quarter of 2024, up from $106 million in the second quarter of 2023, had a few noteworthy items.
Ben: Thank you, Rob and Dominic and good morning.
Robert Tucker: I am pleased to report second quarter 2024 adjusted operating income of $80 million, or $1.44 per share, which is more than double the $36 million or $0.60 per share reported in the second quarter of 2023. Fair value changes of assets underlying the alternative investment may cause volatility in adjusted operating income from quarter to quarter. These increases were partially offset by lower fair value gains on the Puerto Rico contingent value instrument.
Ben Rosenblum: We had no loss expense in the second quarter of 2024 compared with $44 million in the second quarter of 2023. While we did have $21 million of economic loss development in the second quarter of 2024, primarily related to certain healthcare transactions, there was sufficient deferred premium revenue to absorb the development for the quarter, resulting in no loss expense. Second, we had a $10 million increase in equity and earnings, which represents the returns on alternative investments, primarily due to gains in CLO equity tranches and a higher invested balance, in the second quarter of 2024 compared with the second quarter of 2023.
Ben: I am pleased to report second quarter 2024, adjusted operating income of $80 million or $1 44 per share, which is more than double to $36 million or <unk> 60 per share reported in the second quarter of 2023.
Speaker Change: The insurance segment, which contributed $116 million of adjusted operating income in the second quarter of 2024.
Ben: From $106 million in the second quarter of 2023 had a few noteworthy items first we had no loss expense in the second quarter of 2024, compared with $44 million in the second quarter of 2023, while we did have $21 million of.
Ben: <unk> loss development in the second quarter of 2024, primarily related to certain health care transactions. There was sufficient deferred premium revenue to absorb the development for the quarter, resulting in the loss expense.
Ben: We had a $10 million increase in equity and earnings which represents the returns on alternative investments primarily due to gains in CLO equity tranches at higher invested balances in the second quarter of 2024 compared with the second quarter of 2023.
Ben Rosenblum: Fair value changes of assets underlying the alternative investment may cause volatility in adjusted operating income from quarter to quarter. However, on an inception to date basis, they have generated an annualized internal rate of return of 14% in the insurance segment.
Ben: Our value changes of assets underlying the alternative investments may cause volatility and adjusted operating income from quarter to quarter. However.
Ben: However, on an inception to date basis, they have generated an annualized internal rate of return of 14% in the insurance segment.
Ben Rosenblum: These increases were partially offset by lower fair value gains on the Puerto Rico Contingent Value Instrument, which was 17 million dollars in the second quarter of 2024 compared with 40 million dollars in the second quarter of 2023. As of June 30th, the fair value of the remaining CVIs was $221 million, and deferred revenue, which represents the storehouse of future earnings in the insurance segment remains strong at $3.9 billion and is a direct result of the new business production that Rob discussed.
Ben: These increases were partially offset by lower fair value gains on the Puerto Rico contingent value instruments, which was $17 million in the second quarter of 2024, compared with $40 million in the second quarter of 2023 as.
Ben: As of June 30, the fair value of the remaining CVI was $221 million.
Speaker Change: Our deferred revenue, which represents the storehouse of future earnings in the insurance segment remained strong at three $9 billion and as a direct result of the new business production Rob discussed.
Ben Rosenblum: For the second quarter of 2023, the asset management segment results consisted of assured IM results, as it was still a wholly owned consolidated entity. Since the closing of the SoundPoint and AHP transactions in July of 2023, the asset management segment primarily includes Equity Pickup on the Soundpoint Investment, which is on a quarter lag and is reported net of amortization of intangible assets and interning performance fees, based on, and healthcare strategy The second quarter 2024 income from SoundPoint was close to breakeven, which is in line with our seasonally adjusted expectations as gap revenue recognition rules result in SoundPoint's performance fees generally being recognized towards the end of their calendar year.
Speaker Change: For the second quarter of 2023, the asset management segment results consisted of assured <unk> results as well still a wholly owned consolidated entity.
Robert Tucker: Since the closing of the SoundPoint and AHP transactions in July of 2023, the asset management segment primarily includes: On the capital management front, in the second quarter of 2024, we repurchased 1.9 million shares for $152 million at an average price of $78.50 per share.
Ben: Since the closing of the sound point in HP transactions in July of 2023, the asset management segment, primarily includes our equity pick up on the standpoint of investment which is on a quarter lag and is reported net of amortization of intangible assets and continuing performance fees.
Ben: On asset based in health care strategies.
Ben: The second quarter 2024 income from sampling was close to breakeven.
Ben: As in line with our seasonally adjusted expectations as GAAP revenue recognition rules result in some points performance fees generally being recognized towards the end of their calendar year.
Ben Rosenblum: On the capital management front, in the second quarter of 2024, we repurchased 1.9 million shares for $152 million at an average price of $78.50 per share. Stock buybacks continue to be one of our most accretive strategies. Our remaining authorization is approximately $275 million. In terms of the holding company liquidity position, we have cash and investments of approximately $308 million, of which $55 million resides in AGL. The Sherry Purchase Program, along with adjusted operating income and new business production, collectively contributed to new records for adjusted operating shareholder's equity per share of over $109 and adjusted book value per share of over $161.
Ben: On the capital management front in the second quarter of 2024, we repurchased one 9 million shares for 100.
Ben: $52 million.
Ben: At an average price of $78 50 per share stock.
Ben: Stock buybacks continued to be one of our most accretive strategies.
Ben: Our remaining authorization is approximately $275 million.
Ben: In terms of the holding company liquidity position with cash and investments of approximately $308 million.
Ben: Of which $55 million resides in AGL.
Ben: The share repurchase program.
Ben: Along with adjusted operating income and new business production collectively contributed to new records for adjusted operating shareholders' equity per share of over $109 and adjusted book value per share of over $161.
Ben Rosenblum: While Adjusted Operating Income varies from period to period, the consistent quarterly increases in these book value metrics reflect how the successful execution of all our key strategic initiatives builds shareholder values over the long term. As Dominic mentioned, the AGM-AG merger, along with $400 million of stock redemption, results in capital efficiencies and demonstrates the continued execution of our key strategic initiatives. About $270 million of the stock redemptions were in cash, while the remainder consisted of alternative investments. These stock redemptions are available for use in corporate initiatives, including share repurchase. Turn the call over to our operator to give you the instructions for the Q&A period.
Ben: While adjusted operating income varies from period to period, the consistent quarterly increases in this book value metrics reflect how the successful execution of all our key strategic initiatives build shareholder value over the long term.
Ben: As Dominic mentioned, the AGM AG merger, along with $400 million of stock redemption results in capital efficiencies and demonstrates the continued execution of our key strategic initiatives.
Dominic Frederico: <unk> $270 million of the stock redemptions were in cash while the remainder consisted of alternative investments.
Ben: These stock redemptions are available for use in corporate initiatives, including share repurchases.
Speaker Change: I'll now turn the call over to our operator to give you the instructions for the Q&A period.
Speaker Change: Thank you.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. To withdraw your question, please press star and 2. And if you are using a speakerphone, please pick up your headset before pressing the key. At this time, we'll pause momentarily to gather any questions. Our first question comes from Tommy Mcjoynt from KBW. Tommy, your line is now open
Operator: We will now begin the question and answer session. At this time, we'll pause momentarily to gather any questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then.
Speaker Change: One on your telephone keypad.
Ben: To withdraw your question. Please press star two.
Dominic Frederico: And if you are using a speakerphone please pick up your handset before pressing the keys.
Ben: This time, we'll pause momentarily to get there any question.
Tammi <unk>: Our first question comes from Tammi <unk> from K B W.
Tammi <unk>: Your line is now open.
Tommy McJoynt: Hey, good morning, guys. Thanks for taking my questions.
Tammi: Hey, good morning, guys. Thanks for taking my questions.
Dominic Frederico: Starting off on PREPA, you mentioned, you know, and we saw the appeals court ruling in June. Can you just walk through the, I guess, process for how, sort of, you guys seeing that information, that court ruling impacts what you guys ultimately, you know, book as your sort of loss, reserve, or recovery around that specific credit in the quarter? I guess we were a little bit surprised not to see a more favorable mark once that ruling came in.
Speaker Change: Starting off on.
Ben: PREPA.
Speaker Change: You mentioned and we saw the Appeals court ruling in June.
Ben: Can you just walk through the.
Speaker Change: I guess process for how sort of you guys seeing that information that court ruling.
Ben: Tax what you guys ultimately book.
Speaker Change: Book as your sort of loss reserve of recovery around that specific credit in the quarter. I guess, we were a little bit surprised not to see a more favorable mark once that once that ruling came through.
Ben Rosenblum: Well, I'll give you the top, and I'll let Ben give you the bottom. So, on the top, the ruling is very favorable. And obviously, it's a ruling that we had expected all along, as the judge continued to avoid the law and ignore the contract that was signed. So we thought that was going to be the outcome, number one. Number two, there's still a lot of road to go relative to appeals. Number three, timing does matter in how you look at your reserves in terms of when the settlements would actually take place.
Speaker Change: Well I'll give you the top and I'll, let Ben give you the bottom so top of ruling is very favorable and obviously, it's a ruling that we had expected all along as the judge continue to avoid the law.
Ben: For the contract that was signed so we thought that was going to be the outcome number one number two there's still a lot of road to hoe relative to appeals number three timing does matter and how you look at your reserving in terms of when the settlements will actually take place. So we did adjust scenarios, but we thought it would be prudent because of the opening in areas in terms of mediation.
Ben Rosenblum: So we did adjust the scenarios, but we thought it would be prudent because of the open areas in terms of mediation and appeals in terms of what an ultimate decision will be. So you have to continue to rely on these scenario analysis and probability weightings. And we've done, I thought, the right thing in keeping it kind of consistent while we wait for further information and further activity.
Ben: And appeals in terms of where the ultimate decision will be so you've got to continue to rely on the scenario analysis and probability weightings.
Ben: I thought the right thing and keeping it kind of consistent while we wait for further information and further activity.
Unnamed Speaker: I would say Dominic pretty much took all the words out of my mouth. Couldn't have said it any better. I mean, you have scenarios and a lot of our scenarios.
Tommy McJoynt: I would say Dominic pretty much took all the words out of my mouth. I couldn't have said it any better. I mean, you have scenarios and a lot of our scenarios. Assume that we were going to win. We knew we had a very strong case, and now we just have to see it through, and the timing is that we said it didn't matter.
Speaker Change: I would say dominant pretty much took all the words out of my mouth could have said it any better I mean, you have scenarios and a lot of our scenarios.
Speaker Change: Assume that we're going to when we knew we had a very strong case and now we just have to see it through and timing as we said does matter.
Speaker Change: Okay got it.
Dominic Frederico: And then switching topics, um, uh, switching over to his capital. Kind of stick with me here while I walk through some numbers.
Unnamed Speaker: And then switching topics, um, switching over to his capital.
Ben: And then switching topics.
Speaker Change: Switching over to its capital.
Speaker Change: Stick with me here when I walk through some numbers.
Tommy McJoynt: So you've gotten $400 million of special dividends or capital releases out of the subs to the holding company already this year. On slide 16, it looks like the regular way dividend limitation is $483 million combined. So that's together nearly $900 million combined. I know the holding company has about $200 million in cash expenses annually. So that still leaves about $700 million. That's about $200 million in excess of your $500 million annual buyback target. Do you have any plans for what you'll look to do with that extra couple hundred million dollars of liquidity?
Ben: Steve.
Steve: $400 million of special dividends sort of capital releases out of the subs to the holding company already this year on slide 16, it looks like the regular way dividend limited limitation is $483 million combined so that's together nearly $900 million combined.
Steve: The holding company has about $200 million of cash expenses annually, so that still leaves about $700 million.
Speaker Change: About $200 million in excess of your $500 million annual buyback target. So do you have any plans for what Youll look to do with that extra couple of hundred million dollars of liquidity.
Dominic Frederico: Well remember it's a $500 million target per year and obviously we like to make sure we have enough cash in the... Foreseeable future to meet that obligation as it comes due, plus it gives us some flexibility as we hold on to the additional balances, just in case we see something as an accretive opportunity, be it an acquisition, be it another business opportunity, but by and large, it's there for share to share repurchase, and as we said, we've always looked at a $500 million target, so this kind of ensures that 2025 looks pretty damn good as well.
Speaker Change: Oh, I remember as a $500 million targeted per year, and obviously relate to make sure we have enough cash in the.
Steve: Foreseeable future to meet that obligation as it comes due because it gives us some flexibility as we hold onto the additional balances just in case, we see something as an accretive opportunity be it an acquisition be it in other business opportunities, but by and large it's there for sure the share repurchase and as we've said we've always looked at our $500 million target. So those kind of insurers that 2025 weeks.
Steve: Pretty damn good as well.
Dominic Frederico: On the acquisition opportunity front, is there anything that you guys are actively looking at right now? Other than the remaining monolines, which we've always talked about as an opportunity, but they're only not.
Speaker Change: On the acquisition opportunity front is there anything that you guys are.
Speaker Change: Actively looking at right now.
Dominic Frederico: Other than the remaining model lines, which we've always talked about as an opportunity, but they're not capital consumptive at this point, so the answer would be no at this point in time for other acquisitions.
Unnamed Speaker: Other than the remaining monolines, which we've always talked about as an opportunity, but they're only not.
Speaker Change: Other than the remaining mono lines, which you always talked about it as an opportunity, but there are only about capital consumptive at this point. So the answer would be no at this point in time for other acquisitions.
Ben: Yeah.
Speaker Change: Got it thank you.
Speaker Change: Youre welcome.
Operator: Our next question comes from Giuliano Bologna from Compass Point.
Giuliano Bologna: Our next question comes from Giuliano Bologna from Compass Point.
Ben: Our next question comes from Giuliano Bologna from Compass point.
Speaker Change: Can you I know your line is now open.
Giuliano Bologna: Thank you. Congratulations on another great quarter. I was curious what you think about, you know...
Giuliano Bologna: Hi, good afternoon, congratulations on another great quarter.
Giuliano Bologna: I was curious when you think about.
Ben: Okay.
Dominic Frederico: It sounds like the preference at this point is to kind of extend the runway of the $500 million buyback pace, and then it sounds like it looks like you're in a very good position for 25. I'm curious how you think about that long term. Obviously, you're in a great position for the next couple of years. What is the way you'd like to run your capital return strategy for the next few years going forward? And do you think at some point it will evolve to more reinvestment into the business or anything about that longer term?
Ben: Yes.
Ben: Question.
Ben: Okay.
Speaker Change: It sounds like the preference at this point as to kind of extend the runway of the $500 million got it.
Ben: Buyback.
Speaker Change: Pace and then it sounds like obviously it sounds like it looks like you're in a very good position for 'twenty five.
Speaker Change: I'm curious.
Speaker Change: Are you thinking about that long term, obviously youre in a great position for the next couple of years.
Speaker Change: The way you'd like to run your capital controls use for the next few years going forward.
Speaker Change: Do you think at some point, the Baltimore reinvestment into the business or how do you think about that longer term.
Giuliano Bologna: Well, we'll still continue to evaluate it as the most secretive transaction. So as long as we continue to look at that runway, and the runway is positive, we're going to continue to operate on that base. And this gives us tremendous flexibility as well. You know, we've stuck with the 500 million right, wrong, or indifferent. We think that's been the best way to apply it, because it's provided consistent support for the stock. It's allowed the valuation of companies to continue to increase.
Speaker Change: But we'll still continue to evaluate it as the most accretive transaction. So as long as we continue to look at the runway and the runway as possible, we're going to continue to execute on that basis.
Ben: And this gives us tremendous flexibility as well, we've stuck with the $500 million right wrong or indifferent. We think that's been the best way to apply it to provide a consistent support for the stock it's allowed devaluation to continue to increase.
Giuliano Bologna: Nowhere near where we expect it to be and where we expect it to get to, ultimately. But we still think it's the most crucial way to go. And, like you said, this really does clear the runway for quite a period of time.
Ben: We're near where we expect it to be and where we expect it to get to ultimately, but we still think it's the most prudent way to go and like you said this really does clear the runway for quite a period of time.
Giuliano Bologna: That's very helpful. And then, yeah, on the new business front, you've obviously had some very good wins on the, you know, some larger transactions that are out there with some very interesting institutional demand. I'm curious if there are, you know, any opportunities on the structure side of the business or on the international side that create creative and scale in the near term.
Speaker Change: That's very helpful and then on the new business front.
Speaker Change: Some very good wins on the <unk>.
Speaker Change: With some larger transactions that are obviously have some very interesting institutional demand I'm curious if there is if you see any opportunities on the structure side of the business or on the international side that could be accretive.
Speaker Change: Scale in the near term.
Rob Bailenson: It's Mr. Bailenson's right to jump out of his chair, so I'll let him answer the question.
Speaker Change: This Mr balances ready to jump out of his chair I'll, let him answer the question.
Rob Bailenson: Yeah, we are seeing a lot of opportunities in the structural finance and international infrastructure markets. We closed a number of subscription finance transactions, direct lending, pooled corporates, whole business securitizations, and transportation and regulated utility sectors. We're seeing this across the UK, continental Europe, North America, and Australia. We have put resources, as you know, into Australia, and we're seeing some early successes there in structured finance as well as infrastructure, so we're really excited about that opportunity. That's very helpful.
Dominic Frederico: Yeah, we are seeing a lot of opportunities in the structural finance and international infrastructure markets. We closed a number of subscription finance transactions, direct lending, pooled corporates, whole business securitizations, transportation, and regulated utility sectors. We're seeing this across the UK, continental Europe, North America, and Australia.
Mr balances: We are seeing a lot of.
Mr balances: Opportunities in structured finance and international infrastructure markets.
Giuliano Bologna: That's very helpful. Thank you. I appreciate your time, and I'll jump back into the queue.
Speaker Change: We closed the number of subscription finance transactions.
Speaker Change: Direct lending pulled corporate whole business securitization transportation and regulated utility sectors were.
Speaker Change: We're seeing this across the U K Continental Europe, North America and Australia.
Speaker Change: We have.
Speaker Change: Put resources as you know into Australia, and we're seeing some early successes there in structured finance as well as infrastructure. So we're really excited about that opportunity.
Speaker Change: Okay.
Speaker Change: That's very helpful. Thank you.
Speaker Change: At this time and I'll jump back in the queue.
Joanna: Thanks Joanna.
Speaker Change: Yeah.
Operator: One next question comes from Geoffrey Dunn from Darling Partners. Geoffrey, your lines are open.
Speaker Change: Our next question comes from Geoffrey Dunn from Dowling Partners. Jeffrey Your line is now open.
Geoffrey Dunn: Thank you good morning.
Geoffrey Dunn: Morning, Geoff. Can you talk a little bit about the health care issues that you're facing and what's causing some of the pressure on those deals? I know it's a modest development. We saw this quarter on an economic basis, but what are the pressures there? And more importantly, what are your protections in those? Let me start from the top.
Geoffrey Dunn: Good morning, Joe can you talk a little bit about the healthcare issues that you're facing and.
Joe: Whats, causing some of the pressure on those deals I know, it's modest development. We saw this quarter on an economic basis, but what are the pressures there and more importantly, what are your protections on those deals.
Dominic Frederico: Let me start from the top. So, remember, when we look at health care, we always look at essential services, major leaders in the marketplace, and provide ourselves with other safeguards to protect our position. Obviously, coming through COVID, that caused a tremendous spike in pricing, both nursing and supplies. Labor costs went through the roof, other costs went through the roof, and I think it's been a while for both third-party reimbursement to adjust as well as the hospitals themselves to adjust.
Unnamed Speaker: Let me start from the top.
Speaker Change: So let me start from the top so remember when we look at health care, we always look at essential services major leaders in the marketplace and provide ourselves with all their covenants to protect our position.
Geoffrey Dunn: Obviously coming through Covid that cause a tremendous spike in pricing both nursing thin supplies.
Speaker Change: The.
Speaker Change: Labor costs went through the roof. Other costs went through the roof and I think it's been well for both the third party reimbursement to adjust as well as the hospitals themselves to adjust that as we've seen in our book of business things continue to improve.
Dominic Frederico: As we've seen in our book of business, things continue to improve. As I said, we've got tremendous covenants and protections, so we're still very optimistic about the value of health care. And we only get paid when problems exist, so we're happy to make sure that the opportunities that we see in the market are realized. We typically have mortgages on the properties.
Speaker Change: As I said, we've got tremendous covenants and protections.
Speaker Change: Over optimistic about the value of health care, and we only get paid when problems exist. So we're happy to make sure that the.
Speaker Change: Opportunities that we see in the market are realized.
Unnamed Speaker: We typically have mortgages on the properties. Therefore, we have liquidity constraints. We've got debt service reserve covenants. We've got debt service or debt service coverage covenants. So, as I said, it's a well-protected portfolio. Obviously, the stress has been caused mostly by COVID and inflation. But we see hospitals now starting to address that, and the results are improving. And as I said, the protections are pretty strong. But we still like the business. We get paid when there are problems in the market. So it's a great opportunity for us to increase overall production, as well as the return on those individual files.
Speaker Change: We've typically have mortgages on the properties, we have liquidity constraints, we've got debt service reserve covenants, we got good service or debt service coverage covenant. So as I said, it's a well protected portfolio. Obviously the stress has been caused mostly by COVID-19 inflation, we see the hospitals now so our new address debt and results are improving and as I said the protected some pretty strong.
Dominic Frederico: We have liquidity constraints. We've got debt service reserve covenants. We've got debt service or debt service coverage covenants. So, as I said, it's a well-protected portfolio. Obviously, the stress has been caused mostly by COVID and inflation, but we see hospitals now starting to address that. The results are improving. And as I said, the protections are pretty strong. We still like the business. We get paid when there are problems in the market. So it's a great opportunity for us to increase overall production as well as the return of those individual files.
Speaker Change: <unk>, we still like the business, we get paid when there's problems in the market. So it's a great opportunity for us to increase overall production as well as the return of those individual policies.
Speaker Change: Okay.
Geoffrey Dunn: And then the other question I have, I'm not sure you can answer it, but obviously, the company's ROE is diluted with all the excess capital that you're sitting on. Can you give a range as to what the underlying operating ROE would look like if you were running an efficient company?
Speaker Change: And then the other question I have I'm not sure you can answer it but.
Speaker Change: The company's ROE is diluted with all the excess capital that you're sitting on can you give a range as to what the underlying operating ROA. It looks like if you were running out of efficiency.
Dominic Frederico: No, we have a target that we have to get to double digital in every business that we write relative to the overall business written by each of the profit centers that structure international and domestic public finance. So that's still the goal.
Speaker Change: Well, we have a target that we've got to get to double digit in every business that we write relative to the overall business written by each of the profit centers, such structured international and domestic public finance. So thats still the goal was killing US is obviously the excess capital that we carry which has principally been in response to the problems in the past the great recession.
Dominic Frederico: What's killing us is obviously the excess capital that we carry, which has been in response to the problems in the past, you know, the Great Recession, the pandemic, Puerto Rico, as those things now dissolve and basically dissipate. The biggest argument we're having in the company is how much of a cushion we want to keep on the excess capital and then take the rest of the capital down to that level. But as you know, with the statutory limitations that we have, it's going to take some years to get there, but we have a plan to get there in the near term.
Speaker Change: <unk>.
Speaker Change: Puerto Rico as those things now dissolve and basically dissipate.
Speaker Change: Biggest sorry, we're having in the company is how much of accretion we want to keep on the excess capital and then take the rest of the capital down to that level, but as you know with the statutory limitations that we have it's going to take some years to get there, but we have a plan to get there over the near term we are confident both in the growth in the business. The further diversification through things like asset management will be able to achieve an increase in your.
Dominic Frederico: We're confident both in the growth in the business and the further diversification through things like asset management that we'll be able to achieve an increase in the R. As I said, the E is coming down based on the schedule that we established in terms of capital management, maybe not coming down as fast as we'd like. If I told you what the excess capital was, it's basically the same as it was back in 2013 when we started the buyback, having bought back $5.2 billion, I think, of stock.
Speaker Change: And as I said, he is coming down based on the schedule that we discuss stablish in terms of capital management, maybe not coming down as fast as we'd like if I told you what the excess capital was basically the same as it was back in 2013, when we started the buyback having bought back five 2 billion bigger stock we're still back to the same spot of excess capital, which is probably a good problem at a bad problem.
Dominic Frederico: We're still back to the same spot of excess capital, which is probably a good problem and a bad problem, but it does affect the R. We're still working to make sure that we can make a meaningful dent in that excess capital.
Speaker Change: But it does affect the ROE.
Speaker Change: We're still working to make sure that we can make a meaningful dent into that excess capital.
Rob Bailenson: And Geoff, as Dominic said, as we expand internationally in structural finance and international infrastructure, those ROEs are mid-teens or even higher. So as we grow that sector, it really adds to the R, to the return, to the numerator.
Geoff: And Geoff as Dominic said as we expand internationally in structured finance and international infrastructure. Those Roes are mid teens or even higher so as we grow those that sector. It really adds to the or to the return to the numerator, but it does come overtime.
Rob Bailenson: So is it fair to say that this is more like a 12-minute interview?
Speaker Change: So is it fair to say that this is the nature.
Speaker Change: The wavelength business versus the 10 to 12.
Rob Bailenson: Oh, the international one? It could be even higher. Higher than that, yeah, exactly. Depends on the mix. Geoff, remember we take a long lead time when earning a premium, right? It takes a while to come through. Right. Low amortization of the unearned premium.
Speaker Change: Oh the international.
Speaker Change: Even could be even higher higher than that yes exactly.
Speaker Change: Thanks.
Speaker Change: Overall, we earned very little premium.
Speaker Change: Jeff Remember, we take a long lead time, when earning premium rate takes a while to come through.
Speaker Change: Amortization of the unearned premium reserve.
Geoffrey Dunn: When you think about each year's business contributes about 8% to the bottom line, it takes a while to get meaningful change. But as we see, the production building battle helps them tremendously in two or three years.
Speaker Change: When you think about each year's business contributes about 8% to the bottom line. It takes a while to get the meaningful change, but as we see the production building that'll help some tremendously two or three years out.
Speaker Change: Yeah.
Geoffrey Dunn: Okay, I guess just to follow up your comment about the capital being the same as the excess capital, same as 13. It's a little bit ironic with how much you've returned. You're sprinting to stay still here. How do you get ahead of that, because you're earning strength. It's a good problem and it's a bad problem. Oh, but remember, the screen.
Unnamed Speaker: Okay, I guess just to follow up your comment about the capital being the same as the excess capital, same as 13. It's a little bit ironic with how much you've returned; you're sprinting to stay still here.
Speaker Change: Okay, and I guess, just a follow up.
Speaker Change: Sure.
Speaker Change: Comment about the capital at the end of the same in the excess capital famous 13 as you know.
Speaker Change: It's a little bit ironic with how much you'd return.
Speaker Change: Sprinting to stay still here.
Speaker Change: How do you get ahead of that.
Brown: Our earnings strength, good Brown <unk> Brown.
Unnamed Speaker: Well, but remember this spring.
Dominic Frederico: And then why we're at the same spot is because of really what I'll call unique opportunities that we took advantage of, you know, buying all the competitors at huge discounts to capital, doing some large reinsurance deals, by doing some refinancing or restructuring of our capital base, mergers, and eliminations of other companies. So we've had these unique transactions that have really accelerated earnings, the refunding wave based on the zero interest rate environment.
Speaker Change: And then while we're at the same spot because it really what I'll call unique opportunities that we took advantage of buying all the competitors up at huge discounts to capital doing some large reinsurance deals by doing some refinancing or restructuring of our capital base mergers eliminations of other companies. So we have had these unique transactions that have really accelerated earnings.
Unnamed Speaker: The refunding way based on the zero interest rate environment. So now we see that kind of has dissipated a bit now it's solid.
Dominic Frederico: So now we see that kind of has dissipated a bit. Now it's solid, you know, core earnings type of thing, growth of the core businesses. So we're now more confident that we'll be able to make a real dent in the capital over the next few years. And our projections show it that way, Geoff.
Speaker Change: Core earnings type of <unk> growth in the core businesses. So we're now more confident that we'll be able to make a real dent on the capital over the next few years.
Unnamed Speaker: Yeah.
Unnamed Speaker: And our projections show it that way as well.
Speaker Change: Alright, Great you are welcome.
Speaker Change: Thank you.
Speaker Change: Okay.
Robert Tucker: This concludes the question and answer session. I would like to turn the conference back to our host, Robert Tucker, for closing remarks. Please go ahead.
Unnamed Speaker: This concludes the question and answer session I would like to turn the conference back to our host Robert Tucker for closing remarks. Please go ahead.
Robert Tucker: 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.
Speaker Change: 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 call. Thank you very much.
Unnamed Speaker: Okay.
Operator: Ladies and gentlemen, this concludes today's conference call. Thank you all for attending. You may now disconnect your lines. Have a great day.
Speaker Change: Ladies and gentlemen. This concludes today's conference call. Thank you all for attending you may now disconnect your lines.
Speaker Change: Great day.
Unnamed Speaker: [music].
Dominic Frederico: In connection with the merger, we raised $300 million through a special dividend, technically a stock redemption, that the Marlon-Churns Administration approved, and this followed the $100 million stock redemption by AGM during the second quarter. Rating agencies took these transfers into account when considering the combined company's rating.