Q1 2025 Assured Guaranty Ltd Earnings Call

Operator: Good morning and welcome to the Assured Guaranty Limited first quarter 2025 earnings conference call. My name is Ezra and I will be the operator for today's call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad.

Good morning, and welcome to the assured Guaranty limited first quarter 2025 earnings Conference call. My name is Ed and I will be the operator for today's call all participants will be in lift.

Only mode should you need assistance, Steve signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two.

Speaker Change: Please note that this event is being recorded I would now like to turn the conference over to our host Robert Tucker Senior managing director Investor Relations and corporate Communications. Please go ahead.

Operator: Please note that this event is being recorded.

Robert Tucker: I would now like to turn the conference 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 Guarantee for our first quarter 2025 financial results conference call.

Robert Tucker: Thank you operator, and thank you all for joining assured guaranty for our first quarter 2025 financial results Conference call.

Robert Tucker: 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. 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.

Robert Tucker: Today's presentation is made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 995.

Robert Tucker: 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.

Robert Tucker: 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.

Robert Tucker: 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 for our most recent presentations and SEC filings, most current financial filings, and for the risk 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 in our current financial supplement and equity investor presentation, which are on our website at assuredguarantee.com.

Robert Tucker: 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.

Robert Tucker: 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.

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.

And equity Investor presentation, which are on our website at assured guaranty Dot com.

Robert Tucker: Turning to the presentation, our speakers today are Dominic Frederico, President and Chief Executive Officer of Assured Guarantee Limited, Rob Bailenson, our Chief Operating Officer, and Ben Rosenblum, our Chief Financial Officer. After their remarks, we will open the call to your questions.

Rob: Turning to the presentation. Our speakers today are Dominic Frederico, President and Chief Executive Officer of assured Guaranty limited Rob.

Rob: Rob Bailenson, our Chief operating officer, and Ben Rosenbloom, Our Chief Financial Officer.

Speaker Change: After their remarks, we will open the call to your questions as the webcast does 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.

Robert Tucker: As the webcast does not enable for Q&A, please dial into the call if you'd like to ask a question.

Dominic Frederico: I will now turn the call over to Dominic. Thank you, Robert, and welcome to everyone joining today's call. Assured Guaranty had a solid first quarter of 2025. Adjusted operating income per share came in at $3.18 for the first quarter of 2025, compared with $1.96 in the first quarter of last year. Our key valuation measures again reached new highs at quarter end on a per share basis, with adjusted operating shareholders equity at $117.40, adjusted book value at $172.79, and shareholders equity per share at $112.80. Our new business production in the quarter was $39 million of PVP, of which roughly 65% came from the U.S.

Dominic Frederico: Thank you Robert and welcome to everyone joining today's call.

Speaker Change: Assured guaranty had a solid first quarter of 2025.

Speaker Change: Adjusted operating income per share came in at $3 18 for the first quarter of 2025 compared with $1 96 in the first quarter of last year are.

Speaker Change: Our key valuation measures again reached new highs at quarter end on a per share basis with adjusted operating shareholders' equity at $117 40.

Speaker Change: Adjusted book value of $172 79.

Speaker Change: And shareholders' equity per share at $112 80.

Speaker Change: Our new business production in the quarter was $39 million of Pvp of which roughly 65% came from the U S public finance, where we enjoyed a good flow of high quality business.

Dominic Frederico: public finance. We enjoyed a good flow of high-quality business. Bounce is producing global structured finance and non-U.S. public finance. In both of those areas, deal premiums tend to be higher, but the timing of transactions tend to vary because development times are often longer in those areas.

Robert Tucker: It was producing global structured finance and non U S public finance and both of those areas deal premiums tend to be higher but the timing of transactions tend to vary because development times are often longer than those areas I'll, let Rob give you more details in a moment.

Dominic Frederico: I'll let Rob give you more details in a moment.

Dominic Frederico: In an important achievement that we mentioned last quarter, we concluded litigation with Lehman Brothers International in early February 2025, and we recognized a pre-tax gain of $103 million in the first quarter of 2025. This positive outcome is a result of years of negotiation and litigation and is a testament to our determination to defend our legal rights to the fullest extent possible. We have the same determination to enforce our rights as a secured creditor of the Puerto Rico Electric Power Authority. It is again worth noting that, over the FOMB's objections, the First Circuit has confirmed that bondholders are secured by an unavoidable security interest in PREPA's past, current, and future net revenues.

Rob: It is an important achievement that we mentioned last quarter. We concluded litigation with Lehman Brothers International in early February 2025, and we recognized a pre tax gain of $103 million in the first quarter of 2025.

Rob: This positive outcome as a result of years of negotiation litigation and is a testament to our determination to defend our legal rights to the fullest extent possible.

Rob: The same determination to enforce our rights under the secured creditor of the Puerto Rico Electric power authority. It is again worth noting that over the <unk> objections. The first circuit has confirmed that bondholders are secured by an unavoidable security interested preface past current and future net revenues ever remains our final unresolved defaulting, Puerto Rico exposure.

Dominic Frederico: PREPA remains our final unresolved defaulting Puerto Rico exposure. Our strategic approach to asset management continues to focus on increasing the fee-based earnings generated through our 30% ownership interest in SoundPoint, which contributed $13 million to our income in the first quarter. In addition, our investment portfolio benefited from attractive returns on our alternative investments through SoundPoint. Total first quarter investment income from all of our alternative investments was $59 million, the highest quarterly level to date for our alternative investment portfolio. Our inception to date annualized rate of return for all alternative investments was 13%.

Rob: Our strategic approach to asset management continues to focus on increasing the fee based earnings generated through our 30% ownership interest at some point.

Rob: Which contributed $13 million Orient come in the first quarter. In addition, our investment portfolio benefited from attractive returns on alternative investments through sound point total first quarter investment income from all of our alternative investments was $59 million the highest quarterly level to date for alternative investment portfolio.

Rob: Inception to date annualized rate of return for alternative investments was 13%.

Dominic Frederico: Globally, we are currently experiencing a highly volatile market environment and an unpredictable economic environment. In other words, the kind of conditions Assured Guaranty is built for. We have proven for four decades the reliability and value of our guarantee and the resilience of our business model through exceptionally difficult economic and geopolitical environments. We believe the current environment, as volatile as it's been over the past two months, has the potential to drive increased demand for our guarantee as investors seek out proven instruments for reliable cash flow and capital preservation, and issuers seek out increased certainty of market access along with more efficient execution.

Rob: Globally, we are currently experiencing a highly volatile market environment in an unpredictable economic environment in other words, the kind of conditions assured guaranty's build for.

Rob: We have proven for four decades, the reliability and value of our guarantee and the resilience of our business model through exceptionally difficult economic and geopolitical environments.

Rob: We believe the current environment as volatile as it's been over the past two months as the potential to drive increased demand for our guaranty as investors seek out proven instruments reliable cash flow and capital preservation and issuers seek out increased certainty of market access along with more efficient executions.

Dominic Frederico: We have the financial strength, market position, credit skills, surveillance operations, remediation abilities, and comprehensive enterprise risk management to protect our capital as we help issuers and counterparts reduce borrowing costs, improve capital efficiency, and provide investment choices designed specifically to give investors confidence in times like these.

Rob: We have the financial strength market position credit skills surveillance operations remediation abilities and comprehensive enterprise risk management to protect our capital as we help issuers and counterparties reduced borrowing costs improved capital efficiency and provide investment choices designed specifically to give investors confidence in times like these.

Robert Bailenson: I will now turn the call over to Rob to provide more details about our production results. Thank you, Dominic, and good morning to everyone on the call. Assured Guarantee closed $39 million of PVP in the first quarter of 2025. U.S. public finance led the way with $25 million of PVP, and non-U.S. public finance and global structural finance each contributed $7 million of PVP. For the first quarter of 2025, Assured Guaranty continued as the leader in U.S. municipal bond insurance, capturing 64% of the primary market insured, par sold, and 58% of the insured transaction count. Compared with the first quarter of the previous year, Assured Guaranty's insured par sold was up 23% to $4.7 billion and up 46% to 222 new issues in transaction count.

I will now turn the call over to Rob to provide more details about our production results.

Rob: Thank you Dominic and good morning to everyone on the call.

Rob: Assured guaranty closed 39 million Pvp in the first quarter of 2025.

Rob: U S public finance led the way with $25 million of Pvp and non U S public finance and global structured finance each contributed $7 million of PDP.

Rob: For the first quarter of 2025 assured guaranty continued as the leader in U S municipal bond insurance capturing 64%.

Rob: Summary market insured par sold 58% of the insured transaction count compared with the first quarter of the previous year assured guaranty's insured par sold was up 23% to $4 7 billion and up 46% to 222, new issues and transaction counts.

Robert Bailenson: In addition, while quarterly par insured was the second highest in a decade, the average underlying credit quality of first quarter municipal transactions was single A, indicating higher credit quality, less risk, lower rating agency capital charges and less PVP than a similar par amount of more typically rated municipal business would produce. In fact, during the quarter, 30% of the municipal transactions that we closed had underlying ratings in the AA category by S&P or Moody.

Rob: In addition, while quarterly par insured was the second highest in a decade, the average underlying credit quality of first quarter municipal transactions with single aim, indicating higher credit quality less risk lower rating agency capital charges, and less Pvp and a similar par amount of more tips.

Rob: <unk> rated municipal business would produce.

Rob: In fact during the quarter, 30% of the municipal transactions that we closed had underlying ratings in the double a category by S&P or Moody's.

Robert Bailenson: We are excited about developments in our secondary market bond insurance business.

Rob: We are excited about developments in our secondary market bond insurance business, where activity increased substantially during the first quarter of 2025.

Robert Bailenson: where activity increased substantially during the first quarter of 2025, producing $376 million of insured PAR, more than in all of 2024. We believe that many secondary market investors in part sought our guarantee to manage the potential portfolio impact of the current environment's economic stress and market volatility.

Rob: Producing $376 million of insured par more than in all of 2024.

Rob: We believe that many secondary market investors impart sonar guarantee to manage the potential portfolio impact of the current environment economic stress and market volatility.

Robert Bailenson: We are confident our secondary market business has the potential to make a greater contribution going forward, and we have focused the past year on modernizing our processes and technology for acquiring and executing secondary market business. We have already deployed some of the new technology and aim to build a more consistent transaction pipeline with thousands of outstanding issues pre-approved to secondary market insurance.

Rob: Confident our secondary market business has the potential to make a greater contribution going forward and we have focused the past year on modernizing our processes and technology for acquiring and executing secondary market business. We.

Rob: We have already deployed some of the new technology and aimed to build a more consistent transaction pipeline.

Rob: Thousands of outstanding issues Preapproved secondary market insurance.

Rob: Okay.

Robert Bailenson: In the primary market, we continue to use our guarantee to help support some of the largest transactions. and we see our positive results in this area as a gauge of the further growth of institutional demand for our guarantee. In our view, such growth reflects institutions' heightened appreciation of the relative price stability and increased market liquidity our insurance can provide, along with the reduced borrowing costs issuers receive.

Rob: And the primary market, we continue to use our guarantee to help support some of the largest transactions and we see our positive results in this area as a gauge of the further growth of institutional demand for our guaranty.

Rob: In our view such growth reflects institutions heightened appreciation of the relative price stability and increased market liquidity, our insurance can provide along with the reduced borrowing cost issuers receive.

Robert Bailenson: The first quarter of 2025 included eight large transactions, within short par over $100 million, including $261 million for Indiana Municipal Power, $256 million for Sumter Landing Community Development District, and $186 million for the Oklahoma Turnpike Authority. Among AA credits, which we define as credits rated in the AA category by S&P and or Moody's, Assured Guarantee insured 53 primary and secondary transactions for a total of $1.7 billion of insured par during the quarter, further reflecting what we believe is the market's recognition of the value our guarantee can add to even highly rated credits.

Rob: The first quarter of 2025 included eight large transactions with insured par over $100 million, including $261 million for Indiana municipal power $256 million for Sumpter landing community development district, and $986 million for the Oklahoma Turnpike Authority.

Rob: Among doublet credits, which we define as credits rated in the double a category by S&P and Moody's assured guaranty insured 53 primary and secondary transactions for a total of $1 7 billion of insured par during the quarter further reflecting what we believe is the market's recognition of the value of our guarantee can add.

Speaker Change: Stephen highly rated credits.

Robert Bailenson: For non-U.S. public finance, new business in the first quarter of 2025 primarily included U.K.-regulated utility transactions as well as a secondary market transaction for a U.K. public sector entity. Structured finances production in the first quarter of 2025 was primarily attributable to subscription finance and pooled corporate transactions. Both non-U.S.

Speaker Change: For non U S public finance new business in the first quarter of 2025, primarily included UK regulated utility transactions as well as a secondary market transaction for our UK public sector entity.

Speaker Change: Structured finance production in the first quarter of 2025 was primarily attributable to subscription finance and pulled corporate transactions.

Speaker Change: Both non U S public construction finance have expanded the application of our products into various new sectors and locations and we look to continue to develop additional product applications and expand into new territories to further support our business growth for instance post quarter.

Robert Bailenson: public and structured finance have expanded the application of our products into various new sectors and locations, and we look to continue to develop additional product applications and expand into new territories to further support our business growth.

Robert Bailenson: For instance, post-quarter, we guaranteed a transaction issued by XP Fiber, the largest independent fiber-to-home operator in France.

Speaker Change: We guaranteed a transaction issued by XP fiber the largest independent fiber to home operator in France. This is our first primary financial guarantee and the French infrastructure space. Since we opened our Paris office and represents a key milestone in our strategy to expand our product offerings and strengthen our presence.

Robert Bailenson: This is our first primary financial guarantee in the French infrastructure space since we opened our Paris office, and represents a key milestone in our strategy to expand our product offerings and strengthen our presence in continental Europe. We expect demand to continue for our core products and see that demand likely increasing at times when challenges or uncertainty arises in the economy and financial markets, or when the cost of borrowing goes up, our products can help further optimize. A variety of transactions. so our clients can accomplish more with lower financing costs and are better capital efficient.

Speaker Change: In Continental Europe.

Speaker Change: We expect demand to continue for our core products and see that demand likely increasing at times when challenges where uncertainty arises in the economy and financial markets are when the cost of borrowing goes up our products can help further optimize.

Speaker Change: A variety of transactions so our clients can accomplish more with lower financing costs and to a better capital efficiencies.

Benjamin Rosenblum: I'll now turn the call over to Ben. Thank you, Dominic and Rob, and good morning. I am pleased to report first quarter 2025 adjusted operating income of $162 million or $3.18 per share. This represents a 62% increase from the first quarter 2024 adjusted operating income of $1.96 per share or $113 million. The largest driver of the increase in adjusted operating income in the first quarter of 2025 compared with the first quarter of 2024 is the $103 million pre-tax gain, which represents the judgment awarded and claims for attorney's fees, expenses, and interest in connection with the LBIE litigation.

Ben: I'll now turn the call over to Ben.

Ben: Thank you Dominic and Rob and good morning.

Ben: I am pleased to report first quarter 2025, adjusted operating income of $162 million or $3 18 per share.

Ben: This represents a 62% increase from the first quarter 2024, adjusted operating income of $1 96 per share or $113 million.

Ben: The largest driver of the increase in adjusted operating income in the first quarter of 2025 compared with the first quarter of 2024 is the $103 million pre tax gain which represents the judgment awarded and claims for our attorney's fees expenses and interest in connection with the.

Ben: L B I E litigation.

Benjamin Rosenblum: This equates to an $82 million after tax gain or $1.62 per share. The LBIE gain was reported as a $63 million recovery that is reflected as a benefit and loss expense and economic development and $40 million in credit derivative revenue. Excluding the $40 million associated with litigation, net earned premiums and credit derivative revenues decreased by $28 million due to lower financial guarantee refundings and terminations. However, scheduled net earned premiums and credit derivative revenues increased by 7% and deferred premium revenue remained strong at $3.9 billion. First quarter 2025 economic loss development, excluding the litigation benefit, was $48 million, mainly due to losses on the Puerto Rico Electric Power Authority, or PREPA, and certain UK regulated utilities.

Ben: This equates to an $82 million after tax gain of $1 62 per share.

Ben: The <unk> gain was reported as a $63 million recovery that is reflected as a benefit and loss expense and economic development and $40 million and credit derivative revenues.

Ben: Excluding the $40 million associated with litigation net earned premiums and credit derivative revenues decreased by $28 million due to lower financial Guaranty Refundings and terminations. However, scheduled net earned premiums and credit derivative revenues increased by 7% and deferred premium.

Ben: Revenue remained strong at $3 9 billion.

Ben: First quarter 2025, economic loss development, excluding the litigation benefit was $48 million, mainly due to losses on the Puerto Rico Electric power authority, or PREPA and certain U K regulated utilities.

Benjamin Rosenblum: The PREPA loss in the first quarter was due to a potential delay in the expected timing of the resolution of PREPA. loss expense included in adjusted operating income, excluding the benefit associated with the litigation, was $40 million and was primarily related to PREPA and certain health care exposure. Our investment portfolio continues to perform well and demonstrates the value of having both a stable stream of interest income from the fixed maturity portfolio, as well as income from a diverse portfolio of alternative investment. In the first quarter of 2025, net investment income on the available-for-sale fixed maturity and short-term investment portfolio for the segments in corporate division was $90 million compared with $86 million in the first quarter of 2024.

Ben: The PREPA loss in the first quarter was due to a potential delay in the expected timing of the resolution of PREPA.

Ben: Loss expense included in adjusted operating income excluding the benefit associated with the litigation was $40 million and was primarily related to PREPA and certain health care exposures.

Ben: Our investment portfolio continues to perform well and demonstrates the value of having both a stable stream of interest income from the fixed maturity portfolio as well as income from a diverse portfolio of alternative investments.

Ben: In the first quarter of 2025 net investment income on the available for sale fixed maturity and short term investment portfolio for the segments and corporate division was $90 million compared with $86 million in the first quarter of 2024.

Benjamin Rosenblum: In the first quarter of 2025, net investment income included $11 million related to CLO EquityTron. Certain CLO equity tranche investments were reclassified to the available-for-sale fixed maturity portfolio in the fourth quarter of 2024 with interest income now reported in net investment income and changes in fair value reported in other comprehensive incomes. The company previously held DCLO equity tranches in a sound point managed fund with changes in net asset value reported in equity and earnings or losses of investees in the insurance segment. Net investment income on the short-term investment portfolio decreased by $9 million as a result of lower short-term interest rates and lower average short-term asset balances.

Ben: In the first quarter of 2025 net investment income included $11 million related to CLO equity tranches.

Ben: Certain CLO equity tranche investments were reclassified to the available for sale fixed maturity portfolio in the fourth quarter of 2024 with interest income now reported in net investment income and changes in fair value reported in other comprehensive income.

Ben: The company previously held these CLO equity tranches in a some point managed fund with changes in net asset value reported in equity and earnings or losses of Investees in the insurance segment.

Net investment income on the short term investment portfolio decreased by $9 million as a result of lower short term interest rates and lower average short term asset balances.

Benjamin Rosenblum: Alternative investments have generated an annualized internal rate of return of approximately 13% on an inception to date basis through March 31st, 2025. Equity in earnings from our alternative investments reported in our segments and corporate division results were $46 million compared with $37 million in the first quarter of 2024. The change in fair value of trading securities, which mainly consists of Puerto Rico contingent value instruments, was a $1 million gain compared with a $26 million gain in the first quarter of 2024. Breaking down the main contributors of our first quarter results, the insurance segment contributed $168 million up from $149 million in the first quarter of 2024.

Ben: Alternative investments have generated an annualized internal rate of return of approximately 13% on an inception to date basis through March 31 2025.

Equity in earnings from our alternative investments reported in our segments and corporate Division results were $46 million compared with $37 million in the first quarter of 2024.

Ben: The change in fair value of trading Securities, which mainly consist of Puerto Rico contingent value instruments was a $1 million gain compared with a $26 million gain in the first quarter of 2024.

Ben: Breaking down the main contributors of our first quarter results.

Ben: Insurance segment contributed $168 million up from $149 million in the first quarter of 2024.

Benjamin Rosenblum: The asset management segment contributed $12 million up from $1 million in the first quarter of 2024, and mainly consists of earnings related to our 30% ownership interest in Soundpoint. These segment earnings were offset in part by the corporate division's adjusted operating loss of $20 million in the first quarter of 2025, which is down from a $37 million loss in the prior year. On the capital management front, in the first quarter of 2025, we repurchased 1.3 million shares for $120 million at an average price of $89.72 per share. Our remaining authorization is approximately $181 million. We also returned $18 million in dividends to our shareholders.

Ben: The asset management segment contributed $12 million up from $1 million in the first quarter of 2024, and mainly consists of earnings related to our 30% ownership interest in some point.

Ben: These segment earnings were offset in part by the corporate division's adjusted operating loss of $20 million in the first quarter of 2025, which is down from a $37 million loss in the prior year.

Ben: On the capital management front in the first quarter of 2025, we repurchased one 3 million shares for $120 million at an average price of $89 and <unk> 72 per share.

Ben: Our remaining authorization is approximately $181 million, we also returned $18 million in dividends to our shareholders.

Benjamin Rosenblum: In terms of our current holding company liquidity position, we have cash and investments of approximately $257 million, of which $53 million resides in AGL. Sherry Purchases, along with Adjusted Operating Income and New Business Production, collectively contributed to new records for Adjusted Operating Shareholders' Equity per share of over $117 and Adjusted Book Value per share of over $172. While adjusted operating income varies from period to period, the consistent quarterly increases in these book value metrics reflect the value of our key strategic initiatives, which build shareholder value over the long term.

Ben: In terms of our current holding company liquidity position, we had cash and investments of approximately $257 million of which $53 million resides in AGL.

Ben: Share repurchases, along with adjusted operating income and new business production collectively contributed to new records for adjusted operating shareholders' equity per share of over $117 and adjusted book value per share of over $172.

Ben: While adjusted operating income varies from period to period and consistent quarterly increases in this book value metrics reflect the value of our key strategic initiatives, which build shareholder value over the long term.

Operator: I'll now turn the call over to our operator to give you the instructions for the Q&A period. Operator. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. If you are using a speakerphone, please pick up your handset before pressing the key.

Ben: I'll now turn the call over to our operator to give you the instructions for the Q&A period.

Ben: Okay.

Ben: Yeah.

Ben: Okay.

Ben: Operator.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

Joel: Joel Your question. Please press Star then Q.

Joel: If you are using a speakerphone please pick up your handset before pressing the keys.

Operator: At this time we will pause momentarily to assemble our roster.

Joel: At this time, we will pause momentarily to assemble our roster.

Joel: Yeah.

Joel: Okay.

Joel: Okay.

Joel: Okay.

Joel: Yeah.

Marissa Lobo: Our first question comes from Marissa Lobo with UBS. Marissa, your line is now open. Please go ahead.

Speaker Change: Our first question comes from Marissa logo with UBS. Your line is now open. Please go ahead.

Marissa Lobo: Good morning. Thanks for taking my question. On the topic of UK water exposures, specifically Thames water, what likelihood are you now placing on a haircut to the debt given there is the clear bidder for Thames?

Marissa logo: Good morning, Thanks for taking my question.

Marissa logo: On the topic of U K water exposures, specifically Thames water.

Are you now placing on a haircut to the debt given there there is a clear better for Tom.

Dominic Frederico: Marissa, that's not the way our reserves work.

Most of that's not where our reserves work.

Dominic Frederico: I'll let Ben give you the. and Marc Mam collaborative, Julian Crowley, David Wilkie and Newt Jones. Right. Now, I understand there's a range of scenarios. We've got to outline all possible scenarios of probability weighting. I think you have to look at really a couple of factors. One, what scenarios you're looking at and each probability weight. And a scenario may have a haircut or may not have a haircut. And in the event there is a haircut, then what kind of recovery would you get if there was potentially equity on the other side of it? And we obviously have spent a lot of time looking at each of the scenarios, assessing what we think the likelihood of a haircut is based on information that we are involved in getting.

Marissa logo: I'll, let Ben give you the.

Ben: Tutorial on reserving we there are many ways to look at it and then once you work through it.

Ben: There are a range.

Ben: Alright.

Ben: This range of Atlanta.

Ben: Outline on possible scenarios, a probability weight them.

Speaker Change: Alright, I think you have to look at too.

Speaker Change: Really a couple of factors one what scenarios you're looking at in these probability way. So in a scenario may have a haircut. It may not have a haircut and in the event. There is a haircut then what kind of recovery would you get if there was potentially equity on the other side of it and we obviously have spent a lot of time looking at each of the scenarios assessing what we think the likelihood of a haircut is based on information that we.

Speaker Change: Involved in getting we don't reserve through the marketplace, We don't reserve through newspapers and articles you say and we do look at each year, we are talking to people all over the place and looking at it and we do have quite a few scenarios now that we're playing with both in terms of a haircut the receive any recover we may get on the backend.

Dominic Frederico: We don't reserve through the marketplace. We don't reserve through newspapers and articles you see. And we do look at each, you know, we are talking to people all over the place and looking at it. And we do have quite a few scenarios now that we're playing with both in terms of a haircut to receive and any recovery we may get on the back end.

Marissa Lobo: Appreciate that.

Speaker Change: Appreciate that.

Dominic Frederico: Well, I was also hoping you could share your view on how you see the process timeline from here. The process timeline is going to go through the regulatory environment, and that's still in question as well as that's getting studied.

Speaker Change: I was also hoping you could share your view on how you see that.

Speaker Change: Process timeline from here.

Speaker Change: So the process timeline is going to go through the regulatory environment. So in that spill into question as well as giving study, but both correctly second to the reserve. So the majority of cases, showing no loss to assured guarantee on the bonds remember where the senior creditor position in those situations. We worked out a liquidity plan that we believe really provides the space necessary for <unk>.

Dominic Frederico: But let's go back for a second to the reserve. So the majority of cases show no loss to assured guarantee on the bonds. Remember, we're the senior creditor position in those situations. We've worked out a liquidity plan that we believe really provides the space necessary for them to raise the necessary equity to be back in the market. As Ben said, the recovery will take many forms and will also have to be evaluated as well. But the majority of our cases, the strong majority of our cases, will have no ultimate laws to assure. And we think the regulatory work itself out over the next 6 to 12 months.

Speaker Change: M to raise the necessary equity would be back in the market.

Speaker Change: As Ben said the recovery will take many forms were also revalued as well, but the majority of our cases, a strong majority of our cases, who have no reserve no ultimate loss to assure we think the regulatory work itself out over the next six to 12 months.

Marissa Lobo: Much appreciated.

Speaker Change: Much appreciate it.

Dominic Frederico: And on another topic, I was hoping you could speak to, you know, the impact of tariffs. Do they mean, do they have any potential impacts to any of the credits that you wrap? I think that's such a fluid situation, it's really hard to make an estimate at this point in time. So I go there, look to the market, if you saw it in the first quarter, you know, municipal issuance is way, way up, which is reflective of the stronger credits going to the marketplace, and then the confidence that the market will still respond to it.

Speaker Change: And on another topic I was hoping you could speak to the impact of tariffs today, meaning do they have any potential impacts to any of the credits.

Speaker Change: I think there is such a fluid situation, it's really hard to make an estimate at this point in time, so I gather in the market as we saw in the first quarter municipal issuance was way way up which is reflective of that stronger growth going into the marketplace.

Speaker Change: The confidence that the market will still respond to so we're taking a wait and see approach. Obviously, we continue to look at our international opportunity. We think this volatility and economic upheaval involved we are questioning position will help our demand for our product, but in the long run.

Dominic Frederico: So we're taking a wait and see approach. Obviously, we continue to look at our international opportunities, we think this volatility and an economic upheaval or questioning position will help our demand for our product in the long run. We're thinking short term, we've got opportunities if reports might be affected. We looked at our book in that area. So I think we're looking at volatility and confusion as a good thing for Assured, because that's when the market is the most, you know, receptive to our guarantee. I think if you look, it's very similar to COVID, where we optimistically saw the market dislocated in COVID, particularly in areas like airports, and we did very well writing business during that.

Speaker Change: Or in your short term we've got opportunities.

Speaker Change: Words might be affected we looked at our book.

Speaker Change: So I think we're looking at volatility and confusion is a good thing for sure is that when the market is the most.

Speaker Change: Receptive to a guarantee.

Speaker Change: Thank you for your loss is very similar to Covid, where we opportunistically saw the market dislocated and call of it particularly in areas like airports and we took we did very well writing business during that time.

Marissa Lobo: Got it.

Speaker Change: Got it.

Dominic Frederico: Thanks for your answers and congrats on the strong quarter. Thank you. Thank you very much.

Speaker Change: Thanks for your answers and congrats on the strong quarter.

Speaker Change: Thank you. Thank you.

Speaker Change: Thank you very much. Our next question comes from Tony Nick Jones with K B W.

Tommy McJoynt: Our next question comes from Tommy Mcjoynt with KBW. Your line is now open. Please go ahead. No, that was in this quarter, as you know.

Speaker Change: Your line is now open. Please go ahead.

Speaker Change: Okay.

Speaker Change: Hey, good morning, guys.

Speaker Change: Question on commentary you put out there.

Speaker Change: Around the type of primary issuance that came through in the quarter sitting at UBS.

Speaker Change: Overall, our higher rated credit.

Speaker Change: Does this change your outlook on what the normalized pvp to par and looks like going forward or should we not read too much into one quarter one data point.

Speaker Change: No that was good this quarter as you know.

Dominic Frederico: With the market volatility, a lot of the issuance was in the senior rate of positions, AAA, AA, in the public finance market, and everyone was, you know, waiting and seeing what's going to happen with interest rates and the volatility with respect to the tariffs and all the noise. So, AAA and AA issuance came to market. We actually, as I said, significantly, we wrapped a significant portion of the AA market. But so, as business specs, it doesn't change what we think is going to happen going forward for the year. In fact, we see a strong pipeline in public finance, both the primary and the flow primary business in our target markets in the AA and BBB, as well as in our secondary market execution, as I talked about.

Speaker Change: With the market volatility that a lot of the issuance was in the senior aide positions AAA doubling in the public finance market and everyone was.

Speaker Change: Waiting and seeing what's going to happen with interest rates and the volatility with respect to the tariffs and all the noise. So AAA and <unk> came to market, we actually as I said significantly we perhaps a significant portion of the Dublin market, but those business space with doesn't change when we think is going to happen going forward for the year in fact, we see a <unk>.

Speaker Change: Long pipeline and public finance, both the primary and the flow primary business.

Our target markets in the a and triple B as well as in our secondary market execution as I talked about we're seeing.

Dominic Frederico: We're seeing, we have a lot of names that are open. We've made our process, we've increased our. We've significantly invested in our systems to help execute that market with our counter parties, giving them real time information of what the price is going to be quickly, and how our premium fits into that into that transaction, how people can save money. So, we see the opportunity in secondary growing throughout the year and also in our flow business as markets have become less volatile.

Speaker Change: We have a lot of names that are up and we've we've.

Speaker Change: Made a process we've increased our.

Speaker Change: We've significantly invested in our systems to help.

Speaker Change: Executed that market with our Counterparties.

Speaker Change: Giving them real time information of what the price is going to be quickly and how our premium fits into that.

Speaker Change: Into that transaction, how people can save money. So we see the opportunity in secondary.

Speaker Change: Growing throughout the year and also in our flow business as markets have become less volatile, yes, Tommy I'd say, we actually take a lot of comfort in the first quarter and get all the confidence that would be or is going to look like strong credits came to the market in a volatile period would you expect that the stronger credits would still go out to issue. It shows the demand for financing with the municipalities still need the mark.

Dominic Frederico: Yeah, Tommy, I'd say we actually take a lot of comfort in the first quarter and get all the confidence of what the year is going to look like. Strong credits came to the market in a volatile period, which you would expect that the stronger credits would still go out to issue. It shows the demand for financing that the municipalities still need. The market in general was up 20% or 19% par over par, and yet we were up 33% par over par. So, it shows the demand for the papers there. There's issuance activity there. We expected stronger credit to the volatile market to go to the market because they're not really affected.

Speaker Change: And in general was up 20% or 19% or over par and yeah. We were up 33% are over par. So it shows the demand for the papers there theres issuance activity. There, we expect a stronger credits in a volatile market to go to the market because they're not really affected we expect the rest of the credit will come to the market as the year folds out when things get more stable and the tariff situation.

Dominic Frederico: We expect the rest of the credit will come to the market as the year pulls out and things get more stable in the entire situation and the global economic situation. So, we are very encouraged by the first quarter.

Speaker Change: The global economic situation. So we are very encouraged by the first quarter.

Speaker Change: Okay.

Tommy McJoynt: Okay, Scott, I appreciate the color there.

Speaker Change: Okay got it I appreciate the color there.

Dominic Frederico: And on some of those technology investments that you're making to potentially increase penetration in the secondary market, can you remind me, is there competition in that space? I know on the primary municipal side, there's really only one other competitor. What's the environment like competitively in the secondary side? Same as the primary, we have one other competitor looking at secondary market executions, but remember they look at a lot smaller end of the market than we do. Okay, got it.

Speaker Change: Some of those technology investments that you're making.

Speaker Change: Anyway.

Speaker Change: Integration in the secondary market.

Speaker Change: Can you remind me is there competition in that space I know on the primary municipal side, there's really only one other competitor, what's the environment like competitively and secondary side.

Speaker Change: The same is the primary way one other competitor looking at secondary market institutions will remember they look at it a lot smaller end of the market than we do.

Speaker Change: Okay got it.

Speaker Change: Your question please.

Dominic Frederico: I'm sorry. The first quarter reflected, if you look at the demand for the two companies and the amount of par that was insured by the two companies, there was a significant difference in the first quarter versus other quarters. Why? Because the stronger credits came to the market, we're only sure it can provide assistance there. Okay, got it.

Speaker Change: I'm sorry.

Speaker Change: The first quarter reflects that if you look at the demand for the two companies and the amount of part of that was insured by the two companies.

Speaker Change: The significant difference in the first quarter versus other quarters, why because the stronger credits came in the market where only assure it can provide assistance there.

Speaker Change: Okay got it and then just last question on the asset management segment and the bottom line there was a bit stronger me were expected.

Benjamin Rosenblum: And then this last question, the asset management segment, the bottom line there was a bit stronger than we were expected. Can you talk me through what happened there on the asset management side? Yeah, I think when you look at the asset management business, a lot of our earnings in the asset management business are back end loaded. So we book on a quarter lag. So we are looking really booking what Soundpoint did in the fourth quarter. And I think we are seeing a lot of that at Soundpoint typically has a very strong end of the year as they syndicate some of the loans they have out there, they pick up some incentive fees.

Speaker Change: Can you talk me through what happened there.

Speaker Change: Thank God.

Speaker Change: Yeah, I think when you look at the asset management business a lot of our earnings in the asset management business are backend loaded. So we book on a quarter lag. So we are looking really booking what sound pointed in the fourth quarter and I think we are seeing a lot of that at some point typically has a very strong end of the year as a syndicate. Some of the loans that are out there they pick up some incentive fees and what we've observed.

Benjamin Rosenblum: And what we've observed is that they typically it's a little bit back end loaded. So I think, you know, as you as you model through the rest of the year, I would always assume that, you know, our first quarter, which is really their fourth quarter is probably going to be our best quarter in that space. Thank you.

Speaker Change: Does that they typically it's a little bit back end loaded.

Speaker Change: As you model through the rest of the year I would always assume that our first quarter, which is really therefore, the quarter is probably going to be our best quarter in that space.

Speaker Change: Thanks.

Operator: This concludes the question and answer session.

Speaker Change: This concludes our question and answer session I would now like to turn the conference back over to our host to Robert Tucker for closing remarks.

Robert Tucker: I would now like to turn the conference back over to our host Robert Tucker for closing remarks. Thank you, operator. I'd like to thank everyone for joining us on today's call. If you have additional questions, please feel free to give us a call. Thank you very much.

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.

Operator: This concludes today's conference call. Thank you all for attending. You may now disconnect your lines. Have a great day.

Robert Tucker: This concludes today's conference call.

Speaker Change: You all for attending you may now disconnect your lines have a great day.

Robert Tucker: Okay.

Robert Tucker: Yeah.

Robert Tucker: [music].