Assured Guaranty Ltd (AGO) Q2 2025 Earnings Call Highlights: Record Highs in Book Value Amidst ...
Adjusted Operating Shareholders' Equity Per Share: $120.11 at the end of Q2 2025.
Adjusted Operating Income Per Share: $4.21 for the first half and $1.01 for Q2 2025.
US Municipal Issuance: 17% increase in par amount through June 30, 2025, compared to the previous year.
Secondary Market Policies: Nearly $900 million written in the first half, including over $500 million in Q2 2025.
Primary and Secondary Insured Municipal Par: Approximately $15 billion in the first half of 2025.
New Issue Insured Par Sold: $14.1 billion in the first half, 30% more than the same period last year.
New Issue Insured Par Sold in Q2: $9.5 billion, up 32% year-over-year.
Primary Market Transactions: 474 new issues in the first half, 44% more than the previous year.
Non-US Public Finance PVP: $14 million in the first half of 2025.
Structured Finance PVP: $15 million in the first half of 2025.
Adjusted Operating Income: $50 million or $1.01 per share in Q2 2025, compared to $80 million or $1.44 per share in Q2 2024.
Net Earned Premiums and Credit Derivative Revenues: Increased by $5 million in Q2 2025.
Net Investment Income: Increased by $8 million in Q2 2025.
Insurance Segment Loss Expense: Increased by $27 million in Q2 2025.
Share Repurchases: 1.5 million shares for $131 million at an average price of $85.03 per share in Q2 2025.
Dividends: $19 million returned to shareholders in Q2 2025.
Holding Company Liquidity: Cash and investments of $157 million as of June 30, 2025.
Warning! GuruFocus has detected 8 Warning Signs with EMBC.
Release Date: August 08, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Assured Guaranty Ltd (NYSE:AGO) achieved record highs in adjusted book value per share and adjusted operating shareholders' equity per share at the end of the second quarter.
The company led the municipal bond insurance industry in par insured during the first half of 2025, capturing 64% of the insured par sold.
Assured Guaranty Ltd (NYSE:AGO) significantly increased its secondary market policies, writing nearly $900 million in the first half of 2025.
The company remains committed to its share repurchase program, with a target of $500 million for the year, and has already repurchased $296 million worth of shares.
S&P Global Ratings and KBRA affirmed Assured Guaranty Ltd (NYSE:AGO)'s financial strength ratings, citing strong competitive position, excellent capital and earnings, and a well-diversified global underwriting strategy.
Negative Points
Second quarter 2025 adjusted operating income decreased to $50 million from $80 million in the second quarter of 2024.
The company experienced an increase of $27 million in the Insurance segment loss expense, primarily due to additional reserves on certain UK regulated utility and US revenue exposures.
Changes in the fair value of alternative investments and trading securities contributed to the decrease in adjusted operating income compared to the previous year.
The average balance of the short-term investment portfolio declined, resulting in a decrease of $10 million in net investment income.
Westchester Medical was added to the below investment grade list due to concerns about liquidity and potential headwinds from Medicaid and Medicare patients.
Q & A Highlights
Q: How does a lower interest rate environment impact Assured Guaranty's opportunities in primary and secondary public finance? A: Dominic Frederico, President and CEO, explained that a lower interest rate environment would decrease the premium volume as the basis for premium calculation would go down. It would also affect the insurance portfolio, which consists mostly of fixed income securities. However, the secondary market might not be impacted, and lower rates could lead to more issuers entering the market, potentially increasing business opportunities.
Q: Can you provide more details on the increase in loss expenses and the exposure to non-US markets, particularly regarding Thames Water? A: Dominic Frederico noted that the company evaluates credits independently, and while some credits are downgraded, the top tier of the capital stack is well-protected. Loss reserves are calculated based on scenario analysis and probability weighting, and many credits do not result in actual losses. Regarding Thames Water, the company is comfortable with its position and expects the refinancing plan to be approved and implemented.
Q: What is the impact of the recent changes in the Puerto Rico Oversight Board on restructuring procedures? A: Dominic Frederico expressed optimism that the changes could lead to improvements, as the previous board had not been effective in executing consensual deals. The process for appointing new members is still uncertain, but any change is expected to be positive.
Q: How much contingent value instruments from earlier Puerto Rico restructuring does Assured Guaranty still hold, and how does this relate to PREPA's ability to repay? A: Dominic Frederico stated that the company holds about $117 million in contingent value instruments, which have performed well. The company believes PREPA has the ability to repay its debt, and the administrative expense claim continues to grow, indicating a positive outlook for resolving disputes and reaching a consensual agreement.
Q: What led to Westchester Medical being added to the BIG list, and what are the expectations for its turnaround? A: Benjamin Rosenblum, CFO, explained that the downgrade was due to liquidity concerns and potential headwinds from Medicaid and Medicare. However, the company has a positive view on the turnaround possibilities and is working with the facility to address the issues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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