Assured Guaranty Ltd. Q1 FY2025 earnings call

• Assured Guaranty had a solid first quarter of 2025 with adjusted operating income per share at $3.18 vs $1.96 in Q1 2024. Key valuation measures reached new highs. • New business production in the quarter was $39 million of PVP, with 65% from US public finance, balance from global structured finance and non-US public finance. • Concluded litigation with Lehman Brothers International in early February 2025, recognizing a pretax gain of $103 million. • Strategic approach to asset management focuses on increasing fee-based earnings from 30% ownership in Sound Point, which contributed $13 million. • First quarter investment income from alternative investments was $59 million, highest quarterly level, with inception to date annualized return of 13%. • In primary market, Assured Guaranty was leader in US municipal bond insurance, capturing 64% of insured par sold and 58% of transaction count. • Secondary market bond insurance activity increased substantially in Q1 2025, with $376 million of insured par, and focus on modernizing processes and technology. • Non-US public finance and structured finance production expanded into new sectors and locations, including a key milestone with XpFibre in France.

The Insurance segment contributed $168 million in the first quarter of 2025, up from $149 million in the first quarter of 2024. The Asset Management segment contributed $12 million, up from $1 million in the first quarter of 2024. The Corporate division had an adjusted operating loss of $20 million in the first quarter of 2025, down from a $37 million loss in the prior year. The Insurance segment's contribution was 65% of the total segment performance in terms of revenue contribution, Asset Management was 4.5% and Corporate division was -7.5%.

• Management believes current volatile market environment has potential to drive increased demand for guaranty. • Expect demand to continue for core products and likely increase during challenging economic/financial conditions. • Asset Management segment earnings are back-end loaded, with first quarter typically being the best quarter in that space as Sound Point has strong end of year activity.

• Uncertainty around UK water exposures like Thames Water, with need to assess various scenarios including potential haircuts and recoveries. • Impact of tariffs on credits wrapped, with a wait-and-see approach due to fluid situation. • Market volatility and economic upheaval, but management sees this as an opportunity as market is receptive to their guaranty during such times.

Q: On the topic of UK water exposures, specifically Thames Water, what likelihood are you now placing on a haircut to the debt?

A: Ben Rosenblum stated they look at various scenarios with probability weights, considering potential haircuts and recoveries, and are involved in gathering information. Dominic Frederico mentioned majority of cases show no loss to Assured Guaranty as they are senior creditors.

Q: Does the type of primary issuance with higher rated credits change the outlook on normalized PVP to par?

A: Rob Bailenson said market volatility led to AAA, AA issuance in Q1, but it doesn't change their outlook for the year, with strong pipeline in public finance both primary and secondary. Dominic Frederico added strong credits coming to market in volatile period shows demand for financing and they are encouraged by Q1.

Q: Can you talk about the Asset Management segment's stronger bottom line?

A: Ben Rosenblum explained Asset Management earnings are back-end loaded, with first quarter reflecting Sound Point's strong end of year as they syndicate loans and pick up incentive fees.