Assured Guaranty Q2 2025 Earnings Report

Assured Guaranty EPS Results

• Actual EPS: $1.01
• Consensus EPS: $1.57
• Beat/Miss: Missed by -$0.56
• One Year Ago EPS: $1.44

Assured Guaranty Revenue Results

• Actual Revenue: $281.00 million
• Expected Revenue: $203.91 million
• Beat/Miss: Beat by +$77.09 million
• YoY Revenue Growth: +39.10%

Assured Guaranty Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Friday, August 8, 2025
• Conference Call Time: 8:00AM ET

Assured Guaranty (NYSE:AGO) Ltd is a Bermuda-domiciled provider of financial guaranty insurance and reinsurance products serving public finance, infrastructure and structured finance markets. The company’s primary business activity is credit enhancement, whereby it guarantees the timely payment of principal and interest on debt obligations issued by municipal and infrastructure entities. By combining rigorous risk assessment with active portfolio management, Assured Guaranty helps issuers access capital at more attractive rates while protecting investors against credit events.

In its public finance segment, the company underwrites municipal bond insurance for state and local governments, public-private partnerships and essential infrastructure projects. Its structured finance offerings cover asset-backed securities, residential and commercial mortgage obligations, and other specialty lending transactions. The reinsurance arm provides capacity relief and diversification to third-party insurers by assuming credit risk on existing policies, and the firm also offers runoff management services to optimize recoveries on legacy guaranteed portfolios.

Headquartered in Hamilton, Bermuda, with principal executive offices in New York, Assured Guaranty conducts business across North America, Europe and select Asian markets. Since its founding in the late 1980s, the company has navigated multiple credit cycles and evolving regulatory frameworks, refining its underwriting standards and capital management approach. Under the leadership of Chairman and Chief Executive Officer Dominic J. Frederico, Assured Guaranty continues to emphasize disciplined underwriting, robust credit analytics and strategic capital allocation to support its policyholders and stakeholders.

Assured Guaranty Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Adjusted book value per share and adjusted operating shareholders’ equity per share reached record highs at $176.95 and $120.11, respectively, at quarter end.
• Positive Sentiment: Assured Guaranty insured 64% of the US municipal market in H1 2025, writing $14.1 B of primary and $900 M of secondary market policies with strong credit quality.
• Positive Sentiment: The company repurchased $296 M of common shares year-to-date, representing 6.8% of outstanding shares, and received board approval to buy an additional $300 M plus a $250 M special dividend.
• Positive Sentiment: S&P and KBRA affirmed Assured Guaranty’s AA and AA+ financial strength ratings with stable outlooks, citing excellent capital, competitive position, and liquidity.
• Negative Sentiment: Q2 adjusted operating income fell to $50 M ($1.11 per share) from $80 M ($1.44 per share) a year ago, driven by volatile alternative investment valuations and higher loss reserves.

Presentation

[Operator]

Good morning, and welcome to the Assured Guaranty Limited Second Quarter twenty twenty five 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. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded.

[Operator]

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, Senior MD at Assured Guaranty]

Thank you, operator, and thank you all for joining Assured Guaranty for our second quarter twenty twenty five financial results conference call. Today's presentation is made pursuant to the Safe Harbor provision 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, Senior MD at Assured Guaranty]

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, both 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 assuredguaranty.com. Turning to the presentation, our speakers today are Dominic Frederico, President and Chief Executive Officer of Assured Guaranty Limited Rob Balenson, our Chief Operating Officer and Ben Rosenblum, our Chief Financial Officer.

[Robert Tucker, Senior MD at Assured Guaranty]

After their remarks, we will open the call to your questions. As the webcast is not enabled for Q and 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, President, CEO & Member of Executive Committee at Assured Guaranty]

Thank you, Robert, and welcome to everyone joining today's call. We continue to build value for Assured Guaranty shareholders and policyholders during the second quarter and 2025. Adjusted book value per share of $176.95 and adjusted operating shareholders' equity per share of $120.11 both reached record highs at the end of the second quarter. Adjusted operating income per share was $4.21 and $1.01 for the first half and second quarter respectively. Ben will provide more details later about our financial results.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

US municipal issuance remained strong in the 2025. Through June 30, the par amount of US municipal issuance was 17% ahead of last year's record pace. We insured 64% of the insured parts sold in the primary market during the 2025. This indicates that the market recognizes the strength of our guarantee and value proposition. One of our strategic priorities in 2025 was to increase our production and ensuring US municipal bonds in the secondary market.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

We wrote nearly $900,000,000 of secondary market policies in the first half, including over $500,000,000 in the second quarter. Our first half secondary par was a 150% of the total amount of secondary par we insured in all of 2024. And as I have mentioned in the past, we received significantly higher premiums on our secondary market policies. Overall, our US public finance originations in the first two quarters were of unusually high credit quality and produced $74,000,000 of PVP. Rob will provide more details on our high quality business mix in a few minutes.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

With the addition of non US public finance and global structured finance, six month PVP totaled $103,000,000. In capital management, we remain committed to our share repurchase program with a target of this year of $500,000,000. So far this year, as of 08/06/2025, the company had repurchased $296,000,000 of common shares, representing 6.8% of the shares that were outstanding on 12/31/2024. And in August, our board authorized the repurchasing of additional $300,000,000 of its common shares. We're also pleased to announce that in July, a $250,000,000 stock redemption or special dividend by our US insurance subsidiary was approved by our Maryland regulator.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

Over the years, we have repeatedly proven the strength and resilience of our business model. Reflecting this on June 30, S and P Global Ratings affirmed Assured Guaranty's AA financial strength rating with a stable outlook, citing our very strong competitive position, excellent capital and earnings, well diversified global underwriting strategy, and exceptional liquidity. Additionally, last week, KBRA affirmed the Sure Guarantee's double a plus financial strength rating with a stable outlook, citing substantial claims paying resources, strong risk management, leadership position in the finance guarantee market, high quality insured portfolio, and conservative investment approach among other factors. We believe we are now on a growth trajectory in both US and non US markets. In 2022, after a long period of reducing our insurance exposure, the amount of our new business each year began to exceed what was amortizing in our insurance portfolio.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

That began the current trend of increasing the size of the insured portfolio. We intend to continue our leadership position in The US municipal bond insurance while further expanding and diversifying our global infrastructure and structured finance reach. I will now turn the call over to Rob to discuss in detail our production results.

[Robert Bailenson, COO at Assured Guaranty]

Thank you, Dominic. Assured Guaranty led the municipal bond insurance industry and par insured during the 2025, capturing 64% of the insured parts sold. We insured $14,100,000,000 of new issued par sold, 30% more than during the same period last year. As Dominic discussed, in the secondary market, we insured an additional $900,000,000 of par at much higher premium rates. In aggregate, during the 2025, our primary and secondary insured municipal par totaled approximately $15,000,000,000.

[Robert Bailenson, COO at Assured Guaranty]

We also significantly increased the number of primary market transactions we executed, guaranteeing 474 new issues during the first half, 44% more than in the period last year. For the second quarter twenty twenty five, our new issue insured par sold of $9,500,000,000 was up 32% year over year, while the total insured portion of the market was up by 21%. Our deal count for the quarter was up 41%. First half results reflected an unusual operating environment. The ratings of new issues in the first half of this year were more weighted toward higher quality and therefore lower average premium rates than has typically been the case.

[Robert Bailenson, COO at Assured Guaranty]

These higher quality credits also tend to moderate our overall risk profile and result in lower rating agency capital charges. Our guarantee adds value to the high quality bonds because it can further enhance credit quality, reduce borrowing costs, mitigate the impact of downgrade and headline risk, improve market liquidity and potentially stabilize market value. During the 2025, we issued over a 100 policies totaling $5,000,000,000 AA bar, some of which in the secondary market. These are issues with underlying ratings in the AA category by S and P or Moody's. For municipal transactions we closed in the 2025, such AA credits represented 32% of our insured par.

[Robert Bailenson, COO at Assured Guaranty]

This represents a 50% increase over the percentage of AA business reinsured in each of the previous three years. During the second quarter, we issued 54 primary and secondary market policies totaling $3,300,000,000 of AA credits. The composition of our business mix in the 2025 was more heavily weighted toward double a credits than last year's second quarter, where we also had two large high premium transactions that significantly boosted that quarter's PDP. This year, we have also insured a number of transactions with insured par amounts of $100,000,000 or more. Institutional investors are large buyers of these transactions and they continue to value our guarantee on them.

[Robert Bailenson, COO at Assured Guaranty]

In the 2025, we guarantee par of at least a $100,000,000 on 27 transactions for a total of $6,700,000,000 of insured parcel. Of that, during the second quarter, we guaranteed 19 transactions totaling $5,200,000,000 of insured parcel. The insured par amounts of some of these larger transactions included $1,000,000,000 for the Dormitory Authority of the State of New York, dollars $844,000,000 in aggregate for two issues for the Downtown Revitalization Public Infrastructure District in Utah, $411,000,000 for Allegheny County Airport in Pennsylvania, and $361,000,000 for Meredith Health issued by the Maryland Health and Higher Education Facilities Authority. In our other markets, non US public finance contributed $40,000,000 in PVP for the first half of twenty twenty five. Second quarter twenty twenty five transactions included one primary and several secondary infrastructure transactions in The UK.

[Robert Bailenson, COO at Assured Guaranty]

Additionally, in Europe, we issued a guarantee for Spain's A127 Aragon Regional Roadway, our first post financial crisis p three transaction in Spain, and a guarantee for XP Fiber, the largest independent fiber to home operator in France, which is our first primary transaction in French infrastructure since we opened our Paris office. The nature of this business, which includes large transactions, significant lead times, result in less predictable quarterly production results. Structured Finance contributed $50,000,000 in PVP for the 2025. Within Structured Finance, results were primarily attributable to subscription finance and pooled corporate transactions. Subscription finance transactions are typically short duration, so their PVP earns significantly faster than the PVP generated by our other business segments.

[Robert Bailenson, COO at Assured Guaranty]

Further, based on our experience with these deals, there's an expectation that many of these transactions will extend or renew at maturity, generating additional PVP that was not recognized at the time of closing. Since 2021, we have seen growth in this product line year over year, and we expect this growth to continue in the coming years. Looking at the third quarter, we are off to a good start, ensuring approximately $2,800,000,000 in par close in the month of July. This includes $600,000,000 of par for the new terminal one at New York's JFK Airport. With over $10,000,000 in claims paying resources, we're well equipped to support projects of this scale.

[Robert Bailenson, COO at Assured Guaranty]

We're also in the process of closing another substantial transaction in Australia as a follow-up to the transaction we insured in 2024. In closing, we believe we are well positioned for the second half of the year. As Dominic indicated earlier, The US municipal market is seeing high issuance with some forecasts projecting that municipal issuance in 2025 could surpass February record of $500,000,000,000 Total market volume had already reached $278,000,000,000 by June 30. We see many attractive opportunities in global infrastructure and structured finance. We have confidence in our strategy and a commitment to succeed.

[Robert Bailenson, COO at Assured Guaranty]

I will now turn the call over to Ben to discuss our financial results further.

[Benjamin Rosenblum, CFO at Assured Guaranty]

Thank you, Dominic and Rob, and good morning. Second quarter twenty twenty five adjusted operating income was $50,000,000 or $1.1 per share which compares with adjusted operating income of $80,000,000 or $1.44 per share in the 2024. The key revenue drivers, net earned premiums and net investment income on the available for sale portfolio were both up in the 2025 compared with the 2024, which reflects the earnings power of each of these predictable streams of core earnings. Net earned premiums and credit derivative revenues increased by $5,000,000 primarily due to earnings on new large transactions and supplemental premiums written in 2024. Our deferred premium revenue, which is our future store earnings, was $3,900,000,000 Net investment income on the available for sale fixed maturity and short term investment portfolio increased $8,000,000 in the 2025.

[Benjamin Rosenblum, CFO at Assured Guaranty]

There were a few notable changes in the composition of the available for sale investment portfolio compared with the 2024 that contributed to the increase in net investment income. First, certain CLO equity tranche investments were reclassified to the available for sale fixed maturity portfolio from a CLO fund whose change in net asset value or NAV was previously reported in adjusted operating income. Net investment income in 2025 included $9,000,000 related to the CLO equity tranches whereas in the prior year the change in the NAV of the CLO fund was $3,000,000 And second, net investment income on the externally managed portfolio increased by $6,000,000 as our managers reinvested into higher yielding assets. However, the average balance of our short term investment portfolio declined as did the short term interest rates resulting in an offsetting decrease of $10,000,000 in net investment income. In addition to the CLO equity tranches in the available for sale portfolio, we also have other alternative investments whose changes in NAV are reported in adjusted operating income.

[Benjamin Rosenblum, CFO at Assured Guaranty]

Earnings from this portfolio tend to be more volatile than the fixed maturity portfolio. In the 2025, the change in NAV from these alternative investments was $5,000,000 compared with $15,000,000 in the 2024. On an inception to date basis as of 06/30/2025, our aggregate alternative investments have generated an annualized internal rig return of 13%, substantially greater than the returns on the fixed maturity portfolio. Changes in the fair value of trading securities, which mainly consists of Puerto Rico contingent value instruments also tends to be volatile. In the 2025, the change in fair value of trading securities was a $2,000,000 gain compared with a $17,000,000 gain in the 2024.

[Benjamin Rosenblum, CFO at Assured Guaranty]

The changes in fair value of alternative investment and trading securities are two of the three primary drivers of the decrease in adjusted operating income in second quarter twenty twenty five compared with second quarter twenty twenty four. The last notable component of the variance is an increase of $27,000,000 in the insurance segment loss expense. In the 2025, loss expense was primarily attributable to additional reserves on certain UK regulated utility and U. S. Municipal revenue exposures.

[Benjamin Rosenblum, CFO at Assured Guaranty]

Loss expense is a function of both economic loss development and the amortization of deferred premium revenue. In the 2025, economic loss development was $36,000,000 mainly due to certain healthcare UK regulated utility and municipal revenue exposures. Breaking down the main contributors of our second quarter results, the insurance segment contributed $76,000,000 and the asset management segment contributed $4,000,000 These segment earnings were offset in part by the corporate division's adjusted operating loss of $29,000,000 in the 2025, which is down from a $35,000,000 loss in the prior year. On the capital management front, we repurchased 1,500,000.0 shares for $131,000,000 at an average price of $85.03 per share and also returned $19,000,000 in dividends to our shareholders in the 2025. Including our Board's most recent $300,000,000 share repurchase authorization, our current remaining authorization is $356,000,000 In terms of our current holding company liquidity position, we have cash and investments of $157,000,000 of which $60,000,000 resides in AGL.

[Benjamin Rosenblum, CFO at Assured Guaranty]

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 $120 and adjusted book value per share of almost $177 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. Since the end of the quarter, we had two very positive developments which demonstrate the successful execution of several of our key strategic initiatives. First, after many years of negotiation and hard work, our largest loss mitigation security with a carrying value of $4.00 $8,000,000 as of 06/30/2025 was paid down using the proceeds from the liquidation of the trust assets. This outcome showcases our multifaceted approach to loss mitigation combining a vigorous legal defense and financial flexibility. We reached a positive resolution after pursuing our legal rights, allocating capital to repurchase most of the outstanding exposure at discount and remaining patient while the collateral value recovered.

[Benjamin Rosenblum, CFO at Assured Guaranty]

There will be little impact on the third quarter income for this final resolution. However, on an inception to date basis, we received over $100,000,000 more in recoveries than we paid out, which resulted in a positive lifetime internal return of 2.7% for this troubled exposure. The second development, as Dominic mentioned, was that the Maryland Insurance Administration approved the redemption by the company's U. S. Insurance subsidiary Assured Guaranty Inc.

[Benjamin Rosenblum, CFO at Assured Guaranty]

Of $250,000,000 of its shares of common stock. Assured Guaranty Inc. Expects to redeem such shares in exchange for cash and alternative investments in the 2025. Proceeds from the stock redemption will flow into our U. S.

[Benjamin Rosenblum, CFO at Assured Guaranty]

Holding companies and will be available for strategic initiatives including share repurchases. I'll now turn the call over to our operator to give you the instructions for the Q and A period.

[Operator]

Thank you very much. We will now begin the question and answer session. Our first question comes from Marisa Lobo with UBS. Your line is now open. Please go ahead.

[Marissa Lobo, Analyst at UBS Group]

Thank you. Good morning. Thanks for taking my question. I was just looking for more color on the pub. Hi. Can you hear me okay?

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

Sorry. We missed the question. You guys are up. Please repeat.

[Marissa Lobo, Analyst at UBS Group]

I was hoping for more color on how, a lower interest rate environment impacts the opportunity set for for AGO both in primary and secondary public finance?

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

The lower interest rate environment, as we said, we get paid on principal and interest. So lower interest rate environment, but obviously depressed premium volume terms of what we would calculate is our rate against. So the basis of the premium calculation would go down, would affect our insurance portfolio, which is obviously made of mostly fixed income securities. So it would also affect book value of that. In terms of the secondary market, don't think it has any impact whatsoever.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

And as we said, strategically, we've looked at the secondary market as kind of the balance in today's marketplace where there are low rates and tight spreads. The secondary market gives us an opportunity to balance that out with higher rated, higher performance, or higher ROE business. So as I said, I think it'll affect the portfolio, affect the premium calculation going forward depending on the size of the decrease in the interest rates.

[Robert Bailenson, COO at Assured Guaranty]

Yeah. But if rates remember also, Rebecca, if spreads widen out, even if rates go down, then you're still gonna get you're calculate higher premium rates.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

Well, on the positive side, if rates go down, you're gonna probably have more issuers in the market as well because people take advantage of the low interest rates to an effect to accomplish some borrowings that they've probably been holding off of because of the volatility in the market because of tariffs, no tariff, you know, political, no political. So we gotta make sure that that strains out as well. But if they're low enough, you'll see a lot more issuers come to market as well.

[Robert Bailenson, COO at Assured Guaranty]

You'll also see more triple b and and single a rated issuers come to market at low risk with with lower interest rates.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

And it could affect our earned premium in a positive way because of refunding. So there's some good news and some bad news with the lower interest rate environment.

[Marissa Lobo, Analyst at UBS Group]

That's helpful. Thank you. And and just moving on to, the loss expense and increase in big exposures. Could you speak a little bit about, you know, the the increase in big, exposure towards the non US and and also how you see the process timeline playing out for, Gaines water here?

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

So this is something we've something we've discussed at length in the company and also to you over the quarter. So what we're responsible to do from the standpoint of evaluating the credits is do an independent evaluation of what we would rate the credit. And the rating is kind of severe. So if you look at a bright line, where the top tier of the, basically, capital stack, the ability to get to us in terms of a loss situation is pretty remote. But once the underlying credit has trouble making cash flow or making operating expenses, you downgrade the stack, but the stack is protected at the top very, very well.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

So you're looking at it below investment grade credit that, quite honestly, if you're the top 2,000,000,000 of 7,000,000,000, you really have no exposure. But that's not the way the rules work. When it comes time to loss reserves, you got the same problem. Low investment grade credit's gonna attack attract the loss reserve. Losses are calculated based on a scenario analysis and the probability weighting.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

The majority, and I mean the significant majority of our credits that goes into our calculation of either reserves or below investment grade do not pay losses. So it's an accounting concept. We actually try to get a statistic for you that how many lower reserves that we put up or we never paid a loss on, and it's the majority of the cases the strong majority of the cases. Ben, you wanna add anything to that?

[Benjamin Rosenblum, CFO at Assured Guaranty]

I think, Sean, I think that I think that sums it up. I think in many I think in many cases, we put up losses, you know, and this is true certainly in the health care sector in The US where we put up many losses over the years and we downgraded our credit this quarter in Westchester Medical Center. But I can't even think of the last time we paid out a loss The US health care sector. It's probably the Bayonne Hospital, you know, twenty some odd years ago. So Your

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

insurance, I think.

[Benjamin Rosenblum, CFO at Assured Guaranty]

Well, FSA did it. But at the end of the day, we do have a very strong surveillance team that works on the health care front. They're very good at their job. They get in there and work out the credit. They downgrade it, and then we work through the problem.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

And your question was on TAM, so let's go back to that for a second. So remember, as we said, we're in the op code, not the hold code. The problem there is capital expenditure is not operating expenses or operating ability to cover that service. We're very well protected in terms of the legal structure. And as you've seen in the current environment, we put up a plan with the rest of the creditors relative to refinancing, which is the only plan available.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

We're very comfortable with our position in the plan. What it means to us as a company. So, hopefully, that'll continue its pace, get approved, and then put into effect, we'll be able to cure the credit. You know, the joke I make internally, I'll put it out here over some criticism, is that he's even in Puerto Rico's case, they paid the water bill. So I'm assuming the UK government will do the same.

[Marissa Lobo, Analyst at UBS Group]

Thanks for that. That's it for me.

[Operator]

Our next question comes from Tommy McJoint with KBW. Your line is now open. Please go ahead.

[Tommy McJoynt, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Hey, good morning guys.

[Robert Tucker, Senior MD at Assured Guaranty]

Morning, This

[Tommy McJoynt, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

is a timely call following the announcement just a few days ago that five of the seven members of the Puerto Rico Oversight Board were dismissed by the president. Can you walk through your understanding of what happens from here in terms of nominations or new appointments to that board if they have to go through approval process? And then if it this in in any way delays, the overall restructuring procedures just as new members get up to speed.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

Well, let's look at the facts from the rear. So number one, nothing could delay a restructuring or a consensual deal than the existing board was doing in terms of their execution. Remember, we had signed three previous deals, which they reneged on every time. So it couldn't go any slower. So any change to that's gotta be an improvement, Tommy.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

So at the end of the day, I'm optimistic that this returns out to be a positive, not a negative. Number two, what ultimately happens, I think, is still up for discussion relative to who's got legal rights to do what. Remember how the original board was constituted. Each side got to put a couple on. The president got to put somebody on.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

Will they follow that path? I have no idea. So it's still up in the opening. It's still whether they're gonna contest the dismissals. But as I said, to me, it can only improve. It can't go, you know, in an reverse way.

[Tommy McJoynt, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Okay.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

So I think it leads to a yield potential.

[Tommy McJoynt, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Yeah. Yeah. We'll we'll stay tuned on that. How much, contingent value instruments, from earlier Puerto Rico restructuring do you guys still hold? As I understand that those have been performing very well, and that's just reflective of of sales tax receipts coming in above budget.

[Tommy McJoynt, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

You know, as we see that happen, can we think of, you know, PREPA's ability to repay and the ultimate recovery there as also potentially coming in better? Just thinking about, you know, economic activity driving sales tax receipts and that also potentially leading to more electric utilization. Is is there a correlation there that we can think of?

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

Let me answer your first question. So we have about a $117,000,000 remaining from the previous contingent value securities. And as you said, they performed very well. That's why we held back unless it doesn't meet our turn internal return thresholds. We would sell, but they do.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

So we hold. We expect them to continue to improve. So as the market presents opportunity, we'll execute accordingly. We don't have a liquidity situation or position, so we don't have to worry about holding the securities. So at the end of day, it's positive for the company.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

Number two, depending on what we ultimately resolve PREPA with, will there be contingent securities? I don't know. But like you said, since they tend to undervalue them, they're not a bad investment to take as part of a settlement because they typically outperform. We believe PREPA has abilities to repay its debt. And as you can see, the growth in the administrative expense plan continues to significantly increase, which represents a significant portion of the debt that was owed, which is kinda funny.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

In this case, we thought we'd have to prove that there's money there. That would have to prove to us that there is no money there. So I think it's a very different situation than it was in the past with the change in the board members potentially and this administrative claim. I think things are getting very positive from the standpoint of Prebys' ability to settle our dispute and get to a consensual agreement.

[Tommy McJoynt, Director - Equity Research at Keefe, Bruyette & Woods (KBW)]

Thanks, Donald.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

You want them, Tommy.

[Operator]

Our next question comes from Jeffrey Dunn with Dowling and Partners. Your line is now open. Please go ahead.

[Geoffrey Dunn, Partner at Dowling & Partners]

Thanks. Good morning.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

Good morning, Jeff.

[Geoffrey Dunn, Partner at Dowling & Partners]

Saw Westchester Medical was added to your BIG list, and I know it's only one notch below investment grade. But can you talk a little bit about what occurred there relative to first quarter and second quarter that brought it down to the BIG level?

[Benjamin Rosenblum, CFO at Assured Guaranty]

Yeah. I think we know we we're evaluating our credits. As I mentioned, we have a good really good surveillance team led by Holly Horn. And she looked at it. We looked at it, and we saw the liquidity was not where we like our standards.

[Benjamin Rosenblum, CFO at Assured Guaranty]

Additionally, you know, when you look at what's coming out of Washington, if there may be some headwinds from Medicaid and Medicare patients out there. And as a result, we as a forward looking basis, we decided we would downgrade it. We do not believe this is gonna be a big problem. We generally, as I mentioned, work out our health care credits, but you gotta take the prudent measures and put up the ratings so you think it makes sense at the time.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

This is a critical facility, very important to the state, very important to the local environment. But as, Ben points out, we have a process where we look at credits, we look at the future, we look at the cash flow situation, the available, you know, management team, margins that are being pressurized, and take the decision we think are necessary relative to managing the credit.

[Benjamin Rosenblum, CFO at Assured Guaranty]

We generally have a very positive view on the turnaround possibilities there, and we're we're looking forward to working with them to turn it around.

[Dominic Frederico, President, CEO & Member of Executive Committee at Assured Guaranty]

So I think as Ben talks about in our history of the health care credits, they perform very, very well because they are an operating exposure that can easily be amended versus political situations that are a little tougher to handle. This is not one of those. We are recognizing the facts of what this means relative to Medicare, Medicaid, and cash flows and the demand. Remember, they're bringing on a new facility, which always has its problems in terms of operations. But just being forewarned is forearmed. That's kind of our process in surveillance.

[Geoffrey Dunn, Partner at Dowling & Partners]

Okay. Thank you. You're welcome. Thanks.

[Robert Bailenson, COO at Assured Guaranty]

Welcome, Joe.

[Operator]

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

[Robert Tucker, Senior MD at Assured Guaranty]

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.

Participants

Executives

• Robert Tucker, Senior MD
• Dominic Frederico, President, CEO & Member of Executive Committee
• Benjamin Rosenblum, CFO

Analysts

• Robert Bailenson, COO at Assured Guaranty
• Marissa Lobo, Analyst at UBS Group
• Tommy McJoynt, Director - Equity Research at Keefe, Bruyette & Woods (KBW)
• Geoffrey Dunn, Partner at Dowling & Partners