Assured Guaranty’s second quarter results were met with a negative market reaction, as revenue growth significantly surpassed Wall Street’s expectations, but non-GAAP earnings per share fell well below consensus. Management attributed the strong top-line performance to robust U.S. municipal bond issuance, especially in the primary and secondary markets, and highlighted higher-quality business mix and increased penetration with institutional investors. However, CEO Dominic Frederico and CFO Benjamin Rosenblum acknowledged that elevated loss expenses, particularly related to certain U.K. utility and healthcare exposures, pressured profitability, while revenue streams from investment income and premiums remained resilient.
Is now the time to buy AGO? Find out in our full research report (it’s free).
Assured Guaranty (AGO) Q2 CY2025 Highlights:
- Revenue: $281 million vs analyst estimates of $185.8 million (39.1% year-on-year growth, 51.2% beat)
- Adjusted EPS: $1.01 vs analyst expectations of $1.59 (36.6% miss)
- Adjusted Operating Income: $130 million (46.3% margin, 46.1% year-on-year growth)
- Operating Margin: 46.3%, up from 44.1% in the same quarter last year
- Market Capitalization: $3.93 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Assured Guaranty’s Q2 Earnings Call
- Marissa Lobo (UBS) asked about the impact of lower interest rates on primary and secondary public finance opportunities. CEO Dominic Frederico explained that while lower rates can reduce premium volume, they often prompt more issuers to enter the market, offsetting the impact.
- Marissa Lobo (UBS) requested more detail on increased loss reserves for non-U.S. exposures and the outlook for Thames Water. Frederico responded that most loss reserves are accounting-driven, not reflective of immediate loss risk, and the company is comfortable with its position in ongoing refinancing plans.
- Thomas Patrick McJoynt-Griffith (KBW) questioned the implications of changes to the Puerto Rico Oversight Board on restructuring timelines. Frederico stated that delays were already significant, and any change could potentially accelerate progress, with optimism for a positive resolution.
- Thomas Patrick McJoynt-Griffith (KBW) inquired about the performance and expectations for contingent value instruments from Puerto Rico. Frederico confirmed that these securities have performed well and the company will act opportunistically based on market conditions.
- Geoffrey Dunn (Dowling and Partners) sought clarification on the downgrade of Westchester Medical Center to below investment grade. CFO Benjamin Rosenblum cited declining liquidity and potential headwinds from Medicare and Medicaid, but expressed confidence in the credit’s turnaround potential.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will be monitoring (1) trends in U.S. municipal bond issuance and the company’s ability to sustain high market share, (2) progress in international infrastructure and structured finance transactions as the company diversifies its portfolio, and (3) developments in risk and reserve management, particularly in sectors facing potential downgrades. Additionally, we will track how volatility in investment returns influences overall profitability.
Assured Guaranty currently trades at $82.51, down from $84.63 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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