Assured Guaranty reports Q2 profit slump

Assured Guaranty has announced that it made a second quarter 2018 profit of $75 million, less than half the $153 million it made for the same period of 2017.

According to the company the decrease was primarily attributable to changes in foreign exchange rates, lower net earned premiums, and a commutation loss of $18 million related to the SGI Transaction.

It added that the second quarter 2017 effective tax rate was lower than second quarter 2018 due primarily to the release of $37 million in tax reserves for uncertain tax positions in the second quarter of 2017. Unrealised gains on credit derivatives and lower loss and loss adjustment expenses (LAE) partially offset the decline in net income in the second quarter of 2018.

Foreign exchange gains and losses relate primarily to remeasurement of premiums receivable and are due mainly to changes in the exchange rate of the British pound sterling relative to the US dollar. Second quarter 2018 foreign exchange losses were $34 million, compared with gains of $21 million in second quarter 2017.

Net earned premiums in the second quarter of 2018 were $136 million, compared with $162 million in the second quarter of 2017. Assured Guaranty blamed this decline mainly on reduced refunding activity due to a reduction in the insured portfolio as well as fewer advanced refunding bonds, caused by changes in tax law.

“For the fourth consecutive year, we increased our future earnings power by completing a substantial strategic transaction within our industry,” said Dominic Frederico, president and chief executive officer of Assured Guaranty. “The closing of our reinsurance transaction with Syncora Guarantee brought about record new business results in the second quarter of 2018. We continue to lead the municipal bond insurance industry and insured 57 percent of US municipal bond par volume issued with insurance year-to-date. And once again, we reached new highs for per share shareholders’ equity, non-GAAP operating shareholders’ equity and non-GAAP adjusted book value.”