Assured Guaranty Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2023

Key Takeaways

  • Record equity metrics: At mid-2023, adjusted operating shareholders’ equity per share reached $95.64 and adjusted book value per share hit $144.21, both all-time highs for the company.
  • Robust new business: First-half PVP totaled $203 million—the second largest H1 amount since 2009—driven by diversified wins across U.S. public finance, international infrastructure and global structured finance.
  • SoundPoint and AHP transactions: Closed the contribution of Assured IM to SoundPoint (30% stake) and sale of Assured Healthcare Partners, positioning asset management to be immediately accretive and fee-generative.
  • Puerto Rico exposure: Increased Q2 loss reserves by $49 million, primarily for PREPA, as negotiations stall and the company commits to litigation and Title III plan confirmation to protect its bondholder rights.
  • Strong Q2 operating income: Adjusted operating income rose to $36 million ($0.60/share) from $30 million ($0.46/share) a year ago, led by higher net investment income and fair value gains on Puerto Rico instruments.
AI Generated. May Contain Errors.
Earnings Conference Call
Assured Guaranty Q2 2023
00:00 / 00:00

There are 9 speakers on the call.

Operator

Good morning, and welcome to the Assured Guaranty Limited Second Quarter 2023 Earnings Call. My name is Glen, and I'll be the operator for today's call. All participants will be in a 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 call over to our host, Robert Tuptka, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead.

Speaker 1

Thank you, operator, and thank you all for joining Assured Guaranty for our Q2 2023 financial results conference call. Today's presentation is made pursuant to the Safe Harbor provisions 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.

Speaker 1

If you're listening to a replay of this call or if you're reading the transcript of the call, please note that our statements made today, they 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 and Rob Bailenson, our Chief Financial Officer.

Speaker 1

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.

Speaker 2

Thank you, Robert, and welcome to everyone joining today's call. At the halfway mark of 2023, Assured Guaranty's adjusted operating shareholders' equity per share and adjusted book value per share were at the highest levels in our history, $95.64 $144.21 respectively. New business production for the first half remained strong, consistent with recent year's results, was diversified across U. S. Public finance, international infrastructure and global structured finance.

Speaker 2

First half PVP of $203,000,000 is the 2nd largest amount of total first half PVP since 2,009 and the second time that first half PVP exceeded $200,000,000 during that time period. In July, we completed our transaction with SoundPoint Capital Management involving Assured I'm and separately we sold Assured Healthcare Partners. I will discuss those transactions in a few minutes. For the first half of twenty twenty three, Assured share of the insured primary municipal bond market was 63%, up from 56% in the first half of twenty twenty two. We guaranteed 2.90 new issues totaling $9,800,000,000 of primary insured par sold.

Speaker 2

This par amount was fairly consistent with the first half of twenty twenty two despite the total market par being down by approximately 14% in the first half of twenty twenty three compared with the first half of twenty twenty two. Our secondary market par written for the first half of the year was $280,000,000 bringing our total insured parcel to $10,100,000,000 in the primary and secondary markets. We continue to see higher demand for bond insurance than we did before the pandemic. First half twenty twenty three insured product market penetration of 9% was higher than the 8.8% in the first half of twenty twenty two and significantly higher than the 5.9% of 20 nineteen's first half. Total insured penetration for the Q2 was 10.1 percent for the highest penetration rate since 2,009.

Speaker 2

Additionally, market demand for bond insurance increased significantly in the Q2 of 2023, up 72% from the Q1 of 2023. Assured Guaranty saw an 86% increase in insured cars sold in the Q2 of 2023 compared to the Q1 of 2023, insuring $6,400,000,000 in the Q2 of 2023, 28% higher than the same period last year. During the Q2, we also continue to benefit from institutional investor demand for our insurance as we guarantee $4,000,000,000 of par on 13 transactions that each utilize $100,000,000 or more of Assured Guaranty's insurance. This brought the total number of such transactions during the first half of twenty twenty three to 21 transactions for a total of $5,500,000,000 International Public Finance produced $36,000,000 of PVP during the first half of twenty twenty three, up from $30,000,000 in the first half of twenty twenty two. 2nd quarter activity includes a guarantee on a UK regulated utility and our pipeline of potential international public finance transactions includes a significant number of transactions that we consider likely to close later in 2023.

Speaker 2

Global structured finance direct PPP was the largest first half announced since 2,009, producing $68,000,000 of PVP. We continue to see opportunities with banks, insurance companies, pension funds and asset backed investor clients across sectors including pooled corporate and fund finance. In July, S and P reaffirmed our AA Financial Strength Rating with stable outlook for our financial guarantee companies, citing both our very strong financial risk profile and very strong business risk profile in its annual review of Assured Guarantee. This report describes many strengths supporting our AA ratings, including S and P's view that we have excellent capital and earnings with a meaningful capital adequacy buffer. You can read the entire report on our website at assuredguaranty.com.

Speaker 2

In July, we completed the transaction with SoundPoint Capital Management in which we contributed substantially all of the short I'm and we engaged them as the sole alternative credit manager for AGM and AGC in return for a 30% interest in the combined entity. As we have said, we are highly optimistic about this new venture with Southpoint Capital Management and believe it will be immediately accretive to our bottom line. In July, Assured Guaranty sold all of its equity interest in Assured Healthcare Partners LLC. Assured Guaranty will remain a strategic investor in certain AHP managed funds, while retaining its carried interest in existing AHP managed funds and has received other consideration. Regarding the Puerto Rico Electric Power Authority, PREPA, is our last remaining nonpaying Puerto Rico exposure.

Speaker 2

As we have said all along, we remain committed to negotiating a fair and reasonable settlement that will protect and enforce our legal rights as bondholders through litigation and the Title 3 plan confirmation and appeal process as necessary. Given the uncertainty in this global economic environment, it's good to reflect on the proven resiliency of our company. In the 1st year of the pandemic, we saw investor appetite for bond insurance increase. That heightened interest has been maintained in development so far this year. Continue to remind investors that the future is often volatile.

Speaker 2

We have succeeded through decades of economic cycles by delivering on our own commitments to reduce borrowing costs for issuers and protecting against shortfalls in investors' principal and interest payments, while providing our resilience for disciplined risk management and responsible stewardship of capital. This resilience has positioned us to thrive as business and market conditions are creating more intense for the use of financial guarantees. We believe that we have never been a better prepared to serve our clients, protect our policyholders and create value for our shareholders. I'll now turn the call over to Rob.

Speaker 3

Thank you, Dominic, and good morning to everyone on the call. I am pleased to report Q2 2023 adjusted operating income increased to $36,000,000 or $0.60 per share from $30,000,000 or $0.46 per share in the Q2 of 2022. In the Q2 of 2023, the largest components of adjusted operating income for the Insurance segment, which contributed $106,000,000 of adjusted operating income and the Corporate division, which had a net loss of $50,000,000 In the comparable prior year period, the Insurance segment generated income of $55,000,000 which was partially offset by the Corporate division's net loss of $35,000,000 Higher investment income and fair value gains were the most significant contributors to the increase in insurance segment adjusted operating income. Net investment income increased by $24,000,000 which was driven mainly by higher short term interest rates and average balances. We also had fair value gains on Puerto Rico contingent value instruments of $40,000,000 in the Q2 of 2023 compared with losses of $18,000,000 in the prior year.

Speaker 3

And lastly, we had a fair value gain of $5,000,000 on our alternative investments in the Q2 of 2023 compared with a loss of $34,000,000 in the Q2 of 2022. As of June 30, 2023, the fair value of investments in assured I'm funds was $350,000,000 Inception to date, the annualized return on the assured I'm funds was 10.1%, which is in line with our long term expectation for these investments. These Assured I'm funds will now be managed by SoundPoint or Assured Healthcare Partners. We will remain strategic investors in these funds and will commit additional amount to SoundPoint as the alternative investment manager for our U. S.

Speaker 3

Insurance subsidiaries. Net earned premiums and credit derivative revenues increased to $88,000,000 in the Q2 of 2023 from $86,000,000 in the Q2 of 2022. Deferred premium revenue remained steady at approximately $3,700,000,000 Accelerations were under $10,000,000,000 in Q2 of 2023 and 2022 as the funding activity remains muted due to the higher interest rate environment. Loss expense in the Q2 of 2023 was $44,000,000 and economic loss development was $49,000,000 mainly due to increases in reserves for certain Puerto Rico exposures. On the insurance regulatory front, I'm happy to report that New York and Maryland successfully completed their 5 year joint examinations of AGM and AGC, our 2 U.

Speaker 3

S. Insurers and issued clean examination reports with no adverse findings or adjustments. The AGM and AGC examination reports are publicly available on the New York and Maryland regulators websites. Results of Assured I'm reported in the Asset Management segment and were about breakeven in the 2nd quarters of both 2023 2022. In July 2023, Assured I'm excluding AHP was contributed to SoundPoint in exchange for an equity interest in the combined SoundPoint Assured I'm entity and our entire equity interest in AHP was sold to an entity owned by its managing partner.

Speaker 3

The transformation of our asset management business from fully integrated subsidiaries to a minority stake in a larger SoundPoint Assured I'm combined entity is expected to be accretive to future earnings and provides a stream of income based on asset management fees and will also provide a wider array of alternative investment opportunities. Going forward, our investment in SoundPoint will be accounted for under the equity method, which will simplify the presentation of the asset management results. We are also in the process of evaluating all the consolidation conclusions for the Assured I'm CLOs and funds as a result of the SoundPoint and AHP transactions and we expect that we will be able to deconsolidate some of these entities. The resulting changes will be reflected in Q3 financial statements. Expenses associated with the SoundPoint and AHP transactions were $24,000,000 in the Q2 of 2023.

Speaker 3

This was the primary driver of the increase in corporate division adjusted operating loss, which is where most of these expenses were reflected. Adjusted operating income includes the effect of consolidating VIEs, which was a loss of $18,000,000 in the Q2 of 2023 compared with a gain of $10,000,000 in the Q2 of 2022. A net effect of VIE consolidation is primarily a function of changes in fair value of these entities and insurance losses and benefits associated with the FG VIEs including the Puerto Rico Trust. In addition to advancing our key objectives in asset management and alternative investments with the SoundPoint and AHP transactions, we continue to focus on our other long term strategic initiatives to grow the company and enhance shareholder value. In the Insurance segment, we have had diversified sources of new and assumed business, which are accretive to key book value metrics.

Speaker 3

And on the loss mitigation front, we continue to maximize our economic benefit by strategically selling the recovery bonds we received last year as part of the resolution of the majority of our Puerto Rico insured exposures. As of the end of last week, we had sold approximately 99% of the recovery bonds in the investment portfolio and 34% of the CBIs. Based on our fair value, we have approximately $14,000,000 in recovery bonds and $340,000,000 in CVIs remaining in our investment portfolio. With respect to our capital management strategic initiative, we resumed the share repurchase program in the 2nd quarter. We currently have $158,000,000 of remaining authorization.

Speaker 3

In addition, our UK subsidiary paid a dividend of £100,000,000 or $127,000,000 to AGM and we have a capital plan to distribute additional excess capital from our UK subsidiaries over the next 2 years. This year's UK dividend provided $100,000,000 in additional AGM dividend capacity in 2023. At the holding company level, we currently have cash and investments of approximately $90,000,000 of which $43,000,000 resides in AGL. These funds are available for debt service and corporate operating expenses or for the use in the pursuit of our strategic initiatives, including potentially redeeming debt and or repurchasing shares to manage our capital. Adjusted operating shareholders' equity and adjusted book value per share reached new records of over $95 $145 respectively, due to positive adjusted operating income and strong new business production results for the quarter, demonstrating the value of all of our initiatives.

Speaker 3

I'll now turn the call over to the operator to give you the instructions for the Q and A period. Thank you.

Operator

Thank you. We will now begin the question and answer session. Our first question comes from Tommy McJoynt from KBW. Tommy, your line is now open.

Speaker 4

Hey, good morning guys. Thanks for taking my questions. So I'll start off with the big question. Now that New York and Maryland audits are complete with clean bills, can you talk about the next steps toward requesting special dividends that have been mentioned before? And are there kind of in process plans to sort of seek out specials from various subsidiaries?

Speaker 4

Or are you just targeting just AGM or just AGC? Can you just kind of walk through how that works?

Speaker 2

With the clean audits now, Tommy, we're able to proceed with these requests for special dividends, which we plan on doing. We'll do it to any company that has excess capital. As you've seen, we paid the dividend from the AIG UK subsidiary. So we have the same plan, the other subsidiaries as we look at their capital positions. And now with the audit behind us, we're now free to do that.

Speaker 3

We plan to do that within this next second half of the year.

Speaker 4

Okay, got it. And when we think about the residual amount of capital that's inflowing that might be available for buybacks or potentially the debt redemption, just coming out of the insurance subsidiaries, what are the annualized cash expenses at the Holdco level, like I guess interest, dividends, corporate expenses and then just kind of like a minimum liquidity buffer that you like?

Speaker 3

Yes, that's exactly right. If you look at page, it's in

Speaker 1

the presentation, Robert. In the equity presentation.

Speaker 3

Equity presentation, it says a short guarantee overview, Tommy. In there we say that we have annual net expenses of $50,000,000 dollars annual dividend distributions of $66,000,000 and annual debt service of $82,000,000 So if you add all that up, those are the uses of funds for the holding company.

Speaker 4

And any minimum liquidity buffer? You talked about having 90 on hand right now.

Speaker 3

Yes. We generally keep that. That's generally what we keep as our liquidity buffer. It's generally 6 months worth of debt service.

Speaker 4

Okay, got it. And then just lastly, some debt due next year that you guys have talked about potentially redeeming. Do you walk through some of the puts and takes about whether how you're thinking about your existing debt to capital leverage right now? How comfortable your rating agencies are with that threshold and kind of why you might consider redeeming it?

Speaker 3

We're actually constantly evaluating whether or not we should redeem it, whether or not we should refinance it. And it all depends on whether or not we feel that it's appropriate. If we want to go and refinance it, it's all about price execution. If we want if we think it's more appropriate to redeem, then we'll go redeem. But right now, if we could refinance at appropriate rates, then we would want to do that.

Speaker 3

But we have a number of quarters before we have to evaluate that.

Speaker 4

Got it. Thank you.

Operator

Thank you.

Speaker 2

We have our

Operator

next question comes from Brian Meredith from UBS.

Speaker 5

Yes, thanks. I'm wondering if you could dive a little bit into the Puerto Rico loss development, kind of what happened there. And maybe if you can just kind of frame what's the potential additional Puerto Rico loss? I mean, there's going to be a cap obviously to what's your debt services on prep and stuff.

Speaker 2

Brian, like we've always said in the past, we have to react to any new information on any exposure that we've got that we believe has a probability of a claim. So obviously, there's been some new information on PREPA. We have to update our scenarios. We have to then adjust our probabilities and look at what the reserve change is going to be. Obviously, PREPA, the offers currently on the table are insulting to say the least.

Speaker 2

So obviously, our view is litigation. It's the path that we're going to take and there's been nothing that changes my mind that I've seen so far in the marketplace. So we just go along with the information provided to us and adjust our models accordingly. But my view is that this is a litigation situation anyway.

Speaker 5

Is the loss solely just the additional reserves solely PREPA related?

Speaker 2

Predominantly PREPA. Predominantly.

Speaker 5

Okay, great. And then a second question, I'm just curious, I read through the S and P report and maybe I just missed it. But is there kind of capital buffer over and above the AAA level that you all have now?

Speaker 2

Of course, you've seen that capital buffer above the AAA. I think the last number we gave you was in the $1,600,000,000 or $8,000,000,000 number. 1.8000000000. 1.8000000000. 1.8000000000.

Speaker 2

1.8000000000. Yes. So remember S and P notches us down even though we're at 1.8000000000 excess capital at AAA, we still only call it the AA company, which is beyond insulting as well.

Operator

Got you.

Speaker 5

All right. Thanks, all. Appreciate it.

Speaker 3

Thank you. Thank you, Brennan.

Operator

Thank you. Your next question comes from Jeffrey Dunn from Darling Partners. Jeffrey, your line is now open.

Speaker 6

Thanks. Good morning. Good morning, Jeffrey. Rob, I think you mentioned that or Dominic that you would request special dividends from any company with excess capital. How do you think about true excess capital now that the business is growing again and the fact that you're being held to a AAA capital standard as a AA company?

Speaker 6

I have to imagine that that $1,800,000,000 buffer is not necessarily all excess. And I want to say, go back 20 years ago, AAA companies might have retained $500,000,000 to $800,000,000 cushion. Is that the right way to think of what is true excess capital across the companies or is there a different framework to consider?

Speaker 2

Remember, we've got a lot of regulators in our business. So you not only do you look at S and P, but you also have to look at the states, have to look at the other agencies. But I think the excess capital position of the S and P number is a fairly good number. And growth by and large itself will not significantly impact that. You remember as we write business, we get the benefit of the on our premium reserve as part of the capital calculation.

Speaker 2

So the business is not that dilutive to capital excess. I mean, I think we'd lose about maybe 12% to 20% of the PDP would be or of the business written in terms of additional capital. So it's not a big number. So to get excess capital, like I said, to go through all the measurements by all the entities, there are different hurdles that you have to meet. There are different buckets that get counted.

Speaker 2

So we look at all companies and go through the entire process of evaluating this criteria to see what excess capital we have and therefore what can be dividend out to help us do the capital management program that we've been implementing.

Speaker 3

And that'll be part of the discussion with the regulator. So we start with Jeff with the 1.8. We want to keep a cushion of a number based upon what we believe is appropriate. And in years past, the number would have been higher because of the volatility of Puerto Rico and now maybe we can lower that buffer as such, but you never want to be in a situation where you actually jeopardize ever downgrade can put you in a situation where you drop over that AAA level. So a cushion is we're going to always keep a conservative cushion.

Speaker 6

Okay. And then obviously the excess capital has been a challenge to the ROE. And I'm wondering your previous target for buyback was $500,000,000 annually supported by specials. And that was picking away at that excess capital issue. Does the clearing of the 5 year audit allow you to consider being more aggressive with trying to correct the size of the company and right size that ROE?

Speaker 6

Or is it a more of a long measured race here?

Speaker 2

No, I think it's kind of a combination of both, Jeff. We will continue to evaluate what's the best course of action taken. If we see the opportunity to accelerate, we can still meet all the requirements that we have relative to regulation and rating agency, we'll do that. Obviously, where the stock trades versus where the book value are is a huge advantage for us in terms of accretion to the bottom line, accretion to the book value numbers, etcetera. So we look for every opportunity to accelerate if we can.

Speaker 2

We've been following that process for a lot of years. We've gotten to where we've gotten. We see what the results have been. Now it's time to really put the rest of the strategic plan together and really correct the company as we now clear the audit, have Puerto Rico basically behind us in the rearview mirror. We've got good growth opportunities across all of our business units.

Speaker 2

We've got an asset management now, it's functioning profitably. So I think we're in a great position to do exactly that.

Speaker 6

Okay. And then my last question, I'm sorry.

Speaker 3

I just wanted to just emphasize what Dominic just said at the end. Everyone should focus on the fact that we had an asset manager that was basically 0 breakeven right around that. And now we've combined with SoundPoint that is profitable and will be accretive, day 1. So that's a significant part of our growth opportunity.

Speaker 6

Okay. And then my last question is, you had some migration on your B. I. G. List.

Speaker 6

It looks like 1 credit in particular went from 1 to 2. Can you elaborate on what is occurring with that healthcare exposure?

Speaker 2

Yes. As we talked about, we've seen some stress in the healthcare marketplace and therefore we've looked at our healthcare credits and take the corporate actions where we saw fit. Remember, most of those credits are still highly protected and therefore we've got opportunities from workouts, other measures that we take to save the credit, very few result in the payment, but we've got to be mindful of how we look at our internal ratings.

Speaker 6

Okay.

Operator

Thanks. Thank you. Our next question comes from Jordan Howlett from Philadelphia Management. Jordan, your line is now open.

Speaker 7

Hey, guys. A couple of different questions. 1 on Page 38, for a lot of the past decade, there's been the story that AGO is a melting ice cube. In Page 30, this is the first time that the PVP has actually increased. Could you state emphatically at this point that the declines will have stopped given the strong production and the company is growing again?

Speaker 2

We think the opportunity for growth is as good as it's been over the last number of years and we're optimistic about what the year looks like and what next year looks like. So the unapproved reserve is growing, PVP is getting higher. So as you point out, and I'm going to say emphatically and absolutely, nobody can say that I don't know that kind of power or that crystal ball. At the end of the day, we're as optimistic as we ever been relative to the market opportunities that we see across all of our business units. As Rob mentioned, we also now have a functioning asset management division as well that will create opportunities for both the insurance and investment side.

Speaker 2

And Jordan, we're seeing on Financial

Speaker 3

Guarantee, the great pipelines in U. S. Level finance, global structured infrastructure, global structured finance and international infrastructure, all of our 3 legs in the financial guaranty business, we have very strong pipelines.

Speaker 7

And in addition to growing again after years of shrinking to flat, if you look at Page 48, you blow investment gains percent, below investment grade percentage is the lowest level it's been in over a decade at this point. So not only you're growing it with better credit quality, that alone should give the regulators more confidence than not less confidence to improve a buyback or special dividend. Is that a reasonable way to think about that?

Speaker 2

I think everything is reasonable in today's marketplace, including below investment grade, Puerto Rico growth opportunities, the other noise in the company out of the basically dealt with, the audit dealt with, etcetera. However, I'm getting a little sensitive to the melting ice cube where the continued rundown of the business. Remember, we were one company that bought 4.5 other companies. So we have 5.5 other companies earning business to a highly redemptive market for, curly redempts. That caused the earnings to spike.

Speaker 2

We've been running consistently good business over a number of years, but because we've had 5.5 companies that are on our premium reserve, it looks like we were declining, but we couldn't have written in business any faster than we did. And that offset of 5.5 companies earning and 1 company writing the depressed market, which caused the drop in the volumes in terms of earned premium, the down earned premium reserve. But I think as you've said, you've kind of corrected the ship now. And now that most of that has run off or been redeemed, it's now time to start focusing on growth across all of our business units.

Speaker 7

And the final question is, given the later back end part of the buyback, you weren't sure if you could hit the 300 base much less the 500 buyback. Without commenting on what you will or won't do, do you think you have with the special dividend from the UK, the capacity to at least do the 300,000,000 this year?

Speaker 2

We can't comment on that, but remember everything is predicated on special dividends. And we're one down, 2 to go.

Speaker 7

But it was the one down, do you have the capacity to do the $300,000,000

Speaker 2

Like I said, do the math, we won't publicly state that or not.

Speaker 3

I mean, we did obviously, we got the $100,000,000 I said in my commentary that it helped, it increased our dividend capacity by $100,000,000 So we are and we are going to look for a special dividend.

Speaker 7

Okay. Thank you.

Speaker 3

Thank you. Thanks, Jordan.

Operator

Thank you. With our last question comes from Giuliano Bolander from Compass Point. Giuliano, your line is now open.

Speaker 8

Thank you. Congrats on great performance again. One thing I'd be curious about is maybe following up on sort of Jordan's trend of thought. It looks like you're as of right to vendor, you're given capacity in the back half of the year for the balance of $23,000,000 came up by $77,000,000 or $75,000,000 ballpark AGM and there's also an increase AGREIT. So you're up about $100,000,000 there for the back half of the year versus where you were last quarter.

Speaker 8

And you also had kind of a back half weighted schedule. Is it fair to think about you're deploying a little bit more in the back half plus about $100,000,000 that you're getting before thinking about the special dividends from potentially AGM or AGC? Is that a good way to think about your buyback capacity or how that could really scale up based on what we know today?

Speaker 2

It's a way to think about it Giuliano and obviously we said it was back end weighted and we've got a lot of other plans and especially special dividend request from the U. S. Regulators that will significantly enhance that. But remember you also have the volume issue in terms of how much stock you can buy back on any given day. So we might actually run out of limit of what we can buy back relative to the trading days volume that could be a problem.

Speaker 2

But we expect to have significant funds to be able to look at capital management as one of our key strategic objectives.

Speaker 3

Yes. And when we were saying it back end loaded, we would take into account that we were expecting to get this dividend from the UK subsidiary. That's why it was back end loaded. And Don, to point out a really important point, you get this towards the end of the year, it's based on you can only buy back a certain based on your volume, how much you trade during the day. So the good news is if we get it, it's going to help us going forward with our capital management program.

Speaker 3

It just might bleed into the next year.

Speaker 8

Got it. That's very helpful. Then thinking about the special dividends, I realize that there's probably no perfect timeline to think about. But I'm curious when you think about making requests for such dividends. Is that usually a relatively quick turnaround in terms of like weeks or a few months?

Speaker 8

Or can it stretch out over a few quarters?

Speaker 2

Well, time is of the essence. So we're going to try to put as much pressure as we possibly can. And as you said, as we've said, doing the audit was the real criteria. And again, it's just clean audit opinion with no adjustments proposed, I think gives us an opportunity to really take advantage of that strong audit result. And of course, the excess capital position and the company's position with the regulators anyway, I think we're in good shape relative to getting the special request.

Speaker 2

And obviously, time is of the essence in getting it into the states. And remember, we're going to do our best to

Speaker 3

put a plan in place. Hopefully, we do have to deal with the regulator and their schedules. So we can only control what we put in front of them.

Speaker 8

So very helpful. And then one last one is around kind of new business. It looks like you did a decent reinsurance transaction in the quarter. I think there's still 2 things. Is there a pipeline of reinsurance opportunities similar to that or that look that resemble that reinsurance transaction out there?

Speaker 8

And also I'm just curious about thinking about the cadence of new business. It seems like it's picking up and I'd be curious how you feel about the pipeline as you think it's going to continue to fill up. I realize it's not going to be perfectly linear on a quarter over quarter basis.

Speaker 2

Well, we continue to look for opportunities across all of our markets, both direct and reinsurance business, and that doesn't change. And obviously, it goes through our underwriting standards before we accept a piece of business. And that's the philosophy, and we'll continue to follow that. And if there's business out there on both either the reinsurance side or the direct side, we're more than happy to entertain it. But as we've talked about, our direct business pipelines are very, very strong.

Speaker 2

So we're very optimistic about the rest of the year in terms of what we're able to achieve from a PVP point of view, driving that on our premium reserve higher and higher.

Speaker 8

That's great. I really appreciate the time and the questions and I will jump back in the queue. Thank you.

Speaker 3

Thanks. Thank you, Julian.

Operator

Thank you. This concludes the question and answer session. I would now

Speaker 5

like to turn the conference back to over to our host, Robert Tucker for closing remarks.

Speaker 1

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

Thank you. This concludes today's conference call. Thank you all for attending. You may now disconnect the lines. Have a great day.

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