Good morning, and welcome to the Assured Guaranteed Limited Second Quarter 2021 Earnings Conference Call. All participants will be in listen only mode. Call. Please note this event is being recorded. I'd now like to turn the conference over to Robert Tucker, Senior Managing Director of Investor Relations and Corporate Communications.
Please go ahead.
Thank you, operator, and thank you all for joining Assured Guaranty for our Q2 2021 financial results conference call. Today's presentation is made with the J. J. Harper 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 and do not undertake any obligation to publicly update or revise them except as required by law. If you are listening to a replay of this call or if you are 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, post current financial filings and for other 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. After the presentation, our speakers today are Dominic Marico, President and Chief Executive Officer of Guaranty Limited and Rob Bailyn, our Chief Financial Officer. 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.
Thank you, Robert, and welcome to everyone joining today's call. Having completed one of the best first hands for direct insurance production in over 10 years, key measures of Assured Guaranty shareholder value per share stood at record high levels as of June 30, 2021, including shareholders' equity at $87.74 adjusted operating shareholders' equity at $81.81 and adjusted book value at $119.72 During the 1st 6 months of this year, we earned $163,000,000 of adjusted operating income, of which $120,000,000 was earned in the 2nd quarter. Additionally, we produced $167,000,000 of PVP, almost half of which came in the 2nd quarter. In contrast to the Q1, when record U. S.
Public finance production generated the lion's share of PVP, new business production in the Q2 was well diversified with strong international production and a solid contribution from our structured finance business, exemplifying again how our diversified strategy helps to support our new business production. At mid year 2021, total par volume issued in the U. S. Municipal bond market was outpacing the rate of issuance at the same point last year, which was an all time record year. Both monetary and fiscal policy are driving economic recovery, which means more money to invest for retail investors and more revenue and improved credit strength for municipalities.
Additionally, many high net worth individual investors have been anticipating higher tax rates, which has driven up demand for tax exempt income. As a result, municipal interest rates have again been near historic lows with the benchmark rate on June 30 at just 1.5% for 30 year AAA municipal bonds. Credit spreads tightened trended tighter through the first half to levels not seen since before the Great Recession. In these market conditions, you would not expect municipal bond insurance to reach its highest first half penetration rate in a decade, but that's exactly what happened. Assured Guaranty led the municipal bond insurance industry to a market penetration of 8.4%.
Year over year, the industry's total first half insured par was up 34%, more than double the 15% rate of increase for total par issued in the market. Taxable issues made up a quarter of the primary municipal bond market year to date based on par amounts sold. Taxable municipal bonds are currently attractive relative to corporate bonds as they are generally providing a stronger credit for an equivalent yield. Taxable issues also attract corporate and par fixed income investors who are less familiar with municipal credit and may want to know that the underlying obligations have been vetted by an experienced insurer. In the first half, bond insurance penetration of taxable par sold reached 10%.
Assured Guaranteed continued to see outstanding U. S. Public finance production during the 1st 6 months of 2021, guaranteeing 58% of new issue insured par sold. The $11,100,000,000 we insured in the primary market was 34% higher than in the first half of twenty twenty. And looking back to a comparable period just before the pandemic, our new issue insured par sold was 73% more than in the first half of twenty nineteen.
In the Q2, Assured Guaranty continued to lead the bond insurance market with approximately 52% of primary market insured par sold. We guaranteed 292 transactions for a total of $5,500,000,000 in insured par sold. We also continue to see heightened demand for our insurance on larger transactions, where high demand typically singles interest from institutional investors. During the first half of twenty twenty one, Assured Guaranty selectively insured 21 transactions of $100,000,000 or more in insured par, 13 of which were sold in the 2nd quarter. We also continue to add value on AA credits during the Q2, ensuring $809,000,000 of par sold on 29 transactions assigned AA underlying ratings by at least 1 of the 2 leading rating agencies, bringing our first half production in this category to $2,300,000,000 on 56 deals.
Additionally, we guaranteed $3,900,000,000 of taxable parcel, which was about 2 thirds of the parcel with insurance in that portion of the market. US public finance PPP totaled $29,000,000 in the 2nd quarter, which was exceeded by the $43,000,000 we produced in international infrastructure finance, where we executed a variety of transactions. Among these were index linked transactions in the UK, including a well received £327,000,000 18.5 year bond issue with Queen's Alexandra Hospital in Portsmouth and 2 secondary market transactions providing protections on bonds held by institutions. In Spain, Assured Guaranty Europe closed our 5th transaction in 2 years in the Spanish renewable industry. This €125,000,000 17 year fixed rate bond issue refinanced 18 seasoned solar plants spread across a number of provinces and all the facilities benefit from the Spanish electricity payments that subsidize a predetermined level of return.
These issues were privately placed, but an application for listing has been submitted to the Frankfurt Stock Exchange. In structured finance, we produced $9,000,000 of PVP in the 2nd quarter, primarily from an insurance securitization and a whole business securitization. We have a nice pipeline of structured finance transactions that we consider highly likely to close. For our insurance segment as a whole, 2nd quarter new business production offset amortization and other reductions of the insured portfolio, resulting in growth in net prior outstandings for the 5th consecutive quarter. Total net prior outstandings increased by $500,000,000 from March 30 1 to June 30, continuing to increase the par amount of our insured portfolio supports our predictable base of future earnings.
As I noted on our last call, the below investment grade portion of our insured portfolio is down to 3% of insuredpar outstanding. Additionally, more than 57% of net par exposure is classified as single layer Hyatt. We are very comfortable with the credit quality and diversification of our insured portfolio and believe further fiscal stimulus and improved economic conditions are likely to strengthen it further. Our heightened surveillance activity after the COVID-nineteen pandemic struck has been fully reflected in our internal credit ratings and the loss projections we apply to those to our exposures. We have paid only relatively small first time insurance claims we believe are due at least in part to credit stress arising specifically from COVID-nineteen.
We continue to project nearly full reimbursement of these relatively small claims. We had no net economic loss development in public finance during the Q2. And overall, we actually had a net economic benefit of $20,000,000 Regarding our most significant below investment grade exposure, Puerto Rico and its public corporations, we view recent and continuing developments as positive for both the Commonwealth and its creditors. As I discussed on our last earnings call, we and other creditors now have consensual agreements in place with the Puerto Rico Oversight Board that covers 94% of our net par outstanding of Assured Guaranty's Puerto Rico exposures, and almost all the rest of those exposures are current on their debt service payments. The Oversight Board has also announced that additional creditors have signed on to certain of these agreements, including the official committee of unsecured creditors and the additional monoline.
The Oversight Board has voiced optimism that some of these agreements could be finalized as early as the end of this year. Meanwhile, the island's economic condition continues to improve with increased economic activity and revenues, and it remains eligible for 1,000,000,000 more in federal aid on top of the funds it's already received. Last month, S and P Global Ratings affirmed our insurance company's AA stable outlook financial strength ratings and noted that in relation to our Puerto Rico exposure, its capital adequacy analysis includes a near term loss assumption and a view of claims beyond 2024. After performing its rigorous capital adequacy analysis of our business, S and P stated that Assured Guaranty has excellent capital and earnings with a meaningful capital adequacy buffer at the current AA rating. It also noted our very strong business risk and financial risk profiles as well as our well defined diverse underwriting strategy.
Turning to our asset management segment, assets under management reached $17,600,000,000 as of June 30. During the 1st 6 months, we increased fee earning AUM from 75% of total AUM to 93%. Issuance in the CLO market continued to be strong in the Q2, reflecting robust demand for CLO securities and plentiful loan supply for collateral. During the quarter, we executed our 3rd CLO of the year, which issued approximately 40% of its equity to 4 different third party investors. We also opened additional CLO warehouses and now have 2 warehouses in the United States and 1 in Europe.
A Gas' healthcare exposure performed well with continued revenue and earnings growth related to the portfolio of private investment exposures. The asset based portfolio continues to perform well as asset credit quality has improved due to the economic reopening and fiscal stimulus. Prospects for the rest of this year look good across both of our business segments. Economic growth has been impressive since vaccinations have allowed more public activity. However, investors will soon not forget how the virus came without warning to disrupt all aspects of life.
And we believe the pandemic may prove to be a watershed event that favorably changes how the market perceives the value of financial guarantee insurance. Some of the current sources of economic uncertainty are spread are the spread of the Delta variant, extreme weather events and potentially volatile political polarization. We have the financial strength and short portfolio diversification, underwriting and surveillance capabilities and risk management discipline to safeguard our ability to protect investors and to create value for shareholders. In an uncertain world, many investors will demand the extra security of our financial guarantee. On a final note, we continued our capital management program and made some beneficial changes to our capital structure.
To give you details on those changes and other performance data, I will now turn the call over to Rob.
Thank you, Dominic, and good morning to everyone on the call. Picking up from Dominic's last point, I am pleased to report we had a very successful debt issuance in May, raising $500,000,000 in the form of 10 year notes at an attractive rate of 3.15 percent. In July, we used $200,000,000 of those proceeds to redeem AGMH debt, including $100,000,000 of notes due in 2,101 at 6.7eight and $100,000,000 of notes due in 2,102 at 6.25 percent. The addition of $300,000,000 in debt after taking into consideration the July redemptions resulted in incremental annual debt service of only $2,600,000 The remaining proceeds will be used in the pursuit of our key business strategies, including share repurchases. Demonstrating the success to date of the share repurchase program, I am happy to report that our book value metrics reached record highs on a per share basis and that our adjusted operating income per share increased to 1 point $5.9 in the Q2 of 2021 from $1.36 in the Q2 of 2020.
Total adjusted operating income was $120,000,000 in the Q2 of 2021 compared with $119,000,000 in the Q2 of 2020. Turning to our core business results. The Insurance segment generated adjusted operating income of $152,000,000 in the Q2 of 2021 compared with $154,000,000 in the Q2 of 2020. Strong investment results from our alternative investment strategies, combined with the lower loss expense on Puerto Rico substantially offset the decline in premium accelerations due to refundings and a prior year communication gain that did not recur in 2021. Total income from the insurance segment investment portfolio, which includes net investment income from its fixed maturity portfolio and equity and earnings from alternative investments such as the assured I'm funds increased by $11,000,000 or 10%.
Our fixed maturity and short term investments account for the largest portion of the portfolio, generating net investment income of $71,000,000 in the Q2 of 2021 compared with $82,000,000 in the Q2 of 2020. The decrease in net investment income was primarily due to lower average balances, which declined primarily due to dividends paid by the insurance subsidiaries that were then used for AGL share repurchases and lower reinvestment yields on short term investments. Since the establishment of Assured I'm the insurance subsidiaries have invested $366,000,000 in Assured I'm funds, which now have a net asset value of $433,000,000 Equity and earnings of Assured I'm Funds generated a gain of $37,000,000 in the Q2 of 2021 compared with $26,000,000 in the Q2 of 2020. The healthcare and CLO funds were the largest components of these gains. Our various other third party managed alternative investments generated gains of $11,000,000 in the Q2 of 2021.
As a reminder, equity in earnings of investees is a function of mark to market movements attributable to the Assured I'm funds and other alternative investments. It is more volatile than the net investment income on the fixed maturity portfolio and will fluctuate from period to period. As we shift fixed maturity assets into these alternative investments, net investment income from fixed maturity securities may decline. However, over the long term, we expect the enhanced returns on the alternative investment portfolio to be over 10%, which exceeds the expected returns on the fixed maturity portfolio. Another driver of the quarter over quarter variance is the decline in loss expense, which was a benefit of $12,000,000 in the Q2 of 2021, compared with a loss of $39,000,000 in the Q2 of 2020.
Driver of loss expense in net economic loss development, which was a benefit of $20,000,000 in Q2 2021 and mainly consists of a $28,000,000 benefit in U. S. RMBS exposures, which benefited from higher excess spread, improved recoveries on chartered off loans and improved performance on certain transactions. The economic development attributable to changes in discount rates for all transactions was a loss of $50,000,000 for the Q2 of 2021. In the prior year, Q2 economic development was primarily attributable to Puerto Rico exposures.
In terms of premiums, scheduled net earned premiums were consistent relative to Q2 2020, as new business production substantially offset the decline in earnings on structured finance transactions. Accelerations due to refundings and terminations were down to $50,000,000 in Q2 of 2021 compared with $32,000,000 in the Q2 of 2020, driving the overall decline in net earned premiums from $125,000,000 in the Q2 of 2020 to $106,000,000 in the Q2 of 2021. In the Asset Management segment, we have continued to make great progress in advancing our strategic goals. This quarter, we increased fee earning CLO AUM through the issuance of $400,000,000 in new CLOs and the sale of CLO equity from legacy funds, which reduced the amount of rebated fees. Since the end of 2019, we have sold substantially all of the CLO equity in legacy funds, which helped increase fee earned CLO AUM from $3,400,000,000 at the end of 2019 to $14,000,000,000 as of June 30, 2021.
As of June 30, 2021, 96 percent of CLO AUM is now fee earning compared to 83% as of last quarter. We also continue to liquidate assets in the wind down funds and now have $1,200,000,000 in AUM, which represents a 79% decline since the BlueMountain acquisition. In addition, using Assured I'm Investment Management expertise, we've expanded investment strategies in the insurance segment and to date we have recorded strong mark to market results on the funds established by Assured I'm The Asset Management segment adjusted operating loss was $2,000,000 in the Q2 of 2021 compared to $9,000,000 in the Q2 of 2020. Asset management revenues increased 62% in Q2 2021 compared with Q2 2020 due mainly to the increase in fee earning AUM as well as the recovery of deferred CLO fees. The COVID-nineteen pandemic and downgrades in loan markets had triggered over collateralization provisions in CLOs in the second and third quarters of 2020, resulting in the deferral of CLO management fees.
However, as of June 30, 2021, there were no CLOs triggering over collateralization provisions and therefore no CLO fees are being deferred. The increase in management fees from CLOs and opportunity and liquid strategies more than offset the decline in fees from our wind down funds as our core strategies continue to increase our top line. The corporate division mainly consists of interest expense on the U. S. Holding company's debt as well as corporate expenses and Board of Directors fees.
The loss for the corporate division of $34,000,000 in Q2 2021 was higher than the loss of $26,000,000 in the Q2 of 2020, mainly due to higher interest expense from the new debt issuance and higher state and local taxes. In the Q3, the redemption of AGMH debt, which will of AGMH debt will result in the acceleration of the unamortized discount of $66,000,000 or $52,000,000 after tax that will be recorded as a loss on extinguishment of debt. This loss represents the difference between the amount paid to redeem the debt and the carrying value of the debt, which includes the unamortized fair value adjustments that were recorded upon acquisition of AGMH in 2,009. Prior to the redemption, this discount was being accreted into interest expense over the next 80 years, which represented the remaining contractual life of the debt. The overall effective tax rate on adjusted operating income fluctuates from period to period based on the proportion of income in different tax jurisdictions.
In Q2 2021, the effective tax rate was 18.7% compared with 14.2% in Q2 2020. As an update to our recent share repurchase activity, in Q2 2021, we repurchased 1,900,000 shares for $88,000,000 at an average price of $46.63 per share. Subsequent to the quarter close, we have continued the program and repurchased an additional 1,200,000 shares for $58,000,000 Since the beginning of our repurchase program in January 2013, we have returned $3,900,000,000 to shareholders under this program, resulting in a 65% reduction in total shares outstanding. The cumulative effect of these repurchases was a benefit of approximately $32 in adjusted operating shareholders' equity per share and over $55 in adjusted book value per share and helped drive these metrics to new record highs of over $81 in adjusted operating shareholders' equity per share and over $119 in adjusted book value per share. From a liquidity standpoint, the holding companies currently have cash and investments of approximately $356,000,000 of which $70,000,000 resides in AGL.
These funds are available for liquidity needs or for use in the pursuit of our strategic initiatives to either expand our business or repurchase shares to manage our capital. Finally, earlier this week, consistent with our long standing capital management goals, our Board of Directors approved an additional $350,000,000 in share repurchase authorization. In total, as of today, we have $379,000,000 in remaining share repurchase authorization. I'll now turn the call over to the operator to give you the instructions for the Q and A period. Thank you.
We will now begin the question and answer session. Our first question comes from Christopher Testa from Royce Investment Partners. Please go ahead.
Hi, good morning guys. Thank you for taking my questions. Just wanted to touch a bit on the asset management side. So CLOs, it's great to hear that you're not tripping any junior OC tests. That's great news.
My question is, how are you looking to compete on gathering more CLO assets and attracting investors given the fierce competition among the allotted Tier 1 collateral managers? Do you think you're going to be able to gain market share? And if so, how do you expect to do that?
I think as a top twenty CLO manager, we have the network relationships and investor appeal. Network, relationships and investor appeal that allows us those opportunities. And as you can see, the activity in the current year kind of supports that major player in that market standing. We think we have good experienced people that have great market recognition and it's worked very, very well and we continue to think that we'll continue to run one of the leading CLO businesses in the marketplace.
Got it. Okay. And I know you guys had mentioned getting more investment income, doing less than fixed income and more into alternative. Are the alternative pieces of the CLO equity that you're managing or are they more along the lines of maybe BB or maybe A debt within those structures?
Well, it really is a diversified portfolio of assets that are being managed by Assured I'm for Assured Guarantees operating companies. So you're right, some of the CLO equity. In the early days of the CLO crisis, we did take certain tranches of CLOs as just investments, specifically some managed by us, some managed by 3rd party that performed very, very well. And the remaining investments represent support of our existing strategies in healthcare and structured finance. So it's spread across the board.
No one dominates it. But where we are in CLO today is in the CLO equity side.
Got it. And lastly
And those are just to be clear, those are also the equity layers of the CLOs that we manage.
Got it. Okay. Yes. So those are strictly when you're buying equity, those are all Assured Investment Management equity?
Yes. Yes.
Okay. Great. We should invest in equity be earned by Assured Investment Management.
Okay.
And then have you guys had to I know you haven't made as many fee rebates as you did with the legacy investments. Are you anticipating having to do fee rebates that lower the traditional 50 bps of par in order to attract more AUM or are you going to kind of hold steady there?
So on the legacy side, it's just a liquidation strategy through harvest period at this point in time. We don't charge management fees on those as we now are in absolute harvesting. So there is no management fees, therefore there's no rebate. Obviously, we look to continue to grow the asset management business and part of the reason for the acquisition was to allow Assured to put its capital next to third party capital to generate more management fees. And that's kind of the strategy, that's the goal and that's kind of how we're heading.
Got it. Great. And last one for me and I'll hop back in the queue. Dominic, you had mentioned that something that's driving new demand and I agree with you is that the fear of higher federal taxes obviously allows munis to sort of shield that. However, there has also been an issue with Biden and the rest of his cohorts in Congress getting through the tax increases.
Has that sort of abated at all in terms of investors not being as concerned? Or are you still seeing the same strong muni demand from investors that were initially concerned about that?
I guess, the best surrogate you can look at is the flow of funds in the mutual funds. I mean, the number today is just incredible. I think we're going to set a record for the year in terms of fund flows into taxes at mutual funds. But the finding is, you bring up an interesting point or a contradiction in the market. So as much money that's coming in the patient of a tax increase, we're also seeing in the search for yield, more investors interested in municipal taxable issues just to get yield.
So you got the 2 kind of forces out there that seem to be in opposite direction, yet it seems to be driving significant demand in the market, which we then believe will help our penetration rate and the use of insurance going forward.
The next question comes from Tommy McJoynt from KBW. Please go ahead.
Hey, good morning guys. Thanks for taking my questions here. Good morning. So, yes, good to see the $500,000,000 successful issuance. So, thinking about that net $300,000,000 of proceeds that you still have, are you evaluating any targets forward in terms of acquisitions or anything?
Or is the plan really to use a lot of that for to fund buybacks?
Well, as you said, we continue to look at all the alternatives that are out there in the market for the investment of our money. Obviously, today, the capital management or the repurchasing of shares still represents the most accretive transaction we can do. So obviously, we pay a lot of attention to that. If we saw something that really piqued our interest and we felt would add true value long term to the company, obviously, we'd look at that. But remember, on those sides of further, what I'll say acquisitions, they're typically not very capital intensive.
So at the end of the day, I think our strategy still sticks with capital management as a preeminent thing that we should be looking at and trying to execute on behalf of the company and its shareholders.
Okay. And so there's no restrictions on using the full $300,000,000 for buyback?
No. Restriction.
Okay, great. And then just going back to the acquisition side, when we think about previous acquisitions or reinsurance deals that you've done on some of the runoff books of business out there in the insurance sector, What's like the main valuation metric that you guys look at? Is it most appropriate to look at potential purchase price at some multiple of GAAP book value or statutory capital or net bar earnings power? Just What do you kind of think about when you think about how much you pay for some of those assets out there?
It's all based on return on capital, return on amount invested. And you point out a good point that we use reinsurance in a lot of cases. That actually allows us to really identify what portions of a portfolio that we like, which ones we think we can attractively price and therefore absorb into our risk portfolio and of course the risk that we're willing to accept. When you look at wholesale acquisitions, you really got to get comfortable with the entire portfolio. And if you think of what's out there today in terms of targets, those portfolios have shrunk pretty dramatically.
Obviously, we look at them all the time. And I think for us reinsurance is as good of a option of a transaction that gets most of the benefits of an acquisition without some of the baggage that comes along with it.
Okay. That makes sense. And I guess just when you comfortable around the reserve adequacy of potential targets, what's that process like?
You individually re underwrite every transaction. I mean, I think we can say that the company has demonstrated its credit capabilities and its credit analysis and its surveillance capabilities. So we take every credit through our process to make sure we're comfortable with it, what the credit is, if there is a reserve, how adequate the reserve is, what's the premium on the books, what's the discount rate relative to the capital that would allow us to allocate additional premiums to the transaction to make sure we hit our return on it. So it still gets back to that return on capital.
Okay, thanks. And then just last one, what was the impact of the change in discount rate assumption on the loss in LAE regarding the Puerto Rico exposures and their potential recoveries?
We don't disclose what the discount is just for Puerto Rico. I mean, I said in my commentary what the total effective discount rates were, which is on that for everything was $15,000,000 in the second quarter.
Okay. Got it. Thanks guys.
The next question comes from Michael Semple, Private Investor. Please go ahead.
Good morning, gentlemen. A couple
of quick questions. As you highlighted the penetration rate of insured product in Q1, first half and how it's ticking up, so I think you said an 8.4% penetration rate. Can you remind us again, it's maybe apples and oranges, but can you remind us of what the industry high mark penetration was in, say, the last decade? Again, understanding that dynamics have probably changed dramatically
from Sure. Let me dust off my old analysis. So in the old days, the market of insurers insured about 50% of all issues, but that included AAA's, AA's across the entire spectrum. Obviously, as we look at the market today, I still like that 50% rate. However, it's applied to a different universe.
So today, we think because of the AA rating of the insurance industry for financial guarantee and our underwriting criteria or appetite relative to certain large exposures, certain lower rated issuers, we think the insurable market today compared to that market of the past is only 50%. So we think today based on ratings, credit appetite, risk tolerance, we can only insure what we used to 50% of what we used to insure. But I think on that 50% under a normalized interest rate environment, we can still get to a 50% penetration. And if you look at our statistics, A rated issues not far, we insure over 50% of the industry, insurers typically over 50% of A rated issuance. So I think you can get to 50% of the 50% insurable market or a 25% overall penetration rate.
If you had normalized interest rates. As we all know, we do not live in an environment of a normalized interest rate. And when we'll ever return there is anybody's best guess. Mine's horrible, so I've been wrong every year, so I'm not going to make another one. But you can't keep a U.
S. 10 year treasury at 1.25 or 1.5 whatever it is today. I mean, ultimately, when that gets to a normalized position, I think the upside in our penetration and therefore our premium is very dramatic because remember, we also get paid on debt service, which is part times interest rate. So an interest rate increase not only generates potential opportunity for higher penetration, but it will result in a greater premium calculation for the company as well.
Very good. Thank you for that. Switching gears to Puerto Rico, could you just remind us again of the major legal milestones that lie ahead as we work towards, I guess, a 2022 resolution to the entire mishmash. I'm aware of the November court case, but are there other confirmation cases, but are there other legal milestones that we should be aware of as we move through the second half of the year here?
Yes. You're calling it a mismatch and being kind to be honest, but at the
end of the day, so Well, we are in waking hours, so yes, watching my language.
Yes, exactly. We are on the PG rated channel. So at the end of the day, everything that's left is really legal. So it's getting disclosures done, which we just did for the GEO and Commonwealth debt, then it's to the court for certification. And I think all of them are scheduled through the end of this year for the GEOs, PBAs, early next year for HTA and potentially PREPA.
But once again, these are target based. They're not absolute. They're not guaranteed. Therefore, anything can happen. And as you can appreciate, a lot of unnatural things have happened in Puerto Rico over time.
But anyway, we're still very optimistic that things are moving very well. The fact that you had these other creditors sign on to the GOPBA deals, I think, is a good sign. It gets us above the level of necessary positive signers to get the deal done. So I think it's now more of a legal process and there is a calendar that takes us through basically midyear next year.
Very good. Thank you, gentlemen, for your answers. Thank you.
Thank you.
The next question comes from Ron Bobman from Capital Returns. Please go ahead.
Good morning, gentlemen. I had 2 sort of simple questions. Dominic, you mentioned the company's market share. I think one figure was 52%, another one was 58%, I think depending upon sort of the time series. The balance of the insured market sort of who's making up the remaining 48% 42%, is that spread over a couple or multiple carriers or is it concentrated across really just one of the carrier?
How distributed is the balance of the insurance market?
It's one other carrier. It's a mutual company called Build America Mutual.
Okay. I'm familiar with them. Okay. Thanks. And Rob, when you mentioned the refi of the 2 debt instruments, I think I misheard, but I can't imagine it's right.
The second one, I thought I heard you say that a retired debt instrument that was going to be due in 2,102. I could have heard it wrong, but that just seems too far out there to be correct.
No, that is correct. Those were the issue that were 100 year debt, and that product doesn't even exist anymore, but it was called a blood par after 5 years and we were able to take advantage of taking out high cost debt and maintain flexibility at the holding company.
Okay. Thanks guys. Best of luck. Hope all is well. Thanks, Nunez.
The next question comes from Jeffrey Dunn from Dowling and Partners. Please go ahead.
Thank you. Good morning. Good morning, Jeff. I had two questions. First, there was some noise in the news about Puerto Rico a few weeks ago.
Basically, I think it was the Commonwealth Lawyers arguing for the pensioners and saying that how do you issue new debt in these agreements without support from Puerto Rico. So what is the reality of Puerto Rico's sway here and the potential ability to derail the agreements?
Good question and I'm not the attorney in the room, but I'll play one just for the sake of argument. So the issue with pensions really gets to 2 issues, right? Number 1, does the control board have the authority to basically steamroll the legislature? It seems like they think that they do. I'm not the judge, so I can't tell you whether that's true or not, but it seems like they did.
So that says, okay, even though you want to see the pensioners protected, do you have the authority or capability to do that? Good question. However, against that kind of backdrop, you got to remember in bankruptcy, there's a statement in the PROMESA that says all creditors of equal standing has to be treated equally. So to me, it's an impossible argument to say that pensioners, if every other creditor is taking an impairment, don't take an impairment. I don't know how that would pass the muster of a review and especially a challenge because it's black and white.
You can't all creditors of equal standing have to be treated fairly. How can you preserve one class that's not even secured and say they're going to get $100 from a dollar yet all these other classes are going to take impairment. So although they rattle the saber and both of them are rattling the saber, I'm not so sure who draws it and whether this is just positioning to try to reduce the amount of the discount.
Okay.
Stid, would that be the answer, Jeff?
Yes, actually, yes, I mean it directionally helps, but who knows until it's all finalized, right? Right. The other question I had is on the future prospect for runoff book M and A. Puerto Rico has obviously put this on hold, but let's go forward to the scenario where the settlements are all done. Does Puerto Rico still present an area of challenge given the CVI components of the settlements and a certain amount of that predicated on future speculation?
Or is that something you think you can get comfortable with through the underwriting, including putting no value on those instruments on something you might acquire?
I think we can get very comfortable.
There are
no more questions in the queue. This concludes our question and answer session. I'd like to turn the conference back over to Robert Tucker for any closing remarks.
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.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.