Assured Guaranty Ltd (AGO) 2004 Q3 法說會逐字稿

Good day ladies and gentlemen and welcome to Assured Guaranty's third quarter 2004 earnings conference call. My name is Rachel and I will be your coordinator for today.

[OPERATOR INSTRUCTIONS]

I would now like to turn the presentation over to your host for today's call, Ms. Sabra Purtill, Senior Vice President of Investor Relations.

Thank you Rachel, and thank you all for joining us today for Assured Guaranty's third quarter 2004 earnings conference call. As you know, we released our earnings yesterday evening and our press release, financial supplement and updated fixed income investor presentation as well. And those items are available on our web site at www.assuredguaranty.com.

The speakers on our call today will be Dominic Frederico, Chief Executive Officer of Assured Guaranty Ltd. and Bob Mills, Chief Financial Officer. Following their presentation, we will open up the telephone lines for your questions and other senior members of management, including Michael Schozer, head of our financial guaranty-direct business and Pierre Samson, head of our financial guaranty-reinsurance segment, will be available to address your questions as well. I would note that a replay of this call will be available on our website as well as by telephone at 1-888-286-8010 in the U.S. and for international callers at 617-801-6888. The pass code for the replay is 68549455.

Before turning the call over to Dominic, I'm like to remind you that our commentary today will contain forward-looking statements, such as statements relating to our financial outlook, business strategy, growth prospects, ratings goals, personnel, demand, and other market conditions. Actual results may differ materially. Please refer to our most recent SEC filings, as well as our earnings press release and financial supplement, which are available on our website, for more information on factors that could affect the forward-looking statements.

With that, I'll turn the call over to Dominic.

Thank you, Sabra, and thanks to all of you on the call and webcast for your interest in Assured Guaranty.

Our third quarter produced financial results in line with our expectations. The benefit of our reinsurance platform in support of our developing direct financial guaranty business is in accordance with our plans.

This is our first full quarter as a publicly-traded company. We are pleased by the progress we have made in our operations over the last six months and are encouraged by our future opportunities.

Market conditions remained challenging in the quarter. While total PVP was in line with our prior quarter, it was not as strong as we would have liked. This was due to a variety of factors including market conditions and the timing of closing certain transactions. We are encouraged by the progress our underwriting teamshave made on the new business front. What I would like to specifically mention is how well our new business pipeline is developing. With the addition of new high-quality underwriting talent, new business opportunities should further expand as our new people settle in.

Normally I would not refer to future business, however, based on our current size and position in the market, there are some deals that are in the public market today and have already closed for the fourth quarter.

In the public finance area, we closed two public deals in October. The largest of which was a $46 million deal for Philadelphia Gas Works. We insured part of this $225 million transaction, along with FSA and CIFG, and we were very pleased with how our insured bonds priced relative to the other insurers on this deal. This will help us in competing for other public business going forward.

In the RMBS area, we have been very active, wrapping several public transactions in the fourth with total par insured of more than $3 billion.

While structured finance activity has been relatively modest due to the continuing tight credit spreads, we are pleased with the pipeline going forward.In addition to CLO's, we are working on a number of transactions in both consumer and commercial assets.

Reinsurance new business activity was good this quarter and facultative submissions are up in the fourth quarter. We are currently in negotiations for the 2005 contract with our largest reinsurance client and will announce the results of those negotiations when they have concluded. At the present time, the negotiations are proceeding as expected.

A further indicator of our future success is the quality and commitment of our people. I am very pleased by the people we have added to the Assured Guaranty team in the last few months. We have substantially expanded our bench strength, adding 19 new team members to our underwriting, risk management, legal and finance teams since the beginning of the third quarter. Our headcount today is 102, which approximates the total of 101 contemplated in our business plan at the IPO, at roughly the same total salary cost. More importantly, we believe our team today has better experience and higher productivity than before.

Clearly, we have been busy and I am very pleased with the progress we have made in achieving the strategic objectives necessary for Assured Guaranty's long-term success. With our key underwriting teams fully in place, we are proactively accessing the market and finding good business opportunities despite more challenging conditions than in 2003.

Now I'd like to turn the call over to Bob Mills, our CFO, to cover the financial highlights for the quarter. I look forward to taking your questions later on in the call.

Thanks Dominic. The third quarter represents our first full quarter as a stand-alone public company.

Net income was 59 cents a share compared to 57 cents a share for the second quarter of 2004, and 57 a share for the third quarter of 2003. Our operating income per share, which we calculate as net income excluding realized gains and losses on investments and unrealized gains on derivative financial instruments, was 45 cents a share, compared to 37 cents a share for the second quarter of 2004 and 39 cents a share for the third quarter of 2003. Earnings from municipal bond refundings contributed about three cents per share in the third quarters of both 2004 and 2003.

I would encourage you to refer to our press release and the financial supplement for segment level details and further explanations. I would like to review a few items in the quarter in a bit more detail.

Gross written premiums for the quarter totaled $62.2 million, down 44% from the third quarter of 2003. That amount was $110.2 million. The 2003 amount, however, included $26 million in the other segment. It also included the effect of a reinsurance treaty entered in the quarter that was retroactive to January 1. The impact of that was $13.8 million. There was also a $3.8 million reduction over the third quarter of 2003 in GWP from the non-renewed treaties.

Net earned premiums for the quarter totaled $53.4 million down 32% from the third quarter of 2003. If we exclude the other segment's net earned premiums of $35.2 million in the third quarter of 2003, the direct, reinsurance, and mortgage earned premiums increased by 24% in 2004. The increase was substantially focused in the reinsurance segment due to the growth of this business over the last year.

Loss and loss adjustment expense totaled $4.2 million for the quarter compared to $32 million for the third quarter of 2003, which included a loss provision of $24.4 million in the other segment in 2003.

Losses for the quarter reflect a few offsetting factors. Net case loss reserve additions were $1.7 million. At the segment level there was a $3.7 million addition to reinsurance portfolio reserves, which was largely offset by a $3 million release in the financial guaranty direct segment. The direct release was due to the maturing of CDO exposures and the continued runoff of the single name CDS book. The reinsurance addition reflected new business and credit migration.

In addition, we further refined our portfolio reserve methodology for the financial guaranty portfolio and updated loss estimates for the mortgage guaranty book, reflecting the rating agency's recent assessment of that book using the same methodology as for our financial guaranty business.

The net impact of this change in estimate was to increase portfolio reserves by $1.8 million, consisting of a $1.5 million addition in financial guaranty direct, a $5.8 million addition in financial guaranty reinsurance, and a $5.5 million release in mortgage guaranty. These amounts reflect our normal ongoing portfolio reserve process. The net impact of this $1.8 million was only $200,000 in additional after-tax loss expenses

The investment portfolio grew minimally from the beginning of the quarter. Yields were up slightly from the second quarter of 2004, but declined by 20 basis points from the third quarter of 2003 reflecting the rate environment and slight changes in the investment mix. The current pre-tax book yield is 4.72% and the duration remains steady at approximately 5.2 years, in line with our objectives in the current environment.

Operating expenses were reduced from the second quarter of 2004 which included the one time charge of $11.3 million in the second quarter related to vesting of stock awards at the IPO date. Compared to the third quarter of 2003, operating expenses were up 14.6%, the result of expenses related to the establishment of a holding company infrastructure, as part of the IPO process.

Our book value per share was $19.58. Our net unrealized gain on investments improved during the quarter by $29.6 million, or 38 cents per share compared to the end of the second quarter. Adjusted book value, which is used by management and investors to evaluate growth in the company's equity and in-force book of business, was $26.69 per share at quarter end.

The Company's operating ROE in the quarter, which is calculated by dividing our annualized quarterly operating income by average shareholders' equity, was 9.7%. Year to date operating ROE was 10.2%. Our target operating ROE, as reported, for 2004 continues to be 10.2% calculated on an as reported basis. Which is consistent with our expectations during the IPO roadshow of 11%, but was calculated on a basis that required multiple adjustments. We have not lowered the guidance for 2004.

Looking forward, a number of variables over which we do not have direct control will impact our projected ROE. These variables include our split ratings from the rating agency and uncertainty regarding the timing of potential upgrade, as well as market conditions and credit spreads.

It should also be recognized that we have a significant amount of capital that will be utilized more efficiently as we grow the business. It is clearly our goal to continue to improve ROE, but considering these issues and their impact on our ability to accurately predict performance, we do not plan on providing specific earnings or ROE guidance for 2005.

The PVP, or present value of written premiums, declined by 10% this quarter versus the second quarter and declined by 55% compared to the third quarter of 2003. Management and investors use PVP as a measurement of new business written during the period.

PVP for the direct business was $7.9 million, down 45% from the second quarter of 2004, reflecting tighter credit spreads, slower market activity and the expansion of our underwriting staff late in the quarter.

PVP for the reinsurance segment totaled $39 million, relatively flat with the second quarter of 2004. You will recall that this segment reports PVP on installment business and par written on a one quarter lagged basis, due to the delay in receiving new business information from the primary companies. We continue to expect that the change last quarter in our reinsurance relationships with two of our clients will cause our reported PVP for the balance of the year to be lower.

This quarter for the first time we have disclosed PVP for the mortgage guaranty segment. Now that this segment's business is rated on the same basis as our financial guaranty business, we have revised our loss estimates for the business and our methodology for premium reporting to be consistent with our financial guaranty business.

Investors should keep in mind, however, that mortgage guaranty is normally upfront premium on multiple year contracts, and the PVP can be quite lumpy, so the PVP for this segment will show greater volatility than our financial guaranty business. PVP for the mortgage segment totaled $1.1 million and $20.3 million for the third quarter and year to date 2004, respectively, and $0.6 million for both the third quarter and year to date for 2003, as 2003 had very few new contracts.

This change also affected adjusted book value compared to the second quarter of 2004. As announced in our press release, the Board has authorized a $25 million share repurchase program. The purpose of this program will be to support our existing employee stock compensation plans. We expect that this will cover plan needs for up to a three year period.

In summation, we continue to make progress. We expect to release our fourth quarter earnings by the second week of February and will update you on the time and date as we get closer to that point in time. With that I'd like to turn the call back over to the Operator to poll for questions.

Thank you sir.

[OPERATOR INSTRUCTIONS]

Your first question comes from the line of Geoffrey Dunn of KBW.

Thank you. Good morning. First, congratulations. It sounds like the pipeline is really developing well for the fourth quarter. Had a couple of questions on the numbers.

First of all, on the expense lines you don't break out a corporate line like other financial guarantors. So can you review how overhead is allocated among the segments, and how we should think about expenses in our projections and whether or not this is a good level going forward?

I'll let Bob answer that.

All right Jeff. How are you today?

Good thanks.

The overhead expenses are allocated today based upon net earned premium. The expense look a little high in relation to the reinsurance segment, but that's really because that is still our book of business. And when it comes to underwriting system support, et cetera, there's still a fair amount associated with that.

However, we are certainly increasing our investment in the direct business now. So we are reevaluating how we allocate expense. And we may allocate expense more on a direct basis rather than an allocated basis in the future.

But up to this point in time it's been based upon net premiums earned.

Is the current dollar level on a consolidated basis, a good proxy for where we should be thinking going forward?

On a consolidated basis, yes, I think it is, Jeff.

OK. And then second, can you give us any kind of guidance on two things. One, the tax rate. I think it was kind of up in the air where that might fall as we projected out as things are cleaned up. And second, is there any kind of quantification you can provide on the impact of the treaty changes and what that might do to the PVP's going forward?

I'm going to let Bob do the tax rate. I'll do the PVP question, if you don't mind Jeff.

Sure.

You know, Jeff, we try and manage the tax rate. Naturally there are two pieces. One, the U.S. piece which the taxable entity there. We try to manage that as close as possible down towards the alternative minimum tax. The Bermuda piece is naturally tax exempt.

But a good rate to look for, I think, is probably around 18% on a composite basis.

OK. And, Jeff, in terms of the PVP, for the third quarter the non-renewed treaties would have had an impact of $9.4 million in the third quarter. For the fourth quarter we projected that number would be $11.4 million.

OK. And can you just follow up. You mention that the facultative business is picking up. Can you provide a little more color on that?

Well, I'll give you another piece of information. So, you know, our kind of run rate of reinsurance is probably in the $30 million range for PVP, adjusting for the non-renewed treaties. And obviously, you know, as part of our marketing efforts in the reinsurance area there are new clients out there that we're looking to establish relationships with.

So that's kind of a snapshot point in time. Obviously that will change as we continue the reinsurance marketing effort. And, I'm sorry, what was your next question?

Just on the facultative acceleration you mentioned.

Yes. We have been very heavily involved in the marking of the facultative business side, as I think I've mentioned. You know, submission activity was up substantially in the third quarter over second quarter and prior quarters.

In the fourth quarter we're already almost at a level of submissions for the entire third quarter in the first month of fourth quarter. So we do anticipate that continuing to build a very strong pipeline of reinsurance opportunity.

Great. Thank you.

Thank you sir. Your next question comes from the line of A.J. Grewal of Smith Barney.

Yes. Hi. Dominic has mentioned that your trading value is - has improved on some of the deals that you did in October. Could you give us some more color on that and actually give us some more tangible numbers around that?

Yes. When we talk about the things that we can actually rate in terms of publicly issued paper, for instance, on the municipal deals that we did, we were trading 14 to 16 basis points wide of FSA and Ambac on a specific maturity.

We continue to grade that exactly as we can see that price in the market place. Spreads did widen out because of some of the market activity. So today, that would go up as high as maybe 15 points. You know, 15 to 25 wide.

OK. And could you give us an idea of where you expect losses incurred going forward, particularly loss and loss adjusted expenses, I apologize. Give, you know, all the movements in the different parts.

Certainlye you can't predict and you don't predict loss ratios, et cetera, going forward. I think in the past that we had said that we fully expect our loss ratios to be in line with the industry. But as we build up our book you are going to see some fluctuations on that until we get to what I would call critical mass in the direct business.

Look in the short term at some of the things that have happened in the reserve - The maturing of the CDO portfolio that we had that resulted in a recovery that's going to continue for a couple of quarters. So that will have a positive impact on it and absent case reserves the normal portfolio reserving process will take place.

So as we put on new business the portfolio reserves will naturally increase on a calculated methodology. There will be some releases in parts of this because of maturities as you go along. I mean, when you look at the reserve a very large portion of our reserve, say, 70 to 75% of our reserves are portfolio reserves rather than case reserves.

They are done based upon ratings and term maturities. So as new business comes on they go up as other pieces of business roll off, become more mature, you will have recoveries against those. So it's not things that have happened in the reserve this quarter are part of the normal process of business as it goes on and rolls off and matures.

And how about the mortgage guaranty business? We've seen three quarters where you've had some, I guess, release. Do you expect that trend to continue for next couple of quarters or is that going to get back to reserving?

I'm mean the mortgage business is a mature business and we have had run off in that business which has resulted in the recoveries. The recovery in this quarter is really just because we had the book rated.

I mean, previously that was what I call a legacy business where the business was not rated by the rating agencies. We went to the effort of having that business rated by the rating agency and now it passes through the portfolio reserve process just like any other piece of the FG business. That's really the recovery in this quarter.

There isn't much left as far as that going forward in the future. It would be minimal development going forward.

OK. Thank you. And just one last question. In general, what kind of market conditions, competitive conditions, are you seeing in the reinsurance marketplace? And also how are the primaries - have you seen any different approach from the primaries relative to the reinsurance business?

I'll take that. Market pretty much follows the primary market in terms of volumes and opportunities. Obviously we're the primary players are today in terms of volumes. There's a decrease there where you expect that have a knock down effect on reinsurance.

In terms of the competitive environment, as you are probably aware, there was a new reinsurer announced recently. We still think the reinsurance business is a very underserved market. You know, we do have the largest capital dedicated with 15 years or 16 years of experience personnel to handle and service that business.

So we're still a very optimistic about our reinsurance platform at this point in time. And in terms of the primary, treating it differently, obviously we went through the treaty renewal at the last quarter. And as I said we're seeing a very strong increase in facultative submission activity, which is what we anticipated.

Thank you.

Thank you.

Thank you. Your next question comes from the line of Rob Ryan of Merrill Lynch.

Good morning.

Good morning Rob.

How's the development of the international business going?

Well, as you know, we recently got the license. We've hired a key element of the staff over there - a gentleman named Ashley Blows, who's going to run the PFI business. As we talked in previous times that business has a fairly long lead time.

We don't really expect it to have activity in 2004, but we are building a pipeline of 2005 opportunities and are very optimistic in terms of what the European license will provide us. And we will continue to build out that platform in 2005.

Are you confident regarding mandates and it's just a matter of the transactions coming to fruition and actually closing? Or at this point is it more submissions, things that you're working on, but you're not sure whether you're going to win the transaction or the transaction is actually going to go the insured route?

I'd say that's hard to predict but there is a little bit of both currently in our pipeline.

OK. Thank you.

Thank you.

Thank you sir. Your next question comes from the line of Brian Meredith of Bank of America Securities.

Yes. Good morning everybody. Just a couple of quick questions. Most have been answered.

First one, Bob, I'm wondering. I was just looking at your reinsurance segment and there was a big pick up in the earned premium excluding refundings. Is that a good run rate going forward? Anything unusual in the quarter?

–Dominic Frederico: Brian, we are subject to the information that we get reported by the ceding companies. And each quarter you will have some past dated transactions, depending on the size, can have an impact on earned premium because it's a catch up. So this quarter had some of those transactions. So I wouldn't call it a good run rate.

We can get back to you with something more reasonable.

Great. That's terrific. Next question. Dominic, you talked a little bit about S&P. I seem to continue to have conversations with them. Is there any kind of change in the kind of their view of what their looking for in order to kind of remove that negative outlook?

Well, just because they're on my speed dial, Brian, doesn't mean we have a lot of conversations with them. But we are continuing to dialogue with them to get better understandings in terms of the type of activity they are looking for.

We feel reasonably confident that we're meeting their goals and objectives. Obviously we need them to confirm that. But at the same time we have a very similar dialogue with Moody's as well. So we're really looking for them to provide us specific action items that they're looking for us to deliver. And, obviously, we are working as hard as we can to meet those goals.

Great. And the last question is, let's assume that spreads stay where they are right now. As I look out to '05, you know, what would your outlook be as far as PVP, particularly in the direct area?

I've got about 45 people shaking their hands. No way would I give you that answer. I will follow their fine lead.

We're making a joke of it, but there is so many things up in the air that would be very heavily influenced by any changes in our ratings that that number would not be worth much for me to give it to you today.

Gotcha. All right. Thanks Dominic.

Thank you.

Thank you sir. Your next question comes from the line of Mark Lane of William Blair.

Good morning.

Good morning.

Just on the credit side, can you just speak generally about the watch list and any major movements on or off and what you're seeing generally on the underlying portfolio?

Yes. By and large, Mark, the credit environment's been still pretty good. That's probably one of the reasons why spreads are where they are as well. In terms of our closely monitored list there was very little activity in terms of significance. You know, it reduced marginally in the quarter.

There were some changes in certain classes, more in the airline ETC area and some manufactured housing, that got downgraded. Remember 50% of our list is in the category one, which is where we're just watching it, but we have no expectation at this point in time of a loss.

So there really is no news of any real significance coming out of the closely monitored credits.

And specifically on the public finance transaction that you wrote that you said that the public deal closed in the fourth quarter, the gas deal. What kind of - was that a primary issuance or how did you participate in that deal? And what was the nature of the transaction?

My understanding was, you know, within public finance you basically have the opportunity for a secondary market transaction.

Let's clarify that. That's a good question. You know, it is a public finance primary guaranty. We're on the cover with the other providers of the financial guaranty. We compete for it the same way they compete for it in terms of, in that case, FSA and CIFG.

So it's very traditional. When you talk about our market opportunities, as we told you in the past, we have three opportunities in the public finance area. One, the smaller deals that are not really the target of our larger competitors, because quite honest we do not typically play in their market place.

So things like, Philadelphia Gas, small airports, small higher learning institutes, that's where we do have opportunities. Transaction size is typically below 50 million, maybe in the 15 to 25 million range.

Number two, wherever there is capacity constrained we obviously have an opportunity because we have some free capacity so that we do get the key there as well. And lastly, as you said, in the secondary markets where, once again, you know, there's a lot of non-wrapped paper that people ultimately do seek a wrap later on after the paper's already been sold.

So what was the opportunity in this specific transaction? I mean, it's a small deal. You're on it with other guarantors. Certainly they would have the capacity to do the whole deal. Did they not want it? I mean, given the trading value ...

I tend to look at it as we targeted it, as opposed to their not wanting it. So these are the types of deals we're out their sourcing. As we talked about, we made significant hires in our public finance areas. These people all come in with good experience, contacts in the market, hit the ground running. So we're going to see more and more activity in kind of the smaller public finance arena.

Despite the trading disparity?

Absolutely. Because remember also these are going to be, by and large, triple B, triple B plus risks. So that differentiates, you know, where the rest of the market is going to be on those specific accounts.

OK. What about the CDS CDO, the run off book that - not the CDO run off book, but the CDS run off book. Is there any way to give the level of reserves on that. You've given the run off of the principal issuance or the principal values.Is there anyway to give the reserves associated with that? I mean, if financial guaranty direct earned premiums is going to continue to be light that's going to continue to have an impact on the loss side if you're going to continue to release the CDS reserves. Assuming you don't have a loss. Correct?

Yes. No. I guess you're referring to the single name credit default swaps which are running off, which would give a schedule of.

Yes.

Yes. No, we put them into the portfolio reserve analysis and they are really rated then by their rating and par value. I guess we could try to go back and actually break them out of the model, but their not significant. And as Bob said, the ongoing, there will still be continued reserve changes in terms of reductions because the run off in certain segments of the portfolio, as you just identified.

But as we're ramping up the direct business that should have a very minimal effect bottom line.

But, in this quarter the negative 1.2 million in direct, my understanding that was despite the increase in the portfolio reserving process that the main reason that those came down was that you had reserves established on certain CDO transactions and single name that dropped to the bottom line because they are now mature.

Right. The bigger piece of that is the CDO piece. As I had said earlier, we will continue to have that type of development for the next couple of quarters. But it's going to slowly dissipate and the impact of it will be noted less certainly as the business ramps up.

But it's not a long term phenomenon, we don't really publicize by segment or by pieces of the book how much of the portfolio reserves there is. But it will have an impact for the next couple of quarters, but it's ...

OK. And then just ...

Excuse me. Just one item to come back on a point that was raised earlier, and that was relative to the impact on net earned premium on the reinsurance book. And the question that was asked to Dominic was the impact of the additional information that we received in the quarter relative to that book and the impact on the run rate.

It's probably $5 million on the quarter.

OK. And just a last question back on the pipeline. Can you give a little bit more detail on the nature of the competition for those transactions. Were those deals that had been in the pipeline that you had been working on for a while? Are those associated - any of those associated with the new people that you had hired?

Are they responsible for any of those deals? Or are those their relationships? Or are you in direct competition for any of these deals with the other major players in the market?

Well, I would answer you, Mark, kind of all of the above except on the competitive side, remember to the extent that one of the incumbent or other mono lines, especially the larger ones, I wanted to come down and play in that arena. Then obviously we would not have an opportunity.

So we're really looking and targeting those areas where we know there is opportunity where it is a less served market place, where we can get involved and get an opportunity. So we know what our limits are in the market. We really do not compete with the Ambac’s and the MBIA's in the public finance market for the large obligations, the higher rated GO's. We know that.

So we have people that are really targeting that smaller end of the market place. And it's work that's been in progress since the time we decided to use this strategy or affect this strategy. It's definitely aided by the new folks that came on board because they come together with a lot of market contacts and recognition in the market.

So as I said, we're pretty happy with where we're at. We think we'll see more activity in this area.

Great. Thank you.

Thank you.

Thank you sir. Your next question comes from the line of James Shanahan of Wachovia Securities.

Good morning.

Good morning.

A question, I guess, about the single name credits of the default swap business, as well, and your top 10 exposures. It appears that two of the internal credit ratings improved in the period. One from, I think, double A one to double A. Second from triple B plus to A plus.

And the third triple B plus exposure dropped off the list entirely. How does the company determine that an upgrade is warranted here? And did the telecom, the Deutsche telecom exposure run off entirely? And finally, can you remind us how the ratings agency view the single name credit default swap business? Thank you.

OK. That was a lot.

I'm sorry.

The ratings are public ratings.

Oh. OK. Thanks.

And therefore we monitor the ratings that they provide and obviously that has a heavy influence. We also rate them ourselves to make sure that we're in agreement with what we think the rating is.

So it's kind of normal movement, as I said, the market has been pretty good on the credit side. There have been improvements in the current quarter, which is reflected in that closely monitored list.

The rating agencies were not very positive on the single name credit default swap, and neither were we ultimately long term. And that's why we're out of that business and we're just sitting here reporting to you in terms of monitoring its run off.

It's a short duration. You'll note from the run off that is, that we do publish, that the vast majority of the single name book runs off next year.

Thank you.

Thank you.

Thank you sir. As a reminder, ladies and gentlemen, it is star one to ask a question at this time. Your next question comes as a follow up from the line of A.J. Grewal of Smith Barney.

Yes. Could you provide us any more color on how many deals are in the pipeline and what the size of the pipeline is, and how that compares to the last quarter? Thank you.

We won't go to size or number, but we will tell you that the pipeline is very active. We're very pleased with the progress that we're making in terms of all the meetings that we're having to attract new business to the company. And we will provide - I guess you'll see more activity in the fourth quarter.

Any idea of how much it's grown, I guess? Can you tell us that?

Yes. I know. It's like herding cats. But the nice thing is, we're going to tell you the fourth quarter is typically the largest quarter in the structured finance area as everyone looks to make balance sheet movements prior to the end of the year.

So I will tell you the pipeline is larger today than it was last quarter, but there's also a seasonality factor in there was well that you've got to consider.

Thank you.

Thank you.

Thank you sir. Ladies and gentlemen, at this time there are no further questions. I'd like to turn it back to the management team for any closing remarks.

I'd like to thank you all for joining us today. We appreciate your interest in Assured Guaranty. To the extent that you have follow up questions, please feel free to contact us. Our contact information and email addresses are on the press release.

Thank you very much, and we look forward to talking to you again soon.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your presentation and you may now disconnect. Have a wonderful day.

Thank you.