Good morning, and welcome to the Assured Guaranty Ltd. third quarter 2022 earnings conference call. My name is Bailey, and I'll be the operator for today's call. All participants will be listening in listen-only mode. Should you need assistance, please signal a conference specialist by pressing Star, then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your telephone keypad. To withdraw your question, please press Star then two. Please note that this event is being recorded. I would now like to turn the conference over to our host, Robert Tucker, Senior Managing Director, Investor Relations and Corporate Communications. Please go ahead. Thank you, operator, and thank you all for joining Assured Guaranty for our third quarter 2022 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. If you are listening to a replay of this call or if you're 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, most current financial filings, and for the risk factors. Turning to the presentation. 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 Ltd., and Rob Bailenson, our Chief Financial Officer. After their remarks, we'll open the call to your questions. As the webcast is not enabled for Q&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. We continue to build shareholder value of Assured Guaranty during the third quarter and first nine months of 2022. As of September thirtieth, 2022, Assured Guaranty's adjusted operating shareholders' equity per share of $91.82, and adjusted book value per share of $137.87 were both record highs. Adjusted operating income per share of $2.11 for the third quarter and $3.88 for the first nine months represented increases of 369% and 49%, respectively, compared with last year's periods. New business production continued to be strong in the third quarter, with $95 million of PVP. It's substantially the same as in the third quarter of last year and our best quarter so far this year. This year's third quarter was our best third quarter in international public finance and second best in U.S. public finance in more than a decade. We believe there's been a permanent shift in the market toward a greater appreciation of our value proposition as the pandemic, the volatility in the markets and the global economy, geopolitical unpredictability, and climate-related natural disasters have reminded investors of the vulnerabilities of their investments. Municipal bond yields, which had risen dramatically in the first half of this year, continued to climb in the third quarter, with the benchmark yield for a 30-year AAA GO bonds finishing at 3.9%. Credit spreads remain tighter than have been typical over the past decade, although they have widened somewhat over the course of the year. While interest rate increases and credit spreads widening are promising factors, U.S. municipal bond issuance volume has not kept pace with last year's. There have been fewer refundings this year, where in past years, refundings have helped drive high total new issue volumes during the year of ultra-low interest rates. Additionally, year-to-date demand has been curtailed by approximately $92 billion in net outflows from municipal bond funds and ETFs. Even with the reduced issuance volume, this was the third consecutive year in which insured volume in the primary market exceeded $21 billion during the first nine months. You'd have to go back to 2009 to see a higher insured volume. At 7.8% of par issued, the industry penetration rate was the second highest in over a decade for the first three quarters. For Assured Guaranty year to date, strong demand for our secondary market municipal bond insurance offset some of the impact of lower overall issuance. In the secondary market, we wrote more insured par in the first three quarters of 2022 than in any first nine-month period of the last decade. Our $2.2 billion of secondary insured par totaled more than 11 times that of last year's first three quarters. With fewer opportunities to purchase insured bonds in the primary market, investors have evidently been seeking the security and other benefits of our guarantee through the secondary market, which we believe is a sign of fundamental demand that is likely to be reflected in the primary market as volume returns. Holders of uninsured bonds may also want insurance because it has the potential to stabilize the market value of a position compared to the uninsured position should a credit come under financial stress. Our secondary market policies command competitively higher premiums, and have made an important contribution to our strong PVP this year. Assured Guaranty remains the market leader for bond insurance, ensuring approximately 56% of all primary market insured par sold during the first nine months of 2022. In total, our insured par sold in the primary and secondary markets was $15.1 billion, the third largest amount we have insured during the first nine months of any year in the last decade. This included $4.8 billion of par from 21 US public finance transactions that each involved at least $100 million of insured par. During the third quarter of 2022, our insured par sold in the primary and secondary markets totaled $3.4 billion, of which $480 million was secondary market par. We were pleased to continue to add value on double-A credits, where we believe investors see our guarantee on high quality credits as a mitigant of various risks. During the third quarter, we insured $683 million of par on 24 primary and secondary transactions with double-A underlying ratings. In aggregate, for the first nine months of 2022, we insured more than $2.3 billion of par on 103 primary and secondary market transactions that either S&P or Moody's or both had assigned double-A underlying ratings. Outside U.S. public finance, our international public finance business had its best third quarter since 2009, producing $37 million of PVP and bringing its year-to-date PVP to $67 million. We guaranteed the transactions in the transportation, airport, water, and other utility sectors. We have good prospects for a strong finish to the year, including local authority debt and other transactions. In global structured finance, we are currently processing mandates in such areas as subscription finance, diversified payment rights, whole business securitizations, and portfolio capital management for banks and insurance companies. Our new business production benefits from our strong financial strength ratings. Last month, Kroll Bond Rating Agency affirmed the AA+ ratings it applies to our U.S., U.K., and European insurance subsidiaries. In separate reports on AGO, AGM and AGC, KBRA highlighted the company's substantial claim paying resources, ability to withstand KBRA's conservative stress scenario losses, and our skilled management team. Last month, the Puerto Rico Highways and Transportation Authority settlement and plan of adjustment was approved by the district court in Puerto Rico, and the plan is expected to be implemented before year-end. Resolving HTA reduces our total remaining insured Puerto Rico net par exposure to about 0.5% of our total insured portfolio. With regard to PREPA, after mediation had reached an impasse, the court had allowed certain litigation to proceed while directing further mediation to continue, resume concurrently. The PREPA bonds have robust credit protection, creditor protections, but as always, we prefer to resolve the matter consensually if possible, as we have attempted to do for many years. Overall, our insured portfolio has improved significantly in the last five years, with the low investment-grade exposure diminishing from 4.8% of insured net par outstanding in September 2017 to 2.5% today as a result of our loss mitigation efforts. It's important to remember that only a portion of the BIG exposure is ever likely to produce actual losses. As many of you know, we acquired our asset management business in October 2019 with the aims of, one, diversifying our revenue sources by adding a fee-based revenue stream, and two, gaining an in-house platform to increase our investment returns through alternative investments. We refocused the firm and have now almost fully wound down the legacy funds that we wished to exit. In terms of our key objectives as of September thirtieth, our asset management business had more than $17.5 billion of assets under management, substantially all of which is fee earning. In comparison, at the end of 2019, with a comparable amount of AUM, less than half was fee earning. We also made progress on the second objective. Since we've been investing in Assured IM funds, those investments have generated an annualized internal rate of return of over 10%, which is markedly higher than any other insurance segment investment. Keep in mind, these investments are marked to market on the income statement and will therefore show more volatility than our fixed income investments. However, the current marks do not change our expectation of our ultimate returns. Capital markets have continued to experience volatility. In October, the 10-year Treasury yield went above 4% for the first time since 2008. Last week, the Federal Open Market Committee added another 75 basis points to the Fed funds rate. In the municipal market, the benchmark yield on tax-exempt AAA 30-year GOs also exceeded 4% last month, a level last seen in January of 2014. In the muni market, yields are roughly now 260 basis points higher than what they averaged in 2021. Given the current environment of higher interest rates and what appears to be a weakening economy, we would expect to benefit from further spread widening and a potential return to municipal insurance volume to higher levels. If these occur, demand for municipal bond insurance should increase. I can tell you that so far in October, in the fourth quarter, the municipal market saw greater insured penetration, while Assured Guaranty increased its market share, found more frequent opportunities to insure transactions with larger par amounts. We also believe that in volatile global markets, many participants in infrastructure and structured finance are likely to have good reasons to employ the versatile tools we offer to manage the risk. Our outlook is positive as we continue to focus on our core principles of disciplined risk management, excellent customer service, and prudent capital management that is optimized for the benefits of our policyholders, clients, and shareholders. I'll now turn the call over to Rob. Thank you, Dominic, and good morning to everyone on the call. I am pleased to report strong adjusted operating income in third quarter 2022 of $133 million or $2.11 per share. This represents a 369% increase on a per share basis compared with the third quarter of 2021. As a reminder, in the third quarter of last year, we refinanced $600 million of long-term debt, which resulted in a $138 million loss on the extinguishment of higher coupon long-term debt. Third quarter insurance segment adjusted operating income was $159 million compared with $214 million in the prior year. These results include strong and relatively predictable scheduled earnings generated by our financial guarantee contracts and fixed maturity investment portfolio, offset by some fair value movements in other investments. In terms of premiums, third quarter 2022 net earned premiums and credit derivative revenues were $92 million compared with $114 million in the same period of last year. The decrease relates primarily to $13 million of net earned premiums on certain transactions in the third quarter of 2021 that did not recur, and lower accelerations and updates to debt service assumptions in the third quarter of 2022. Refundings were $12 million in the third quarter of 2022, compared with $15 million in the third quarter of 2021, which is consistent with our expectations. Deferred premium revenue on the investment-grade exposures has been approximately $3.5 billion for each of the last eight quarters, as our new business production has replenished the normal amortization of the in-force book of business. As Dominic mentioned, financial guarantee new business production was strong in the third quarter of 2022, despite reduced primary market issuance. Higher interest rates and a more active secondary market contributed to a stable level of deferred premium revenue. Net investment income from the available-for-sale and short-term investment portfolio was also a relatively predictable stream of income and was consistent on a quarter-over-quarter basis as $59 million. As Dominic also mentioned, the economic environment, characterized by market volatility and rising interest rates, impacted several components of adjusted operating income, adjusted operating shareholders' equity and adjusted book value. The largest component of the quarter-over-quarter variance for the insurance segment's adjusted operating income is the fair value movement attributable to investments, specifically fair value losses related to alternative investments in the third quarter of 2022 of $11 million, compared with gains of $33 million in the third quarter of 2021. This includes investments in Assured IM funds, whose inception to date mark is a pre-tax gain of $107 million, representing a 10.3% annualized return. This is in line with our targeted return, demonstrating the value of our investment diversification strategy to enhance overall returns. With respect to the Puerto Rico contingent value instruments, the company received these instruments in the first and third quarters of 2022 under the GO PBA Plan and HTA support agreements, and we now manage these recoveries as trading securities. In third quarter 2022, the related fair value loss was $8 million on a pre-tax basis, primarily due to rising interest rates. Economic loss development, which was a net benefit of $72 million in the third quarter of 2022, was also affected by the rising interest rate environment as it included a benefit of $25 million related to higher risk-free rates used to discount expected losses. The economic benefit was mainly driven by a $95 million dollar benefit in US RMBS, which had several components, including a benefit related to the purchase of a loss mitigation security, a benefit on assumed RMBS, where we shared proportionally in a ceding company's rep and warranty settlement, and additional benefits related to updated second lien default assumptions, higher recoveries on charged-off second lien loans, and improved performance in certain other transactions. The net effect of economic loss development and the amortization of related deferred premium revenue resulted in a benefit in loss expense of $75 million dollars in the third quarter of 2022. The asset management segment's adjusted operating loss was $3 million dollars in the third quarter of 2022, an improvement over last year's adjusted operating loss of $7 million dollars. The more favorable results were due to higher asset management fees compared with third quarter of 2021, as the increase in fee earning opportunity fund AUM more than offset the decline in AUM associated with the wind down funds and lower segment operating expenses. As of September 30, 2022, we have only about $200 million of AUM in our wind down funds, compared with $800 million of AUM as of September 30, 2021. AUM in opportunity funds as of September 30, 2022 was $2 billion, up from $1.6 billion as of September 30, 2021, due to fundraising in our healthcare strategy. Foreign exchange rates also moved significantly in the third quarter. While the strengthening US dollar relative to the British pound does not have a material effect on adjusted operating income, it can have a material effect on GAAP net income as well as all of our non-GAAP book value metrics. The effective tax rate is a function of taxable income across tax jurisdictions and varies from period to period. In the third quarter of 2022, the tax provision included a $20 million benefit attributable to a returns provision adjustment. With respect to our capital management objectives, we repurchased 1.8 million shares for $97 million in the third quarter of 2022. Subsequent to the quarter close, we purchased 785,000 shares for $42 million. As of now, the remaining authorization to repurchase shares is $261 million. Continued share repurchases, along with our positive adjusted operating income, new business production, and favorable loss development have increased operating shareholders' equity and adjusted book value per share to new records of over $91 and $137, respectively. While quarterly operating results vary from period to period, the consistent quarterly increases in these book value metrics reflect how the successful execution of our key strategic initiatives build shareholder value over the long term. Since the beginning of our repurchase program in 2013, we have returned $4.6 billion to shareholders under this program, resulting in a 72% reduction in total shares outstanding. From a liquidity standpoint, the holding companies currently have cash and investments of approximately $127 million, of which $75 million 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. 2022 has been a year of great progress, particularly in terms of our Puerto Rico exposure. Aside from PREPA, our remaining exposure to defaulting Puerto Rico credits are covered under the HTA plan, for which we are awaiting the effective date to be announced. In third quarter, we received $147 million in cash and $672 million in original notional contingent value instruments as part of the pending HTA settlement. Our exposure to Puerto Rico salvage assets in the form of recovery bonds and CVIs has also been declining as opportunities arise to sell those securities. During the third quarter, we sold approximately 20% of par or notional value of the amounts received under the settlement agreements, for a total reduction of 48% on a year-to-date basis. In addition, $87 million of the CVI is paid down subsequent to quarter end. As we look forward to the fourth quarter and beyond, we remain optimistic that the interest rate environment will benefit new issuance, new insurance business production, and asset management and alternative asset strategies will continue to contribute to the company's progress towards its long-term strategic goals. I'll now turn the call over to our operator to give the instructions for the Q&A period. Thank you. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. If you're using a speakerphone, please pick up your handsets before pressing the keys. At this time, we will pause momentarily to assemble our roster. The first question today comes from the line of Brian Meredith from UBS. Please go ahead. Your line is now open. Hey, thanks. A couple questions here. First, I'm just curious, Dominic, there was a disclosure by MBIA that they're undergoing some strategic evaluation with Barclays. I'm just curious your kind of thoughts on whether that would make a good strategic fit with AGO, any opportunities there. Well, Brian, thanks for the question. We heard that same comment in the market as well. Obviously, we've continued, as one of our strategic objectives has always been to consolidate the other remaining monolines. Like any other opportunity, we'll look at it if given the opportunity and see if it makes sense and whether we can meet the credit terms of our credit underwriting standards and look what else is in the portfolio. Great. Thanks. Second question, I'm just curious to look at the dividend capacity, you know, out of the insurance op right now, it's relatively low. Maybe give us kind of the views of maybe a special dividend, particularly, you know, could you get one when HTA ultimately, you know, comes through and everything finally gets done? Well, I'll let Rob answer the specifics. Yeah, we obviously look at other means in terms of meeting our cash flow requirements to the holding company to allow us to operate or execute our strategic objectives, one of them, which is capital management. Obviously, as Puerto Rico continues to wind down, we get down to basically one exposure, which is PREPA. Remember, the regulators were giving us special dividends dealing with Puerto Rico back in the day, and then obviously COVID hit, and that changed things dramatically. We think the environment is getting in the right structure for us to go back to the market or go back to the regulators and have the discussion about special dividends. Obviously, as we want to achieve further strategic objectives, that's important for us to be able to accelerate or increase our cash flow to the holding company. Brian, you know, as you look at page 12 of the equity investor presentation, you can see the remaining capacity at AGM and AGC, but that's just for this year. That will be replenished in the next year. Remember it's either 10% of policyholder surplus or your net investment income. That will be replenished, in addition to which AGRE will have more capacity going into next year as well. Obviously we're always looking to increase that dividend capacity through possible dividends from our UK operations, and so we continue to try to maximize our dividend capacity with our operating subsidiaries. Gotcha. Dom, I wanna go just quickly back to my first question. Just curious, from your perspective, is there the ability for AGO to do a transaction for all of MBIA, or would you be purely focused on National if something was possible? Well, that's pretty speculative, Brian. At the end of the day, you know, we really, at this point, we've looked at the portfolio from a reinsurance perspective over time, but obviously we'd have to do a complete update of our understanding of what's in each of the organizations to see what makes sense. If there's something that makes sense, then obviously we would consider it. Great. Thank you. No problem. Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. The next question today comes from the line of Thomas McJoynt-Griffith from KBW. Please go ahead. Your line is now open. Hey, good morning, guys. Thanks for taking my question. Good morning, Tommy. Morning, Tommy. Morning. I won't ask, say, specifically about your interest in MBI, but just perhaps from your seat, kind of a unique standpoint, do you think that other multi-line insurance companies might have interest in an asset like that? I guess said another way, is it possible that other insurers could aim to enter the bond guarantee market, I guess with a positive outlook of higher rates and wider spreads? Is the stigma of Puerto Rico really likely to keep some entrants away from this market? Well, speaking from a third-party perspective, I don't think the stigma of Puerto Rico makes any difference at all at this point in time. I think it's a credit that's getting its way through resolution, obviously based on the creditworthiness of the government and the activities and its actions would make it difficult for them going forward to get further bond insurance applied to any of their debt. That's for another day. I don't think Puerto Rico matters at all. I think it really looks at the regulatory environment. Remember, when you get into this business, you not only have regulators, you have rating agencies, which are two very high hurdles. If a company is willing to climb those hurdles, then they would take a look at it. You know, for us to try to speculate on whether a P&C company or a title company or a life company wants to get in the financial guarantee business. Hey, we welcome the competition. I think Assured is very well positioned relative to the marketplace, to our standing with our clients and, you know, the performance that we've done and the, you know, track record that we've amassed, which is not easy to duplicate at this point in time. Plus, as we've always said, in this business, you need a track record, you need earnings, you need a deferred revenue source to really make it sensible to put the capital in play. You say these companies that are left big enough to establish that benchmark or that foothold to allow you to go forward in the business. Like I said, it's not for us to determine. Us, it's just to determine whether it's attractive to us or not. If we see competition, then we see competition. Got it. Thanks. I guess on that topic of thinking about regulators and rating agencies and dealing with both, I guess on the topic of a special dividend and the potential size of it, do rating agencies look at it really differently than regulators might? I know you guys were trying to work on coming up with an updated figure of the, I think it was an S&P report, kind of estimating how much excess capital you had in excess of a triple A rating, that was I think last out in 2019. Just any update on that and really just kind of thinking about how regulators look at it from the perspective versus rating agencies. Well, I think the regulator and rating agencies do have different perspectives, right? Obviously, the rating agencies are more based on a stress loss scenario. Regulators have a lot more criteria. They have a different capital model than the rating agencies do. Yet, as a financial guarantor, you're probably responsible for both. In terms of the excess capital, we anticipated the question. The numbers come down over the last two years due to our success. I'm reading a prepared remark, so bear with me on this. The numbers come down over the past two years due to our successful capital management program. Basically, resolutions related to Puerto Rico. We're very comfortable that we have substantial excess capital. The last time we gave you this information was for year-end 2019, where we had approximately $2.6 billion of S&P AAA excess capital. Very important to note it's on a AAA basis. However, between then and the year-end 2021, we repurchased $1 billion of our common shares, $1 billion worth of common shares, paid approximately $140 million in dividends, paid over $700 million of PR debt service, excluding settlements, invested over $500 million through AGAS and other high-cap charge investments. Despite using this $2.14 billion of capital, our S&P excess AAA capital is still $1.8 billion as of year-end 2021. Hopefully that gives you your answer. Yes. That is, that's what we were looking for. Thanks for having that prepared for us. No problem. Just last question. I think it looked like in the slides that the industry's U.S. public bond insurance penetration actually looks like it dipped a little bit in the third quarter, just if I basically see the penetration in the first half and compare it to what it was for the first nine months. It looks like it declined a bit sequentially, which is a bit surprising given the backdrop. Any sense of what drove that? Yeah. I mean, remember, that's very relative to who's in the marketplace at any given period of time. Of course, the market volume is way down. The issuers that are in the market are probably the more liquid issuers that are probably gonna use bond insurance less. I think as you see the statistics for the complete year, you'll get a very different answer relative to the penetration rate. It's still kind of flat with the prior year, which is still way above years, you know, four or five years ago. We're making progress in penetration. We think with the rising interest rates, the widening of credit spreads, the economic uncertainty, we think demand is now positioned to really start to increase substantially. We'll hopefully see that in the fourth quarter when we give you our fourth quarter and year-end statistics. Great. Thanks for answering this question. No problem. Thank you. The next question today comes from the line of Jackie Cavanaugh from Putnam. Please go ahead. Your line is now open. Hi, guys. Can you hear me okay? Yeah, we can, Jackie. Hi, how are you? Hi. Hi. Thank you so much for taking my question. I guess just a follow-up to the prior question, and thanks for going through the different capital sources. Does the regulator or the rating agencies care at all about the AOCI marks? Does that impact their analysis or the way they might think about a special or the capital excess, just given the magnitude of the marks? Thank you. The mark doesn't have effect on statutory capital, and it doesn't have an effect on rating agency capital. Obviously, it would be a discussion that we talk about with rating agencies, but it doesn't affect surplus or rating agency capital. Okay, great. They're sort of agnostic to it, just like the street kind of looks through it. They all look through it. It's just not part of their model. One looks at claims-paying reserves, one looks at statutory capital, which this doesn't jump statutory capital. It doesn't affect statutory capital. S&P starts with our surplus and statutory capital, and then the rating agencies just obviously. I mean, the regulators will look at surplus. As Dominic said earlier, there are other, you know, regulatory tests that we need to comply with them and deal with them when it comes to getting special dividends. Got it. Okay. I know you've told me that before, but I just wanted to confirm given the magnitude of the marks. Thank you very much. Well, the marks are the marks, and at the end of the day, it doesn't change our economic outlook and returns on those assets. Obviously, some adjustments will affect certain parts of the balance sheet, but over time, we would believe that things would return to basically normal and the marks should start to, you know, reverse. Great. Thanks, guys. You're welcome. Thank you. Thank you. The next question today comes from the line of Geoffrey Dunn from Dowling & Partners. Please go ahead. Your line is now open. Thanks. Good morning. Good morning, Jeff. I mean, I don't remember the years where you discussed this, but you know, in the aftermath of the Great Recession, you speculated at where the municipal bond market could ultimately recover to, under kind of the new model of being a double A, etc. I want to say it was like 25% penetration. Part of that recovery was based on rates going up and spreads going out. Obviously, that's happening now, and who knows if it'll be sustained. In your vision of where the muni bond market for FG goes or even the global market for financial guarantee goes, what else do you think needs to happen other than what we've been seeing on rates and spreads to reach what you think could be a fully recovered, sustainable financial guarantee business model going forward? One word, Jeffrey, one word, stability. Rates are getting to an area where we're very comfortable is gonna really further increase demand for, you know, municipal insurance. It's got to stay over time, right? We can't get the rates to go up like a balloon and then down like, you know, a popped balloon. If these rates will hold, and if the Fed and the Treasury stay constant, then I think it creates that absolutely conducive market for growth for us. We started to do some analysis, right? A couple of cute little tidbits of information. Robert took it away from me, so now I don't see it. The one I'll tell you is a 1% rise in interest rates is worth 10% on PVP. Think about a 1% rise in interest rates, 10% on PVP. That's just keeping everything else constant. Thank you, Robert. To give you an idea, if we look at debt service on the same amount of par, remember, we get paid based on rate times debt service. 2021 debt service resulted in 135% of par. 2022's debt service resulted in 193% of par because of the change in the interest rates. We get paid based on debt service. Think about that impact we'll have on future premium. Not only will we calculate as PVP, but we get to earn over the future periods. In a rising interest rate environment, you're not having refunding, so we're not going to get this acceleration that robs future periods of earnings. Now, the earnings will be stable over time, but grow according to the PVP growth year over year and add to that earnings stream year over year over year. We are very optimistic as we look at the market today. The only thing we hope for, stability. That it stabilizes at this low rate, and it stays that way for a period of time, you know, a few years at least, before there's panic in the streets and they start lowering rates again. Jeff, you know. When you look at the. Secondary- Yeah. I was just saying, Jeff, in the secondary as you saw, we, the secondary was very strong over the last couple of quarters, and that's generally a leading indicator to the primary as well. If you get stability and less volatility, the issuance will pick up in the primary market. Yeah. A little fact that we look at is secondary market activity, and that's typically a forerunner of primary market activity. To give you an idea of secondary market activity, in the current year, nine months to date, we've written $60 million of PVP in the secondary market compared to. Four. $4 million last year. $4 million last year. $64 million. 60 versus 4. Mm-hmm. That's typically a precursor or an indicator of where the primary market's going. Okay. You know, it's been it might be, you know, probably a decade and a half since financial guarantee companies really talked about the different hurdle rates across return hurdle rates across muni structured and international. As you weigh potential M&A, I'm just curious if you can share some sort of range on hurdle rates on new business just so we can get a gauge of, you know, what type of return on an M&A opportunity might be compelling enough for you to look at versus retaining the capital for buyback and growth. Well, you look at it on that basis, Jeff, you have to say the return on an M&A basis has got to be north of 15%. Because we think the capital return on this buyback of stock is in the 11%-13% range. We're writing new business anywhere between, say, 8%-11%, depending on the transaction and depending on the source of business. International would have a higher than that rate. Obviously, international is not the major part of our business. U.S. public finance, when we look at returns on a transaction-by-transaction basis plus for the quarter. Remember, that's also on regulated capital, not the capital that has to be absorbed in the company. The excess capital is not in that calculation, the real returns are less than that. I can fault the profit center for writing business at regulatory capital enhanced returns, and they're not responsible for the excess capital in the company. As we look at that hurdle rate for the M&A, it's got to be north of 15%. Okay. It's got to make sense credit-wise and everything else for the development of the organization. I'm sorry, Jeff. Right. Just financially, is there any kind of return leverage preference between reinsurance versus an outright acquisition? In the old days, the outright acquisition had a lot of benefits, right? It got us the portfolio re-rated, broaden the, you know, investor base, which we really don't need anymore, but that was important to us back in the day, like the FSA transaction. Then we got a huge discount on the capital, and the capital was substantial to get a discount on. Now, the capital bases are a lot smaller, so the discount, if any, is not going to be the same value to us that it used to be. For us, we're agnostic from reinsurance to acquisition. Both of them will provide the portfolio we want at the risk rating we want at the premium level that we want. Okay. My last question, do you recall the discount to statutory capital that you paid for FSA? Wow. The statutory cap, I can tell you it's a book value, right? We paid 37%, 38%. Yeah. The denominator was, like, 37%. It was down to 62, and then as we went through the transactions, it got into the 50s, and then the later transaction was probably in the 20s and 30s. As the portfolios got smaller, they got, you know, less volatile. There was less capital to be discounted, so they were bigger back in 2009. I think it's the next one was, like, 2011 or 2012, which might have been 50%. Then the ones in 2013 and 2015, if they were the years, if I remember correctly, were probably in the 20%-25% range. Yeah. Yeah, the discount was, like, 63% for us today, just to make sure we're clear because if we pay, like, 37% of book value. Of the book, yeah. Got it. Okay. Thanks, guys. You're welcome. Thank you. The next question today comes from the line of Giuliano Bologna from Compass Point. Please go ahead. Your line is now open. Yeah, another great quarter of performance. What I'd be curious is actually following up a little bit on the kind of pricing and return question. When I think about, you know, the spread environment, obviously, spreads have widened, so your ability to generate synergies for, you know, your end customer, you know, has increased. I'm curious, you know, where returns have gone from a return on capital perspective on, you know, where business was before rates moved higher versus kind of where it is now and where that could go. I'm curious how much, you know, improvement potential there is from kind of a return on capital perspective for new business in this kind of, you know, better operating environment. Yeah. I think the improvement is, you know, reasonably large. If you think about it, Giuliano, public finance is the largest book of the business, right? Obviously the most competitive end of the business, more susceptible to competition in the marketplace, more from uninsured versus insured. And if you look at it, we do it on a transaction-by-transaction basis. I'm trying to remember from the top of my head. In most quarters, we're trying to achieve a 10% minimum return. I think we get that most of the time, but there probably were some quarters, say one year ago or two years ago, it might have dipped below 10% to, like, 8% or 9%. Then on some transactions that were competitive, you might even go lower, and then other transactions where we really added value, you're able to go higher. I'm giving the average. As we look at the book today, I'd say, remember, we're just at the beginning of seeing this enhanced flow of business and rates and premium and spreads. This quarter, I think every business line was over 10%. International is always over 10%. It'd really be odd that it wouldn't be. But even in the domestic U.S. public finance, if I remember the number correctly, it was north of 10. Like I said, that's the very beginning stages of what we're seeing is a return of reasonable rates and spreads to the marketplace. We think spreads have a lot more widening that, you know, to experience as the economy rolls forward to potentially a recession. You know, if you just think of the basic math, Giuliano, if as Tom has said, you know, we get paid on debt service public finance. For all of our lines of business, you know, the higher the interest rate and the wider the spreads, you're getting paid more dollars. The denominator, that capital charge stays the same. By definition, your returns must go up. Well, unless you're an idiot. Hopefully I can be proven that we're not. That's great. I was referring to someone else in the market, if you look at their published financial statements. I guess, you know, kind of going back to another question on the kind of, you know, consolidation trends in the industry or the desire to, you know, consolidate the rest of the industry. I'd be curious, you know, obviously, reinsurance can achieve, you know, effectively the same thing. But as, you know, the remaining entities that are out there are running off, you know, the opportunity to do large reinsurance deals obviously gets smaller and smaller. I'm curious if there's any preference for acquiring the legal entities so you can effectively acquire capital at a discounted capital and also get the benefit of higher investment income, which obviously boosts the dividend capacity. I'm curious, you know. Well, that's the exact, you know, question you raised, Giuliano. If you have some thoughts. Yeah, no, you hit it right on the head, right? Reinsurance gets you a very highly rated, well-premiumed risk exposure that fits into your risk model and accepted by your credit underwriting standards. That's reinsurance. What's missing when you get to the acquisition of the entire company, two pieces. One, breadth of customer, we've already got that, so we don't need that anymore. Back in 2009, that was important to us, and acceptance of the paper in the marketplace. The third thing, as you just pointed out, the discount on capital. These capital bases have shrunk substantially because of obviously refundings, runoff, et cetera. The value of the discount, even if you say I can get a 30% discount, it's on a very small capital base. For us, the reinsurance gets us to pick the risk that we want, meets our underwriting standards, gets a premium level that gives us that level of return that we targeted. One is better than the other to a certain extent, unless you get a really good value on the discounted capital. That's very helpful. Thank you for taking my questions, and I'll jump back in the queue. Good to hear from you, Giuliano. Yeah. Thank you, Giuliano. Thank you. This concludes the question and answer session. I would now like to return the conference back over to our host, Robert Tucker, for closing remarks. Thank you, operator, and 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. This concludes today's conference call. Thank you all for attending. You may now disconnect your lines. Have a great day.