On May 29, 2015, Zacks Investment Research upgraded Assured Guaranty Ltd. AGO to a Zacks Rank #1 (Strong Buy) on solid first-quarter results and prudent capital deployment.
In the first quarter, Assured Guaranty delivered operating earnings of 89 cents per share that outperformed the Zacks Consensus by 7% and increased about 12% year over year on higher refunding and terminations, lower loss expense and a lower effective tax. The top line also surpassed the Zacks Consensus Estimate.
While both net investment income and credit derivative revenues increased in the quarter, total expenses declined due to lower loss expenses.
With respect to its performance, this multiline insurer delivered positive earnings surprises in three of the last four quarters, with an average positive beat of 28.23%.
Assured Guaranty is also strengthening its balance sheet. Cash balance improved substantially at the quarter-end, while long-term borrowings remained same as the 2014 level. Book value per share was a record at $54.66 increasing 1.9% from 2014-end.
Continued strong performance has enabled Assured Guaranty to deploy capital to enhance shareholders’ value. The company spent $152 million to buy back 5.9 million shares in the first quarter. Subsequently, Assured Guaranty exhausted its $400 million share buyback authorization with repurchasing 2 million shares for $56 million from April through May 4.
Concurrently, the board of directors approved a new $400 million share buyback program. Notably, Assured Guaranty returned about $1.2 billion of excess capital via share repurchases and quarterly dividends over the last nine quarters.
The Zacks Consensus Estimate for 2015 and 2016 are currently pegged at $2.33 and $2.48, respectively.
Other Stocks to Consider
Investors interested in multiline insurers may also look at Old Republic International Corporation ORI, Radian Group Inc. RDN and James River Group Holdings, Ltd. JRVR. While Old Republic International sports a Zacks Rank #1, Radian Group and James River Group carry a Zacks Rank #2 (Buy).
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