On Jun 23, we initiated coverage on Assured Guaranty Corp. AGO. The company is a proven leader in bond insurance, providing credit enhancement products to the U.S. and international public finance, infrastructure and structured finance markets.
The company is poised for long-term growth on account of a rise in new business production, its acquisition of Radian Asset Assurance and strong capital management.
In 2014, Assured Guaranty recorded present value of new business production (PVP) at $168 million, up 19% year over year. The company is witnessing increased new business production, with contributions from its U.S. public finance, international infrastructure and global structured finance businesses.
Moreover, Assured Guaranty turned to inorganic growth with the acquisition of Radian Asset Assurance Inc. The buyout is expected to be accretive to earnings, operating shareholders’ equity and adjusted book value.
The company has also been making consistent efforts to reduce its claim profile by loss mitigation and other loss recovery strategies.
Steps taken toward fortifying its capital have strengthened the company’s balance sheet. Regular share buyback also points to an efficient capital management practice.
Nonetheless, persistent low volume of issuance in the U.S. public finance market, continued uncertainty regarding the company's financial strength and a low interest rate environment remain some of the headwinds.
Assured Guaranty carries a Zacks Rank # 1 (Strong Buy). Other stocks worth considering are Prudential Financial Inc. PRU, James River Group Holdings, Ltd. JRVR and Ping An Insurance (Group) Company of China, Ltd. PNGAY. All these stocks carry a Zacks Rank #2 (Buy).
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