On Jun 17, 2014, shares of Assured Guaranty Ltd. (AGO) scaled a new 52-week high of $26.78. With about 4.1 million shares exchanging hands in the last trading session, shares gained 3.62% to close at $26.33. The momentum was driven by the first-quarter outperformance and continued efforts to enhance performance. The one-year return from the stock came in at 11.6%, which was ahead of the S&P’s return of 5.1%.
With respect to earnings performance, this multiline insurer delivered positive surprise in the last three of four quarters, with an average beat of 4.49% and the highest surprise of 14.3% in the last quarter. Reported income also showed a turn around from loss incurred in the year-ago quarter.
Assured Guaranty’s residential mortgage-backed securities’ (RMBS) claims declined 80% since their peak in the second quarter of 2012.
With loss mitigation efforts and de-leveraging of insured portfolio on track, Assured Guaranty’s is improving its risk profile. Moreover, it is also writing new businesses. These prompted credit rating agency Standard & Poor's Ratings Services (S&P) to upgrade the financial strength rating of all insurance operating subsidiaries to AA from AA- with a stable outlook, the highest rating that it presently assignes to any active bond insurer.
Operating shareholders' equity per share at quarter end reached a new high of $34.45 with book value per share also improving to $49.79.
With respect to enhancing value of shareholders, Assured Guaranty’s resumed its share repurchases in March and spent $35 million to buy back 1.4 million shares in the first quarter. It spent another $40 million to buy back 1.6 million shares in the ongoing second quarter.
Assured Guaranty’s is also strengthening its balance sheet. While cash balance improved 18% at first quarter end over the 2013 level, debt level declined 0.5%. Debt-to-capital improved 30 basis points at quarter end.
Assured Guaranty presently carries a Zacks Rank #4 (Sell).
Other Stocks to Consider
Some better-ranked multi line insurers include Horace Mann Educators Corp.(HMN), Radian Group Inc. (RDN) and Old Republic International Corporation (ORI). All these stocks sport a Zacks Rank #1 (Strong Buy).
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