Assured Guaranty shares rise after 4th-qtr report; analysts see it as strongest
NEW YORK - Shares of Assured Guaranty Ltd. rose sharply Tuesday as analysts and investors continued to see it as one of the strongest bond insurers after it reported its fourth-quarter results.
Assured Guaranty shares rose $1.59, or 7.4 percent, to $23.10. Shares have traded between $13.34 and $31.99 during the past year.
Assured Guaranty has some exposure to the weakening credit markets, but not as much as its competitors, which has helped it to protect its vital "AAA" financial strength rating.
Late Monday, Assured Guaranty reported a fourth-quarter loss of $260.1 million, or $3.77 per share, compared with profit of $42.4 million, or 58 cents per share, in the year-ago period. On an adjusted basis, the company posted income of 53 cents per share, above the 51 cents per share expected by analysts polled by Thomson Financial.
Assured Guaranty in January said a book of contracts pledging to cover losses on home-equity loans lost more than $300 million in value, sending the company to a loss.
Assured Guaranty is still in better position than its peers though, analysts agreed. MBIA Inc. and Ambac Financial Group Inc. combined to loss more than $5.5 billion during the fourth quarter. Ambac's rating has already been cut by Fitch Ratings, and ratings agencies have warned they might do the same to MBIA.
"We view Assured Guaranty as the best way to play the bond insurers at this time," Banc of America Securities analyst Tamara Krevec wrote in a research note. "As long as the bond insurance business model remains viable, Assured Guaranty is well positioned for growth and a rising return on equity, in our opinion."
With other bond insurers stumbling, Assured Guaranty has been able to increase its market share in recent months, JPMorgan Chase & Co. analyst Andrew Wessel, wrote in a research note.
"It seems the company has attained a 15 percent to 20 percent share so far in 2008, up markedly from its 1.7 percent share in 2007," Wessel wrote in a research note. The roughly $2.2 billion of municipal bond insurance Assured Guaranty covered during the fourth quarter was 40 percent more than what it insured in all of 2006, Wessel added.
Not only is Assured Guaranty in line to boost earnings through adding market share, it is also likely to boost business by reinsuring other bond insurers, Wessel said.
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