Assured Guaranty Ltd.AGO

Morningstar Rating

Stock Research and Analysis

by Jim Ryan

Bond insurance was once a business with moat characteristics, but we don't think it is any more. Owning a coveted AAA rating insulated established players and granted them membership to an exclusive club that included only those with the necessary capital Read more

Bulls Say

The debt Assured Guaranty insures can have long maturities, even decades. This embeds a steady stream of premium income for the firm and lessens pressure to grow by renewing unprofitable contracts.

Expansion into international markets will help Assured Guaranty win sales from larger private entities that frequently issue debt on government projects.

As investment bankers invent new types of debt securities, the firm's market naturally expands, especially since most investors won't buy these securities without a guarantee.

The combined entity of Assured and FSA will be the largest in the industry, allowing it to define the playing field. Read more

Bears Say

The unanimous AAA insurance financial strength rating is gone. Without it, many bonds won't need the insurance.

Assured has significant exposure to Alt-A and home-equity loan residential mortgage-backed securities. Both segments of the housing market will experience above-average default rates.

Losses will be rare, but they will be substantial when they occur, as the firm insures risks totaling 151 times its capital; however, creditor collateral will partially offset this. Read more

Strategy

Assured Guaranty is striving to broaden the range of securities it guarantees, expanding from a reinsurance focus to underwriting asset-backed and government securities. The firm is also expanding into Read more

Management

President and CEO Dominic Frederico has guided the ship through difficult waters and may be the top CEO in the industry, judging by performance over the past few years. CEO compensation is determined by financial performance, with revenue growth as Read more

Profile

Diversified financial guarantor Assured Guaranty boasts one of the largest capital bases in its industry. About one fourth of earned premiums originate from financial guaranty Read more

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