Assured Guaranty Earnings & Revs Top Ests in Q4 - Analyst Blog


Assured Guaranty Ltd. ( AGO ) delivered operating net income of 73 cents per share in the fourth-quarter of 2013, surpassing the Zacks Consensus Estimate of 66 cents by 10.6%. However, earnings slid 23.2% from the prior-year quarter number.

The year-over-year decline was largely attributable to lower revenues. However, lower U.S. residential mortgage-backed securities (RMBS) loss expense limited the downside in the bottom line.

Including one-time items, net income of Assured Guaranty came in at $1.90 per share, significantly higher than 38 cents reported in the year-ago quarter. The surge was primarily due to Non-credit impairment unrealized fair value gains on credit derivatives compared with losses incurred in the prior-year quarter.

Operational Update

Assured Guaranty generated total revenue of $321 million in the fourth quarter, down 28.2% year over year due to significantly lower net earned premiums. The result, nevertheless, surpassed the Zacks Consensus Estimate of $276 million by 16.3%.

Net earned premiums of Assured Guaranty were $194 million, down 39.6% year over year, attributable to the lower scheduled amortization of the insurance portfolio, and lower refunds and terminations of policies.

Net investment income of Assured Guaranty increased 8.1% year over year to $107 million.

Assured Guaranty's credit derivative revenues also declined 9.7% year over year to $28 million due to a decrease in structured finance book of the business' net par outstanding.

Total expenses of Assured Guaranty fell by nearly 27.9% year over year to $142 million. The decline was primarily due to lower loss expense in the reported quarter.

Loss expense at Assured Guaranty plunged 47.2% year over year to $67 million, largely attributable to decline in U.S. residential mortgage-backed securities (RMBS) losses. However, higher U.S. public finance losses were a partial offset.

2013 Full-Year highlights

Assured Guaranty reported 2013 net operating earnings of $3.25 per share, up 15.7% year over year. The number also exceeded the Zacks Consensus Estimate of $3.18 by 2.2%. The improvement resulted from lower loss expense from U.S. RMBS and also lower losses incurred on Greek exposures.

Including one-time items, net income of the company was $4.30 per share, surging from 57 cents reported in 2012.

Revenues totaled $1.32 billion, down 19% year over year due to lower net earned premiums.

Financial Details

Assured Guaranty exited the quarter with $184 million in cash, increasing from $106 million as of the end of third-quarter 2013.

Operating shareholders' equity as of 2013-end stood at $6.16 billion, up from $6.04 billon as of third-quarter end.

Long-term borrowings of Assured Guaranty were $816 million as of Dec 31, 2013, against $819 million as of Dec 31, 2012.

Share Repurchase Update

In 2013, Assured Guaranty bought back 12.5 million of its shares for $264 million under its $315 million share repurchase authorization. As of the end of 2013, the company had a share repurchase authorization of $400 million.

Zacks Rank

Assured Guaranty presently carries a Zacks Rank #3 (Hold). Some top-ranked stocks worth mentioning in the multi line insurance industry include AEGON N.V. ( AEG ), Old Republic International Corporation ( ORI ) and Kemper Corporation ( KMPR ). While AEGON and Old Republic both sport a Zacks Rank #1 (Strong Buy), Kemper carries a Zacks Rank #2 (Buy).

AEGON N V (AEG): Free Stock Analysis Report

ASSURED GUARNTY (AGO): Free Stock Analysis Report

KEMPER CORP (KMPR): Free Stock Analysis Report

OLD REP INTL (ORI): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: RMBS , AEG , AGO , KMPR , ORI

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