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Assured Guaranty Ltd. Message Board

  • mrsbuffet mrsbuffet Feb 26, 2009 12:08 PM Flag

    any comments would help

    "...increase in loss and loss adjustment expenses on U.S. residential mortgage-backed securities exposures.

    Operating income, which excludes unrealized losses on credit derivatives, was $3.5 million, or 4 cents a share, compared with $37 million, or 53 cents a year ago.

    The company confirmed that loss and loss adjustment expenses rose more than four-fold to $69.3 million, or 76 cents a share. "

    What are expected loss adjustment expenses for the next 3 quarters?

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    • Hope we are both right.

      If so AGO and others in this market will do great. As you've pointed out, it is a win-win. Bond insurers should make money over time and municipalities etc will be able to fund new projects which will both improve the lives of the people in their area and create jobs.

      Saw another neat reference in Warren Buffett's letter to shareholders where he says:

      "WHY PREMIUMS FOR TAX-EXEMPT BOND INSURANCE HAVE BEEN TOO LOW"

      http://www.cnbc.com/id/29441086/page/3/

      Hopefully it will lead to increased premiums etc. If history is a good indicator, AGO should be able to reduce more of the potential losses than its competitors. Yes there will be losses even for AGO (that's the nature of insurance) but as long as these losses are contained within acceptable limits, AGO should be able to do well.

    • Good point. "Managing the process" of underwriting does not fit too well into government.

      Govt "reinsurance" makes more sense.

    • Maybe your right but I think Gov't would better served providing AGO and/or other bond guaranty companies with reinsurance. Reason is very simple. Providing guaranties is a very specialized business requiring a great deal of skills underwriting and documenting deals. It would likely be cheaper for Gov't to leverage an already existing enterprise than do it directly. Yes Gov't have done a few high profile bank guaranties but they could justify the associated costs but for the large volume of guaranties needed it would overwhelm Gov't.

      Part of the reason for posting the link was to so who even Dominic thinks it’s a good having a few other companies in the sector as it would give more credibility to all of them.

    • I am not sure that Frederico's argument, "private solutions are needed to help alleviate the lack of capacity currently available in the market" is all that strong. His claim may fall on deaf ears in a "Washington" who seem to be a bunch who would do anything to funnel an inexpensive source of funds toward the President's projects.

      It seems to me that a Govt. insurance program backing bonds could turn into something like a "war bond" campaign and offer investors a strong alternative to U.S. Treasuries. The U.S. Govt does not seem to be very sympathetic toward middle men looking to profit from the current market conditions that forming a barrier to funding the public projects the President seems so intent on doing.

      The stock market seems to be siding against monolines at this point.

    • See recent Bond buyer article:

      http://www.bondbuyer.com/article.html?id=20090226BX2THZXY

      Very good reading.

    • Assuming WLRoss made his additional open market purchase of 5MM shares between 09/18/08 and the end of the year at an average cost of $10 and assuming he performs the backstop and purchases another 60MM shares at $6 per share in a few weeks, his average cost in AGO will be about $8.50. If you buy for less than that he's paying you to manage your money for you.

    • I've been looking at buying this ever since I heard that Wilbur Ross has been taking an increased interest in this company. That guy has been pretty sharp in picking up distressed banking assets in the past couple years. He's made out like a bandit picking up rights to mortgage servicing from failed lenders. When I see him taking an equity stake in this company, that gets me interested in what value he sees here.

    • Valid point but my impression is that AGO is buying FSA at a discount and they have looked at every account and I assume all investments they will be inheriting. I can only assume that they are comfortable with these investments too. FSA is coming with equity to support their portfolio. As a result expanding the portfolio with FSA due to diversification into areas FSA have in their portfolio that AGO do not have.

      Yes combined AGO & FSA is bigger but size provides diversification and therefore reduced overall risk. Combine reduced risk with buying FSA at a discount should add to the benefit FSA provides AGO.

      I did some calculations and I thought FSA will add a few dollars to AGO's book value per share. I am probably missing some of benefits, so true benefits will probably start to show by 2009 year end or in 2010.

      Ultimately Dominic Frederico is really excited about this purchase, Dominic really likes to win, really like to make money and is really sharp, so if he likes the deal I'll take it on faith that its good for AGO and by implications shareholders.

      Please note, I appreciate your good points as they make us all think. Keep them coming and we are all better off. Thanks.

      GLTA.

    • Federico deserves accolades for not falling for the "worm on a hook" like Ambac and MBIA did. He is a winner for that.

      Concerns are starting to rise in my mind, that bigger may not be better in a public debt market that is clearly shrinking. This all has to do with the FSA acquisition at a point in time that their cash-flow may not be able to shoulder the combined losses of their investments. I would like to believe that credit markets are going to return to normal sooner rather than later, but the threat of a long recession is looking more likely. We have a ways to go yet to get to 1982 levels, but the fear here is the duration/length of the slowdown rather than just the debth of it.

      I guess I agree with Federico....let's make the gamble.....God doesn't love a coward. I guess I just hate to see AGO adding muscle when they have already demonstrated their current ability to do heavy lifting.

    • Don't know what numbers to show you to support my views of Dominic Frederico. I've seen him in action and he is impressive.

      AGO's rating, profits and continued viability when the rest in his sector have imploded should go a long to prove my point. Yes I would like to see higher profits but that will come in next few years as AGO can practically set their own price as they are really the only game in town. With FSA, this is even truer.

      Re my view on reserves, I'd say it is impossible to prove at this time. Only time will show me to have been right or wrong. It is sort of like what the US banks are facing. What's the value of an asset when there is no market for that asset. Sure you could say $0 and if you had to liquidate it today, that may be true but if you can hold it, it is likely a number higher than $0. Experience has shown me that lots of people are happy with the $0 valuation but in long term in similar situations, value has proven to be much higher. As previously stated, based on what I know of Dominic Frederico, I am willing to have sufficient faith in his work and that of his team's to buy the stock.

      You have to make your own judgment call for yourself.

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AGO
23.22-0.34(-1.44%)Sep 19 4:05 PMEDT

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