Moodys think they are the Fed so they are going to apply their own "stress test". However, since California announced a 22% revenue shortfall last week, Moodys wants to give AGO a second look. It actually makes sense that they would do this. Unfortunately, these "second looks" usually result in a downgrade. I think the stock is going to have real problems advancing much from here and it will probably drop again once the downgrade is issued (90% chance). Nevertheless, I agree with everyone here that PV is somewhere between $30-40/share, realizing this price may be very difficult. I also think Washington is against the insurers or anything that will help states and municipalities pile-on more debt or create debt instruments that might compete with U.S. Treasuries.
Tining is bad for Assured. The muni market is much stronger this versus last year. I expect the issuance volume to be up 30% in first quarter. If AGO maintained same market share, the premiums and net par insured would look quite strong. Now, the second quarter underwriting will be uncertain because the review issue.
Seems like the rating agencies are giving AGO the rating they want to andf then think about a criteria or rationale to explain it. Reverse in logic.
With strong cashflow and settlements, share buybacks and dividends will continue.