The negatives: Net premiums declined 15% year over year, but share earnings likely grown 3%. Lower premium and credit derivative revenues. Higher prepayment speeds and historically low reinvestment yields. These factors, plus sovereign debt situation in Europe, may weigh this year.
The positives: AGO expected to earn $2.40-2.70, the PE is 5.0, which is way below industry longterm average 10. The company finalized the settlement with Deutsche Bank. The agreement is relief to the balance sheet, as it provides a cash payment and certainty surrounding the loss-sharing arrangement on other claims. The enhanced capital adequacy ought to boost Assured’s image in the eyes of ratings agencies. AGO reassumed $14.7 billion business in par previously sold to Radian. Agreed to acquire insurer Municipal and Infrastructure Assurance Corporation. In addition, AGO reassumed $6.2 billion business from Tokio Marine. These actions ought to provide financial flexibility and helps future income stream, plus will mitigate the passing downturn in new business activity.
AGO has wide appreciation potential to 2015, the shares are undervalued.You need to be risk-tolerant. The dividend yield is nice.