Isn't it time to conclude that at best, IF the financial guaranty business ever really retuns, there will be 2 remaining players -- Warren Buffet's Berkshire Hataway and AGO, both focused on muni business. The IF is simly that it makes more sense in my view to buy a diversified portfolio of munis (individual or most easy thru a fund -- such as Vanguard) that will provide higher yield and lower risk than a monoline wrapped deal? I can't see institutional investors ever going back and even for retail, it will take years. And given the scrutiny of the rating agencies, what are the odds they will ever rate these companies AA again -- what's to gain after the loss of credibility. Any other views? Neutral view of AGO, negative view of Ambac and strong sell on MBIA. Any insights that are independent appreciated. Thank you.
Simply, you have made a lot of incorrect statements.
Berkshire is out leaving just AGO. As well, AGO continues to write Structured Finance - they are not just muni's. Also, Assured is AAA S&P and Aa3 Moody's (no-one cares about Fitch). The one you are missing is MBIA's National Finance. If thier split survives the legal action you will see them compete again in this space w/ AGO. Macquarie has also been looking into starting a monoline. Don't know where that is.
Investors/retail are already working with Assured as ther 9% issued penetration shows. You have to realize there are something like 80,000 issuing muni entities in the country. In order for one-off and smaller muni's to get noticed enough by investors they have to carry high ratings. Something a monoline can proved with thier wrap. There is and will be a business model for Assured going forward unless the US government steps in and guaratees all state obigations which is not likely as of now.
Operating EPS of 0.91 versus expectations of 0.70 was driven by the decision to not take any further reserves for defaults in the legacy RMBS book. (Remember they took such a reserve in Q1, and operating income came in at $0.47/share, well below estimates.) Q2 operating income of $172 million was almost double Q1 operating income of $ 89.6 million. Unless the economy double-dips, we will likely not see any further reserves this year, meaning they should do $3/share operating income.
They also claim to be making progress in putting defective loans back to originators-this could be a huge positive and hopefully we will get more color on the call. (They are probably being helped by the fact that the FHA is seeking to do the same and recently subpoenaed the big originators.)
PVP (essentially the net present value of premiums for all policies written during the quarter) was $80M, up nicely from $79M in Q1. That’s pretty good, especially in light of the fact that June was the lightest month for muni origination in some time. Driving the results was an increase in AGO’s penetration (i.e. percentage of total muni deals they insured) from 6.3 % in Q1 to 10.8% in June. They mention the trend continued in July, but the PVP number is the one to watch in the coming quarters.