On Mar 5, 2014, shares of Assured Guaranty Ltd. (AGO) touched a new 52-week high of $26.18. The momentum was driven by solid fourth-quarter and full-year 2013 earnings results. The one-year return from the stock came in at 38.6%, way ahead of the S&P’s return of 23.4%.
The fourth-quarter earnings figure at Assured Guaranty clocked a positive surprise beat of 10.6% while the top line exceeded the Zacks Consensus Estimare by 16.3%. This takes forward the company’s robust earnings performance wherein it delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 22.4%. Year 2013 also marked the fourth consecutive year with an operating income that exceeded $0.5 billion at the company.
Assured Guaranty’s total expenses fell by nearly 27.9% year over year primarily owing to lower loss expense that plunged 47.2% in the quarter, largely attributable to decline in U.S. residential mortgage-backed securities (RMBS) losses. However, higher U.S. public finance losses were a partial offset.
Assured Guaranty also strengthened its balance sheet. While cash balance improved 33% at year 2013-end, long-term borrowings edged down 0.4%.
With respect to returning value to shareholders, in 2013, the company spent $264 million to repurchase 12.5 million shares besides having $400 million remaining under its authorization. In addition, the board of directors increased its quarterly dividend by 10%, marking three straight years of dividend hike and bringing the total increase to 144% since its Nov 2011 dividend payment.
Assured Guaranty presently carries a Zacks Rank #3 (Hold). Some better-ranked multi–line insurers worth considering include AEGON N.V. (AEG), Old Republic International Corp. (ORI) and FBL Financial Group Inc. (FFG). While AEGON and Old Republic International sport a Zacks Rank #1 (Strong Buy), FBL Financial carries a Zacks Rank #2 (Buy).
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