Assured Guaranty Ltd (NYSE: AGO)

Sector: Financial Services Industry: Insurance - Specialty CIK: 0001273813
Market Cap 4.28 Bn
P/B 0.76
P/E 10.65
P/S 4.33
ROIC (Qtr) 5.97
Div Yield % 1.13
Rev 1y % (Qtr) -23.05
Total Debt (Qtr) 1.70 Bn
Debt/Equity (Qtr) 0.30
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About

Assured Guaranty Ltd. (AGO), a Bermuda-based holding company, is a significant player in the provision of credit protection products to the United States and non-U.S. public finance and structured finance markets. The company's primary business revolves around financial guaranty insurance, an unwavering and irrevocable guarantee that safeguards the holder of a debt instrument or other monetary obligation from non-payment of scheduled principal and interest payments when due. Assured Guaranty's operations span across various business activities....

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Investment thesis

Bull case

  • Strong tangible asset base of 12.10B provides 7.11x coverage of total debt 1.70B, indicating robust asset backing and low credit risk.
  • Strong free cash flow of 266M provides 12.67x coverage of acquisition spending 21M, indicating disciplined M&A strategy.
  • Cash reserves of 157M provide ample 7.48x coverage of acquisition spending 21M, enabling strategic growth opportunities.
  • Strong tangible asset base of 12.10B provides 576.24x coverage of acquisition spending 21M, enabling strategic growth.
  • Retained earnings of 5.84B represent substantial 1.03x of equity 5.66B, indicating strong internal capital generation.

Bear case

  • Operating cash flow of 266M barely covers its investment activities of 514M, with a coverage ratio of 0.52, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 266M provides thin coverage of dividend payments of (69M) with a -3.86 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 266M represents just -1.15x of debt issuance (231M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 5.84B provide limited buffer against comprehensive income items of (179M), which is -32.60x, indicating elevated exposure to market risks.
  • Operating cash flow of 266M is outpaced by equity issuance of (459M) (-0.58 ratio), indicating concerning reliance on equity markets for funding operations.

Reconciling Items Breakdown of Revenue (2024)

Segments Breakdown of Revenue (2024)

Peer comparison

Companies in the Insurance - Specialty
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 FNF Fidelity National Financial, Inc. 15.24 Bn 26.24 1.40 4.77 Bn
2 MTG Mgic Investment Corp 9.59 Bn 22.01 9.04 0.65 Bn
3 AXS Axis Capital Holdings Ltd 8.36 Bn 8.51 1.33 1.49 Bn
4 FAF First American Financial Corp 7.69 Bn 14.26 1.33 2.85 Bn
5 ACT Enact Holdings, Inc. 7.02 Bn 11.97 6.39 0.74 Bn
6 RDN Radian Group Inc 6.94 Bn 35.97 5.85 1.13 Bn
7 ESNT Essent Group Ltd. 6.29 Bn 8.95 4.98 0.49 Bn
8 RYAN Ryan Specialty Holdings, Inc. 5.03 Bn 79.38 1.65 3.53 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.47 0.73
EV to Cash from Ops. EV/CFO 21.35 15.20
EV to Debt EV to Debt 3.34 34.98
EV to EBIT EV/EBIT 9.60 17.99
EV to EBITDA EV/EBITDA 10.80 18.12
EV to Free Cash Flow [EV/FCF] EV/FCF 21.35 15.91
EV to Market Cap EV to Market Cap 1.33 1.54
EV to Revenue EV/Rev 5.74 5.95
Price to Book Value [P/B] P/B 0.76 2.05
Price to Earnings [P/E] P/E 10.65 17.16
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 5.83 2.58
Dividend Payout Ratio % Div Payout % (Qtr) 12.00 39.01
Dividend per Basic Share Div per Share (Qtr) 0.99 2.02
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 17.72 72.24
Interest Coverage Int. cover (Qtr) 6.58 24.85
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex Growth (1y) % 0.00 -23.49
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 6.80 -16.67
Dividend Growth (1y) % Div 1y % (Qtr) -18.18 5.97
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -43.40 22.96
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -24.96 10.55
EBIT Growth (1y) % EBIT 1y % (Qtr) -19.57 33.73
EBT Growth (1y) % EBT 1y % (Qtr) -22.17 48.63
EPS Growth (1y) % EPS 1y % (Qtr) -36.84 37.56
FCF Growth (1y) % FCF 1y % (Qtr) 30.39 -3.16
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -15.63 11.24
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.08 0.23
Cash Payout Ratio Cash Payout (Qtr) 0.26 0.51
Cash Ratio Cash Ratio 0.00 0.00
Current Ratio Current Ratio 0.00 0.06
Debt to Equity Ratio Debt/Equity (Qtr) 0.30 0.50
Interest Cover Ratio Int Coverage (Qtr) 6.58 24.85
Times Interest Earned Times Interest Earned (Qtr) 6.58 24.85
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 59.90 36.44
EBIT Margin % EBIT Margin % (Qtr) 59.86 34.51
EBT Margin % EBT Margin % (Qtr) 50.76 17.56
Gross Margin % Gross Margin % (Qtr) 93.30 74.53
Net Profit Margin % Net Margin % (Qtr) 40.60 10.78