Assured Guaranty Ltd (AGO) Stock Analysis and Metrics

Sector: Financial Services Industry: Insurance - Specialty CIK: 0001273813

Market Cap 4.44 Bn

P/B 0.78

P/E 11.04

P/S 4.49

ROIC (Qtr) 5.97

Div Yield % 1.09

Rev 1y % (Qtr) -23.05

Total Debt (Qtr) 1.70 Bn

Debt/Equity (Qtr) 0.30

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....

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. Its main business focuses on providing financial guaranty insurance and reinsurance on debt obligations issued in both domestic and international public finance and infrastructure markets. This is carried out through its wholly-owned subsidiaries, such as Assured Guaranty Municipal Corp., Assured Guaranty Corp., Assured Guaranty UK Limited, and Assured Guaranty (Europe) SA.

The company's revenue generation is primarily sourced from three types of products: financial guaranty insurance, credit derivatives, and reinsurance. Financial guaranty insurance is the company's flagship product, providing protection to investors against default on scheduled payments due on debt obligations. These obligations range from general obligation bonds, tax-backed bonds, municipal utility bonds, transportation bonds, healthcare bonds, infrastructure bonds, higher education bonds, housing revenue bonds, and investor-owned utility bonds.

Assured Guaranty maintains a strong position within the industry, boasting robust credit ratings and extensive experience in the financial guaranty insurance market. Its competitive advantages are multifaceted, encompassing its ability to provide credit protection to investors in various public finance and structured finance transactions. Key competitors include MBIA Inc., Ambac Assurance Corporation, and National Public Finance Guarantee Corporation.

Assured Guaranty's customers hail from diverse backgrounds, including institutional investors, individual investors, and financial institutions. These customers benefit from the company's financial guaranty insurance, which offers increased certainty that scheduled payments will be received when due and enhances the marketability and liquidity of their investments.

The company's product and service brands include Assured Guaranty Municipal Corp., Assured Guaranty Corp., Assured Guaranty UK Limited, Assured Guaranty (Europe) SA, and Sound Point Capital Management, LP. These brands embody the company's commitment to delivering high-quality financial guaranty insurance and reinsurance solutions to its clients.

Price action

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.

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.	14.91 Bn	12.76	1.06	4.77 Bn
2	AXS	Axis Capital Holdings Ltd	8.73 Bn	8.89	1.39	1.49 Bn
3	MTG	Mgic Investment Corp	7.13 Bn	9.46	5.86	0.65 Bn
4	ESNT	Essent Group Ltd.	6.66 Bn	9.47	5.27	0.49 Bn
5	RYAN	Ryan Specialty Holdings, Inc.	6.64 Bn	96.02	2.24	3.58 Bn
6	FAF	First American Financial Corp	6.33 Bn	13.13	0.89	2.85 Bn
7	ACT	Enact Holdings, Inc.	6.06 Bn	9.19	4.95	0.74 Bn
8	RDN	Radian Group Inc	5.23 Bn	9.08	4.17	1.13 Bn

Industry comparisons

Current Valuation	Value	Ind Avg
EV to Assets EV to Assets	0.48	0.71
EV to Cash from Ops. EV/CFO	21.96	14.19
EV to Debt EV to Debt	3.43	23.24
EV to EBIT EV/EBIT	9.87	18.43
EV to EBITDA EV/EBITDA	11.10	16.13
EV to Free Cash Flow [EV/FCF] EV/FCF	21.96	16.11
EV to Market Cap EV to Market Cap	1.32	1.73
EV to Revenue EV/Rev	5.91	5.55
Price to Book Value [P/B] P/B	0.78	1.80
Price to Earnings [P/E] P/E	11.05	15.04

Dividend Metrics	Value	Ind Avg
Dividend Coverage Ratio Div Coverage (Qtr)	5.83	2.59
Dividend Payout Ratio % Div Payout % (Qtr)	12.00	38.44
Dividend per Basic Share Div per Share (Qtr)	0.99	2.02
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr)	17.72	72.23
Interest Coverage Int. cover (Qtr)	6.58	24.83

Growth Metrics	Value	Ind Avg
Capex Growth (1y) % Capex Growth (1y) %	0.00	-23.94
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr)	6.80	-13.37
Dividend Growth (1y) % Div 1y % (Qtr)	-18.18	6.74
EBIAT Growth (1y) % EBIAT 1y % (Qtr)	-43.40	22.43
EBITDA Growth (1y) % EBITDA 1y % (Qtr)	-24.96	10.45
EBIT Growth (1y) % EBIT 1y % (Qtr)	-19.57	35.06
EBT Growth (1y) % EBT 1y % (Qtr)	-22.17	50.45
EPS Growth (1y) % EPS 1y % (Qtr)	-36.84	37.38
FCF Growth (1y) % FCF 1y % (Qtr)	30.39	-3.02
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr)	-15.63	11.39

Liquidity Ratios	Value	Ind Avg
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	0.51
Interest Cover Ratio Int Coverage (Qtr)	6.58	24.83
Times Interest Earned Times Interest Earned (Qtr)	6.58	24.83

Profitability	Value	Ind Avg
EBITDA Margin % EBITDA Margin % (Qtr)	59.90	36.49
EBIT Margin % EBIT Margin % (Qtr)	59.86	34.57
EBT Margin % EBT Margin % (Qtr)	50.76	17.61
Gross Margin % Gross Margin % (Qtr)	93.30	74.55
Net Profit Margin % Net Margin % (Qtr)	40.60	10.79

Assured Guaranty Ltd (NYSE: AGO)

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