Money Team

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Assured
Guaranty Ltd
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Background
 Assured Guaranty is a property and casualty insurance company
that provides credit protection products to public finance,
infrastructure, and finance markets in the U.S and internationally. Its
insurance is financial guaranty insurance, guaranteeing investors
that principal and interest payment will be made. It insures debt
obligations such as U.S bonds and notes financing infrastructure
projects. It insures and reinsures these debt obligations that include
municipal utility, transportation, healthcare, higher education,
infrastructure, housing revenue, investor-owned utility, and other
public finance bonds. It is based in Hamilton, Bermuda and has a
market cap of about 4.5 billion dollars with 2.5 billion dollars in
assets. It trades on the NYSE for $38.86 per share.
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Assured Guaranty’s
Portfolio and
Stability

 S&P Rating: AA
 S&P Outlook: Stable
 “Strong competitive position
built on a well-diversified
underwriting strategy and
market leadership position”
 “Experienced management
with a proven track record
of success”
 “Low insurance industry
and country risk
assessment” (IICRA)
 S&P Global Ratings
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Valuation

 Assured Guarantee is a very undervalued insurance company

possibly due to fear of tropical storms devastating the
company’s property investments, but these fears have been
premature since hurricanes like Hurricane Nicole have caused
minimal damage to properties. Most of Assured Guarantee’s
investments are held off the island of Bermuda.

 P/TB: 0.63 (Industry Median: 1.5)

 P/E: 6.22 (Industry Median: 13.5)

 Projected FCF (Free Cash Flow) Value: $58

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Key Financial Statistics

Assured Guaranty has strong financial fundamentals to uphold its consistent revenue growth and
strong earnings that have beat analysts’ expectations for the past few quarters

AG’s return on equity ratio is important to look at to analyze the efficiency at making use of funds
and turning them into revenue, which is important for insurance companies

ROE: 11% (Industry Median: 6.21%)

AG is extremely profitable with a Net Profit Margin of 44% which is very high for an insurance
company possibly due to demand in areas such as Puerto Rico for financing infrastructure
rebuilding
AG has an equity/asset of 0.47, showing it has lots of cash to purchase future buybacks of stock
and expand its funding
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AG’s Investment in Chicago

AG is “in force with respect to various bonds, supported by a number of

distinct revenue streams” that include general obligation bonds, tax backed
bonds, water and wastewater bonds, airport charge bonds and also insures
bonds on public schools in Chicago
Chicago is a very economically stable city with a median household income
of $66,000, a new high in 2017, that faces very little threats to natural
disasters that could threaten AG’s investments in properties being built or
already built in the area
Its investments in O’Hare international airport is a very important revenue
stream for Assured Guaranty that will help it increase revenue in the future
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Statements
on Chicago
Investments
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AG’s Investment in Puerto Rico

Assured Guaranty has invested significantly in Puerto Rico’s recovery from Hurricane Irma
and provides public funding for the construction of hospitals, schools, roads and bridges with
bonds

These reconstruction projects have proven to be risky investments as the Puerto Rican
government’s Revised Fiscal Plans have been “fiscally irresponsible” according to Assured
Guaranty

The Commonwealth would rather litigate than cooperate with creditors such as Assured
Guaranty but regulation favors Assured Guaranty as the constitution says that general
obligation debt must be paid first, before any other expenses, which helps secure the
investments of AG in Puerto Rico as PROMESA helps companies gain access to capital
markets
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Conflict with
Puerto Rico’s
Government
Poses Risk