Assured Guaranty (AGO) Ratings Take a Hit, But Investors Focus on Positives; Stock Up 15%
AGO Hot Sheet
Rating Summary:2 Buy, 2 Hold, 0 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 19 | Down: 18 | New: 27
Late last night, around 7pm ET, Moody's issued a credit rating downgrade on Assured Guaranty (NYSE: AGO). Citing the company's MBS exposures, the agency moved its insurance financial strength rating of Assured Guaranty from Aa2 to Aa3, and its insurance financial strength rating of Assured Guaranty Re from Aa3 to A1.
Possibly saving a good amount of downside in the stock today, Assured Guaranty had put out a press release with a response to the Moody's ratings downgrades by 10pm ET last night. The company's President and CEO, Dominic Frederico, said:
"We are pleased that AGC and AGM have both maintained Moody's ratings in the double-A rating category, a rating that connotes significant financial strength in today's economic environment. In assigning these ratings, Moody's has put our insured residential mortgage exposures through a revised stress loss scenario, which is based on an extremely pessimistic view of the future performance of residential mortgage exposures. Even under Moody's stressful scenario, the Assured companies' combined $12.5 billion of claims-paying resources were more than sufficient to meet all projected obligations. We are committed to maintaining the highest possible ratings and plan to implement a capital plan to meet rating agency requirements to maintain double-A ratings. Moreover, these capital initiatives, which entail external reinsurance that has already been negotiated, intercompany capital support and approximately $300 million of additional capital, are to solely support rating agency capital requirements. In the absence of true capital regulation by federal or state authorities, we believe this is in the best interests of the Company."
Traders are cheering the development and capital raise today, bidding the stock up by more than 15%. Moreover, as a Wells Fargo analyst put it, "action by Moody's was expected by the market" -- and given today's market response -- it appears investors had already priced in a at least a two-notch downgrade, rather than the one-notch cut Moody's actually did last night.
The Wells Fargo analyst also noted the fact that "AGO was able to maintain ratings at the Aa level for both financial guaranty direct businesses is quite positive for the company's long-term franchise value..."
Elsewhere on the analyst front, Deutsche Bank pointed out that the "call on capital is occurring ahead of expectations...", but that it would be waiting "Tuesday's earnings release to learn more details around the capital plan, including timing and form of raise..."
Possibly saving a good amount of downside in the stock today, Assured Guaranty had put out a press release with a response to the Moody's ratings downgrades by 10pm ET last night. The company's President and CEO, Dominic Frederico, said:
"We are pleased that AGC and AGM have both maintained Moody's ratings in the double-A rating category, a rating that connotes significant financial strength in today's economic environment. In assigning these ratings, Moody's has put our insured residential mortgage exposures through a revised stress loss scenario, which is based on an extremely pessimistic view of the future performance of residential mortgage exposures. Even under Moody's stressful scenario, the Assured companies' combined $12.5 billion of claims-paying resources were more than sufficient to meet all projected obligations. We are committed to maintaining the highest possible ratings and plan to implement a capital plan to meet rating agency requirements to maintain double-A ratings. Moreover, these capital initiatives, which entail external reinsurance that has already been negotiated, intercompany capital support and approximately $300 million of additional capital, are to solely support rating agency capital requirements. In the absence of true capital regulation by federal or state authorities, we believe this is in the best interests of the Company."
Traders are cheering the development and capital raise today, bidding the stock up by more than 15%. Moreover, as a Wells Fargo analyst put it, "action by Moody's was expected by the market" -- and given today's market response -- it appears investors had already priced in a at least a two-notch downgrade, rather than the one-notch cut Moody's actually did last night.
The Wells Fargo analyst also noted the fact that "AGO was able to maintain ratings at the Aa level for both financial guaranty direct businesses is quite positive for the company's long-term franchise value..."
Elsewhere on the analyst front, Deutsche Bank pointed out that the "call on capital is occurring ahead of expectations...", but that it would be waiting "Tuesday's earnings release to learn more details around the capital plan, including timing and form of raise..."
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