Bond insurer Assured Guaranty Ltd. (AGO) on Tuesday reported a loss for the fourth quarter that narrowed from last year, when results were impacted by loss from changes in the fair value of variable interest entities. Excluding items, operating income rose from last year and beat analysts' estimates. The company's shares gained more than 8 percent in after-hours trading.
Operating income reflects certain adjustments to net income, including the removal of the effects of changes in fair value that are not expected to result in economic loss. The increase in operating income was primarily due to lower loss expense.
Loss expense declined in U.S. residential mortgage-backed securities and other structured finance sectors. However, this was partly offset by an increase in the international public finance sector, where the company increased its expected loss estimate for its exposures to Greece sovereign debt obligation.
Present value of new business production or PVP was $87.5 million for the quarter, down from $105.1 million in the year-ago quarter.
PVP was impacted by a 33.8 percent decline in the size of the new-issue market for U.S. municipal bonds. PVP was also affected by the upward recalibration of municipal ratings in recent years, which reduced the company's insurable market, and the company's own ratings uncertainty in 2011.
The company's fourth-quarter net loss was $83.6 million or $0.46 per share, narrower than loss of $183.5 million or $1.00 per share in the year-ago quarter.
Operating income increased to $173.5 million or $0.95 per share from $152.7 million or $0.81 per share last year. On average, three analysts polled by Thomson Reuters expected earnings of $0.69 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues for the quarter were $79.0 million, compared to negative revenues of $122.8 million in the same period last year.
Net earned premiums for the quarter declined 21 percent to $225.0 million, and net unrealized losses widened to $276.1 million from $165.9 million in the year-ago period. However, net change in fair value of credit derivatives was a gain of $21.9 million, compared to loss of $408.6 million in the prior-year period.
For fiscal year 2011, Assured Guaranty's net income surged to $775.6 million or $4.18 per share from $493.7 million or $2.61 per share in the prior year.
However, operating income declined to $604.4 million or $3.26 per share from $664.1 million or $3.51 per share last year. Analysts expected the company to earn $2.99 per share fr the year.
Total revenue for the year were $1.81 billion, up from $1.32 billion in the previous year.
AGO closed Tuesday's regular trade at $17.14, down $0.17 or 0.98 percent on a volume of 2 million shares. In after-hours, the stock gained $1.46 or 8.52 percent to $18.60.
by RTT Staff Writer
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