Assured Guaranty’s Impressive First Half Performance

Assured Guaranty (NYSE:AGO) has closed out a remarkable first half, with several core valuation metrics reaching record highs. The company’s shareholders’ equity, adjusted operating shareholders’ equity, and adjusted book value per share have all hit new records at quarter-end.

The growth in new business production was a significant highlight, with the company achieving $152 million in present value of new business production (PVP) for the first six months of 2026. This represents a substantial increase from the $103 million recorded in the same period last year.

This achievement is particularly noteworthy given the challenging environment, with the company navigating credit exposures that have not diminished. The growth in new business production has been driven by a range of segments, including US public finance, global structured finance, and annuity reinsurance.

Bull Case: A Business Firing on Multiple Fronts

One of the key drivers of Assured Guaranty’s success has been its performance in US public finance. The company has generated $106 million of PVP in the first half of 2026, surpassing the entire company’s production in the first half of 2025. This growth has been accompanied by a significant increase in insured new issue par, with the company insuring $9.6 billion of new issue par across 423 transactions.

Another notable area of growth has been global structured finance, where PVP more than doubled to $35 million from $15 million in the same period last year. This increase has been driven by fund finance deals, which typically mature within a few months to two years. This allows the company to recycle capital faster than in its longer-duration public finance book.

The company’s newer annuity reinsurance platform, Assured Life Re, launched in January, is also performing well. Management reports that the platform remains on track to hit its production and income milestones.

Assured Guaranty has also made significant strides in expanding its operations internationally, with the addition of deals in the UK, Spain, and France. This expansion is part of the company’s stated push into Europe and Asia Pacific.

In terms of financial performance, the company’s second-quarter adjusted operating income rose 22% year-over-year to $55 million, or $1.23 per share. This increase was driven by a fall in loss expense, which dropped to $4 million from $28 million in the same period last year.

The company has also continued to return cash to shareholders, repurchasing 554,000 shares for $45 million in the quarter and paying $17 million in dividends. The quarterly dividend per share now stands at $0.38.

Bear Case: The Risks Still on the Books

While Assured Guaranty’s performance has been impressive, the company still faces several challenges. The Brightline transaction has been a significant driver of economic loss development in the quarter, and management reports that the toll operator continues to face liquidity pressure even as its revenue grows.

The exposure has not yet impacted adjusted operating income, as expected losses have not exceeded the deferred premium revenue on the policy. However, the company is still working with Brightline and its other creditors to resolve the issue.

Thames Water has also remained a live issue, although management reports no material change to its loss expectations in the second quarter. The company is waiting on a new administration to help implement a solution creditors already negotiated with the UK regulator.

The alternative investment book has delivered a strong performance, with a roughly 12% inception-to-date internal rate of return against a 4.3% three-year average yield on the fixed maturity portfolio. However, the book took a step back after a $19 million mark-to-market loss tied to a CLO equity fund investment.

What the Market is Pricing In

Hedge fund ownership of Assured Guaranty has slipped to 33 funds from 37 in the prior quarter, a pullback that stands out against a quarter of record book value and rising income. Short interest sits at 6.44% of float, suggesting a real bear camp rather than one built purely on hedging.

As of August 17, the stock trades at a forward price-to-earnings ratio of 11.67, a multiple that does not obviously reflect double-digit earnings growth and record equity per share.