Assured Guaranty Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of bond insurer Assured Guaranty (NYS: AGO) popped as much as 20% earlier in today's trading session on favorable news from ratings agency Standard & Poor's.

So what: In a case where less bad news is good news, Standard & Poor's yesterday lowered its credit rating on Assured Guaranty by two notches, to AA- from AA+. Standard & Poor's reasoning for downgrading Assured Guaranty's credit rating included a lack of adequate capital given new restrictions in place regarding the avoidance of large obligator concentrations. Now for that good news: Standard & Poor's kept the company's credit rating in the AA investment-grade range, which is seen as a major victory in a sector that has seen Ambac go belly up and MBIA (NYS: MBI) struggle significantly.

Now what: I wouldn't read too much into yesterday's S&P credit downgrade, as Ambac and MBIA were both AAA-rated at one point and fell to junk status. Assured Guaranty has a considerably stronger history of profitability than either of those two and, according to S&P, should hold a stable outlook as long as it continues to insure investment-grade municipal bonds. In short, this downgrade shouldn't change your investment thesis on Assured Guaranty despite the wild price vacillations.

Craving more input on Assured Guaranty? Add it to your watchlist to keep up on the latest news with the company.

At the time thisarticle was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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