Assured Guaranty post 1Q loss on increased credit losses

Operating earnings fell well short of analyst estimates despite a sharp increase in premium income, and the company's shares plunged 13 percent in electronic aftermarket trading.

The Bermuda-based firm, lauded in recent months for avoiding the risky mortgage-related business that crippled many of its competitors, succumbed to a sharp decline in the value of bonds it insures that are backed by home equity lines of credit.

Assured's loss reached $169.2 million, or $2.11 per share. A year earlier, the firm earned $39 million, or 57 cents per share.

Operating income dropped to $6.2 million, or 8 cents per share, from $46.1 million, or 67 cents, in the same period in 2007. Revenue rose 25 percent to $107.8 million.

Those results fell short of estimates on Wall Street, where analysts expected operating income of 65 cents per share and revenue of $112 million.

"We further downgraded some U.S. (residential mortgage backed securities) exposures, in particular those related to home equity lines of credit, which generated loss reserves that offset our operating income in the quarter," Chief Executive Dominic Frederico said in a statement.

The loss on credit derivatives reached $175.8 million, but was larger than the company had expected, according to William Blair analyst Mark Lane.

"They said worst-case would be $100 million in credit losses, so it's hard to get your arms around how much exposure is still out there," he said.

Frederico said the downgrades "reflect our uncertainty" about how bonds backed by home equity loans will perform.