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Investments

S&P upgrade pushes Assured Guaranty to top of monoline hill

AA Stable rating greatly expands market

Good news for monoline Assured Guaranty (AGO) as Standard & Poor’s Ratings Services raised to AA Stable Outlook from AA- Stable Outlook the financial strength ratings for the company’s principle operating subsidiaries, giving it the highest ratings in the industry from national ratings firms.

The upgrade applies to Assured Guaranty Municipal Corp., Municipal Assurance Corp. and Assured Guaranty Corp., European financial guarantors Assured Guaranty (Europe) Ltd. and Assured Guaranty (UK) Ltd., and reinsurer Assured Guaranty Re Ltd..

With the upgrade, Assured Guaranty greatly expands its market, after years of downgrades and troubles in the wake of the housing crash for bond insurers.

“We are pleased that S&P has recognized the strength of our competitive position and market acceptance along with our extremely strong capital base and our pricing discipline,” Dominic Frederico, president and CEO of Assured Guaranty. "As the proven leader in bond insurance, we have a robust business model and a 30-year track record of service to U.S. and other select financial markets.”

Much of 2013 was spent gaining recoveries and settlements, which strengthened the bond insurer’s position. It won a slate of court rulings and settlement agreements against Bank of America (BAC), UBS (UBS), JPMorgan Chase (JPM) and others over representations and warranties.

In spring 2013, Flagstar Bank (FBC) agreed to pay Assured Guaranty well over $100 million to settle mortgage repurchase claims.

In May, UBS agreed to provide a cash payment of $358 million to Assured Guaranty in order to resolve all representation and warranties claims the bond insurer brought against the RMBS issuer.

Last fall, JPMorgan agreed to settle lawsuits with Assured accusing the mega bank’s EMC Mortgage and Bear Stearns units of making misrepresentations about mortgage-backed securities.

Despite this, Assured struggled through the second quarter of 2013 because of lower unrealized net fair value gains and declining income from insurance premiums, and residential mortgage-backed securities losses continued to haunt the insurer through 2013.

"With our close to $400 million in annual investment income and over $4 billion of unearned premium reserve, we have the resources to remain patient while looking for opportunities that match both our pricing and credit criteria,” Frederico said. "With the upgrades of AGM, MAC, AGE and AGC, no other active guarantor has a higher S&P rating than the AA Stable of our financial guaranty companies, and MAC’s AA+ Stable rating from Kroll Bond Rating Agency is the highest rating in our industry from any nationally recognized statistical rating organization.”

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