Assured Guaranty Posts $35M Q309 Loss

Bermuda-based bond insurer Assured Guaranty (AGO) posted a net loss of $35m in Q309, compared to a net loss of $63.3m in Q308. The narrowed losses came primarily due to a surge in new revenue from Assured Guaranty’s acquisition of Financial Security Assurance Holdings (FSAH), a deal that closed on July 1. Q309 marks the first quarter that FSAH results were included in the company’s quarterly financial report. Operating income was $70.1m, up $44.1m from Q308, but was impacted by a $34.1m after-tax expense related to the FSAH acquisition. The company also experienced $142.2m in losses incurred on credit derivative contracts, compared to $30m in Q308. The losses were primarily in US residential mortgage-backed securitizations (RMBS), and specifically those collateralized by Alt-A and option adjustable-rate mortgages (ARMs). “Our operating earnings were positive, despite the losses on the U.S. residential mortgage-backed securities that we insured, demonstrating the enhanced earnings power of the combined companies,” said president and CEO Dominic Frederico. Assured Guaranty’s US public finance unit generated $154.9m in new business, up 44% from Q308. Net investment income was $84.7m, up from $43.4m in Q308, primarily due to the FSAH acquisition. Last week, Moody’s Investors Services downgraded Assured Guaranty’s bond insurance unit. But Assured Guaranty said it is taking steps to prevent further downgrades. “The FSAH acquisition has added significantly to our invested assets and future revenues,” Frederico said. “Based on Moody’s recently-announced ratings decision and consistent with our long-standing commitment to maintain the highest financial strength ratings possible, we intend to complete capital initiatives by year-end that include already negotiated external reinsurance, intercompany capital support and $300m of external capital.” Write to Austin Kilgore.

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