Bond insurance stays steady

October 16, 2019 11:37 AM

The two active municipal bond insurers benefited from the issuance boom in the third quarter, as the insurance penetration rate in munis rose even as interest rates went back down.

Assured Guaranty and Build America Mutual insured a total of $5.81 billion in the third quarter alone, bringing the total par amount insured to $15.56 billion — more than the $13.28 billion insured during the same time last year.

Total industry insurance penetration currently sits at 5.82%, up from the 5.54% after the first nine months of 2018.

Assured sees increases

Assured Guaranty insured a total of $3.10 billion in 193 deals for a 53.4% market share in the third quarter.

That brings AGO's total in 2019 to $8.81 billion in 616 deals, good for a market share of 56.6%. The figures are according to Refinitiv and include Assured's subsidiary Municipal Assurance Corp.

Comparing the third quarter of 2019 to the previous year’s third quarter, Assured Guaranty’s primary market insured par was up 61%, and its transaction count rose 21%, when including $700 million for the CommonSpirit Health transaction.

In aggregate, the primary and secondary market par insured was approximately $4 billion, with a transaction/policy count of 246, up 60% and 13%, respectively, from third quarter 2018.

Assured Guaranty insured seven transactions totaling over $100 million in par. Some of the larger deals that Assured either insured or partially insured were:

$150 million in GO Bonds for the Folsom Cordova Unified School District, California;
$148 million in GO Bonds for Perris Union High School District, California;
$160 million in GO Bonds for the Oakland Unified School District, California;
$142 million in Green Bonds for the NYC Metropolitan Transportation Authority;
$280 million in Special Sales Tax Revenue Bonds for Jefferson Parish, Louisiana;
$131 million in Special Obligation Refunding Bonds for Alabama Incentives Financing Authority;
And $700 million in Corporate-CUSIP Taxable bonds for CommonSpirit Health.

Assured said it continued to add value with double AA credits this quarter, insuring 9 deals totaling $577 million in par.

"Among our seven largest transactions that each involved over $100 million of insured par, we insured $700 million in taxable bonds for CommonSpirit Health - the largest insured transaction in the market since 2010," Robert Tucker, Senior Managing Director, Investor Relations and Corporate Communications at Assured said.

Assured's subsidiary Assured Guaranty US Holdings Inc. officially closed on its acquisition of asset manager BlueMountain.

“Of note this quarter, we were able to demonstrate our ability to add value on larger transactions across different sectors."

BAM doing more business this year, than last

Build America Mutual accounted for $2.71 billion of insured volume spanning 236 transactions or 46.6% market share in third quarter, bringing its yearly total to $6.75 billion in 610 deals and 43.4% market share in 2019.

“2019 has been a strong year for the insurance industry and that trend continued in the third quarter," Seán W. McCarthy, BAM's CEO, said. "Even as interest rates fell to remarkable lows and investors faced pressure to maximize yield, we found that they continued to value the credit protection we offer, allowing growth in insured volume to outpace the overall market."

Some of the biggest deals BAM insured or partially insured in the third quarter were:

The entire Compton Unified School District, Los Angeles County, California, deal totaling $229.996 million;
The entire Armstrong School District, Armstrong and Indiana Counties, Pennsylvania, deal totaling $84.445 million;
The entire Unified School District No. 469, Leavenworth County, Lansing, Kansas, deal totaling $75.280 million;
The entire Greater Ouachita Water Company deal, totaling $72.300 million, Louisiana;
The entire Washoe County School District, Nevada, deal totaling $69.020 million
The entire Canon-McMillan School District, Washington County, Pennsylvania., deal totaling $65.455 million;
And $61.585 million of the Irvine Unified School District Community Facilities District, Calif. No. 09-01 deal that totaled $86.845 million.

"BAM’s new-issue activity in the quarter was up more than 40% year over year and totaled more than $2.7 billion par insured for a broad range of essential-purpose issuers across 28 states, including both traditional tax-exempt sales and taxable issuance from issuers who took advantage of the interest rate environment to execute advance refundings, McCarthy said.

"Demand for BAM’s secondary insurance remained strong, driven by institutional investors utilizing insurance as part of their portfolio management strategy — both when buying bonds from larger transactions that came to market without insurance and to diversify their credit exposure by adding BAM’s guaranty to existing holdings.”