The amount of long-term debt issued with a bond insurance wrap in the first half of 2015 leapt more than 95% from the same period a year ago, outpacing the robust growth in overall volume to reach the highest level of insured penetration since 2009.
Insured volume climbed to $14.36 billion over 1,084 issues, representing 6.45% of the overall market, versus $7.3 billion over 630 issues for 5.1% penetration in the first half of 2014, according to Thomson Reuters data. The last time insured penetration was this high was when 8.64% of long-term issuance was wrapped with bond insurance in 2009.
The bond insurance industry started the year off right, more than doubling year-over-year in the first quarter to $5.99 billion from $2.77 billion and then almost doubling in the second quarter to $8.36 billion from $4.53 billion. The par amount wrapped in the second quarter of this year represents the most in a quarter since $8.8 billion was issued in the third quarter of 2009.
Assured Guaranty retained its position as the industry leader in market share, insured volume, and number of insured deals in the first half.
Assured finished the first quarter with a 61.4% market share with insured volume of $8.72 billion in 591 deals, including business from subsidiary Municipal Assurance Corp. Kroll Bond Rating Agency recently affirmed MAC's AA-plus rating with a stable outlook.
"Demand for our insurance increased significantly in the second quarter of 2015 to more than double that of second quarter 2014, and our large and seasoned underwriting team and well-established business infrastructure allowed us to provide excellent service for 315 small, medium and large new issues," said Robert Tucker, head of communications and investor relations at Assured.
"We solidified our leading market position by guaranteeing $5.3 billion of bonds sold in the primary market, representing almost two-thirds of insured par and 56% of insured transactions," Tucker said. "Of those transactions, 16 had underlying credit ratings of double-A, indicating the market's strong confidence in our financial strength."
Tucker also contended that Assured was the insurer of choice among smaller issuers, with AGM and MAC together wrapping more bank-qualified issues than any other guarantor in both the second quarter and first six months.
"With $8.7 billion insured in the first half, Assured's new-issue insured par sold is running 124% ahead of last year's pace. Looking at all of our first-half primary and secondary market activity, we insured over $9.1 billion of par on 592 primary transactions and 213 secondary policies," he said.
Build America Mutual saw its most successful quarter to date, with double-digit growth in the primary and secondary market activity.
BAM finished the first half with $5.3 billion of par value wrapped in 476 issues, good for a 37% market share.
"We have continued to see the value that insurance brings and it is particularly widespread among retail buyers," said Suzanne Finnegan, BAM's chief credit officer.
Finnegan said the general economic recovery has improved municipal credit quality and is starting to fuel a rebound in new-money issuance.
"The overall economic recovery has been somewhat uneven but it has continued at a pace that shows stabilization. We have seen property values come back, sales and income receipts coming back," she said. "As a result of that, we are now seeing municipal officials having more confidence and they are coming back to market."
Like other market participants, bond insurers also benefited from the strong growth in refunding activity. The par value of insured refundings more than doubled, to $7.7 billion in the first half.
Since the decision to refund bonds relies on achieving certain targets for reduced debt service, Finnegan noted that the savings from utilizing insurance can make the difference between a refunding that makes economic sense and one that doesn't.
National Public Finance Guarantee, the muni-only arm of MBIA Inc., wrapped $309 million over 11 transactions, accounting for 1.6% of the insured market.
"Our new business production ramp-up has been slower than we anticipated when we returned to the market last year, due in part to the low interest rate environment," said Bill Fallon, MBIA's president and chief operating officer.
"However, I'm pleased to report that we're closing business with more intermediaries, while maintaining our underwriting discipline. In the second quarter, we were at $272 million of par," Fallon said. "So we are starting to develop some momentum on the new business side. It will take many quarters, though, before our new business production replaces that which rolls off of our books."
National is also continuing to build its sales and marketing organization, bringing in Tom Weyl in January to head up the effort, followed by Andy Nakahata to lead western region marketing and Tom Metzold to lead capital market operations.
"I believe that we're fielding the best possible teams," Fallon said. "So we are positioned to take advantage of current opportunities as well as the higher volumes and penetrations that we think will accompany a higher interest rate environment."
