Syncora Capital Assurance Inc., which holds most of the public finance portfolio of Syncora Guarantee Inc., has continued to lose money this year as it looks to recover from its Detroit debt exposure.
SCAI had a loss of $88 million in the first nine months of 2014, about the same as a year earlier, SGI reported in an investor webcast Thursday. SCAI holds $24.5 billion of the public finance par value, compared with $444 million held by SGI. Neither insurer is active in insuring new bonds.
Among positives highlighted by SGI chief financial officer Claude LeBlanc during the call was the planned settlement in Detroit's bankruptcy under which SCAI expects to receive $23.5 million in new general obligation bonds, $21.3 million in limited tax GO bonds secured by Detroit's parking revenues, $6.5 million in real estate purchase vouchers, and $5 million in cash.
When the Detroit bankruptcy started, SCAI held or insured $352 million of Detroit COPs.
SCAI also insured swaps connected with the COPs.
The bankruptcy settlement hasn't addressed these swaps, LeBlanc said. SCAI will deal with this with its counterparties, he said. SCAI has reserves set aside for addressing the COP swaps and dealing with them won't affect SCAI's surplus position in a significant way, he said after the webcast.
SCAI's balance sheet surplus as regards policyholders declined to $117 million from $186 million. In response SGI transferred $30 million to SCAI in mid-November. This added capital makes SGI's professionals and the New York Department of Financial Services "feel better," said chief executive officer Susan Comparato after the webcast.
SCAI's leverage ratio worsened to 54.2 on Sept. 30 from 52.3 on Dec. 31, 2013. The leverage ratio is net par outstanding divided by total claims paying resources. Assuming everything else is constant, higher ratio values indicate greater risk for the insurer.
Comparato said SGI's surplus position had improved to $972 million in Sept. 30 from negative $3.8 billion in March 31, 2009. SGI's liquidity jumped to $1 billion on Sept. 30 from $683 million at the end of 2009.
SGI's second Master Transaction Agreement, the New York Department of Financial Services, and SGI/SCAI's capital structure impose constraints on SGI and SCAI, Comparato said. Over the next year or so SGI and SCAI will attempt to reduce these constraints. If they are successful, the enterprises would pursue new opportunities.
After the call, LeBlanc said the two firms had a combined $489 million exposure to Puerto Rico. About three quarters of this is at SCIA. SCIA insures $192 million in Puerto Rico Electric Power Authority bonds. As of Sept. 30 SCIA had set aside $239 million in anticipation of losses from Detroit and Puerto Rico.
SCIA rates 5.5% ($1.85 billion) of its portfolio as below investment grade.
After the webcast, LeBlanc said the Detroit settlement was "very good" for SCIA and SGI. SCIA and SGI are monitoring other exposures, including Puerto Rico, and remediating them, he said.
