Dominic Frederico, president and CEO of Assured Guaranty.
Dominic Frederico, president and CEO of Assured Guaranty.

Assured Guaranty, the biggest municipal bond insurer, reported a 30% decline in the third-quarter profit due to lower scheduled net earned premiums.

Operating income slid to $117 million, or $0.64 a share, from $166 million, or $0.85 a share, in the third quarter of 2012, Assured Guaranty said Tuesday. Operating income year-to-date rose to $475 million as of Sept. 30, from $351 million in the first nine months of 2012. The 35% increase year-to-date was bolstered by a record $260 million of operating income in the first quarter.

Net earned premiums decreased to $173 million in the third quarter 2013 from $239 million a year earlier, primarily due to scheduled amortization of the insurance portfolio, Assured said. Declines in accelerations and refundings in the quarter also contributed.

The only active post-financial crisis bond insurer before the launch of Build America Mutual in July 2012, Assured’s net income in the third quarter gained to $384 million from $142 million the previous year, the company said in a press release.

In an effort to avoid U.S. withholding taxes that burdened the movement of capital to Bermuda-based holding company Assured Guaranty Limited, Assured established United Kingdom tax residency. The move means Assured can apply U.K. tax rules, including the benefits afforded by U.K. tax treaties, chief executive officer Dominic Frederico said in a conference call Tuesday morning.

“This is clearly an important step in our strategic planning and recognizes the continuing development and evolution of Assured Guaranty in addressing its future opportunities,” Frederico said.

Present value of new business production in U.S. public finance was $24 million in the third quarter, compared with $30 million during the same period last year. Gross par of public U.S. public finance written was $2.07 billion, compared with $3.01 billion in 2012. Structured finance written rose to $273 million from $182 million last year.

“During the quarter, our U.S. public finance [present value of business production] was significantly higher than in either of the first two quarters of this year, partially due to an increase in market yields during the third quarter,” Frederico said.

Present value of production of U.S. public finance business was $15 million in the second quarter of 2013, compared with $47 million in the second quarter of 2012.

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