Assured Guaranty Ltd. Wednesday said it expects loss and loss-adjustment expenses for fourth-quarter 2008 of $90 million, related mostly to deterioration in the residential mortgage-backed securities market.

The losses represent a jump from $17.6 million of loss and loss-adjustment expenses in the fourth quarter of 2007, Assured said in a release of selected financial data. The bond insurer will release full earnings for the quarter on Feb. 25.

Assured's new business production by present value of gross written premiums fell 73% in the fourth quarter to $128.1 million. However, a large portion of the decline relates to a reinsurance transaction completed with Ambac Assurance Corp. in 2007 that inflated that year's fourth-quarter number.

Assured has benefited as other insurers got downgraded. It avoided backing the collateralized debt obligations of asset-backed securities that have led to billions of dollars in losses at its competitors.

Assured topped the market as an insurer in the fourth quarter, wrapping 286 issues with a par value of $4.3 billion, according to Thomson Reuters. In 2009, it has started off insuring 129 issues with a par value $2.9 billion.

Assured's direct structured finance production in the U.S. fell 46% by present value of gross premiums written, reflecting weak overall market conditions, the company said.

The preliminary numbers came in a bit worse than some equity analysts expected. Jim Shanahan at Wachovia Capital Markets LLC wrote that he now expects a loss of between $0.10 and $0.20 per share, which he said was "disappointing, but not horrible, especially considering the environment."

In addition, an analyst at Fox-Pitt Kelton Cochran Caronia Waller said Assured's public finance production appeared strong in January and that the company will be a in a good position to succeed once it completes its acquisition of the insurance business of Financial Security Holdings Ltd. later this year. Assured has said it hopes to finalize the deal by the end of the first quarter.

"With the FSA financing ahead of us, our In Line rating remains appropriate; however, with a continuing flow of business, the company is well positioned to perform well once the FSA transaction is complete," wrote analyst Gary Ransom.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.