The last remaining active insurer of munis has been focusing on its long-term prospects.

“We’re trying to achieve what we believe is long-term value creation,” said Assured Guaranty Ltd. chief executive officer Dominic Frederico in a conference call Tuesday, following the release of his company’s third-quarter results.

“We continue to implement our strategies to create additional rating agency capital and reduce leverage to satisfy [Standard & Poor’s] new requirements,” Frederico said.

“In 2011, we agreed to terminate policies on more than $11 billion of net par for approximately $375 million of S&P rating agency capital,” he said. “In our rep buyback program, we purchased $55 million of face value par during the quarter, bringing our purchases through the third quarter to $1.2 billion of face par value at an average price of 45.8%. Further, through October, we had purchased an additional $170 million of securities. During the quarter, our U.S. structured finance book outstanding par also decreased by over $6 billion, bringing this sector’s outstanding par insured to less than $98 billion.”

“With rating stability in the AA category, we believe we should be in an excellent position with respect to our efforts to increase our market penetration in U.S. public finance, international and structured credit market in 2012,” Frederico said.

Assured Guaranty has already had success increasing this market penetration, it reported. From July to September 2011, its penetration of the U.S. public finance market increased to 15.3% from 11.0% in terms of the number of new-issue transactions and to 7.3% from 3.2% in terms of the amount of new-issue par value.

In recent months, rating agencies have been downgrading many munis, Frederico said. This process is bringing more of them into the single-A rating that is the company’s “sweet spot,” he said. “We believe that will broaden our opportunities.”

Yet operating income in the third quarter of this year, $38.3 million, was down dramatically compared to the third quarter of last year, $222.6 million. This “includes the effect of lower risk-free rates used to discount expected losses of approximately $120 million in pretax loss expense,” Assured Guarantee said.

However, net income of $4.13 per diluted share in the quarter was up sharply from $0.88 for these shares in the third quarter of 2010.

This was “primarily driven by net fair value gains on credit derivatives and financial guaranty variable interest entities totaling $749.4 million that are expected to reverse to zero as the assets and liabilities approach their maturities,” the company reported.

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