Assured Guaranty Ltd. announced an agreement with Syncora Guarantee Inc., that will allow Assured Guaranty Corp., to reinsure SGI-insured financial guaranty insurance policies, generally on a 100% quota share basis.
The transaction announced on Monday morning also includes the commutation of a book of business previously ceded to SGI by Assured Guaranty Municipal Corp. The transactions reinsured and commuted will total approximately $14.5 billion in net par amount. As consideration for the transaction, at closing, SGI will pay $360 million and assign installment premiums estimated to total $55 million on a present value basis to Assured Guaranty. Included in those amounts are approximately $100 million of statutory loss reserves for RMBS transactions.
“We are pleased to announce this transaction, which we expect to be accretive to Assured Guaranty’s future earnings and financial strength," said Dominic Frederico, president and chief Executive officer of Assured. “By reinsuring and administering substantially Syncora’s entire insured portfolio, the transaction continues our successful strategy of acquiring legacy financial guarantors or their insured portfolios.”
The reinsured portfolio consists predominantly of public finance and infrastructure obligations that meet AGC’s new business underwriting criteria. The consideration for the transaction includes proceeds that Assured Guaranty will use to establish loss reserves for certain RMBS transactions. Furthermore, the transaction does not include any Puerto Rico exposure.
“The deal certainly helps current holders of Syncora paper to now have an insurer that is stable and not in run off,” said Howard Cure, director of municipal bond research at Evercore Wealth Management LLC. “Also, I am sure Assured was selective in purchasing the Syncora book and avoided potential credit problems beyond the obvious Puerto Rico issues. Depending on the price paid versus the book purchased and premiums associated with the book, Assured will be able to generate new revenues as the newly purchased Syncora book matures without jeopardizing Assured’s capital base.”
Goldman Sachs & Co. LLC served as financial advisor to Assured Guaranty, and Willkie Farr & Gallagher LLP was Assured Guaranty’s legal counsel.
Additionally, on behalf of SGI, AGC will provide certain administrative services on the reinsured portfolio, including surveillance, risk management, and claims processing. The transaction is subject to regulatory approval and other closing conditions and is expected to close by the end of the second quarter of 2018.