Assured Guaranty Ltd., parent of one of the two monoline insurers with stable triple-A ratings, yesterday reported substantial growth in new business production in the fourth quarter of 2007 — a more than fourfold increase to $477 million over the same period a year earlier — as the company capitalized on its ratings to attract new financial guaranty business and reinsurance contracts.
The company preempted its regularly scheduled, fourth-quarter earnings announcement, set for Feb. 15, to report the numbers yesterday.
“During the quarter, we achieved record new business production results in both our direct and reinsurance segments, reflective of continued strong market demand and broad market acceptance for our triple-A rated financial guaranty policies,” said Dominic Frederico, president and chief executive officer, in a release.
Assured Guaranty Corp., the insurer, has benefitted from the recent turmoil in the bond insurance industry.
With market participants skittish about using insurance from insurers with less than a stellar triple-A rating, Assured has picked up some of the slack.
For Assured, the present value of gross premiums written — a non-GAAP measure used to keep track of new business production — rose 311% to $477 million in the quarter compared to $116 million in the same period last year.
Assured’s financial guaranty reinsurance business increased 610% to $320.7 million, from $45.2 million, due in large part to a deal with Ambac Assurance Corp. in which Assured reinsured $29 billion of Ambac’s book.
Assured also reported that its financial guaranty business rose 121%, to $156.4 million, from $70.8 for the same period last year.
Public finance production in the United States, which accounted for less than 6% of Assured’s fourth-quarter production, grew 97% to a total of $25.6 million, the guarantor said. Structured finance production in the U.S. grew 184% to a total of $92.3 million.
In December, when the first trouble with the bond insurer ratings surfaced, Assured boasted 7.3% of market share. Through the first three weeks of this month, Assured has written 16.4% of the total market share in public finance.
The last financial guarantor to get a third triple-A rating when Moody’s Investors Service assigned its Aaa to the insurer last July, Assured has watched as first Ambac and then yesterday XL Capital Assurance have been downgraded by Fitch Ratings.
The downgrades have come in part from the insurers’ exposure to subprime residential mortgage-backed securities, asset classes to which Assured has some of the lowest exposure, according to Heather Hunt, equity analyst at Citi.
Assured also announced losses tied to the credit derivatives and home equity lines of credit in its portfolio. The credit derivatives portfolio saw $302.9 million in unrealized mark-to-market losses related to financial guarantees written on credit-default swaps, while the company posted a loss reserve of $18.1 million to reflect the falling values in the company’s exposure to home equity lines of credit.
Frederico said in the release that Assured continues to monitor its portfolio, “in light of the turbulent market environment and, more specifically, the deterioration of the U.S. residential housing market.”
About 60% of the those losses in the credit derivative portfolio came because of lower market values in residential and commercial mortgage backed securities. Assured included a breakdown of those credits, and what it calls “closely watched credits,” in yesterday’s release.
