Assured Guaranty Ltd. last night reported a third-quarter net loss of $63.3 million, compared to a net loss of $115 million in the same quarter last year.
Assured posted an operating income of $26 million, or $0.28 per diluted share, which excludes after-tax losses on investments and after-tax unrealized losses on credit derivatives. Net operating income fell from $48.2 million in the third quarter of 2007, largely due to the $82.5 million pre-tax loss and loss adjustments it took related mostly to U.S. residential mortgage-backed securities exposures.
After-tax realized losses on investments totaled $17.1 million, and after-tax unrealized losses on credit derivatives equaled $72.2 million.
The third quarter marks the first reported earnings that will reflect the period since Moody's Investors Service in July put bond insurer subsidiary Assured Guaranty Corp.'s triple-A rating on review for downgrade.
"Market volatility, economic conditions and Moody's review for possible downgrade of Assured's ratings clearly presented us with many challenges this quarter," Dominic Frederico, president and chief executive officer of Assured Guaranty Ltd., said in a statement. "Our new business production as well as our operating income was reasonable in light of these challenges."
Assured Guaranty has avoided many of the structured finance exposures and losses that have plagued other bond insurers. Despite the increase in losses and loss reserves on RMBS exposures, Frederico noted the company lacks exposure to collateralized debt obligations of asset-backed securities and the guaranteed investment contracts business-two things that have caused problems at other financial institutions.
Assured's third quarter PVP - present value of financial guaranty and credit derivative gross written premiums - fell 16% from third quarter 2007 to $139.4 million. Its direct segment PVP fell 38% to $82.8 million, due to a reduction structured finance and international production.
Assured's third quarter public finance PVP jumped 557% to $67.7 million, with the company ramping up business due to the struggles at other bond insurers.
Business slowed in the wake of the Moody's action to review Assured Guaranty Corp.'s triple-A rating for downgrade, but it ranks second as an insurer this year, wrapping 776 deals with a par value of $23.1 billion through October, according to Thomson Reuters data. It ranked as top insurer for the month of October, wrapping 63 deals worth $845.8 million.