Shares of Assured Guaranty Ltd. fell 5.4% on Friday as the bond insurance holding company told investors about strategies it could try to maintain its double-A ratings.
Assured's AA-plus rating from Standard & Poor's is currently at risk as the rating agency considers adopting new methodologies that could result in downgrading the insurer "by one or more rating categories … unless those insurers raise additional capital or reduce risk."
Assured could keep its rating by raising equity, reducing outstanding exposure, and accelerating settlements or collections.
Dominic Frederico, Assured's chief executive, told investors in a conference call that reducing exposure would be the company's first preference.
"We have reasonable opportunities in the markets to commute or amend certain deals," he said. He pointed specifically to the international infrastructure business, where the company wraps "strong financial deals" that require high capital charges. "So, we'd love to commute those," he said.
Moody's Investors Service rates the company two notches lower at Aa3.
Frederico reminded investors that Moody's last review of the company was in June 2009. Considering the improvement in Assured's portfolio over the last 18 months, Frederico said a likely review within the coming months would be positive.
However, earlier this week Moody's said President Obama's recent proposal to revive the Build America Bond program on a permanent basis with a 28% federal subsidy would "effectively shut out" a portion of the insurable market.
Assured has struggled to wrap BABs because the cost of bond insurance is excluded from the federal subsidy calculation, making insurance less economical.
Questioned on the company's thoughts that the BAB program would be revitalized, Frederico pointed out the bill doesn't have much support. Still, he said the company has adopted a prayer mode to keep things that way.
"We all said our prayers, lit our candles, [and] did the Stations of the Cross," he said.
On Thursday, the Bermuda-based insurer posted a $157.5 million loss for the fourth quarter of 2010, compared with a $220.8 million profit in the fourth quarter of 2009.