A new television ad shows a jittery young man getting down on one knee in the middle of a restaurant, holding a ring up to his girlfriend. She hesitates as the slogan comes onto the screen: "This would be a good time for an Assured Guaranty."
The spot is part of a marketing campaign by Assured Guaranty Corp., and its subsidiaries Assured Guaranty Municipal and Municipal Assurance Corp., as bond insurers compete to rebuild market share they lost in the financial crisis. In addition to its 30 second television commercials on CNBC and digital platforms, Assured runs 60 second drive-time radio spot ads "for investors who embrace possibilities but invest in certainties" which are broadcast nationally on SiriusXM.
"To support product demand, we run radio, television and digital video commercials designed to reach not only municipal professionals but also a broader audience of financial advisors and retail investors," said Billy O'Keefe, senior managing director of public finance marketing at Assured.
With strategic branding methods highlighting the value of their product, Assured and rivals MBIA and Build America Mutual have edged their way back into the municipal market, increasing penetration to 4.8% as of June 30 from 3.2% a year earlier. Their share of the market remains well behind the 50% insurers held before the financial crisis.
"Television and radio marketing is one part of the bond insurers' efforts to rebuild demand for its credit enhancement as we continue to work through the fall out of the financial crisis and the failure of most of the players in the market," analyst Mark Palmer, managing director of BTIG said.
"One of the biggest challenges for active insurers," he said, "is to make the case for the value proposition of their product and frankly to remind their perspective customers of the value associated with bond insurance. It's not just the primary market; it helps to promote the secondary market as well."
The insurers say the advertising is just the first step.
"Advertising itself is impression based," Nick Sourbis, managing director of MBIA's National Public Finance Guarantee said. "It's casting a wide net to get our name out there and to build brand awareness."
Michael Stanton, head of corporate strategy and communications at Build America Mutual agreed. "It's always easier to start the face to face conversation," he said, "when the person already has some background knowledge of your company."
The insurers place ads in traditional outlets such as financial newspapers, newsletters, pamphlets and brochures along with websites and other digital venues. The multifaceted approach “helps to target our messages to issuers, and to investors that are active in the muni market,” said Stanton, who formerly was publisher of The Bond Buyer.
"Until last summer, Assured stood alone writing new business," said Palmer. "Since then there was the launch of BAM and the revival of MBIA's National, so there is a more competitive environment today, particularly as market penetration has not risen dramatically from its crisis lows. It has inched up but given the presence of a new entrant and a retuning player you now have more of a scramble for the business. I've been hearing about vibrant competition in regards to pricing and terms on new deals."
Assured insures deals of various sizes in a variety of sectors, while BAM backs small and medium sized deals in limited sectors. National is also active across the board.
"Competition exists among bond insures with the uninsured market being our biggest competitor," said Kevin Brown, managing director at MBIA. "Many issuers can choose to do an unwrapped deal. A lot of our effort is making sure investors understand the benefits of bond insurance."
All of the bond insurers provide issuers with a reduction in borrowing cost with the guarantee that investors will receive principal and interest payments on time.
A key factor in marketing the benefits of bond insurance to issuers and their advisors is making sure they are aware that insurance is a viable option.
"It's critical for the bond insurers to remind investors of the value of the insurance," said Triet Nguyen, managing partner at Axios Advisors. "With cases like Detroit and Puerto Rico, they have to convince investors that they have enough capital to handle the credit blow-up. It's more difficult for Assured and MBIA than it is for the relative newcomer BAM, which doesn't have Puerto Rico debt."
As the insurers' brand awareness grows and lines of communication between issuers are drawn, having capable staff who know the ins and outs of the business is a vital part of keeping the communication open.
"Assured Guaranty has the largest underwriting and surveillance staff in the industry, with very experienced and respected professionals who know the business and have deep market relationships," O'Keefe said. "Our large municipal marketing department includes a municipal desk where a dedicated staff of former bankers, traders and sales professionals work daily with market participants on new offerings and on secondary market insurance requests."
Daily conversations as well as face-to-face interactions with clients help lay down the foundation for building mutually beneficial relationships with issuers.
"From a customer service standpoint the client's experience is key," MBIA's Sourbis said. "We'll be interacting with the same issuer over 10 to 30 years on a single credit, so it's important to build strong lasting relationships."
Aside from obtaining name recognition by sponsoring the coffee break or cocktail party at an industry event, or moderating or speaking on a panel at a conference, bond insurers are given a chance to solidify these relationships.
"You can have a more productive one-on-one conversation at a conference about how the product is relevant to that issuer's specific needs," Stanton said.
Sourbis agrees. "During one-on-one meetings we [can] address any concerns that issuers might have and broaden their knowledge on our product," he said. "So there's a complementary relationship between print or online advertising and reaching out directly to issuers and investors."
Though the bond insurers' marketing strategies may help, success may ultimately depend on the interest rate environment.
"The main driver of increased demand is higher interest rates," Palmer said. "The future of the bond insurance market is linked with the movement of interest rates. The wild card is the events in Puerto Rico. Issuers' and investors' greater appreciation for bond insurance could translate into higher demand.
