Moody's Investors Service upgraded Assured Guaranty and its subsidiaries due to better credit profiles following the settlement of the group's exposure to Puerto Rico's general obligation bonds and reduced projected volatility among its remaining Puerto Rico exposures.
Assured Guaranty Municipal Corp.’s insurance financial strength rating has been upgraded to A1 from A2 with a stable outlook.
Assured Guaranty Municipal Corp. and Assured Guaranty Corp. both resolved their exposure to the Puerto Rico general obligation, Public Buildings Authority, Convention Center District Authority and Puerto Rico Infrastructure Financing Authority bonds it insured when the commonwealth's
The restructuring settlement entitled Assured Guaranty to net recovery collateral of about $577 million of cash, about $605 million par amount of GO bonds, as well as contingent value instruments. These distributions related to current and previous claims paid on GO, PBA, CCDA and PRIFA bonds in accordance with the terms of the agreement applicable to each bond issue.
Assured and its subsidiaries’ current insured par exposure is $2.3 billion after reducing its exposure to Puerto Rico credits by about $1.3 billion. In the restructuring, Assured Guaranty received cash, new general obligation bonds and contingent value instruments in accordance with the terms of the
“The upgrade reflects that Moody’s has recognized our strong capital profile and the expanding demand for bond insurance," Tucker said. “We believe that a rating agency upgrade is helpful to both investors and issuers.”
The Moody’s rating is in addition to its AA stable ratings from S&P and AA+ stable ratings from Kroll.
Moody's also noted in its upgrade that demand for financial guaranty insurance is trending favorably in both the United States and Europe, indicating that the interests of Assured Guaranty's shareholders, policyholders, and creditors are still aligned.
Moody’s said the size of AGM’s insured portfolio has stabilized after a long period of amortization and is again growing slowly as new business replaces maturing and refunded bonds.
This expansion is projected to enhance the company's earnings profile in the future, especially without the burden of loss and loss adjustment charges experienced on defaulted Puerto Rico exposures in recent years, according to Moody's.
Dominic Frederico, president and CEO of Assured Guaranty, said in a statement the company is pleased Moody’s has upgraded its ratings and “recognized the expanding demand for bond insurance and Assured Guaranty Municipal’s strong capital profile and resilient business model, as well as that we are at a turning point in terms of our growth after a long period of reducing legacy exposures.”
He said throughout the pandemic, Assured Guaranty Municipal performed well and remained well-capitalized, and both issuers and fixed income investors continue to benefit from Assured Guaranty's value proposition.
“With the cloud of our Puerto Rico exposure largely lifted and the capital markets experiencing increased volatility and rising interest rates, AGM is poised to continue growing its insured portfolio to sustain and increase its store of unearned premiums, its future earnings power and its financial strength,” he said.
Assured Guaranty Municipal's A1 rating, according to Moody's, reflects the company's solid capital profile, conservative underwriting of U.S. municipal and international infrastructure financing risks, and market-leading position in the financial guaranty insurance industry.
The confidence-sensitive structure of the financial guaranty insurance industry, as well as a number of substantial single risk exposures relative to capital, moderate these strengths. Within the Assured Guaranty and its subsidiaries, Moody’s said Assured Guaranty Municipal is the flagship guarantee, generating the majority of new business. Assured Guaranty Municipal’s credit profile is resilient to a wide range of stress situations due to its capacity to produce large capital organically through premium and investment profits, the agency said.
Robert Slavin contributed to this story.
