Standard & Poor's has placed muni bond insurer Assured Guaranty Municipal Corp. on negative CreditWatch for significant concentration risk in its insured portfolio.
The rating agency also placed related companies Assured Guaranty Corp. and Assured Guaranty Re Ltd. on negative watch.
"Significant concentration risk in the insured portfolio of the consolidated Assured companies as measured by the largest-obligors test in our updated criteria could result in a lower rating," the agency said in a statement.
Assured Guaranty Municipal Corp. and Assured Guaranty Corp. are currently rated AA-plus and Assured Guaranty Re Ltd. is rated AA. All of the companies were given negative outlooks in August after S&P downgraded the U.S. government, due to their direct link to the credit.
David Veno, credit analyst at Standard & Poor's, said the exposures in the portfolios breach the largest-obligors test and are not consistent with the current ratings under the updated criteria. However, the rating agency added that Assured is working on creating capital and taking other steps to limit the concentration risks, and believe those actions would support ratings in the AA category.
"We are placing the ratings on CreditWatch due to uncertainty regarding the ultimate outcome of management's actions to address the concentrations."
S&P issued its final bond insurance criteria at the end of August after sending out a request for comment criteria in January. Since then, the agency has taken heat both from analysts, investors, and the muni bond insurers themselves.
In a statement, Assured Guaranty Ltd. president and chief executive Dominic Frederico said: "Despite our continued objections to the new criteria, we will continue to implement our strategies to create additional rating agency capital and reduce leverage to satisfy Standard & Poor's new requirements.
"These include our residential mortgage-backed securities representation and warranty putback program and negotiated comprehensive agreements; our capital-accretive reinsurance commutations; our agreements to terminate existing insurance contracts; and our wrapped bond purchase program," he said.
"We believe, and Standard & Poor's has confirmed in today's announcement, that these programs, supplemented by reinsurance or other risk-sharing vehicles, should satisfy the requirements of Standard & Poor's new criteria to retain our rating in the AA ratings category," he said. "We have no current plans to raise equity capital to satisfy the new S&P rating criteria."
The agency expects to come out with a final rating on the firm by Nov. 30.
