By Ashutosh Pandey
Jan 18 Assured Guaranty said it plans to
launch a new municipal-only financial guaranty insurer this year
that will not carry a Moody's rating, a day after the rating
agency downgraded the bond insurer.
The company, however, did not disclose the size of the new
insurer or its planned investment.
"The typical minimum amount of capital that will be required
to have the critical mass to launch a municipal-only bond
insurer is somewhere in the $500 million range," BTIG analyst
Mark Palmer said.
Mortgage insurer Radian Group Inc agreed to sell
Radian Asset's Municipal and Infrastructure Assurance
Corporation to Assured Guaranty for $91 million last January.
The licensed shell, which came with $75 million in capital,
could be capitalized and provide the company with a
municipal-only bond insurer, Palmer said.
The municipal-bond insurance industry witnessed a sharp and
swift contraction in recent years. The amount of insured bonds
in the $3.7 trillion municipal market dropped in 2012, following
a six-year trend, according to Thomson Reuters data.
There were 1,163 issues, worth $13.3 billion, representing
3.6 percent of total issuance last year. In 2011, 1,229 issues
totaling $15.2 billion were insured, representing 5.5 percent of
the bonds sold that year.
Assured Guaranty Municipal Corp - the biggest player in the
industry - backed $11.5 billion of bonds, while Assured Guaranty
insured $13.7 million bonds in 2012.
Moody's downgraded the Insurance Financial Strength rating
of the company and its subsidiaries on Thursday.
"We strongly disagree with Moody's assignment of an A2
rating to Assured Guaranty Municipal," Chief Executive Dominic
Frederico said in a statement.
"Moody's ratings now appear to be determined by unsupported
qualitative factors and assumptions about future product demand,
future profitability and future stock price."
The bond insurer's board also authorized a $200 million
share repurchase program.
Assured Guaranty shares, which fell more than 4 percent in
early trading on the downgrade, closed up about 3 percent on the
New York Stock Exchange on Friday.