The top bond insurer received a vote of confidence from Moody’s.
The rating agency affirmed the A2 and A3 insured financial strength of Assured Guaranty Municipal (AGM) and Assured Guaranty Corp. (AGC), respectively, with “stable” outlooks.
Moody’s lauded the Assured companies’ leadership position in the financial guaranty industry, strong capital profile and decreasing risk exposure due to refundings and the maturity of older insured debt.
As of year-end 2012, AGM had $299.5 billion net par outstanding, compared with $424.1 billion in 2008.
Well-positioned
In its analysis, Moody’s noted that Assured Guaranty, as the market leader in bond insurance, with 86% of total insurance written in 2012, is well-positioned to withstand its credit exposure to both Puerto Rico and Detroit.
It sees a default by Puerto Rico as remote and expects the strengthening of Assured’s capital position, together with its decrease in risk exposure, as contributing toward its improved ability to handle distressed issuers.
Less than 4% of AGM’s portfolio is of below investment-grade quality. In its assessment, Moody’s rates AGM’s capital adequacy as being equal to a hypothetical “Aa”-rated insurer. One offset to its adequate capital is the smaller percentage of bond insurance in the municipal market compared with the pre-financial crisis period.
The difference in ratings between AGM and AGC reflects Moody’s assessment of the strategic role of each subsidiary within the Assured group of companies. AGM is the primary subsidiary that writes new financial guaranty insurance for issuers of municipal bonds, while AGC has exposure to both municipal and structured-finance transactions.