S&P Lowers Ratings for Assured Guaranty
Yesterday [Oct 25] Standard & Poor’s Ratings Services cut its credit and financial strength ratings on two subsidiaries of Bermuda-based Assured Guaranty Ltd., saying low demand for insurance among investors and bond issuers could hurt the company’s business.
The ratings service lowered its counterparty credit and financial strength ratings on Assured Guaranty Corp. and Assured Guaranty Municipal Corp. to “AA+” from “AAA.”
In response President and Chief Executive Officer of Assured Guaranty Ltd. made the following statement:
“We are surprised by this rating action, which comes on the heels of S&P’s affirmation of our AAA ratings in June 2010 and at a time when we are seeing positive developments in our market share and new business production in the U.S. municipal business and achieving significant success in our loss mitigation efforts. We believe our GAAP and statutory capital resources and portfolio meet AAA standards. These new ratings represent changes in S&P’s AAA criteria and market outlook rather than any material change in our credit profile or capital position. Further, in assigning these new ratings, S&P did not provide us with critical assumptions and key sensitivities used in their analysis of certain risks in our RMBS and TruPS portfolios or quantify their view of the extent of our AAA capital shortfall, all of which we believe is required under the Dodd-Frank Act.
“Through the most challenging economic environment in recent memory, we have earned operating income in every quarter since our initial public offering in 2004. Furthermore, we expect that our third quarter 2010 operating earnings per share will exceed the consensus estimate of $0.80 per share, as reported by Bloomberg and Thomson Reuters. Additionally, as of mid-October, mortgage loan originators that have breached representations and warranties have repurchased or agreed to repurchase a cumulative total of $412 million of loans, of which $111 million were in the third quarter alone. We continue to find a significant amount of defective loans and expect to continue to make substantial recoveries.
“We are committed to obtaining the highest ratings available and will continue to work with S&P to achieve that goal. Additionally, we are dedicated to putting our capital behind our credit assessments and providing cost savings to issuers and security to investors, and we believe we have the capital, people and ratings to add significant value in our markets.”
