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Assured Guaranty Ltd. Message Board

  • bi90261 bi90261 Oct 6, 2009 10:21 PM Flag

    barron's article

    Can someone post the barron's article?

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    • Here's an interesting one for you:

      Beefed-Up Assured Is
      Ready to Rule the Roost
      Assured Guaranty Ltd.’s business is
      poised to enjoy a two-pronged benefit:
      capturing fatter portions of fatter spreads,
      according to the credit research firm
      CreditSights.
      After buying Financial Security Assurance
      this month, Assured controls
      the only companies writing any measurable
      new business in the bond insurance
      industry.
      Assured and FSA together captured
      83% of the market share during the first
      half of 2009, according to Thomson Reuters,
      with nearly
      $21 billion in insured
      deals.
      With Berkshire
      Hathaway’s bond
      insurer the only
      other underwriter
      on the map and FSA
      planning to ramp up
      following the merger,
      Assured Guaranty
      should “dominate
      the market,” Credit-
      Sights wrote in a report yesterday.
      That dominance will translate into
      much better returns than the company
      generated in 2006 and 2007, according to
      the report.
      The reason is that the company will
      face less competitive pricing, CreditSights
      said.
      In an interview earlier this month, Assured
      chief executive officer Dominic
      Frederico explained the price of a bond
      insurance policy is buffeted by its value to
      the issuer. For example, if a single-A rated
      city trying to sell a bond would pay a percentage
      point less in interest on its debt if
      it opted for bond insurance, it would never
      pay more than a percentage of the debt for
      an insurance policy.
      Bond insurers charge a portion of that
      spread, Frederico said. Competition is a
      primary determinant of how plump the
      portion is.
      When seven viable insurers fought for
      business as recently as 2007, CreditSights
      said, insurers were charging 25% to 45%
      of the spread.
      That was smaller than usual. The most
      it has ever been is about 70%, according to
      CreditSights.
      “Now that Assured
      is the only
      insurer writing new
      business, it is able to
      take a larger piece
      of the spread differential,”
      Assured
      said.
      Not only will the
      insurer be able to
      capture more of the
      spread, the spreads
      are bigger.
      For most of 2007, a single-A rated 10-
      year municipal bond yielded less than 50
      basis points more than a triple-A rated 10-
      year, according to the Municipal Market
      Data yield curve. Today that spread is
      roughly 120 basis points.
      CreditSights does not foresee Berkshire
      Hathaway becoming a long-term competitor
      in bond insurance.
      Startup firms like Municipal Infrastructure
      and Assurance Corp., which is
      currently awaiting financial strength ratings
      from the rating agencies, may be able
      to compete, CreditSights said.

    • No responses from this board? It's quite boring sometimes. This company is bound for a great destiny, yet nobody is talking about it. If I had a subscription to Barron's, I'd post it for you, but I don't. I don't need Barron's to do my research. I'm an accountant (CPA) with an insurance background, and I'm telling you, AGO is going to explode.

 
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