If it helps any longs feel better, this dude has been bashing ABK, MBIA and AGO forever and is short on all three. I suppose this his way of seeking revenge for losing his ass off by going short on AGO.
That is one convoluted post. It is hard to see what is so confusing.
If Bond Buyer data is correct, the insured share of new issues was around 4.5% in November based on dollar volume, not number of issues. Assured's share for the third quarter was 9.6% Assured has pretty much been 100% of the insured market for most of the year.
The premium figure was just a guess based on the average premium as a percentage of the amount insured over the past three quarters (around 1.6%). Maybe penetration will pick up again now that Moody's has taken Assured off of rating watch.
That's the best damn response I've seen yet. It makes me want to take up the challenge of your research suggestion.
On another note, my gut feeling about the whole situation leads me to believe that not only is AGO "cherry picking" new business, but that they are protecting capital requirements deemed necessary by Moody’s in order to keep investment grade ratings (which increase with the writing of new business).
And yet on one more "another note", if I hear one more person say that Muni's are in risk of default, especially after congress just appropriated 50 billion to aid distressed states and municipalities, I'm going to flip. I can't think of anything safer than insuring Muni's, and AGO only insures the interest, not the principal! Along with a default rates of practically nil, even in the past year, what a poor argument!
You are using statistics in a very badly defined way, and it makes it hard to make any sense of your claims.
Let's make clear distinctions between these points:
1) What percent of all public issues in any time period had any insurance?
2) What was the gross par value insured over the same time period?
3) What was the premium received for that par value?
4) What percent of the issues that were insured were insured by AGO?
When you say 4.5% of all public issues were insured, and then try to conclude from that AGO's market share diminished by more than 50%, that is just an intellectual sleight of hand. 4.5% is at worst the percent of public issues that were insured (point 1) above). It's interesting to compare that type of information to other data points of type 1) - over time - but don't compare it to market share data, because that isn't directly comparable.
As another poster correctly says, it is equally important to look at the gross par value insured (point 2) above). If the percent of public issues that are insured goes down by 50%, but the gross par value goes down by 10%, that is a much less concerning decrease in business. You need to examine both things together.
A related point is to look at the profitability of the new business that is written. If the par value insured goes down but the premium received goes up - all credit risks being equal - the business is more profitable and margins are improving. I'm not saying that happened. I'm saying you have to look at information of type 3) for information of type 2) to be very informative.
Finally, market share is really a different point. No way, no how did AGO reduce its market share within the public issue market to 4.5%. You are confusing information of type 4) with type 1). Don't mix different things.
Maybe someone who has done the research can post the relevant numbers for the three types of information, or can refer us to an article that discusses that.
I remember a few years back when Buffet said that Berkshire's investment base had probably become too heavily tilted toward insurance businesses (Geico, etc.) I was a little surprised then, when he decided to dip Berkshire's toe into the muni insurance market, which was about the same time a lot of the trouble occurred for those such as Ambac. I also remember one announcer saying, at that time, "Buffet is so shrewd; he 'shived' these guys at just the right time to take market share from them."
A few months later, in an aside, I remember Buffet saying that municipalities could become shaky in this recession, and that muni insurance was probably quite a bit more risky now than it has been in the past. Then, I heard that Berkshire was, for the most part, passing on a lot of muni insurance possibilites. My perspective of that is that Buffet probably saw an opportunity, but wasn't all that interested in the business in the first place, and also not so interested in increasing Berkshire's insurance exposure in the second place. Then, he went and bought Burlington Northern, so it seems to me that his interest in the muni insurance business was never that high to begin with.
Assured would prefer to report robust revenue growth. It is probably no coincidence that new issuance volume was reported on a monthly basis when it looked better, but this has not been done for October and November.
If recent volumes continue, Assured will collect around $250M after frictional costs on new issues per year. Is this really worth the investment of capital and effort, and the credit risk?
There are plenty of viable competitors that have opted out of the municipal bond insurance market. Berkshire is one example. If municipal finances were not in such bad shape, there would be more competition.
I think it is fair to say that AGO gets more applications for insurance than they insure. "cherry-picking" is the metaphoical term I would use. Nevertheless, the most beneficial issues for the issuer and potentially for AGO are the riskier issues (ones with highest spreads).
So the implication of the 9.6% and 4.5% figures is that AGO in its sole discretion felt the other public issues were simply too hot to handle at any price? Or did the public issues simply not pursue any kind of insurance because the price charged made their financing uneconomic?
Not laughing at at "plummeting sales", laughing at you.
Last November was the best November yet.
Here's 08 and 07.
NEW YORK--(BUSINESS WIRE)--Dec. 3, 2008--Assured Guaranty Corp. ("Assured" or the "Company"), the principal direct financial guaranty subsidiary of Assured Guaranty Ltd. (NYSE:AGO), announced today that it provided guaranties on 80 transactions totaling $1.6 billion of par insured that priced during November 2008. These transactions represented approximately 6.5% of total new issue U.S. public finance volume for the month and an estimated 60% of insured activity. Assured's new business activity increased significantly over November 2007, during which Assured provided guaranties on 30 transactions totaling $839 million of par insured, or 2.8% of total new issue U.S. public finance volume and 6.9% of insured activity.
New sales are dropping off a cliff for a company you invest in, and you are laughing out loud?
Assured’s share of new issues in October was similar to November. Assured shareholders and analysts cheered the downgrade, but it looks like municipal bond investors might not be quite so ecstatic.