Moody's confirms Assured Guaranty Corp. at Aa3 and AG Re at A1
New York, December 18, 2009 -- Moody's Investors Service has confirmed the Aa3 insurance financial strength rating of Assured Guaranty Corp. (AGC) and the A1 insurance financial strength rating of Assured Guaranty Re (AG Re), the ratings outlook is negative. The rating agency also affirmed the Aa3 insurance financial strength rating (negative outlook) of Assured Guaranty Municipal Corp. (AG Muni -- formerly, Financial Security Assurance Inc.). AGC, AG Re, AG Muni (collectively, Assured) are all insurance operating subsidiaries of Assured Guaranty Ltd. These rating actions reflect the effect of Assured's capital restructuring. These actions conclude the ratings review of AGC and AG Re initiated on November 12, 2009. Today's rating actions have implications for the various transactions wrapped by AGC as discussed later in this press release.
Moody's review of AGC's and AG Re's IFS ratings initiated on November 12, 2009, focused on the successful execution of Assured's plans to bolster the weakened economic and regulatory capital position of AGC stemming from mortgage related losses. The review also entailed assessing the impact of these initiatives on the capital position of AG Re. Earlier this month Assured disclosed the intention to raise equity and implement inter-company capital support to enhance AGC's capital position. Since then, Assured has completed a $575 million common stock issuance and has indicated a portion of the proceeds have been downstreamed to AGC. Based on discussions with the company, Moody's understands that the remainder of Assured's planned capital support transactions have also been executed, although the specific details have not been publicly disclosed. Moody's believes that these transactions have replenished AGC's capital to a level consistent with the Aa3 rating, while still leaving its affiliates with capital structures appropriate for their own ratings. Accordingly, Moody's has confirmed the A1 IFS rating of AG Re and affirmed the Aa3 rating of AG Muni. The rating agency also confirmed the senior debt rating of Assured Guaranty US Holdings and the issuer ratings of Assured Guaranty Ltd at A3 (negative outlook), concluding reviews initiated on November 12, 2009.
The negative outlook for Assured's ratings considers the meaningful remaining uncertainty about the group's ultimate credit losses, including claims on mortgage exposures and Assured's success in putting back mortgage loans to lenders. The outlook also reflects the dislocation in the muni market and recent volatility of Assured's new business volumes despite limited alternative forms of credit enhancement and virtual absence of financial guaranty competition In Moody's view, it is unclear how demand for financial guaranty wraps and Assured's competitive position will evolve once the municipal finance market normalizes.
The last rating action was on November 12, 2009 when Moody's confirmed the Aa3 insurance financial strength ratings of AG Muni; and downgraded the insurance financial strength ratings of AGC and AG Re, as well as the debt ratings of the related holding companies, and continued the reviews of these ratings for possible downgrade.