Ratings: S&P: ‘AA’ (Stable Outlook)
Asset Guaranty (AG) is stronger than ever. With its financial strength rating of ‘AA’, reaffirmed by Standard & Poor’s this Spring, and its purchase earlier in the year by Radian Group, Inc., AG is well positioned to increase market share in the bond insured segment of the municipal market.
In its rating reaffirmation, S&P cited the uniqueness of AG’s business strategy. AG looks to insure those municipal issuers that fall in the low investment grade or high non-investment grade rating categories and have been overlooked for some reason by the ‘AAA’ rated insurers. These issuers have been concentrated in the small utility, health care, higher education, and special district sectors. This is a market differentiation strategy that sets AG apart from other insurers. The borrowers that Asset Guaranty insures may have bond issues too small for consideration by larger ‘AAA’ rated insurers, issue bonds infrequently, or possess other unique characteristics that cause them to fall outside other insurers’ purview. Known on Wall Street for its strong analytical team, AG carefully assesses every issue it insures. Site visits, management meetings, and intensive review of underwriting decisions has served to provide a strong portfolio of insured credits.
In addition to its careful approach to credit, AG has found its capital position strongly enhanced as a result of the company’s acquisition on February 28, 2001 by Radian Group, Inc. Radian is a diversified insurance company that is a leading domestic residential mortgage insurer, exhibits strong earnings, has a solid market position, and is well capitalized. Radian, which is injecting hard capital into Asset Guaranty, recently reported strong earnings for the third quarter 2001 with reported net income of $91.5 million compared with $64.1 million in the prior year period. Radian’s net premiums written equaled $35.7 million with premiums earned of $28.4 million. For the first nine months of fiscal 2001, municipal premiums written equaled $38 million. Through its new affiliation with another Radian subsidiary, Radian Insurance Co., AG is expected to expand its underwriting activity in asset backed securities.
Conclusion
Asset Guaranty’s capital adequacy and claims paying ability have been assessed as “sound” by S&P, especially in light of its acquisition by Radian. Radian’s deep pockets, earnings track record, and synergistic business strategy all contribute to a stronger business position and improved confidence among investors and issuers alike. Finally, Asset Guaranty had no exposure as a result of the September 11 tragedy at the World Trade Center.Today, Asset Guaranty is in stronger position to continue its practice of writing to a “zero loss” underwriting standard than ever before.