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Assured Guaranty: No significant impact on market from competitor's withdrawal

The withdrawal of one of Assured Guaranty Ltd.'s two primary competitors in the bond insurance market does not drastically change the competitive landscape, according to the company's top executive.

National Public Finance Guarantee Corp., a subsidiary of MBIA Inc., said in July that it would no longer write new business following a credit downgrade from S&P Global Ratings. National was one of the three primary financial guaranty writers in the U.S., alongside Assured Guaranty and Build America Mutual Assurance Co.

But the absence of National will not affect the industry much because the company's share of the market was low relative to the amount of par insured or number of transactions conducted, Assured Guaranty Deputy Chairman, President and CEO Dominic Frederico said during Assured Guaranty's second-quarter earnings call.

"Their downgrade, albeit taking a competitor out ... [it was] not a significant competitor relative to the overall market position," Frederico said. Assured Guaranty and Build America were previously the dominant players in the space, and that will continue to be the case, he said.

S&P's affirmation of the ratings of Assured Guaranty and its subsidiaries makes it the only guarantor with diversified business and "stable" AA category ratings from two rating agencies, according to the CEO.

But Frederico also expressed frustration with his company's rating from Moody's, which reviewed Assured Guaranty in April but made no change to the company's rating or outlook. Absent an upgrade the company felt it deserved, Assured Guaranty asked Moody's to drop that rating, but the agency refused to do so.

"Moody's continues to impose an unfair and uninformative rating on [Assured Guaranty] that is based primarily on subjective, qualitative factors that have little or no reflection on a guarantor's financial strength or ability to pay claims," Frederico said.

The company's current rating does not reflect Assured Guaranty's "substantial leverage improvement" since Moody's first rated the company in 2013, the CEO said.

"How can Moody's not see a reason for changing the rating?" Frederico said. "It becomes rather obvious why we requested them to drop the rating."