The Bedford Report Provides Analyst Research on Ambac Financial
Feb. 4, 2011 (Marketwire) --
NEW YORK, NY -- (Marketwire) -- 02/04/11 -- The Surety & Title Insurance sector has struggled early in 2011. Insurers hold as much as two-thirds of their assets in bonds, and as such are highly sensitive to credit market conditions. Analysts expect that weak investment portfolios and reduced income from the variable annuities, in addition to weak underwriting, will make for downside pressure on these companies in the coming months. The Bedford Report examines the outlook for companies in the Surety & Title Insurance Industry and provides research reports on Ambac Financial Group, Inc. (PINKSHEETS: ABKFQ) and Assured Guaranty Ltd. (NYSE: AGO). Access to the full company reports can be found at:
Maintaining a high credit rating is critical to the success of a bond insurer as these companies rely on a high credit rating to allow themselves to guarantee lower rated debt. After experiencing catastrophic losses following the 2007 subprime mortgage crisis, bond insurers began to lose their AAA ratings and were forced to stop selling new guarantees. S&P announced that there are nine new categories and that companies will likely have to raise additional capital and lower risk if they want to achieve high investment grades. This change comes in response to the bout of companies that lost AAA investment grades during the financial crisis. In fact, Ambac was forced into pursuing a restructuring of their business when the crisis took place. S&P also changed its criteria for mortgage-backed bonds and other securities after assigning top ratings to financial instruments that later collapsed in value during the credit crisis.
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In late January shares of Assured Guaranty -- the only active investment-grade rated municipal bond insurer -- fell heavily as the company admits it is "astonished" at S&P's proposal. Assured Guaranty's main insurance units are rated AA+ by S&P, but the company says it would have a capital shortfall of about $1.9 billion to support a AA credit rating under S&P's new bond insurance proposal. S&P analysts said they would take into account comments for Assured Guaranty on a proposed change, however.
In late 2010, Ambac requested that Standard and Poor's Ratings Services withdraw its ratings of the company.
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