Answers to Questions About AGC's Acquisition of MBIA UK Insurance Limited
January 13, 2017
Assured Guaranty Corp. (AGC) acquired MBIA UK Insurance Limited (MBIA UK), the European operating subsidiary of MBIA Insurance Corporation, on January 10, 2017. MBIA UK has been renamed Assured Guaranty (London) Ltd. (AG London).
Assured Guaranty currently intends to maintain AG London as a subsidiary of AGC. It is Assured Guaranty's intention to combine AG London with its other affiliated European insurance companies, Assured Guaranty (Europe) Ltd., Assured Guaranty (UK) Ltd. and CIFG Europe S.A. Any such combination will be subject to regulatory and court approvals; as a result, Assured Guaranty cannot predict when, or if, such a combination will be completed.
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Q&A for Issuers and Trustees of Securities Guaranteed by MBIA UK
Do we need to do anything to make sure our MBIA UK (i.e., AG London) financial guarantees are still in force?
No. MBIA UK has the same obligations and financial resources it had before the acquisition. Only its ownership and name have changed.
We are required to make regular financial disclosures to MBIA UK. Where do we send them now?
Beginning January 1, 2017, issuers who are currently providing financial disclosures to MBIA UK should provide those disclosures to AG London. Send information to Michael Winch, Managing Director, email@example.com, +44 20 7562 7918 or Geoffrey Durno, Managing Director, firstname.lastname@example.org,
+1 212 339-3527.
Whom do I contact to make a claim or request a waiver or consent?
Q&A For Investors in Securities Guaranteed by MBIA UK
Are my bonds or notes still guaranteed?
Yes. MBIA UK’s financial guarantees remain in full force and effect and are still direct obligations of MBIA UK under its new name, AG London. Although its name and ownership are new, AG London has the same responsibility to meet obligations under MBIA UK's outstanding financial guarantees as it had before the acquisition. Assured Guaranty, as the owner of AG London, will provide AG London with its management resources and surveillance capabilities.
Are there any changes to my financial guarantee?
No. The financial guarantees have the same terms and conditions as when they were issued.
Is my credit protection as strong as it was before the acquisition?
Yes. AG London has the same obligations and financial resources as before the change in ownership, and it remains solely responsible for its financial guarantees. Additionally, beneficiaries of the financial guarantees have gained the benefit of Assured Guaranty’s surveillance of the guaranteed portfolio. As the leading monoline financial guarantor, Assured Guaranty is an active participant in European infrastructure finance and has the management resources and experience to address credit issues that may arise in the guaranteed portfolio.
The Assured Guaranty group has three decades of international experience, and as of September 30, 2016, in aggregate, the Assured Guaranty companies had $12 billion of claims-paying resources and annual investment income of approximately $400 million.
Does the rating of my guaranteed securities change?
On January 13, 2017, Moody's upgraded AG London to Baa2 with a stable outlook, citing its improved credit profile as part of the Assured Guaranty group. Moody's rates securities guaranteed by AG London at a level equal to the higher of Baa2 or Moody's published underlying rating (and for structured securities, Moody's published or unpublished underlying rating).
The S&P rating of securities guaranteed by AG London does not change. However, on January 12, 2017, S&P placed AG London on CreditWatch Positive, based on its "expectation that AG London will be folded into Assured's affiliated European insurance companies" and then carry the Assured Guaranty financial strength rating. See Ratings for current information.
Where can I obtain more information about AGC and Assured Guaranty?
This website, AssuredGuaranty.com, contains extensive information about Assured Guaranty and AGC. The Investor Information section at assuredguaranty.com/investor-information/by-company contains links to pages about both companies with access to Financial Supplements and GAAP and statutory financial statements. The website also provides general information about Assured Guaranty’s experience and capabilities.
I have specific questions about my securities. Where should I direct them?
Please email Assured Guaranty's Investor Relations department at email@example.com.
Q&A for Assured Guaranty Shareholders
How does the MBIA UK transaction affect the value of Assured Guaranty as a company?
The acquisition is expected to be accretive to Assured Guaranty’s operating earnings per share, operating shareholders’ equity and adjusted book value. The initial impact of the acquisition will be reflected in Assured Guaranty’s first quarter 2017 financial statements.
What did AGC pay for MBIA UK and what did it acquire for that amount?
As consideration for the outstanding shares of MBIA UK plus $23 million in cash, AGC exchanged all its holdings of notes issued in the Zohar II 2005-1 transaction. As of September 30, 2016, AGC’s Zohar II 2005-1 notes had a total outstanding principal of approximately $347 million. MBIA Insurance Corporation insures all of the notes issued in the Zohar II 2005-1 transaction.
As of September 30, 2016, using current currency exchange rates, MBIA UK had a guaranteed portfolio of approximately $13 billion (£10 billion) of net par and GAAP book value of approximately $470 million (£382 million). Because the guaranteed portfolio consists primarily of European infrastructure transactions, the acquisition increases the diversification of Assured Guaranty’s risk profile and signals its ongoing commitment to the European marketplace, where there is renewed interest in monoline financial guarantees for infrastructure financings.
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