Statement on S&P and Moody’s Comments Regarding Assured Guaranty’s Puerto Rico and Detroit Exposures
February 12, 2014
S&P and Moody’s have now made clear that Assured Guaranty’s exposures to Puerto Rico and Detroit have not affected the ratings or stable outlooks of AGM or AGC.
S&P stated, both in published reports and during its February 4, 2014 webcast regarding their downgrade of Puerto Rico, that their rating actions “do not significantly affect the capital adequacy or financial strength ratings” of Assured Guaranty, that Assured Guaranty’s capital is “very strong” and that we maintain sufficient liquidity to pay possible Puerto Rico-related losses that may occur. S&P further said that a downgrade of Puerto Rico credits from BBB to BB would result in an additional incremental capital charge to Assured Guaranty of $65 million and that a downgrade from BBB to B would result in an additional incremental capital charge of $115 million. Additionally, S&P said that at year-end 2012, Assured Guaranty’s capital cushion was between $450 million and $500 million and that they project Assured Guaranty’s capital grew by 3% while our total insured par decreased by 10% during 2013.
In Moody’s February 10, 2014 report affirming the ratings and outlooks of AGM (A2/Stable) and AGC (A3/Stable), Moody’s pointed to Assured Guaranty’s position of industry leadership, strong overall capital profile and ongoing insured portfolio de-risking. Moody’s further said, “Assured’s ratings remain well positioned at current levels, reflecting both the insurer’s substantial current financial resources and its otherwise improving capital adequacy profile.” While Moody’s also affirmed AG Re’s rating, they changed its outlook to negative based on AG Re’s relative position within the group and other factors.
Last week, Moody’s acknowledged in its report on Puerto Rico, and we agree, that “the administration has taken strong and aggressive actions to control spending, reform the retirement systems, reduce debt issuance and promote economic development” in addition to revenue enhancing measures. We would add that the Commonwealth recently announced its intent to achieve a balanced budget for fiscal 2015 and that it has shown it recognizes the importance of finding solutions that both improve its financial stability and honor its obligations to creditors.
With our $12 billion of claims-paying resources across the group and our consistently positive operating results, including the approximately $400 million of income we generate each year from our investment portfolio alone, Assured Guaranty’s capital position is very strong.
Holders of bonds we insure, whether for Puerto Rico, Detroit or anywhere else, are fully protected by our unconditional guaranty that they will receive their principal and interest payments on time and in full in accordance with the terms of Assured Guaranty’s insurance policies. Even now, holders of Assured Guaranty-insured Puerto Rico and Detroit bonds are benefiting from their insured bonds’ relative price stability when compared with the same issuers’ uninsured obligations.