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Municipal Bond Policy Writing Business Update and Comprehensive Table of Credit Ratings

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Municipal Bond Policy Writing Business Update and Comprehensive Table of Credit Ratings Municipal Bond Policy Writing Business Update and Comprehensive Table of Credit Ratings Below you will find three things 1) an excerpt from the Municipal Bond Weekly that discusses an article from Bloomberg Brief concerning municipal bond insurers business, 2) a comprehensive table of municipal bond insurers with their ratings and 3) the Bloomberg Brief article itself; “ Insurers Build Most Market Share Since 2009 ”. You can find the most recent Moody’s reports on: 1) Assured Guaranty subsidiaries (AGM, AGC and MAC) by typing the ticker “ AGO ” (link ) (the parent of these subsidiaries) into BairdWeb, 2) National Public Guarantee Corp . by typing in the ticker “MBI ” (link ) (MBIA is the parent of NPFGC) into BairdWeb and 3) Radian by typing in the ticker “RDN ” (link ). For the other rated insurers, 4) There is no Moody’s research available on BairdWeb because either the entities are not- rated/withdrawn ratings (ACA, Ambac, CIFG, FGIC, XLCA) or are not Moody’s rated (BAM). Bond Insurers Building Books of Business – From a recent Bloomberg Brief article it was highlighted that municipal bond insurers are now building books of business. So far in 2014, insurers have insured 5.2% of the $248 billion of new issuance (the highest in over five years). In 2013 3.2% of issuance was insured. Before the financial crisis approximately 50% of issuance was insured. It has become obvious, as was expected, that insurance has provided value to investors; Detroit is a case in point and Puerto Rico may become so. In the case of certain Puerto Rico bonds at the nadir of prices during the summer the difference between insured values (approx. par) and uninsured values (approx. 40 cents on the dollar) provides evidence of this value. Assured Guaranty has been writing new policies for a while but just recently, in August, National Public Guarantee wrote its first new policy since 2008. As evidence of insurance value to the insurer, the policy written by National allowed Detroit Water and Sewer to reduce the offering yield by 25 bps. The only other municipal bond insurer writing new policies currently is Build America Mutual Assurance Corp. Provided below is a comprehensive table of municipal bond insurance credit ratings. Moody's S&P Insurer Rating Outlook Rating Outlook Berkshire Hathaway Assurance Corp. Aa1 Stable AA+ Stable (BHAC) Assured Guaranty Municipal (AGM) A2 Stable AA Stable Assured Guaranty Corp. (AGC) A3 Negative AA Stable Municipal Assurance Corp. (MAC) Not rated AA Stable Build America Municipal Assurance (BAM) Not rated AA Stable National Public Guarantee Corp. (NPGC) A3 Negative AA- Stable Radian Ba1 Negative B+ Stable ACA Not rated Not rated Ambac Withdrawn Not rated CIFG Withdrawn Not rated FGIC Withdrawn Not rated XLCA (Syncora) Withdrawn Not rated Bloomberg Brief Article (Friday 10/3/14) Insurers Build Most Market Share Since 2009 Municipal bond insurers are capturing the most market share since 2009 as Detroit’s bankruptcy and Puerto Rico’s struggles underscore the value of the coverage to investors in the $3.7 trillion market. About 5.2 percent of the $248 billion in munis issued this year through September carried insurance, up from 3.2 percent in 2013 and the highest in five years, data compiled by Bloomberg show. Before the financial crisis cost insurers their top ratings amid losses on guarantees of subprime-mortgage debt, more than half the market had the backing. The coverage has proven its worth in the past year as insured bonds from Detroit and Puerto Rico issuers retained their value while uninsured debt sank. In a sign of the revival, MBIA Inc. said yesterday that it hired muni analyst Tom Weyl from Barclays Plc. “Detroit and Puerto Rico have both shown the marketplace that there’s value in solid bond insurers,’’ said Rick Taormina , head of muni strategies in New York at J.P. Morgan Asset Management, which oversees $53 billion in local debt. “You could start to see a movement towards 10 to 15 percent of bonds insured over an economic cycle.’’ Weyl, formerly director of muni research at Barclays in New York, will start by yearend as managing director and head of new business development at National Public Finance Guarantee Corp., MBIA’s munibond insurance unit in Purchase, New York. He’s the latest muni analyst to bet on an insurance revival. John Hallacy last year joined Assured Guaranty Ltd. as managing director of public finance after stepping down as Bank of America Merrill Lynch’s head of muni research. Weyl didn’t respond to a voicemail left at his Barclays office number. Mark Lane, a spokesman at Barclays in New York, declined to comment. In August, National backed its first new bond offering since 2008, according to Bloomberg data. It guaranteed portions of a $1.8 billion deal from the Michigan Finance Authority on behalf of the Detroit Water and Sewerage Department. Assured Guaranty Municipal Corp. also backed some of the debt. National’s backing drove down yields on the Detroit bonds. A portion due in July 2017 with National insurance priced to yield 1.24 percent, while uninsured debt with the same maturity yielded 1.49 percent. Investors expected National to back new bonds after Standard & Poor’s raised its rating in March to AA-, fourth-highest and one level below units of Assured and Build America Mutual Assurance Co., the market’s primary insurers. “Events over the past year have helped to refocus the market on some of the important benefits of Assured Guaranty bond insurance,’’ Robert Tucker, head of communications and investor relations in New York, said by e-mail. “Those benefits include greater price stability and improved market liquidity, along with the certainty of timely payment of debt service and our ability to work with an issuer to resolve its difficulties.’’ In one example, Puerto Rico general obligations with Assured’s protection and due in July 2024 traded this week at 100 cents on the dollar, while debt with the same maturity that doesn’t have insurance traded Sept. 26 at 73 cents on the dollar. S&P said in March that insurers may double their market share to 8 percent of issuance this year. Municipal Market Advisors, a Concord, Massachusetts-based research firm, said in the same month that 5 percent was a probable target. As soon as next week, Stockton, California’s public-financing authority plans to issue $71 million of wastewater revenue debt with insurance from Build America Mutual, offering documents show. The city, which sought bankruptcy protection in 2012, has treated enterprise securities such as the water debt as unimpaired, meaning investors will get paid in full, bond documents show. S&P rates the underlying bonds A- while the Build America backing boosts the grade to AA. National will probably guarantee more new bond sales, and the competition among three companies instead of just two will further boost insured volume, said Alan Schankel, a managing director at Janney Montgomery Scott LLC. “When National attracts somebody like Tom Weyl, much like Assured brought in John Hallacy, that’s part of an overall effort to get out and tell their story,’’ he said. “For insurers, their challenge is marketing now. They have a good story: Stockton, Detroit and other distressed situations have seen investors benefit from having insurance.’’ .
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