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Assured Guaranty set for reinsurance deals with $304mn fundraising

Financial guaranty and credit (re)insurer Assured Guaranty Ltd (AGL) has successfully raised net proceeds of $304mn on the sale of 12,483,960 shares in a public offering priced at $25.50 a share.

The funds will be pumped into its reinsurance subsidiary Assured Guaranty Re Ltd (AG Re) “to capitalise on large reinsurance portfolio opportunities that provide capital relief to unaffiliated monoline financial guaranty companies”.

They will also support growth in its direct operation, Assured Guaranty Corp, by providing reinsurance, said the company.

Banc of America Securities LLC and Merrill Lynch & Co were joint book-runners on the public offering.

The company, in which Bermudian giant ACE Ltd has a $445mn equity stake, valued at 30 September 2007, has already stepped in to take advantage of the turmoil in the monoline bond insurer sector triggered by the sub-prime crisis and subsequent credit crunch.

AG Re has agreed to reinsure a “diversified portfolio of financial guaranty contracts totalling approximately $29bn of net par outstanding” from an Ambac Financial Group subsidiary.

Ambac and MBIA Inc are the two largest bond insurers who, along with Bermudian XL affiliate Security Capital Assurance (SCA), have seen share prices slump, as rating agencies have warned of potential downgrades in the sector as a result of exposure to sub-prime and other mortgage backed securities and concerns over capitalisation.

AGL, however, may be financially strong enough to sell such reinsurance because it limited its CDO and other sub-prime exposure, a reason cited by Fitch on 12 December when it affirmed Assured’s AAA ratings.

“The affirmation of Assured Guaranty’s ratings is based on the company’s disciplined underwriting strategy exemplified by minimal exposure to higher-risk structured finance collateralised debt obligations, improving financial results and sufficient excess capital,” Fitch explained.

As previously reported (see Insider Week No 307), Standard & Poor’s, Fitch Ratings and Moody’s have placed a number of bond insurers’ ratings on review or negative outlook.

And last week, Fitch Ratings followed actions to put MBIA’s AAA financial strength ratings on rating watch negative by placing eight classes of collateralised debt obligations rated AAA and insured by MBIA on rating watch negative.

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