Assured Acquired FSA, Sees Strength In Combination

By: Dr. Jay H. Abrams
Chief Municipal Credit Analyst

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Assured Guaranty, one of the last three bond insurers to still carry a “AAA” rating, announced it has acquired rival Financial Security Assurance, also rated “AAA.” 

Assured is convinced that the combined company will be stronger than either company on its own. For that reason, Assured believes the rating agencies are likely to maintain their “AAA” ratings on both companies following the transaction’s close.

The cash and stock transaction is expected to close in the first quarter of 2009, subject to regulatory approval. Assured will acquire FSA from present owner Dexia, but will leave the insurer’s Financial Products Segment behind.In a conference call with investors, Dominic Frederico, president and chief executive officer of Assured, indicated that both insurers would remain intact as separate entities under a common parent. FSA will continue to insure municipal bond debt exclusively, while Assured may insure some structured finance transactions, in addition to its municipal finance book of business.

Assured sees the combination as making it the premier insurer of municipal bonds. After the purchase, Assured pointed to the strength it will have from a combined $13 billion in pro forma claims paying resources, and a pro forma GAAP equity base of $3.6 billion. Frederico also cited business synergies such as a greater geographical and product mix resulting from bringing together expertise in issuance sectors in which each company has strength. 

11/17/2008