Bond Insurers' Margin of Safety Remains Strong Under Burden of Increased Assumed Losses May 01

Standard & Poors, May 2001

Abstract
Notwithstanding higher health care capital charges and assumed severe losses on California utility exposure, the bond insurance industry's weighted-average margin of safety remained at 1.4 times (x) to 1.5x in 2000. With minimal additions of hard and soft capital, the stability of the margin of safety is that much more remarkable given net par exposure rose 12%. While conservative underwriting can lessen the strain on capital, improved economic results enabled the insurers to generate capital at a pace faster than the growth in theoretical depression losses in 2000. Following on the heels of 1999 when for the first time asset-backed and structured finance par written exceeded public finance par written for the industry, and net par exposure exceeded $1 trillion,...

Companies mentioned in this report are:
- Pacific Gas & Electric Co.
- Southern California Edison Co.
- Ambac Assurance Corp.
- Financial Guaranty Insurance Co.
- Assured Guaranty Municipal Corp.
- Radian Reinsurance Inc.
- MBIA Insurance Corp.
- Assured Guaranty Corp
- Radian Asset Assurance Inc.
- Axa Re Finance S.A.
- RAM Reinsurance Co Ltd.
- ACA Financial Guaranty Corp.

Standard and Poors RatingsXpress Credit Research provides in-depth coverage of international corporates, financial institutions, insurance companies, utilities, sovereigns and structured finance programs. RatingsXpress Credit Research lets users determine the credit rating of holdings and identify key factors underlying an issuer's creditworthiness, distinguishes the different risk exposures for new and existing deals, and provides an understanding of how their analysts interpret key regulatory, political and environmental events and their economic impact.

Research Type: Commentary
Criteria articles describe the thought process and methodology Standard & Poor's analysts use in determining ratings. These commentary pieces discuss both the quantitative (economic and financial) and qualitative (business analysis and caliber of management) aspects of the analysis, as well as legal issues.

- Pacific Gas & Electric Co.
- Southern California Edison Co.
- Ambac Assurance Corp.
- Financial Guaranty Insurance Co.
- Assured Guaranty Municipal Corp.
- Radian Reinsurance Inc.
- MBIA Insurance Corp.
- Assured Guaranty Corp
- Radian Asset Assurance Inc.
- Axa Re Finance S.A.
- RAM Reinsurance Co Ltd.
- ACA Financial Guaranty Corp.

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