Assured Guaranty merges US operating companies

Bermuda-based Assured Guaranty will merge its two US subsidiaries to increase its available capital and a more efficient operating structure. 

The combination, which takes effect on August 1, will see Assured Guaranty Municipal merge into Assured Guaranty Inc. Assured Guaranty UK (AGUK) and Assured Guaranty Europe (AGE) will become direct subsidiaries of AG in the new structure. 

“We see this merger as beneficial for all our stakeholders,” said Dominic Frederico, president and CEO. “It will result in more efficient utilisation of the combined capital of the two companies, and it will simplify the administration and eliminate duplicative expenses of Assured Guaranty’s US financial guaranty operations."

By aggregating AGM and AG into a single insurance company, the merger enlarges the pool of capital available to support each insurance policy and results in a further diversification of the insured portfolio’s credit profile. The merger is also expected to strengthen Assured Guaranty’s ability to continue successfully executing its strategies to achieve its business objectives. 

Management said the merger was not expected to have any effect on the company's ratings. 

"In recent years, AGM has served as Assured Guaranty’s flagship financial guaranty insurance company, offering guarantees on US and non-US public and infrastructure finance obligations, while AG has provided risk and capital management solutions for insurance, pension and banking institutions, offered guarantees on structured financings, and served as the acquirer or reinsurer of insured portfolios of non-affiliated financial guaranty insurers in runoff," the company said. "Both companies’ insured portfolios contain public and infrastructure finance exposures and structured finance exposures."

“Assured Guaranty has been growing and broadening the financial guaranty products it provides and the markets it serves, extending a long tradition of innovation,” said Robert Bailenson, chief operating officer. “This transaction will eliminate an unnecessary distinction between the companies and allow us to even more effectively lead the bond insurance industry.”

In connection with the merger of AGM into AG, the MIA approved a $300 million stock redemption (sometimes described as a “special dividend”) by the combined company, which is expected to be effectuated shortly following the merger.

The merger will simplify the credit insurer's overall organisational structure and create capital, operational and regulatory efficiencies, ratings agency KBRA has said. 

"KBRA views the merger and the resultant simplification of the overall organizational structure as creating capital, operational, and regulatory efficiencies, as well as enhancing Assured Guaranty Ltd.'s overall global platform and scale as management continues to position its business to optimise its market position and future growth opportunities."

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