NEW YORK--(BUSINESS WIRE)--Aug. 7, 2003--Niche bond insurers ACA
Financial Guaranty Corp. (ACA) and Radian Asset Assurance Inc. (Radian
Asset) posted very good underwriting results for their 2002 books of
business, according to a report published by Standard & Poor's Ratings
Services today.
ACA is an 'A' rated financial guarantor and Radian Asset is a 'AA'
rated financial guarantor. They are considered "niche" companies
because the 'AAA' rated financial guarantors are dominant in terms of
overall market share.
The 'AAA' bond insurance industry is sometimes characterized as a
"commodity-like" industry, where underwriting practices are often
quite similar and the primary companies sometimes have difficulty
differentiating themselves other than with premium rates. On the other
hand, the lower ratings (and implicit higher degree of risk) of the
niche companies afford a greater degree of underwriting flexibility.
Unlike the 'AAA' companies, the niche bond insurers will wrap some
non-investment grade debt; 'AAA' underwriting standards do not allow
for the insurance of non-investment grade transactions.
"Overall, as one would expect, the somewhat higher-risk business
strategies of the niche financial guarantors have, in 2002, yielded a
book of business with the potential for better incremental economic
results versus the 'AAA' rated companies," said credit analyst Robert
Green. "What remains to be seen is the sensitivity of the current
embedded profit to the incrementally greater possibility for future
losses or capital consumptive credit deterioration given the niche
companies' more liberal underwriting standards," Green added.
The full report, "Niche Bond Insurers Report Profitable 2002 Books
of Business," is available on RatingsDirect, Standard & Poor's
Web-based credit research and analysis system. Members of the media
may request a copy from Christopher Mortell at 212-438-2756 or
Christopher_mortell@sandp.com.