Moody's To Review Ratings Of Assured Guaranty

NEW YORK (AP) — Credit ratings agency Moody's Investors Service on Thursday placed the key ratings of bond insurer Assured Guaranty Ltd. on review for a possible downgrade.

Moody's also placed the ratings of Financial Security Assurance Inc. on review for a potential downgrade. Assured Guaranty is expected to close its deal to acquire Financial Security Assurance by the end of the second quarter.

Assured Guaranty's critical insurance financial strength rating, currently at an investment-grade "Aa2," will be reviewed because expectations for losses in its insured portfolio have sharply increased, Moody's said in a statement. Losses are likely to climb due to mortgage-related risks, Moody's said.

"Moody's has taken a more negative view of Assured's mortgage-related exposures in light of worse-than-expected performance trends, and recognizing the continued susceptibility of the insured portfolio to the weak economic environment," the ratings agency said in a statement.

A potential increase in losses could negatively affect Assured Guaranty's ability to generate new business and thus impact its market share, Moody's said.

Bond insurers have struggled since the beginning of the credit crisis not because of their traditional business of insuring municipal bonds, but instead because of insurance covering riskier debt like mortgage-backed securities. As mortgages have increasingly defaulted over the past two years, it has widely been expected that bonds backed by the troubled loans would default as well, triggering huge payouts by insurers such as Assured Guaranty.