Moody's cuts Assured Guaranty Corp one notch to Aa3

NEW YORK, Nov 13 (Reuters) - Moody's Investors Service late on Thursday downgraded its insurance financial strength rating on Assured Guaranty Corp by one notch and said it may cut the rating again, citing deterioration in the bond insurer's mortgage-related exposures. Still, Assured's shares rose 25 percent to a new 52-week high on Friday after J.P. Morgan said the long-awaited rating action removed a big overhang on the company. For details click on. Moody's cut Assured Guaranty's financial strength rating to Aa3, the fourth-highest investment grade, from Aa2. It cut Assured Guaranty Re to A1, the fifth-highest investment grade, from Aa3. Both companies are operating units of Assured Guaranty Ltd. Moody's affirmed Assured Guaranty Municipal Corp, formerly Financial Security Assurance, at Aa3 with a negative outlook, meaning the unit is at risk of a downgrade over the next 12 to 18 months. "We are pleased that Assured Guaranty Corp and Assured Guaranty Municipal have both maintained Moody's rating in the double-A rating category, a rating that connotes significant financial strength in today's economic environment," Assured Guaranty Ltd President Dominic Frederico said in a statement. The company is committed to maintaining double-A ratings, he said. Frederico also said Assured's combined $12.5 billion of claims-paying resources are more than sufficient to meet all projected obligations, even under Moody's revised stress loss scenario, which is based on an extremely pessimistic view of the performance of residential mortgage exposures. The Assured Group insures about $31.2 billion of U.S. residential mortgage-backed securities and faces substantial additional claims from some of those exposures, Moody's said. Losses are partly mitigated by the firm's ability to "put back" to solvent lenders some loans that are in breach of representations and warranties, potentially recovering substantial amounts on claims paid, Moody's said. "However, significant uncertainty remains as to the extent of (Assured's) ultimate success," Moody's said. Business opportunities in the structured finance market have also fallen off significantly, though Assured has a strong competitive position in the U.S.

municipal market, Moody's said. JP Morgan analyst Andrew Wessel said the one-notch downgrade was a key level for Assured to continue to write new muni bond insurance. Moody's also downgraded the senior debt rating of Assured Guaranty Holdings to A3, the seventh-highest investment grade, from A2. (Reporting by Dena Aubin in New York and Sweta Singh in Bangalore; Editing by James Dalgleish) Keywords: ASSURED RATING/MOODYS ([e-mail]; Tel: [phone]; Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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