Business Context and Reporting Period
Company: Assured Guaranty Ltd.
Filing Type: Form 8-K (Current Report)
Date of Report: August 25, 2011
Reporting Period: Immediate event reporting regarding regulatory criteria changes.
Key Financial Metrics
This filing does not contain specific financial statements, revenue, profit, cash flow, margin, debt, or liquidity figures. The report focuses exclusively on a regulatory event affecting credit ratings.
Material Changes
Event: Standard & Poor's (S&P) published updated "Bond Insurance Rating Methodology and Assumptions" effective immediately.
Impact: The new criteria supersede previous standards and may result in financial strength ratings for Assured Guaranty's investment-grade subsidiaries (Assured Guaranty Municipal Corp. and Assured Guaranty Corp.) being lowered by one or more categories.
Timeline: S&P expects rating changes to occur after reviewing third-quarter 2011 financial statements, but no later than November 30, 2011. Ratings could be placed on credit watch for downgrade at any time.
Outlook, Risks, and Management Commentary
- New Criteria: The final criteria include a "Largest Obligors Test" not present in the January 2011 proposal. This test appears to significantly reduce allowed single risk limits and limit financial strength rating levels.
- Management Action: Assured Guaranty is currently reviewing the revised criteria and analyzing the implications of the Largest Obligors Test.
- Next Steps: The company intends to communicate further after evaluating the criteria and discussing implications with S&P.
Investor Verification Checklist
- Verify the specific impact of the "Largest Obligors Test" on Assured Guaranty's single risk limits.
- Monitor for any credit watch placement or rating downgrades by S&P prior to November 30, 2011.
- Review the company's upcoming third-quarter 2011 financial statements for S&P's rating review.
- Check for subsequent communications from Assured Guaranty regarding their discussion with S&P.