Monday, 11 February 2008 00:00

Reinsurer recap

What do the RMBS reinsurers look like? Here is snapshot of the statistics to look at before AGO's earnings are announced.

Break-dwon of Net premium earned -AGO

Public finance

5.2

9.3%

Structured finance

26.5

47.2%

Financial guaranty direct

31.7

56.4%

Public finance

15.4

27.4%

Structured finance

6.2

11.0%

Financial guaranty reinsurance

21.6

38.4%

Mortgage guaranty

2.9

5.2%

Net Premiums Earned

56.2

100.0%

Assured Guaranty XL Capital Security Capital Assurance Radian Group MGIC Investment The PMI RAM Holdings Old Republic International CRM Ambac Financial MBIA Triad Guaranty
AGO XL SCA RDN MTG PMI RAMR ORI CRMH ABK MBI TGIC
Share price 21.6 42.7 2.0 8.3 15.2 8.9 1.6 15.2 6.6 11.0 14.6 6.5
Shares outstanding (mn) 79.5 178.4 65.3 80.4 81.8 50.5 27.2 230.4 15.9 101.6 207.7 14.9
52 Week -High 32.0 85.7 34.6 64.1 67.4 50.5 17.3 23.2 9.5 96.1 72.4 52.6
52 Week -Low 13.3 36.3 1.5 5.4 10.4 5.4 0.8 12.2 5.0 4.5 6.8 5.3
Price as % of 52-week high 67% 50% 6% 13% 23% 18% 9% 65% 69% 11% 20% 12%
1 month return -8% -15% -12% -5% -15% 0% -2% 3% -12% -43% 3% -13%
3 month return 9% -34% -69% -34% -28% -40% -73% 1% -18% -58% -58% -24%
12 month return -20% -41% -94% -87% -77% -81% -90% -34% -20% -88% -79% -87%
Market Capitalization (mn) 1715 7612 131 670 1247 450 43 3493 105 1116 3032 97

Break-down of Net premium earned -XL Capital Insurance Reinsurance Life Operations Total % break-up
Casualty — professional lines 354,622 66,140 420,762 24.3%
Casualty — other lines 186,190 139,224 325,414 18.8%
Property catastrophe 17,075 70,396 87,471 5.1%
Other property 165,725 205,967 371,692 21.5%
Marine, energy, aviation and satellite 141,262 35,110 176,372 10.2%
Other specialty lines 125,182 125,182 7.2%
Other 5,037 51,476 56,513 3.3%
Structured Indemnity 17,052 2,885 19,937 1.2%
Total P&C Operations 1,012,145 571,198 0 1,583,343 91.5%
Life operations:
Other Life 98,892 98,892 5.7%
Annuity 48,347 48,347 2.8%
Total Life Operations 0 0 147,239 147,239 8.5%
Total 1,012,145 571,198 147,239 1,730,582 100.0%

AGO

XL

3Q 2007
Gross Premiums Written $89 $1,934
$74 $2,248
21.3% -13.9%
Net Premiums Written $80 $1,385
$73 $1,476
9.9% -6.1%
Net Premiums Earned $56 $1,731
$52 $1,855
8.3% -6.7%
Total investments (mn) $2,614 $42,751
Cash and cash equivalents $25 $3,185
Total Assets $3,138 $60,888
Total Debt $347 $3,778
Net Debt $322 $593
Shareholders' equity $1,604 $11,432
RMBS exposure (in millions as of September 30, 2007)
By type
Prime $14,328
Sub-prime $7,201
Total Net Par Outstanding $21,529
Prime 67%
Sub-prime 33%
Total Net Par Outstanding 100%
By rating
AAA/Aaa $15,679
AA/Aa $719
A/A $1,410
BBB/Baa $3,629
Below investment grade $92
Total Net Par Outstanding $21,529
(percentage break-down)
AAA/Aaa 73%
AA/Aa 3%
A/A 7%
BBB/Baa 17%
Below investment grade 0%
Total Net Par Outstanding 100%
By year
2000 and prior $227
2001 $248
2002 $265
2003 $554
2004 $902
2005 $3,241
2006 $8,508
2007 year to date $7,584
$21,529
(percentage break-down)
2000 and prior 1%
2001 1%
2002 1%
2003 3%
2004 4%
2005 15%
2006 40%
2007 year to date 35%
100%
Sub prime $7,200
-International Sub-prime $40
-US Sub-prime $7,160
-Financial Guaranty direct (a) $6,880
-Financial Guaranty re-insurance (b) $280
Financial Guaranty Direct (a) $6,881
AAA/Aaa $6,614
AA/Aa $0
A/A $6
BBB/Baa $209
Below investment grade $52
Financial Guaranty Re-insurance (b) $280
AAA/Aaa $194
AA/Aa $15
A/A $11
BBB/Baa $21
Below investment grade $39
Financial Guaranty Direct (a) 96%
AAA/Aaa 92%
AA/Aa 0%
A/A 0%
BBB/Baa 3%
Below investment grade 1%
Financial Guaranty Re-insurance (b) 4%
AAA/Aaa 3%
AA/Aa 0%
A/A 0%
BBB/Baa 0%
Below investment grade 1%
By rating
AAA/Aaa $701
AA/Aa $347
A/A $941
BBB/Baa $4,299
Below investment grade $281
Total Net Par Outstanding $6,569
(percentage break-down)
AAA/Aaa 11%
AA/Aa 5%
A/A 14%
BBB/Baa 65%
Below investment grade 4%
Total Net Par Outstanding 100%
Financial guaranty portfolio
International Finance $3,357
Public Finance $714
Structured Finance $2,499
Total $6,569
(percentage break-down)
International Finance 51%
Public Finance 11%
Structured Finance 38%
Total 100%
Company’s fixed income portfolio by credit rating
AAA 53%
AA 17%
A 17%
BBB 11%
BB & below 2%
Maturity profile of the fixed income securities
Less than 1 year remaining $800
At least 1 year but less than 5 years remaining $3,452
At least 5 years but less than 10 years remaining $3,865
At least 10 years but less than 20 years remaining $1,520
At least 20 years or more remaining $3,613
Mortgage and asset-backed securities $10,970
Total $24,219
(percentage break-down)
Less than 1 year remaining 3%
At least 1 year but less than 5 years remaining 14%
At least 5 years but less than 10 years remaining 16%
At least 10 years but less than 20 years remaining 6%
At least 20 years or more remaining 15%
Mortgage and asset-backed securities 45%
Total 100%
Total exposure to sub-prime and related collateral in fixed income portfolio
Sub-prime first lien mortgages $1,193
Alt-A mortgages $992
Second lien mortgages (including sub-prime second lien mortgages) $128
ABS CDOs with sub-prime collateral $115
Total $2,428
(percentage break-down)
Sub-prime first lien mortgages 49%
Alt-A mortgages 41%
Second lien mortgages (including sub-prime second lien mortgages) 5%
ABS CDOs with sub-prime collateral 5%
Total 100%
Last modified on Monday, 11 February 2008 00:00

2 comments

  • Comment Link Reggie Middleton Tuesday, 12 February 2008 01:55 posted by Reggie Middleton

    Let's wait and see what the price movement is in AGO by the end of the day. If it is not signigicantly adverse, then I will plow through their books and numbers with a fine tooth comb. If it moves to sharply down, it will not be worth it for me since thier share price is already in the low $20 range.

    Report
  • Comment Link Jon Pearlstone Monday, 11 February 2008 22:41 posted by Jon Pearlstone

    Reggie

    At first glimpse of AGO's loss they reported today, I came across the following issues that raised questions.

    1) The mark-to-market loss on CDS in fourth quarter 2007 was due to the decline in market values of the securities referenced by the CDS and was not due to rating agency downgrades of the securities. Approximately 60% of this unrealized mark-to-market loss resulted from lower market values in the U.S. residential mortgage-backed (RMBS) and commercial mortgage-backed securities (CMBS) markets. The balance was due largely to the decline in market values for collateralized loan obligations (CLO) and other pooled corporate securities.

    HOW CAN WE FIND OUT WHAT THEY USED AS "MARKET VALUES" ON THESE WRITEDOWNS? IS THIS ANOTHER "MODEL BASED MARKDOWN TO MARKET" THAT HAS NO BASIS IN REALITY?

    DOES THIS ALSO MEAN WHEN THESE MBS's GET DOWNGRADED RATINGS THE VALUE WILL BE MARKED DOWN FURTHER?

    2) Financial guaranty reinsurance PVP increased by 610% in fourth quarter 2007 versus the prior year period to $320.7 million, principally due to the facultative reinsurance transaction with Ambac Assurance Corporation (“Ambac”) that was announced by the Company on December 13, 2007.

    BEST I CAN TELL THIS IS ALL THE REINSURANCE AGO WROTE FOR THE QUARTER -- THE AMBAC DEAL -- DID THIS PAYMENT (or the profit from it anyhow) ALLOW THEM TO GENERATE THE OPERATING INCOME OF .53? I CAN'T FIND DETAILS OF THE AMBAC DEAL--321 MILLION TO REINSURE 29 BILLION OF FINANCIAL GUARANTY CONTRACTS? THOSE WOULD BE STRUCTURED FINANCE, NOT MUNIS RIGHT?

    AGO'S TOTAL ASSETS ARE 3.8 BILLION FROM WHAT I READ -- DOES THIS SOUND LIKE A COMPANY THAT CAN HANDLE A WORST CASE STRESS SCENARIO THAT WOULD JUSTIFY A AAA RATING?

    Anyhow--just wanting to see if I am reading this information correctly or maybe they are truly the exception to the rule and can pay unlimited structured finance claims.

    looking forward to further info on AGO as well as your other analyses.

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