Assured Guaranty Ltd. (NYSE: AGO) has announced the merger of its two U.S. financial guaranty insurers * Assured Guaranty Municipal Corp. (AGM) into Assured Guaranty Inc. (AG). This move is expected to result in a more efficient utilization of the combined capital of the two companies and eliminate duplicative expenses of Assured Guaranty’s U.S. financial guaranty operations.
Before the merger, AGM served as the flagship financial guaranty insurance company, offering guarantees on U.S. and non-U.S. public and infrastructure finance obligations. On the other hand, AG provided risk and capital management solutions for insurance, pension, and banking institutions, offered guarantees on structured financings, and served as the acquirer or reinsurer of insured portfolios of non-affiliated financial guaranty insurers in runoff.
The merger is expected to bring about several changes compared to the companies' prior states. The new AG is projected to have a larger, more highly diversified insured portfolio, a larger investment portfolio, a larger capital base, creating a more efficient capital structure, and greater claims-paying resources. This consolidation is also anticipated to strengthen Assured Guaranty’s ability to execute its strategies to achieve its business objectives.
Following the merger, AG will continue to be domiciled in Maryland, with the Maryland Insurance Administration (MIA) as its primary regulator. The MIA has approved a $300 million stock redemption by the combined company, which is expected to be effectuated shortly following the merger.
In terms of credit ratings, both AGM and AG had identical ratings from S&P Global Ratings, Kroll Bond Rating Agency, and Moody’s Ratings. The merger is not expected to impact Assured Guaranty’s strong and stable financial strength ratings.
The merger is seen as a step that eliminates an unnecessary distinction between the companies and allows Assured Guaranty to effectively lead the bond insurance industry, as stated by Robert Bailenson, the Chief Operating Officer.
Following these announcements, the company's shares moved 0.7%, and are now trading at a price of $76.7. If you want to know more, read the company's complete 8-K report here.
