Printer Friendly

FINANCIAL GUARANTY INDUSTRY HAD ANOTHER RECORD YEAR IN 1991, ANNUAL REPORT SHOWS

 FINANCIAL GUARANTY INDUSTRY HAD ANOTHER RECORD YEAR IN 1991,
 ANNUAL REPORT SHOWS
 NEW YORK, July 22 /PRNewswire/ -- The Association of Financial Guaranty Insurors (AFGI) which represents nine triple-A rated companies that insure or reinsure municipal bonds and structured corporate obligations, today announced that its members reported aggregate increases in capital, premiums, earnings and other measures of financial strength and performance during 1991. Financial guaranty insurance provides investors with the assurance of timely payment of interest and principal in the event of insured bond defaults.
 Wallace O. Sellers, chairman of AFGI and chief executive officer of Enhance Reinsurance Company said, "Nineteen ninety-one was another record year for the industry, and all indications are that the favorable trend will continue in 1992. Almost 30 percent of all new issue municipal bonds were insured in 1991, up from 26 percent in 1990. So far in 1992, fully one third of all new issue municipal bonds are insured. Lingering economic uncertainty has increased the attractiveness of insured bonds for individual investors. In addition, municipalities find bond insurance to be an effective way to reduce debt service costs. And many municipalities continue to take advantage of lower interest rates to issue new debt and refund outstanding debt. In the asset-backed market, the industry continued to provide insurance for a broad array of financings in the United States, Europe and the Pacific Rim. Financial guarantors have an important role to play in the global market for structured finance."
 Sellers said, "In the 20-year history of the bond insurance industry, no monoline financial guaranty insurance company has been downgraded, no insured issue has been downgraded, and no insured bond investor has failed to receive an insured bond payment."
 AFGI member firms are AMBAC Indemnity Corporation, Capital Guaranty Insurance Company, Capital Markets Assurance Corporation, Capital Reinsurance Company, Connie Lee Insurance Company, Enhance Reinsurance Company, Financial Guaranty Insurance Company, Financial Security Assurance, Inc. and Municipal Bond Investors Assurance Corporation.
 Claims Paying Resources
 The industry's claims-paying resources continued to increase in 1991. Statutory qualified capital -- or the industry's capital base -- rose 18 percent in 1991 to $3.7 billion, from $3.1 billion in 1990.
 The industry's net income for 1991 increased 41 percent to $448.5 million.
 Investment income increased 19 percent to $478.7 million. Total investment income contributed 55 percent of the industry's total revenue in 1991.
 The industry has an extremely conservative investment philosophy. As a result, the quality of the industry's investment portfolio is exceptionally high. Over 98 percent of the industry's portfolios, which hold the assets backing the industry's capital, surplus, contingency and unearned premium reserves, were invested in high-quality fixed-income securities rated single-A or higher. Total investments at year-end 1991 were $6.4 billion, up 17 percent from 1990.
 Direct premiums written, representing all premiums which are collected and arise from policies issued by those companies acting as the primary insurors, increased 22 percent in 1991 to $763.6 million.
 Financial guaranty insurance premiums are usually paid in full by the issuer when the securities are insured. These premiums, which are typically non-refundable, are earned as related risks expire over the life of the insured issue, up to 30 years for municipal bonds. This long and predictable earnings pattern is unique to the bond insurance industry and provides a major and visible source of future revenue and claims-paying ability.
 Premiums are earned as the related risks expire. Net premiums earned increased 44 percent to $381.8 million.
 Quality of Insured Portfolio
 The quality of the industry's insured portfolio continues to reflect high underwriting standards. As of year end 1991, over 72 percent of the industry's insured portfolio was single-A quality or higher according to industry rating criteria. Net exposure in force (par value and interest insured) was $500.2 billion in 1991, an increase of 19 percent over 1990.
 Losses incurred are the losses recorded to pay both the principal and interest for insured securities that have defaulted or are expected to default in the future. Loss adjustment expenses are expenses incurred in connection with the adjustment and recording off losses oradjustment expenses in 1991 was $42.6 million, down from $44.2 million in 1990.
 Loss ratio is the ratio of losses incurred and loss adjustment expenses to premiums earned. The loss ratio for 1991 was 11 percent, down from 17 percent in 1990.
 Underwriting Expenses
 Underwriting expenses, a direct measure of the cost of operating the business, increased 7 percent to $242.3 million. While the costs of operating the business increased, the increase was not as rapid as the increase in premium volume. The ratio of total underwriting expenses to direct premiums written, an indication of operating efficiency, showed a healthy decrease to 32 percent in 1991 from 36 percent in 11990.
 Industry Overview
 The volume of insured municipal bonds and structured corporate and asset-backed securities increased significantly in 1991. Total par insured for the industry increased 35 percent in 1991, to $68.7 billion, from $51 billion in 1990. Of this, $58.9 billion represented par value of insured municipal bonds, a 44 percent increase over 1990; $9.8 billion represents par amount of structured corporate and asset-backed securities, a slight decline of 3.9 percent.
 AFGI members operate solely in the area of financial guaranty insurance and have no exposure to any other type of risk. Each AFGI member carries a triple-A rating, or "claims-paying ability rating" from one or more of the major rating agencies. Insured bonds receive the triple-A claims-paying ability rating of the insurance company rather than the rating of the issuer.
 This report was prepared by AFGI and refers to the financial guaranty industry as a whole. It is based on combined financial information provided by the reporting companies on a statutory accounting basis.
 -0- 7/22/92
 /CONTACT: Annette Bronkesh of Clarke & Weinstock, 212-953-2550, for Association of Financial Guaranty Insurors/ CO: Association of Financial Guaranty Insurors ST: New York IN: INS SU:


TS-TQ -- NY021 -- 1807 07/22/92 10:59 EDT
COPYRIGHT 1992 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Jul 22, 1992
Words:998
Previous Article:AMBAC INDEMNITY GENERAL COUNSEL TO HEAD LAWYERS ALLIANCE
Next Article:PLANNED PARENTHOOD DEBUTS 'FIRST THINGS FIRST' RECORD AT LISTENING PARTY


Related Articles
FINANCIAL GUARANTY INSURANCE INDUSTRY CONTINUED RECORD PERFORMANCE IN FIRST SIX MONTHS OF 1992
FINANCIAL GUARANTY INSURANCE INDUSTRY CONTINUED STRONG FINANCIAL RESULTS IN THIRD QUARTER
LOSSES FROM UNDERFUNDED PLANS INCREASED PBGC'S DEFICIT IN 1991
ORION CAPITAL REPORTS RECORD OPERATING RESULTS FOR 1991
ENHANCE FINANCIAL SERVICES GROUP REPORTS RECORD EARNINGS
ENHANCE FINANCIAL SERVICES GROUP REPORTS FIRST QUARTER EARNINGS
ENHANCE FINANCIAL SERVICES GROUP PROMOTES PAUL M. MOONEY TO SENIOR VICE PRESIDENT
FINANCIAL GUARANTY REPORTS OUTSTANDING THIRD QUARTER RESULTS
PBGC ISSUES ANNUAL REPORT FOR FISCAL YEAR 1992
DUFF & PHELPS SAYS THAT FINANCIAL GUARANTY INDUSTRY SEEKS NEW REVENUE SOURCES

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters