Fitch's Releases New Capital Model Results for Financial Guaranty Industry.
In this Special Report, 'Financial Guarantors - Initial Matrix Capital Model Results,' Fitch is releasing its capital model results for the following financial guarantors: Ambac Assurance Corp. (Ambac); Assured Guaranteed Ltd. (Consolidated Assured Guaranty Corp. and Assured Guaranty Re Ltd); CIFG Guaranty (CIFG); Financial Guaranty Insurance Company (FGIC); Financial Security Assurance, Inc. (FSA); MBIA Insurance Corp. (MBIA); Radian Asset Assurance Inc.; Security Capital Assurance Ltd. (SCA, Consolidated XLCA and XLFA).
Fitch's Core Capital Adequacy Ratio (CCAR) is the foundation of Matrix's capital adequacy assessment. The CCAR compares a financial guarantor's actual capital (and other claims paying resources) to a probability distribution comprising up to 500,000 scenarios reflecting various levels of insured claims simulated by Matrix over a spectrum of good through bad economies. The simulation is based on a robust assessment of portfolio defaults and recoveries, as well as reinsurance recoveries, less any uncollectible reinsurance balances. At a minimum, each financial guarantor is expected to maintain a minimum ratio of 1.00 for their given rating threshold, meaning it is holding more capital than that required under the Matrix simulation to meet claim payments.
Currently, the majority of the financial guaranty industry rated by Fitch maintained more than enough capital to meet the minimum capital requirements for their given rating threshold. However, going forward, Fitch will individually address cases where the financial guarantor's minimum capital requirements are close to or below Fitch's minimum expectations. In these instances, a reasonable period to cure, or improve, the model results will be granted by Fitch before any ratings action would be contemplated, as long as a capital enhancement plan is effectively in place.
'We believe the very strong showing of the financial guaranty industry under Matrix is a testament to the very high levels of financial strength in this industry, and we do not view any signs of weakness reported upon our introduction of Matrix as problematic in any way. Matrix is a new model, and companies need to have time to adjust their capital planning to meet the new standards we are bringing to the industry. Fitch does not view resolution of current capital shortfalls as being a challenge, since each company will have various capital management solutions to help improve its Matrix results,' said Thomas Abruzzo, Managing Director, Fitch Ratings. 'Additionally, on a go-forward basis, all financial guarantors rated by Fitch will have individual access to the Matrix model to help them manage their capital adequacy requirements.'
The initial industry results included in this Special Report are just a few of the key metrics that Fitch will be using to assess each financial guarantor's capital adequacy and insured portfolio quality. Additionally, Fitch expects the list of outputs produced by Matrix to expand as more meaningful trends can be established over time for additional ratios and analysis.
Fitch plans to produce Matrix model results for each guarantor on a regular basis going forward, following an initial developmental period where each financial guarantor gets their systems upgraded to provide the necessary data required that is required to build the model's core simulation on a regular and timely basis.
This Special Report, 'Financial Guarantors - Initial Matrix Capital Model Results,' is available now on www.fitchratings.com.
Related Reports and Events:
In addition to this report, for a more detailed discussion of Matrix, see the associated Criteria Report 'The Fitch Matrix Financial Guaranty Capital Model' and related press release, dated Jan. 9, 2007. For additional information concerning Matrix's rating guidelines and methodology, see 'Rating Guidelines for Financial Guarantors'.
Fitch also will hold a webcast and teleconference on Wednesday, Jan. 10, 2007 at 10:30am ET. More details on the webcast to follow in a separate press statement.
All materials are available on www.fitchratings.com.
|Printer friendly Cite/link Email Feedback|
|Date:||Jan 10, 2007|
|Previous Article:||Fitch Provides Municipal Default and Recovery Expectations by Sector.|
|Next Article:||Bronto Posts Strong 2006 Results with Profitable Revenues and Expanded Management Team.|