Bond Insurer Earnings Calls On Tap

Starting this week, the monoline bond insurers will be releasing their 1st quarter earnings. Ambac is the first one to report on Wednesday. Here is an Associated Press article summarizing the industry in the 1st quarter:

(source: Market Spotlight: Bond insurers see altered landscape, By Stephen Bernard. Monday April 21, 2008. Associated Press)

Assured Guaranty and Financial Security Assurance are among those writing the most new business, said Richard Tortora, president of Capital Markets Advisors, which provides bond advisory services for municipalities in the Northeast. Both were among the smallest players before ratings agencies started worrying about the sector's financial strength.

The two insurers have been cashing in on their newfound strength, with their premiums in some cases more than doubling, Tortora said, as their trading value in the secondary markets has enabled them to charge more...

As a result, both Ambac and MBIA are expected to post first-quarter losses. Analysts polled by Thomson Financial, on average, expect Ambac to lose $1.50 per share and MBIA to lose 16 cents...

Despite the rapid changes, things are settling down, Tortora said, adding that new business is expected to rebound during the second quarter from the lows seen during the first three months of the year.


Ambac and MBIA could easily miss their earnings estimate (to the downside) due to mark-to-market losses. Citigroup and Merrill Lynch wrote down a chunk of their hedges from monoline insurers. I'm not sure how much of that is from Ambac and MBIA, as opposed to FGIC, ACA, or others.

As I wrote about before, the key thing is to see if there is any credit impairment, particularly related to CDOs and HELOCs & CESes. I don't know if management will elaborate on them but I'm wondering how the non-mortgage ABS market is performing.

I am really curious about over the next few months is what happens to structured product insurance. It's not clear if any of Ambac's competitors are writing business in that area or if insurance for the ABS of credit card loans/student loans/auto loans/etc has completely dried up.

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