Assured Guaranty buys MBIA’s UK subsidiary

The monoline insurer has acquired its counterpart in a deal that adds £34bn to its non-US portfolio, now valued at about £10bn.

Monoline insurer Assured Guaranty has bought the UK-based arm of MBIA Insurance Corporation in a deal it described as “transformational” for its European business.

MBIA UK has an insured portfolio in Europe of £10 billion ($13 billion; €11.6 billion), boosting Assured Guaranty’s non-US portfolio by over 41 percent. This is largely based on infrastructure with a focus on utilities.

Speaking to Infrastructure Investor after the deal, Assured Guaranty’s European chief executive Nick Proud said it continues the company’s strategy of consolidation within the market, but is a significant boost to its European operations.

“In Europe we've been taking over exposures of other monolines on a piecemeal basis,” he said. “Where we've not been able to buy a portfolio, we've been looking at transactions where we can just replace. We can take on a risk we like. It's kind of a convoluted process and it hasn’t been quite as successful as we would have liked. This is going to be transformational for us in Europe. We'll be able to take over an entire book of business so it's great from a European perspective.”

The purchase price sees Assured Guaranty transfer all of the notes issued in the Zohar II 2005-1 transaction that it holds, a total outstanding amount of £261 million. In addition, MBIA UK has transferred its shares to Assured Guaranty and also paid £18 million in cash. Assured Guaranty said it will keep MBIA UK as a standalone entity but could combine it with its other European affiliates in the future.

“We withstood the challenges of the market and are in a position to not only be able to support the policy holders, but use our capital resources to buy those which were less successful in their ability to withstand the [credit] crisis,” Proud added. “We're still hoping to see a greater flow of infrastructure deals to get involved with. We are seeing strong activity around the university accommodation sector and we're doing well there and winning a number of deals in that sector. We're seeing refinancing of bank-financed deals immediately post-crisis and we're seeing ourselves as being competitive there.”