NU Online News Service, Sept. 28, 2:24 p.m. EDT

Standard & Poor's Ratings Services says it is placing the AA-plus financial strength rating of Assured Guaranty Municipal Corp. and the AA rating Assured Guaranty Re Ltd. on CreditWatch with negative implications, prompting an objection to S&P's new rating criteria by the financial-guaranty insurer.

S&P credit analyst David Veno says, “The CreditWatch placement is due to significant concentration risk in Assured's consolidated insured portfolio.”

S&P adds that the existing legacy insured portfolio of exposures that Assured maintains contains many exposures that and are not consistent with the current ratings under the rating agency's updated criteria.

“The concentrations are in Assured's structured finance and public finance insured portfolios,” says S&P.

Dominic Frederico, president and chief executive officer of Assured Guaranty, says in a statement, “This action is a result of S&P's new criteria for determining the financial strength ratings of financial guaranty companies. Despite our continued objections to the new criteria, we will continue to implement our strategies to create additional rating agency capital and reduce leverage to satisfy S&P's new requirements. These include our residential mortgage-backed securities representation and warranty putback program and negotiated comprehensive agreements, our capital-accretive reinsurance commutations, our agreements to terminate existing insurance contracts, and our wrapped bond purchase program.”

S&P says it understands that Assured's management “will take steps such as creating capital or utilizing additional forms of reinsurance to mitigate these concentration risks.”

The rating agency says it is likely that such actions would support ratings in the 'AA' category. “We are placing the ratings on CreditWatch due to uncertainty regarding the ultimate outcome of management's actions to address the concentrations,” says S&P.