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Buffett starts municipal bond insurer

Buffett starts municipal bond insurer

Billionaire investor Warren Buffett is starting a bond insurer that may take U.S. local-government business away from companies including MBIA Inc. and Ambac Financial Corp., the Wall Street Journal reported.
Berkshire Hathaway Assurance Corp. opened for business yesterday in New York State, Buffett said in an interview with the newspaper. Buffett and Ajit Jain, who heads his insurance activities, will seek approvals to operate in California, Puerto Rico, Texas, Illinois and Florida.
Buffett, 77, said in October he was looking for investments to absorb US$45 billion of capital. Credit rating companies are reviewing MBIA, Ambac and other so-called monoline insurers on concern they can't cover losses stemming from accelerating downgrades of the debt they guarantee, potentially endangering US$2.4 trillion of securities.
"The monolines are hurting so now is a good time for Buffett to be getting into the market," said Matthew Maxwell, a London-based credit analyst at Calyon, the investment banking unit of Credit Agricole SA. "Investors might feel more comfortable investing in bonds insured by Buffett than those backed by an insurer with the legacy of the credit crisis hanging over them."
Calls before regular business hours to Berkshire spokeswoman Jackie Wilson and Buffett's assistant Debbie Bosanek, both in Omaha, Nebraska, weren't immediately returned.
Reinsurance acquisition
Buffett's Berkshire Hathaway Inc. agreed to buy the reinsurance unit of ING Groep NV for about $440 million, the biggest Dutch financial-services company said in a statement yesterday.
Bond insurers reported combined losses of US$2.9 billion in the third quarter after writing down the value of some of the asset-backed securities and collateralized debt obligations they guarantee.
ACA Capital Holdings Inc., the bond insurer that lost its investment-grade credit rating last week, has given control to regulators to avert delinquency proceedings. ACA Financial Guaranty Corp., a unit of ACA Capital, will seek approval from the Maryland Insurance Administration before pledging or assigning assets or paying dividends, the New York-based company said in a filing this week.
S&P cut ACA's rating by 12 levels last week to CCC after the company posted a US$1.04 billion third-quarter loss in November.
Fitch Ratings said the bond insurers need to do more to bolster capital. Fitch last week gave Armonk, New York-based MBIA and Ambac and FGIC Corp., both in New York, four to six weeks to raise at least US$1 billion or lose their top ratings. Fitch also put XL Capital Assurance in New York on review for a possible downgrade, saying the company needs to raise US$2 billion.
Moody's Investors Service assigned a negative outlook on the Aaa grade assigned to MBIA's insurance unit on December 14. It also placed its top rankings for FGIC and XL Capital Assurance on review for possible downgrade.
Standard & Poor's has FGIC on review for a rating cut, and has a negative outlook on MBIA, Ambac, XL Assurance and CIFG.


Updated : 2021-05-06 22:11 GMT+08:00