Syncora Holdings’ New York financial guarantee insurance subsidiary, Syncora Guarantee (SGI), has entered into a reinsurance framework agreement with Assured Guaranty Corp to help cap insured exposure on $13.5 billion of net par outstanding SGI-insured financial guaranty insurance policies.
Under the agreement, Assured Guaranty will provide reinsurance generally on a 100% quota share basis on policies representing approximately 91% of SGI’s outstanding insured exposure.
The transaction includes a commutation of a small book of business ceded to SGI by an Assured Guaranty affiliate which is included in the par outstanding numbers.
Frederick Hnat, the President and Chief Executive Officer of SGI, said; “we are extremely pleased to enter into this reinsurance agreement which effectively caps our insured exposure, leaving SGI in a more stable financial position and making it possible for us to return value to our stakeholders, subject to approval, including by the New York Department of Financial Services.
“We look forward to working with Assured Guaranty in transitioning certain administrative functions associated with the ceded portfolio.”
Dominic Frederico, President and Chief Executive Officer of Assured Guaranty, added, “By reinsuring and administering substantially all of Syncora’s insured portfolio, the transaction continues our successful strategy of acquiring legacy financial guarantors or their insured portfolios.”
As consideration for the transaction, SGI would pay approximately $360 million (which amount includes ceded reserves) and assign over future instalment premium for the reinsured policies.
In addition, SGI has also entered into an administrative services agreement in which Assured Guaranty would provide certain administrative services with respect to the reinsured policies.
In addition, SGI has the option to cede certain debt service reserve fund surety and interest rate swap policies for an immaterial additional premium payment.
Closing of the reinsurance transaction is subject to the receipt of required regulatory approvals, and other closing conditions, including New York Department of Financial Services’ approval of a payment of principal and accrued interest of at least $400 million on SGI’s surplus notes.
Moelis & Company LLC is acting as financial advisor to SGI on the transaction and Debevoise & Plimpton LLP is acting as legal advisor to SGI – the parties expect to close the transaction before the end of 2018 Q2.
The financial effects of this agreement and other related disclosures are expected to be disclosed at a later date.
