NEW YORK (Bloomberg) — Assured Guaranty Ltd., which owns one of two bond insurers to have retained Aaa credit ratings, said its second-quarter profit would surge by more than 14 times because of gains in credit derivatives.

The company, whose second-biggest shareholder is billionaire investor Wilbur Ross, expects to post net income ranging from $515 million to $565 million, or $6.18 per share, for the quarter ended June 30, due to unrealised gains between $475 million and $525 million on credit derivatives, according to a statement today.

Profit was $32.8 million, or 47 cents a share, in the same period of 2007.

Assured made the statement after Moody's Investors Service said yesterday it is reviewing the financial strength ratings of Assured Guaranty Corp., the company's main bond insurance unit. Bond insurers owned by MBIA Inc., Ambac Financial Group Inc., Security Capital Assurance, FGIC Corp., and CIFG Holdings were stripped of their top ratings over the past six months as losses grew from securities backed by subprime mortgages.

Moody's action "is not at all reflective of a deterioration in Assured's capital base, credit exposures or earnings outlook," Assured's Chief Executive Officer Dominic Frederico said in the statement yesterday. "We are confident in Assured's financial strength and are committed to maintaining our ratings and will work closely with Moody's in their current review."

Moody's said it's reviewing Assured on concerns that guarantees on certain structured finance securities may bear higher risk, and that demand for bond insurance is falling. Assured is in talks to take, through reinsurance, portfolios of mainly municipal risk into Assured Guaranty Re Ltd.

"In light of the announcement by Moody's, we do not know when or if these reinsurance opportunities will be realised," Frederico said.

Assured's rating would be unlikely to fall more than two levels, Moody's said yesterday.

The company's second-quarter earnings estimates include $675 million of after-tax gains as a result of the change in Assured Guaranty Corp.'s credit-default swaps spreads, which increased substantially in June. The contracts for five years rose to a record high of 1,014.9 basis points July 16 from 190.2 basis points at the end of 2007, according to CMA Datavision.

Assured expects the unrealised gain or loss on these credit derivatives to reduce to zero as the contracts approach maturity.

The review for downgrade leaves only Warren Buffett's Berkshire Hathaway Assurance Corp., which was created in December, with a stable outlook on all its top credit ratings.

Assured Guaranty and Financial Security Assurance Inc. escaped downgrades this year because the two insurers shunned guarantees on collateralised debt obligations backed by subprime mortgages.