Bermuda-based Assured Guaranty Ltd. yesterday lost the bond insurance industry's last AAA credit rating, which had helped the company to dominate the US municipal bond insurance market.

But US billionaire investor Wilbur Ross, a major backer of Assured, told The Royal Gazette that he remained committed to the company and did not feel the downgrade would hurt its business.

The company's shares plunged as much as 14 percent in New York Stock Exchange trading yesterday, before recovering somewhat to close down eight percent at $19.52.

S&P cut its financial strength and counterparty credit rankings on Assured Guaranty Corp. and Assured Guaranty Municipal Corp. one level to AA+.

Assured's chief executive officer Dominic Frederico responded by saying he was "surprised" by the downgrade and indicated that third-quarter profits would beat analysts' expectations.

The AAA ratings held by Assured's operating units were the last for a bond insurer after guarantors from MBIA Inc. to Ambac Financial Group Inc. were downgraded in 2008 amid a housing crisis that saddled the insurers with potential losses from mortgage-related bets.

Assured, which was spun off by Ace Ltd. in 2004, managed to steer clear of the worst of the mortgage-related bonds that caused their rivals to falter. The company has been alone in writing new insurance in the $2.8 trillion US municipal-bond market, because of its superior rating.

"Our commitment to and enthusiasm for Assured continues unabated," Mr. Ross said in an e-mailed response to our questions yesterday.

"I disagree with Standard and Poor's' decision since it seems to have been based on a change in their methodology rather than on any issue of capital adequacy, but I do not believe it will hurt Assured's business."

In February 2008, Mr. Ross, through his New York company WL Ross & Co, pledged to invest as much as $1 billion in Assured. He was took a seat on the board the following month after making an initial $250 million investment.

According to Bloomberg data, WL Ross & Co owned a little more than 16 million Assured shares as of June 30 this year, a near nine percent stake valued at around $320 million yesterday.

"The company had been AAA- negative outlook for a while and moving it one notch to AA+ stable will remove the uncertainty that kept investors and investment banks from using its insurance," Mr. Ross added.

"Insured bonds had not traded on yields as low as AAA. They had traded on AA yields, so that should not change.

"Only seven non-government financial service companies in the US are AAA-rated and about the same number, including the legendary Berkshire Hathaway, are AA+, so Assured is in extremely rarefied company."

S&P, in its comments, questioned the potential for a re-emergence of a "strong and vital" bond insurance industry.

"The current state of the financial guarantee market, with only one organisation issuing new policies, is symptomatic of investors' and issuers' diminished demand for bond insurance," S&P analyst David Veno said.

S&P left its outlook for Assured as "stable," saying it expects it to maintain "its relatively strong position" in the industry.

Assured CEO Mr. Frederico said: "We are surprised by this rating action, which comes on the heels of S&P's affirmation of our AAA ratings in June 2010 and at a time when we are seeing positive developments in our market share and new business production in the US municipal business and achieving significant success in our loss mitigation efforts."

He went on to claim that S&P failed to provide the firm "with critical assumptions and key sensitivities used in their analysis of certain risks" in Assured's portfolios "or quantify their view of the extent of our AAA capital shortfall", information which he believed to be required under US law.

"Through the most challenging economic environment in recent memory, we have earned operating income in every quarter since our initial public offering in 2004," Mr. Frederico added.

"Furthermore, we expect that our third quarter 2010 operating earnings per share will exceed the consensus estimate of 80 cents per share, as reported by Bloomberg and Thomson Reuters."