Bond Insurers' Stocks Soar Amid New Revelations in Foreclosure Crisis
October 19 2010 - 12:25PM
Marketwired
After experiencing catastrophic losses in 2008, and being rescued
by massive capital injections from the government, the insurance
industry has been taking steps forward on the path to recovery. In
2009, the arrest of activity in credit markets caused bond prices
to drop. Insurers have been hit especially hard by the poor bond
market. They hold as much as two-thirds of their assets in bonds,
and as such are highly sensitive to credit market conditions. It is
expected that weak investment portfolios and reduced income from
the variable annuities, in addition to weak underwriting, will make
for downside pressure on these companies in the coming months. The
Bedford Report examines the outlook for companies in the Surety
& Title Insurance Industry and provides research reports on
Ambac Financial Group, inc. (NYSE: ABK) and MBIA, Inc. (NYSE: MBI).
Access to the full company reports can be found at:
www.bedfordreport.com/2010-10-ABK
www.bedfordreport.com/2010-10-MBI
Last week, bond insurers such as Ambac and MBIA saw their shares
surge after a report from Manal Mehta and Branch Hill Capital
claimed these insurers may be well positioned to benefit from put
backs or rescissions related to the mortgage bond fallout. Bond
insurers have been requesting that banks buy back pools of
mortgages littered with home loans that violate the warranties
banks made when selling mortgage-backed securities. Mehta argues
that put backs in the magnitude of $2 billion to $3 billion could
double the stock price of a bond insurer such as MBIA.
The Bedford Report releases regular market updates on the Surety
& Title Insurance Industry so investors can stay ahead of the
crowd and make the best investment decisions to maximize their
returns. Take a few minutes to register with us for free at
www.bedfordreport.com and get exclusive access to our numerous
analyst reports and industry newsletters.
The Mehta report sees Bank of America as one of the biggest
losers in this foreclosure mess due in part to the liabilities it
took on when it acquired Countrywide. Coincidentally, in late
September, Ambac filed suit against Bank of America over the
lending practices of Countrywide, the mortgage lending business the
bank bought, saying the lender failed to follow its own standards
when making loans.
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