Assured Guaranty said it plans to free up about $1 billion in capital over the next three to five years as it winds down a structured finance portfolio.
The company said that capital will be released as its structured finance book runs off. It added that 26% of the Assured Guaranty legacy structured finance portfolio is expected to run off from 3Q09 to year-end 2010 and 86% by year-end 2015.
In aggregate, the company estimated that over $1 billion of risk-based capital will be released as the portfolio runs off over the next three to five years.
The company, which has reduced its headcount to about 370 from 500, plans to cut a further 15% to 20% by March next year.
Rating agency stress loss estimates on Assured Guaranty’s RMBS exposure are significantly greater than expected losses. This difference, Assured said, should increase excess capital as actual claims are paid and the exposure runs off.
In addition, capital currently allocated to the remaining ABS portfolio, where no losses are expected, will be released as the portfolio amortizes with no new originations.
“As excess capital is generated by run-off of structured finance portfolio, we expect to utilize it for Capital for business and dividends or share buybacks,” the company said in an investor presentation on Tuesday.
Assured also unveiled plans to cut as much as 20% of its workforce by March.