Having insured just two public asset-backed securities deals in the past year, Financial Guaranty Insurance Corp. - looking to reclaim its mid-90s competitive market share - is eyeing a few senior hires to spearhead its ABS efforts, said sources familiar with the situation.
"They're looking for a head for their whole asset-backed department," one source said. "If they're going to get back into it, they're going to have to establish credit, and they'll do that through a big hire."
Though the surety is looking to ramp its team, FGIC has traditionally added market share conservatively, and plans to keep with this strategy, said Judith Herran, spokeswomen for FGIC.
"We very definitely are exploring expanding our activity into a variety of different types of transactions in the ABS area, but we would do so only consistent with our current underwriting standards."
While company officials could not specify from where they plan to shop talent, Herran did confirm a search is underway.
"For us, there are two key components," Herran said. "There's good data, and there's good people. You can't really look at the data until you have the good people."
Already, FGIC gained John Chung from Wachovia Bank. Chung was hired as a senior ABS risk analyst on the research and risk management team. Greg Raab, formerly a senior manager at Fitch IBCA, was hired late last week. Raab was hired as a senior risk manager in structured finance, also on the research and risk management team.
The company is still in the process of interviewing potential candidates for the head of the asset-backed business position, said one source. Additionally, the company plans to add at least one junior level analyst. FGIC is interviewing candidates at ABS investment banks and other insurers.
Another industry source suggested FGIC might look over at MBIA for talent, given some of the recent problems, the decline in market share, and the migration to Armonk, NY.
"I would say this: FGIC, if their looking to get back into asset-backed, they're likely to get into [collateralized bond obligations], and wouldn't MBIA be a good source to pull talent from?" the source said.
As with all parties in the ABS model - be it issuer, underwriter, trustee, lawyer, etc... - market share has fluctuated among the sureties from year to year, currently with Ambac at the helm.
Total market penetration reached its peak last year at nearly 23%, that figure representing insured proceeds over total proceeds. In 1996, the No. 2 year, the sureties wrapped approximately 16% of overall issuance, with FGIC's $4.7 billion accounting for roughly 20%.
Before 1996, FGIC, maintained a moderate presence, wrapping primarily home-equity deals. However, the company more or less subsided from the asset-backed world in 1997. Rumblings have classically been that parent company GE Capital nudged FGIC out of market when conditions were no longer favorable.
"FGIC is, from a bond insurance perspective, definitely a conservative underwriter," Herran said. "We are FGIC and we are going to do this in a way that is very consistent with the way that we've done business all along: exploring opportunity but always in the context of the way we look at the market.
"We do feel like the market has evolved and the market has matured and with this kind of underwriting, when you have a lot of data, you can make good decisions," she added. "And when you don't, at least from our philosophy, that's when you get into making questionable decisions."