Bond insurance volume was down in first half

During the first half of the year, the amount of debt wrapped by bond insurance decreased by 12%, although bond insurance penetration at 9% was still significantly higher than it was before the pandemic when it was nearly 6%.

In comparison to the $17.689 billion of transactions completed in the first half of 2022, the top two municipal bond insurers wrapped $15.571 billion in 2023.

The general decline in municipal bond issuance in the first half of the year contributed to the lower insurance volume. The volume of municipal bonds overall decreased 17.1% from the prior year.

The industry par amount for the top two issuers was achieved in 621 deals in 1H 2023 versus 844 deals in 1H 2022.

Assured Guaranty accounted for a total of $9.776 billion in 290 deals for a 62.8% market share in the first half of the year, compared to $9.977 billion in 382 deals for a 56.4% market share over the same time period in 2022.

Build America Mutual insured $5.795 billion, or a 37.2% market share, in 331 deals during 2023, compared to $7.711 billion, or a 43.6% market share, in 462 deals in 2022.

The first quarter of the year saw $5.679 billion of bond insurance in 262 issues, down 32.6% from 2022, while the second quarter was up 6.7% year-over-year to $9.882 billion from $9.259 billion.

Tax-exempt issues insured fell 3.5% to $14.043 billion in the first half of the year while taxables dropped 81% to $555.6 million. New-money issuance with insurance decreased to $11.728 billion, a 9.9% loss while refundings decreased to $1.566 billion, or 53%.

Revenue bonds accounted for $8.187 billion in 136 issues, an 18.5% decrease from 2022, and general obligation bonds fell to $7.374 billion in 618 issues, a 3.5% decrease from 2022.

Both major insurers said the first half of 2023 was a strong start to the year.

For the first half of 2023, Assured Guaranty’s bond insurance was “relatively flat compared to the first half of 2022, despite total market par being down … in first half 2023 compared to first half 2022,” said Robert Tucker, senior managing director of investor relations and communications at Assured.

This strong result, he said, led Assured Guaranty to increase its market share of the insured primary market to 62.8%, up from 56.4% in the first half of 2022. 

The firm’s “secondary market par written for the first half of the year was $280 million, bringing our total insured par to $10.1 billion in the primary and secondary markets,” he said.

BAM had “a solid first half of 2023, supported by strong demand for BAM’s guaranty from institutional municipal bond investors who were looking to maximize liquidity and manage rating volatility in their portfolios,” said Mike Stanton, head of strategy and communications at BAM.

That translated to “continued utilization of insurance on larger and higher-rated transactions,” with BAM insuring “23 transactions with par of $50 million or more, which generated $2.7 billion par insured,” he said.

That large-deal activity was in line with the firm’s 2022 results, and “the pace of large transactions accelerated in the second quarter even as total market activity declined,” he said.

During the first quarter, Assured insured “eight transactions with $100 million or more in insured par, which totaled approximately $1.6 billion,” Tucker said. This included “a $365 million transaction for the Lower Colorado River Authority in Texas, a $325 million transaction for the H. Lee Moffitt Cancer Center Project in Florida, $320 million for Georgia Municipal Electric Authority consisting of two transactions, and a $135 million transaction for the Board of Education of the City of St. Louis in Missouri.”

In the second quarter, Assured guaranteed 13 transactions “totaling $4 billion that each utilized over $100 million of Assured Guaranty insurance,” including $1.1 billion for the Dormitory Authority of the State of New York and a $756 million Houston Airport System transaction, he said.

This “brought the total number of transactions that utilized over $100 million of our insurance during the first half of 2023 to 21 transactions for a total of $5.6 billion,” he said.

Assured continued to add value on “double-A credits during the second quarter, as we insured almost $1.5 billion of par, and issued 24 policies covering 17 primary deals and seven secondary market transactions,” he said.

In aggregate, during the first half of 2023, “approximately $2.2 billion of par and issued 40 policies, 32 of which were for primary market deals with double-A underlying ratings,” Tucker said.

Over 25% of BAM’s insured par had “public underlying ratings in the double-A category or better from S&P or Moody’s,” Stanton said.

The firm only insures “municipal bonds for issuers that finance essential services, and our first half activity reflected that, with strong results for water and wastewater utility bonds, K-12 education, and general governments,” he said.

Highlights included “$350 million for the Irvine Facilities Financing Authority in Southern California, $315 million for the City of Springdale, Arkansas, and a $208 million of bonds from the Greater Texoma Utilities Authority that will finance water and wastewater treatment investment for Sherman, Texas,” according to Stanton.

Higher education was another strong sector, “highlighted by $148 million of bonds for the new business school at the University of Nevada in Reno, and $115 million for the University of New Hampshire,” he added.