Friday, March 25, 2011

RAM's Primaries Give Mixed Signals

Assured Guaranty numbers look very positive for RAM. AGC reported a very low reinsurance recoverable from RAM of $2.9M. Not to be outdone, AGM reported a negative $5.2M reinsurance recoverable from RAM.

Meanwhile both SGI and FGIC had ugly fourth quarters. However SGI's ending reinsurance recoverable from RAM of $1.5M suggests that the damage was not ceded to the company. FGIC's 2010 recoverable of $44.8M versus $33.8M in 2009 suggests this may have been a trouble spot for RAM. Reinsurance recoverable by company is only published in year end statutory filings of the ceding primaries.

All in, the model predicts a steep $15M loss adjustment expense in the quarter mainly driven by developments in the FGIC book suggesting a net operating loss in the quarter of about $12M. We expect actual results to come in $5M or more better than both of the loss adjustment expense and net operating loss predicted by the model. Still, a net operating loss seems most probable.

We view bumpy results as a reminder of the recent crisis. Still, the numbers suggest that the wide gap between intrinsic and market value at RAM is yet to be significantly impaired by adverse loss developments.

You may find this quarter and previous quarter's models here.

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