Wilbur Ross Stays Bullish On Assured Guaranty

An earlier version of this story incorrectly stated that Assured Guaranty aimed to restart its municipal bond insurance business. Assured Guaranty has an active business insuring municipal bonds. TheStreet regrets the error.

NEW YORK (TheStreet) -- Assured Guaranty(AGO) 's largest shareholder, Wilbur Ross, called the bond insurer "probably the best risk/reward position in my entire portfolio," in a brief email exchange Friday.

Ross added that he was heartened by a U.S. District Court ruling Wednesday, in which a judge ruled Assured Guaranty can move forward with claims against UBS. Assured argues UBS made misrepresentations about the quality of loans it packaged into securities that Assured Guarantee agreed to insure. Judge Harold Baer threw out some of of the claims, however.

The "adverse ruling against UBS is another vindication for Assured's assertion that a major reason for Residential Mortgage Backed Securities defaults was inappropriate underwriting by mortgage originators and packagers who did not live up to the reps and warranties they made to Assured," Ross wrote.

"UBS is pleased with the Court's ruling that Assured Guaranty lacks the contractual right to enforce loan repurchase demands, and as Assured knows, the court ruled on threshold legal issues only and its claims have yet to be tested in court," a UBS spokeswoman said in an emailed statement. "Assured is a highly sophisticated market participant who knowingly undertook insurance risks that it now seeks to transfer improperly to UBS following the collapse of the US housing market."

Expounding upon his bullish thesis, Ross wrote that Assured "is the only credit enhancer to have remained profitable every quarter through the financial crises and every quarter it reduces its exposure to legacy commitments."

Adding that the investment "is probably the best risk/reward position in my entire portfolio," he asked "what else with uninterrupted earnings trades at half of high quality book value and not much more than 1/4 of book value, adjusted for the present value of prepaid premiums for the enhancement of investment grade municipal bonds? It has survived the subprime crisis, the Greek default and will survive the next crises as well," he contended.