Syncora Holdings Ltd. (NASDAQOTH:SYCRF.PK)

NetscribeInsuran (< 20) Submitted: 3/12/2007 6:27:09 AM : Start Price: $28.55 SYCRF.PK Score: -99.29

Security Capital Assurance Ltd is a Bermuda-based company that provides credit enhancement and protection products to the public finance and structured finance markets throughout the United States and internationally. The company through XL Capital Assurance its subsidiary provides credit enhancement and protection by the issuance of financial guaranty insurance policies and credit default swaps. Its subsidiary XL Financial Assurance provides reinsurance of the same products to other companies writing the business.
During 2006, its revenues increased by 23% to $238.6 million due to higher net premiums earned, increased investment income and higher fees income. Net income increased by 46% to $117.4 million which was the result of decrease in net losses and loss adjustment expenses, lower provisions for case basis reserves and lower preferred dividends. Company’s combined ratio in 2006 improved to 60.18% from 69.73% in 2005.
Certain dynamics within the financial guaranty industry like issuers preference for more choices, fixed income investor’s demand for more diversification, and capacity constraints of large companies make it possible for the company as well as other smaller players in the space to continue growing new business writings even in the current difficult new business environment where the larger players are struggling to grow.
While this has led revenue to grow at an astounding 37.71% outpacing the industry growth of 14.53% on a 5 year basis, even the company’s operating return on equity has improved from 10.7% in 2005 to 12.7% displaying the footprints left by prospective combined ratio. In the future it is expected that the company’s expenses would reduce considerably as it benefits from increasing scale which will only lead to a reduced combined ratio and higher profitability.