Financial Products
In our financial products segment, we offer customized, FSA-insured investment products to the municipal and structured finance markets and invest the proceeds in high-quality, liquid securities to generate spread income. The group consists of seasoned capital markets professionals with established credentials in credit analysis, structuring and asset management.
Most of the investments are in the asset-backed and mortgage-backed markets, where we have superior expertise, and are rated Triple-A. To eliminate material interest rate risk, the financial products group's assets and liabilities are generally floating rate obligations tied to LIBOR or fixed rate obligations swapped to LIBOR floating rates. The weighted average life of the asset portfolio is managed so that it does not exceed that of our funding, and currency risk is fully hedged. These practices allow us to earn an attractive net interest margin through a low-risk business that is separate from but complements our financial guaranty business. (See Analyst Communications/Presentations for the most recent update on our mortgage-backed investments.)
Since beginning operations in 2001, the financial products segment has become a fully established pillar of our balanced business strategy. Additionally, it helps us develop relationships with dealers and investors in countries where public infrastructure and asset-backed bond markets are evolving.
We structure two types of financial products, described on the pages linked below:
Guaranteed Investment Contracts
Medium Term Notes