UBS to Pay Assured Guaranty $358 Million in Settlement

UBS AG agreed to pay an initial $358 million to Assured Guaranty Ltd. to settle litigation over money-losing residential mortgage-backed securities transactions, Assured officials said.

UBS, based in Zurich, also agreed to reimburse portions of future losses under a new loss-sharing reinsurance pact, Hamilton, Bermuda-based Assured said today in a statement.

“We are pleased to have reached a settlement with UBS that further reduces our exposure to RMBS losses,” Dominic Frederico, president and chief executive officer of Assured, said in the statement.

Assured said it would supply more information on the financial consequences of the settlement in its first-quarter earnings statement, due May 9.

“The financial effect of the settlement on UBS is insignificant due to provisions that we had previously established,” Megan Stinson, a UBS spokeswoman, said in an e-mailed statement.

The parties filed an agreement in Manhattan federal court today dismissing the suit. Details of the settlement weren’t included in the court filing.

Assured sued in February 2012, claiming UBS breached promises about the quality of the loans underlying $1.5 billion worth of the securities, which Assured had agreed to insure. Assured claimed UBS had gotten inflated assessments for the investments from ratings companies.

‘Massive Number’

The mortgage-backed securities included a “massive number” of defective loans and have defaulted at higher rates than if they had conformed to the quality standards, as UBS promised, Assured claimed in its complaint.

In August, U.S. District Judge Harold Baer dismissed some claims against UBS and permitted the rest of the case to go forward.

The case is Assured Guaranty Municipal Corp. v. UBS Real Estate Securities Inc., 12-cv-01579, U.S. District Court, Southern District of New York (Manhattan).

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