NEW YORK (Bloomberg) — Bermuda-based Assured Guaranty Corp., the eighth- biggest US municipal bond insurer, had its credit rating raised to the highest investment grade, boosting its efforts to win more public finance business.Moody's Investors service raised the rating one level to Aaa from Aa1, giving the insurer top-ratings from all three rating companies. Moody's cited Assured Guaranty's increased market share, strong portfolio and adequate capital. Assured Guaranty, whose parent company, Assured Guaranty Ltd., became publicly traded in April 2004, insured $1.6 billion of municipal bonds last year.

"Receiving triple-A ratings for Assured Guaranty Corp. from all three rating agencies has been a key strategic goal for Assured Guaranty since our initial public offering and is critical to our continued market and earnings expansion," said Dominic Frederico, president and chief executive officer of the parent company in a news release.

Roughly half of the $2.4 trillion of municipal bonds outstanding are insured, according to the Association of Financial Guaranty Insurers. Municipal bond issuers sell insured bonds to increase their ratings and cut borrowing costs.

Virtually all of insured municipal bonds carry top ratings, and it has been difficult for Assured Guaranty to increase its US public finance business without Moody's Aaa grade.

"From a competitive and a pricing position, its questionable as to why you would get a wrap that's other than Aaa," said Arlene Isaacs-Lowe, a senior vice president at Moody's.

Assured Guaranty insured less than one percent of the almost $192 billion of municipal bonds sold with insurance last year, according to Thomson Financial. Most of the company's business comes from credit default swaps, derivatives based on bonds and loans that offer protection against default, Moody's said. Assured Guaranty also insures collateralised debt obligations, which accounted for 62 percent of the bonds the company insured in the first quarter of 2007. Overall, Assured Guaranty insures $139 billion of bonds.

Since the initial public offering, the company has increased its market share to 7.4 percent of all insured bonds, according to Moody's. Assured Guaranty's credit risk ratio, or the expected loss of the portfolio, is 0.35 percent of the total bonds insured by Assured Guaranty, which is within Moody's standards for AAA-rated bond insurers.

"The company has been committed to high quality underwriting of the business it has been able to write," Lowe said in a telephone interview. "They have built up the infrastructure, the risk management oversight and corporate governance."

Shares of Assured Guaranty Ltd. rose 85 cents, or three percent, to close Friday at $28.73.

"In the US public finance market, you'll see a significant increase in our market activity in the course of the next six to nine months," said Sabra Purtill, managing director of investor relations at Assured Guaranty in a telephone interview. "It has been very hard for us to expand in the public finance market without the Aaa from Moody's."