Bermuda-based Assured Guaranty Ltd. announced profits of $43.1 million for the second quarter, a marginal gain on its earnings of $42.7 million a year ago.

The company's net income was also down on the $46.9 million it posted during the first quarter of 2004.

But the company, which was until recent months the financial guaranty arm of ACE Limited, said its outlook after this year was uncertain based on changes in reinsurance agreements and the state of this segment of the market.

CFO Robert Mills said in an earnings release: "Looking ahead to 2005, the continued weakness in the market combined with the reinsurance changes will place significant pressure on our ability to improve return on equity (ROE), although we will be better able to assess our future prospects after the fourth quarter is completed."

For the period ended June 30, CEO Dominic Frederico said company management had spent much time focused on the company's listing on the New York Stock Exchange (NYSE) but was now turning its full attention to the running of the business.

"Assured Guaranty achieved several major accomplishments in our second quarter. Our IPO (in April) was a major undertaking and took a significant amount of management time and attention during the quarter."

He added: "After the IPO, our team has quickly moved back into full-time marketing and underwriting and produced strong new business production in our financial guaranty direct segment results compared to the first quarter of the year."

Broken down per share, the company's second quarter profit stood at 57 cents per diluted share, a mere one percent increase over the last year's results.

Operating income, which is defined as net income excluding after-tax net realised gains (losses) on investments and after-tax unrealised gains (losses) on derivative financial instruments, decreased from $33.2 million in the second quarter of 2003 to $27.9 million, or 37 cents per diluted share.

Operating income, which is often used by investors and analysts to measure the underlying profitability of the business, included a $9.6 million or 13 cents per share after-tax expense for the initial public offering (IPO) related accelerated vesting and replacement of stock awards.

The quarter also included a net loss of $2.4 million that affected net income, or three cents per diluted share, and an operating loss of $5.9 million in operating income, or eight cents per diluted share, from our other segment, which consists of transactions and lines of business that were exited as part of the public listing.

Looking at business levels, the company ? which insures against the default of municipal bonds and other financial instruments ? said it had seen a 21 percent drop in gross premiums written with $64.4 million in the second quarter compared to $81.6 million during the same period a year ago.

Assured Guaranty said gross premiums written in its "other segment" (an area that had been exited) were $10 million in the quarter, while net premiums written in this segment were ($101.4) million, due to the accounting for the unwinding of the remaining businesses exited as part of the initial public offering, including trade credit, title reinsurance and auto residual value.

Net premiums earned during the period were ($26.7) million in the second quarter of 2004, compared with $82.1 million last year.

Investment income in the quarter was $23.5 million, which was two percent lower than the $24 million posted in the second quarter of 2003.