The financial guaranty market is "lacklustre", Ram Re's chief executive officer said this week, but the reinsurer's profit improved by 54 percent in the third quarter.

Another financial guarantee insurer and reinsurer, Assured Guaranty, reported a slight decline in net income.

Ram Re said net income to September 30 was $12.2 million, or 45 cents per diluted share, a 54 percent and 50 percent increase, respectively, compared to net income and diluted earnings per share in the third quarter of 2005 of $7.9 million and 30 cents.

Ram Re CEO Vernon Endo said: "We are quite pleased with our results, particularly given the overall lacklustre financial guaranty market, and they are generally consistent with our expectations.

"We note that a part of our very favourable quarter to quarter net income comparison is explained by a large amount of accelerated premiums from refundings, which contributed approximately $1.8 million to net income in the third quarter of 2006 compared to $0.5 million in 2005.

In addition, we enjoyed a quarter in which we experienced virtually no incurred losses, the combined result of the absence of net case reserves activity coupled with a stable level of unallocated reserves. We are more than happy with these developments but, unfortunately, they are not a sustainable part of our business at these levels.

"Even without these elements Ram's net income increased substantially over 2005. Our current earnings growth continues to be driven by increased investment income, a result of the growth in our invested assets and improvement in our book yield, as well as the growth in earned premium.

"As we had anticipated and suggested within our second quarter earnings announcement, third quarter business production as measured by adjusted premiums written improved significantly compared to the first half of the year and through the first nine months of 2006 it is only slightly below 2005 levels."

Assured Guaranty reported net income of $37.9 million, or 51 cents per diluted share, for the third quarter compared with net income of $39.2 million, or 53 cents per diluted share, for the third quarter of 2005.

Operating income rose to $39 million, or $0.53 cents per diluted share, for the third quarter of 2006 compared with $38.9 million, or 52 cents per diluted share.

"Our third quarter demonstrated the further expansion of our direct financial guaranty franchise, as we continued to achieve higher levels of market penetration across most asset classes, while building a future revenue stream comprised of highly-rated business.

In addition, our reinsurance operation continued to add value to its clients, as it posted significant growth over the prior year," noted Dominic Frederico, chief executive officer of Assured Guaranty Ltd.