Bermuda-based financial guarantor Assured Guaranty Ltd. last night announced profit of more than half a billion dollars for the second quarter — more than 16 times what the company made in the same period last year.

Most of the improvement related to a $518.3 million increase in after-tax unrealised gains on credit derivatives over the second quarter of 2007.

The company said it generally held its credit derivatives to maturity and management expects that the unrealised gain or loss on a credit derivative will reduce to zero as the exposure approaches its maturity date, unless there is a payment default.

The company, which has massively increased its share of US municipal bond business during the first half of this year, when it was one of only two guarantors without its AAA rating under threat.

But last month Moody's put the company's ratings under negative review for downgrade.

In Assured's earnings statement, chief executive officer Dominic Frederico said the company had been in talks with Moody's aimed at "potential solutions".

Billionaire investor Wilbur Ross, who has pledged to plough $1 billion into Assured, said Moody's action was unjustified.

"With regard to Moody's decision to place our ratings under review for possible downgrade, we hope that Moody's will reach a timely and favourable resolution and are committed to working with them to achieve this," Mr. Frederico said.

"We have had several discussions with them in the past two weeks and expect several more meetings and discussions to occur as we look to get more clarity on their specific issues and potential solutions."

Assured reported net income of $545.2 million ($5.97 per diluted share) for the second quarter, compared to net income of $32.8 million ($0.47 per diluted share) for the same period last year.

Operating income was $38.7 million ($0.42 per share) during the period, compared to operating income of $46.7 million ($0.68 per share) in the second quarter of 2007.

The company said the decrease in operating income was principally due to $38.1 million of pre-tax loss and loss adjustment expenses in the second quarter of 2008 compared to a pre-tax loss and loss adjustment recovery of $9.8 million in the same period of 2007.

US public finance credit derivative gross written premiums in the financial guaranty direct segment reached a company record $183.2 million, compared to $15.4 million in the second quarter of 2007.