Assured Guaranty’s shares rose 3.5 per cent yesterday as the Bermuda-based bond insurer’s second-quarter profits beat expectations and fears over its exposure to Puerto Rican debt eased.

Net income for the April-through-June period totalled $297 million, up from $159 million in the corresponding period of last year.

Operating income, which strips out extraordinary items, totalled $278 million, or $1.83 per share — nearly triple the 63 cents per share consensus forecast of analysts tracked by Yahoo Finance.

Assured has previously stated it has around $4.9 billion of net exposure to Puerto Rico and $12 billion in claims-paying resources. It also generates $400 million from its investments portfolio.

Municipal bonds claims are paid out over the duration of the bond and not all at once. Assured has a AA financial strength rating from Standard & Poor’s.

In its earnings statement, Assured described how it raised its expectations for losses from its insured portfolio by $192 million because of the worsening situation in the US Caribbean island.

“Following the developments in Puerto Rico and the governor’s speech claiming that its public debt, considering the current level of economic activity, is unpayable, the company internally downgraded all its Puerto Rico exposures,” Assured stated.

Dominic Frederico, the company’s chief executive officer, described the second-quarter results as “excellent”.

“Operating income reached a record $278 million, with the closing of our Radian Asset acquisition providing a significant benefit,” Mr Frederico said.

“We also further strengthened our balance sheet, and we continue to be the industry leader, insuring nearly two-thirds of the US municipal insured par sold during the quarter.

“Lastly, on June 29, S&P affirmed our AA stable financial strength ratings in its annual review of the company, and we estimate that at December 31, 2014 we had $1.9 billion of excess capital above their AAA requirement.”

After Puerto Rico’s governor Alejandro Garcia Padilla said in June that the island could not afford to pay its debts, shares of exposed bond insurers plunged. Assured slid nearly 20 per cent after the comments.

Since then Assured shares have recovered some of the lost ground and yesterday they closed at $25.41, up 87 cents, or 3.5 per cent.

This week, Puerto Rico actually defaulted by paying only a fraction of what was due on its Public Finance Corp bonds, though none of those bonds were insured. About $13 billion of Puerto Rico’s $72 billion debt load is insured.