Changing industry challenges municipal bond insurers to preserve Aaa ratings says Moody's.

NEW YORK--(BUSINESS WIRE)--May 16, 1995--In an overview of the municipal bond insurance industry released today, Moody's indicates that the industry remains strong and highly profitable despite the significant declines noted in the municipal market over the past year.

However, the report, `` Bond Insurers Confront Challenges of a Changed Industry'' notes that there have been substantial changes in the industry over the past five years. These changes point to a more difficult operating environment for the municipal bond insurers.

`` The next few years will define the future of the bond insurance industry,'' notes the rating agency. ``If a bond insurer makes preservation of its Aaa status its primary objective, that rating can be safeguarded, even in this difficult and rapidly changing environment".

Moody's went on to say, `` If an insurer attempts to enhance earnings by taking on significantly more risk, either through the expansion of its core operations or moving into new businesses, without raising or allocating sufficient capital to cover these risks, the company may jeopardize its Aaa status.''

Moody's cites the primary issues facing the bond insurers to be:

. Volume declines in the bond insurers' core municipal business

. The maturing of their core business

. Pressure to maintain returns such as the industry enjoyed

during 1992 and 1993, which could result in the companies

assuming more risk

. Management efforts to increase returns through diversification

while maintaining the claims-paying ability of the company at

the Aaa level.

Separate company reports focusing on the Aaa-rated insurance financial strength of each of the bond insurers will be issued within two weeks. `` The individual reports will stress analysis of the factors we think are most significant for each particular company'', notes Moody's.

The Aaa-rated bond insurers are: AMBAC Indemnity Corporation, Capital Guaranty Insurance Company, Capital Markets Assurance Corporation, Financial Guaranty Insurance Company, Financial Security Assurance Inc., and MBIA Insurance Corporation.

CONTACT: For information on municipal bond insurers:

Wiliam deSante, [phone]

Nicholas Ferreri, [phone]

or

For information on FSA and CapMAC:

John J. Kriz, [phone]

William Boak, [phone]