Financial Guarantors Post Record Revenue and Net Income in 2001; Insurance Written Reaches New High.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 17, 2002

The Association of Financial Guaranty Insurors (AFGI) today announced record 2001 results for the industry in aggregate revenues, net income and insurance written.

Further, AFGI members' financial strength, as measured by qualified statutory capital and unearned premium reserves, reached new highs. AFGI's nine member companies insure and reinsure municipal bonds and structured asset-backed securities (ABS), guaranteeing scheduled principal and interest payment to holders of insured obligations.

"By all measures, 2001 was an extraordinarily successful year for the financial guaranty industry," said David L. Boyle, Chairman of AFGI and Vice Chairman of Ambac Financial Group, Inc. "We've continued our record of increasingly successful financial results and of adding to our financial strength at a healthy rate. Further, the record level of demand for credit enhancement and insurance by both issuers and investors is a strong endorsement for the value of the financial guarantees AFGI members provide."

Financial Highlights

AFGI members' revenues, consisting primarily of net premiums earned and net investment income, totaled a record $2.47 billion in 2001, compared to 2000's $2.06 billion, a 20% increase. Net income in 2001 was $1.44 billion, up 14%, marking the seventh consecutive year of profit growth.

AFGI members' financial strength reached a new high in 2001. Qualified statutory capital increased 11% to a record $13.15 billion. Unearned premium reserves were a record $6.84 billion. This is an important number in the financial guaranty industry as bond insurance premiums are often collected in full when the securities are insured, and then booked as revenue by the insurer proportionately over the life of the bond. This conservative accounting treatment of unearned premium reserves results in a consistent and predictable earnings pattern unique to the bond insurance industry, and provides a major and highly transparent source of future revenue and claims-paying ability.

Record New Insurance Written

In 2001, AFGI members insured $371 billion in par value of securities -- 36% more than in 2000 and 27% more than the industry's previous record volume of $292 billion in 1998. Fueling the growth was the continued rapid expansion in the asset-backed market, with AFGI members insuring $219 billion in U.S. and international ABS, a 28% increase over last year's record. Institutional investors value the high quality and enhanced liquidity offered by insured ABS.

Municipal bond insurance in both the domestic and international markets was also very strong in 2001, with $152 billion insured, a 50% rise over 2000 and close to the industry record set in 1998. AFGI also experienced a return to insured penetration levels of about 50% of the U.S. municipal market, following a dip the previous year.

The industry attributed the increase in municipal issuance in 2001 to low interest rates, as well as capital spending that was frequently funded by debt because of lower tax revenues associated with a weaker economy. A weaker economy also underscored the value of AFGI-member guarantees to investors and of credit enhancements to issuers. AFGI estimates that credit enhancement saved municipalities approximately $3.4 billion in borrowing costs in 2001. Municipalities save because insured bonds receive the higher credit rating of the insurer, thereby lowering the borrowing rates on their bonds.

The industry's international business, comprising public finance and asset-backed securities (already accounted for in the municipal and ABS volumes described above), totaled $57 billion of par insured in 2001. This total is just less than the prior year's $59 million, which itself was a more than two-fold increase over 1999. Four years ago, the value of international par insured was only $17 billion. "We expect continued strong demand in the international marketplace for our financial guarantees," said Mr. Boyle. "AFGI-member insured securities help establish credit standards in the international marketplace and improve liquidity for securities that carry our guarantees."

About AFGI

AFGI is the trade association representing the nine insurers and reinsurers of municipal bonds and asset-backed securities. AFGI member companies are ACA Financial Guaranty Corporation, ACE Guaranty Re Inc., Ambac Assurance Corporation, Financial Guaranty Insurance Company, Financial Security Assurance Inc., MBIA Insurance Corporation, Radian Reinsurance Inc., RAM Reinsurance Company Ltd. and XL Capital Assurance Inc.

Eight AFGI member firms carry the triple-A claims-paying ability rating from one or more of the major credit rating agencies. One AFGI firm is, by design, a single-A insurer. To safeguard the rating of the insured obligations and to protect the interests of insured bond investors, AFGI firms focus on insuring securities with a low probability of default and, in the event of default, low severity of loss. In fact, all triple-A insurers subscribe to a "zero loss" or "remote loss" underwriting standard. Securities insured by AFGI members receive the unconditional guarantee of scheduled principal and interest payments to holders of these obligations. In the 30-year history of the financial guaranty industry, no issue insured by an AFGI member has ever been downgraded, and no member company has ever failed to fulfill its payment obligations to insured bond investors when due.

For complete financial tables, go to http://www.afgi.org/financial.htm .