Financial Guarantors Project Slight Increase in 2004 Par Value of Insured International Securities, Substantial Growth Seen for 2005.

LONDON -- Survey Finds International Investors Bullish on Growth Of Capital Markets and Insured Securities

The Association of Financial Guaranty Insurers (AFGI) expects its member firms' aggregated volume of insured international securities, which exclude securities from the United States, to increase 4 percent in 2004 to $US61.2 billion and grow substantially in 2005. AFGI's ten member companies are highly rated insurers and reinsurers of municipal bonds and structured asset-backed securities.

AFGI announced the projections today at its first European conference, "The Role of the Monolines in Europe - A Look Forward." Results of an AFGI survey of 74 institutional investors, also announced at the conference, project growth in the issuance of public infrastructure and asset backed securities throughout Europe over the next five years. Further, the survey confirms an expected increase in insured securities, particularly in the PFI/PPP (private finance initiatives/public-private partnerships) sector.

"AFGI members expect to end 2004 with combined par value of insured international securities higher than last year, and we are strongly bullish about the international prospects for the financial guaranty industry in 2005 and beyond," said Neil G. Budnick, Chairman of AFGI and President of MBIA Insurance Corporation. "Further, our institutional investor survey largely corroborates AFGI's optimism."

By sector, AFGI projects that international asset-backed par insured will total $US48.3 billion in 2004, up from $US45.0 billion last year. International public sector par insured is expected to total $US12.9 billion in 2004, a decrease from record volume of $US13.9 billion in 2003 but the second highest total in the history of bond insurance. Looking to 2005, AFGI members expect par volume to grow significantly higher in both sectors.

Growth of insured international securities has been dramatic. International public sector insured volume quadrupled from 1998 to 2003, and asset-backed par insured volume tripled. The first insured international security was issued in 1986.

Survey of International Institutional Investors

International institutional investors expect the use of the capital markets to increase. Eighty-four percent of the institutional investors participating in AFGI's survey say that asset-backed transactions will increase substantially or moderately over the next five years, and 83 percent expect public infrastructure transactions to increase substantially or moderately.

More than half of the investors think that the volume of public infrastructure and asset-backed securities will increase in Spain, Germany, the United Kingdom, Italy and France. Forty-three percent predict an increase in Central Europe, and 41 percent predict an increase in Eastern Europe.

Insurance of securities is also forecast to increase. Eight-four percent of surveyed investors anticipate a rise in insured PFI/PPP transactions, and almost half (46%) expect an increase in insured CDOs, or collateralized debt obligations. Thirty-four percent expect an increase in insured commercial receivables, followed by 19 percent anticipating growth in insured consumer receivables. Demand for insurance may be driven in part by pension reform initiatives across Europe, according to 45 percent of investors.

"Investors anticipate an increase in capital markets executions, which bodes well for our industry, and they foresee other factors, like pension reform, driving the demand for our member firms' financial guarantees," said AFGI's Mr. Budnick. "Within the increasingly complex capital markets, an important added advantage of financial guaranty insurance is that it simplifies the story for investors.

"Because PFIs are complex, AFGI members' guarantees should contribute to investor confidence and demand for the securities," explained Mr. Budnick. "Further, we expect increasing investment in public services, ranging from hospitals to highways, with heightened demand coming from the new member countries of the European Union. On the asset-backed transaction side, we see an expanding appreciation among issuers and investors for the benefits of our credit enhancements," Mr. Budnick concluded.

International institutional investors from commercial banks, mortgage lenders, asset management firms, and investment banks participated in the survey, conducted online in November. Institutional assets under management ranged from under EUR 5 billion (19%) to more than EUR 50 billion (37%).

AFGI Conference

AFGI's volume projections and results of their survey reflecting institutional investors' forecasts were announced at the AFGI conference attended in London on December 2 by international institutional investors. The conference explored the many facets of financial guaranty insurance. Investment bankers, rating agency analysts, institutional investors, a leading structured finance analyst and the insurers made presentations and participated in panel discussions.

About AFGI

AFGI's ten member companies, highly rated insurers and reinsurers of public sector bonds and structured asset-backed securities, provide an unconditional and irrevocable guarantee of scheduled interest and principal payment on the securities they insure. The insurance provides enhanced securities distribution and borrowing cost savings for issuers because securities guaranteed by AFGI members carry the higher claims-paying ratings of the insurers. AFGI member companies have offices in Australia, Bermuda, France, Italy, Japan, Singapore, Spain and the United Kingdom, as well as the United States. The first insured bond was issued in 1971 in the United States.

Today AFGI companies provide credit enhancements for a full range of issues, including public sector infrastructure and project financings; securitizations backed by trade receivables, other corporate assets and consumer assets; structured finance transactions; and sovereign and quasi-sovereign debt. In the history of the financial guaranty industry, no AFGI member company has ever failed to fulfill its payment obligations on an insured security when due.

AFGI member companies are ACA Financial Guaranty Corporation, Ambac Assurance Corporation, Assured Guaranty Corp., CDC IXIS Financial Guaranty North America, Inc., Financial Guaranty Insurance Company, Financial Security Assurance Inc., MBIA Insurance Corporation, Radian Asset Assurance Inc., RAM Reinsurance Company Ltd. and XL Capital Assurance Inc.