Fitch Affirms CIFG Guaranty's 'AAA' IFS Rating.

NEW YORK -- Fitch affirms the insurer financial strength ratings for CIFG Guaranty and its two subsidiaries, CIFG Assurance North America, Inc. and CIFG Europe (collectively, CIFG), at 'AAA'. The Rating Outlook for CIFG is Stable.

Fitch's affirmation reflects the financial strength and commitment of CIFG's ownership, increased profitability and new business production, excess capital support relative to the current insured portfolio, and a low-risk business platform, which has resulted in no incurred losses since inception. Concerns center on CIFG's ability to compete with larger, established 'AAA' primary financial guaranty companies and the resulting trading disparity, concentration to the collateralized debt obligation (CDO) sector at both the senior most and highly rated mezzanine levels, and notable participation as a provider of financial guaranty reinsurance. Highly rated mezzanine CDO exposure is defined as CDO exposure that is of a very high attachment point (typically 'AAA' or higher) but that is mezzanine to one or more tranches in the overall transaction's capital structure. Although of a very high credit quality, and thus, a low probability of default, such exposures pose the potential for higher loss given default relative to the senior most tranche.

Since the initial licensing of its financial guaranty operations in 2001, CIFG has insured a variety of municipal and structured finance exposures. However, CIFG's $24.7 billion of net par insured exposure as of Dec. 31, 2004, is not yet of the scale or diversity of the larger, more established 'AAA' rated financial guaranty companies. As a result, CIFG currently benefits from an excess capital position, as reflected by its operating leverage ratio of 37.8 times (x) pro forma qualified statutory capital as of Dec. 31, 2004. However, Fitch adjusts this ratio, for comparative analytical purposes, to include the $37.3 billion of par exposure above CIFG's mezzanine exposure. Including this exposure would increase CIFG's operating leverage ratio to 94.9x pro forma qualified statutory capital.

CIFG continues to take positive steps towards expanding its market position as a provider of financial guaranty insurance. The company increased its profitability in 2004 and also grew its insured book of business. Fitch would note, however, that CIFG continued to underwrite significant amounts of highly rated mezzanine CDO exposure, as well as other exposures assumed from third parties under reinsurance agreements. Fitch views these as nontraditional lines of business for an 'AAA' rated financial guaranty insurance company, and as such, will monitor CIFG's future participation and profitability in these areas. CIFG also remains at a competitive disadvantage to the larger, more established financial guarantors due to capacity constraints and suboptimal pricing metrics. These challenges have been further exacerbated by the current competitive market environment, which has put downward pressure on premium pricing across all financial guarantors.

As of Dec. 31, 2004, CIFG had no below investment-grade exposure, case-basis reserves, or exposures on its internal credit watchlist. However, credit deterioration of two insured residential mortgage-backed security exposures caused CIFG to downgrade these exposures to below investment grade in July 2005. As of Dec. 31 2004, CIFG's net par exposure to the two transactions totaled $232.4 million, or 0.9% of total net par insured, although prepayments in the first half of 2005 reduced CIFG's insured exposure to approximately $130 million. Fitch believes future claims on these transactions are possible, although manageable, for CIFG.

The ownership transition of CIFG was completed in early 2005, under which CDX IXIS, CIFG's former parent company, was absorbed by Caisse Nationale des Caisses d'Epargne (CNCE, rated 'AA/F1+' by Fitch). CNCE is 65% owned by Groupe Caisse d'Epargne (rated 'AA/F1+' by Fitch) and 35% owned by Caisse des Depots et Consignations (rated 'AAA/F1+' by Fitch). In January 2005, CIFG Holding obtained a $200.0 million committed debt facility from CNCE, $90.0 million of which was immediately drawn upon and contributed to CIFG. Fitch views this capital contribution as further evidence of the ongoing commitment of CIFG's ownership.

The following ratings are affirmed by Fitch:

CIFG Guaranty

CIFG Assurance North America, Inc.

CIFG Europe

-- Insurer financial strength at 'AAA'.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies, and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.