Fitch Affirms MBIA's 'AAA' IFS Ratings.

NEW YORK -- Fitch affirms the 'AAA' insurer financial strength (IFS) rating of MBIA Insurance Corporation (MBIA) and the 'AA' long term debt rating of MBIA Inc., the parent company of MBIA. The Rating Outlook for both entities is Stable.

The 'AAA' IFS rating for MBIA reflects the company's leading market position in the financial guaranty industry, sufficient excess capital and claims-paying resources, an improving and diversified insured portfolio, and predictable, albeit moderating, earnings growth derived from its existing book of business. Rating concerns center on the significant competitive pressure within the financial guaranty industry and the company's higher concentration of below investment grade exposure relative to its established peers.

Financially, MBIA continues to generate consistent returns, which are expected of established companies in this industry. This has been accomplished in the last few years in a less attractive business environment, characterized by a more competitive underwriting and pricing environment on the macro-level that shows little sign of abating in the foreseeable future.

MBIA has produced its financial results under intense regulatory scrutiny related to formal investigations by the Securities and Exchange Commission (SEC), as well as other governmental and regulatory bodies. As a result of the investigations, MBIA completed its final settlement with the SEC, New York State Attorney General (NYAG) and New York State Insurance Department (NYSID) and paid $75 million for penalties and disgorgement of profits for which the company had taken a charge in the third quarter of 2005. Fitch has assessed that the final settlement of $75 million did not materially affect MBIA's financial profile and had no impact on the company's ratings. Fitch views positively the closure of these regulatory investigations.

The difficult pricing environment affecting the financial guaranty industry has been driven by tight credit spreads, resulting from a highly benign credit environment. Favorably, the strong credit markets have had a positive impact on the underlying credit quality of MBIA's insured portfolio. The amount of existing below investment grade exposures has declined quite noticeably in the past year or two. This development not only reduces the credit risk of the insured portfolio, but also reduces the amount of capital MBIA will need to hold to maintain its 'AAA' rating.

Reviewing capital adequacy, under Matrix, Fitch's proprietary capital model for financial guarantors, MBIA maintained a core capital adequacy ratio (CCAR) of 1.09 times (x) as of the assessment performed as of year-end 2005. The 1.09x CCAR ratio indicated that the company had about $1 billion of excess capital. Given the improvement in the underlying portfolio during 2006, the limited growth in outstanding par, and the build-up in capital, MBIA is expected to see further benefits to its Matrix model runs in the future. With that expectation, Fitch believes the parent company will be rather aggressive repurchasing shares in the future relative to its share repurchase activity in the past and its industry peers. To help fund a recent $1 billion share authorization, MBIA paid an extraordinary dividend of $500 million to its parent company prior to year-end 2006.

Fitch affirms the following insurer financial strength ratings at 'AAA' with a Stable Rating Outlook:

--MBIA UK Insurance Ltd.;

--MBIA Assurance, SA;

--Capital Markets Assurance Corp.;

--MBIA Insurance Corp.

Fitch also affirms the following:

MBIA Inc.

--Long-term debt 'AA'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.