Fitch Affirms MBIA Following Announcement of Settlement.

NEW YORK -- Fitch affirms the 'AAA' insurer financial strength (IFS) rating of MBIA Insurance Corp. and the 'AA' long-term debt rating of MBIA Inc. (collectively MBIA). The Rating Outlook for MBIA is Stable.

The affirmation follows today's announcement that MBIA has concluded civil settlements with the Securities and Exchange Commission (SEC), the New York State Attorney General's Office (NYAG), and the New York State Insurance Department (NYSID) with respect to questionable transactions entered into by MBIA in 1998 following defaults on insured bonds issued by the Allegheny Health, Education and Research Foundation (AHERF).

The terms of the settlement, which Fitch had been anticipating, include the following:

--A restatement, which was completed and reported in MBIA's third-quarter 2005 earnings release, of MBIA's GAAP and statutory financial results for 1998 and subsequent years related to the agreements with AXA Re Finance S.A. (AXA Re) and Muenchener Rueckversicherungs-Gesellshaft (Munich Re);

--Payment of penalties and disgorgement totaling $75 million;

--MBIA's consent to a cease and desist order with respect to future violations of securities laws;

--A report by MBIA's independent auditors, PricewaterhouseCoopers, to MBIA's board of directors, the SEC staff, the NYAG and the NYSID concerning MBIA's accounting for and disclosure of advisory fees and the assets of certain conduits;

--Retention of an Independent Consultant, which began work in the summer of 2006, to review and report to the SEC, the NYAG and the NYSID on the evaluation previously undertaken at the direction of the Audit Committee of MBIA's board of directors by Promontory Financial Group LLC of MBIA's controls, policies and procedures with respect to compliance, internal audit, governance, risk management and records management, MBIA's implementation of Promontory's recommendations, MBIA's accounting for and disclosure of its investment in Capital Asset Holdings GP, Inc., and MBIA's accounting for and disclosure of its exposure to the U.S. Airways 1998-1 Repackaging Trust and any other transaction in which MBIA paid or acquired all or substantially all of an issue of insured securities other than as a result of a claim under the related policy.

Fitch believes that the settlement announced today effectively brings the AHERF-related investigations against MBIA to a close. Additionally the $75 million accrual for penalties and disgorgement, which was made during the third quarter of 2005, did not materially affect MBIA's financial profile.

Fitch believes that in the past 18 months, MBIA's management and the board of directors have done a credible job of bolstering the company's corporate governance structure. Fitch remains in frequent dialogue with MBIA on this issue as well as the scope of the review being conducted by the independent consultant.

Based in Armonk, NY, MBIA is the largest financial guarantor in terms of net par outstanding and claims-paying resources. Its insured portfolio, which totaled $590.5 billion on a net par outstanding basis as of Sept. 30, 2006, includes exposure to municipal finance, structured finance, and international structured and public finance.

The following ratings are affirmed with a Stable Rating Outlook by Fitch:

MBIA Insurance Corp.

MBIA UK Insurance Limited

MBIA Assurance, S.A.

MBIA Insurance Corp. of Illinois

Capital Markets Assurance Corp.

--IFS at 'AAA'.

MBIA Inc.

--Long-term debt at '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.