Fitch Affirms Ratings on MBIA.

NEW YORK -- The 'AAA' insurer financial strength (IFS) rating of MBIA Insurance Corp. (MBIA) and the 'AA' long-term senior debt rating of parent holding company MBIA Inc. have been affirmed by Fitch (see full list of ratings below). The Rating Outlook for both entities remains Stable.

The 'AAA' IFS rating and Stable Outlook for MBIA reflect the company's leading market position in the financial guaranty industry and sizable base of claims-paying resources. Additionally, the ratings reflect the company's low-risk and diversified insured portfolio, predictable, albeit moderating earnings profile, and stable trading valuations in a challenging business environment. Concerns continue to focus predominantly on the, at times, less conservative management style employed by the company's management team relative to that of other well established 'AAA' rated financial guarantors, ongoing uncertainties related to existing regulatory investigations, significant competitive pressure within the financial guarantor industry, and noticeable below investment grade exposure relative to its established peers.

Operationally, MBIA continues to meet the financial profile necessary to achieve an 'AAA' IFS rating. This has been accomplished more recently in a less attractive business environment, characterized by a more competitive underwriting and pricing environment on the macro-level, as well as intense regulatory and other public scrutiny specifically centered on MBIA. These pressures have not unexpectedly slowed down new business production over the past year. Notwithstanding, through financial discipline and pro-active capital management, MBIA has been able to consistently maintain balance sheet and capital strength that meets Fitch's 'AAA' ratings guidelines.

Fitch recognizes that MBIA has been under intense regulatory scrutiny over the past year related to formal investigations by the Securities and Exchange Commission (SEC), the New York State Attorney General's Office, the U.S. Attorney's Office for the Southern District of New York, the New York State Insurance Department, and other external media reports. However, it is Fitch's expectations that the outcome of such investigations will not materially affect MBIA's financial capabilities or have an impact on its ratings.

It is Fitch's current understanding that the bulk of the regulatory review is centered on MBIA's well documented purchase of retroactive reinsurance related to losses suffered on its exposure to Allegheny, Health, Education, and Research Foundation (AHERF) back in 1998 and related earnings restatement in March of 2005 when evidence of a verbal-side agreement potentially negating risk transfer in the reinsurance agreement was uncovered. Subsequently, in August 2005, MBIA Inc. announced that it received a 'Wells Notice' from the staff of the SEC indicating that the staff is considering recommending that the SEC bring a civil injunctive action against MBIA related to the AHERF reinsurance transaction. It is Fitch's opinion that any civil fines or other restitutions, as well as potential additional restatements related to these investigations, should be manageable from a financial perspective.

Fitch has concerns that management at MBIA has at times demonstrated a pattern of behavior and decision making that could be viewed as aggressive. While Fitch makes this assessment recognizing that many of these issues have occurred over the course of many years, it does raise concerns about management's financial priorities in balancing its ratings with the needs of other constituencies, including its shareholders' desires for growth and high returns. These items include not only the AHERF reinsurance transactions but management's actions related to a subsidiary company, Capital Asset Research Corp., which subsequently led to the ill-fated decision by current management to ensure securitizations issued by this subsidiary that subsequently defaulted. More recently, current management was aggressive, in Fitch's view, in selling credit protection on its own name in 2005, as well as continuing its share repurchase program for MBIA Inc. stock during the past year, which Fitch views as financially unsuitable in light of the company's regulatory travails.

In reviewing these issues, Fitch has held numerous discussions with management on these issues and has received appropriate assurances that these are isolated events. To that end, Fitch also takes comfort that management and the board of directors have engaged an external consultant firm specializing in regulatory compliance matters, to help bolster the company's corporate governance structure on a go-forward basis. Fitch intends on discussing these and other issues in greater detail in its full report on MBIA Insurance Corp. that should be available in the next month.

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 $580.7 billion on a net par outstanding basis as of June 30, 2005, 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.

-- Insurer financial strength of 'AAA'.

MBIA Inc.

-- Long-term debt of '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.