Fitch Expects to Rate Louisiana Citizens' $1B Assessment Revenue Bonds 'BBB'.

CHICAGO -- Fitch Ratings is expected to assign a 'BBB' Issuer Default Rating (IDR) to Louisiana Citizens Property Insurance Corporation (LA Citizens), and 'BBB' underlying ratings to LA Citizens' $708.2 million assessment revenue bonds, series 2006B, and $300 million assessment revenue bonds, series 2006C (auction rate). The Rating Outlook is Stable. Fitch also expects to assign 'AAA' insured ratings to the bonds given that they will be insured with an unconditional guarantee of principal and interest.

This debt is being issued to finance the $954 million 2005 plan-year deficit in the company's FAIR plan that resulted from over $1 billion in estimated losses from Hurricanes Katrina and Rita.

The ratings reflect LA Citizens' state-authorized power to assess its assessable insurers as a pass-through vehicle to property insurance policyholders in Louisiana, and the high credit quality of that assessable insurer base and the strong general obligation rating of the State of Louisiana (rated 'A' by Fitch; Rating Watch Negative). Weighted against these positives are the nature of exposure to windstorm catastrophes, the sizable amount of debt to service relative to the available amount of emergency assessments, which are the debtholders' primary repayment source, and the uncertainty with respect to the ability of the state's economy to recover.

LA Citizens' ability to service debt depends not so much on the strength of individual insurers, but on the viability of the voluntary property/casualty insurance market in Louisiana going forward. One positive is that the Louisiana insurance market has benefited from reforms over the last several years which have led to market pricing that has become more actuarially sound, along with increased market capacity. Nevertheless, the 2005 hurricane losses have caused some insurers to reduce their exposure in the state, particularly for wind coverage. In addition, future storms that result in above-average losses would put more strain on the market. This could result in reduced capacity in the voluntary market as insurers lessen their exposure. Also, any additional future assessments and premium rate increases could put an added strain on policyholders.

Given the magnitude of the hurricane-related losses, there is also uncertainty with respect to the ability of Louisiana's overall economy to recover for the foreseeable future. There is a risk that a sizable portion of the population will not return to the New Orleans area to rebuild, making it more difficult to rebuild a strong economy and growing tax base in the state.

LA Citizens is a non-profit, tax-exempt entity that provides coverage for those unable to obtain property insurance in Louisiana's voluntary market. The company was created by the Louisiana State Legislature in 2003, effective Jan. 1, 2004, to improve the conditions of the residual insurance market and decrease its competitiveness with the voluntary market. LA Citizens became the administrator for two existing plans -- the FAIR Plan and the Coastal Plan.

The following ratings are expected to be assigned with a Stable Outlook:

Louisiana Citizens Property Insurance Corporation

-- Issuer Default Rating (IDR) 'BBB';

-- $708.2 million assessment revenue bonds, series 2006B, due 2023 'BBB';

-- $300 million assessment revenue bonds, series 2006C (auction rate), due 2026 'BBB'.

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.