NEW YORK, April 23, 2001 - The Association of Financial Guaranty Insurors (AFGI) today announced strong aggregate industry results for the year 2000. AFGI's ten member companies, which are highly-rated primary insurers and reinsurers of municipal, asset-backed and structured securities, provide an unconditional and irrevocable guaranty of scheduled principal and interest on insured bonds. Bonds insured by the AFGI member companies carry the claims-paying ratings of the insurers, resulting in a lower cost of funding and broader distribution of bonds for issuers-governments and government agencies, financial institutions and asset managers. Insured bonds offer investors due diligence, surveillance and enhanced liquidity, in addition to the guaranty.

In 2000, AFGI members insured $273 billion in par value of asset-backed
securities and municipal bonds, almost equal to 1999's record par amount. The par value of asset-backed securities (ABS) insured in 2000 by AFGI members reached a record $171.3 billion, up 21% over the previous year's amount. ABS insured by AFGI members comprise an expanding range of securities backed by residential mortgages, consumer receivables, and pools of corporate bonds and loans. The industry's international business, which represented 22% of new par originated, more than doubled in 2000.

Continuing a trend noted in 1999, the volume of structured ABS insured by AFGI members exceeded the volume of insured municipal bonds, which totaled $101.64 billion in 2000. This total is below that of the year before, reflecting both reduced new issue volume in the municipal market and a decline in insured penetration to 40% from 46%. Municipal new issue volume was down 12% in part because the strong economy created budget surpluses that reduced the need of many issuers to access the capital markets to fund capital expenditures. In addition, the interest rate environment limited refunding activity. The reduced penetration was due to both higher premium rates and more stringent credit selectivity.

Robert P. Cochran, Chair of AFGI and Chairman and CEO of Financial Security Assurance, said: "2000 was an excellent year for the financial guaranty industry, continuing the industry's strong record of sustained profitability. Despite the decline in municipal originations, the business continued to be well diversified across the municipal and asset-backed sectors, and the industry is adding to its financial strength at a pace well ahead of originations.

"The outlook for 2001 is very favorable," he added. "We expect modest growth in our U.S. municipal business as volume increases in response to falling interest rates. The asset-backed business continues to be robust, and the international business is expanding."

International Growth
The par amount of insured international issues (already reflected in the total volumes of insured ABS and municipals) reached a new high of $59.30 billion in 2000. Internationally, AFGI firms insure infrastructure and project financings, local government issues, asset securitizations, structured finance transactions, and sovereign and quasi-sovereign debt.

"A number of trends -- globalization, privatization, bank disintermediation and increasing regulatory capital requirements for financial institutions -- are converging to create demand for insured bonds in the international public infrastructure and asset-backed markets," Mr. Cochran said. "We believe that financial guaranty products are an important catalyst in the continuing expansion of global markets, helping to set credit standards and improving liquidity in many sectors," he added.

Taxpayer Savings
On the domestic front, municipal bonds insured by AFGI members in 2000 saved municipalities and their taxpayers approximately $2.3 billion in borrowing costs based on the lower funding cost that results from the bond insurers' ratings on the bonds. Since the inception of municipal bond insurance in 1971, AFGI estimates that savings have totaled approximately $30 billion nationwide.

Financial Strength
AFGI members' financial strength continued to grow in 2000. Qualified statutory capital, comprising policyholders' surplus and contingency reserves, increased to a record $11.85 billion, and unearned premium reserve reached a record $6.39 billion. The unearned premium reserve consists of municipal bond insurance premiums that have already been collected but have not yet been booked as revenue, an accounting requirement that ensures a steady income stream for financial guarantors.

Nine AFGI member firms carry the Triple-A claims paying ability rating from one or more of the major credit rating agencies. One AFGI firm is, by design, a Single-A insurer. To safeguard their ratings of the insured obligations and to protect the interests of insured bond investors, AFGI firms focus on insuring securities with a low risk of default. In fact, all Triple-A insurers subscribe to a "zero loss" or "remote loss" underwriting standard.

Other Financial Highlights
AFGI members' net income in 2000 was $1.26 billion, exceeding 1999's record result and recording the sixth consecutive year of profit growth. Revenues, which consist of net premiums earned, net investment gain, and other income, reached $2.06 billion, also an increase over 1999.

AFGI
AFGI is the trade association representing the ten insurers and reinsurers of municipal bonds and asset-backed securities. AFGI member companies are ACA Financial Guaranty Corporation, ACE Guaranty Re Inc., Ambac Assurance Corporation, AXA Re Finance S.A., Enhance Reinsurance Company, Financial Guaranty Insurance Company, Financial Security Assurance Inc., MBIA Insurance Corporation, RAM Reinsurance Company Ltd. and XL Capital Assurance Inc.

Securities insured by AFGI members receive the unconditional guarantee of scheduled interest and principal payments to holders of these obligations. In the nearly 30-year history of the financial guaranty industry, no issue insured by an AFGI member has ever been downgraded, and no member company has ever failed to fulfill its payment obligations to insured bond investors when due.

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