In the News:

NEW YORK, April 23, 2003 – By all measures, the financial guaranty industry had its most successful year ever in 2002. In aggregate, members of the Association of Financial Guaranty Insurors (AFGI) reported a record volume of insurance written, both municipal bonds and asset-backed securities, as well as record qualified statutory capital, unearned premium reserves, revenues and net income.

AFGI's nine member companies, highly rated insurers and reinsurers of municipal bonds and structured asset-backed securities, provide an unconditional and irrevocable guarantee of scheduled interest and principal payments of their insured securities. Bonds insured by AFGI companies carry the claims-paying ratings of the insurers, resulting in a lower cost of funding. AFGI estimates that in 2002 U.S. municipal issuers saved approximately $2.8 billion in borrowing costs because of the lower interest rates resulting from the insurers' ratings on the bonds. Since the inception of municipal bond insurance in 1971, borrowing cost savings are estimated to total more than $35 billion nationwide.

David L. Boyle, Chairman of AFGI and Vice Chairman of Ambac Financial Group, Inc., provided the following commentary on the industry and 2002 results: "We're proud of the industry's 2002 performance and the value we bring to all our constituents: issuers, taxpayers, investors and the general public.

"Our industry benefited this year from many marketplace forces. Municipal bond issuance was driven in 2002 by lower interest rates, critical infrastructure needs, and state and local governments' funding shortfalls. Further, the value of an unconditionally insured security by a monoline insurance company is heightened during a time of investor wariness. We look forward to a continued robust pace of new issuance in 2003 as governments take advantage of the low-interest rate environment to fund their budget gaps.

"In the asset-backed segment, AFGI member firm insurance has grown and is continuing to grow at a responsible pace, both domestically and internationally, while penetration in the corporate area of collateralized debt obligations and credit default swaps is plateauing.

"Finally, we expect continued strong demand in the international marketplace for our financial guarantees – for both public finance infrastructure and asset-backed securities. Financial guaranty products help establish credit standards in the international marketplace and improve liquidity for securities that carry our guarantees.

"Across all security types, AFGI member firms employ their own proprietary, stringent risk management assessments to ensure the overall high quality of securities being insured. Effective risk management can mitigate or eliminate potential claims that an insurer may face, and while the need for claims payments is infrequent, we carefully analyze the causes behind any loss. This year our loss ratio, though higher than in the recent past, remained extremely low, demonstrating the robustness of our business model.

"2002 results are a testament to the industry's model, which has performed well through over 30 years of business cycles. We are an industry whose individual members are highly competitive, but share a commitment to serving issuers and protecting investors. We continue to be strongly optimistic for our industry's prospects in 2003 and beyond."

Record New Insurance Written In 2002, AFGI members insured $431.2 billion in par value of securities -- 16% more than the industry's previous record volume of $370.5 billion written in 2001. Fueling the growth was demand in both the asset-backed and municipal markets. Continuing a trend begun in 1999, asset-backed direct par insured eclipsed the value of insured municipal bonds, but not by as a wide a margin.

AFGI members insured $228.7 billion in U.S. and international asset-backed securities, a 5% increase over last year's record. Institutional investors value the high quality and enhanced liquidity offered by insured ABS.

Municipal bond insurance in both the domestic and international markets reached a record $202.5 billion insured, a 33% rise over 2001 and eclipsing the industry record set in 1998 by 18%. Insured penetration levels were close to 50%.

The industry's international business, comprising public finance and asset-backed activity (already accounted for in the municipal and ABS volumes described above), totaled $71.3 billion of par insured in 2002, beating the record $59.3 billion set in 2000 by 20%. Five years ago, the value of international par insured was only $17 billion.

Financial Strength AFGI members' financial strength reached a new high in 2002. Qualified statutory capital increased 12% to a record $14.8 billion. Unearned premium reserves were a record $7.7 billion. This is an important number in the financial guaranty industry as bond insurance premiums are often collected in full when the securities are insured, and then booked as revenue proportionately over the life of the bond. This conservative accounting treatment of unearned premium reserves results in a consistent and predictable earnings pattern unique to the bond insurance industry, and provides a major and highly transparent source of future revenue and claims-paying ability.

Revenues and Net Income AFGI members' revenues, consisting primarily of net premiums earned and net investment income, totaled a record $2.9 billion in 2002, beating 2001's record revenues by 19%. Net income was $1.6 billion, up 13%, making 2002 the eighth consecutive year of profit growth.

About AFGI AFGI is the trade association representing the nine insurers and reinsurers of municipal bonds and asset-backed securities. AFGI member companies are ACE Guaranty Corp., Ambac Assurance Corporation, CDC IXIS Financial Guaranty North America, Inc, Financial Guaranty Insurance Company, Financial Security Assurance Inc., MBIA Insurance Corporation, Radian Reinsurance Inc., RAM Reinsurance Company Ltd. and XL Capital Assurance Inc.

All AFGI member firms carry the triple-A or double-A claims-paying ability rating from one or more of the major credit rating agencies. Further, the financial guarantors operate under the strict risk-based capital provisions of Article 69 of the New York Insurance Law. To safeguard the rating of the insured obligations and to protect the interests of insured bond investors, AFGI firms subscribe to a "zero loss" or "remote loss" underwriting standard. Securities insured by AFGI members receive the unconditional guarantee of scheduled principal and interest payments to holders of these obligations. In the 32-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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