NEW YORK - The member firms of the Association of Financial Guaranty Insurers (AFGI) insured a record $466.6 billion in par value of municipal bonds and asset-backed securities in 2004. Also reaching record levels were aggregated revenues of $3.7 billion and aggregated net income of $1.9 billion, representing ten straight years of profit growth. Qualified statutory capital, an important measure of the insurers’ financial strength, showed double digit growth for the fourth consecutive year, and reached $19.1 billion.

Neil G. Budnick, AFGI Chairman and President of MBIA Insurance Corporation, said, "In 2004, the financial guaranty industry’s performance continued to advance by virtually all measures. We are extremely proud of our growth, both domestically and internationally, particularly during the last decade. Our long-term financial performance attests to the economic value of AFGI members’ financial guarantees to issuers and investors and our important role within the global capital markets."

AFGI’s eleven 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 on the securities they insure. Issuers benefit from enhanced securities distribution and borrowing cost savings resulting from the credit enhancement of their insured securities. Results for 2004 do not include AFGI’s newest member, BluePoint Re Limited, which joined the association in the first quarter of 2005.

ABS Drive Growth, Public Sector Still Strong
AFGI’s $466.6 billion in par insured volume in 2004 - including domestic and international public sector bonds and asset back securities (ABS) – was 19% higher than the prior year’s volume of $391.5 billion and 8% higher than the previous high of $431.2 billion in 2002.

AFGI estimates that in 2004 U.S. municipal bond insurance saved taxpayers more than $2 billion because of the lower cost of funding for issuers of insured bonds. Since the inception of municipal bond insurance in 1971, borrowing cost savings are estimated to total more than $37 billion nationwide.

Internationally, par insured volume totaled $58.5. The volume of international public sector par insured reached $11.7 billion, down from 2003’s record $13.9 billion but significantly higher than in prior years. International asset-backed par insured was up, increasing 4% to $46.8 billion. While international business was virtually flat in 2004 compared to 2003, it is viewed by AFGI as a growth market for financial guaranty insurance.

Financial Strength
AFGI members' financial strength continued its growth in 2004. Revenues (consisting primarily of net premiums earned and net investment income) of $3.7 billion represented a 6% increase over record 2003 revenues of $3.4 billion. Net income in 2004 was $1.9 billion, up 3% from the prior high of $1.8 billion in 2003. Qualified statutory capital (comprising policyholders’ surplus and contingency reserves) increased 13% to $19.1 billion from $17.0 billion. Unearned premium reserves increased 15% to $10.6 billion, from $9.2 billion in 2003. Bond insurance premiums are often collected in full when securities are insured, and then booked as revenue proportionately over the life of the bond. This accounting treatment of unearned premium reserves contributes to a consistent and predictable earnings pattern unique to the bond insurance industry. AFGI members’ qualified statutory capital and unearned premium reserves have increased every year since the inception of the association.

About AFGI
AFGI is the trade association representing the eleven insurers and reinsurers of municipal bonds and asset-backed securities. AFGI member companies are ACA Financial Guaranty Corporation, Ambac Assurance Corporation, Assured Guaranty Corp., BluePoint Re Limited, CIFG Assurance North America, Inc., Financial Guaranty Insurance Company, Financial Security Assurance Inc., MBIA Insurance Corporation, Radian Asset Assurance Inc., RAM Reinsurance Company Ltd. and XL Capital Assurance Inc.

All AFGI member firms 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 34-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.

Posted: July 2005

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