AFGI's nine member companies insure and reinsure municipal bonds and structured asset backed securities, guaranteeing scheduled principal and interest payment to holders of insured obligations.

Financial Highlights
AFGI members' revenues, consisting of net premium earned, net investment gain, and other income, totaled $2.06 billion in 1998, compared to $1.67 billion in 1997, a 23% increase. Net income in 1998 was $1.18 billion, a 20% increase over 1997's record $980 million.

"The financial guaranty business is thriving," said Ann C. Stern, Chair of AFGI and Chairman, President and CEO of the Financial Guaranty Insurance Company (FGIC). "The industry's excellent financial performance in 1998 underscores the value of bond insurance to both issuers and investors. Further, our industry directly feels the impact of the marketplace, and 1998 was an extraordinarily active year," she added.

Municipal Par Insured and Penetration Hit Records
The total par value of municipal securities insured by AFGI member firms grew 43% to a record $171.6 billion last year, up from $119.8 billion in 1997. This figure includes domestic and international securities, both new issue and secondary market. According to Securities Data Co. (SDC) as reported in The Bond Buyer, an industry publication, more than half, or a record 51%, of new-issue municipal bonds were insured in 1998. According to SDC, market penetration was 48% in 1997 and 46% in 1996. New municipal bonds, including new money and refundings, totaled $286 billion in 1998, the second biggest year ever.

$3.7 Billion Saved
Insured municipal bonds saved municipalities approximately $3.7 billion in borrowing costs in 1998, a record amount. Insured bonds receive the higher credit rating of their insurer, and this credit enhancement lowers borrowing costs for the issuer. AFGI estimates that savings have totaled over $25 billion nationwide since the inception of municipal bond insurance in 1971.

Insured Asset-Backed Securities: Records in Par Value and Penetration
AFGI firms insured $120.1 billion of asset-backed and mortgage-backed securities in 1998, a 30% increase over the record $92.6 billion insured in 1997. According to Asset Sales Report, 26% of all domestic asset-backed securities issued in 1998 were insured.

International Expansion Continues
AFGI firms further expanded into the international securities market, insuring $19.5 billion of municipal and asset-backed debt. The 17% increase over the $16.7 billion par insured in 1997 points to the continuing momentum in this sector of the financial guaranty business.

Financial Strength Reaches New High
The industry's capital base reached an all-time high in 1998. AFGI's qualified statutory capital, comprised of policyholders' surplus and contingency reserves, increased to a record $9.83 billion, up 11% over 1997's $8.85 billion. Qualified statutory capital has risen annually, growing at an average annual rate of 14% since 1993.

AFGI firms' direct premiums written in 1998 increased 18% to $1.57 billion from $1.33 billion, while net premiums earned in 1998 were up 17% to $933 million from $797 million in 1997. Insurance premiums for municipal bonds are typically paid in full by the issuer when the securities are insured, and then earned by the insurer proportionately over the life of the bond. This long and predictable earnings pattern is unique to the bond insurance industry, and provides a major and visible source of future revenue and claims-paying ability. AFGI firms' unearned premium reserve in 1998 was $5.72 billion, 9% greater than the previous year's record of $5.27 billion.

Ms. Stern noted that the regulation of minimum capital and surplus, contingency and loss reserves, and aggregate and single risk limits are part of the controls required of the financial guaranty industry. "From state insurance departments and financial guaranty legislation, to the credit rating agencies and AFGI members' own controls, our industry is very highly regulated, and we support that regulation. It's essential to protecting bondholders and maintaining the integrity of our credit ratings."

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

In the 28-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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TABLES FOLLOW

Association of Financial Guaranty Insurors
Members' Combined Financial Highlights
Summary for the Years Ended December 31,
(Amounts in $ millions)					1998			1997			1996			1995			1994
Insurance Written & Outstanding
Direct municipal par insured					$171,620			$119,821			$97,857			$79,980			$78,917
Direct non-municipal par insured					120,060			92,593			74,508			44,655			24,718
Total direct par insured					$291,680			$212,414			$172,365			$124,635			$103,635
Total outstanding net insured P&I					$1,416,433			$1,262,697			$1,076,821			$895,559			$785,126
Financial Results
Income Statement
Direct premiums written					$1,569			$1,334			$1,024			$825			$872
Net premiums earned					933			797			658			509			595
Net investment gain					962			846			805			677			564
Other income					163			29			15			14			6
Losses & loss expenses incurred, net of salvage received					213			66			32			27			67
Other underwriting expenses					336			359			320			270			310
Net Income before taxes					1,489			1,231			1,122			903			788
Income taxes					311			251			247			167			160
Net Income					$1,178			$980			$875			$736			$628
Balance Sheet
Cash and invested assets					15,922			14,295			12,291			10,923			10,065
Other assets					735			642			493			398			277
Total assets					$16,657			$14,937			$12,784			$11,321			$10,342
Losses and loss expense reserves					316			155			120			123			128
Unearned premium reserve (deferred premium revenue)					5,717			5,265			4,779			4,325			4,038
Contingency reserves					3,534			3,007			2,452			2,047			1,720
Other liabilities					791			666			535			378			369
Surplus					6,299			5,844			4,898			4,448			4,087
Total liabilities and surplus					$16,657			$14,937			$12,784			$11,321			$10,342
Qualified statutory capital					$9,833			$8,851			$7,350			$6,495			$5,807
Key Statistics
Capital ratio					144:1			143:1			147:1			138:1			135:1
Return on average surplus					19.4%			18.2%			18.7%			17.3%			16.0%
Loss ratio					22.8%			8.3%			4.9%			5.3%			11.3%
Expense ratio					23.5%			28.1%			31.6%			32.7%			36.3%
Combined ratio					46.3%			36.4%			36.5%			38.0%			47.6%
This report was prepared by AFGI and refers to the financial guaranty industry as a whole. The combined results are based on information provided by the member companies and are unaudited. 1998 results include financial data from RAM Reinsurance Company Ltd, that was incorporated and joined AFGI in 1998; combined results for 1994 - 97 do not. ACA Financial Guaranty Corporation results are included beginning in 1997. AXA Re Finance results are included beginning in 1996. All disclosures are on a statutory accounting basis in accordance with rules and procedures prescribed or permitted by state regulatory authorities, except those submitted by AXA Re Finance, a Paris-based reinsurer whose financial data was adjusted to approximate statutory results.

Insurance Outstanding										6
Net Par Outstanding
(Amounts in $ millions)										12/31/98
Municipal
General obligation										$221,158
Tax-backed revenue										99,509
Utility revenue										123,151
Health care revenue										77,885
Transportation revenue										56,518
University revenue										27,622
Housing revenue										21,928
Student loan										5,242
International										6,317
Other										21,850
Total municipal										$661,180
Non-Municipal
Mortgage-backed securities										$112,334
Asset-backed securities										69,190
Investor-owned utility obligations										19,053
International										23,753
Other										12,056
Total non-municipal/structured finance										236,386
TOTAL										$897,566

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