NEW YORK, May 16, 2000 - The Association of Financial Guaranty Insurors (AFGI) today announced 1999 financial results, including record profits for the fifth consecutive year. AFGI's ten member companies insure and reinsure municipal, asset-backed and structured securities, guaranteeing scheduled principal and interest payment to holders of these obligations.

The par volume of asset-backed securities insured worldwide by AFGI members in 1999 increased 18%, and for the first time slightly exceeded the volume of insured municipal securities. The municipal par insured in 1999 declined from the prior year's level, reflecting a 21% drop in the U.S municipal market's overall new-issue underwriting from 1998's near-record volume. AFGI firms insured a record $26.74 billion in securities originated outside the United States, 37% more than in 1998.        Click image to enlarge

AFGI members' financial strength reached an all-time high in 1999. Qualified statutory capital, comprised of policyholders' surplus and contingency reserves, increased to a record $11.14 billion, up 13% over 1998 and up 72% since 1995. Unearned premium reserve in 1999 reached a record $6.07 billion.

Robert P. Cochran, Chair of AFGI and Chairman and CEO of Financial Security Assurance, said: "By every measure, profitability, business production and growth of capital resources, 1999 was an excellent year for the financial guaranty insurance industry. The industry is on very strong footing.

"Looking ahead, we expect the trend toward more balanced originations between the asset-backed and municipal markets to continue, based on modest growth expectations for the U.S. municipal segment. That said, the U.S. municipal market is a very large and important market for our industry, and we expect to continue to play as significant a role as we have in the past. We also look for substantial expansion of municipal, infrastructure and asset-backed business in markets outside of the U.S.," he added.

Other Financial Highlights
AFGI members' net income in 1999 was $1.21 billion, surpassing 1998's record $1.18 billion. Revenues, which consist of net premiums earned, net investment gain, and other income, totaled $1.95 billion in 1999, slightly less than 1998's record $2.06 billion. However, net premiums earned, the largest component of revenues, reached a record $1.01 billion.

The par value of municipal securities insured by AFGI member firms totaled $136.94 billion in 1999, a decrease from the record $171.62 billion in 1998. These figures include domestic and international securities, both new issue and secondary market. In the U.S., 46% of new-issue municipal bonds were insured in 1999.                                               Click image to enlarge

AFGI firms insured a record-setting $142.09 billion of asset-backed and mortgage-backed securities in 1999, a dramatic 218% increase over the value of asset-backed securities insured five years ago. Approximately 31% of asset-backed securities issued in the public market in 1999 were insured.

$2.7 Billion Saved
Insured municipal bonds saved municipalities approximately $2.7 billion in borrowing costs in 1999. 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 close to $30 billion nationwide since the inception of municipal bond insurance in 1971.

More International Expansion Expected
"While the European and Asian markets for structured finance are not nearly as developed as those in the U.S., they are growing fast and offer the financial guaranty industry significant opportunities," said Mr. Cochran.

AFGI members insure a wide range of bonds and other financial obligations in world markets. These include direct senior obligations of sovereigns, semi-sovereigns and local governmental agencies, infrastructure financings (including those under the U.K. Private Finance Initiative and other privatization programs), asset-backed securities and collateralized debt obligations. They also offer access to proprietary asset-backed commercial paper and medium term note facilities and assist regulated institutions in managing portfolio risk and capital allocation through credit default swap programs.

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.

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.