MANAGING GROWTH: CREDIT, SURVEILLANCE AND CAPITAL

Transcription

1 MANAGING GROWTH: CREDIT, SURVEILLANCE AND CAPITAL A FIXED-INCOME INVESTOR CONFERENCE Presented by Financial Guaranty Insurance Company Friday, September 22, 2006

2 WELCOME TO FGIC S Fixed Income Investor Conference Frank J. Bivona, Chief Executive Officer

3 MANAGING GROWTH TODAY S FOCUS Credit Risks We Insure and the Related Process Surveillance Review and Oversight of Insured Exposure Capital Managing Our Resources to Support Triple-A A Ratings

4 MANAGING GROWTH EXPANDING THE FRANCHISE Established in 1983 Leader in the Industry in Market and Product Expansion Mid-1990 s Pull Back by Then Parent (GECC) Low Risk Municipal Focus Ownership Change in December 2003 New Strategy and Direction

5 MANAGING GROWTH STRATEGY Selectively Expand & Develop the FGIC Franchise Reenter Markets Where FGIC Participated Where Other Industry Participants Have Proven Business Models Focus on Excellent Risk, Growth and Return Characteristics

6 MANAGING GROWTH EXECUTION OF STRATEGY ACTIONS Established State of the Art Risk Management and Corporate Governance Hired Experienced Market Leaders in New Product Areas Re-established London Office International Franchise Extensive Client Marketing to Highlight Ability to Execute Expanded Investor Reporting and Transparency, Reinforced by Calling Campaign to Promote Top-notch Trading Value

7 MANAGING GROWTH EXECUTION OF STRATEGY RESULTS Re-established Our Presence in Virtually Every Major Financial Guaranty Market More Than Doubled Staffing Levels Senior Management is the Most Tenured in the Industry Robust Investor Relations Programs that Support Superior Trading Value Financial Results and Claims-paying Resources Have Grown at Exceptional Levels

8 Frank J. Bivona, Chief Executive Officer Frank J. Bivona is Chief Executive Officer and a member of the Board of Directors of FGIC Corporation. Before joining FGIC, Mr. Bivona was Vice Chairman and Chief Financial Officer of Ambac Financial Group, Inc. and Ambac Assurance Corporation. In addition to his CFO role, other responsibilities while at Ambac included: Group Head of the Financial Services Group; senior member of the Portfolio Risk Management Committee; President of the Construction Loan Insurance Company (Connie Lee), an Ambac subsidiary; and head of several Ambac businesses, including investment arbitrage, derivative products, third party investment management; investor relations, rating agency relationships and reinsurance. Prior to Ambac, Mr. Bivona was with Citibank in various finance positions, including CFO of Citibank's Global Insurance Division. He also worked in the Northern European Division based in London and played a key role in establishing new offices in Scandinavia. He is a member of the Board of Directors of the YMCA of Greater New York. Mr. Bivona received a BS from Adelphi University.

9 MANAGING CREDIT Sandy D Imperio, Chief Credit Officer

10 Establish Credit Policy Ensure Compliance & Consistency Communicate Risk Tolerance CREDIT RISK MANAGEMENT

11 CREDIT RISK MANAGEMENT ROLE OF CREDIT RISK MANAGEMENT ESTABLISH CREDIT POLICY Review Underwriting Criteria Set Risk Limits Modify Credit Policy as Necessary Communicate Changes Internally

12 CREDIT RISK MANAGEMENT ROLE OF CREDIT RISK MANAGEMENT ENSURE COMPLIANCE AND CONSISTENCY CRM Involvement Credit Committee Structure Standardized Documentation

13 CREDIT RISK MANAGEMENT ROLE OF CREDIT RISK MANAGEMENT COMMUNICATE RISK TOLERENCE Deal Meetings Senior Credit Committee Portfolio Risk Committee Surveillance Meetings

14 Three Deal Managers One Financial Institutions Analyst One Modeling Manager Sovereign Risk Consultant CRM TEAM

15 Sandy D Imperio, Chief Credit Officer alessandra.dimperio@fgic.com Alessandra V. D'Imperio, Senior Managing Director and Chief Credit Officer, has overall responsibility for FGIC's underwriting risk management for new business production. Ms. D'Imperio joined FGIC in April Prior to that, she was a Managing Director and Head of Credit Risk Management, Public Finance, at Ambac. She began her career at MBIA. Ms. D'Imperio holds a BA from the State University of New York at Albany and an MPA from New York University.

16 FGIC U.S. PUBLIC FINANCE Jeffrey R. Fried, Senior Managing Director

17 U.S. PUBLIC FINANCE BOOK OF BUSINESS FGIC AS OF 12/03 Utility Revenue 17% Tax-Supported 52% Education 4% Other PF <1% Net Par In Force $189.4 Billion Transportation 12% Excise 12% Leases 3% Limited Provider Single Skill Set Narrow Book of Business Single-risk Concentration Market Share Focus Low Risk

18 U.S. PUBLIC FINANCE BOOK OF BUSINESS FGIC AS OF 6/06 Full Service Provider Multiple Skill Set Diversified Book of Business Risk Dispersion Transportation 11% Leases 7% Utility Revenue 16% Education 5% Health Care 3% Tax-Supported 42% Housing <1% Investor-Owned Utilities 2% Other PF <1% Return Focus Still Low Risk Excise 12% Net Par In Force $219.9 Billion

19 U.S. PUBLIC FINANCE BOOK OF BUSINESS Utility Revenue 17% 12/03 Tax-Supported 52% Education 4% Other PF <1% Net Par In Force $189.4 Billion Transportation 12% Excise 12% Leases 3% Transportation 11% Leases 7% Excise 12% Utility Revenue 16% 6/06 Education 5% Health Care 3% Tax-Supported 42% Net Par In Force $219.9 Billion Housing <1% Investor-Owned Utilities 2% Other PF <1%

20 U.S. PUBLIC FINANCE Where We re Going CONTINUED EXPANSION AS INDUSTRY LEADERS Guiding Principles Focus on Value Added Market Sectors Relationships and Execution Capabilities Creative Credit Enhancement Solutions Maintain Risk / Reward Discipline

21 U.S. PUBLIC FINANCE Where We re Going BUILDING BLOCKS Core Infrastructure Maintain Balanced Portfolio Keep Steady Deal Flow Service Client Base Select Enterprise Sectors Health Care Municipal Electric Utilities Cultural Institutions Land-secured Deals Municipal Leasing Transportation Public / Private Partnerships (P3s) and Project Finance Potential High Growth Essential Assets Execution Capabilities

22 U.S. PUBLIC FINANCE CREDIT ANALYSIS EXPERTISE Construction RISK YANKEE STADIUM

23 U.S. PUBLIC FINANCE CREDIT ANALYSIS EXPERTISE YANKEE Construction STADIUM EXAMPLE Risk Bankruptcy Risk Construction Bankruptcy Environmental Environmental Risk Enterprise Risk RISKS Financing Risk Structural Structural Risk Financing Enterprise

24 U.S. PUBLIC FINANCE CREDIT ANALYSIS EXPERTISE YANKEE Construction STADIUM EXAMPLE Risk Construction Bankruptcy Risk Guaranties Sureties Contingencies Environmental Risk Enterprise Risk Property Tax Analysis Structural Financing Risk Structural Risk Bankruptcy Stadium Company MITIGANTS Derivative Expertise Financing Environmental Impact Survey Credit Analysis Stress Test Reserves Enterprise

25 U.S. PUBLIC FINANCE GOALS Deep Relationships Built on Trust Leader in Value Added Sectors Insurer of Choice for Complex Transactions Expand Range of Products and Services Maintain Strict Credit Risk Standards

26 Jeffrey R. Fried, Senior Managing Director Jeffrey R. Fried, Senior Managing Director, leads FGIC s Public Finance Group. Before joining FGIC, he was General Counsel, since 1998, of Ambac Assurance Corporation's Public Finance Department and Financial Services Division. Mr. Fried was also a voting member of Ambac's Public Finance credit committee. In 1995, Mr. Fried joined Ambac from Greenberg Traurig LLP, where he served as bond counsel and underwriters' counsel. He holds a BS from the State University of New York at Albany and a JD from Fordham University School of Law.

27 INTERNATIONAL FINANCE Timothy S. Travers, Senior Managing Director

28 INTERNATIONAL FINANCE TIMELINE s 12/03 FGIC Founded Opened London and Paris Offices Obtained Branch Licenses UK and France Closed London and Paris Offices Branches Kept in Place Sale to New Investor Group

29 INTERNATIONAL FINANCE TIMELINE: 12/2003 8/2006 FGIC 12/03 London Office Opens 10/04 6/04 First Hires Insures 1st Deal 11/04 11/04 FSA Approves License for FGIC UK Limited Ltd FGIC Credit Products Ltd Obtains FSA License 7/05 1/05 1st New Issue Priced Insures 1st Utility New Issue 11/05 9/05 Closes 1st Two Future Flow Deals Insures 1st Euro Market & 1st Italian Deal 6/06 6/06 Insures 1st New Issue PFI Deal 8/06 Awarded 1st Mandate for Australian Deal

30 Time Zones... and Technology FOCUSED CREDIT CULTURE

31 INTERNATIONAL FINANCE INTERNATIONAL TEAM Skill Base Credit Focused Experienced Execution Oriented Local Market Knowledge Strength One Credit Committee Streamlined, Consistently Applied Standards Real Time Feedback Proven Track Records Nimble / Responsive Promises Kept Languages French, Spanish, Italian, Portuguese, Greek Markets London, Sydney, Hong Kong, Tokyo, Paris, Madrid

32 INTERNATIONAL FINANCE BOOK OF BUSINESS Sub-Sovereign 32% 12/2003 Public Finance Infrastructure 14% 6/30/2006 Future Flow 7% Sovereign 1% Utility 32% International Sovereign 68% Net Par In Force $0.17 Billion Sub-Sovereign 4% Other 1% Toll Road 2% Pooled Debt Obligations 39% Net Par In Force $8.3 Billion

33 INTERNATIONAL FINANCE COUNTRY BREAKDOWN Diversified 38% United Kingdom 37% Australia 9% Turkey 5% Brazil 1% France 2% Canada <1% Italy 4% Kazakhstan 1% Singapore 2% $8.3 Billion Net Par Outstanding

34 INTERNATIONAL FINANCE WHERE ARE WE GOING? New Offices? Sydney, Tokyo, Mexico City, Madrid, Paris, Milan, Frankfurt, Toronto New Geography? New Asset Classes Central & Eastern Europe, Latin America, Asia Acceptable Risk Profiles Acceptable Economics P3 Frontier Exporting Our Expertise

35 INTERNATIONAL FINANCE CREDIT ANALYSIS EXPERTISE BIRMINGHAM HOSPITAL PFI EXAMPLE

36 INTERNATIONAL FINANCE CREDIT ANALYSIS EXPERTISE BIRMINGHAM HOSPITAL PFI PROJECT EXAMPLE Construction Service Contract Trust Default RISKS Foundation Trust Vires Force Majeure

37 INTERNATIONAL FINANCE CREDIT ANALYSIS EXPERTISE BIRMINGHAM HOSPITAL PFI PROJECT EXAMPLE Construction Service Contract Trust Default Experience Guaranties TA Review Experience Competitive Suppliers TA Review MITIGANTS Secretary of State Guarantee of Trust Obligation QC Opinion Auditors Opinion Stringent Legal Analysis Foundation Trust Vires Standstill DSRA Termination Force Majeure

38 INTERNATIONAL FINANCE WHERE WE ARE...WHERE WE ARE GOING??

39 Timothy S. Travers, Senior Managing Director Timothy Travers is Senior Managing Director of International Finance and Global Utilities of FGIC Corporation. Prior to joining FGIC, Mr. Travers held various positions at Ambac Assurance Corporation, most recently Managing Director-European Structured Finance and Securitization. He served as Ambac's Managing Director- Global Utilities from 1993 through Mr. Travers received a BS from New York University s School of Business and Public Administration.

40 U.S. STRUCTURED FINANCE Thomas J. Adams, Senior Managing Director Kenneth L. Degen, Managing Director

41 U.S. STRUCTURED FINANCE FGIC S EVOLUTION Very Limited Participation MBS 84% 2003 Narrow Focus 2006 Broad Participation Across Market Spectrum Building Portfolio Similar to Peers CDOs Commercial Assets Consumer Assets

42 U.S. STRUCTURED FINANCE BOOK OF BUSINESS 12/2003 MBS 84% 83% Conduits 6% Credit Card 5% Other 6% Net Par In Force $17.2 Billion

43 U.S. STRUCTURED FINANCE BOOK OF BUSINESS 12/2003 6/2006 Pooled Aircraft Auto 5% 4% Receivables 3% Credit Card 1% MBS 83% MBS 84% 83% Conduits 6% Credit Card 5% Other 6% MBS 59% CDO 22% Other <1% Other ABS 6% Net Par In Force $17.2 Billion $61.2 Billion

44 HIRED STRUCTURED FINANCE PROFESSIONALS TO SUPPLEMENT EXISTING TEAM

45 U.S. STRUCTURED FINANCE ABS CONSUMER ANALYSIS MBS 84% SUB-PRIME AUTO LOAN TRANSACTIONS

46 U.S. STRUCTURED FINANCE ABS CONSUMER SUB-PRIME AUTO LOAN TRANSACTIONS Counterparty MBS 84% Underwriting Guidelines / Process Collection Efforts Ability to Liquidate / Repossess Collateral RISKS Collateral Borrower Credit Quality New vs. Used Car Borrower Equity Loan Terms Market New Car Market - Incentives, Supply, etc. Used Car Price Volatile Asset Performance

47 U.S. STRUCTURED FINANCE ABS CONSUMER SUB-PRIME AUTO LOAN TRANSACTIONS Established Asset Classes MBS 84% Counterparty Track Record & Financial Strength Back-Up Servicer MITIGANTS Rigorous Loss Modeling Short Exposure Large Loss Cushion Structured Protection Credit Enhancement Triggers Servicer Termination Triggers

48 U.S. STRUCTURED FINANCE ABS CONSUMER SAMPLE AUTO POOL FGIC S LOSS COVERAGE PROVIDES A SUBSTANTIAL CUSHION 25% MBS 84% Breakeven Loss Curve Worst Performing Vintage 10% 0% Base Case Loss Curve 1 Month Months

49 U.S. STRUCTURED FINANCE ABS COMMERCIAL CREDIT ANALYSIS EXPERTISE TRIPLE-X

50 U.S. STRUCTURED FINANCE U.S. STRUCTURED FINANCE ABS COMMERCIAL ABS COMMERCIAL WHAT IS TRIPLE X INSURANCE SECURITIZATION? Statutory Reserve Requirements under Regulation Triple-X Created Significant Excess Reserve Requirements for Life Companies MBS 84% Standard Valuation Mortality Tables are Based on Outdated Mortality Data of the Insured Population Do Not Adjust for Historical Mortality Improvements Do Not Adjust for Variance in Mortality Experience Among Different Risk Classes

51 U.S. STRUCTURED FINANCE ABS COMMERCIAL TERM LIFE INSURANCE POLICIES RESERVE PROFILES 1,400,000 MBS 84% 800, ,000 0 Economic Reserves

52 U.S. STRUCTURED FINANCE ABS COMMERCIAL TERM LIFE INSURANCE POLICIES RESERVE PROFILES 1,400,000 MBS 84% 800,000 Statutory Reserves 200,000 Economic Reserves

53 U.S. STRUCTURED FINANCE - COMMERCIAL CREDIT ANALYSIS EXPERTISE TRIPLE-X EXAMPLE Mortality Lapse Underwriting MBS 84% RISKS Asset Insolvency

54 U.S. STRUCTURED FINANCE ABS COMMERCIAL TRIPLE-X EXAMPLE Contributed Capital Embedded Profits MBS 84% Actuarial Review MITIGANTS Rigorous Model Testing Stringent Investment Guidelines Legal Analysis

55 U.S. STRUCTURED FINANCE WHERE WE RE GOING CONTINUED EXPANSION AS INDUSTRY LEADERS Balance Opportunities with Prudent Risk Taking MBS 84% Drive Business through Expertise, Execution and Relationships Continue to Diversify for Effective Capital Allocation

56 Thomas J. Adams, Senior Managing Director Thomas J. Adams, Senior Managing Director, leads FGIC's Consumer Asset- Backed Securities Group. Before joining FGIC, Mr. Adams was a Managing Director at Ambac responsible for Mortgage-Backed Securities and mortgage-related collateral. Prior to that, he worked at Moody's Investors Service in the Asset-Backed Securities Group and in the Residential Mortgage-Backed Security Group. Until 1992 Mr. Adams worked in the Structured Finance Group of Thacher Proffitt & Wood. He holds a BA from Colgate University and a JD from Fordham University School of Law.

57 Kenneth L. Degen, Managing Director Ken Degen joined FGIC in May 2004, and he is the head of the Commercial Asset-Backed Group. In this role he is responsible for all commercial asset transactions, including aviation, operating and leasing securitizations, as well as all financial institution products. Prior to joining FGIC, Mr. Degen spent 14 years with the bond insurer MBIA where he was responsible for insuring more than $12 billion in asset-backed transactions. He has been involved in the securitization of numerous asset classes including residential mortgages, rail stock, shipping containers and other corporate assets. Mr. Degen also has seven years experience at Standard & Poor s. He has a BS from Temple University and an MPA from Syracuse University Maxwell School.

58 SURVEILLING RISK A. Edward Turi, III, Senior Vice President and General Counsel

59 SURVEILLING RISK RISK CLIMATE WHY SURVEILLANCE? Housing Market Cools Got Downgraded Hurricane Hits New Orleans Will Interest Rates Continue to Rise? Medicare Reform Introduced

60 SURVEILLING RISK DEVELOPMENTS Since 12/03, FGIC s Business Has Grown Significantly Insured Portfolio Up 40% Substantial Increase in New Sectors / Countries Surveillance Department is Growing and Changing to Meet These Demands And Will Continue to Adapt with FGIC s Growth and Diversification

61 SURVEILLING RISK CORE SURVEILLANCE RESPONSIBILITIES PROACTIVE MONITORING LEADS TO EARLY DETECTION AND FACILITATES LOSS PREVENTION Credit Monitoring Remediation of Impaired Credits Portfolio Risk Assessments

62 SURVEILLING RISK OPERATING MODEL INTEGRATED PROCESS HELPS MAINTAIN FGIC S HIGH QUALITY INSURED PORTFOLIO Underwriting Performance Assessments Lessons Learned and Reinforced Credit, Legal, Structural Analyses Surveillance

63 STRONG, EXPERIENCED TEAM IS CRITICAL TO SURVEILLANCE QUALITY

64 SURVEILLING RISK SURVEILLANCE INFRASTRUCTURE FRAMEWORK FOR HIGH QUALITY PORTFOLIO MONITORING Implemented Surveillance Policies / Procedures for New Sectors Developed Risk Management Database Automated Surveillance Calendar Enhanced Tracking of Exposures Deal Specific Performance for ABS and CDOs Enhanced FGIC s Modeling Capabilities Instituted Portfolio Sector Reviews Enhanced Oversight

65 SURVEILLING RISK OVERSIGHT OF SURVEILLANCE ACTIVITIES STRONG MANAGEMENT AND BOARD OVERSIGHT IN PLACE Surveillance Department Operates Independent of Underwriting and Credit Departments Reports to General Counsel Frequent, Regular Meetings FGIC s Watch List Committee FGIC s Portfolio Risk Committee The FGIC Board s Credit and Investment Committee

66 SURVEILLING RISK HOW WE DO IT SURVEIL TO A NO SURPRISE LEVEL OF OVERSIGHT REGULAR SURVEILLANCE FORMAL REVIEWS Each Transaction Monitored in Accordance with a Risk-Adjusted Review Schedule PLUS Fully Performing Sign off by Managing Director, Portfolio Risk Calendar Reset Monthly / Quarterly Performance Tracking Financial Database More Frequent Review List Counterparty Diligence Visits Rating Agency Feeds Market Trend Analysis

67 SURVEILLING RISK HOW WE DO IT SURVEIL TO A NO SURPRISE LEVEL OF OVERSIGHT ISSUES IDENTIFIED Impairment Detected Recommend for Watch List Remediation Process Begins More Frequent and Heightened Surveillance Reviews Proactive Remediation Efforts Regular Review by Senior Management and Board Committee

68 SURVEILLING RISK SURVEILLANCE OVERVIEW CONSUMER ASSET BACKED SECURITIES EXAMPLE Annual Surveillance Monthly Surveillance Written Deal Reviews Issuer Financial and Performance Review Servicer and Issuer On-Site Due Diligences Cash Flow Analysis on Seasoned Transactions Track Deal Performance Review Comparative Performance Issuer by Vintage Industry Comparisons Track Market Trends Report Market Trends

69 KATRINA HOW DID WE REACT?

70 SURVEILLING RISK FGIC s RESPONSE TO KATRINA WE KNEW WE NEEDED TO MOVE FAST, SO WE... Leveraged the Whole FGIC TEAM Resources from Underwriting, Credit and Legal to Supplement Surveillance Efforts Contacted Issuers, Trustees and Paying Agents Reached Out to Law Firms and Consultants Visited New Orleans Mobilized Trade Association Efforts Established Comprehensive Communications Plan

71 SURVEILLING RISK FGIC s RESPONSE TO KATRINA FGIC S PROACTIVE SURVEILLANCE EFFORTS YIELDED: Informed Assessments of Potential Exposure Publicly Posted September 2005 Determined Impaired Credits Reserves Established Where Appropriate Credibility with Issuers, Investors and Other Participants Opens Up Dialogue and Information Flow Seat at the Negotiating Table Ability to Influence and Act Quickly on Loss Mitigation Opportunities

72 SURVEILLING RISK KATRINA EXPOSURE TODAY $1 Billion Par on FGIC Watch List Essential Services Restored Housing / Population Coming Back Slowly Remediation Efforts Continue Federal and State Aid Flowing We Are Cautiously Optimistic

73 SURVEILLING RISK SURVEILLANCE GOING FORWARD Will Continue to Evolve to Meet FGIC s Needs Will Always Play a Critical Role Will Provide Ongoing Value and Comfort to FGIC s Investors

74 A. Edward Turi, III, Senior Vice President and General Counsel A. Edward Turi, III, has served as General Counsel of FGIC Corporation and FGIC Insurance since September He joined FGIC in July 1991 and was Co-General Counsel from January 1992 to September Mr. Turi was an attorney at Cravath, Swaine & Moore from August 1984 until he joined FGIC. He holds a BS from Georgetown University and a JD from the University of Virginia School of Law.

75 MANAGING CAPITAL Donna J. Blank, Chief Financial Officer

76 MANAGING CAPITAL INTEGRATED APPROACH Managing Capital An Integrated Approach Focused On: Protecting a Solid Triple-A While Maximizing Return on Capital

77 MANAGING CAPITAL MAINTAINING STABLE TRIPLE-A FGIC TRIPLE-A A CAPITAL STRUCTURE DEFINED AT MULTIPLE LEVELS Deal Level Capital Charge Single Obligor / Servicer Limits S&P Margin of Safety Cushion Moody s Capital Ratios Margins Fitch Capital Model NYSID Aggregate Insured Limits Equity Allocated to Each Deal + Limits on Portfolio Concentrations + Overall Financial Strength Requirements = AAA

78 MANAGING CAPITAL CLAIMS PAYING RESOURCES ($ in Millions) 14% $3,141 $111 $895 $300 17% $3,566 $192 $1,062 $300 8% $4,483 $4,164 $520 $393 $1,374 $1,273 $300 $300 Present Value of Installment Premiums Unearned Premiums and Loss & LAE Soft Capital $1,835 $2,011 $2,198 $2,289 Statutory Capital 12/ / /2005 6/2006

79 Capital Adequacy Trend MANAGING CAPITAL CAPITAL ADEQUACY RESULTS CAPITAL TO MEET TRIPLE-A A CRITERIA x x x x x Moody's Total Capital Ratio 1.44* S&P Margin of Safety * Published as of 1H05

80 MANAGING CAPITAL CAPITAL PLANNING BALANCE CAPITAL GENERATION WITH CAPITAL USE Total Claims Paying Resources Capital Usage Net Consumer of Capital Currently Growth Will Reach a Level Where Returns on Capital Fund New Business Growth

81 MANAGING CAPITAL HOW WE MANAGE CAPITAL FOCUSED ATTENTION FROM A CORPORATE FINANCE AND BUSINESS PERSPECTIVE Goal Critical Levers Corporate Capital Structure Optimize Capital Structure, Given Rating Agency Criteria Financial Leverage Soft Capital Utilization Dividend Policy Liquidity Position Business Performance Target Profitable Product Mix, While Maintaining Risk Diversity across the Insured Portfolio Product Mix Sector Capital Requirements Expense Efficiency

82 MANAGING CAPITAL HOW WE MANAGE CAPITAL: CORPORATE LEVEL GOAL: OPTIMIZE CAPITAL STRUCTURE GIVEN RATING AGENCY CRITERIA Since the Sale of FGIC in December 2003 Introduced Financial Leverage at the Holding Company Introduced Market-Standard Soft Capital Facility Have Reinvested Capital Generated in the Business to Support New Business Growth

83 MANAGING CAPITAL HOW WE MANAGE CAPITAL: BUSINESS PERFORMANCE GOAL: TARGET PROFITABLE PRODUCT MIX, MAINTAIN PORTFOLIO DIVERSITY Since the Sale of FGIC in December 2003 Diversified the Product Mix, Notably in Areas that Offer Attractive Risk/Return Dynamics Building the Scale to Achieve Improved Operating Efficiency Going Forward

84 MANAGING CAPITAL HOW WE MANAGE CAPITAL: BUSINESS PERFORMANCE ACHIEVING GROWTH IN EARNINGS AND RETURNS Year-over-Year Earnings Growth 04-1H06 40% 15% -10% -10% 2004 Year-over-Year ROE Growth Rate 10% H 2006 Diversification of Product Lines Building Operating Efficiency 30%

85 MANAGING CAPITAL RETURN ON EQUITY CREATING POSITIVE PROFITABILITY DYNAMIC 11.1% 8.6% 9.5% H 2006

86 MANAGING CAPITAL SUMMARY CAPITAL PLANNING: WELL POSITIONED FOR THE FUTURE Managing Capital Efficiently is a Key Strategic Imperative for FGIC FGIC, as Planned, is Now a Capital Consumer FGIC s Capital Structure Aligned to Support Business Growth

87 Donna J. Blank, Chief Financial Officer Donna Blank has served as the Chief Financial Officer of FGIC Corporation since March Ms. Blank joined FGIC in 1997, and after serving in several financial roles, is currently responsible for directing the company s financial operations including financial reporting, financial and capital planning, accounting, treasury, and tax. She also manages the Information Technology department. Prior to joining FGIC, Ms. Blank held several management positions, including Manager of Financial Planning and Analysis for a GE insurance business unit, and Director of Budget and Planning for the Robert Plan Insurance Company. Ms. Blank received a bachelor s degree from the University of Michigan. She holds an MBA in Finance, and a Master in International Affairs, both from Columbia University.

88 MANAGING GROWTH: CREDIT, SURVEILLANCE MANAGING GROWTH AND CAPITAL Howard C. Pfeffer, President A FIXED-INCOME INVESTOR CONFERENCE Presented By Financial Guaranty Insurance Company Friday, September 22, 2006

89 MANAGING GROWTH ADJUSTED GROSS PREMIUM BY BUSINESS LINES $ in Millions International Finance Structured Finance Public Finance /03 12/04 12/05

90 MANAGING GROWTH FUTURE GROWTH Growth of Capital Markets Convergence of Public & Structured Finance Exportation of Products to New Markets Advancement of Existing Core Markets Niche Markets Strategic Relationships New Structures, Technology

91 MANAGING GROWTH CHALLENGES Tight Credit Spreads Alternative Structures Bank Competition Monoline Competition Maintaining Discipline

92 MANAGING GROWTH HOW WE WILL GROW Disciplined Business Expansion Organizational Flexibility Consistent Risk Management Superior Transaction Execution

93 MANAGING GROWTH HOW WE WILL GROW Exercise Risk / Return Discipline Optimize Capital Usage Enhance Risk Distribution Maintain Transparency

94 MANAGING GROWTH EVOLUTION OF A LEADER FGIC IN 5 YEARS Global Franchise Buyer and Seller of Credit Risk Execution Capability in All Markets Remain at Forefront of Risk Management Diversified Insured Portfolio Low Risk Insured Portfolio Transparent Organization

95 Howard C. Pfeffer, President Howard C. Pfeffer is President and a member of FGIC Corporation s Board of Directors. He is responsible for all of FGIC s domestic and international underwriting businesses. Mr. Pfeffer Joined FGIC in December Prior to joining FGIC, he was a Vice Chairman of Ambac Financial Group, which he joined in During his 14 years at Ambac, he had responsibility for a variety of Ambac s businesses including Public Finance and Structured Finance. In 2003, he assumed responsibility for Ambac s Investment Portfolio and Financial Services Group. Mr. Pfeffer was a member of Ambac s Senior Credit Committee and Portfolio Risk Management Committee. Prior to joining Ambac, Mr. Pfeffer was a Vice President in Citicorp s Investment Bank s Municipal Finance Division. During his tenure at Citicorp, he specialized in innovative structured finance transactions utilizing Citibank credit and derivative products. In addition, Mr. Pfeffer was a member of Citicorp Investment Bank s recruiting committee. He holds a Bachelor of Business Administration degree from Baruch College and completed an Executive Management Program at Stanford University.

96 DISCLAIMER The information contained in this presentation is of a general nature and includes forward-looking statements. Actual results may differ, and FGIC does not undertake to update the forward-looking statements or any other information contained in this presentation. This presentation is not intended to be, and should not be, relied upon for the purpose of making any investment decisions whatsoever. Under no circumstances does it constitute an offer or invitation to invest in FGIC or any securities or investments guaranteed by FGIC.