III Seminario De

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III Seminario De Inversiones Amafore
Puerto Vallarta 17 Octubre, 2003
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Financial Guaranty Insurance The Product

• Unconditional and irrevocable guarantee of full
  transaction principal and interest as originally
  scheduled

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Notable Product Features

• Insured bonds sell with MBIAs Aaa/AAA ratings
• For investors, insurance should be viewed as
  credit enhancement not credit substitution
• Upon payment of a claim, MBIA is subrogated to
  the rights of bondholders

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A Win/Win Proposition

• Issuers investors both obtain tangible benefits
  
• Issuers achieve certainty of execution at the
  very attractive spreads associated with MBIAs
  Triple-A ratings
• Investors obtain
• The security of MBIAs timely Triple-A rated
  guarantee
• Ratings downgrade, headline and price protection
• Portfolio Diversification
• Improved secondary markets liquidity
• Remediation and surveillance leverage
• Payment in accordance with original schedule

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MBIA Highlights

• Largest monoline financial guarantor in terms of
  assets, par value insured, market share and
  claims-paying resources
• AAA/Aaa/AAA ratings (SP/Moodys/Fitch)
• Unmatched strength and insurance capacity
• Balance sheet--US11 billion in claims-paying
  resources
• Reinsurance treaties
• Global Company
• Offices in New York, London, Madrid, Paris,
  Sydney, Singapore and Tokyo
• US58 billion in non-U.S. net insurance in
  force
• Large asset management business--US 36 billion
  under management
• Listed on the NY Stock Exchange (NYSE MBI)

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MBIA Foundation Principles

• Build the strongest team
• No-loss underwriting
• Triple-A ratings
• Build shareholder value

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MBIA Business Strategy

• Our distinctive competency is credit risk
  management. We apply this skill to build and
  maintain the following franchises
• Global credit enhancement
• Institutional investment management
• Our products and services are provided to public
  finance and financial institutions clients
• We manage our business with prudent risk taking,
  low annual volatility and competitively superior
  returns, consistent with our Triple-A ratings

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MBIA Insurance Corporation
Strong Triple-A Ratings

• MBIAs claims-paying resources totaled 11.9
  billion on June 30, 2003
• 78 percent of our insured net par outstanding is
  rated A or above on the global rating scale (one
  full rating category higher than UMS)
• The average quality of our investment portfolio
  is Double-A, with 99 percent rated A or above
• Balance sheet and profitability are strong and
  improving

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MBIA Insurance Corporation Claims-Paying
Resources
Billions
11.9
11.0
10.1
9.1
8.5
7.8
6.8
5.8
5.1
4.5
4.0
3.5
1995
1999
2001
6/31/03
1993
1997
Capital Ratio 1541 1621 1661 1591 1661 1641
1591 1531 1511 1461 1441 1411 Claims
Paying 751 801 831 831 871 881 881 851
851 821 821 781Ratio Leverage
Ratio 321 371 391 401 441 451 461 461 461
451 451 431
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MBIA Insurance Corporation
Investor Benefits No-Loss Underwriting
Surveillance

• Transactions must meet MBIAs stringent credit
  criteria and be investment grade
• We actively monitor the insured portfolio and
  aggressively remediate poorer performing
  transactions
• The workout function allows avoidance or
  minimization of losses incurred
• In 28 years, MBIA has insured over 88,000 issues
  representing 1.583 trillion in net debt service
  insured, and has incurred only 3 basis points in
  losses on 60 issues

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MBIA Insurance Corporation
Percent of Net Par Outstanding by Bond Type(As
of June 30, 2003)
514.2 Billion
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MBIA Insurance Corporation
What Are the Risks?

• New entrants -- increased competition
• Pricing pressure
• Deteriorating underwriting criteria
• Ratings Risk
• Sharp, sustained drop in issuance
• Large, unexpected losses

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Financial Guarantee Premium Sources
MBIA Insurance Corporation
1996
2003 YTD
663.8 Million
612.4 Million
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MBIA Inc.
Building Shareholder Value Historical Book Value
Per Share
Per Share
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Summary MBIA Strengths

• Monoline industry leader with unmatched financial
  position
• Triple-A global ratings by Moody's, Standard
  Poor's, and Fitch
• Excellent credit quality and diversification of
  insured portfolio
• Highly rated, liquid investment portfolio
• Conservative underwriting and constructive
  remediation process
• State-of-the-art portfolio modeling complements
  risk management
• Strong management team

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Why Do Issuers Use Financial Guaranty Insurance?

• Most cost-effective borrowing cost
• Certainty of execution, particularly during
  periods of stress
• Structuring expertise
• Access to the broadest range of investors

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MBIA Global Business Lines

• Public Finance
• State Municipal Obligations
• General Obligations
• Leases
• Taxbacked debt
• Transportation Infrastructure
• Colleges Universities
• Hospitals

• Structured Finance
• Mortgage Backed Securities
• Residential
• Commercial
• Consumer Receivables
• Credit cards
• Car loans
• Corporate Future Flow Receivables
• Collateralized Debt Obligations
• Equipment Pools/Transportation Fleets

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Financial Guaranty Market Penetration
Insured 3 - 5 Year Penetration CAGR

• U.S. public finance 45 - 55 8 - 10
• U.S. structured finance 25 - 35 10-14
• International public finance Very Low gt20
• International structured finance Very Low gt20

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Mexico Target Sectors

• Transportation infrastructure
• Toll roads
• Airports
• Ports
• Housing
• Mortgage backed finance
• Construction bridge loan securitization
• Electric, gas and water utility infrastructure
• State and municipal finance

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MBIAs Pricing Methodology

• MBIAs insurance pricing has two overall
  objectives
• Offer economic benefit to issuer for utilizing
  insurance
• Balance transaction risk and return
• Successful pricing should offer savings to issuer
  while achieving risk adjusted return hurdles

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Overview of Issuer Economics
XYZ State, 50 MillionGeneral Obligation Bonds,
Series 2000 (30-Year Term)
Uninsured MBIA-Insured

• Credit Rating A2/A Aaa/AAA
• Coupon Rate 5.55 5.4
• Net Interest Cost 53,208,000 52,071,000
• Cost of Insurance -0- 306,200
• Total Cost 53,208,000 52,377,200
• Net Savings -0- 830,800
• P.V. Savings -0- 356,346

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International Finance
Percent of Net Par Outstanding by Country(As of
June 30, 2003)
69.2 Billion
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Mexico is a Priority Market for MBIA

• Increased economic integration with U.S.
• Favorable macroeconomic management
• Acceptable political environment
• Growth of fixed income capital markets
• Investor credit quality requirements
• Investor need for portfolio diversification
• Sound legal basis for asset securitization

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Challenges for MBIA in Mexico

• Triple-B sovereign ratings ceiling presents a
  narrow opportunity for global rating scale
  investment grade credits
• Need for ongoing success with legal and
  regulatory systems
• Well established global relative value of MBIA
  wrapped bonds is not yet fully recognized in the
  Mexican domestic market
• The spread above UMS that domestic investors have
  initially demanded is a distortion of MBIAs
  global relative value
• Not fully explained by the peso-dollar swap
  spread
• Will likely reduce the volume of wrapped paper
  for Mexican obligors placed in the domestic
  market

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Conclusion Investor Opportunities

• MBIA wrapped bonds provide investors with
  significant benefits
• Very favorable risk adjusted returns
• Portfolio diversification, uncorrelated to
  systemic Mexican market risks
• Unparalleled credit strength and stability,
  reflected in MBIAs Triple-A global scale
  ratings
• Ensures timely payment of debt service when due
• Eliminates credit loss risk and downgrade risk
• Promotes price stability
• Much enhanced secondary markets liquidity
• Experienced surveillance team manages long term
  credit risks

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Conclusion MBIA-Investor Challenges

• MBIA would like to continue to work with local
  investors on those remaining challenges posed by
  wrapped bonds in Mexico
• Acceptance of the full value of global scale
  Triple-A ratings
• Residual uncertainty regarding the unconditional
  nature of MBIAs insurance policy
• Reconcile trading value and trading levels
• Demand characteristics and limitations of local
  markets investors
• Treatment of wrapped bonds under a changing
  regulatory regime

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www.mbia.com
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