FGIC Announces First Quarter 2010 Statutory-Basis Results

Statutory Deficit Increases to $1.64 Billion

NEW YORK--(BUSINESS WIRE)-- Financial Guaranty Insurance Company (“FGIC”) today announced a net loss of $324.1 million for the quarter ended March 31, 2010. The net loss resulted primarily from loss and loss adjustment expenses of $361.0 million (net of reinsurance) for the quarter. The loss and loss adjustment expense related principally to FGIC’s exposure to first and second-lien residential mortgage-backed securities (“RMBS”). The RMBS was insured by FGIC primarily in 2005, 2006 and 2007, and the RMBS performance continued to deteriorate during the first quarter. As of March 31, 2010, FGIC’s statutory deficit was $1.640 billion and its capital impairment was $1.707 billion, in each case reflecting an increase of $358.6 million during the quarter.

As previously announced, due to FGIC’s statutory deficit and capital impairment, FGIC is subject to an order issued by the New York State Insurance Department (the “NYID”) pursuant to Section 1310 of the New York Insurance Law, requiring FGIC to suspend paying any and all claims effective November 24, 2009, and to take such steps as may be necessary to remove the impairment of its capital and to return to compliance with its minimum surplus to policyholders’ requirement by not later than June 15, 2010. FGIC is continuing its efforts to effectuate the Surplus Restoration Plan that it submitted to the NYID on March 25, 2010, including its participation in the offer to exchange certain RMBS and asset-backed securities insured by FGIC for cash and uninsured securities by Sharps SP I LLC, which is described in a separate press release issued today by Sharps SP I LLC. No assurance can be given that the transactions comprising FGIC’s Surplus Restoration Plan, including the offer to exchange referenced above, will be consummated on the terms contemplated or at all.

Financial Statements

Copies of FGIC’s statutory financial statements and its Annual and Quarterly Statements filed with the NYID can be found on FGIC's website at www.fgic.com.

Financial Guaranty Insurance Company
Statutory-Basis Balance Sheets
(Dollars in Thousands, except per share amounts)
		March 31,				December 31,
		2010				2009
		(Unaudited)
Admitted assets
Fixed maturity securities, available for sale at amortized cost (fair
value of $1,381,724 in 2010 and $1,309,393 in 2009)		$	1,302,039			$	1,235,501
Fixed maturity securities, available for sale at fair value (amortized
cost of $1,779 in 2010 and $87,640 in 2009)			1,779				87,640
Preferred stock (fair value of $8,322 in 2010 and $6,853 in 2009)			3,713				3,713
Common stock			-				4,728
Other invested assets			24,406				25,672
Short-term investments, at cost, which approximates fair value			120,332				170,651
Cash and cash equivalents			324,797				195,525
Total cash and invested assets			1,777,066				1,723,430
Accrued investment income			17,725				17,575
Other assets			8,406				8,578
Receivable from parent and subsidiaries			3,734				2,757
Federal and foreign income tax receivable			-				26,997
Total admitted assets		$	1,806,931			$	1,779,337
Liabilities and capital and surplus
Liabilities:
Losses		$	2,952,601			$	2,597,687
Loss adjustment expenses			15,687				11,060
Unearned premiums			241,521				246,205
Provision for reinsurance			7,514				5,385
Contingency reserves			205,863				168,284
Accounts payable and accrued expenses			20,596				29,728
Federal and foreign income tax payable			1,023				114
Ceded balances payable			2,530				2,294
Total liabilities			3,447,335				3,060,757
Capital and surplus (deficit):
Common stock, par value $1,500 per share; 10,000 shares
authorized, issued, and outstanding			15,000				15,000
Redeemable preferred stock, par value $1,000 per share; 3,000
shares authorized, issued and outstanding			300,000				300,000
Paid-in surplus			439,770				439,551
Unassigned deficit			(2,395,174	)			(2,035,971	)
Total capital and deficit			(1,640,404	)			(1,281,420	)
Total liabilities and capital and deficit		$	1,806,931			$	1,779,337

About FGIC

FGIC is a wholly owned subsidiary of FGIC Corporation, an insurance holding company. Please visit www.fgic.com.

Forward-Looking Statements

This press release contains “forward-looking statements” - that is, statements related to possible future events. Forward-looking statements often address expectations and beliefs as to future performance, results and business plans. You should not place undue reliance on forward-looking statements, because they speak only as of the date they are made and are necessarily subject to risks and uncertainties that could cause actual results and performance to differ materially from those expressed or implied by FGIC’s forward-looking statements. Among the factors that could cause FGIC’s actual results or performance to differ are, without limitation: (1) FGIC’s ability to consummate the transactions contemplated by the commitment and support agreement with certain counterparties to FGIC-insured credit default swaps (“CDS”), to close the offer to exchange and to successfully achieve the goals of the final surplus restoration plan presented to the NYID, in each case, within the time frame and on the terms required by the NYID or otherwise; (2) FGIC’s current negative policyholders’ surplus and FGIC’s ability to restore and maintain the statutory required minimum policyholders’ surplus even if it closes the offer to exchange and other contemplated restructuring transactions; (3) the extent to which FGIC is able to pursue and achieve other strategic alternatives, either with or without the participation of potential investors and other third parties; (4) the results of other loss mitigation efforts; (5) a decision by the NYID or FGIC’s other regulators to take further regulatory action such as rehabilitation or liquidation of FGIC by the NYID at any time due to FGIC’s current failure to maintain the statutory required minimum policyholders’ surplus or otherwise; (6) legislative and regulatory developments within the United States and abroad, including the effect of new pronouncements by accounting authorities; (7) fluctuations in the economic, credit, interest rate or other environments in the United States or abroad; (8) potential consequences of FGIC’s continued suspension of claims payments or FGIC’s inability to recommence claims payments such as the risk of defaults under FGIC-insured CDS, FGIC Corporation’s and FGIC’s revolving credit agreement and FGIC Corporation’s senior notes indenture, non-payment of premiums and other amounts owed to FGIC and possible limitations on FGIC’s rights under other agreements; (9) higher losses on FGIC-insured obligations due to deterioration in the performance of residential mortgage loans or otherwise; (10) possible defaults and/or additional ratings downgrades or other adverse actions with respect to mortgage-backed securities or other obligations insured by FGIC; (11) the commencement of new litigation or the outcome of current and new litigation; (12) further deterioration in general economic conditions, including as a result of the financial crisis as well as inflation, interest rates, foreign currency exchange rates and other factors and the effects of disruption or economic contraction due to catastrophic events or terrorist acts; and (13) other risks and uncertainties that have not been identified by FGIC at this time. Forward-looking statements are based upon FGIC’s current expectations and beliefs concerning future events. FGIC undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Financial Guaranty Insurance Company
212-312-3000

Source: Financial Guaranty Insurance Company