S&P Assigns ‘AAA’ Rating to MBIA U.K.

May 14, 2004

Standard & Poor’s Ratings Services announced that it has assigned its “AAA” financial strength rating to financial guaranty insurer MBIA UK Insurance Limited with a stable outlook.

S&P said the rating is based on the comprehensive support provided by its ultimate parent, MBIA Insurance Corp., which is also rated “AAA.” It noted that “MBIA U.K.’s claims-paying resources include $120 million of capital, a net worth maintenance agreement from MBIA, and a stop-loss reinsurance agreement with MBIA.

“The net worth maintenance agreement calls for MBIA to maintain capital at $100 million or, in the future, the amount of capital required by laws or regulatory authorities of the U.K.,” the announcement continued. It also noted that any contributions by MBIA cannot exceed “35 percent of MBIA’s policyholders’ surplus on an accumulated basis, as determined by the laws of the State of New York. Single contributions by MBIA cannot exceed $300 million each without taking any additional actions under New York Insurance Law.”

S&P described the reinsurance treaty as being “appropriately structured, as it provides the ceding company with true and timely transfer of risk and protection against worst-case lose. Under the reinsurance agreement, MBIA will reimburse MBIA U.K. for the losses, including loss-adjustment expenses, incurred in each calendar year that are in excess of $100 million. However, the liability of MBIA shall not exceed, in any one calendar year, 20 percent of MBIA U.K.’s net retention with respect to the aggregate insured principal sum outstanding.”

The company is licensed in the U.K. as a financial guaranty insurance company, and “will focus on sovereign and sub-sovereign issuers, infrastructure projects, ABS, and synthetic structures,” said S&P. “Operationally, MBIA U.K. is committed to underwriting to a ‘no loss’ standard and benefits from technical, administrative, and analytical support provided by MBIA.

“Standard & Poor’s derives the stable outlook for MBIA U.K.’s financial strength rating from the strong franchise value, solid capital position, and prudent underwriting and risk management strategy of its parent company, MBIA.”

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