Excess capital for most financial guaranty insurance companies'declined during most of last year, Fitch ratings said.

The New York-based firm released results of its study ofcompanies through its capital model, Matrix, for the period endingSept. 30, 2006.

Thomas J. Abruzzo, managing director, Fitch Ratings, said the“notable exceptions” to this trend include Financial SecurityAssurance Inc. (FSA) and MBIA Insurance Corp. (MBIA).

Fitch's initial report highlighting Matrix statistics producedresults from a period that ended on or before June 30, 2006.

The rating firm said around the middle of this year it willissue this report for all companies based on year-end 2006 data,and will then produce quarterly updates beginning with June 30,2007 results.

Fitch today released Sept. 30, 2006 results for: Ambac AssuranceCorp. (Ambac); Assured Guaranty Ltd.; CIFG Guaranty (CIFG);Financial Guaranty Insurance Co. (FGIC); FSA; MBIA; Radian AssetAssurance Inc. (Radian); and Security Capital Assurance Ltd. (SCA,the parent company for XL Capital Assurance Inc. and XL FinancialAssurance Ltd.).

Mr. Abruzzo said the primary driver in the decline of excesscapital has been the industry's aggressive growth rate during thecourse of 2006 in the face of a very challenging underwritingenvironment.

He said the environment had been characterized by historicallytight credit spreads. “Additionally, a greater proportion of thatgrowth has been driven by larger individual transaction sizes,which tend to get more negatively impacted in the tail of the lossdistribution,” Mr. Abruzzo observed.

As of Sept. 30, 2006, all of the “triple-A” financial guarantorsrated by Fitch maintained more than enough capital to meet theminimum capital requirements for their given rating threshold,Fitch said.

The company said it was important to note that Fitch'simplementation of Matrix occurred after the financial guarantorshad already underwritten the majority of their business in 2006.Fitch said it has yet to taken any rating actions as a result ofdeficiencies in Matrix results, as the agency recognizes the timinglag of business underwritten in 2006.

Fitch noted it is “providing a reasonable period to cure anycapital deficiencies in the 2006 Matrix simulations, as long as anydeficient company institutes a capital enhancement plan that willeffectively resolve any capital shortfalls.'

The rating firm said in most instances, it does not viewresolution of weak Matrix results as being a challenge, as everycompany will have various capital management solutions available tohelp improve its model results.

A complete list of Financial Results for the previously namedfinancial guarantors is in the Special Report titled “FinancialGuarantors – 3rd Quarter 2006 Matrix Capital Model Results,” whichis available online at www.fitchratings.com.