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Announcement:

MOODY'S COMMENTS: SECURITY CAPITAL ASSURANCE LTD PRICES INITIAL PUBLIC OFFERING; Aaa RATINGS OF XL CAPITAL ASSURANCE AND XL FINANCIAL ASSURANCE UNAFFECTED; OUTLOOK STABLE

02 Aug 2006
MOODY'S COMMENTS: SECURITY CAPITAL ASSURANCE LTD PRICES INITIAL PUBLIC OFFERING; Aaa RATINGS OF XL CAPITAL ASSURANCE AND XL FINANCIAL ASSURANCE UNAFFECTED; OUTLOOK STABLE

New York, August 02, 2006 -- On August 1, 2006, Security Capital Assurance Ltd (NYSE: SCA) priced its initial public offering at $20.50 per share, raising approximately $460 million in gross proceeds, a portion of which will go to XL Capital Ltd ("XL Capital"), as the selling shareholder. SCA is a newly formed holding company that owns the financial guaranty businesses of XL Capital, including XL Capital Assurance Inc. ("XLCA") and XL Financial Assurance Ltd ("XLFA"). SCA expects to retain approximately $341.5 million in net proceeds from the offering, the majority of which will be downstreamed to XLCA and XLFA to augment their claims-paying resources. Moody's affirmed the Aaa insurance financial strength ratings of XLCA and XLFA on April 7, 2006. The outlook for the ratings is stable.

Once the transaction closes, XL Capital will beneficially own approximately 65% of SCA's outstanding common shares (61% if the underwriters exercise their option to purchase an additional 2.2 million shares). However, through SCA's bye-law restrictions, XL Capital will have less than majority voting control over SCA for virtually every matter requiring a common share vote. The single exception to this is in respect of the election of SCA's directors, where XL Capital will have a maximum 50.1% voting interest. The nomination of SCA's independent board members will be conducted through SCA's Nominating & Governance Committee, whose composition will be entirely of directors that meet the NYSE definition of independence and who will also be unaffiliated with XL Capital.

As subsidiaries of XL Capital, XLCA and XLFA have been subject to a high degree of parental control. This element of control has given XL Capital the latitude to affect many aspects of the financial guaranty subsidiaries' operations, such as the decision to enter and exit the business, set dividend policy, influence management and set strategic direction. This control has been the source of rating linkage between XL Capital and the financial guaranty companies. Under such circumstances, XL Capital's A3 senior debt rating has reached a point where further rating pressure would likely diminish the justification for permitting additional rating separation. The completion of the IPO, however, will reduce XL Capital's voting interest in the companies and place substantive control in the hands of a much more independent board that will be unambiguously dedicated to the interests of SCA's broad shareholder group. In Moody's opinion, this reduces the linkage between the ratings of XL Capital and SCA.

Moody's also recognizes that XL Capital will retain meaningful influence over SCA for the foreseeable future. Consequently, if XL Capital's senior debt rating were to fall below the investment grade level, the ratings of XLCA and XLFA could face downward pressure in the absence of potential additional measures taken by XL Capital or SCA. Under such a scenario, Moody's would place particular focus on evaluating XL Capital's plans regarding its holdings in SCA, the market's willingness to conduct business with XLCA and XLFA given their affiliation with a much lower rated majority owner, and the unlikely possibility that SCA's assets could be accessed in a creditor claim against XL Capital.

Security Capital Assurance Ltd is a Bermuda-domiciled holding company whose primary operating subsidiaries, XL Capital Assurance Inc. and XL Financial Assurance Ltd (each rated Aaa for insurance financial strength), provide credit enhancement and protection products to the public finance and structured finance markets throughout the United States and internationally. For the six months ended June 30, 2006, SCA reported net income of $59 million. As of June 30, 2006 SCA had shareholders' equity of $893 million.

New York
James Eck
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Jack Dorer
Managing Director
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH  CURRENT OPINIONS. MOODY'S INVESTORS SERVICE DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY'S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY'S INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND  OTHER OPINIONS INCLUDED IN MOODY'S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY'S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY'S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND  PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES  ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

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