ACA FINANCIALS CHEER BONDHOLDERS
Research pays off

Holders of ACA-insured bonds can be very pleased with the company’s recently announced financial results.

The bond insurer reported impressive earnings for both the final quarter as well as for full year 2006. Net income reported for the year was $58.7 million, a 104% increase over 2005. Fourth quarter net income of $16.5 million represented a 293% increase over the same period one year ago.

“A”-rated ACA Capital is a niche insurer of small size or lower investment grade issues that are often overlooked by the larger “AAA”-rated insurers. ACA provides credit enhancement to borrowers through a thorough credit review process and industry-leading surveillance of its existing portfolio. ACA’s underwriting staff is highly experienced and widely respected in the municipal bond market for identifying the issues that meet its strict criteria.
           
We’re particularly gratified by ACA’s success.
           
In January 2001, Standard & Poor’s placed ACA on “negative credit watch,” stating that ACA’s capitalization levels were below those required for an “A”-rated insurer. ACA-insured bonds plummeted on the news.

Once again, while most major brokerages were advising their customers to sell, we recommended buying these bonds with yields as much as 100 basis points higher than similarly secured bonds. (See: “There is a Silver Lining in the Cloud Over ACA”)  Investors who followed our advice were well rewarded as ACA regained its financial footing.
           
Today, bonds insured by ACA are backed by a company with $6 billion in total assets, up from $5.8 billion at December 31, 2005.

As ACA has matured, its financial strength has substantially increased, providing an enhanced level of comfort to our clients and other bondholders.       

2/21/07

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