WALNUT CREEK, Calif.--(BUSINESS WIRE)--Aug. 4, 2003--The PMI
Group, Inc. (NYSE:PMI) announced today that it is the strategic
investor in a group (Investor Group) that will acquire Financial
Guaranty Insurance Company (FGIC) from General Electric Capital
Corporation (GE) for $2.16 billion including approximately a $260
million pre-closing dividend. FGIC is a leading triple -A rated
financial guaranty company with approximately $202 billion of insured
par outstanding.
"Our investment in FGIC marks the achievement of our strategic
goal to have a major presence in the financial guaranty industry. PMI
and its affiliates are now positioned to offer a full range of credit
enhancement products and services domestically and internationally,
with strong potential synergies between FGIC and the existing
companies of The PMI Group," said Roger Haughton, PMI Group's Chairman
and CEO.
"We believe our investment in FGIC represents a solid growth
opportunity, and a diversification that strengthens the overall risk
profile of The PMI Group. We are very excited about our FGIC
investment and we are pleased to have The Blackstone Group, The
Cypress Group, and CIVC as our partners," said Haughton.
PMI's equity investment will be approximately $607 million and
will represent an ownership interest of approximately 42%. PMI's
principal co-investors in this transaction are The Blackstone Group
and The Cypress Group who will each own approximately 23%. CIVC
Partners, another investor, will own approximately 7%, and GE will
maintain approximately 5% ownership of the common equity.
PMI expects net income per share from the investment to range
between $0.20 - $0.30 in 2004, assuming the transaction closes by
December 31, 2003.
Frank Bivona will be FGIC's CEO following the close of the
transaction. Mr. Bivona is the former Vice Chairman and Chief
Financial Officer of Ambac Financial Group, Inc.
The strategic direction and financial controls of FGIC, as
determined by management and the Board of Directors, are key
considerations for PMI in its role as a long term strategic investor.
PMI will be able to influence strategic direction through its ability
to appoint five of FGIC's 14 directors, including the non-executive
Vice Chairman of the Board. At this time it is expected that PMI's
CEO, Roger Haughton, will serve as FGIC's non-executive Vice Chairman.
Another key element in setting the strategic direction will be FGIC's
business plan, which will require approval by PMI as well as The
Blackstone Group and The Cypress Group. Finally, an important aspect
of financial controls will be the appointment of FGIC's independent
auditor, which PMI will have sole authority to name.
As a leading insurer of municipal bonds, FGIC provides credit
enhancement solutions that enable state and local issuers to reduce
their borrowing costs and enhance their access to the capital markets
by guarantying payment when due of the principal and interest on their
guaranteed obligation. Historically, FGIC has confined itself to the
most secure segment of the municipal bond insurance market.
"Under GE's guidance, FGIC insured a portfolio that was heavily
concentrated in municipal bonds," said Brad Shuster, President and
Chief Executive Officer, PMI Capital Corporation. "The financial
guaranty industry has grown over the past few years, in part due to
the development of the domestic and international asset backed
securities market, which has made extensive use of the structured
transactions insured by the primary financial guarantors."
Under the direction of Mr. Bivona, FGIC intends to execute a
strategic business plan geared to compete across the full range of
financial guaranty business, including asset backed securities and
international markets, with the objective of achieving returns
comparable to the other major competitors in the financial guaranty
industry.
"With new ownership and direction, FGIC's strategic plan calls for
it to become more diversified by expanding our market presence into
structured finance and international sectors. Our objective is for
FGIC to achieve a major market presence across the full spectrum of
financial guaranty markets," said Shuster. "The people of FGIC are
among the best in the industry and we're pleased to have them join us
as colleagues, and we are extremely pleased that Frank Bivona will be
FGIC's CEO."
As separately announced today, PMI's approximate $607 million
investment will be partially financed by the sale of approximately
$100 million of common equity and approximately $207 million of
equity-related securities. Approximately $300 million of cash from The
PMI Group, Inc. will also be utilized to facilitate the completion of
the transaction.
The closing of the acquisition is subject to normal regulatory
approvals, confirmation of ratings by the rating agencies and other
customary closing conditions. The acquisition is expected to close in
the fourth quarter of this year.
Banc of America Securities LLC originated the transaction and
served as exclusive financial advisor to the Investor Group. Lazard
acted as investment banker to PMI, and Sullivan & Cromwell LLP served
as legal advisor to PMI in this transaction.
The PMI Group, Inc., headquartered in Walnut Creek, California is
an international provider of credit enhancement products and lender
services that promote homeownership and facilitate mortgage
transactions in the capital markets. Through its wholly owned
subsidiaries and unconsolidated strategic investments, the company
offers residential mortgage insurance and credit enhancement products
domestically and internationally, lender services and financial
guaranty reinsurance.
PMI is an advocate of affordable housing and supports a number of
organizations that foster greater access to affordable housing. PMI's
approach to affordable housing lending is to develop products and
services that assist responsible borrowers who may not qualify for
mortgage loans under traditional underwriting practices.

FORWARD-LOOKING STATEMENTS

Statements in this press release that are not historical facts or
that relate to future plans, events or performance are
"forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include statements regarding the investor group's proposed
acquisition of FGIC, PMI's expected financial performance and
strategic and operational plans as a result of the proposed
acquisition, and PMI's plans with respect to the financing of its
investment in the proposed acquisition. Readers are cautioned that
these forward-looking statements by their nature involve risk and
uncertainty because they relate to events and depend on circumstances
that will occur in the future. Many factors could cause actual results
and developments to differ materially from those expressed or implied
by these forward-looking statements, including, among others, the
possibility that the acquisition will not close and the possibility
that the closing may be delayed, as well as conditions affecting the
financial guaranty or mortgage insurance industries and general
economic conditions. Events or developments affecting FGIC or the
financial guaranty industry may cause the investment in FGIC not to
contribute the net income per share in the amounts estimated. PMI's
ability to complete its financing is subject to market conditions.
Other risks and uncertainties that could affect PMI are discussed in
its various Securities and Exchange Commission filings, including its
report on Form 10-K for the year ended December 31, 2002, and its
report on Form 10-Q for the quarter ended March 31, 2003. PMI
undertakes no obligation to update forward-looking statements.

Note to the editor: The Buyer Group and GE have each issued news
releases on this transaction.
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