"In 2001, we measured our success not only by our financial performance but that of our customers. Driven by their requirements we have enhanced our time-proven franchise with structural innovation, creative risk management solutions and streamlined execution."

Dear Friends,

2001 was a year like no other. The tragic events of September 11th cast a long shadow that ultimately brought out the best in people – especially in our determination to work through grief and anger and look past those feelings to the future. In spite of our proximity to the disaster, Financial Guaranty Insurance Company (FGIC), a GE Capital Company, was determined to be back in business within 24 to 48 hours. But our first concern was the safety of our employees. My gratitude and relief that they were all safe is immeasurable – and I am awed by their performance under fire. In spite of the fact that they were geographically scattered, they continued to work as a cohesive team supporting each other and quickly reaching out to our customers to meet their needs.

Our record results in 2001 occurred in a tumultuous environment. Not surprisingly, investors fled to quality and insured municipal bonds became a highly desirable commodity. Driven by low interest rates, it was the second largest year ever for municipal issuance, with an overall volume of more than $286.3 billion. FGIC insured a record $31.4 billion or 23.9% of total insured volume, as compared to $20.2 billion in 2000. In addition we insured $7.8 billion of structured finance transactions – a full 16% gain over the prior year.

In 2001, we completed a major “Voice of the Customer” study, conducting personal interviews across all of our product lines and sales channels. We had a dual objective: to learn more about our customers' critical needs, and more importantly, to find out what they thought of FGIC. Their responses were unequivocal – both in the areas where they thought we were doing well, such as analytics and underwriting – and those that needed improvement, such as clarifying our risk appetite and business structure. In addition, they wanted us to be more innovative and open to new ideas and to improve their access to analysts and decision makers.

It was a wake-up call and it changed the way we do business. The shift from “how many new deals can we do?” to “how well do we exceed our customers’ expectations?” was a shift of major proportion. But for FGIC it was a strategic imperative to align with our customers.

Our key agenda was to drive growth by developing relationships that would increase the amount of business we do with each customer – and the support was already in place. We were able to draw on passionate, talented people to create customer relationship teams, set goals and develop action plans, using customer feedback to drive the entire effort. To track our progress and make sure we are delivering on our commitments, we use GE Six Sigma Quality program tools and process metrics. They provide a clear picture of whether we are meeting our customer needs or, better yet, exceeding them.

There is no question that our employees are our greatest asset, and attracting and retaining the best talent is a major initiative and critical to our success. By developing talented, motivated and satisfied employees, every customer they touch will want to do business with us. In addition, the proven strength of the FGIC leadership team – some of the most seasoned and capable people in the business – underscores our ability to service our customers.

In a challenging market environment, we will continue to listen to the voice of the customer, to transform ourselves around new opportunities and position our company as your insurer of first choice. In all of our markets, and the products and services we offer, we will be focused on meeting customer needs.

As always, we thank you for selecting FGIC to meet your capital markets needs. Our commitment to you is to maintain our exceptional strength while providing flexible, innovative and customer-driven solutions that contribute to the success of your business.