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Exhibit 99.2
Quarterly
Operating
Supplement
September 30, 2003
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
QUARTERLY OPERATING SUPPLEMENT
Third Quarter 2003
Table of Contents
| Highlights | | Page 2 |
Review of Operations |
|
Page 3 |
Condensed Consolidated Statements of Operations and Comprehensive Income |
|
Page 10 |
Condensed Consolidated Balance Sheets |
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Page 11 |
Expense Analysis |
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Page 12 |
Effect of Insured Bond Refundings |
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Page 13 |
Annual Financial and Statistical Data |
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Page 14 |
Statutory Analytics and Investment Portfolio |
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Page 15 |
Municipal New-Issue Market Data |
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Page 16 |
Gross Par Value and Present Value Originated by FSA |
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Page 17 |
FSA Insured Portfolio Profile |
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Page 18 |
50 Largest Municipal Exposures |
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Page 19 |
25 Largest Asset-Backed Exposures |
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Page 20 |
Asset-Backed Debt Service and Premiums |
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Page 21 |
Municipal Debt Service and Premiums |
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Page 22 |
Asset-Backed Net Debt Service and Premiums Amortizations and Ending Balances |
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Page 23 |
Municipal Net Debt Service and Premiums Amortizations and Ending Balances |
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Page 24 |
Financial Security Assurance Holdings Ltd. (the Company), through its wholly owned subsidiary, Financial Security Assurance Inc. (FSA), provides Aaa/AAA/AAA financial guaranty insurance for obligations in the municipal, infrastructure, asset-backed and structured finance markets worldwide. FSA's financial strength is rated Triple-A by Fitch Ratings, Moody's Investors Service, Inc., Standard & Poor's Ratings Services (S&P) and Rating and Investment Information, Inc. (R&I). The Company is a member of the Dexia group, a leading European banking group with three major business lines: public and project finance; retail banking; and private banking, asset management and investment fund administration.
Financial Security Assurance Holdings Ltd.
Highlights
Financial Key Lines
| | 3rd Qtr.
2003
| | Year-to-date
2003
| | Full Year
2002
| |
|---|
| Net Income (Millions) | | $ | 66.1 | | $ | 200.0 | | $ | 181.1 | |
| Stockholders' Equity (Millions) | | $ | 2,076.5 | | $ | 2,076.5 | | $ | 1,868.4 | |
| Return on Average Equity | | | 13.2 | % | | 13.7 | % | | 10.3 | % |
| GAAP: | | | | | | | | | | |
| | Loss Ratio(1) | | | 15.3 | % | | 10.3 | % | | 20.6 | % |
| | Expense Ratio(1) | | | 31.7 | % | | 31.5 | % | | 31.6 | % |
| | Combined Ratio(1) | | | 47.0 | % | | 41.8 | % | | 52.2 | % |
| Effective Tax Rates: | | | | | | | | | | |
| Net Investment Income | | | 9.6 | % | | 9.5 | % | | 10.4 | % |
| Underwriting and Other Income | | | 39.3 | % | | 34.3 | % | | 29.3 | % |
| | |
| |
| |
| |
| | Total Income | | | 25.1 | % | | 23.3 | % | | 17.1 | % |
Reconciliation of Net income to Operating Earnings(2)
(dollars in millions)
| | 3rd Qtr.
2003
| | Year-to-date
2003
| | Full Year
2002
| |
|---|
| Net Income | | $ | 66.1 | | $ | 200.0 | | $ | 181.1 | |
| Less Mark-to-Market of Pooled CDS, net of taxes(3) | | | 3.1 | | | 5.9 | | | (34.1 | ) |
| | |
| |
| |
| |
| Operating Earnings(4) | | | 63.0 | | | 194.1 | | | 215.2 | |
| | |
| |
| |
| |
Reconciliation of Book Value to Adjusted Book Value
(dollars in millions)
| | September 30,
2003
| | December 31,
2002
|
|---|
| Book Value(5) | | $ | 2,076.5 | | $ | 1,868.4 |
| After-Tax Value of: | | | | | | |
Net Deferred Premium Revenue, Net of DAC |
|
|
538.4 |
|
|
407.6 |
Present Value of Future Installment Premiums and Present
Value of Future Net Interest Margin | | | 418.4 | | | 411.3 |
| | |
| |
|
| Adjusted Book Value | | $ | 3,033.3 | | $ | 2,687.3 |
- (1)
- Relates solely to FSA.
- (2)
- See Review of Operations for additional analysis.
- (3)
- This item pertains to SFAS No. 133 adjustments for FSA-insured credit default swaps that reference pools of financial obligations and are of investment-grade quality.
- (4)
- This definition of operating earnings differs from that used in FSA's financial reporting prior to the fourth quarter of 2002.
- (5)
- Includes the effect of after-tax unrealized gains in the investment portfolio, which was $146.2 million at September 30, 2003 and $134.7 million at December 31, 2002.
2
FSA THIRD QUARTER 2003 FINANCIAL RESULTS
NET INCOME
$66 Million in Q3 03 (+92% vs. Q3 02)
$200 Million in 9M 03 (+49% vs. 9M 02)
ORIGINATIONS (PRESENT VALUE)
$259 Million in Q3 03 (+3% vs. Q3 02)
$692 Million in 9M 03 (+11% vs. 9M 02)
New York, New York, November 6, 2003—Financial Security Assurance Holdings Ltd. (the Company), the holding company for bond insurer Financial Security Assurance Inc. (FSA), reported third quarter 2003 net income of $66.1 million, an increase of 92.1% over third quarter net income a year ago. Comparing the nine-month periods of this year and last, net income rose 49.3% to $200.0 million.
Operating earnings were $63.0 million for the third quarter and $194.1 million for the first nine months, representing increases of 17.0% and 23.9%, respectively, over the results in last year's comparable periods. (The Company has restated operating earnings for the third quarter of 2002 to reflect the definition it adopted in the fourth quarter of 2002. See "Non-GAAP Terms" below for definitions of operating earnings, adjusted book value and present value originations. Reconciliations of operating earnings to net income and of adjusted book value to book value also appear below.)
Shareholders' equity (book value) was $2.1 billion and adjusted book value (ABV) was $3.0 billion at September 30, 2003. Over the past twelve months, ABV grew 17.4% excluding realized and unrealized capital gains and losses in the investment portfolio and 16.3% including such gains and losses. (The Company paid no dividends during the past twelve months.)
Third quarter present value (PV) originations were $259.3 million, compared with $251.4 million for the same period last year. Robert P. Cochran, chairman and chief executive officer of FSA Holdings and FSA, said: "This was our best third quarter production ever. Market conditions, both volume and pricing, have been good and are expected to remain favorable through year-end.
"FSA continued to achieve excellent results in the high-volume U.S. municipal market. Our international business continued to grow and diversify, although none of the large infrastructure transactions in our pipeline closed in the quarter. In general, we are very comfortable with the volume and quality of the international transactions in the works. In the U.S. asset-backed market, which continues robust growth, our activity was limited by tight spreads, aggressive credit terms and our own conservative credit appetite. Nonetheless, we found a number of significant transactions in the collateralized loan obligation, auto loan and residential mortgage sectors that met our underwriting and pricing requirements."
3
BUSINESS PRODUCTION
GROSS PAR INSURED OF NEW ORIGINATIONS
(Dollars in billions)
| | Three Months Ended
September 30,
| | Nine Months Ended
September 30,
|
|---|
| | 2003
| | 2002
| | 2003
| | 2002
|
|---|
| U.S Municipal Obligations | | $ | 17.5 | | $ | 13.0 | | $ | 44.2 | | $ | 37.0 |
| U.S. Asset-Backed Obligations(1) | | | 5.3 | | | 10.2 | | | 11.8 | | | 33.6 |
| International Obligations | | | 4.7 | | | 1.7 | | | 8.2 | | | 13.3 |
| | |
| |
| |
| |
|
| Total(1)(2) | | $ | 27.5 | | $ | 24.9 | | $ | 64.2 | | $ | 83.9 |
| | |
| |
| |
| |
|
- (1)
- U.S. asset-backed amounts for the three- and nine-month periods ended September 30, 2002 have been restated to exclude guaranteed investment contract (GIC) originations.
- (2)
- Excludes amounts relating to FSA-insured GICs issued by the Company's GIC subsidiaries (FSA Capital Markets Services LLC and FSA Capital Management Services LLC), which are consolidated in the Company's financial statements. The outstanding par amount of such GICs is reflected as insurance exposure in FSA's financial statements but as GIC liabilities in the consolidated statements of the Company. As a result, the outstanding insurance exposures reported by FSA and the Company differ.
GROSS PV ORIGINATIONS
(Dollars in millions)
| | Three Months Ended
September 30,
| | Nine Months Ended
September 30,
|
|---|
| | 2003
| | 2002
| | 2003
| | 2002
|
|---|
| U.S Municipal Obligations(1) | | $ | 160.0 | | $ | 103.1 | | $ | 368.6 | | $ | 253.6 |
| U.S. Asset-Backed Obligations(1)(2) | | | 51.1 | | | 50.2 | | | 138.2 | | | 163.1 |
| International Obligations(1) | | | 35.1 | | | 67.0 | | | 153.8 | | | 151.7 |
| Financial Products(3) | | | 13.1 | | | 31.1 | | | 31.4 | | | 57.7 |
| | |
| |
| |
| |
|
| Total | | $ | 259.3 | | $ | 251.4 | | $ | 692.0 | | $ | 626.1 |
| | |
| |
| |
| |
|
- (1)
- Present value of premiums originated (PV premiums). The discount rate was 5.91% in each period.
- (2)
- U.S. asset-backed amounts for the three- and nine-month periods ended September 30, 2002 have been restated to exclude GIC originations.
- (3)
- Present value of future net interest margin from GICs issued to municipalities and other market participants. The discount rate was 5.91% in each period.
Municipal. Year-to-date, new issue volume in the U.S. municipal bond market reached a record $287.2 billion, and insurance penetration was approximately 53%, compared with 50% in last year's comparable period. In this environment, FSA insured approximately 27% of the insured new issues sold during the nine-month period.
FSA guaranteed a par amount of $17.5 billion of U.S. primary and secondary municipal obligations with closing dates in the third quarter, an increase of 34.6% over the amount insured in the prior year's comparable period. FSA's U.S. municipal PV premium originations were $160.0 million for the quarter, 55.2% higher than in the third quarter of 2002. Average premium rates continued to be strong across municipal sectors and were boosted further by a higher proportion of transportation and health care transactions, which tend to have higher premiums relative to par. For the nine months, FSA's U.S. municipal par originated rose 19.3% to $44.2 billion, and PV premiums increased 45.3% to $368.6 million.
Asset-backed. For the third quarter, the Company's U.S. asset-backed par originated was $5.3 billion, compared with $10.2 billion in the third quarter of last year, but asset-backed PV premiums increased slightly to $51.1 million. The decline in par insured largely reflected reduced activity in Super Triple-A credit default swaps (CDS) and Triple-A mortgage-backed securities, both of which tend to have low premium rates, and increased activity in higher premium sectors, such as residential mortgage net interest margin securitizations and collateralized loan obligations. For the first nine months, FSA's U.S. asset-backed par originated declined 64.8% to $11.8 billion, and PV premiums declined 15.3% to $138.2 million.
4
International. For the third quarter, FSA insured $4.7 billion par of international obligations, generating $35.1 million of PV premiums, versus $1.7 billion of par and $67.0 million of PV premiums in the third quarter of 2002. FSA executed a variety of European infrastructure finance and asset-backed transactions during the quarter. The decline in PV premiums despite the increase in par primarily reflects a single high-premium infrastructure transaction executed in the same period a year ago, as well as certain high-quality, high-par asset-backed transactions in the third quarter of this year. For the first nine months, FSA's international par originated declined to $8.2 billion from $13.3 billion, while PV premiums increased to $153.8 million from $151.7 million. International PV premiums have increased slightly over the first three quarters despite the decline in par insured primarily because of a shift in the asset-backed business mix from Super Triple-A pooled corporate CDS to a broader range of transactions.
Financial Products. The financial products segment comprises guaranteed investment contracts (GICs) issued by the Company's GIC subsidiaries and the operations of FSA Global Funding Limited (FSA Global) and Premier International Funding Co. (Premier), two entities that the Company consolidated in the third quarter. (FSA Global is managed as a "matched funding vehicle," in which the proceeds from the issuance of FSA-guaranteed notes are invested in obligations having cash flows substantially matched to those of, and maturing prior to, such notes. Premier is principally engaged in debt defeasance for lease transactions.)
The present value of future net interest margin (PVNIM) in this segment was $13.1 million in the third quarter and $31.4 million in the first nine months of 2003, compared with $31.1 million and $57.7 million in the respective comparable periods of last year. Substantially all of this PVNIM was generated by the GIC business. Third-quarter PVNIM declined primarily because of three high-value-added transactions in the third quarter of 2002 that represented special opportunities. In addition, the low interest rate environment has led to reduced demand for long-term GICs throughout the year, and the year-to-date results were affected by previously disclosed regulatory constraints that limited the GIC business until April 2003, when an exemption from the Investment Company Act was received.
ANALYSIS OF FINANCIAL RESULTS
RECONCILIATION OF NET INCOME TO OPERATING EARNINGS
(Dollars in millions)
| | Three Months Ended September 30,
| | Nine Months Ended September 30,
| |
|---|
| | 2003
| | 2002
| | 2003
| | 2002
| |
|---|
| Net Income | | $ | 66.1 | | $ | 34.4 | | $ | 200.0 | | $ | 133.9 | |
Less mark-to-market of pooled CDS, net of taxes(1) |
|
|
3.1 |
|
|
(19.5 |
) |
|
5.9 |
|
|
(22.7 |
) |
| | |
| |
| |
| |
| |
| Operating Earnings(2) | | $ | 63.0 | | $ | 53.9 | | $ | 194.1 | | $ | 156.6 | |
| | |
| |
| |
| |
| |
- (1)
- This item pertains to SFAS No. 133 adjustments for FSA-insured CDS that reference pools of financial obligations and are of investment-grade quality.
- (2)
- This definition of operating earnings differs from that used in FSA's financial reporting prior to the fourth quarter of 2002. The amounts for the three- and nine-month periods ended September 30, 2002 have therefore been restated.
5
NOTEWORTHY ITEMS INCLUDED IN NET INCOME
(All items shown net of taxes. Dollars in millions)
| | Three Months Ended
September 30,
| | Nine Months Ended
September 30,
| |
|---|
| | 2003
| | 2002
| | 2003
| | 2002
| |
|---|
| Refundings, calls or other accelerations(1) | | $ | 5.2 | | $ | 3.3 | | $ | 11.2 | | $ | 8.1 | |
| Realized gains, net(2) | | | 0.1 | | | 1.9 | | | 3.0 | | | 19.5 | |
| Equity-based compensation(2) | | | (4.9 | ) | | (5.3 | ) | | (18.1 | ) | | (15.1 | ) |
| General reserve contribution for estimated loss on CDOs(2) | | | (5.5 | ) | | | | | (6.5 | ) | | (22.1 | ) |
| Mark-to-market of single-name CDS program(2) | | | | | | (15.0 | ) | | | | | (28.3 | ) |
| Equity earnings in Fairbanks | | | (11.0 | ) | | 3.5 | | | (9.3 | ) | | 8.5 | |
| Cumulative accounting adjustment(3) | | | 4.8 | | | | | | 4.8 | | | | |
| Accelerated amortization of debt issuance costs(4) | | | (2.1 | ) | | | | | (2.1 | ) | | | |
- (1)
- Net of deferred acquisition cost amortization
- (2)
- Excluded from operating earnings under the definition used prior to the fourth quarter of 2002
- (3)
- Effective for the third quarter of 2003, the Company applied FIN No. 46 to two variable interest entities, Canadian Global Funding Corporation and FSA Global Funding Limited, which it therefore consolidated. These events were recorded as a cumulative effect of a change in accounting principle.
- (4)
- Reflects defeasance of 6.950% Senior QUIDS due November 1, 2098 (see "Debt Issue and Redemption" below)
NET INCOME. The $66.1 million of third quarter net income is 92.1% higher than in the third quarter of 2002. Expenses in the third quarter of last year included an after-tax mark-to-market charge of $15.0 million in connection with the termination of a diversified portfolio of single-name CDS and after-tax mark-to-market adjustments of $19.5 million for pooled CDS (see "Operating Earnings" below). After-tax capital gains were $0.1 million in the third quarter of 2003, compared with $1.9 million in the comparable period of last year. For the first nine months, net income rose 49.3% to $200.0 million.
For the third quarter of 2003, the Company's equity in the earnings of Fairbanks Capital Holding Corp. (Fairbanks), a mortgage servicing holding company in which the Company owns a minority interest, was recorded as a pre-tax loss of $11.8 million, compared with pre-tax income of $3.7 million in the third quarter of 2002. The decrease in the Company's equity in the earnings of Fairbanks for the quarter was largely a result of estimated Federal Trade Commission (FTC) and related litigation settlement charges accrued. For the first nine months of 2003 the Company's pre-tax equity in the earnings of Fairbanks was a pre-tax loss of $10.0 million compared with pre-tax income of $9.2 million for the prior year. At September 30, 2003, the Company's interest in Fairbanks had a book value of $49.9 million, including unamortized goodwill of $7.6 million. While the Company does not believe the investment is currently impaired, the final outcome of the FTC and related investigations must be known before the Company can reasonably assess the value of its investment in Fairbanks.
During the third quarter of 2003, the Company applied FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN No. 46) to Canadian Global Funding Corporation and FSA Global, which it therefore consolidated on the Company's financial statements. The resulting cumulative effect of a change in accounting principle added $4.8 million to net income. FSA also took control of and consolidated Premier, which had no material effect on net income. The consolidation of all three entities increased assets and liabilities by $1.9 billion.
The Company has always included in net income the full future-value payout cost of its performance share program, which is the Company's only equity-based compensation program.
6
OPERATING EARNINGS. Operating earnings exclude only mark-to-market adjustments for pooled CDS under Statement of Financial Accounting Standards No. 133 (SFAS No. 133). Such adjustments are expected to sum to zero over time.
Third quarter operating earnings of $63.0 million are lower than net income because they exclude positive mark-to-market adjustments totaling $4.5 million before taxes and $3.1 million after taxes. The comparable mark-to-market adjustments in the third quarter of 2002 were charges totaling $28.5 million before taxes and $19.5 million after taxes.
Operating earnings rose 17.0% for the third quarter and 23.9% for the first nine months compared with last year's comparable-period results.
GROSS PREMIUMS WRITTEN. Third quarter gross premiums written were $262.1 million, up 21.8% from $215.2 million in the comparable period of 2002. First nine months gross premiums written were $686.5 million, up 29.4% from $530.6 million in the comparable period of 2002.
NET PREMIUMS WRITTEN. Third quarter net premiums written were $182.9 million, up 22.5% from $149.3 million in the comparable period of 2002. First nine months net premiums written were $463.0 million, up 25.2% from $369.7 million in the comparable period of 2002.
EARNED PREMIUMS. Third quarter net premiums earned totaled $95.5 million, a 19.2% increase from $80.1 million in last year's comparable period. Third quarter refundings and prepayments were $10.7 million, compared with $6.4 million in the same period of 2002.
First nine months net premiums earned totaled $263.7 million, a 16.3% increase from $226.8 million in last year's comparable period. First nine months refundings and prepayments were $22.6 million, compared with $15.7 million in the same period of 2002.
INVESTMENT PORTFOLIO. Net investment income for the third quarter of 2003 was $39.2 million, an increase of 13.8% over last year's third quarter result. The increase reflected higher invested balances partially offset by lower reinvestment rates stemming from the current low interest rate environment. Net realized gains were $0.2 million in the third quarter of 2003 and $2.8 million in the same period of 2002. The Company's effective tax rate on investment income (excluding the effects of realized gains and losses and variable interest entities) was 9.6% for the third quarter of 2003, compared with 9.9% for the same period of the prior year. For the first nine months, net investment income was $113.5 million and net realized gains were $4.0 million, compared with $103.0 million and $26.8 million, respectively, in last year's comparable period.
The Company's investment portfolio totaled $3.6 billion at September 30, 2003, compared with $3.2 billion at December 31, 2002. These amounts exclude assets of the GIC subsidiaries and Global Funding.
NET INTEREST MARGIN. Third quarter net interest margin for the financial products segment was $1.7 million, compared with $3.5 million in last year's comparable period. The first nine months' net interest margin was $3.8 million, compared with $6.1 million in last year's comparable period.
EXPENSES AND RESERVES. For the third quarter, policy acquisition and other operating expenses increased to $28.2 million, or $3.8 million higher than in last year's third quarter. Losses and loss adjustment expenses, net of reinsurance, were $14.6 million ($10.3 million after taxes) in the third quarter of 2003. In the third quarter of 2002, losses and loss adjustment expenses, net of reinsurance, were $8.9 million ($6.2 million after taxes). Additions to reserves represent management's estimate of the amount required to cover the present value of the net cost of claims, based on statistical provisions for new originations and a separate review of the insured CDO portfolio. At September 30, 2003, FSA's general reserve totaled $91.4 million. During the third quarter of 2003, net transfers from the general reserve to case reserves totaled $12.7 million, primarily for CDOs. Transfers from general to case reserves represent a reallocation of existing loss reserves and have no impact on earnings. At September 30, 2003, case and general reserves in aggregate totaled $173.8 million, compared with $147.7 million at December 31, 2002.
7
DEBT ISSUE AND REDEMPTION
As previously disclosed, on July 31, 2003, the Company issued $100 million of 5.60% Notes due July 15, 2103 and callable on or after July 31, 2008. The Company also announced that it would use the proceeds from the debt offering to redeem in full, on November 1, 2003, its 6.950% Senior Quarterly Income Debt Securities (6.950% Senior QUIDS) due November 1, 2098. As of September 25, 2003, the Company delivered to the bond trustee sufficient collateral to defease its 6.950% Senior QUIDS. The pre-tax unamortized debt issuance costs of $3.2 million for the 6.950% Senior QUIDS were reflected as part of interest expense in net income for the third quarter of 2003. Subsequently, the trustee used the defeasance collateral to redeem all of the 6.950% Senior QUIDS.
ADDITIONAL INFORMATION
The Company will post its current Operating Supplement to its website, www.fsa.com, today. The Operating Supplement contains additional information about results for the period covered in this release. On the Investor Presentations page of its website, the Company will also post updated information about its insured securitization program with AmeriCredit Corp.
NON-GAAP TERMS
Management and investors consider the measures listed and defined below to be important in analyzing the financial results of the Company. However, none of these measures are promulgated in accordance with accounting principles generally accepted in the United States of America and should not be considered as substitutes for shareholders' equity, net income, revenues, expenses and gross premiums written.
Operating earnings—Net income before the effects of mark-to-market adjustments for pooled CDS under Statement of Financial Accounting Standards No. 133 (SFAS No. 133). Under SFAS No. 133, the Company marks to market certain CDS transactions based on an estimate of fair value derived from pricing of insurance premiums in the credit default swap market during the applicable period. For purposes of calculating operating earnings, pooled CDS are defined as FSA-insured credit default swaps that reference pools of financial obligations and require payments by the Company if losses exceed a defined deductible providing an investment-grade level of protection to the Company. Management considers operating earnings a key measure of normal operating results, as the SFAS No. 133 adjustments for each guaranteed credit default swap are expected to sum to zero over the life of the transaction.
Present value originations (PV originations)—For business originated in a given period, the sum of PV premiums (future installment premiums discounted to their present value plus upfront premiums) and the present value of future net interest margin from financial products, such as guaranteed investment contracts. The Company considers PV originations and PV premiums to be important indicators of a given period's origination activity because a substantial portion of the Company's premiums is collected in installments.
Adjusted book value—Book value plus the after-tax present value of net deferred premium revenue, installment premiums and future net interest margin less deferred expenses. Management and some equity analysts use adjusted book value per common share as a proxy for the Company's intrinsic value, exclusive of franchise value.
RECONCILIATION OF BOOK VALUE TO ADJUSTED BOOK VALUE
(Dollars in millions)
| | September 30,
2003
| | December 31,
2002
|
|---|
| Book Value(1) | | $ | 2,076.5 | | $ | 1,868.4 |
| After-tax value of: | | | | | | |
| | Net deferred premium revenue, net of deferred acquisition cost | | | 538.4 | | | 407.6 |
| | Present value of future installment premiums and
present value of future net interest margin(2) | | | 418.4 | | | 411.3 |
| | |
| |
|
| | Adjusted Book Value | | $ | 3,033.3 | | $ | 2,687.3 |
| | |
| |
|
- (1)
- Includes the effect of after-tax unrealized gains in the investment portfolio, which was $146.2 million at September 30, 2003 and $134.7 million at December 31, 2002.
- (2)
- The discount rate varies according to the year of origination. For each year's originations, the Company calculates the discount rate as the average pre-tax yield on its investment portfolio for the previous three years. The rate for 2003 is 5.91%. The rates were 5.91%, 5.79% and 5.77% for origination years 2002, 2001 and 2000, respectively.
8
FORWARD-LOOKING STATEMENTS
The Company relies upon the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. This safe harbor requires that the Company specify important factors that could cause actual results to differ materially from those contained in forward-looking statements made by or on behalf of the Company. Accordingly, forward-looking statements by the Company and its affiliates are qualified by reference to the following cautionary statements.
In its filings with the SEC, reports to investors, press releases and other written and oral communications, the Company from time to time makes forward-looking statements. Such forward-looking statements include, but are not limited to, (i) projections of revenues, income (or loss), earnings (or loss), dividends, market share or other financial forecasts; (ii) statements of plans, objectives or goals of the Company or its management, including those related to growth in adjusted book value or return on equity; and (iii) expected losses on, and adequacy of loss reserves for, insured transactions. Words such as "believes", "anticipates", "expects", "intends" and "plans" and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
The Company cautions that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in forward-looking statements made by the Company. These factors include: (i) changes in capital requirements or other criteria of securities rating agencies applicable to financial guaranty insurers in general or to FSA specifically; (ii) competitive forces, including the conduct of other financial guaranty insurers in general; (iii) changes in domestic or foreign laws or regulations applicable to the Company, its competitors or its clients; (iv) changes in accounting principles or practices that may result in a decline in securitization transactions; (v) an economic downturn or other economic conditions (such as a rising interest rate environment) adversely affecting transactions insured by FSA or its investment portfolio; (vi) inadequacy of loss reserves established by the Company; (vii) temporary or permanent disruptions in cash flow on FSA-insured structured transactions attributable to legal challenges to such structures; (viii) downgrade or default of one or more of FSA's reinsurers; (ix) the amount and nature of business opportunities that may be presented to the Company; (x) market conditions, including the credit quality and market pricing of securities issued; (xi) capacity limitations that may impair investor appetite for FSA-insured obligations; (xii) market spreads and pricing on insured credit default swap exposures, which may result in gain or loss due to mark-to-market accounting requirements; (xiii) prepayment speeds on FSA-insured asset-backed securities and other factors that may influence the amount of installment premiums paid to FSA; (xiv) changes in the value or performance of strategic investments made by the Company and (xv) other factors, most of which are beyond the Company's control. The Company cautions that the foregoing list of important factors is not exhaustive. In any event, such forward-looking statements made by the Company speak only as of the date on which they are made, and the Company does not undertake any obligation to update or revise such statements as a result of new information, future events or otherwise.
THE COMPANY
Financial Security Assurance Holdings Ltd. (FSA Holdings) is a New York-headquartered holding company whose subsidiaries provide financial guarantees in both the public and private sectors around the world. Its principal operating subsidiary, Financial Security Assurance Inc. (FSA), is a leading guarantor of municipal bonds, infrastructure financings and asset-backed securities. FSA has earned Triple-A ratings, the highest ratings available, from Fitch Ratings, Moody's Investors Service, Inc., Standard & Poor's Ratings Services and Rating and Investment Information, Inc. FSA Holdings is a member of the Dexia group. For additional information, visit www.fsa.com.
9
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income
(Dollars in thousands)
| | Three Months Ended
September 30,
| | Nine Months Ended
September 30,
| |
|---|
| | 2003
| | 2002
| | 2003
| | 2002
| |
|---|
| Revenues: | | | | | | | | | | | | | |
| Net premiums written | | $ | 182,946 | | $ | 149,304 | | $ | 463,015 | | $ | 369,731 | |
| | |
| |
| |
| |
| |
| Net premiums earned | | | 95,460 | | | 80,087 | | | 263,708 | | | 226,838 | |
| Net investment income | | | 39,218 | | | 34,457 | | | 113,527 | | | 102,955 | |
| Net realized gains | | | 151 | | | 2,803 | | | 4,044 | | | 26,760 | |
| Financial products net interest income | | | 17,041 | | | 9,612 | | | 36,947 | | | 17,787 | |
| Financial products net realized gains (losses) | | | | | | 54 | | | (1,096 | ) | | 54 | |
| Net realized and unrealized gains (losses) on derivative instruments | | | 8,259 | | | (54,296 | ) | | 10,399 | | | (78,994 | ) |
| Other income | | | 290 | | | 646 | | | 1,917 | | | 1,828 | |
| | |
| |
| |
| |
| |
| | | TOTAL REVENUES | | | 160,419 | | | 73,363 | | | 429,446 | | | 297,228 | |
| | |
| |
| |
| |
| |
| Expenses: | | | | | | | | | | | | | |
| Losses and loss adjustment expenses | | | 14,638 | | | 8,876 | | | 27,533 | | | 50,995 | |
| Interest expense | | | 11,750 | | | 5,880 | | | 25,921 | | | 17,622 | |
| Policy acquisition costs | | | 16,349 | | | 13,292 | | | 43,285 | | | 39,169 | |
| Financial products net interest expense | | | 15,060 | | | 6,117 | | | 29,289 | | | 11,640 | |
| Other operating expenses | | | 11,872 | | | 11,110 | | | 44,811 | | | 32,094 | |
| | |
| |
| |
| |
| |
| | | TOTAL EXPENSES | | | 69,669 | | | 45,275 | | | 170,839 | | | 151,520 | |
| | |
| |
| |
| |
| |
| Minority interest | | | (3,025 | ) | | (1,435 | ) | | (7,745 | ) | | (5,650 | ) |
| Equity in earnings of unconsolidated affiliates | | | (5,874 | ) | | 6,784 | | | 3,512 | | | 19,664 | |
| | |
| |
| |
| |
| |
| INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE | | | 81,851 | | | 33,437 | | | 254,374 | | | 159,722 | |
| Benefit (provision) for income taxes | | | (20,570 | ) | | 959 | | | (59,179 | ) | | (25,801 | ) |
| | |
| |
| |
| |
| |
| INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE | | | 61,281 | | | 34,396 | | | 195,195 | | | 133,921 | |
| Cumulative effect of accounting change, net of income taxes of $2,598 | | | 4,800 | | | | | | 4,800 | | | | |
| | |
| |
| |
| |
| |
| NET INCOME | | | 66,081 | | | 34,396 | | | 199,995 | | | 133,921 | |
| Other comprehensive income, net of tax: | | | | | | | | | | | | | |
| | Unrealized gains (losses) on securities: | | | | | | | | | | | | | |
| | | Holding gains (losses) arising during period | | | (27,218 | ) | | 75,240 | | | 14,180 | | | 110,160 | |
| | | Less: reclassification adjustment for gains included in net income | | | 229 | | | 2,022 | | | 2,707 | | | 19,577 | |
| | |
| |
| |
| |
| |
| | Other comprehensive income (loss) | | | (27,447 | ) | | 73,218 | | | 11,473 | | | 90,583 | |
| | |
| |
| |
| |
| |
| COMPREHENSIVE INCOME | | $ | 38,634 | | $ | 107,614 | | $ | 211,468 | | $ | 224,504 | |
| | |
| |
| |
| |
| |
10
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except per share data)
| | September 30,
2003
| | December 31,
2002
| |
|---|
| ASSETS | |
Bonds at market value (amortized cost of $3,203,178 and $2,615,173) |
|
$ |
3,436,759 |
|
$ |
2,829,763 |
|
| Short-term investments | | | 163,348 | | | 375,688 | |
| | |
| |
| |
| Total financial guaranty investment portfolio | | | 3,600,107 | | | 3,205,451 | |
| Variable interest entities bonds at market value (amortized cost of $1,389,953) | | | 1,386,777 | | | | |
| Variable interest entities short-term investment portfolio | | | 6,723 | | | | |
| Guaranteed investment contract bond portfolio at market value (amortized cost of $3,206,339 and $1,840,949) | | | 3,203,909 | | | 1,827,312 | |
| Guaranteed investment contract bond portfolio pledged as collateral at market value (amortized cost of $91,789) | | | 87,205 | | | | |
| Guaranteed investment contract short-term investment portfolio | | | 151,082 | | | 4,632 | |
| | |
| |
| |
| Total investment portfolio | | | 8,435,803 | | | 5,037,395 | |
| Cash | | | 19,839 | | | 31,368 | |
| Securitized loans | | | 457,649 | | | 437,462 | |
| Deferred acquisition costs | | | 258,719 | | | 253,777 | |
| Prepaid reinsurance premiums | | | 668,144 | | | 557,659 | |
| Investment in unconsolidated affiliates | | | 113,247 | | | 115,833 | |
| Reinsurance recoverable on unpaid losses | | | 84,963 | | | 75,950 | |
| Other assets | | | 946,238 | | | 518,039 | |
| | |
| |
| |
| | TOTAL ASSETS | | $ | 10,984,602 | | $ | 7,027,483 | |
| | |
| |
| |
| LIABILITIES AND MINORITY INTEREST AND SHAREHOLDERS' EQUITY | |
Deferred premium revenue |
|
$ |
1,766,830 |
|
$ |
1,450,211 |
|
| Losses and loss adjustment expenses | | | 258,751 | | | 223,618 | |
| Guaranteed investment contracts | | | 3,191,769 | | | 2,449,033 | |
| Variable interest entities debt | | | 2,238,734 | | | | |
| Deferred federal income taxes | | | 140,307 | | | 124,310 | |
| Notes payable | | | 626,572 | | | 430,000 | |
| Accrued expenses and other liabilities | | | 685,129 | | | 481,941 | |
| | |
| |
| |
| | TOTAL LIABILITIES AND MINORITY INTEREST | | | 8,908,092 | | | 5,159,113 | |
| | |
| |
| |
| Common stock (200,000,000 shares authorized; 33,517,995 issued; par value of $.01 per share) | | | 335 | | | 335 | |
| Additional paid-in capital—common | | | 900,166 | | | 903,494 | |
| Accumulated other comprehensive income (net of deferred income taxes of $74,177 and $66,270) | | | 146,156 | | | 134,683 | |
| Accumulated earnings | | | 1,029,853 | | | 829,858 | |
| Deferred equity compensation | | | 23,445 | | | 23,445 | |
| Less treasury stock at cost (297,658 shares held) | | | (23,445 | ) | | (23,445 | ) |
| | |
| |
| |
| | TOTAL SHAREHOLDERS' EQUITY | | | 2,076,510 | | | 1,868,370 | |
| | |
| |
| |
| TOTAL LIABILITIES AND MINORITY INTEREST AND SHAREHOLDERS' EQUITY | | $ | 10,984,602 | | $ | 7,027,483 | |
| | |
| |
| |
11
Expense Analysis(1)
(dollars in thousands)
2003
| | 1st Qtr.
| | 2nd Qtr.
| | 3rd Qtr.
| | 4th Qtr.
| | Year
| |
|---|
| Losses and loss adjustment expenses | | $ | 6,300 | | $ | 6,595 | | $ | 14,638 | | | | $ | 27,533 | |
| Interest | | | 7,085 | | | 7,085 | | | 11,750 | | | | | 25,920 | |
| Amortization of previously deferred underwriting expenses and reinsurance commissions | | | 13,399 | | | 13,537 | | | 16,349 | | | | | 43,285 | |
Gross underwriting and operating expenses |
|
|
47,450 |
|
|
56,899 |
|
|
46,688 |
|
|
|
|
151,037 |
|
Underwriting expenses deferred |
|
|
(31,849 |
) |
|
(39,561 |
) |
|
(34,816 |
) |
|
|
|
(106,226 |
) |
| Reinsurance commissions received, net | | | (9,083 | ) | | (27,920 | ) | | (20,996 | ) | | | | (57,999 | ) |
| Reinsurance commissions deferred, net | | | 9,083 | | | 27,920 | | | 20,996 | | | | | 57,999 | |
| | Other operating expenses | | | 15,601 | | | 17,338 | | | 11,872 | | | | | 44,811 | |
| | |
Total expenses |
|
$ |
42,385 |
|
$ |
44,555 |
|
$ |
54,609 |
|
|
|
$ |
141,549 |
|
2002
| | 1st Qtr.
| | 2nd Qtr.
| | 3rd Qtr.
| | 4th Qtr.
| | Year
| |
|---|
| Losses and loss adjustment expenses | | $ | 2,912 | | $ | 39,207 | | $ | 8,876 | | $ | 14,618 | | $ | 65,613 | |
| Interest | | | 5,861 | | | 5,881 | | | 5,880 | | | 10,476 | | | 28,098 | |
| Amortization of previously deferred underwriting expenses and reinsurance commissions | | | 12,365 | | | 13,512 | | | 13,292 | | | 14,924 | | | 54,093 | |
Gross underwriting and operating expenses |
|
|
43,083 |
|
|
43,293 |
|
|
46,176 |
|
|
61,555 |
|
|
194,107 |
|
| Underwriting expenses deferred | | | (32,820 | ) | | (32,572 | ) | | (35,066 | ) | | (35,384 | ) | | (135,842 | ) |
| Reinsurance commissions received, net | | | (12,690 | ) | | (10,589 | ) | | (15,619 | ) | | (29,566 | ) | | (68,464 | ) |
| Reinsurance commissions deferred, net | | | 12,690 | | | 10,589 | | | 15,619 | | | 29,566 | | | 68,464 | |
| | Other operating expenses | | | 10,263 | | | 10,721 | | | 11,110 | | | 26,171 | | | 58,265 | |
| | |
Total expenses |
|
$ |
31,401 |
|
$ |
69,321 |
|
$ |
39,158 |
|
$ |
66,189 |
|
$ |
206,069 |
|
- (1)
- Excludes expenses of guaranteed investment contract business.
12
Effect of Insured Bond Refundings
(dollars in thousands)
2003
| | 1st Qtr.
| | 2nd Qtr.
| | 3rd Qtr.
| | 4th Qtr.
| | Year
|
|---|
| Earned Premium Recognized | | $ | 4,397 | | $ | 7,493 | | $ | 10,729 | | | | $ | 22,619 |
| Less: | | | | | | | | | | | | | | |
| | Deferred Acquisition Costs Recognized | | | 1,220 | | | 1,376 | | | 2,789 | | | | | 5,385 |
| Net Effect Before Taxes | | | 3,177 | | | 6,117 | | | 7,940 | | | | | 17,234 |
| Tax Provision | | | 1,112 | | | 2,141 | | | 2,779 | | | | | 6,032 |
| Net Income Effect | | | 2,065 | | | 3,976 | | | 5,161 | | | | | 11,202 |
2002
| | 1st Qtr.
| | 2nd Qtr.
| | 3rd Qtr.
| | 4th Qtr.
| | Year
|
|---|
| Earned Premium Recognized | | $ | 2,289 | | $ | 7,019 | | $ | 6,403 | | $ | 12,254 | | $ | 27,965 |
| Less: | | | | | | | | | | | | | | | |
| | Deferred Acquisition Costs Recognized | | | 555 | | | 1,432 | | | 1,338 | | | 1,043 | | | 4,368 |
| Net Effect Before Taxes | | | 1,734 | | | 5,587 | | | 5,065 | | | 11,211 | | | 23,597 |
| Tax Provision | | | 607 | | | 1,955 | | | 1,773 | | | 3,924 | | | 8,259 |
| Net Income Effect | | | 1,127 | | | 3,632 | | | 3,292 | | �� | 7,287 | | | 15,338 |
13
Annual Financial and Statistical Data
(dollars in thousands, except per share data)
| | Years Ended December 31
| |
|---|
| | 2002
| | 2001
| | 2000
| | 1999
| | 1998*
| |
|---|
| Income Statement | | | | | | | | | | | | | | | | |
| Gross premiums written | | $ | 803,701 | | $ | 485,570 | | $ | 372,325 | | $ | 362,671 | | $ | 319,266 | |
| Net premiums written | | | 532,747 | | | 319,638 | | | 218,138 | | | 230,435 | | | 219,853 | |
| Net premiums earned | | | 314,880 | | | 230,999 | | | 192,149 | | | 174,959 | | | 137,927 | |
| Net investment income | | | 139,120 | | | 128,921 | | | 121,144 | | | 94,723 | | | 78,823 | |
| Guaranteed investment contract, net | | | 8,411 | | | (235 | ) | | | | | | | | | |
| Losses and loss adjustment expenses | | | 65,613 | | | 12,497 | | | 9,403 | | | 8,829 | | | 3,949 | |
| Income before income taxes | | | 216,179 | | | 269,477 | | | 67,401 | | | 163,978 | | | 157,251 | |
| Net Income | | | 181,075 | | | 209,496 | | | 63,283 | | | 125,405 | | | 115,356 | |
| Selected Financial Statistics | | | | | | | | | | | | | | | | |
| GAAP Basis(1) | | | | | | | | | | | | | | | | |
| Loss ratio (%) | | | 20.6 | | | 5.4 | | | 4.9 | | | 5.0 | | | 2.9 | |
| Expense ratio (%) | | | 31.6 | | | 34.6 | | | 54.5 | | | 38.3 | | | 44.2 | |
| Combined ratio (%) | | | 52.2 | | | 40.0 | | | 59.4 | | | 43.3 | | | 47.1 | |
| SAP Basis(1) | | | | | | | | | | | | | | | | |
| Loss ratio (%) | | | 15.1 | | | 4.0 | | | (0.5 | ) | | 3.0 | | | (7.4 | ) |
| Expense ratio (%) | | | 20.9 | | | 37.1 | | | 59.1 | | | 18.9 | | | 25.5 | |
| Combined ratio (%) | | | 36.0 | | | 41.1 | | | 58.6 | | | 21.9 | | | 18.1 | |
| Balance Sheet | | | | | | | | | | | | | | | | |
| Total investments | | $ | 5,037,626 | | $ | 3,214,097 | | $ | 2,234,851 | | $ | 2,140,022 | | $ | 1,874,837 | |
| Prepaid reinsurance premiums | | | 557,659 | | | 420,798 | | | 354,117 | | | 285,105 | | | 217,096 | |
| Total assets | | | 7,051,637 | | | 4,308,854 | | | 3,148,694 | | | 2,905,644 | | | 2,452,266 | |
| Deferred premium revenue | | | 1,450,211 | | | 1,090,332 | | | 936,826 | | | 844,146 | | | 721,699 | |
| Notes payable | | | 430,000 | | | 330,000 | | | 230,000 | | | 230,000 | | | 230,000 | |
| Total liabilities | | | 5,183,267 | | | 2,672,896 | | | 1,682,961 | | | 1,652,960 | | | 1,386,130 | |
| Shareholders' equity | | | 1,868,370 | | | 1,635,958 | | | 1,465,733 | | | 1,251,984 | | | 1,065,436 | |
| Selected Financial Statistics(1) | | | | | | | | | | | | | | | | |
| Gross insurance in force | | $ | 512,232,953 | | $ | 422,296,318 | | $ | 321,753,871 | | $ | 271,964,391 | | $ | 216,564,000 | |
| Net insurance in force | | | 365,256,111 | | | 300,637,067 | | | 225,426,403 | | | 195,571,240 | | | 159,995,000 | |
| Qualified statutory capital | | | 1,876,117 | | | 1,593,570 | | | 1,436,681 | | | 1,320,082 | | | 1,037,710 | |
| Policyholders' leverage ratio | | | 195:1 | | | 189:1 | | | 157:1 | | | 148:1 | | | 154:1 | |
- (1)
- These ratios and statistics relate solely to FSA. The GAAP loss ratio is losses and loss adjustment expenses incurred (inclusive of additions to the General Reserve) divided by net premiums earned. The SAP loss ratio is losses and loss adjustment expenses incurred (exclusive of additions to the General Reserve) divided by net premiums earned. The GAAP expense ratio is underwriting and operating expenses divided by net premiums earned. The SAP expense ratio is underwriting and operating expenses divided by net premiums written. The combined ratio on both a GAAP and SAP basis is the sum of the applicable loss and expense ratios.
- (2)
- Includes $105,541 of merger related costs.
- *
- 1998 results have been restated to show effect of accounting change for forward share purchase agreements.
14
Statutory Analytics & Investment Portfolio
September 30, 2003
(dollars in thousands)
Statutory Analytics
| | 3rd Qtr.
2003
| | Year-to-date
2003
| | Full Year
2002
| |
|---|
| Loss Ratio(1) | | 12.7 | % | | 10.4 | % | | 15.1 | % |
| Expense Ratio(1) | | 12.1 | % | | 17.8 | % | | 20.9 | % |
| Combined Ratio(1) | | 24.8 | % | | 28.2 | % | | 36.0 | % |
| | | | | | 9/30/03 | | | 12/31/02 | |
| Contingency Reserve | | | | | 870,071 | | | 691,955 | |
| Capital and Surplus | | | | | 1,151,257 | | | 1,184,162 | |
| | Qualified Statutory Capital | | | | | 2,021,328 | | | 1,876,117 | |
| Unearned Premium Reserve | | | | | 1,281,769 | | | 1,055,340 | |
| Loss and Loss Adjustment Expenses | | | | | 82,362 | | | 58,012 | |
| | Policyholder Capital and Reserves | | | | | 3,385,459 | | | 2,989,469 | |
| Net Present Value of Installment Premiums | | | | | 596,150 | | | 589,654 | |
| Third-Party Capital Support | | | | | 525,000 | | | 240,000 | |
| | Total Claims-Paying Resources | | | | | 4,506,609 | | | 3,819,123 | |
| | | | | | | | | | |
| Net insurance in force (principal & interest) | | | | $ | 405,043,931 | | $ | 365,256,111 | |
| Capital Ratio(2) | | | | | 198:1 | | | 194:1 | |
| Claims-paying ratio(3) | | | | | 93:1 | | | 96:1 | |
- (1)
- Underwriting expense ratio is based on net premium earned for GAAP and net premiums written for statutory.
- (2)
- Capital ratio is net insurance in force divided by qualified statutory capital.
- (3)
- Claims-paying ratio is net insurance in force divided by claims-paying resources.
Investment Portfolio(1)
Type of Security
| | Amortized Cost
| | Market Value
| | % of
Amortized
Cost
| | Yield(2)
| | Annualized
Income(3)
|
|---|
| Long-term bonds: | | | | | | | | | | | | |
| Tax-exempt | | $ | 2,414,135 | | $ | 2,625,386 | | 71.7 | % | 5.17% | | $124,790 |
| Taxable | | | 789,043 | | | 811,373 | | 23.4 | % | 4.82% | | 38,051 |
| Short-term | | | 163,348 | | | 163,348 | | 4.9 | % | .82% | | 1,367 |
| Total | | $ | 3,366,526 | | $ | 3,600,107 | | 100.0 | % | 4.87% | | $164,208 |
Maturity
| | Amortized Cost
| | % of Amortized Cost
| |
| | Quality Distribution
of Long-Term Fixed
Income Investments
| |
|---|
| Within 1 Year | | $ | 210,709 | | 6.2 | % | | | AAA | | 78.5 | % |
| 1 to 5 Years | | | 357,317 | | 10.6 | % | | | AA | | 18.3 | % |
| 5 to 10 Years | | | 436,847 | | 13.0 | % | | | A | | 3.2 | % |
| 10 or more Years | | | 2,035,922 | | 60.5 | % | | | NR | | 0.0 | % |
| | | | | | | | | | | |
| |
| Mortgage-backed Securities | | | 244,611 | | 7.3 | % | | | | | 100.0 | % |
| Asset-backed Securities | | | 81,120 | | 2.4 | % | | | | | | |
| Total | | $ | 3,366,526 | | 100.0 | % | | | | | | |
- (1)
- Excludes portfolio related to municipal investment agreements.
- (2)
- Estimated yield on assets at end of reporting quarter; short-term investments includes taxable and tax-exempt securities but excludes cash equivalents of $35.9 million.
- (3)
- Before taxes if applicable; based on indicated yields.
15
Municipal New-Issue Market Data(1)
(dollars in billions)
| | Par Value
| | Percent
| | FSA Market Share(2)
| |
|---|
| | Issued
| | Insured
| | Insured
| | Amount
| | Percent
| |
|---|
| 3rd Qtr. 2003 | | 84.8 | | 46.3 | | 54.6 | % | 12.8 | | 27.7 | % |
| 2nd | | 117.1 | | 59.0 | | 50.4 | % | 15.1 | | 25.6 | % |
| 1st | | 85.3 | | 45.6 | | 53.5 | % | 13.1 | | 28.7 | % |
4th Qtr. 2002 |
|
105.0 |
|
50.0 |
|
47.6 |
% |
13.0 |
|
26.0 |
% |
| 3rd | | 87.2 | | 42.7 | | 49.0 | % | 10.5 | | 24.6 | % |
| 2nd | | 98.4 | | 48.0 | | 48.8 | % | 12.4 | | 25.8 | % |
| 1st | | 68.2 | | 36.7 | | 53.8 | % | 11.6 | | 31.6 | % |
2002 |
|
358.8 |
|
177.4 |
|
49.4 |
% |
47.5 |
|
26.8 |
% |
| 2001 | | 286.6 | | 132.5 | | 46.2 | % | 36.3 | | 27.4 | % |
| 2000 | | 200.7 | | 79.5 | | 39.6 | % | 19.5 | | 24.5 | % |
| 1999 | | 227.4 | | 105.3 | | 46.3 | % | 24.2 | | 23.0 | % |
| 1998 | | 286.7 | | 145.5 | | 50.7 | % | 32.0 | | 22.1 | % |
| 1997 | | 220.5 | | 107.5 | | 48.8 | % | 16.2 | | 15.1 | % |
| 1996 | | 185.0 | | 85.7 | | 46.3 | % | 11.2 | | 13.1 | % |
| 1995 | | 160.0 | | 68.5 | | 42.8 | % | 3.3 | | 4.8 | % |
| 1994 | | 165.0 | | 61.5 | | 37.3 | % | 2.7 | | 4.4 | % |
| 1993 | | 292.2 | | 107.9 | | 36.9 | % | 7.5 | | 7.0 | % |
| 1992 | | 234.7 | | 80.8 | | 34.4 | % | 4.8 | | 5.9 | % |
| 1991 | | 172.4 | | 51.9 | | 30.1 | % | 2.8 | | 5.4 | % |
- (1)
- FSA estimates based on industry sources, including The Bond Buyer and Securities Data Company. Data is subject to revision as additional information becomes available.
- (2)
- Share of insured bond market. FSA volume for 1993 through 2003 is based on sales dates, not closing dates, and will not reconcile with other data in this Supplement. Excludes secondary-market and non-U.S. transactions.
16
Gross Par Value and Present Value Originated by FSA
(dollars in millions)
| | 3rd Quarter
| | Year-to-Date
|
|---|
| | 2003
| | 2002
| | 2003
| | 2002
|
|---|
| Municipal(U.S. and International) | | | | | | | | |
| Gross Par Value Insured | | 18,083 | | 13,620 | | 46,155 | | 38,803 |
| Gross Premiums Written | | | | | | | | |
| | Up-Front | | 178.0 | | 107.4 | | 418.9 | | 279.7 |
| | Installments(1) | | 8.1 | | 30.9 | | 35.9 | | 37.1 |
| | | | Total Gross Premiums | | 186.1 | | 138.3 | | 454.8 | | 316.8 |
| Gross Present Value of Premiums Written(2) | | 180.6 | | 153.3 | | 473.5 | | 353.6 |
| Asset-Backed(U.S. and International) | | | | | | | | |
| Gross Par Value Insured | | 9,411 | | 11,201 | | 17,998 | | 45,091 |
| Gross Premiums Written | | | | | | | | |
| | Up-Front | | 3.5 | | 8.4 | | 16.9 | | 14.1 |
| | Installments(1) | | 73.6 | | 68.5 | | 215.9 | | 199.7 |
| | | | Total Gross Premiums | | 77.1 | | 76.9 | | 232.8 | | 213.8 |
| Gross Present Value of Premiums Written(2) | | 65.6 | | 67.0 | | 187.1 | | 214.8 |
| Financial Products | | | | | | | | |
| Gross Par Value Insured(3) | | 1,185 | | 349 | | 2,144 | | 1,436 |
| Gross Net Interest Margin Written | | | | | | | | |
| | Up-Front | | 0.0 | | 0.0 | | 0.0 | | 0.0 |
| | Installments | | 1.9 | | 0.0 | | 4.8 | | 0.0 |
| | | | Total Gross Net Interest Margin | | 1.9 | | 0.0 | | 4.8 | | 0.0 |
| Gross Present Value of Net Interest Margin(4) | | 13.1 | | 31.1 | | 31.4 | | 57.7 |
| Total Originations Written | | | | | | | | |
| Gross Par Value Insured | | 28,679 | | 25,230 | | 66,297 | | 85,330 |
| Gross Originations Written | | | | | | | | |
| | Up-Front | | 181.5 | | 115.8 | | 435.8 | | 293.8 |
| | Installments | | 83.6 | | 99.4 | | 256.6 | | 236.8 |
| | | | Total Gross Originations | | 265.1 | | 215.2 | | 692.4 | | 530.6 |
| Gross Present Value of Originations | | 259.3 | | 251.4 | | 692.0 | | 626.1 |
- (1)
- Installments are the periodic premium payments received by FSA for business written in current and prior years.
- (2)
- The Company evaluates its insurance business production for a given period by its gross present value (PV) of premiums written. Gross PV premiums written for a particular period includes both (i) the amount of premiums received in such period under all insurance policies in which premiums are payable up front and (ii) the amount of all future premiums estimated to be payable under the Company's installment-based policies issued during such period, discounted to present value. The discount rate for business written in 2003 is 5.91% per annum and in 2002 is 5.91% per annum, equal to the average pre-tax yield on the Company's investment portfolio for the previous three calendar years. Management uses its best estimate of the life of each insurance policy for which premiums are payable in installments when calculating gross PV premiums written. However, the actual period over which installment-based premiums are paid and the total amount paid will vary from management's estimate if the insured obligation remains outstanding for a period that is different from that estimated by management. If the life of an insured obligation is shorter than that estimated, the related gross PV premiums outstanding will be reduced. Conversely, if the life of an insured obligation is longer than that estimated, the related gross PV premiums outstanding will be increased.
- (3)
- Relates only to FSA-insured GICs issued by the Company's GIC subsidiaries (FSA Capital Markets Services LLC and FSA Capital Management Services LLC), which are consolidated in the Company's financial statements. For these transactions, the outstanding par amounts are reflected as insurance exposure in FSA's financial statements but as GIC liabilities in those of the Company. As a result, the total outstanding exposures reported by FSA and the Company differ.
- (4)
- The present value of the net interest margin represents the present value of the difference between the estimated interest to be received on the GIC investments and the estimated interest to be paid on the GIC liabilities over the estimated life of each transaction, giving effect to swaps and other derivatives which convert fixed rate assets and liabilities to floating rates. The discount rate is the same as used for premiums (see footnote 2).
17
FSA Insured Portfolio Profile
Par Value
(dollars in millions)
| | Insured in 2003
| | Outstanding as of September 30, 2003
|
|---|
| | Gross
Amount
| | %
| | Net
Amount
| | %
| | Net
Amount
| | %
|
|---|
| Municipal Obligations | | | | | | | | | | | | | | | |
| Domestic | | | | | | | | | | | | | | | |
| | General obligation bonds | | $ | 16,477 | | 35.7 | | $ | 13,693 | | 37.8 | | $ | 62,734 | | 38.0 |
| | Tax-supported bonds | | | 8,901 | | 19.3 | | | 7,189 | | 19.8 | | | 32,661 | | 19.8 |
| | Municipal utility revenue bonds | | | 8,727 | | 18.9 | | | 6,652 | | 18.3 | | | 29,166 | | 17.6 |
| | Health care revenue bonds | | | 1,089 | | 2.4 | | | 720 | | 2.0 | | | 6,436 | | 3.9 |
| | Housing revenue bonds | | | 1,876 | | 4.1 | | | 1,559 | | 4.3 | | | 7,188 | | 4.3 |
| | Transportation revenue bonds | | | 4,596 | | 9.9 | | | 3,270 | | 9.0 | | | 10,694 | | 6.5 |
| | Other municipal bonds | | | 2,495 | | 5.4 | | | 2,173 | | 6.0 | | | 10,756 | | 6.5 |
| | |
| |
| |
| |
| |
| |
|
| | | Subtotal | | | 44,161 | | 95.7 | | | 35,256 | | 97.2 | | | 159,635 | | 96.6 |
| International | | | 1,994 | | 4.3 | | | 1,025 | | 2.8 | | | 5,585 | | 3.4 |
| | | Total municipal obligations | | $ | 46,155 | | 100.0 | | $ | 36,281 | | 100.0 | | $ | 165,220 | | 100.0 |
Geographic Distribution |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| | California | | $ | 8,061 | | 17.5 | | $ | 6,343 | | 17.5 | | $ | 24,654 | | 14.9 |
| | New York | | | 4,542 | | 9.8 | | | 3,463 | | 9.6 | | | 15,307 | | 9.3 |
| | Texas | | | 3,032 | | 6.6 | | | 2,350 | | 6.5 | | | 11,924 | | 7.2 |
| | Pennsylvania | | | 3,078 | | 6.7 | | | 2,591 | | 7.1 | | | 9,907 | | 6.0 |
| | Florida | | | 3,285 | | 7.1 | | | 2,552 | | 7.0 | | | 9,791 | | 5.9 |
| | Illinois | | | 1,387 | | 3.0 | | | 1,086 | | 3.0 | | | 7,696 | | 4.7 |
| | New Jersey | | | 3,524 | | 7.6 | | | 2,914 | | 8.0 | | | 8,493 | | 5.1 |
| | Washington | | | 1,196 | | 2.6 | | | 984 | | 2.7 | | | 6,125 | | 3.7 |
| | Massachusetts | | | 1,104 | | 2.4 | | | 1,011 | | 2.8 | | | 4,999 | | 3.0 |
| | Michigan | | | 1,620 | | 3.5 | | | 1,299 | | 3.6 | | | 4,964 | | 3.0 |
| | Wisconsin | | | 415 | | 0.9 | | | 350 | | 1.0 | | | 3,616 | | 2.2 |
| | All Other U.S. Jurisdictions | | | 12,917 | | 28.0 | | | 10,313 | | 28.4 | | | 52,159 | | 31.6 |
| | International | | | 1,994 | | 4.3 | | | 1,025 | | 2.8 | | | 5,585 | | 3.4 |
| | | Total municipal obligations | | $ | 46,155 | | 100.0 | | $ | 36,281 | | 100.0 | | $ | 165,220 | | 100.0 |
Asset-Backed Obligations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Domestic | | | | | | | | | | | | | | | |
| | Residential mortgages | | $ | 3,437 | | 17.1 | | $ | 3,147 | | 18.6 | | $ | 16,040 | | 12.9 |
| | Consumer receivables | | | 3,636 | | 18.1 | | | 2,790 | | 16.4 | | | 14,802 | | 11.9 |
| | Pooled corporate obligations | | | 3,776 | | 18.7 | | | 2,812 | | 16.6 | | | 49,503 | | 39.8 |
| | Other asset-backed obligations(1) | | | 3,123 | | 15.5 | | | 2,704 | | 15.9 | | | 7,001 | | 5.7 |
| | |
| |
| |
| |
| |
| |
|
| | | Subtotal | | | 13,972 | | 69.4 | | | 11,453 | | 67.5 | | | 87,346 | | 70.3 |
| International | | | 6,170 | | 30.6 | | | 5,518 | | 32.5 | | | 36,959 | | 29.7 |
| | | Total asset-backed obligations(1) | | $ | 20,142 | | 100.0 | | $ | 16,971 | | 100.0 | | $ | 124,305 | | 100.0 |
Total Portfolio |
|
$ |
66,297 |
|
|
|
$ |
53,252 |
|
|
|
$ |
289,525 |
|
|
| |
| | Rating(2)
| |
| | Percent of Portfolio
| |
|
|---|
| Distribution of Insured Portfolio by Rating as of September 30, 2003 | | | | AAA
AA
A
BBB
Other | | | | 25.1
27.0
35.2
11.7
1.0 | | |
| | | | | | | | |
| | |
| | | | | | | | | 100.0 | | |
- (1)
- Includes amounts related to FSA-insured GICs
- (2)
- Based upon internal FSA ratings.
18
50 Largest Municipal Exposures
as of September 30, 2003
(dollars in millions)
Obligor
| | Net Par Outstanding
| | Net Par
of Total
%
Outstanding
| |
|---|
| California Housing Finance Agency Single-Family Mortgage Revenue Bonds | | $ | 1,446 | | .50 | % |
| New York State Thruway Authority, Highway and Bridge Trust Fund | | | 894 | | .31 | % |
| Commonwealth of Massachusetts G.O. | | | 884 | | .31 | % |
| State of Washington G.O. | | | 876 | | .30 | % |
| Clark County School District, NV, G.O. | | | 834 | | .29 | % |
| State of Hawaii G.O. | | | 826 | | .29 | % |
| New York City, NY, G.O. | | | 822 | | .28 | % |
| State of Connecticut Special Tax | | | 803 | | .28 | % |
| Long Island Power Authority, NY | | | 801 | | .28 | % |
| Metropolitan Transit Authority, NY | | | 779 | | .27 | % |
| New Jersey Transportation Trust Fund Authority | | | 777 | | .27 | % |
| State of Illinois G.O. | | | 772 | | .27 | % |
| State of California G.O. | | | 750 | | .26 | % |
| New Jersey Turnpike Authority Revenue Bonds | | | 741 | | .26 | % |
| New York Local Government Assistance Corp | | | 716 | | .25 | % |
| Seattle, WA, Light and Power | | | 703 | | .24 | % |
| Philadelphia, PA, School District G.O. | | | 698 | | .24 | % |
| Port Authority of New York and New Jersey, Consolidated Bonds | | | 684 | | .24 | % |
| Los Angeles USD, CA, G.O. | | | 646 | | .22 | % |
| Metropolitan Transit Authority, NY Dedicated Tax | | | 622 | | .21 | % |
| Detroit, MI, Sewage Disposal System Revenue Bonds | | | 615 | | .21 | % |
| Puerto Rico Electric Power Authority | | | 610 | | .21 | % |
| Los Angeles MTA, CA, Sales Tax Revenue Bonds | | | 601 | | .21 | % |
| Massachusetts Water Resources Authority, General Revenue | | | 601 | | .21 | % |
| NYS Dormitory Authority—Mental Health Services | | | 598 | | .21 | % |
| Florida Public Education (Gross Receipts) | | | 592 | | .20 | % |
| Houston, TX, Water and Sewer System Revenue | | | 582 | | .20 | % |
| State of California Department of Water Resources Power Supply | | | 573 | | .20 | % |
| Houston, TX Airport System | | | 550 | | .19 | % |
| Kentucky State Property and Buildings Commission Revenue Bonds | | | 546 | | .19 | % |
| Michigan State Building Authority | | | 539 | | .19 | % |
| Hydro-Quebec—Province of Quebec Guaranteed | | | 536 | | .19 | % |
| New York City, NY, Municipal Water Finance Authority | | | 535 | | .18 | % |
| Miami-Dade County, FL, Aviation Revenue Miami Int'l Airport | | | 534 | | .18 | % |
| NJHMFA Multi-Family Housing Revenue Bonds | | | 532 | | .18 | % |
| Commonwealth of Puerto Rico G.O. | | | 501 | | .17 | % |
| New York City, NY, Health and Hospital Corp | | | 500 | | .17 | % |
| District of Columbia, G.O. | | | 495 | | .17 | % |
| New Jersey Economic Development Authority State Pension Funding | | | 482 | | .17 | % |
| Maine Health and Higher Educational Facilities Authority | | | 478 | | .17 | % |
| Sacramento Municipal Utility District, CA, Electric Revenue | | | 478 | | .17 | % |
| South Carolina Public Service Authority, Santee Cooper | | | 454 | | .16 | % |
| Philadelphia, PA, G.O. | | | 448 | | .15 | % |
| State of Florida, Department of Transportation Turnpike Revenue | | | 437 | | .15 | % |
| The School Board of Palm Beach County, Florida Lease | | | 436 | | .15 | % |
| Province of Quebec, G.O. | | | 436 | | .15 | % |
| Energy Northwest Electric Revenue | | | 431 | | .15 | % |
| Massachusetts HFA Single Family Housing Revenue | | | 429 | | .15 | % |
| Garden State, NJ Preservation Trust Open Space and Farmland | | | 425 | | .15 | % |
| State of Michigan Grant Anticipation Notes | | | 424 | | .15 | % |
| Total | | $ | 31,472 | | 10.90 | % |
| | |
| |
| |
19
25 Largest Asset-Backed Exposures
as of September 30, 2003
(dollars in millions)
Obligor
| | Net Par Outstanding
| | % of Total
Net Par Outstanding
| |
|---|
| International Super AAA Synthetic CDO | | $ | 2,665 | | .92 | % |
| International Super AAA Synthetic CDO | | | 2,595 | | .90 | % |
| International Synthetic CDO | | | 1,896 | | .65 | % |
| International Super AAA Synthetic CDO | | | 1,852 | | .64 | % |
| International Super AAA Synthetic CDO | | | 1,703 | | .59 | % |
| U.S. AAA Synthetic CDO | | | 1,592 | | .55 | % |
| U.S. AAA Synthetic CDO | | | 1,588 | | .55 | % |
| U.S. AAA Synthetic CDO | | | 1,509 | | .52 | % |
| International Synthetic CDO | | | 1,480 | | .51 | % |
| International Synthetic CDO | | | 1,404 | | .48 | % |
| International Super AAA Synthetic CDO | | | 1,375 | | .48 | % |
| International Super AAA Synthetic CDO | | | 1,356 | | .47 | % |
| International Super AAA Synthetic CDO | | | 1,327 | | .46 | % |
| International Super AAA Synthetic CDO | | | 1,312 | | .45 | % |
| US Super AAA Synthetic CDO | | | 1,312 | | .45 | % |
| WFS Financial 2003-3 Owner Trust | | | 1,164 | | .40 | % |
| International Super AAA Synthetic CDO | | | 1,120 | | .39 | % |
| International Synthetic CDO | | | 1,048 | | .36 | % |
| International Super AAA Synthetic CDO | | | 1,015 | | .35 | % |
| WFS Financial 2002-4 Owner Trust | | | 999 | | .34 | % |
| International Super AAA Synthetic CDO | | | 968 | | .33 | % |
| International Super AAA Synthetic CDO | | | 963 | | .33 | % |
| US Super AAA Synthetic CDO | | | 930 | | .32 | % |
| WFS Financial 2002-2 Owner Trust | | | 918 | | .32 | % |
| US Super AAA Synthetic CDO | | | 903 | | .31 | % |
| Total | | $ | 34,994 | | 12.07 | % |
| | |
| |
| |
"International Synthetic CDO" denotes a CDO with 20% or greater non-US collateral. "Super AAA" means the level of first-loss protection exceeds 1.3x the level required for an Aaa/AAA rating. Where indicated, ratings are current FSA internal ratings expressed in industry terms.
20
Asset-Backed Debt Service and Premiums
(dollars in millions)
| | Insured Debt Service
| |
| |
|
|---|
Debt Service
(Principal and Interest)
| | Portfolio
Run Off(1)
| | Ending Net
Outstanding
|
|---|
| | Gross
| | Ceded
| | Net
|
|---|
| 3rd Qtr. 2003 | | $ | 8,822 | | $ | 1,340 | | $ | 7,482 | | $ | (6,923 | ) | $ | 134,912 |
| 2nd | | | 6,279 | | | 1,444 | | | 4,835 | | | (8,761 | ) | | 134,353 |
| 1st | | | 4,501 | | | 1,150 | | | 3,351 | | | (6,757 | ) | | 138,279 |
4th Qtr. 2002 |
|
|
7,638 |
|
|
2,554 |
|
|
5,084 |
|
|
(6,791 |
) |
|
141,685 |
| 3rd | | | 12,631 | | | 3,008 | | | 9,623 | | | (7,434 | ) | | 143,392 |
| 2nd | | | 15,428 | | | 2,779 | | | 12,649 | | | (6,450 | ) | | 141,203 |
| 1st | | | 18,432 | | | 2,241 | | | 16,191 | | | (8,491 | ) | | 135,004 |
2002 |
|
|
54,129 |
|
|
10,582 |
|
|
43,547 |
|
|
(29,166 |
) |
|
141,685 |
| 2001 | | | 75,404 | | | 10,681 | | | 64,723 | | | (19,807 | ) | | 127,304 |
| 2000 | | | 44,714 | | | 8,181 | | | 36,533 | | | (19,031 | ) | | 82,388 |
| 1999 | | | 41,694 | | | 8,904 | | | 32,790 | | | (15,574 | ) | | 64,886 |
| 1998 | | | 28,258 | | | 3,584 | | | 24,674 | | | (13,108 | ) | | 47,670 |
| | Written Premium
| |
| |
| |
|
|---|
Premiums (GAAP Basis)
| | Ending Net
Unearned
Premium
| | Ending
Net PV
Premium
| |
|
|---|
| | Gross
| | Ceded
| | Net
| | Total
|
|---|
| 3rd Qtr. 2003 | | $ | 79.0 | | $ | 22.3 | | $ | 56.7 | | $ | 92.2 | | $ | 511.8 | | $ | 604.0 |
| 2nd | | | 91.2 | | | 26.7 | | | 64.5 | | | 95.7 | | | 507.6 | | | 603.3 |
| 1st | | | 67.4 | | | 20.0 | | | 47.4 | | | 88.6 | | | 522.6 | | | 611.2 |
4th Qtr. 2002 |
|
|
84.2 |
|
|
25.2 |
|
|
59.0 |
|
|
93.5 |
|
|
520.1 |
|
|
613.6 |
| 3rd | | | 76.9 | | | 21.2 | | | 55.7 | | | 100.0 | | | 528.9 | | | 628.9 |
| 2nd | | | 70.8 | | | 18.3 | | | 52.5 | | | 98.4 | | | 543.2 | | | 641.6 |
| 1st | | | 66.1 | | | 17.6 | | | 48.5 | | | 105.3 | | | 550.1 | | | 655.4 |
2002 |
|
|
298.0 |
|
|
82.3 |
|
|
215.7 |
|
|
93.5 |
|
|
520.1 |
|
|
613.6 |
| 2001 | | | 254.8 | | | 86.8 | | | 168.0 | | | 105.2 | | | 510.2 | | | 615.4 |
| 2000 | | | 202.6 | | | 68.0 | | | 134.6 | | | 98.4 | | | 352.3 | | | 450.7 |
| 1999 | | | 160.9 | | | 45.0 | | | 115.9 | | | 93.4 | | | 301.7 | | | 395.1 |
| 1998 | | | 96.4 | | | 28.5 | | | 67.9 | | | 72.2 | | | 189.2 | | | 261.4 |
- (1)
- Includes decreases due to prepayments and increases due to accretions or higher outstanding under variable programs
21
Municipal Debt Service and Premiums
(dollars in millions)
| | Insured Debt Service
| |
| |
|
|---|
Debt Service (Principal and Interest)
| | Portfolio
Run Off(1)
| | Ending Net
Outstanding
|
|---|
| | Gross
| | Ceded
| | Net
|
|---|
| 3rd Qtr. 2003 | | $ | 29,620 | | $ | 6,115 | | $ | 23,505 | | $ | (8,210 | ) | $ | 266,132 |
| 2nd | | | 28,389 | | | 8,004 | | | 20,385 | | | (3,258 | ) | | 250,837 |
| 1st | | | 18,477 | | | 3,277 | | | 15,200 | | | (5,061 | ) | | 233,710 |
4th Qtr. 2002 |
|
|
25,295 |
|
|
7,209 |
|
|
18,086 |
|
|
(3,928 |
) |
|
223,571 |
| 3rd | | | 23,699 | | | 6,490 | | | 17,209 | | | (5,200 | ) | | 209,413 |
| 2nd | | | 23,287 | | | 6,366 | | | 16,921 | | | (3,502 | ) | | 197,404 |
| 1st | | | 20,671 | | | 6,983 | | | 13,688 | | | (3,036 | ) | | 183,985 |
2002 |
|
�� |
92,952 |
|
|
27,048 |
|
|
65,904 |
|
|
(15,666 |
) |
|
223,571 |
| 2001 | | | 64,821 | | | 20,431 | | | 44,390 | | | (14,095 | ) | | 173,333 |
| 2000 | | | 40,542 | | | 16,456 | | | 24,086 | | | (11,733 | ) | | 143,038 |
| 1999 | | | 45,749 | | | 15,088 | | | 30,661 | | | (12,301 | ) | | 130,685 |
| 1998 | | | 60,194 | | | 19,127 | | | 41,067 | | | (10,223 | ) | | 112,325 |
| | Written Premium
| |
| |
| |
|
|---|
Premiums (GAAP Basis)
| | Ending Net
Unearned
Premium
| | Ending
Net PV
Premium
| |
|
|---|
| | Gross
| | Ceded
| | Net
| | Total
|
|---|
| 3rd Qtr. 2003 | | $ | 186.1 | | $ | 56.9 | | $ | 129.2 | | $ | 1,006.5 | | $ | 84.3 | | $ | 1,090.8 |
| 2nd | | | 206.5 | | | 80.2 | | | 126.3 | | | 914.8 | | | 88.9 | | | 1,003.7 |
| 1st | | | 62.2 | | | 17.4 | | | 44.8 | | | 816.1 | | | 79.0 | | | 895.1 |
4th Qtr. 2002 |
|
|
192.1 |
|
|
84.8 |
|
|
107.3 |
|
|
799.0 |
|
|
69.6 |
|
|
868.6 |
| 3rd | | | 138.3 | | | 44.7 | | | 93.6 | | | 714.7 | | | 67.7 | | | 782.4 |
| 2nd | | | 100.0 | | | 27.3 | | | 72.7 | | | 646.1 | | | 59.3 | | | 705.4 |
| 1st | | | 78.5 | | | 31.8 | | | 46.7 | | | 588.6 | | | 47.9 | | | 636.5 |
2002 |
|
|
508.9 |
|
|
188.6 |
|
|
320.3 |
|
|
799.0 |
|
|
69.6 |
|
|
868.6 |
| 2001 | | | 230.8 | | | 79.2 | | | 151.6 | | | 564.3 | | | 46.2 | | | 610.5 |
| 2000 | | | 169.7 | | | 86.2 | | | 83.5 | | | 484.3 | | | 42.0 | | | 526.3 |
| 1999 | | | 201.8 | | | 87.3 | | | 114.5 | | | 465.7 | | | 38.0 | | | 503.7 |
| 1998 | | | 222.9 | | | 70.9 | | | 152.0 | | | 432.4 | | | 44.0 | | | 476.4 |
- (1)
- Includes decreases due to prepayments and increases due to accretions or higher outstanding under variable programs.
22
Asset-Backed Net Debt Service and Premiums
Amortizations and Ending Balances
As of September 30, 2003
(dollars in millions)
Net Debt Service
| | Scheduled
Amortization
| | Outstanding
|
|---|
| 3rd Qtr. 2003 | | | | | $ | 134,912 |
4th |
|
$ |
6,094 |
|
|
128,818 |
2004 |
|
|
25,472 |
|
|
103,346 |
| 2005 | | | 22,040 | | | 81,306 |
| 2006 | | | 29,555 | | | 51,751 |
| 2007 | | | 21,106 | | | 30,645 |
2008-2012 |
|
|
25,824 |
|
|
4,821 |
| 2013-2017 | | | 2,608 | | | 2,213 |
| 2018-2022 | | | 1,032 | | | 1,181 |
| 2023+ | | | 1,181 | | | |
| | Total | | $ | 134,912 | | | |
| | | | | | |
| |
| | Scheduled Premium Earnings
|
|---|
Net Premiums
| | Unearned Premiums
| | From Unearned Premium
Amortization
| | From
Installments
| | Total
|
|---|
| 3rd Qtr. 2003 | | $ | 92.2 | | | | | | | | | |
4th |
|
|
68.3 |
|
$ |
23.9 |
|
$ |
30.0 |
|
$ |
53.9 |
2004 |
|
|
54.5 |
|
|
13.8 |
|
|
157.6 |
|
|
171.4 |
| 2005 | | | 45.8 | | | 8.7 | | | 112.4 | | | 121.1 |
| 2006 | | | 38.4 | | | 7.4 | | | 84.5 | | | 91.9 |
| 2007 | | | 32.4 | | | 6.0 | | | 52.1 | | | 58.1 |
2008-2012 |
|
|
10.1 |
|
|
22.3 |
|
|
96.9 |
|
|
119.2 |
| 2013-2017 | | | 5.3 | | | 4.8 | | | 28.3 | | | 33.1 |
| 2018-2022 | | | 3.3 | | | 2.0 | | | 11.8 | | | 13.8 |
| 2023+ | | | | | | 3.3 | | | 18.2 | | | 21.5 |
| | Total | | | | | $ | 92.2 | | $ | 591.8 | | $ | 684.0 |
23
Municipal Net Debt Service and Premiums
Amortizations and Ending Balances
As of September 30, 2003
(dollars in millions)
Net Debt Service
| | Scheduled
Amortization
| | Outstanding
|
|---|
| 3rd Qtr. 2003 | | | | | $ | 266,132 |
4th |
|
$ |
3,296 |
|
|
262,836 |
2004 |
|
|
13,732 |
|
|
249,104 |
| 2005 | | | 14,455 | | | 234,649 |
| 2006 | | | 14,075 | | | 220,574 |
| 2007 | | | 14,246 | | | 206,328 |
2008-2012 |
|
|
69,350 |
|
|
136,978 |
| 2013-2017 | | | 55,909 | | | 81,069 |
| 2018-2022 | | | 41,014 | | | 40,055 |
| 2023+ | | | 40,055 | | | |
| | Total | | $ | 266,132 | | | |
| |
| | Scheduled Premium Earnings
|
|---|
Net Premiums
| | Unearned
Premiums
| | From
Unearned
Premium
Amortization
| | From
Installments
| | Total
|
|---|
| 3rd Qtr. 2003 | | $ | 1,006.5 | | | | | | | | | |
4th |
|
|
979.8 |
|
$ |
26.7 |
|
$ |
0.7 |
|
$ |
27.4 |
2004 |
|
|
884.8 |
|
|
95.0 |
|
|
8.7 |
|
|
103.7 |
| 2005 | | | 799.4 | | | 85.4 | | | 9.3 | | | 94.7 |
| 2006 | | | 721.7 | | | 77.7 | | | 9.1 | | | 86.8 |
| 2007 | | | 650.1 | | | 71.6 | | | 8.6 | | | 80.2 |
2008-2012 |
|
|
369.6 |
|
|
280.5 |
|
|
37.1 |
|
|
317.6 |
| 2013-2017 | | | 189.1 | | | 180.5 | | | 28.3 | | | 208.8 |
| 2018-2022 | | | 81.9 | | | 107.2 | | | 19.4 | | | 126.6 |
| 2023+ | | | | | | 81.9 | | | 19.3 | | | 101.2 |
| | Total | | | | | $ | 1,006.5 | | $ | 140.5 | | $ | 1,147.0 |
24
Corporate Headquarters
Investor Relations Contact
Corporate Communications Contact
Internet
Financial Security Assurance Holdings Ltd.
Quarterly Operating Supplement
September 30, 2003
QuickLinks
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. QUARTERLY OPERATING SUPPLEMENT Third Quarter 2003Table of ContentsFinancial Security Assurance Holdings Ltd. HighlightsFSA THIRD QUARTER 2003 FINANCIAL RESULTS NET INCOME $66 Million in Q3 03 (+92% vs. Q3 02) $200 Million in 9M 03 (+49% vs. 9M 02) ORIGINATIONS (PRESENT VALUE) $259 Million in Q3 03 (+3% vs. Q3 02) $692 Million in 9M 03 (+11% vs. 9M 02)GROSS PAR INSURED OF NEW ORIGINATIONS (Dollars in billions)GROSS PV ORIGINATIONS (Dollars in millions)RECONCILIATION OF NET INCOME TO OPERATING EARNINGS (Dollars in millions)NOTEWORTHY ITEMS INCLUDED IN NET INCOME (All items shown net of taxes. Dollars in millions)RECONCILIATION OF BOOK VALUE TO ADJUSTED BOOK VALUE (Dollars in millions)FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. AND SUBSIDIARIES Condensed Consolidated Statements of Operations and Comprehensive Income (Dollars in thousands)FINANCIAL SECURITY ASSURANCE HOLDINGS LTD. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (Dollars in thousands, except per share data)Expense Analysis(1) (dollars in thousands)Effect of Insured Bond Refundings (dollars in thousands)Annual Financial and Statistical Data (dollars in thousands, except per share data)Statutory Analytics & Investment Portfolio September 30, 2003 (dollars in thousands)Gross Par Value and Present Value Originated by FSA (dollars in millions)FSA Insured Portfolio Profile Par Value (dollars in millions)25 Largest Asset-Backed Exposures as of September 30, 2003 (dollars in millions)Asset-Backed Net Debt Service and Premiums Amortizations and Ending Balances As of September 30, 2003 (dollars in millions)Municipal Net Debt Service and Premiums Amortizations and Ending Balances As of September 30, 2003 (dollars in millions)
