Investment Portfolio > As of September 30, 2008 October 15, 2008 Exhibit 99.3 |
2 Investment Portfolio MARKET EVENTS 3 Mo LIBOR vs Fed Funds -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 After-tax Unrealized MTM Gain/(Loss) (4,000) (3,500) (3,000) (2,500) (2,000) (1,500) (1,000) (500) 0 FOMC Cuts 75 bps Bearns Stearns Collapse Monolines Downgraded Fannie and Freddie Takeover Lehman Fails Milllions % FOMC Cuts 50 bps Northern Rock Takeover FOMC Cuts 75 bps Widespread Writedowns and Capital Issuances IndyMac Collapse Housing Bill Signed |
3 Asset-backed securities Mortgage-backed securities Commercial mortgage- backed securities $42 billion $10 billion Corporate bonds Municipals Treasuries Agency debentures Agency mortgages Small Business Administration loans OECD Governments Investment Portfolio Government /Agency Structured Securities Unsecured Credit Portfolio amounts are expressed at Book Value. ASSETS: INVESTMENT PORTFOLIO (PERIOD END 9/30/08) $26 billion |
4 > Assets selected using rigorous credit process > Performing within expectations at 9/30/08 > Diversified by asset class and geography > 93.1% AAA / AA rated at 9/30/08 > Constructed to perform well through periods of economic weakness > Unrealized after-tax AFS & HTM MTM = $(3.3)B at 9/30/08 0.1% $0.1 - - - - BB 100.0% 1.0% 1.1% 2.9% 6.5% 88.5% $75.7 $0.8 $0.8 $2.2 $4.9 $67.0 2007 100.0% 1.0% 1.5% 4.3% 8.7% 84.4% $78.0 $0.8 $1.2 $3.3 $6.8 $65.8 Q3 ‘08 100.0% 1.1% 0.3% 3.3% 1.9% 93.4% $37.7 $0.5 $0.1 $1.2 $0.7 $35.2 2004 Total NR BBB A AA AAA $ in billions INVESTMENT PORTFOLIO DETAIL (PERIOD END 9/30/08) Portfolio amounts are expressed at Book Value. Investment Portfolio |
5 Investment Portfolio $1,356M 36 29 15 8 5 Downgrades ex Munis 2 $847M 32 43 7 13 1 Credit watch ex Munis 1 0 49 789 $(3,282)M 84.4% AAA 8.7% AA $78.0B Q3 ‘08 0 442 558 $(1,940)M 86.7% AAA 7.6% AA $75.4B Q1 ‘08 $0 $1,364M $2,384M — — — Q3 ‘08 Asset Value 632 9 16 Downgrades 2 0 375 $(684)M 88.5% AAA 6.5% AA $75.7B Q4 ‘07 43 1 Credit watch 1 0 0 Defaults 2 $(2,012)M $(513)M Unrealized after-tax MTM gain/(loss) 84.4% AAA 8.7% AA 89.3% AAA 5.6% AA Ratings $75.0B $77.9B Size of portfolio Q2 ‘08 Q3 ‘07 1 Securities added to negative credit watch within the respective quarter, excluding downgrades 2 Event occurred in respective quarter Portfolio amounts are expressed at Book Value. INVESTMENT PORTFOLIO (PERIOD END 9/30/08) |
6 Investment Portfolio HOLDINGS BY ASSET CLASS (PERIOD END 9/30/08) 9,354 (3,282) 100.0 78.0 1.0% 0.1% 1.5% 4.3% 8.7% 84.4% TOTAL PORTFOLIO 572 (209) 5.9 4.6 17% — 1% 1% 50% 31% Clipper tax-exempt bonds/other 5,326 (6) 3.2 2.5 — — 4% 25% 31% 40% Municipal bonds 161 (56) 3.2 2.5 — — 25% 59% 10% 6% Corporate bonds 149 (173) 5.4 4.2 — — — — 1% 99% Commercial mortgage- backed securities 1,853 (764) 26.1 20.4 — — — 1% 1% 98% Mortgage-backed securities 762 (2,091) 37.6 29.3 — 0% 1% 3% 12% 84% Asset-backed securities 531 17 18.6 14.5 — — — — — 100% Government/Agency securities # CUSIPS NR BB BBB A AA AAA Investment Unrealized After-tax MTM Gain/(Loss) ($M) Book Value (% Total) Book Value ($B) Ratings |
7 Investment Portfolio ASSET-BACKED SECURITIES HOLDINGS (PERIOD END 9/30/08) 762 (2,091) 100.0 29.3 0.0% 0.2% 1.4% 3.1% 11.5% 83.8% TOTAL ABS 22 (79) 1.7 0.5 0% — — — 12% 88% Other 16 (59) 1.0 0.3 — 7% 4% 26% 48% 15% HELOC 253 (801) 18.8 5.5 — 1% 3% 5% 34% 57% Sub-Prime 39 (100) 5.1 1.5 — — — 2% 2% 96% CLOs 101 (171) 20.1 5.9 — — — 1% 3% 96% Foreign RMBS 40 (15) 3.5 1.0 — — 5% 9% 9% 77% Auto/Equipment 110 (213) 16.7 4.9 — — 4% 6% 2% 88% Credit Cards 181 (653) 33.1 9.7 — — — 1% 9% 90% Student Loans # CUSIPS NR BB BBB A AA AAA Investment Unrealized After-tax MTM Gain/(Loss) ($M) Book Value (% Total) Book Value ($B) Ratings |
8 Investment Portfolio ASSET- BACKED SECURITIES COLLATERALIZED BY SUB-PRIME FIRST-LIEN MORTGAGES (PERIOD END 9/30/08) 0 19 12 $(801)M 44.5% 57% AAA 34% AA, 5% A 3% BBB, 1% BB $5.5B Q3’08 0 12 3 $(592)M 42.6% 62% AAA 38% AA $5.7B Q2’08 $0 $706 $287M — — — — Q3 ‘08 Asset Value 0 3 0 $(574)M 41.4% 70% AAA 30% AA $5.9B Q1 ’08 3 0 Credit watch¹ 0 0 Defaults 0 0 Downgrades² $(314)M $(149)M Unrealized MTM after-tax gain/(loss) 39.8% 37.6% Credit enhancement 71% AAA 29% AA 73% AAA 27% AA Ratings $6.2B $6.6B Size of portfolio Q4 ’07 Q3 ’07 1 Securities added to negative credit watch within the respective quarter, excluding downgrades 2 Event occurred in respective quarter Portfolio amounts are expressed at Book Value. |
9 Investment Portfolio HCL = historic cumulative loss; Avg. CE = average credit enhancement; SFL = STT’s stressed future losses; Coverage = Avg. CE/SFL STRESS COVERAGE: ASSET-BACKED SECURITIES PORTFOLIO (PERIOD END 9/30/08) SFL: 1.1% (worst historic loss experience- UK 1989) Coverage: 9.7x HCL: < 0.1% Avg. CE: 10.7% Foreign RMBS: $5.9B SFL: 7.5% (worst single month annualized-November 2005) Coverage: 2.5x HCL: 6.1% (= wgtd. avg. charge-offs) Avg. CE: 19.0% Credit cards $4.9B SFL: 7.2% (assumes no insurance; industry/rating agency assumption) Coverage 2.0x HCL: 0.6% (with insurance) Avg. CE: 14.7% (excluding excess spread) Private student loans: $0.7B SFL: if all monoline wrappers except FSA fail and default spreads stay elevated in perpetuity and we have 0% recoveries, after tax loss $(29)M SFL:21.2% (roll rate analysis, previous worst is 4%-2000) Coverage 2.1X SFL: 4.5% (double the average default rate of 3.5% with half the long-term recovery rate of 70%) Coverage: 5.8x SFL: 2.8% (using worst vintage in 10 years-2000) Coverage: 5.0x SFL: 12% (historic default rate before government guarantees with 0% recoveries) With 100% credit enhancement, no risk of loss HCL: 0% (with insurance) Avg. CE: 3.5% overcollateralization plus monoline insurance HELOC: $269M HCL: 3.7% Avg. CE: 44.5% (AAA 44.6, AA 47.8) Sub-Prime $5.5B HCL: <1.0% Avg. CE: 26.3% CLO/CREs: $1.5B HCL: 0.8% Avg. CE: 13.9% Auto/equipment: $1.0B HCL: < 0.1% Avg. CE: +100% (98% govt. guarantee + 5.5% CE) Govt. student loans: $9.0B |
10 Investment Portfolio MORTGAGE-BACKED SECURITIES HOLDINGS (PERIOD END 9/30/08) 2,002 (937) 100.0 24.6 1.0% 0.6% 98.4% TOTAL MBS 149 (173) 17.1 4.2 0.0% 0.5% 99.5% CMBS 314 (732) 33.7 8.3 3.0% 1.5% 95.5% Non-Agency MBS 1,539 (32) 49.2 12.1 0.0% 0.0% 100.0% Agency MBS # CUSIPS A AA AAA Investment Unrealized After-tax MTM Gain/(Loss) ($M) Book Value (% Total) Book Value ($B) Ratings |
11 Investment Portfolio SFL: 4.6% (2X S&P Alt-A curve) Coverage: 2.6X HCL: 0.4% Avg. CE: 11.8% Alt-A: $1.1B SFL: 4.4% (1999 Snyderman Study long-term avg.) Coverage: 5.5X SFL: 2.3% Coverage: 4X No losses expected HCL: 0.2% Avg. CE: 24.2% CMBS: $4.2B HCL: 0.2% Avg. CE: 9.14% Non-Agency MBS: $7.2B 100% AAA-backed primarily by Fannie Mae, Freddie Mac & Ginnie Mae Securities Agency MBS: $12.1B STRESS COVERAGE: MORTGAGE-BACKED SECURITIES PORTFOLIO (PERIOD END 9/30/08) HCL = historic cumulative loss; Avg. CE = average credit enhancement; SFL = STT’s stressed future losses; Coverage = CE/SFL |
12 Investment Portfolio > Philosophy: Assets are purchased based on an independent assessment of their underlying credit quality, not based on the insurance “wrap” provided > As a result, our exposure to “wraps” for protection is secondary and is relatively small > Diversified by monoline insurer > $2.3B of insurance covers 4,269 issues – Municipal bonds: $1.953B (4,242 issues) – Sub-prime asset-backed securities: $27.6M (10 issues) – Home Equity Lines of Credit: $269M (16 issues) > If all securities were “unwrapped,” the 93.1% AAA/AA rating would become 91.7% AAA/AA rating INVESTMENT PORTFOLIO—MONOLINE INSURANCE COVERAGE (PERIOD END 9/30/08) |
13 Investment Portfolio 0.1% 0.1% BB 100% 1.0% 1.5% 4.3% 8.7% 84.4% Credit quality 100% 1.4% 1.9% 4.9% 9.0% 82.7% Credit quality unwrapped Total NR BBB A AA AAA As of 9/30/08 INVESTMENT PORTFOLIO—MONOLINE INSURANCE COVERAGE (PERIOD END 9/30/08) 91.7% Credit quality unwrapped 93.1% Credit quality AAA & AA Combined |
14 Investment Portfolio TOTAL MONOLINE EXPOSURE (PERIOD END 9/30/08) # - Number of cusips * - On Rating Watch negative * + On Rating Watch positive 4,269 $2,252.6 1 $3 4,242 $1,953 16 $269 10 $27.6 Total AAA Aaa/*- 113 3% $70 113 $70 Assured A/*- A3 6 0% $3 6 $3 RADIAN B Ba2 375 6% $144 375 $144 CIFG BBB-/*- B2/*+ 687 12% $268 687 $268 Syncora BB/*- B1 249 9% $192 242 $159 4 $29 3 $4 FGIC AA Aa3/*- 621 17% $386.2 613 $257 7 $129 1 $0.2 AMBAC AA A2/*- 671 17% $376.4 1 $3 664 $303 3 $70 3 $0.4 MBIA AAA Aaa/*- 1,547 36% $813 1,542 $749 2 $41 3 $23 FSA S&P Moody # % ($mm) # ($mm) # ($mm) # ($mm) # ($mm) Insurer Rating Total Student Loan Municipal HELOC Subprime |