EXHIBIT 1
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
Condensed Consolidated Financial Statements
June 30, 1997
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
INDEX
FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
The New York State Insurance Department recognizes only statutory accounting
practices for determining and reporting the financial condition and results of
operations of an insurance company, for determining its solvency under the New
York Insurance Law, and for determining where its financial condition warrants
the payment of a dividend to its stockholders. No consideration is given by the
New York State Insurance Department to financial statements prepared in
accordance with generally accepted accounting principles in making such
determinations.
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
JUNE 30, DECEMBER 31,
1997 1996
ASSETS ---- ----
Bonds at market value (amortized cost of
$1,099,965 and $1,054,678) $1,118,214 $1,068,677
Equity investments at market value (cost
of $2,492 and $1,000) 2,514 1,000
Short-term investments 113,979 55,699
---------- ----------
Total investments 1,234,707 1,125,376
Cash 20,682 7,517
Deferred acquisition costs 150,581 146,233
Prepaid reinsurance premiums 169,112 151,224
Reinsurance recoverable on unpaid losses 29,799 29,875
Other assets 77,712 69,705
---------- ----------
TOTAL ASSETS $1,682,593 $1,529,930
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDER'S EQUITY
Deferred premium revenue $ 570,363 $ 511,196
Losses and loss adjustment expenses 74,013 72,079
Deferred federal income taxes 44,396 41,682
Ceded reinsurance balances payable 19,589 12,599
Payable for securities purchased 52,065 14,142
Accrued expenses and other liabilities 60,958 62,900
---------- ----------
TOTAL LIABILITIES 821,384 714,598
---------- ----------
Common stock (637 and 660 shares authorized,
issued and outstanding; par value of
$23,560 and $22,727 per share) 15,000 15,000
Additional paid-in capital 650,370 654,470
Unrealized gain on investments (net of
deferred income tax provision of $6,395
and $4,899) 11,876 9,099
Accumulated earnings 183,963 136,763
TOTAL SHAREHOLDER'S EQUITY 861,209 815,332
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $1,682,593 $1,529,930
---------- ----------
---------- ----------
See notes to condensed consolidated financial statements.
1
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
1997 1996
---------- ----------
REVENUES:
Net premiums written (net of
premiums ceded of $37,427 and $32,476) $94,679 $64,865
Increase in deferred premium revenue (42,344) (22,381)
--------- ---------
Premiums earned (net of premiums ceded of
$19,266 and $21,167) 52,335 42,484
Net investment income 32,886 30,103
Net realized gains 1,384 1,457
Other income 4,537 163
TOTAL REVENUES 91,142 74,207
--------- ---------
EXPENSES:
Losses and loss adjustment expenses
(net of reinsurance recoveries of
$884 and $1,131) 4,441 3,155
Policy acquisition costs 13,349 12,620
Other operating expenses 8,387 6,674
--------- ---------
TOTAL EXPENSES 26,177 22,449
--------- ---------
INCOME BEFORE INCOME TAXES 64,965 51,758
Provision for income taxes 17,766 13,293
--------- ---------
NET INCOME $47,199 $38,465
--------- ---------
--------- ---------
See notes to condensed consolidated financial statements.
2
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1996
---- ----
Cash flows from operating activities:
Premiums received, net $ 98,426 $ 70,424
Policy acquisition and other operating
expenses paid, net (33,988) (36,102)
Recoverable advances received (paid) (443) 7,628
Loss and LAE paid, net (2,332) (9,603)
Net investment income received 29,487 28,790
Federal income taxes paid (6,152) (15,240)
Other, net 1,370 1,807
--------- ---------
Net cash provided by operating activities 86,368 47,704
--------- ---------
Cash flows from investing activities:
Proceeds from sales of bonds 470,721 458,659
Purchases of bonds (482,437) (457,287)
Sale of subsidiary 4,086
Purchases of property and equipment (1,638) (1,225)
Net increase in short-term securities (56,935) (24,436)
--------- ---------
Net cash used for investing activities (66,203) (24,289)
--------- ---------
Cash flows from financing activities:
Stock repurchase (7,000)
Dividends paid (18,000)
--------- ---------
Net cash used for financing activities (7,000) (18,000)
--------- ---------
Net increase in cash 13,165 5,415
Cash at beginning of period 7,517 555
--------- ---------
Cash at end of period $ 20,682 $ 5,970
--------- ---------
--------- ---------
See notes to condensed consolidated financial statements.
3
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1. ORGANIZATION AND OWNERSHIP
Financial Security Assurance Inc. (the Company), an indirect wholly owned
subsidiary of Financial Security Assurance Holdings Ltd. (the Parent), is an
insurance company domiciled in the State of New York. The Company is
primarily engaged in the business of providing financial guaranty insurance
on asset-backed financings and municipal obligations.
2. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared by the Company and are unaudited. In the opinion of management, all
adjustments, which include only normal recurring adjustments, necessary to
present fairly the financial position, results of operations and cash flows
at June 30, 1997 and for all periods presented, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These statements
should be read in conjunction with the Company's December 31, 1996
consolidated financial statements and notes thereto. The year-end condensed
balance sheet was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The results of operations for the periods ended June 30, 1997 and 1996 are
not necessarily indicative of the operating results for the full year.
Certain amounts in the 1996 financial statements have been reclassed to
conform to the 1997 presentation.
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