EXHIBIT 99
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
Condensed Consolidated Financial Statements
March 31, 2001
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 2001 and 2000
INDEX
FINANCIAL STATEMENTS:
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations and
Comprehensive 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 whether 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 accounting principles generally accepted in the United States of
America in making such determinations.
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
March 31, December 31,
ASSETS 2001 2000
---- ----
Bonds at market value (amortized cost of $2,040,970 and
$1,979,942) $2,158,375 $2,084,282
Equity investments at market value (cost of $10,006) 9,746 9,746
Short-term investments 73,174 112,493
---------- ----------
Total investments 2,241,295 2,206,521
Cash 14,599 7,053
Deferred acquisition costs 209,075 201,136
Prepaid reinsurance premiums 362,399 354,117
Reinsurance recoverable on unpaid losses 22,035 24,617
Receivable for securities sold 2,947 4,595
Other assets 184,756 184,551
---------- ----------
TOTAL ASSETS $3,037,106 $2,982,590
========== ==========
LIABILITIES AND MINORITY INTEREST AND SHAREHOLDER'S EQUITY
Deferred premium revenue $ 963,173 $ 936,826
Losses and loss adjustment expenses 99,639 116,336
Deferred federal income taxes 131,387 123,121
Ceded reinsurance balances payable 52,324 48,784
Payable for securities purchased 21,284 5,158
Long-term debt 120,000 120,000
Minority interest 39,372 37,228
Accrued expenses and other liabilities 62,675 106,271
---------- ----------
TOTAL LIABILITIES AND MINORITY INTEREST 1,489,854 1,493,724
---------- ----------
Common stock (400 shares authorized, issued and outstanding;
par value of $37,500 per share) 15,000 15,000
Additional paid-in capital 789,922 789,922
Accumulated other comprehensive income [net of deferred
income tax provision of $38,233 and $34,527] 78,912 69,553
Accumulated earnings 663,418 614,391
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 1,547,252 1,488,866
---------- ----------
TOTAL LIABILITIES AND MINORITY INTEREST
AND SHAREHOLDER'S EQUITY $3,037,106 $2,982,590
========== ==========
See notes to condensed consolidated financial statements.
1
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Dollars in thousands)
Three Months Ended March 31,
----------------------------
2001 2000
---- ----
REVENUES:
Net premiums written (net of premiums ceded of
$32,316 and $29,931) $ 71,373 $ 36,936
Decrease (increase) in deferred premium revenue (20,109) 10,648
-------- --------
Premiums earned (net of premiums ceded of
$22,095 and $19,896) 51,264 47,584
Net investment income 31,308 27,998
Net realized gains (losses) 1,726 (26,812)
Other income 250 58
-------- --------
TOTAL REVENUES 84,548 48,828
-------- --------
EXPENSES:
Losses and loss adjustment expenses (net of
reinsurance recoveries of $369 and $55) 2,778 1,781
Policy acquisition costs 9,274 9,681
Merger related expenses 9,195
Other operating expenses 9,098 10,548
-------- --------
TOTAL EXPENSES 21,150 31,205
-------- --------
Minority interest and equity earnings (574) (379)
-------- --------
INCOME BEFORE INCOME TAXES 62,824 17,244
Provision for income taxes 13,797 205
-------- --------
NET INCOME 49,027 17,039
-------- --------
Other comprehensive income, net of tax:
Unrealized gains on securities:
Holding gains arising during period 10,572 22,409
Less: reclassification adjustment for gains (losses)
included in net income 1,213 (17,849)
-------- --------
Other comprehensive income 9,359 40,258
-------- --------
COMPREHENSIVE INCOME $ 58,386 $ 57,297
======== ========
See notes to condensed consolidated financial statements.
2
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31,
----------------------------
2001 2000
---- ----
Cash flows from operating activities:
Premiums received, net $ 74,576 $ 28,377
Policy acquisition and other operating expenses
paid, net (70,480) (31,394)
Recoverable advances received (paid) 1,536 (709)
Loss and LAE recovered (paid), net (20,279) 679
Net investment income received 32,314 28,079
Federal income taxes paid (9,495) (10,949)
Interest paid (1,500) (1,500)
Other, net 1,877 (2,354)
--------- ---------
Net cash provided by operating activities 8,549 10,229
--------- ---------
Cash flows from investing activities:
Proceeds from sales of bonds 114,451 694,871
Purchases of bonds (155,061) (806,855)
Purchases of property and equipment (430) (2,291)
Net decrease in short-term securities 39,862 103,647
Other investments, net 175 11
--------- ---------
Net cash used for investing activities (1,003) (10,617)
--------- ---------
Net increase (decrease) in cash 7,546 (388)
Cash at beginning of period 7,053 4,153
--------- ---------
Cash at end of period $ 14,599 $ 3,765
========= =========
See notes to condensed consolidated financial statements.
3
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
1. ORGANIZATION AND OWNERSHIP
Financial Security Assurance Inc. (the Company), a 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 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
March 31, 2001 and for all periods presented, have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. These
statements should be read in conjunction with the Company's December 31, 2000
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 accounting principles generally accepted in
the United States of America. The results of operations for the periods ended
March 31, 2001 and 2000 are not necessarily indicative of the operating results
for the full year. Certain prior year balances have been reclassified to conform
to current year's presentation.
3. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). SFAS 133 was subsequently amended by
SFAS 137 and 138. These statements established accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and hedging activities. It requires that entities
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure the instruments at fair value. At December 31,
2000 and March 31, 2001, the Company had a limited number of insurance policies
that would be considered derivatives for accounting purposes and had no open
positions in U.S. Treasury bond futures, call options or other derivative
instruments used for hedging purposes. The adoption on January 1, 2001 of this
standard did not have a material impact on the Company's financial position,
results of operations or cash flows.
4