EXHIBIT 99
FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
Condensed Consolidated Financial Statements
September 30, 2001
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FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 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.
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FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
ASSETS 2001 2000
---- ----
Bonds at market value (amortized cost of $2,168,656 and
$1,979,942) $2,306,438 $2,084,282
Equity investments at market value (cost of $10,006) 10,076 9,746
Short-term investments 127,731 112,493
---------- ----------
Total investments 2,444,245 2,206,521
Cash 11,864 7,053
Deferred acquisition costs 227,555 201,136
Prepaid reinsurance premiums 395,232 354,117
Reinsurance recoverable on unpaid losses 23,577 24,617
Investment in unconsolidated affiliate 48,395 43,721
Other assets 147,435 145,425
---------- ----------
TOTAL ASSETS $3,298,303 $2,982,590
---------- ----------
LIABILITIES AND MINORITY INTEREST AND SHAREHOLDER'S EQUITY
Deferred premium revenue $1,041,728 $ 936,826
Losses and loss adjustment expenses 106,907 116,336
Deferred federal income taxes 145,685 123,121
Ceded reinsurance balances payable 26,609 48,784
Long-term debt 120,000 120,000
Minority interest 43,818 37,228
Accrued expenses and other liabilities 143,440 111,429
---------- ----------
TOTAL LIABILITIES AND MINORITY INTEREST 1,628,187 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 792,914 789,922
Accumulated other comprehensive income (net of deferred
income tax provision of $44,072 and $34,527) 93,780 69,553
Accumulated earnings 768,422 614,391
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 1,670,116 1,488,866
---------- ----------
TOTAL LIABILITIES AND MINORITY INTEREST
AND SHAREHOLDER'S EQUITY $3,298,303 $2,982,590
========== ==========
</Table>
See notes to condensed consolidated financial statements.
1
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FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2001 2000
---- ----
REVENUES:
Net premiums written (net of premiums ceded of
$112,317 and $119,024) $230,519 $ 153,548
======== =========
Premiums earned (net of premiums ceded of
$70,780 and $58,170) 171,438 137,950
Net investment income 94,467 87,316
Net realized gains (losses) 5,064 (32,875)
Other income 569 304
-------- ---------
TOTAL REVENUES 271,538 192,695
-------- ---------
EXPENSES:
Losses and loss adjustment expenses (net of
reinsurance recoveries of $2,795 and $1,000) 9,112 7,139
Policy acquisition costs 30,368 28,436
Merger related expenses 33,912
Other operating expenses 32,352 28,481
-------- ---------
TOTAL EXPENSES 71,832 97,968
-------- ---------
Minority interest and equity earnings 434 (1,878)
-------- ---------
INCOME BEFORE INCOME TAXES 200,140 92,849
Provision for income taxes 44,520 19,456
-------- ---------
NET INCOME 155,620 73,393
-------- ---------
Other comprehensive income, net of tax:
Unrealized gains on securities:
Holding gains arising during period 27,635 39,046
Less: reclassification adjustment for gains (losses)
included in net income 3,408 (22,189)
-------- ---------
Other comprehensive income 24,227 61,235
-------- ---------
COMPREHENSIVE INCOME $179,847 $ 134,628
======== =========
</Table>
See notes to condensed consolidated financial statements.
2
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FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<Table>
<Caption>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2001 2000
---- ----
Cash flows from operating activities:
Premiums received, net $ 194,971 $ 157,166
Policy acquisition and other operating expenses
paid, net (67,289) (52,227)
Recoverable advances paid (607) (4,040)
Loss and LAE recovered (paid), net (16,809) 1,723
Net investment income received 91,390 77,695
Federal income taxes paid (38,109) (23,619)
Interest paid (3,000) (4,500)
Other, net 3,132 (3,383)
--------- -----------
Net cash provided by operating activities 163,679 148,815
--------- -----------
Cash flows from investing activities:
Proceeds from sales of bonds 339,060 1,197,746
Purchases of bonds (484,227) (1,465,966)
Purchases of property and equipment (2,623) (3,484)
Net decrease (increase) in short-term securities (14,151) 173,781
Other investments, net 1,670 796
--------- -----------
Net cash used for investing activities (160,271) (97,127)
--------- -----------
Cash flows from financing activities:
Stock repurchase (55,000)
Capital contribution 2,992
Dividends paid (1,589)
Other 5
--------- -----------
Net cash provided by (used for) financing
activities 1,403 (54,995)
--------- -----------
Net increase (decrease) in cash 4,811 (3,307)
Cash at beginning of period 7,053 4,153
--------- -----------
Cash at end of period $ 11,864 $ 846
========= ===========
</Table>
See notes to condensed consolidated financial statements.
3
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FINANCIAL SECURITY ASSURANCE INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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
September 30, 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
September 30, 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 (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133). SFAS No. 133 was
subsequently amended by SFAS No. 137 and No. 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 September 30, 2001, the Company had a limited
number of insurance policies considered to be 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. For the nine months
ended September 30, 2001, the Company recorded, as an increase to premiums
earned, a market value adjustment of $6,039,000 relating to these policies. 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.
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3. RECENTLY ISSUED ACCOUNTING STANDARDS-CONTINUED
In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" (SFAS No. 141) and No. 142, "Goodwill and Other
Intangible Assets" (SFAS No. 142). SFAS No. 141 requires the purchase method of
accounting be used for all business combinations initiated after June 30, 2001,
establishes specific criteria for the recognition of intangible assets
separately from goodwill, and requires unallocated negative goodwill to be
written off immediately as an extraordinary gain (instead of being deferred and
amortized). These provisions are effective for business combinations accounted
for by the purchase method for which the date of acquisition is after June 30,
2001. Certain SFAS No. 141 provisions also apply to purchase business
combinations for which the acquisition date was before July 1, 2001. SFAS No.
142 addresses how intangible assets acquired individually or with a group of
other assets (but not those acquired in a business combination) should be
accounted for in the financial statements. This statement requires that goodwill
no longer be amortized and instead be subject to an impairment test performed at
least annually. The provisions of SFAS No. 142 will be effective for fiscal
years beginning after December 31, 2001. Management believes that the
implementation of these standards, on January 1, 2002, will not have a material
effect on the Company's financial position, results of operations or cash flows.
4. LONG TERM DEBT
On October 2, 2001, the Company, with the approval of the New York
Insurance Department, repaid to its parent $26,000,000 of principal on its
surplus notes.
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