SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 1-12644
Financial Security Assurance Holdings Ltd.
(Exact name of registrant as specified in its charter)
New York 13-3261323
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
350 Park Avenue
New York, New York 10022
(Address of principal executive offices)
(212) 826-0100
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
At April 30, 1998, there were outstanding 29,895,507 shares of Common Stock, par
value $0.01 per share, of the registrant (includes 1,126,953 shares of Common
Stock owned by a trust on behalf of the Company and excludes 2,380,794 shares of
Common Stock actually held in treasury).
INDEX
PAGE
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Financial Security Assurance Holdings Ltd. and Subsidiaries
Consolidated Balance Sheets - March 31, 1998 and
December 31, 1997 3
Consolidated Statements of Income - Three months ended
March 31, 1998 and 1997 4
Consolidated Statement of Changes in Shareholders' Equity
- Three months ended March 31, 1998 5
Consolidated Statements of Cash Flows
- Three months ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION, AS APPLICABLE
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
2
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
March 31, December 31,
ASSETS 1998 1997
----------- -----------
Bonds at market value (amortized cost of $1,137,100 and
$1,230,479) $ 1,173,884 $ 1,268,158
Equity investments at market value (cost of $29,194 and
$29,430) 31,766 30,539
Short-term investments 256,977 132,931
----------- -----------
Total investments 1,462,627 1,431,628
Cash 18,139 12,475
Deferred acquisition costs 175,896 171,098
Prepaid reinsurance premiums 175,983 173,123
Reinsurance recoverable on unpaid losses 23,685 30,618
Receivable for securities sold 35,712 20,623
Other assets 60,409 61,079
----------- -----------
TOTAL ASSETS $ 1,952,451 $ 1,900,644
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deferred premium revenue $ 604,140 $ 595,196
Losses and loss adjustment expenses 69,268 75,417
Deferred federal income taxes 52,712 56,872
Ceded reinsurance balances payable 16,618 11,199
Payable for securities purchased 96,820 72,979
Notes payable 130,000 130,000
Accrued expenses and other liabilities 79,220 76,621
----------- -----------
TOTAL LIABILITIES 1,048,778 1,018,284
----------- -----------
Preferred stock (3,000,000 shares authorized; 2,000,000
issued and outstanding; par value of $.01 per share) 20 20
Common stock (50,000,000 shares authorized; 32,276,301
issued; par value of $.01 per share) 323 323
Additional paid-in capital - preferred 680 680
Additional paid-in capital - common 693,476 693,851
Accumulated other comprehensive income (net of deferred
income tax provision of $13,922 and $13,575) 25,855 25,212
Accumulated earnings 254,358 231,124
Deferred equity compensation 23,706 26,181
Less treasury stock at cost (3,507,747 and 3,521,847 shares
held) (94,745) (95,031)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 903,673 882,360
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,952,451 $ 1,900,644
=========== ===========
See notes to condensed consolidated financial statements.
3
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
March 31,
---------------------
1998 1997
-------- --------
Revenues:
Net premiums written (net of premiums ceded
of $16,391 and $13,927) $ 37,947 $ 27,184
Increase in deferred premium revenue (6,026) (2,410)
-------- --------
Premiums earned (net of premiums ceded of
$13,120 and $8,865) 31,921 24,774
Net investment income 18,683 16,361
Net realized gains (losses) 2,733 (498)
Other income 230 448
-------- --------
TOTAL REVENUES 53,567 41,085
-------- --------
Expenses:
Losses and loss adjustment expenses (net of
reinsurance recoveries of $(6,841) and $442) 1,047 2,285
Interest expense 2,434 541
Policy acquisition costs 8,387 6,209
Other operating expenses 5,605 4,784
-------- --------
TOTAL EXPENSES 17,473 13,819
-------- --------
INCOME BEFORE INCOME TAXES 36,094 27,266
Provision for income taxes 9,648 7,016
-------- --------
NET INCOME 26,446 20,250
-------- --------
Other comprehensive income, net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period 2,419 (11,422)
Less: reclassification adjustment for
losses (gains) included in net income (1,776) 324
-------- --------
Other comprehensive income 643 (11,098)
-------- --------
COMPREHENSIVE INCOME $ 27,089 $ 9,152
======== ========
As based upon net income:
Basic earnings per common share $ 0.91 $ 0.67
======== ========
Diluted earnings per common share $ 0.88 $ 0.66
======== ========
See notes to condensed consolidated financial statements.
4
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
Additional Additional Unrealized
Paid-In Paid-In Gain
Preferred Common Capital - Capital - (Loss) on
Stock Stock Preferred Common Investments
----- ----- --------- ------ -----------
BALANCE, December 31, 1997 $20 $323 $680 $693,851 $25,212
Net income
Net unrealized gain on 643
investments
Dividends paid on common stock
($0.1075 per share)
Deferred equity compensation
Deferred equity payout 193
Purchase of 2,184 shares of
common stock
Issuance of 7,674 shares of treasury
treasury stock for options exercised (13)
Forward share transactions-settlements
with employees and directors (555)
--- ---- ---- -------- -------
BALANCE, March 31, 1998 $20 $323 $680 $693,476 $25,855
=== ==== ==== ======== =======
Deferred
Equity
Accumulated Compen- Treasury
Earnings sation Stock Total
-------- ------ ----- -----
BALANCE, December 31, 1997 $231,124 $26,181 $(95,031) $882,360
Net income 26,446 26,446
Net unrealized gain on 643
investments
Dividends paid on common stock
($0.1075 per share) (3,212) (3,212)
Deferred equity compensation 3,395 3,395
Deferred equity payout (5,832) 204 (5,435)
Purchase of 2,184 shares of
common stock (121) (121)
Issuance of 7,674 shares of treasury
treasury stock for options exercised (38) 203 152
Forward share transactions-settlements
with employees and directors (555)
-------- ------- -------- --------
BALANCE, March 31, 1998 $254,358 $23,706 $(94,745) $903,673
======== ======= ========= ========
See notes to condensed consolidated financial statements.
5
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31,
----------------------------
1998 1997
--------- ---------
Cash flows from operating activities:
Premiums received, net $ 44,043 $ 27,895
Policy acquisition and other
operating expenses paid, net (38,872) (28,766)
Loss and LAE paid, net (164) (1,052)
Net investment income received 21,049 16,211
Recoverable advances received 5,778 15
Federal income taxes recovered (paid) (2,128) 8,198
Interest paid (2,424)
Other, net (377) (481)
--------- ---------
Net cash provided by
operating activities 26,905 22,020
--------- ---------
Cash flows from investing activities:
Proceeds from sales of bonds 426,801 227,710
Purchases of bonds (321,496) (211,600)
Purchases of property and equipment (389) (909)
Net increase in short-term securities (122,855) (32,289)
--------- ---------
Net cash used for investing activities (17,939) (17,088)
--------- ---------
Cash flows from financing activities:
Dividends paid (3,213) (2,942)
Treasury stock 83 (42)
Other (172) (654)
--------- ---------
Net cash used for financing activities (3,302) (3,638)
--------- ---------
Net increase in cash 5,664 1,294
Cash at beginning of period 12,475 8,146
--------- ---------
Cash at end of period $ 18,139 $ 9,440
========= =========
See notes to condensed consolidated financial statements.
6
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1998 and 1997
1. ORGANIZATION AND OWNERSHIP
Financial Security Assurance Holdings Ltd. (the Company) is an insurance
holding company domiciled in the State of New York. The Company is primarily
engaged (through its insurance subsidiaries, collectively known as FSA) in the
business of providing financial guaranty insurance on asset-backed and municipal
obligations. At March 31, 1998, the Company was owned 42.1% by U S WEST Capital
Corporation (U S WEST), 12.0% by Fund American Enterprises Holdings, Inc. (Fund
American), 6.7% by The Tokio Marine and Fire Insurance Co., Ltd. (Tokio Marine)
and 39.2% by the public and employees. These percentages are calculated based
upon outstanding shares, which are reduced by treasury shares as presented in
these financial statements.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with instructions to Form 10-Q and, accordingly, do not include all
of the information and disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1997 Annual
Report to Shareholders. The accompanying financial statements have not been
audited by independent accountants in accordance with generally accepted
auditing standards but, 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, 1998 and
for all periods presented have been made. The December 31, 1997 condensed
balance sheet data 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 March 31, 1998 and 1997 are not
necessarily indicative of the operating results for the full year.
3. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards (SFAS) No.
130, Reporting Comprehensive Income, which requires that all components of other
comprehensive income be classified by their nature in a financial statement and
accumulated balances of other comprehensive income be displayed separately from
retained earnings and additional paid-in capital in the equity section of a
balance sheet. The Company is disclosing this information in its statements of
income. Comprehensive income is defined as the change in shareholders' equity
during a period from transactions and other events and circumstances from
non-owner sources and includes net income and all changes in shareholders'
equity except those from investments by owners and distributions to owners. This
statement did not change the current accounting treatment for components of
comprehensive income such as changes in unrealized gains or losses on securities
available for sale.
7
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
1998 and 1997 First Quarter Results
The Company's 1998 first quarter net income was $26.4 million, compared with
$20.3 million for the same period in 1997, an increase of 30.6%. Core net income
(operating net income less the after-tax effect of refundings and prepayments)
was $24.6 million, compared with $20.6 million for the same period in 1997, an
increase of 19.8%. Total core revenues in the first quarter of 1998 increased
$6.9 million, from $39.3 million in 1997 to $46.2 million in 1998, while total
core expenses increased only $1.3 million. Operating net income (net income less
the after-tax effect of net realized capital gains or losses and the cost of the
performance share program) was $26.8 million for the first quarter of 1998
versus $21.6 million for the comparable period in 1997, an increase of $5.2
million or 23.9%.
There are two measures of gross premiums originated for a given period. Gross
premiums written captures premiums collected in the period, whether collected
up-front for business originated in the period, or in installments for business
originated in prior periods. An alternative measure, the gross present value of
premiums written (gross PV premiums written) reflects future installment
premiums discounted to a present value, as well as up-front premiums, but only
for business originated in the period. During the first quarter of 1998, the
Company revised the discount rate used to estimate gross PV premiums written in
order to more accurately reflect current interest rates. The new discount rate
of 6.3% represents the average pre-tax yield on the Company's investment
portfolio for the previous three years. The Company intends to revise the
discount rate in future years according to the same formula. For business
written prior to 1998, the discount rate remains 9.5% in all years. The change
to the new discount rate has no effect on current or future earned premiums.The
Company considers gross PV premiums written to be the better indicator of a
given period's origination activity because a substantial part of the Company's
premiums are collected in installments, a practice typical of the asset-backed
business. Regardless of the measure used, quarter to quarter comparisons are of
limited significance because originations fluctuate from quarter to quarter but
historically have not exhibited a seasonal pattern.
Gross premiums written increased 32.2%, to $54.3 million for the first quarter
of 1998 from $41.1 million for the first quarter of 1997. Also, gross PV
premiums written increased 19.5%, to $50.7 million in the first quarter of 1998
from $42.4 million in the first quarter of 1997. Applying the unrevised discount
rate of 9.5% to the first quarter 1998 production would have resulted in gross
PV written of $48.8 million, an increase of 15.0% over the first quarter 1997
result. The increase in gross premiums written and gross PV premiums written is
attributable to the fact that the Company wrote a greater proportion of
municipal business during the first quarter of 1998. In the first quarter of
1998, asset-backed gross PV premiums written were $16.1 million, as compared
with $21.2 million in 1997, a decrease of 24.2%. This decrease was due primarily
to a decline in residential mortgage-backed transactions. For the municipal
business, gross PV premiums written in the first quarter increased from $21.2
million in 1997 to $34.6 million in 1998, an increase of 63.2%.
In the first quarter of 1998, the Company insured par value of bonds totaling
$9.1 billion, a 33.6% increase over the same period in 1997. FSA's first quarter
asset-backed component decreased 31.6% to $2.9 billion while its municipal
sector rose 144.8% to $6.2 billion.
Net premiums written were $37.9 million for the first quarter of 1998, an
increase of $10.8 million or 39.6% when compared with $27.2 million in 1997. Net
premiums earned for the first quarter of 1998 were $31.9 million, compared with
$24.8 million in the first quarter of 1997, an increase of 28.8%. Premiums
earned from refundings and prepayments were $4.7 million for the first quarter
of 1998 and $2.3 million for the same period of 1997, contributing $2.2 million
and $1.1 million, respectively, to after-tax earnings. Net premiums earned for
the quarter grew 21.3% relative to the same period in 1997 when the effects of
refundings and prepayments are eliminated.
Net investment income was $18.7 million for the first quarter of 1998 and $16.4
million for the comparable period in 1997, an increase of 14.2%. This increase
was due primarily to higher invested assets. The Company's effective tax rate on
investment income was 18.8% for the first quarter of 1997 compared with 18.4% in
1998. In the first quarter
8
of 1998, the Company realized $2.7 million in net capital gains as compared with
realized net capital losses of $0.5 million for the same period in 1997. Capital
gains and losses are a by-product of the normal investment management process
and will vary substantially from period to period.
The provision for losses and loss adjustment expenses during the first quarter
of 1998 was $1.0 million compared with $2.3 million in 1997, representing
additions to the Company's general loss reserve. The additions to the general
reserve represent management's estimate of the amount required to adequately
cover the net cost of claims. The Company will, on an ongoing basis, monitor
these reserves and may periodically adjust such reserves based on the Company's
actual loss experience, its future mix of business, and future economic
conditions. At March 31, 1998, the unallocated balance in the Company's general
loss reserve was $53.6 million. The general reserve at March 31, 1998 reflects
$18.3 million in recoveries of losses incurred in prior years in the Company's
commercial real estate portfolio. These recoveries were realized in the first
quarter and reestablished to the general reserve.
Total policy acquisition and other operating expenses (excluding the cost of the
performance share program of $3.3 million for the first quarter of 1998 compared
with $1.6 million for the same period of 1997) were $10.7 million for the first
quarter of 1998 compared with $9.4 million for the same period in 1997, an
increase of 14.2%. Excluding the effects of refundings, total policy acquisition
and other operating expenses were $9.4 million for the first quarter of 1998
compared with $8.7 million for the same period in 1997, an increase of 7.6%. The
increase was the result of higher DAC amortization due to a higher level of
premiums earned and an increase in other operating expenses.
Income before income taxes for the first quarter of 1998 was $36.1 million, up
from $27.3 million, or 32.4%, for the same period in 1997.
The Company's effective tax rate for the first quarter of 1998 was 26.7%
compared with 25.7% for the same period in 1997.
The weighted average number of diluted shares of common stock outstanding
decreased to 30,165,000 for the quarter ended March 31, 1998, from 30,749,000
during the first quarter of 1997. This decrease was due to shares the Company
repurchased to fund obligations under employee benefit plans and to close out a
portion of its forward purchase arrangement, as discussed in previous filings,
partially offset by an increase in the dilutive effect of its convertible
preferred stock and shares issuable under its performance share program.
Earnings per share increased to $0.88 for the first quarter of 1998 from $0.66
for the same period in 1997.
Liquidity and Capital Resources
The Company's consolidated invested assets and cash equivalents at March 31,
1998, net of unsettled security transactions, was $1,401.5 million, compared
with the December 31, 1997, balance of $1,379.3 million. These balances include
the change in the market value of the investment portfolio, which had an
unrealized gain position of $39.8 million at March 31, 1998 and $38.8 million at
December 31, 1997.
At March 31, 1998, the Company had, at the holding company level, an investment
portfolio of $68.3 million available to fund the liquidity needs of its
activities outside of its insurance operations. Because the majority of the
Company's operations are conducted through FSA, the long-term ability of the
Company to service its debt and to declare and pay dividends will largely depend
upon the receipt of dividends from FSA and upon external financings.
FSA's ability to pay dividends is dependent upon FSA's financial condition,
results of operations, cash requirements, rating agency approval and other
related factors and is also subject to restrictions contained in the insurance
laws and related regulations of New York and other states. Under New York State
insurance law, FSA may pay dividends out of earned surplus, provided that,
together with all dividends declared or distributed by FSA during the preceding
12 months, the dividends do not exceed the lesser of (i) 10% of policyholders'
surplus as of its last statement filed with the New York Superintendent of
Insurance or (ii) adjusted net investment income during this period. FSA paid no
dividends in 1997. Based upon FSA's statutory statements for the quarter ended
March 31, 1998, and considering dividends that can be paid by its subsidiary,
the maximum amount available for payment of dividends by FSA without regulatory
approval over the following 12 months is approximately $50.9 million. The New
York Superintendent has approved the repurchase by FSA of up to $75.0 million of
its shares from its parent, pursuant to which FSA has repurchased $70.8 million
of its shares through March 31, 1998.
9
Dividends paid by the Company to its shareholders increased to $3.2 million in
the first quarter of 1998 from $2.9 million in the comparable period of 1997 and
to $0.1075 per common share in 1998 from $0.095 in 1997. In addition to paying
dividends, the Company uses funds to make debt service payments and to
repurchase shares of the Company's common stock to fund employee benefit plans.
The Company has outstanding $130.0 million of 7-3/8% Senior Quarterly Income
Debt Securities due September 30, 2097 and callable without premium or penalty
on or after September 18, 2002.
In May 1996, the Company repurchased 1,000,000 shares of its common stock from U
S WEST for a purchase price of $26.50 per share. At the same time, the Company
also entered into forward agreements with National Westminster Bank Plc and
Canadian Imperial Bank of Commerce (the Counterparties) in respect of 1,750,000
shares (the Forward Shares) of the Company's common stock. Under the forward
agreements, the Company has the obligation either (i) to purchase the Forward
Shares from the Counterparties for a price equal to $26.50 per share plus
carrying costs or (ii) to direct the Counterparties to sell the Forward Shares,
with the Company receiving any excess or making up any shortfall between the
sale proceeds and $26.50 per share plus carrying costs in cash or additional
shares, at its option. The Company made the economic benefit and risk of 750,000
of these shares available for subscription by certain of the Company's employees
and directors. When an individual participant exercises Forward Shares under the
subscription program, the Company settles with the participant but does not
necessarily close out the corresponding Forward Share position with the
Counterparties. The cost of these settlements during 1997 was $2.1 million and
was charged to additional paid-in capital. By the fourth quarter of 1997, such
exercises by participants had increased the number of shares allocated to the
Company from 1,000,000 shares to 1,187,800 shares. During the fourth quarter of
1997, the Company exercised rights under the forward agreements, purchasing
1,187,800 Forward Shares for a total cost of $33.9 million. At March 31, 1998,
as a result of the Company's exercise, the repurchased shares were held as
treasury stock, and the remaining 562,200 Forward Shares were allocated to the
subscription program.
FSA's primary uses of funds are to pay operating expenses, to pay dividends to
its parent and to repurchase stock from its parent. FSA's funds are also
required to satisfy future claims, if any, under insurance policies in the event
of default by an issuer of an insured obligation and the unavailability or
exhaustion of other liquidity sources in the transaction, such as the cash flow
or collateral underlying the obligations. FSA seeks to structure asset-backed
transactions to address liquidity risks through inclusion of such other
liquidity sources in transactions. The insurance policies issued by FSA provide,
in general, that payments of principal, interest and other amounts insured by
FSA may not be accelerated by the holder of the obligation but are paid by FSA
in accordance with the obligation's original payment schedule or, at FSA's
option, on an accelerated basis. These policy provisions prohibiting
acceleration of certain claims are mandatory under Article 69 of the New York
Insurance Law and serve to reduce FSA's liquidity requirements.
The Company believes that FSA's expected operating liquidity needs, both on a
short- and long-term basis, can be funded from its operating cash flow. In
addition, FSA has a number of sources of liquidity that are available to pay
claims on a short- and long-term basis: cash flow from written premiums, FSA's
investment portfolio and earnings thereon, reinsurance arrangements with
third-party reinsurers, liquidity lines of credit with banks, and capital market
transactions.
A group of international Aaa/AAA-rated banks make available to FSA a standby
irrevocable limited recourse line of credit, which was increased from $125.0
million to $240.0 million during 1997. This credit facility provides liquidity
and credit support to FSA in the event losses from municipal obligations in
FSA's insured portfolio exceed specified limits. Repayment of amounts drawn
under the line will be limited primarily to recoveries of losses related to such
municipal obligations. The facility expires on April 30, 2005 unless extended.
10
The Company has a credit arrangement aggregating $150.0 million at March 31,
1998, which is provided by commercial banks and intended for general application
to transactions insured by FSA. At March 31, 1998, there were no borrowings
under this arrangement, which expires on November 23, 1999. In addition, there
are credit arrangements assigned to specific insured transactions. In August
1994, FSA entered into a facility agreement with Canadian Global Funding
Corporation and Hambros Bank Limited. Under the agreement, FSA can arrange
financing for transactions subject to certain conditions. The amount of this
facility was $186.9 million, of which $100.9 million was unutilized at March 31,
1998.
The Company has no material plans for capital expenditures within the next
twelve months.
11
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(1) Financial statements of Financial Security Assurance Inc. for
the quarterly period ended March 31, 1998.
(b) Reports on Form 8-K
None
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FINANCIAL SECURITY ASSURANCE HOLDINGS LTD.
By /s/ Jeffrey S. Joseph
--------------------------------------------
May 13, 1998 Jeffrey S. Joseph
Managing Director & Controller (Chief
Accounting Officer)
13
Exhibit Index
Exhibit No. Exhibit
- ----------- -------
1. Financial statements of Financial Security Assurance Inc. for
the quarterly period ended March 31, 1998