Finance Assets, net:

In 2003, PMCC ceased making new investments and began focusing exclusively on managing its portfolio of finance assets in order to maximize its operating results and cash flows from its existing lease portfolio activities and asset sales. Accordingly, PMCC’s operating companies income will fluctuate over time as investments mature or are sold.

At March 31, 2014, finance assets, net, of $1,874 million were comprised of investments in finance leases of $1,916 million, reduced by the allowance for losses of $42 million. At December 31, 2013, finance assets, net, of $1,997 million were comprised of investments in finance leases of $2,049 million, reduced by the allowance for losses of $52 million.

PMCC assesses the adequacy of its allowance for losses relative to the credit risk of its leasing portfolio on an ongoing basis. During the first quarters of 2014 and 2013, PMCC determined that its allowance for losses exceeded the amounts required based on management’s assessment of the credit quality and size of PMCC’s leasing portfolio. As a result, for the three months ended March 31, 2014 and 2013, PMCC reduced its allowance for losses by $10 million and $20 million, respectively. These decreases to the allowance for losses were recorded as reductions to marketing, administration and research costs on Altria Group, Inc.’s condensed consolidated statements of earnings. PMCC believes that, as of March 31, 2014, the allowance for losses of $42 million was adequate. PMCC continues to monitor economic and credit conditions, and the individual situations of its lessees and their respective industries, and may increase or decrease its allowance for losses if such conditions change in the future.

The activity in the allowance for losses on finance assets for the three months ended March 31, 2014 and 2013 was as follows:



	For the Three Months Ended March 31,
	2014			2013
	(in millions)
Balance at beginning of the year	$	52		$	99
Decrease to allowance	(10		)	(20		)
Balance at March 31	$	42		$	79

All PMCC lessees were current on their lease payment obligations as of March 31, 2014.

The credit quality of PMCC’s investments in finance leases as assigned by Standard & Poor’s Ratings Services (“Standard & Poor’s”) and Moody’s Investors Service, Inc. (“Moody’s”) at March 31, 2014 and December 31, 2013 was as follows:



	March 31, 2014		December 31, 2013
	(in millions)
Credit Rating by Standard & Poor’s/Moody’s:
“AAA/Aaa” to “A-/A3”	$	409	$	464
“BBB+/Baa1” to “BBB-/Baa3”	892		927
“BB+/Ba1” and Lower	615		658
Total	$	1,916	$	2,049