EX-99 4 dex99.txt MBIA & SUBSIDIARIES CONSOLIDATED FINANCIAL STATEME Exhibit 99 MBIA INSURANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2002 AND DECEMBER 31, 2001 AND FOR THE PERIODS ENDED MARCH 31, 2002 AND 2001 MBIA INSURANCE CORPORATION AND SUBSIDIARIES I N D E X --------- PAGE ---- Consolidated Balance Sheets - March 31, 2002 and December 31, 2001 (Unaudited) 3 Consolidated Statements of Income - Three months ended March 31, 2002 and 2001 (Unaudited) 4 Consolidated Statement of Changes in Shareholder's Equity - Three months ended March 31, 2002 (Unaudited) 5 Consolidated Statements of Cash Flows - Three months ended March 31, 2002 and 2001 (Unaudited) 6 Notes to Consolidated Financial Statements (Unaudited) 7-8 -2- MBIA INSURANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands except per share amounts)
March 31, 2002 December 31, 2001 -------------- ----------------- Assets Investments: Fixed-maturity securities held as available-for-sale at fair value (amortized cost $6,697,868 and $6,707,183) $6,785,147 $6,839,389 Fixed-maturity securities pledged as collateral at fair value (amortized cost $416,900 and $465,670) 428,065 479,938 Short-term investments, at amortized cost (which approximates fair value) 384,432 284,321 Other investments 28,680 28,756 ---------- ---------- Total investments 7,626,324 7,632,404 Cash and cash equivalents 34,212 24,404 Securities purchased under agreements to resell 519,391 559,751 Accrued investment income 112,788 110,264 Deferred acquisition costs 278,352 277,699 Prepaid reinsurance premiums 515,078 507,079 Reinsurance recoverable on unpaid losses 39,041 35,090 Goodwill 76,938 76,538 Property and equipment, at cost (less accumulated depreciation of $56,217 and $53,618) 111,999 113,176 Receivable for investments sold 33,857 23,599 Other assets 77,665 100,284 ---------- ---------- Total assets $9,425,645 $9,460,288 ========== ========== Liabilities and Shareholder's Equity Liabilities: Deferred premium revenue $2,568,574 $2,565,096 Loss and loss adjustment expense reserves 529,643 518,389 Securities sold under agreements to repurchase 519,391 559,751 Deferred income taxes 228,822 249,169 Current income taxes 36,162 4,508 Deferred fee revenue 23,533 23,987 Payable for investments purchased 26,495 50,239 Other liabilities 187,959 263,260 ---------- ---------- Total liabilities 4,120,579 4,234,399 ---------- ---------- Shareholder's Equity: Common stock, par value $150 per share; authorized, issued and outstanding - 100,000 shares 15,000 15,000 Additional paid-in capital 1,575,806 1,567,478 Retained earnings 3,676,615 3,572,397 Accumulated other comprehensive income, net of deferred income tax provision of $34,470 and $51,300) 37,645 71,014 ---------- ---------- Total shareholder's equity 5,305,066 5,225,889 ---------- ---------- Total liabilities and shareholder's equity $9,425,645 $9,460,288 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. -3- MBIA INSURANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (dollars in thousands) Three months ended March 31 ------------------- 2002 2001 -------- -------- Revenues: Gross premiums written $186,772 $184,905 Ceded premiums (52,315) (55,149) -------- -------- Net premiums written 134,457 129,756 Decrease (increase) in deferred premium revenue 4,581 (9,621) -------- -------- Premiums earned (net of ceded premiums of $44,501 and $38,316) 139,038 120,135 Net investment income 106,139 102,372 Net realized gains (losses) (1,008) 4,559 Change in fair value of derivative instruments 12,904 (3,767) Advisory fees 6,287 5,992 Other 82 194 -------- -------- Total revenues 263,442 229,485 -------- -------- Expenses: Losses and loss adjustment 14,938 14,222 Amortization of deferred acquisition costs 11,123 9,611 Operating 17,398 18,055 -------- -------- Total expenses 43,459 41,888 -------- -------- Income before income taxes 219,983 187,597 Provision for income taxes 57,765 45,981 -------- -------- Income before cumulative effect of accounting change 162,218 141,616 Cumulative effect of accounting change -- (11,082) -------- -------- Net income $162,218 $130,534 ======== ======== The accompanying notes are an integral part of the consolidated financial statements. -4- MBIA INSURANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (Unaudited) For the three months ended March 31, 2002 (Dollars in thousands except per share amounts)
Accumulated Common Stock Additional Other Total ------------------- Paid-in Retained Comprehensive Shareholder's Shares Amount Capital Earnings Income (Loss) Equity --------- ------- ---------- ---------- ------------- ------------- Balance, January 1, 2002 100,000 $15,000 $1,567,478 $3,572,397 $ 71,014 $5,225,889 Comprehensive income: Net income -- -- -- 162,218 -- 162,218 Other comprehensive income (loss): Change in unrealized appreciation of investments net of change in deferred income taxes of $(16,830) -- -- -- -- (31,491) (31,491) Change in foreign currency translation -- -- -- -- (1,878) (1,878) ---------- Other comprehensive loss (33,369) ---------- Comprehensive income 128,849 Dividends declared (per common share $580.00) -- -- -- (58,000) -- (58,000) Tax reduction related to tax sharing agreement with MBIA Inc. -- -- 8,328 -- -- 8,328 --------- ------- ---------- ---------- -------- ---------- Balance, March 31, 2002 100,000 $15,000 $1,575,806 $3,676,615 $ 37,645 $5,305,066 ========= ======= ========== ========== ======== ========== Disclosure of reclassification amount: Unrealized appreciation of investments arising during the period, net of taxes $(440,974) Reclassification adjustment, net of taxes 409,483 --------- Net unrealized appreciation, net of taxes $ (31,491) =========
The accompanying notes are an integral part of the consolidated financial statements. -5- MBIA INSURANCE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands)
Three months ended March 31 --------------------- 2002 2001 --------- --------- Cash flows from operating activities: Net income $ 162,218 $ 130,534 Adjustments to reconcile net income to net cash provided by operating activities: (Increase) decrease in accrued investment income (2,524) 2,005 Increase in deferred acquisition costs (653) (117) Increase in prepaid reinsurance premiums (7,999) (14,115) Increase in deferred premium revenue 3,418 23,736 Increase in loss and loss adjustment expense reserves, 7,303 9,140 Depreciation 2,599 2,596 Goodwill -- 1,164 Amortization of bond discount, net 1,608 139 Net realized (gains) losses on sale of investments 1,008 (4,559) Current income tax provision 31,654 15,765 Deferred income tax benefit (3,522) (5,975) Fair value of derivative instruments (12,904) 9,734 Cumulative effect of acounting change, net -- 11,082 Other, net (34,081) 55,095 --------- --------- Total adjustments to net income (14,093) 105,690 --------- --------- Net cash provided by operating activities 148,125 236,224 --------- --------- Cash flows from investing activities: Purchase of fixed-maturity securities, net of payable for investments purchased (890,629) (985,508) Sale of fixed-maturity securities, net of receivable for investments sold 768,558 746,565 Redemption of fixed-maturity securities, net of receivable for investments redeemed 143,537 123,625 Purchase of short-term investments, net (100,111) (63,151) Purchase of other investments, net (237) (9,453) Capital expenditures, net of disposals (1,435) (492) --------- --------- Net cash used by investing activities (80,317) (188,414) --------- --------- Cash flows from financing activities: Dividends paid (58,000) (40,800) --------- --------- Net cash used by financing activities (58,000) (40,800) --------- --------- Net increase in cash and cash equivalents 9,808 7,010 Cash and cash equivalents-beginning of period 24,404 12,541 --------- --------- Cash and cash equivalents - end of period $ 34,212 $ 19,551 ========= ========= Supplemental cash flow disclosures: Income taxes paid (refunded) $ 20,301 $ (987)
The accompanying notes are an integral part of the consolidated financial statements. -6- MBIA INSURANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation --------------------- The accompanying consolidated financial statements are unaudited and include the accounts of MBIA Insurance Corporation and its Subsidiaries (the "Company"). The statements do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the Company's consolidated financial statements and notes thereto for the year ended December 31, 2001. The accompanying consolidated financial statements have not been audited by independent accountants in accordance with auditing standards generally accepted in the United States of America, but in the opinion of management such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to summarize fairly the Company's financial position and results of operations. The results of operations for the three months ended March 31, 2002 may not be indicative of the results that may be expected for the year ending December 31, 2002. The December 31, 2001 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. 2. Dividends Declared ------------------ Dividends declared and paid by the Company during the three months ended March 31, 2002 were $58.0 million. 3. Recent Accounting Pronouncements -------------------------------- Effective January 1, 2002 the Company adopted Statement of Financial Accounting Standards (SFAS) 141, "Business Combinations" and SFAS 142, "Goodwill and Other Intangible Assets." SFAS 141, which supercedes Accounting Principles Board Opinion (APB) 16, "Business Combinations," requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 and provides specific criteria for initial recognition of intangible assets apart from goodwill. SFAS 142 supercedes APB 17, "Intangible Assets," and requires that goodwill and intangible assets with indefinite lives no longer be amortized but be subject to annual impairment tests in accordance with the Statement. The Statement includes a two-step process aimed at determining the amount, if any, by which the carrying value of a reporting unit exceeds its fair value. Other intangible assets are to be amortized over their useful lives. The following table contains a reconciliation of reported net income to net income adjusted for the effect of goodwill amortization on the three months ended March 31, 2001: -7- MBIA INSURANCE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) March 31, March 31, 2002 2001 --------------------------------------------------- Net income (in millions): As reported $162 $131 Amortization of goodwill -- 1 ---------------------- Adjusted net income $162 $132 --------------------------------------------------- The Company completed its transitional impairment testing on its existing goodwill as of January 1, 2002 in accordance with the Statement. As of January 1, 2002, goodwill in the insurance segment totaled $76.9 million. SFAS 142 requires a two step approach in determining any impairment in goodwill. Step one entails evaluating whether the fair value of a reporting segment exceeds its carrying value. In performing this evaluation the Company determined that the best measure of the fair value of the insurance reporting segment is its book value adjusted for deferred premium revenue, prepaid reinsurance premiums, deferred acquisition costs and the present value of installments to arrive at adjusted book value. As of January 1, 2002, the insurance reporting segment's adjusted book value exceeded its carrying value, and thus there was no impairment of its existing goodwill. -8-