Table of Contents

 

 

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

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 Number 1-9583

 

 

MBIA INC.

(Exact name of registrant as specified in its charter)

 

 

 

Connecticut   06-1185706
(State of incorporation)  

(I.R.S. Employer

Identification No.)

113 King Street, Armonk, New York   10504
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (914) 273-4545

 

 

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   þ     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   þ     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   þ   Accelerated filer   ¨    Non-accelerated filer   ¨   Smaller reporting company   ¨

Indicate by check mark whether the Registrant is shell company (as defined in Rule 12b-2 of the Act).    Yes   ¨     No   þ

As of November 7, 2013, 192,247,762 shares of Common Stock, par value $1 per share, were outstanding.

 

 

 


Table of Contents
         PAGE  

PART I FINANCIAL INFORMATION

  

Item 1.

  Financial Statements MBIA Inc. and Subsidiaries (Unaudited)   
  Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 (Unaudited)      1   
  Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (Unaudited)      2   
  Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2013 and 2012 (Unaudited)      3   
  Consolidated Statement of Changes in Shareholders’ Equity for the nine months ended September 30, 2013 (Unaudited)      4   
  Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (Unaudited)      5   
  Notes to Consolidated Financial Statements (Unaudited)      6   

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      79   

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      131   

Item 4.

  Controls and Procedures      134   

PART II OTHER INFORMATION

  

Item 1.

  Legal Proceedings      135   

Item 1A.

  Risk Factors      135   

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds      149   

Item 5.

  Other Information      149   

Item 6.

  Exhibits      150   

SIGNATURES

     151   


Table of Contents

PART 1 FINANCIAL INFORMATION

Item 1. Financial Statements

MBIA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In millions except share and per share amounts)

 

                     
     September 30, 2013      December 31, 2012  

Assets

     

Investments:

     

Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $4,516 and $4,347)

   $ 4,505       $ 4,485   

Fixed-maturity securities at fair value

     249         244   

Investments pledged as collateral, at fair value (amortized cost $407 and $489)

     347         443   

Short-term investments held as available-for-sale, at fair value (amortized cost $1,377 and $662)

     1,378         669   

Other investments (includes investments at fair value of $10 and $12)

     16         21   
  

 

 

    

 

 

 

Total investments

     6,495         5,862   

Cash and cash equivalents

     1,057         814   

Premiums receivable

     1,085         1,228   

Deferred acquisition costs

     270         302   

Insurance loss recoverable

     742         3,648   

Property and equipment, at cost (less accumulated depreciation of $87 and $146)

     37         69   

Deferred income taxes, net

     1,243         1,199   

Other assets

     247         268   

Assets of consolidated variable interest entities:

     

Cash

     46         176   

Investments held-to-maturity, at amortized cost (fair value $2,566 and $2,674)

     2,809         2,829   

Investments held as available-for-sale, at fair value (amortized cost $156 and $637)

     156         625   

Fixed-maturity securities at fair value

     626         1,735   

Loans receivable at fair value

     1,704         1,881   

Loan repurchase commitments

     1,116         1,086   

Other assets

             
  

 

 

    

 

 

 

Total assets

   $ 17,633       $ 21,724   
  

 

 

    

 

 

 

Liabilities and Equity

     

Liabilities:

     

Unearned premium revenue

   $ 2,544       $ 2,938   

Loss and loss adjustment expense reserves

     688         853   

Investment agreements

     760         944   

Medium-term notes (includes financial instruments carried at fair value of $204 and $165)

     1,554         1,598   

Long-term debt

     1,677         1,732   

Derivative liabilities

     1,370         2,934   

Other liabilities

     439         245   

Liabilities of consolidated variable interest entities:

     

Variable interest entity notes (includes financial instruments carried at fair value of $2,426 and $3,659)

     5,385         7,124   

Derivative liabilities

     15         162   
  

 

 

    

 

 

 

Total liabilities

     14,432         18,530   
  

 

 

    

 

 

 

Commitments and contingencies (See Note 14)

     

Equity:

     

Preferred stock, par value $1 per share; authorized shares—10,000,000; issued and outstanding—none

             

Common stock, par value $1 per share; authorized shares—400,000,000; issued shares—277,804,062 and 277,405,039

     278         277   

Additional paid-in capital

     3,113         3,076   

Retained earnings

     2,157         2,039   

Accumulated other comprehensive income (loss), net of tax of $30 and $21

     (50)         56   

Treasury stock, at cost—85,551,418 and 81,733,530 shares

     (2,318)         (2,275)   
  

 

 

    

 

 

 

Total shareholders’ equity of MBIA Inc.

     3,180         3,173   

Preferred stock of subsidiary and noncontrolling interest

     21         21   
  

 

 

    

 

 

 

Total equity

     3,201         3,194   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 17,633       $ 21,724   
  

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

1


Table of Contents

MBIA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In millions except share and per share amounts)

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  
     2013      2012      2013      2012  

Revenues:

           

Premiums earned:

           

Scheduled premiums earned

   $ 80       $ 85       $ 236       $ 291   

Refunding premiums earned

     24         70         112         173   
  

 

 

    

 

 

    

 

 

    

 

 

 

Premiums earned (net of ceded premiums of $2, $3, $7 and $12)

     104         155         348         464   

Net investment income

     42         50         118         172   

Fees and reimbursements

            20         17         47   

Change in fair value of insured derivatives:

           

Realized gains (losses) and other settlements on insured derivatives

     (28)         12         (1,548)         (420)   

Unrealized gains (losses) on insured derivatives

     285         (33)         1,562         1,473   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net change in fair value of insured derivatives

     257         (21)         14         1,053   

Net gains (losses) on financial instruments at fair value and foreign exchange

                   62         (18)   

Investment losses related to other-than-temporary impairments:

           

Investment losses related to other-than-temporary impairments

            (3)                (58)   

Other-than-temporary impairments recognized in accumulated other comprehensive income (loss)

            (5)                (47)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net investment losses related to other-than-temporary impairments

            (8)                (105)   

Net gains (losses) on extinguishment of debt

                   49          

Other net realized gains (losses)

     (29)                (29)          

Revenues of consolidated variable interest entities:

           

Net investment income

     13         17         43         51   

Net gains (losses) on financial instruments at fair value and foreign exchange

     17         44         128         (17)   

Net gains (losses) on extinguishment of debt

            16                49   

Other net realized gains (losses)

                           
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     420         281         751         1,703   

Expenses:

           

Losses and loss adjustment

     98         171         92         330   

Amortization of deferred acquisition costs

                   36         36   

Operating

     71         72         280         307   

Interest

     59         69         179         214   

Expenses of consolidated variable interest entities:

           

Operating

                          14   

Interest

     10         13         34         43   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     249         338         629         944   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

     171         (57)         122         759   

Provision (benefit) for income taxes

     39         (64)                161   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 132       $      $ 118       $ 598   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) per common share:

           

Basic

   $ 0.68       $ 0.04       $ 0.61       $ 3.09   

Diluted

   $ 0.67       $ 0.04       $ 0.60       $ 3.07   

Weighted average number of common shares outstanding:

           

Basic

     192,711,608         193,879,994         193,440,078         193,760,654   

Diluted

     196,746,771         194,977,642         197,762,488         194,835,537   

The accompanying notes are an integral part of the consolidated financial statements.

 

2


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MBIA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In millions)

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  
     2013      2012      2013      2012  

Net income (loss)

   $ 132       $      $ 118       $ 598   

Other comprehensive income (loss):

           

Unrealized gains (losses) on available-for-sale securities:

           

Unrealized gains (losses) arising during the period

     (15)         75         (155)         236   

Provision (benefit) for income taxes

     (6)         18         (55)         70   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     (9)         57         (100)         166   

Reclassification adjustments for (gains) losses included in net income (loss)

     13         (8)         (6)         84   

Provision (benefit) for income taxes

            (3)         (2)         29   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

            (5)         (4)         55   

Available-for-sale securities with other-than-temporary impairments:

           

Other-than-temporary impairments and unrealized gains (losses) arising during the period

                   15         40   

Provision (benefit) for income taxes

                          14   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

                          26   

Reclassification adjustments for (gains) losses included in net income (loss)

     (1)                (5)         52   

Provision (benefit) for income taxes

     (1)                (2)         18   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

                   (3)         34   

Foreign currency translation:

           

Foreign currency translation gains (losses)

     32         (7)         (7)         (18)   

Provision (benefit) for income taxes

            (4)                (3)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     31         (3)         (8)         (15)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other comprehensive income (loss)

     36         54         (106)         266   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss)

   $ 168       $ 61       $ 12       $ 864   
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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Table of Contents

MBIA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)

For The Nine Months Ended September 30, 2013

(In millions except share amounts)

 

                                                                                                                        
                   Additional
Paid-in
Capital
            Accumulated
Other

Comprehensive
Income (Loss)
                   Total
Shareholders’

Equity
of MBIA Inc.
     Preferred Stock
of Subsidiary  and
        
     Common Stock         Retained
Earnings
        Treasury Stock         Noncontrolling Interest      Total
Equity
 
     Shares      Amount               Shares      Amount         Shares      Amount     

Balance, December 31, 2012

     277,405,039       $ 277       $ 3,076       $ 2,039       $ 56         (81,733,530)       $ (2,275)       $ 3,173         1,315       $ 21       $ 3,194   

Net income (loss)

                          118                              118                       118   

Other comprehensive income (loss)

                                 (106)                       (106)                       (106)   

Share-based compensation net of tax of $4

     399,023                37                       (3,817,888)         (43)         (5)                       (5)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance, September 30, 2013

     277,804,062       $ 278       $ 3,113       $ 2,157       $ (50)         (85,551,418)       $ (2,318)       $ 3,180         1,315       $ 21       $ 3,201   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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Table of Contents

MBIA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In millions)

 

                     
     Nine Months Ended September 30,  
     2013      2012  

Cash flows from operating activities:

     

Premiums, fees and reimbursements received

   $ 143       $ 223   

Investment income received

     326         459   

Insured derivative commutations and losses paid

     (453)         (463)   

Financial guarantee losses and loss adjustment expenses paid

     (382)         (620)   

Proceeds from recoveries and reinsurance

     1,797         131   

Operating and employee related expenses paid

     (227)         (300)   

Interest paid, net of interest converted to principal

     (170)         (377)   

Income taxes (paid) received

     (1)         (8)   
  

 

 

    

 

 

 

Net cash provided (used) by operating activities

     1,033         (955)   
  

 

 

    

 

 

 

Cash flows from investing activities:

     

Purchase of fixed-maturity securities

     (2,704)         (2,032)   

Sale and redemption of fixed-maturity securities

     3,444         4,283   

Proceeds from paydowns on variable interest entity loans

     211         203   

Redemptions of held-to-maturity investments

     20         828   

Sale (purchase) of short-term investments, net

     (665)         335   

Sale (purchase) of other investments, net

            109   

Consolidation (deconsolidation) of variable interest entities, net

     (26)         (51)   

(Payments) proceeds for derivative settlements

     (51)         (266)   

Collateral (to) from swap counterparty

     65         (298)   

Capital expenditures

     (2)         (5)   
  

 

 

    

 

 

 

Net cash provided (used) by investing activities

     297         3,106   
  

 

 

    

 

 

 

Cash flows from financing activities:

     

Proceeds from investment agreements

     25         52   

Principal paydowns of investment agreements

     (218)         (629)   

Proceeds from medium-term notes

            18   

Principal paydowns of medium-term notes

     (77)         (74)   

Principal paydowns of variable interest entity notes

     (1,001)         (1,059)   

Payments for securities sold under agreements to repurchase

            (287)   

Proceeds from secured loan

     50          

Payments for retirement of debt

     (3)         (364)   

Change in noncontrolling interest and redemption of subsidiary preferred stock, net

            (1)   

Restricted stock awards settlements, net

             
  

 

 

    

 

 

 

Net cash provided (used) by financing activities

     (1,224)         (2,343)   
  

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

             
  

 

 

    

 

 

 

Net increase (decrease) in cash and cash equivalents

     113         (192)   

Cash and cash equivalents—beginning of period

     990         633   
  

 

 

    

 

 

 

Cash and cash equivalents—end of period

   $ 1,103       $ 441   
  

 

 

    

 

 

 

Reconciliation of net income (loss) to net cash provided (used) by operating activities:

     

Net income (loss)

   $ 118       $ 598   

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

     

Change in:

     

Premiums receivable

     138         98   

Deferred acquisition costs

     32         35   

Unearned premium revenue

     (392)         (443)   

Loss and loss adjustment expense reserves

     (169)         109   

Insurance loss recoverable

     2,802         (270)   

Accrued interest payable

     82          

Accrued expenses

     54         (40)   

Net investment losses related to other-than-temporary impairments

            105   

Unrealized (gains) losses on insured derivatives

     (1,562)         (1,473)   

Net (gains) losses on financial instruments at fair value and foreign exchange

     (190)         35   

Other net realized (gains) losses

     28         (7)   

Deferred income tax provision (benefit)

            163   

(Gains) losses on extinguishment of debt

     (49)         (49)   

Interest on variable interest entities, net

     65         114   

Other operating

     74         70   
  

 

 

    

 

 

 

Total adjustments to net income (loss)

     915         (1,553)   
  

 

 

    

 

 

 

Net cash provided (used) by operating activities

   $ 1,033       $ (955)   
  

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 1: Business Developments and Risks and Uncertainties

Summary

MBIA Inc., together with its consolidated subsidiaries, (collectively, “MBIA” or the “Company”) operates one of the largest financial guarantee insurance businesses in the industry and is a provider of asset management and advisory services. These activities are managed through three business segments: United States (“U.S.”) public finance insurance; structured finance and international insurance; and advisory services. The Company’s U.S. public finance insurance business is primarily operated through National Public Finance Guarantee Corporation and its subsidiaries (“National”), its structured finance and international insurance business is primarily operated through MBIA Insurance Corporation and its subsidiaries (“MBIA Corp.”), and its asset management and advisory services business is primarily operated through Cutwater Holdings, LLC and its subsidiaries (“Cutwater”). The holding company, MBIA, and certain of its subsidiaries also manage certain other business activities, the results of which are reported in its corporate, asset/liability products, and conduit segments. The corporate segment includes revenues and expenses that arise from general corporate activities. While the asset/liability products and conduit businesses represent separate business segments, they may be referred to collectively as “wind-down operations” as the funding programs managed through those businesses are in wind-down. Refer to “Note 11: Business Segments” for further information about the Company’s reporting segments.

Business Developments

Operating Cost Reductions

In order to better position the Company for future business opportunities, in the third quarter of 2013, the Company initiated cost reduction measures focused on its legal, consulting, staffing and head office occupancy costs. As a result, expenses for net compensation costs related to staff reductions totaled $18 million and were recorded primarily during the third quarter of 2013. These expenses are included in “Operating expenses” on the Company’s consolidated statements of operations. These staff reductions reduced its worldwide June 30, 2013 headcount by approximately 21%. As a result of the potential sale of the office used in its operations, the Company recorded an impairment charge of $29 million on its Armonk, New York facility. The carrying value of the facility was adjusted to its fair market value, which was determined based on an independent third-party appraisal of the facility. This impairment charge is reflected in the results of the Company’s U.S. public finance insurance segment and is reported within “Other net realized gains (losses)” on the Company’s consolidated statements of operations.

In addition, during the nine months ended September 30, 2013, the Company incurred operating expenses of approximately $89 million related to settlement, consulting and legal expenses associated with the resolution of the litigation matters with Bank of America Corporation, Societe Generale, and Flagstar Bank. Refer below for discussions related to these settlements.

Bank of America Settlement

In May of 2013, MBIA Inc., together with its subsidiaries MBIA Corp. and National, entered into a comprehensive settlement agreement and related agreements (the “BofA Settlement Agreement”) with Bank of America Corporation and certain of its subsidiaries (collectively, “Bank of America”). As a result of the BofA Settlement Agreement, the repayment of MBIA Insurance Corporation’s secured loan from National (the “National Secured Loan”) and recent credit ratings upgrades, the Company is currently evaluating strategies for re-entry into the U.S. public finance market. As of September 30, 2013, National was rated A with a stable outlook by Standard & Poor’s Financial Services LLC (“S&P”) and Baa1 with a positive outlook by Moody’s Investors Service, Inc. (“Moody’s”). As of September 30, 2013, MBIA Insurance Corporation was rated B with a stable outlook by S&P and B3 with a positive outlook by Moody’s. The Company is considering obtaining ratings for National from additional rating agencies.

Under the terms of the BofA Settlement Agreement, MBIA Corp. received a payment of approximately $1.7 billion, consisting of $1.6 billion of cash and $136 million principal amount of MBIA Inc.’s 5.70% Senior Notes due 2034. In exchange for such payment, MBIA Corp. agreed to dismiss the litigation commenced in September 2008 against Countrywide Home Loans, Inc. (“Countrywide”), among other parties, and later amended to include claims against Bank of America, relating to breaches of representations and warranties on certain MBIA-insured securitizations sponsored by Countrywide. Bank of America and MBIA also agreed to the commutation of all of the MBIA Corp. policies held by Bank of America, which had a notional insured amount of approximately $7.4 billion, of which $6.1 billion were policies insuring credit default swaps (“CDS”) held by Bank of America referencing commercial real estate (“CRE”) exposures. MBIA Corp. has no further payment obligations under the commuted policies. The New York State Department of Financial Services (“NYSDFS”) advised MBIA Corp. that the NYSDFS did not object to the BofA Settlement Agreement. The $1.6 billion of cash received in connection with the BofA Settlement Agreement is included in “Proceeds from recoveries and reinsurance” presented under the heading “Cash flows from operating activities” on the Company’s consolidated statements of cash flows.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1: Business Developments and Risks and Uncertainties (continued)

 

Under the terms of the BofA Settlement Agreement, Blue Ridge Investments, L.L.C. (“Blue Ridge”), an affiliate of Bank of America, received a five-year warrant to purchase 9.94 million shares of MBIA common stock at a price of $9.59 per share. Bank of America has also agreed to dismiss the pending litigation between the parties concerning the restructuring transactions announced by MBIA on February 18, 2009 (the “Transformation”) and the pending litigation between the parties concerning the senior debt consent solicitation completed by MBIA in the fourth quarter of 2012. In addition, Bank of America agreed to withdraw the purported “notice of default” it sent in connection with such consent solicitation.

Under the terms of the BofA Settlement Agreement, the dismissals of the litigations referenced above are initially being filed on a “without prejudice” basis. The parties will refile such dismissals on a “with prejudice” basis provided that, within the one-year period following execution of the BofA Settlement Agreement, none of the claims released pursuant to the BofA Settlement Agreement are reinstated and neither party is required to make a payment on any such released claims. The Company views the likelihood of such an event as remote, and thus expects that the litigation dismissals will be filed on a “with prejudice” basis at the expiration of such one-year period.

MBIA Corp.’s policies insuring the residential mortgage-backed securities (“RMBS”) securitizations originated by Countrywide will continue to be in full force and effect, and MBIA Corp. will continue to make timely payments of principal and interest if there are shortfalls when due under such policies. Bank of America will have no further representation and warranty liability with respect to the origination of the mortgage loans in the MBIA-insured Countrywide and certain other securitizations.

In addition, MBIA Insurance Corporation has entered into a $500 million three-year secured revolving credit agreement with Blue Ridge (the “Blue Ridge Secured Loan”). During the third quarter of 2013, MBIA Insurance Corporation borrowed $50 million under this agreement. Refer to “Note 9: Debt” for a discussion of the Blue Ridge Secured Loan.

The payment from Bank of America, including the MBIA Inc. notes, was used by MBIA Corp. to repay the outstanding balance and accrued interest on the National Secured Loan. The National Secured Loan balance of $1.7 billion as of March 31, 2013 was reduced to approximately $1.6 billion prior to the Bank of America settlement as a result of the receipt of $110 million in settlement of Flagstar Bank’s put-back obligation.

The value of the settlement is consistent with amounts recorded on MBIA Corp.’s statutory balance sheet as of December 31, 2012. MBIA Corp.’s liquidity and capital risk profile has substantially improved as a result of the settlement.

Pursuant to the anti-dilution provisions of warrants that were issued by MBIA to Warburg Pincus Private Equity X, L.P. and certain of its affiliates (“Warburg Pincus”) pursuant to an Investment Agreement, dated as of December 10, 2007, as amended and restated as of February 6, 2008, by and between MBIA and Warburg Pincus, the exercise price under such warrants was decreased and the aggregate number of shares of MBIA common stock to be issued upon exercise of such warrants was increased, in each case as a result of the issuance of the warrant to Blue Ridge. The adjustments to the exercise price and number of such underlying shares did not have a material dilutive effect on the MBIA common stock. In addition, under the Investment Agreement, Warburg Pincus has certain gross up rights that are triggered in connection with the offering by the Company of any equity securities. As such, in August of 2013, MBIA issued Warburg Pincus a five-year warrant to purchase 1.91 million shares of MBIA common stock at an exercise price of $9.59 per share.

Societe Generale Settlement

In May of 2013, the Company entered into an agreement with Societe Generale pursuant to which the Company commuted $4.2 billion of gross insured exposure comprising asset-backed securities (“ABS”) collateralized debt obligations (“CDOs”), structured commercial mortgage-backed securities (“CMBS”) pools and CRE CDOs. The amount MBIA paid to Societe Generale in consideration of commuting its insured exposure is consistent with MBIA Corp.’s December 31, 2012 aggregate statutory loss reserves for the exposures commuted. Also, pursuant to the agreement, Societe Generale agreed to dismiss the pending litigation between the parties concerning the Transformation, which includes any appeals of the decision denying the Article 78 petition and the plenary case.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1: Business Developments and Risks and Uncertainties (continued)

 

Residential Capital LLC Agreement

In May of 2013, the Company and the other Consenting Claimants, Residential Capital LLC (“ResCap”) and Ally Financial Inc. (“Ally”), agreed to the terms of a comprehensive plan agreement to support ResCap’s Chapter 11 plan. The confirmation of ResCap’s Chapter 11 plan would resolve MBIA Corp.’s claims against the Residential Funding Company, LLC (“RFC”), GMAC Mortgage LLC (“GMAC”) and ResCap estates, and Ally. In June of 2013, the bankruptcy court issued a Memorandum Opinion approving the Plan Support Agreement (the “Plan”). The Plan is now subject to voting by creditors as well as a confirmation hearing by the bankruptcy court. All creditor ballots were due back by October 21, 2013 and as of the date of this report, the results had not been tallied. There can be no assurance that the Plan will be confirmed. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” for a discussion of the ResCap agreement.

Transformation Litigation

Subsequent to the BofA Settlement Agreement and the Societe Generale settlement, all litigation brought originally by the group of eighteen domestic and international financial institutions relating to the establishment of National has been resolved.

Other

As of September 30, 2013, the liquidity position of MBIA Inc., which consists of the liquidity positions of the Company’s corporate segment and asset/liability products segment, was $282 million compared with $239 million as of December 31, 2012. Subsequent to September 30, 2013, National declared and paid a dividend of $214 million to its ultimate parent, MBIA Inc. During the nine months ended September 30, 2013, $115 million was released from an escrow account under the MBIA group’s tax sharing agreement (the “Tax Escrow Account”), which resulted in an increase to MBIA’s liquidity position. Management believes that MBIA can support its operating needs for the foreseeable future primarily from its existing liquidity position, expected subsidiary dividends and additional anticipated releases of assets from the Tax Escrow Account, which releases are subject to the risks of National incurring net tax losses in the future and/or declines in the value of the assets held in the Tax Escrow Account. As of September 30, 2013 and December 31, 2012, MBIA Corp.’s cash and liquid assets, that were immediately available, totaled $97 million and $345 million, respectively. The Company believes MBIA Corp.’s current liquidity position, together with future cash inflows and amounts available under the Blue Ridge Secured Loan, is adequate to make expected future claim payments.

The combination of commutation payments to reduce liabilities and claim payments have placed liquidity pressure on MBIA Corp. MBIA Corp. continues to seek to reduce both the absolute amount and the volatility of its obligations and potential future claim payments through the execution of commutations of insurance policies. During the nine months ended September 30, 2013, MBIA Corp. commuted $19.9 billion of gross insured exposure, primarily comprising structured CMBS pools, investment grade CDOs, ABS CDOs, first-lien subprime RMBS, high yield corporate CDOs, CRE CDOs, structured insurance securities, and first-lien alternative A-paper (“Alt-A”) RMBS.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1: Business Developments and Risks and Uncertainties (continued)

 

Risks and Uncertainties

The Company’s financial statements include estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The outcome of certain significant risks and uncertainties could cause the Company to revise its estimates and assumptions or could cause actual results to differ from the Company’s estimates. While the Company believes it continues to have sufficient capital and liquidity to meet all of its expected obligations, if one or more possible adverse outcomes were to be realized, its statutory capital, financial position, results of operations and cash flows could be materially and adversely affected. Significant risks and uncertainties that could affect amounts reported in the Company’s financial statements in future periods include, but are not limited to, the following:

 

   

The amount and timing of potential claims from the Company’s second-lien RMBS and remaining insured CMBS pools are potentially volatile, as are the projected collections of excess spread and the remaining put-back recoverables. However, management’s expected liquidity and capital forecasts for MBIA Corp., which include expected availability of draws under the Blue Ridge Secured Loan and expected recoveries from the ResCap agreement, reflect adequate resources to pay expected claims. Further, the remaining insured portfolio, aside from these exposures, could deteriorate and result in loss reserves and claim payments. While management believes MBIA Corp. will have adequate resources to pay expected claims, if MBIA Corp. experiences higher than expected claim payments or is unable to commute the remaining exposures that represent substantial risk to the Company, MBIA Corp. may ultimately have insufficient resources to continue to pay claims, which could cause the NYSDFS to put MBIA Insurance Corporation into a rehabilitation or liquidation proceeding. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” for information about MBIA Corp.’s reserves and recoveries.

 

   

The Company’s ability to commute insured transactions is limited by available liquidity, including the availability of the Blue Ridge Secured Loan, recoveries from the ResCap agreement and the use of other available financing structures and liquidity, some of which could be subject to regulatory approval by the NYSDFS and/or the United Kingdom’s (“U.K.”) Prudential Regulation Authority. The Company’s primary strategy for managing its CMBS pool and ABS CDO exposures has been commutations. There can be no assurance that the Company will be able to fund further commutations through borrowings or otherwise. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” for information about the Company’s estimate of losses on its exposures.

 

   

As of September 30, 2013, MBIA Insurance Corporation was not in compliance with a requirement under the New York Insurance Law (“NYIL”) to hold qualifying assets in an amount necessary to satisfy its contingency reserves. MBIA Insurance Corporation has reported the deficit to the NYSDFS. In addition, as of September 30, 2013, MBIA Insurance Corporation exceeded its aggregate risk limits and reported an overage related to its single risk limits under NYIL. MBIA Insurance Corporation plans to notify the NYSDFS of these overages and submit a plan to achieve compliance with its limits. While the NYSDFS has not taken action against MBIA Insurance Corporation, the NYSDFS may impose remedial actions for failing to meet these requirements.

 

   

MBIA Inc. continues to have liquidity risk. If invested asset performance deteriorates, or the flow of dividends from subsidiaries is interrupted, its liquidity position would be eroded over time. However, management believes that MBIA Inc. has sufficient liquidity resources to meet all of its obligations for the foreseeable future. In order to meet its liquidity requirements, MBIA Inc. may use free cash or other assets or use its ability to finance through intercompany or third-party facilities, although there can be no assurance that these strategies will be available or adequate. A failure by MBIA Inc. to settle liabilities that are also insured by MBIA Corp. could result in claims on MBIA Corp.

 

   

Changes in fair value of insured credit derivatives can be caused by general market conditions, volatility in MBIA Corp.’s credit spreads and volatility on the underlying collateral assets on insured credit derivatives. This may result in significant unrealized gains and losses in the Company’s reported results of operations. Refer to “Note 6: Fair Value of Financial Instruments” for information about the Company’s valuation of insured credit derivatives.

Note 2: Significant Accounting Policies

The Company has disclosed its significant accounting policies in “Note 2: Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The following significant accounting policies provide an update to those included in the Company’s Annual Report on Form 10-K.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 2: Significant Accounting Policies (continued)

 

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual periods. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2012. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company’s consolidated financial position and results of operations. All material intercompany balances and transactions have been eliminated.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results.

The results of operations for the three and nine months ended September 30, 2013 may not be indicative of the results that may be expected for the year ending December 31, 2013. The December 31, 2012 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP for annual periods. Certain amounts have been reclassified in the prior year’s financial statements to conform to the current presentation. This includes the reclassification of accrued interest on surplus notes and senior notes from “Other liabilities” to “Long-term debt” on the Company’s consolidated balance sheets. Refer to “Note 9: Debt” for information about the amounts of this reclassification. These reclassifications had no impact on total revenues, expenses, assets, liabilities, shareholders’ equity, operating cash flows, investing cash flows, or financing cash flows for all periods presented.

Note 3: Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02)

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02, “Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” that requires an entity to present information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component and to present significant amounts reclassified out of AOCI by the respective line items of net income. The amendment only affects the Company’s disclosures and does not affect the Company’s consolidated balance sheets, results of operations, or cash flows. The Company adopted this standard in the first quarter of 2013.

Disclosures about Offsetting Assets and Liabilities (ASU 2011-11)

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities”. ASU 2011-11 creates new disclosure requirements about the nature of the Company’s rights of setoff and related arrangements associated with its financial instruments and derivative instruments. This amendment does not change the existing offsetting eligibility criteria or the permitted balance sheet presentation for those instruments that meet the eligibility criteria. The disclosure requirement was effective for the Company beginning in the first quarter of 2013. In January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 210)—Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”. ASU 2013-01 clarifies that ASU 2011-11 applies only to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. These standards only affect the Company’s disclosures and do not affect the Company’s consolidated balance sheets, results of operations, or cash flows. The Company adopted this standard in the first quarter of 2013.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 3: Recent Accounting Pronouncements (continued)

 

Recent Accounting Developments

Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (ASU 2013-11)

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740)—Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”. ASU 2013-11 requires presentation of an unrecognized tax benefit (“UTB”) as a reduction to a deferred tax asset when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists in the same tax year and jurisdiction as the UTB. ASU 2013-11 does not affect the recognition or measurement of uncertain tax positions under “Income Taxes (Topic 740)” and does not affect any related tax disclosures. ASU 2013-11 is effective for interim and annual periods beginning January 1, 2014 with early adoption permitted. The Company currently presents any UTBs as a reduction to a deferred tax asset in accordance with ASU 2013-11 as all of its UTBs relate to the same tax years and jurisdictions in which NOLs exist, therefore, this standard will not affect the Company’s consolidated balance sheets, results of operations, or cash flows.

Note 4: Variable Interest Entities

Structured Finance and International Insurance

Through MBIA’s structured finance and international insurance segment, the Company provides credit protection to issuers of obligations that may involve issuer-sponsored special purpose entities (“SPEs”). An SPE may be considered a variable interest entity (“VIE”) to the extent the SPE’s total equity at risk is not sufficient to permit the SPE to finance its activities without additional subordinated financial support or its equity investors lack any one of the following characteristics: (i) the power to direct the activities of the SPE that most significantly impact the entity’s economic performance or (ii) the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity. A holder of a variable interest or interests in a VIE is required to assess whether it has a controlling financial interest, and thus is required to consolidate the entity as primary beneficiary. An assessment of a controlling financial interest identifies the primary beneficiary as the variable interest holder that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. An ongoing reassessment of controlling financial interest is required to be performed based on any substantive changes in facts and circumstances involving the VIE and its variable interests.

The Company evaluates issuer-sponsored SPEs initially to determine if an entity is a VIE, and is required to reconsider its initial determination if certain events occur. For all entities determined to be VIEs, MBIA performs an ongoing reassessment to determine whether its guarantee to provide credit protection on obligations issued by VIEs provides the Company with a controlling financial interest. Based on its ongoing reassessment of controlling financial interest, the Company determines whether a VIE is required to be consolidated or deconsolidated.

The Company makes its determination for consolidation based on a qualitative assessment of the purpose and design of a VIE, the terms and characteristics of variable interests of an entity, and the risks a VIE is designed to create and pass through to holders of variable interests. The Company generally provides credit protection on obligations issued by VIEs, and holds certain contractual rights according to the purpose and design of a VIE. The Company may have the ability to direct certain activities of a VIE depending on facts and circumstances, including the occurrence of certain contingent events, and these activities may be considered the activities of a VIE that most significantly impact the entity’s economic performance. The Company generally considers its guarantee of principal and interest payments of insured obligations, given nonperformance by a VIE, to be an obligation to absorb losses of the entity that could potentially be significant to the VIE. At the time the Company determines it has the ability to direct the activities of a VIE that most significantly impact the economic performance of the entity based on facts and circumstances, MBIA is deemed to have a controlling financial interest in the VIE and is required to consolidate the entity as primary beneficiary. The Company performs an ongoing reassessment of controlling financial interest that may result in consolidation or deconsolidation of any VIE.

Wind-down Operations

In its asset/liability products segment, the Company invests in obligations issued by issuer-sponsored SPEs which are included in fixed-maturity securities held as available-for-sale (“AFS”). The Company evaluates issuer-sponsored SPEs to determine if the entity is a VIE. For all entities determined to be VIEs, the Company evaluates whether its investment is determined to have both of the characteristics of a controlling financial interest in the VIE. The Company performs an ongoing reassessment of controlling financial interests in issuer-sponsored VIEs based on investments held. MBIA’s wind-down operations do not have a controlling financial interest in any issuer-sponsored VIEs and are not the primary beneficiary of any issuer-sponsored VIEs.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 4: Variable Interest Entities (continued)

 

In the conduit segment, the Company has managed and administered two conduits that invested primarily in debt securities and were funded through the issuance of VIE notes and long-term debt. MBIA Corp. insures the debt obligations of the conduits, and provides credit protection on certain assets held by the conduits. The conduits are VIEs and are consolidated by the Company as primary beneficiary. In 2012, all debt securities held by one of the conduits were entirely repaid, and the proceeds were used to repay all outstanding long-term debt of this conduit. The Company subsequently dissolved this conduit, and no longer provides any related credit protection.

Nonconsolidated VIEs

Insurance

The following tables present the total assets of nonconsolidated VIEs in which the Company holds a variable interest as of September 30, 2013 and December 31, 2012, through its insurance operations. The following tables also present the Company’s maximum exposure to loss for nonconsolidated VIEs and carrying values of the assets and liabilities for its interests in these VIEs as of September 30, 2013 and December 31, 2012. The Company has aggregated nonconsolidated VIEs based on the underlying credit exposure of the insured obligation. The nature of the Company’s variable interests in nonconsolidated VIEs is related to financial guarantees, insured CDS contracts and any investments in obligations issued by nonconsolidated VIEs.

 

                                                                                       
    September 30, 2013  
                Carrying Value of Assets     Carrying Value of Liabilities  

In millions

  VIE
Assets
    Maximum
Exposure
to Loss
    Investments (1)     Premiums
Receivable (2)
    Insurance
Loss
Recoverable (3)
    Unearned
Premium
Revenue (4)
    Loss and
Loss
Adjustment
Expense
Reserves (5)
    Derivative
Liabilities (6)
 

Insurance:

               

Global structured finance:

               

Collateralized debt obligations

  $ 13,564      $ 7,972      $ 118      $ 45      $     $ 38      $ 26      $ 94   

Mortgage-backed residential

    22,400        9,915        11        57        696        56        374         

Mortgage-backed commercial

    2,010        1,102                                       

Consumer asset-backed

    6,788        2,888              21              20        17         

Corporate asset-backed

    14,258        7,817              87        19        103               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total global structured finance

    59,020         29,694        138        211        720        218        417        99   

Global public finance

    51,060         20,258              205              250               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total insurance

  $ 110,080      $ 49,952      $ 138      $ 416      $ 720      $ 468      $ 422      $ 99   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Reported within “Investments” on MBIA’s consolidated balance sheets.

 

(2) - Reported within “Premiums receivable” on MBIA’s consolidated balance sheets.

 

(3) - Reported within “Insurance loss recoverable” on MBIA’s consolidated balance sheets.

 

(4) - Reported within “Unearned premium revenue” on MBIA’s consolidated balance sheets.

 

(5) - Reported within “Loss and loss adjustment expense reserves” on MBIA’s consolidated balance sheets.

 

(6) - Reported within “Derivative liabilities” on MBIA’s consolidated balance sheets.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 4: Variable Interest Entities (continued)

 

                                                                                       
    December 31, 2012  
                Carrying Value of Assets     Carrying Value of Liabilities  

In millions

  VIE
Assets
    Maximum
Exposure
to Loss
    Investments (1)     Premiums
Receivable (2)
    Insurance
Loss
Recoverable (3)
    Unearned
Premium
Revenue (4)
    Loss and
Loss
Adjustment
Expense
Reserves (5)
    Derivative
Liabilities (6)
 

Insurance:

               

Global structured finance:

               

Collateralized debt obligations

  $ 16,925      $ 10,873      $     $ 62      $     $ 55      $ 37      $ 74   

Mortgage-backed residential

    34,061        13,075        11        77        3,278        75        440         

Mortgage-backed commercial

    4,801        2,432                                       

Consumer asset-backed

    5,820        3,086        10        19              19        21         

Corporate asset-backed

    19,980        9,981              123        13        140               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total global structured finance

    81,587         39,447        21        283        3,296        291        498        78   

Global public finance

    39,259         21,346              220              267               
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total insurance

  $ 120,846      $ 60,793      $ 21      $ 503      $ 3,296      $ 558      $ 502      $ 78   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Reported within “Investments” on MBIA’s consolidated balance sheets.

 

(2) - Reported within “Premiums receivable” on MBIA’s consolidated balance sheets.

 

(3) - Reported within “Insurance loss recoverable” on MBIA’s consolidated balance sheets.

 

(4) - Reported within “Unearned premium revenue” on MBIA’s consolidated balance sheets.

 

(5) - Reported within “Loss and loss adjustment expense reserves” on MBIA’s consolidated balance sheets.

 

(6) - Reported within “Derivative liabilities” on MBIA’s consolidated balance sheets.

The maximum exposure to loss as a result of MBIA’s variable interests in VIEs is represented by insurance in force. Insurance in force is the maximum future payments of principal and interest, net of cessions to reinsurers, which may be required under commitments to make payments on insured obligations issued by nonconsolidated VIEs.

Other

During the first quarter of 2013, Trifinium Advisors (UK) Limited (“Trifinium”) began managing a VIE that issues notes for the purpose of funding loans to the U.K. social housing sector. Assets of the VIE totaled approximately $144 million as of September 30, 2013. Trifinium holds de minimis variable interests in the VIE, has no obligation or commitment to provide the financial support or liquidity to the VIE, and is not the primary beneficiary.

Consolidated VIEs

The carrying amounts of assets and liabilities of consolidated VIEs were $6.4 billion and $5.4 billion, respectively, as of September 30, 2013, and $8.3 billion and $7.3 billion, respectively, as of December 31, 2012. The carrying amounts of assets and liabilities are presented separately in “Assets of consolidated variable interest entities” and “Liabilities of consolidated variable interest entities” on the Company’s consolidated balance sheets. Additional VIEs are consolidated or deconsolidated based on an ongoing reassessment of controlling financial interest, when events occur or circumstances arise, and whether the ability to exercise rights that constitute power to direct activities of any VIEs are present according to the design and characteristics of these entities. No additional VIEs were consolidated during the nine months ended September 30, 2013 and 2012. There were no net realized gains or losses recorded in the three months ended September 30, 2013 and 2012. During the nine months ended September 30, 2013, the Company recorded a net realized gain of $1 million related to the deconsolidation of VIEs. There were no net realized gains or losses recorded in the nine months ended September 30, 2012.

Holders of insured obligations of issuer-sponsored VIEs related to the Company’s structured finance and international insurance segment do not have recourse to the general assets of MBIA. In the event of nonpayment of an insured obligation issued by a consolidated VIE, the Company is obligated to pay principal and interest, when due, on the respective insured obligation only. The Company’s exposure to consolidated VIEs is limited to the credit protection provided on insured obligations and any additional variable interests held by MBIA. Creditors of the conduits do not have recourse to the general assets of MBIA apart from the financial guarantee insurance policies provided by MBIA Corp. on insured obligations issued by the conduits.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves

Loss and Loss Adjustment Expense Process

U.S. Public Finance

U.S. public finance insured transactions consist of municipal bonds, including tax-exempt and taxable indebtedness of U.S. political subdivisions, as well as utility districts, airports, health care institutions, higher educational facilities, student loan issuers, housing authorities and other similar agencies and obligations issued by private entities that finance projects that serve a substantial public purpose. The Company estimates future losses by utilizing probability-weighted scenarios that are customized to each insured transaction. Future loss estimates consider debt service due for each insured transaction, which includes par outstanding and interest due.

The Company has established loss and loss adjustment expense (“LAE”) reserves and an insurance loss recoverable of $94 million and $17 million, respectively, as of September 30, 2013. During the nine months ended September 30, 2013, losses and LAE was $105 million, primarily related to certain general obligation bonds and the loss related to the difference in the value of the salvage receivable previously recorded and the fair market value of the marketable securities received in connection with the restructuring of a gaming revenue transaction.

Certain local governments remain under extreme financial and budgetary stress and several have filed for protection under the United States Bankruptcy Code, or have entered into state statutory proceedings established to assist municipalities in managing through periods of severe fiscal stress. This could lead to an increase in defaults by such entities on the payment of their obligations and losses or impairments on a greater number of the Company’s insured transactions. The Company monitors and analyzes these situations closely, however, the overall extent and duration of such events are uncertain. As of September 30, 2013, the Company had $131.5 billion of gross par outstanding on general obligations, of which $251 million was reflected on the Company’s “Classified List.” Capital appreciation bonds are reported at the par amount at the time of issuance of the insurance policy.

Structured Finance and International

As of September 30, 2013, the majority of the structured finance and international insurance segment’s case basis reserves and insurance loss recoveries recorded in accordance with GAAP were related to insured second-lien and first-lien RMBS transactions. These reserves and recoveries do not include estimates for policies insuring credit derivatives and do not include losses and recoveries on financial guarantee VIEs that are eliminated in consolidation. Policies insuring credit derivative contracts are accounted for as derivatives and carried at fair value under GAAP. The fair values of insured derivative contracts are influenced by a variety of market and transaction-specific factors that may be unrelated to potential future claim payments under the Company’s insurance policies. In the absence of credit impairments on insured derivative contracts or the early termination of such contracts at a loss, the cumulative unrealized losses recorded from fair valuing these contracts should reverse before or at the maturity of the contracts.

Notwithstanding the difference in accounting under GAAP for financial guarantee policies and the Company’s insured derivatives, insured derivatives have similar terms, conditions, risks, and economic profiles to financial guarantee insurance policies, and therefore, are evaluated by the Company for loss (referred to as credit impairment herein) and LAE periodically in a manner similar to the way that loss and LAE reserves are estimated for financial guarantee insurance policies. Credit impairments represent actual payments and collections plus the present value of estimated expected future claim payments, net of recoveries. MBIA Insurance Corporation’s expected future claim payments for insured derivatives were discounted using a rate of 5.72%, the same rate it used to calculate its statutory loss reserves as of September 30, 2013. These credit impairments, calculated in accordance with statutory accounting principles (“U.S. STAT”), differ from the fair values recorded in the Company’s consolidated financial statements. The Company considers its credit impairment estimates as critical information for investors as it provides information about loss payments the Company expects to make on insured derivative contracts. As a result, the following loss and LAE process discussion includes information about loss and LAE activity recorded in accordance with GAAP for financial guarantee insurance policies and credit impairments estimated in accordance with U.S. STAT for insured derivative contracts. Refer to “Note 6: Fair Value of Financial Instruments” included herein for additional information about the Company’s insured credit derivative contracts.

To date, the Company has resolved or agreed to resolve substantially all of its contract claims (referred to as “put-back” claims) related to those mortgage loans whose inclusion in insured securitizations failed to comply with representations and warranties (“ineligible loans”), with the exception of those ineligible loans securitized by Credit Suisse 2007-2 in the home equity mortgage trust (“HEMT”) securitization. Credit Suisse has challenged the Company’s assessment of the ineligibility of individual mortgage loans and the dispute is the subject of litigation for which there is no assurance that the Company will prevail.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

RMBS Case Basis Reserves and Recoveries (Financial Guarantees)

The Company’s RMBS reserves and recoveries relate to financial guarantee insurance policies. The Company calculated RMBS case basis reserves as of September 30, 2013 for both second-lien and first-lien RMBS transactions using a process called the “Roll Rate Methodology.” The Roll Rate Methodology is a multi-step process using a database of loan level information, a proprietary internal cash flow model, and a commercially available model to estimate expected ultimate cumulative losses on insured bonds. “Roll Rate” is defined as the probability that current loans become delinquent and that loans in the delinquent pipeline are charged-off or liquidated. Generally, Roll Rates are calculated for the previous three months and averaged. The loss reserve estimates are based on a probability-weighted average of three scenarios of loan losses (base case, stress case, and an additional stress case).

In calculating ultimate cumulative losses for RMBS, the Company estimates the amount of loans that are expected to be charged-off (deemed uncollectible by servicers of the transactions) or liquidated in the future. The Company assumes that charged-off loans have zero recovery values.

Second-lien RMBS Reserves

The Company’s second-lien RMBS case basis reserves as of September 30, 2013 relate to RMBS backed by home equity lines of credit (“HELOC”) and closed-end second mortgages (“CES”).

The Roll Rates for 30-59 day delinquent loans and 60-89 day delinquent loans are calculated on a transaction-specific basis. The Company assumes that the Roll Rate for 90+ day delinquent loans, excluding foreclosures and Real Estate Owned (“REO”) is 95%. The Roll Rates are applied to the amounts in the respective delinquency buckets based on delinquencies as of August 31, 2013 to estimate future losses from loans that are delinquent as of the current reporting period.

Roll Rates for loans that are current as of August 31, 2013 (“Current Roll to Loss”) are also calculated on a transaction-specific basis. A proportion of loans reported current as of August 31, 2013 is assumed to become delinquent every month, at a Current Roll to Loss rate that persists at a high level for a time and subsequently starts to decline. A key assumption in the model is the period of time in which the Company projects high levels of Current Roll to Loss to persist. The Company runs multiple scenarios, each with varying periods of time, for which the high levels of Current Roll to Loss rates persist. Loss reserves are calculated by using a weighted average of these scenarios, with the majority of the probability assigned to stressful scenarios where the high levels of Current Roll to Loss rates persist for six or twenty four months before reverting to historic levels. In the base case scenario, the Company assumes that the Current Roll to Loss begins to decline immediately and continues to decline over the next six months to 25% of their levels as of August 31, 2013. For example, in the base case, as of August 31, 2013, if the amount of current loans which become 30-59 days delinquent is 10%, and recent performance suggests that 30% of those loans will be charged-off, the Current Roll to Loss for the transaction is 3%. In the base case, it is then assumed that the Current Roll to Loss will reduce linearly to 25% of its original value over the next six months (i.e., 3% will linearly reduce to 0.75% over the six months from September 2013 to February 2014). After that six-month period, the Company further reduces the Current Roll to Loss to 0% by early to mid-2014 with the expectation that the performing seasoned loans will eventually result in loan performance reverting to lower levels of default consistent with history.

In addition, in the Company’s loss reserve models for transactions secured by HELOCs, the Company considers borrower draw and prepayment rates and factors that could affect the excess spread generated by current loans, which offsets losses and reduces payments. For HELOCs, the current three-month average draw rate is generally used to project future draws on the line. For HELOCs and transactions secured by fixed-rate CES, the three-month average conditional prepayment rate is generally used to start the projection for trends in voluntary principal prepayments. Due to the current volatility in mortgage prepayment rates, which influence mortgage refinancing and voluntary principal prepayment rates, the Company used historical average mortgage rates to model its loss reserves in the third quarter of 2013. Projected cash flows are also based on an assumed constant basis spread between floating rate assets and floating rate insured debt obligations (the difference between prime and London Interbank Offered Rate (“LIBOR”) interest rates, minus any applicable fees). For all transactions, cash flow models consider allocations and other structural aspects of the transactions, including managed amortization periods, rapid amortization periods and claims against MBIA Corp.’s insurance policy consistent with such policy’s terms and conditions. In developing multiple loss scenarios, stress is applied by elongating the Current Roll to Loss rate for various periods, simulating a slower improvement in the transaction performance. The estimated net claims from the procedure above are then discounted using a risk-free rate to a net present value reflecting MBIA’s general obligation to pay claims over time and not on an accelerated basis. The above assumptions represent MBIA’s probability-weighted estimates of how transactions will perform over time.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The Company monitors portfolio performance on a monthly basis against projected performance, reviewing delinquencies, Roll Rates, and prepayment rates (including voluntary and involuntary). However, loan performance remains difficult to predict and losses may exceed expectations. In the event of a material deviation in actual performance from projected performance, the Company would increase or decrease the case basis reserves accordingly. If actual performance were to remain at the peak levels for six additional months compared to the probability-weighted outcome currently used by the Company, the addition to the case basis reserves would be approximately $85 million.

Second-lien RMBS Recoveries

The Company primarily records two types of recoveries related to insured second-lien RMBS exposures; recoveries related to put-back claims on ineligible mortgages and excess spread that is generated from performing loans in the insured transactions.

Ineligible Mortgage Loans

As of September 30, 2013, the Company recorded estimated recoveries of $1.1 billion, gross of income taxes, related to second-lien RMBS put-back claims on ineligible mortgage loans, consisting of $18 million included in “Insurance loss recoverable” and $1.1 billion included in “Loan repurchase commitments” presented under the heading “Assets of consolidated variable interest entities” on the Company’s consolidated balance sheets. As of September 30, 2013 and December 31, 2012, the Company’s estimated recoveries after income taxes calculated at the federal statutory rate of 35%, were $737 million and $2.3 billion, respectively, which was 23% and 73% of the consolidated total shareholders’ equity of MBIA, excluding preferred stock of subsidiaries and noncontrolling interests, respectively. As of September 30, 2013, the remaining estimated recoveries relate to the Company’s claims based on ineligible mortgage loans asserted against Credit Suisse and the agreed to claims and recoveries against the bankruptcy estates of RFC, GMAC and ResCap as reflected in a disclosure statement filed in August of 2013.

On May 14, 2012, ResCap and its wholly-owned subsidiary companies, RFC and GMAC, each filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. MBIA asserted claims based on the inclusion of ineligible loans against RFC, GMAC and ResCap, based upon the direct contractual relationship between the Company, RFC and GMAC.

As of May 23, 2013, Ally, ResCap, RFC, GMAC and the Consenting Claimants (which includes MBIA), among other parties, executed a term sheet and supplemental term sheet agreeing to, among other things, a settlement amount of $796 million to be paid to MBIA as part of a proposed plan to resolve claims against Ally and RFC, GMAC and ResCap. In August of 2013, a disclosure statement filed indicated an increased expected recovery for MBIA of approximately $828 million. The increased recovery was primarily due to the favorable disposition of assets and settlements of claims. The settlement and anticipated recoveries are consistent with the put-back recoveries recorded by the Company. The agreement will be implemented through a plan of reorganization in ResCap’s Chapter 11 cases, subject to bankruptcy court approval. In June of 2013, the bankruptcy court issued a Memorandum Opinion approving the Plan. The Plan is subject to confirmation by the bankruptcy court, with confirmation hearings currently scheduled in November 2013. MBIA anticipates an initial distribution of funds to the Company and other claimants in late 2013 or early 2014. This anticipated timeline may change due to developments related to the Junior Secured Note litigation, which occurred in October of 2013, or other matters that develop in the course of events in the bankruptcy court plan confirmation process.

The Company continues to refine the indicative scenarios used to calculate put-back recoveries for ResCap based upon information received during the bankruptcy process. The Company has made additional adjustments to its recovery calculations related to ResCap in consideration of the agreed upon recovery amount as described in the executed term sheet, supplemental term sheet and plan support agreement submitted in motions filed in May of 2013. During the third quarter of 2013, MBIA made additional refinements to the probability assumptions utilized to calculate the Company’s expected recoveries. The revisions were based upon the submission of documents related to the Plan.

In addition, the Company believes that it will prevail in enforcing its contractual put-back rights against Credit Suisse. Based on the Company’s assessment of the strength of these claims, the Company believes it is entitled to collect the full amount of its incurred losses, and interest on amounts paid. However, uncertainty remains with respect to the ultimate outcome of the litigation with Credit Suisse, which is contemplated in the scenario based-modeling the Company utilizes. The Credit Suisse recovery scenarios are based on the amount of incurred losses measured against certain probabilities of ultimate resolution of the dispute with Credit Suisse over the inclusion of ineligible mortgage loans in the HEMT securitization. Most of the probability weight is assigned to partial recovery scenarios.

Expected cash inflows from put-back recoveries are discounted using the current risk-free discount rates associated with the underlying transaction’s cash flows which ranged from 1.4% to 2.7%, depending upon the transaction’s expected average life, which ranged from 5.0 years to 10.4 years.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The Company consistently reviews the approach and assumptions it applies to calculate put-back recoveries. The same transactional documents that provide the Company with its put-back rights against Credit Suisse also provide that the Company is entitled to reimbursement of interest on paid claims at a prescribed interest rate. Following Judge Jed Rakoff’s decision on February 7, 2013 in the Assured Guaranty v. Flagstar case (Assured Guaranty Municipal Corp. v. Flagstar Bank, 11-cv-02375, U.S. District Court, Southern District of New York (Manhattan)), in which he confirmed Assured Guaranty’s analogous right to recover contractual interest in addition to claims paid, the Company has refined its put-back recovery assumptions against Credit Suisse to increase the probability that it will be reimbursed for contractual interest owed on paid claims. Consistent with the Company’s probability based put-back recovery calculations, it has determined the interest owed contemplating litigation risk and repayment risk, as well as the potential value in the context of a settlement. The Company continues to maintain that in the context of its put-back litigation, the Company is entitled to receive interest at the New York State statutory rate. However, the Company currently calculates its put-back recoveries using the contractual interest rate, which is lower than the New York State statutory rate.

To date, MBIA has either settled or agreed to settle the majority of the Company’s put-back claims, with only Credit Suisse remaining as an outstanding dispute. The settlement amounts have been consistent with the put-back recoveries previously included in the Company’s financial statements. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the BofA Settlement Agreement. Additional information on the status of the litigation against Credit Suisse can be found in the “Recovery Litigation” discussion within “Note 14: Commitments and Contingencies.”

The Company’s assessment of the remaining unsettled recoveries related to insured Credit Suisse second-lien RMBS is principally based on the following factors:

 

  1. the settlement of the majority of the Company’s put-back claims with sellers/servicers, including those with Bank of America and Flagstar Bank in May of 2013;

 

  2. Assured Guaranty’s favorable court ruling in its put-back litigation against Flagstar Bank, awarding it the vast majority of the claims paid on the relevant transactions plus interest, fees and expenses, as well as their subsequent settlement with Flagstar Bank, which resolved Assured Guaranty’s put-back claims; and

 

  3. the court rulings in MBIA’s put-back litigations.

The Company continues to consider all relevant facts and circumstances, including the factors described above, in developing its assumptions on expected cash inflows, probability of potential recoveries (including the outcome of litigation) and recovery period. The estimated amount and likelihood of potential recoveries are expected to be revised and supplemented to the extent there are developments in the pending litigation and/or changes to the financial condition of Credit Suisse. While the Company believes it will be successful in realizing recoveries from contractual claims, the ultimate amounts recovered may be materially different from those recorded by the Company given the inherent uncertainty of the manner of resolving the claims (e.g., litigation) and the assumptions used in the required estimation process for accounting purposes which are based, in part, on judgments and other information that are not easily corroborated by historical data or other relevant benchmarks.

All of the Company’s policies insuring second-lien RMBS for which litigation has been initiated against sellers/servicers are in the form of financial guarantee insurance contracts. In accordance with GAAP, the Company has not recorded a gain contingency with respect to pending litigation.

Excess Spread

As of September 30, 2013, the Company recorded estimated recoveries of $756 million in reimbursement of past and future expected claims through excess spread in insured second-lien RMBS transactions. Of the expected reimbursement from excess spread, $669 million is included in “Insurance loss recoverable” and $87 million is included in “Loss and loss adjustment expense reserves” on the Company’s consolidated balance sheets. Excess spread is generated by performing loans within insured RMBS securitizations and is the difference between interest inflows on mortgage loan collateral and interest outflows on insured beneficial interests. The amount of excess spread depends on the future delinquency and loss trends, future prime and LIBOR interest rates and borrower refinancing behavior, which results in voluntary prepayments.

First-lien RMBS Reserves

The Company’s first-lien RMBS case basis reserves as of September 30, 2013, which primarily relate to RMBS backed by Alt-A and subprime mortgage loans, were determined using the Roll Rate Methodology. The Company assumes that the Roll Rate for loans in foreclosure, REO and bankruptcy are 90%, 90% and 75%, respectively. Roll Rates for current, 30-59 day delinquent loans, 60-89 day delinquent loans and 90+ day delinquent loans are calculated on a transaction-specific basis. The Current Roll to Loss rates stay at the August 31, 2013 level for one month before declining to 25% of this level over a 24-month period.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The Company estimates future losses by utilizing three different probability-weighted scenarios: base; stress; and additional stress. The three scenarios differ in the roll rates to loss of 90+ day delinquent loans. In the base scenario, the Company uses deal-specific roll rates obtained from historic loan level roll rate data. In the stress scenario, the Company assumes a 90% roll rate for all 90+ day delinquent loans. In the additional stress scenario, the roll rates for each deal are an average of the deal-specific roll rate used in the base scenario and the 90% rate. The Roll Rates are applied to the amounts in each deal’s respective 90+ delinquency bucket based on delinquencies as of August 31, 2013 in order to estimate future losses from loans that are delinquent as of September 30, 2013.

In calculating ultimate cumulative losses for first-lien RMBS, the Company estimates the amount of loans that are expected to be liquidated through foreclosure or short sale. The time to liquidation for a defaulted loan is specific to the loan’s delinquency bucket with the latest three-month average loss severities generally used to start the projection for trends in loss severities at loan liquidation. The loss severities are reduced over time to account for reduction in the amount of foreclosure inventory, anticipated future increases in home prices, principal amortization of the loan and government foreclosure moratoriums.

ABS CDOs (Financial Guarantees and Insured Derivatives)

MBIA’s insured ABS CDOs are transactions that include a variety of collateral ranging from corporate bonds to structured finance assets (which includes but are not limited to RMBS related collateral, ABS CDOs, corporate CDOs and collateralized loan obligations). These transactions were insured as either financial guarantee insurance policies or credit derivatives with the majority currently insured in the form of financial guarantees. Since the fourth quarter of 2007, MBIA’s insured par exposure within the ABS CDO portfolio has been substantially reduced through a combination of terminations and commutations. Accordingly, as of September 30, 2013, the insured par exposure of the ABS CDO financial guarantee insurance policies and credit derivatives portfolio has declined by approximately 96% of the insured amount as of December 31, 2007.

The Company’s ABS CDOs originally benefited from two sources of credit enhancement. First, the subordination in the underlying securities collateralizing the transaction must be fully eroded and second, the subordination below the insured tranche in the CDO transaction must be fully eroded before the insured tranche is subject to a claim. The Company’s payment obligations after a default are timely interest and ultimate principal.

The primary factor in estimating reserves on insured ABS CDO policies written as financial guarantee insurance policies and in estimating impairments on insured ABS CDO credit derivatives is the losses associated with the underlying collateral in the transactions. MBIA’s approach to establishing reserves or impairments in this portfolio employs a methodology which is similar to other structured finance asset classes insured by MBIA. The Company utilizes up to a total of four probability-weighted scenarios in order to estimate its reserves or impairments for ABS CDOs.

As of September 30, 2013, the Company established loss and LAE reserves totaling $87 million related to ABS CDO financial guarantee insurance policies after the elimination of $196 million as a result of consolidating VIEs. For the nine months ended September 30, 2013, the Company had a benefit of $47 million of losses and LAE recorded in earnings related to ABS CDO financial guarantee insurance policies after the elimination of a $39 million benefit as a result of consolidating VIEs. In the event of further deteriorating performance of the collateral referenced or held in ABS CDO transactions, the amount of losses estimated by the Company could increase substantially.

Credit Impairments Related to Structured CMBS Pools, CRE CDOs and CRE Loan Pools (Financial Guarantees and Insured Derivatives)

Most of the structured CMBS pools, CRE CDOs and CRE loan pools insured by MBIA are accounted for as insured credit derivatives and are carried at fair value in the Company’s consolidated financial statements. Since the Company’s insured credit derivatives have similar terms, conditions, risks, and economic profiles to its financial guarantee insurance policies, the Company evaluates them for impairment in the same way that it estimates loss and LAE for its financial guarantee policies. The following discussion provides information about the Company’s process for estimating credit impairments on these contracts using its statutory loss reserve methodology, determined as the present value of the probability-weighted potential future losses, net of estimated recoveries, across multiple scenarios, plus actual payments and collections.

The Company has developed multiple scenarios to consider the range of potential outcomes in the CRE market and their impact on MBIA. The approaches require substantial judgments about the future performance of the underlying loans, and include the following:

 

   

The first approach considers the range of commutation agreements achieved over the past several years with multiple counterparties and results in an estimated price to commute the remaining policies. It is customized by counterparty and is dependent upon the level of dialogue with the counterparty and the credit quality and payment profile of the underlying exposure.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

   

The second approach considers current delinquency rates and uses current and projected net operating income (“NOI”) and capitalization rates (“Cap Rates”) to project losses under two scenarios. These scenarios assume that property performance remains flat for the near term and then improves gradually. Additionally, certain large loans are reviewed individually so that performance and loss severity can be more accurately determined. Other loans are reviewed for factors that may mitigate potential performance. This approach utilizes two scenarios which vary in the levels of expected future defaults.

 

   

The last approach is based on a proprietary model developed by reviewing performance data on over 80,000 securitized CRE loans originated between 1992 and 2011. The time period covered during the performance review includes the years 2006 through 2011 because they encompass a period of extreme stress in the economy and the CRE markets. The Company found property type and the debt service coverage ratio to be the most significant determinants of a loan’s average annual default probability, and developed a model based on these factors. The Company then ran Monte Carlo simulations to estimate the timing of defaults and losses at the property level by applying property type-based Cap Rates to estimate the property’s NOI.

The loss severities projected by these scenarios vary widely, from moderate to substantial losses. Actual losses will be a function of the proportion of loans in the pools that are foreclosed and liquidated and the loss severities associated with those liquidations. If the deductibles in the Company’s insured transactions and underlying referenced CMBS transactions are fully eroded, additional property level losses upon foreclosures and liquidations could result in substantial losses for MBIA. Ultimate loss rates remain uncertain because many loans are still delinquent and have not yet been resolved, others have been modified and others do not mature for another three to four years at which time they will face the need to refinance. The Company assigns a wide range of probabilities to these scenarios and incorporates views that liquidations will continue to be mitigated by loan extensions and modifications, and that property values and NOIs have bottomed for many sectors and markets in the U.S. The weightings are customized for each counterparty. If macroeconomic stress were to increase or the U.S. enters into a recession, higher delinquencies, liquidations and/or higher severities of loss upon liquidation may result and the Company may incur substantial additional losses. The foreclosure and REO pipelines are still relatively robust, with several restructurings and liquidations yet to occur, so the range of possible outcomes is wider than those for the Company’s exposures to ABS CDOs and second-lien RMBS. Prior to June 30, 2013, the Company incorporated an additional approach based on recent Roll Rates experienced within each of the commercial mortgage-backed index series. This actuarial approach was eliminated as a result of more emphasis being placed on loan-specific scenarios.

In the CRE CDO portfolio, transaction-specific structures require certain reporting and management protocols and often require the Company to incorporate these structural distinctions into its models. None of the CRE CDOs insured by the Company allow for reinvesting at this time, and many of the senior bonds have begun to amortize.

For the nine months ended September 30, 2013, the Company had a benefit of $28 million of losses and LAE recorded in earnings related to CRE CDO financial guarantee insurance policies. For the nine months ended September 30, 2013, additional credit impairments and LAE for insured derivatives on structured CMBS pools, CRE CDOs and CRE loan pools were estimated to be $487 million as a result of additional delinquencies and loan level liquidations, as well as continued refinements of MBIA’s assessment of various commutation possibilities. The cumulative credit impairments and LAE on structured CMBS pools, CRE CDOs and CRE loan pools were estimated to be $4.1 billion through September 30, 2013. Though the pace of increases in the delinquency rate has slowed, many loans are being modified and liquidations continue to take place. Loan level losses have ranged from 1% to 2%, to near complete losses, and in a few cases severities exceeded 100%. These liquidations have led to bond level losses which have reduced the level of enhancement to the individual CMBS bonds referenced by the insured structured CMBS pools and in certain cases have resulted in deductible erosion. Bond level enhancement and pool level deductibles are structural features intended to mitigate losses to the Company, however, some of the transactions reference similar rated subordinate tranches of CMBS bonds. When there are broad-based declines in property performance, this leverage can result in rapid deterioration in pool performance. Beginning in the second quarter of 2013, the Company paid claims on a CMBS pool transaction that experienced deterioration such that all remaining deductible was eliminated.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

Loss and LAE Activity

Financial Guarantee Insurance Losses (Non-Derivative)

The Company’s financial guarantee insurance losses and LAE for the nine months ended September 30, 2013 are presented in the following table:

 

                                           
Losses and LAE                            
     Nine Months Ended September 30, 2013  

In millions

   Second-lien
RMBS
     First-lien
RMBS
     Other (1)      Total  

Losses and LAE related to actual and expected payments

   $ 85       $ 12       $ 108       $ 205   

Recoveries of actual and expected payments

     (177)         (11)         76         (112)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Gross losses incurred

     (92)                184         93   

Reinsurance

                   (1)         (1)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Losses and LAE

   $ (92)       $      $ 183       $ 92   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (1) - Includes ABS CDOs, CMBS, U.S. public finance and other issues.

The losses and LAE related to actual and expected payments included in the preceding table primarily related to $108 million in other exposures, including $86 million of losses related to U.S. public finance transactions primarily related to certain general obligation issues. The second-lien RMBS losses and LAE related to actual and expected payments comprise net increases of previously established reserves. The recoveries of actual and expected payments were primarily related to second-lien RMBS recoveries of $177 million, including $316 million in recoveries primarily resulting from ineligible mortgage loans included in insured exposures that are subject to contractual obligations by sellers/servicers to repurchase or replace such mortgages, partially offset by a $139 million reduction in excess spread. Partially offsetting increases in second-lien RMBS recoveries of actual and expected payments were decreases of $76 million related to other issues primarily resulting from a reversal of recoveries related to high yield corporate CDOs.

The following table provides information about the financial guarantees and related claim liability included in each of MBIA’s surveillance categories as of September 30, 2013:

 

                                                      
     Surveillance Categories  

$ in millions

   Caution
List

Low
     Caution
List
Medium
     Caution
List
High
     Classified
List
     Total  

Number of policies

     89         20                192         307   

Number of issues (1)

     31         15                135         186   

Remaining weighted average contract period (in years)

     10.8         5.3         9.6         9.6         9.8   

Gross insured contractual payments outstanding: (2)

              

Principal

   $ 5,686       $ 1,099       $ 65       $ 8,332       $ 15,182   

Interest

     3,998         279         32         4,819         9,128   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 9,684       $ 1,378       $ 97       $ 13,151       $ 24,310   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross claim liability

   $      $      $      $ 1,504       $ 1,504   

Less:

              

Gross potential recoveries

                           1,264         1,264   

Discount, net

                          272         272   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net claim liability (recoverable)

   $      $      $      $ (32)       $ (32)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unearned premium revenue

   $ 129       $ 20       $      $ 101       $ 251   

 

(1) - An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments.

 

(2) - Represents contractual principal and interest payments due by the issuer of the obligations insured by MBIA.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The following table provides information about the financial guarantees and related claim liability included in each of MBIA’s surveillance categories as of December 31, 2012:

 

                                                      
     Surveillance Categories  

$ in millions

   Caution
List

Low
     Caution
List
Medium
     Caution
List
High
     Classified
List
     Total  

Number of policies

     54         25         10         206         295   

Number of issues (1)

     29         15         10         136         190   

Remaining weighted average contract period (in years)

     8.1         4.0         7.6         9.5         8.7   

Gross insured contractual payments outstanding: (2)

              

Principal

   $ 4,250       $ 1,176       $ 373       $ 9,458       $ 15,257   

Interest

     2,721         256         120         5,264         8,361   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 6,971       $ 1,432       $ 493       $ 14,722       $ 23,618   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross claim liability

   $      $      $      $ 1,589       $ 1,589   

Less:

              

Gross potential recoveries

                          4,109         4,109   

Discount, net

                          229         229   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net claim liability (recoverable)

   $      $      $      $ (2,749)       $ (2,749)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unearned premium revenue

   $ 142       $ 11       $      $ 122       $ 278   

 

(1) - An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments.

 

(2) - Represents contractual principal and interest payments due by the issuer of the obligations insured by MBIA.

The gross claim liability as of September 30, 2013 and December 31, 2012 in the preceding tables represents the Company’s estimate of undiscounted probability-weighted future claim payments, which principally relate to insured first and second-lien RMBS transactions and U.S. public finance transactions. The gross potential recoveries represent the Company’s estimate of undiscounted probability-weighted recoveries of actual claim payments and recoveries of estimated future claim payments, and principally relate to insured second-lien RMBS transactions and U.S. public finance transactions. The Company’s recoveries have been, and remain based on either salvage rights, the rights conferred to MBIA through the transactional documents (inclusive of the insurance agreement), or subrogation rights embedded within financial guarantee insurance policies. Expected salvage and subrogation recoveries, as well as recoveries from other remediation efforts, reduce the Company’s claim liability. Once a claim payment has been made, the claim liability has been satisfied and MBIA’s right to recovery is no longer considered an offset to future expected claim payments, it is recorded as a salvage asset. The amount of recoveries recorded by the Company is limited to paid claims plus the present value of projected future claim payments. As claim payments are made, the recorded amount of potential recoveries may exceed the remaining amount of the claim liability for a given policy. The gross claim liability and gross potential recoveries reflect the elimination of claim liabilities and potential recoveries related to VIEs consolidated by the Company.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The following table presents the components of the Company’s loss and LAE reserves and insurance loss recoverable as reported on the Company’s consolidated balance sheets as of September 30, 2013 and December 31, 2012 for insured obligations within MBIA’s “Classified List.” The loss reserves (claim liability) and insurance claim loss recoverable included in the following table represent the present value of the probability-weighted future claim payments and recoveries reported in the preceding tables.

 

                     

In millions

   As of
September 30, 2013
     As of
December 31, 2012
 

Loss reserves (claim liability)

   $ 635       $ 790   

LAE reserves

     53         63   
  

 

 

    

 

 

 

Loss and LAE reserves

   $ 688       $ 853   
  

 

 

    

 

 

 

Insurance claim loss recoverable

   $ (737)       $ (3,610)   

LAE insurance loss recoverable

     (5)         (38)   
  

 

 

    

 

 

 

Insurance loss recoverable

   $ (742)       $ (3,648)   
  

 

 

    

 

 

 

Reinsurance recoverable on unpaid losses

   $      $ 14   

Reinsurance recoverable on paid losses

             
  

 

 

    

 

 

 

Reinsurance recoverable on paid and unpaid losses

   $      $ 15   
  

 

 

    

 

 

 

As of September 30, 2013, loss and LAE reserves include $1.0 billion of reserves for expected future payments offset by expected recoveries of such future payments of $326 million. As of December 31, 2012, loss and LAE reserves included $1.2 billion of reserves for expected future payments offset by expected recoveries of such future payments of $332 million. As of September 30, 2013, the insurance loss recoverable principally related to expected future recoveries on second-lien RMBS transactions resulting from expected excess spread generated by performing loans in such transactions. As of December 31, 2012, the insurance loss recoverable principally related to estimated recoveries of payments made by the Company resulting from ineligible mortgage loans in certain insured second-lien residential mortgage loan securitizations that are subject to a contractual obligation by the sellers/servicers to repurchase or replace the ineligible mortgage loans and expected future recoveries on second-lien RMBS transactions resulting from expected excess spread generated by performing loans in such transactions.

To date, as a result of the Bank of America and Flagstar Bank settlements, as well as the agreement between Consenting Claimants, ResCap and Ally, in the ResCap bankruptcy proceeding discussed above, the Company expects to be reimbursed for the majority of its potential recoveries related to ineligible mortgage loans by the end of 2013 or early 2014, which are primarily included in “Loan repurchase commitments” presented under the heading “Assets of consolidated variable interest entities” on the Company’s consolidated balance sheets.

For the nine months ended September 30, 2013, the Company collected approximately $2.9 billion, net of reinsurance, of which $2.8 billion, net of reinsurance, related to insured second-lien RMBS transactions. The Company made payments of $372 million, of which $166 million related to insured second-lien RMBS transactions and $134 million related to U.S. public finance issues.

For the nine months ended September 30, 2013, the decrease in insurance loss recoverable related to paid losses totaled $2.9 billion, and primarily resulted from the collections of previously established recoveries related to the settlement with Bank of America on the ineligible mortgage loans related to insured second-lien RMBS transactions.

The following table presents the amounts of the Company’s second-lien RMBS exposure, gross undiscounted claim liability and potential recoveries related to non-consolidated VIEs and consolidated VIEs, included in the Company’s “Classified List,” as of September 30, 2013.

 

                                                      
Second-lien RMBS Exposure           Outstanding      Gross Undiscounted  

$ in billions

   Issues      Gross
Principal
     Gross
Interest
     Claim
Liability
     Potential
Recoveries
 

Non-consolidated VIEs

     23       $ 3.6       $ 1.3       $ 0.2       $ 0.9   

Consolidated VIEs

     11       $ 1.8       $ 0.7       $ 0.1       $ 1.4   

 

22


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The following table presents changes in the Company’s loss and LAE reserves for the nine months ended September 30, 2013. Changes in the loss and LAE reserves attributable to the accretion of the claim liability discount, changes in discount rates, changes in the timing and amounts of estimated payments and recoveries, changes in assumptions and changes in LAE reserves are recorded in “Losses and loss adjustment” expenses in the Company’s consolidated statements of operations. As of September 30, 2013, the weighted average risk-free rate used to discount the Company’s loss reserves (claim liability) was 2.11%. LAE reserves are expected to be settled within a one-year period and are not discounted.

 

                                                                                       
In millions      Changes in Loss and LAE Reserves for the Nine Months Ended September 30, 2013         

Gross Loss
and LAE
Reserves as of
December 31,
2012

     Loss Payments
for Cases

with
Reserves
     Accretion of
Claim
Liability
Discount
     Changes in
Discount
Rates
     Changes in
Assumptions
     Changes in
Unearned
Premium
Revenue
     Changes in
LAE
Reserves
     Other (1)      Gross Loss
and LAE
Reserves as of
September 30,
2013
 
$ 853       $ (293)       $ 10       $ (71)       $ 116       $      $ (10)       $ 81       $ 688   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Primarily changes in amount and timing of payments.

The decrease in the Company’s gross loss and LAE reserves reflected in the preceding table was primarily due to a decrease in reserves related to loss payments on insured first and second-lien RMBS securitizations and U.S. public finance issues, partially offset by changes in assumptions.

Current period changes in the Company’s estimate of potential recoveries may be recorded as an insurance loss recoverable asset, netted against the gross loss and LAE reserve liability, or both. The following table presents changes in the Company’s insurance loss recoverable and changes in recoveries on unpaid losses reported within the Company’s claim liability for the nine months ended September 30, 2013. Changes in insurance loss recoverable attributable to the accretion of the discount on the recoverable, changes in discount rates, changes in the timing and amounts of estimated collections, changes in assumptions and changes in LAE recoveries are recorded in “Losses and loss adjustment” expenses in the Company’s consolidated statements of operations.

 

                                                                                       
          Changes in Insurance Loss Recoverable and Recoveries on Unpaid  Losses
for the Nine Months Ended September 30, 2013
       

In millions

  Gross
Reserve

as of
December 31,
2012
    Collections
for

Cases with
Recoveries
    Accretion
of
Recoveries
    Changes
in
Discount
Rates
    Changes
in
Assumptions
    Changes
in LAE
Recoveries
    Other (1)     Gross
Reserve

as of
September 30,
2013
 

Insurance loss recoverable

  $ 3,648      $ (2,981)      $ 16      $ (25)      $ 129      $ (33)      $ (12)      $ 742   

Recoveries on unpaid losses

    332                     (27)        15                    326   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 3,980      $ (2,981)      $ 20      $ (52)      $ 144      $ (31)      $ (12)      $ 1,068   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Primarily changes in amount and timing of collections.

The Company’s insurance loss recoverable decreased during 2013 primarily due to recoveries associated with issues outstanding as of December 31, 2012, which related to the settlement with Bank of America on the ineligible mortgage loans included in insured second-lien residential mortgage securitization exposures that are subject to contractual obligations by sellers/servicers to repurchase or replace such mortgages. Recoveries on unpaid losses decreased primarily due to changes in discount rates, partially offset by changes in assumptions.

The following table presents the Company’s total estimated recoveries from ineligible mortgage loans included in certain insured second-lien mortgage loan securitizations as of September 30, 2013. The total estimated recoveries from ineligible mortgage loans of $1.1 billion include $18 million recorded as “Insurance loss recoverable” and $1.1 billion recorded as “Loan repurchase commitments” presented under the heading “Assets of consolidated variable interest entities” on the Company’s consolidated balance sheets.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

                                                                 
In millions                                            

Total Estimated
Recoveries from
Ineligible Mortgage
Loans as of
December 31,

2012

     Accretion
of Future
Collections
     Changes in
Discount Rates
     Recoveries
(Collections)
     Changes in
Assumptions
     Other (1)      Total Estimated
Recoveries from
Ineligible Mortgage
Loans as  of
September 30,
2013
 
$ 3,583       $ 20       $ (7)       $ (2,897)       $ 433       $      $ 1,133   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Primarily changes in amount and timing of collections.

The decrease in the Company’s total estimated recoveries from ineligible mortgage loans in the preceding table primarily resulted from the collections of previously established recoveries related to the settlement with Bank of America and Flagstar Bank on the ineligible mortgage loans related to insured second-lien RMBS securitizations.

Remediation actions may involve, among other things, waivers or renegotiations of financial covenants or triggers, waivers of contractual provisions, the granting of consents, transfer of servicing, consideration of restructuring plans, acceleration, security or collateral enforcement, actions in bankruptcy or receivership, litigation and similar actions. The types of remedial actions pursued are based on the insured obligation’s risk type and the nature and scope of the event giving rise to the remediation. As part of any such remedial actions, MBIA seeks to improve its security position and to obtain concessions from the issuer of the insured obligation. From time to time, the issuer of an MBIA-insured obligation may, with the consent of MBIA, restructure the insured obligation by extending the term, increasing or decreasing the par amount or decreasing the related interest rate, with MBIA insuring the restructured obligation.

Costs associated with remediating insured obligations assigned to the Company’s “Caution List—Low,” “Caution List—Medium,” “Caution List—High” and “Classified List” are recorded as LAE. LAE is primarily recorded as part of the Company’s provision for its loss reserves and included in “Losses and loss adjustment” expenses on the Company’s consolidated statements of operations. The following table presents the gross expenses related to remedial actions for insured obligations:

 

                     
     Nine Months Ended September 30,  

In millions

   2013      2012  

Loss adjustment expense incurred, gross

   $ 31      $ 113  

Note 6: Fair Value of Financial Instruments

Fair Value Measurement

Fair value is a market-based measure considered from the perspective of a market participant. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those which it believes market participants would use in pricing an asset or liability at the measurement date. The fair value measurements of financial instruments held or issued by the Company are determined through the use of observable market data when available. Market data is obtained from a variety of third-party sources, including dealer quotes. If dealer quotes are not available for an instrument that is infrequently traded, the Company uses alternate valuation methods, including either dealer quotes for similar instruments or modeling using market data inputs. The use of alternate valuation methods generally requires considerable judgment in the application of estimates and assumptions and changes to such estimates and assumptions may produce materially different fair values.

The accounting guidance for fair value measurement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available and reliable. Observable inputs are those the Company believes that market participants would use in pricing an asset or liability based on available market data. Unobservable inputs are those that reflect the Company’s beliefs about the assumptions market participants would use in pricing an asset or liability based on the best information available. The fair value hierarchy is broken down into three levels based on the observability and reliability of inputs, as follows:

 

   

Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company can access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail any degree of judgment.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

   

Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 2 assets include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, securities which are priced using observable inputs and derivative contracts whose values are determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

 

   

Level 3—Valuations based on inputs that are unobservable and supported by little or no market activity and that are significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques where significant inputs are unobservable, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The availability of observable inputs can vary from product to product and period to period and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the product. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company assigns the level in the fair value hierarchy for which the fair value measurement in its entirety falls, based on the least observable input that is significant to the fair value measurement.

Financial Assets (excluding derivative assets)

Financial assets, excluding derivative assets, held by the Company primarily consist of investments in debt securities. Substantially all of the Company’s investments are priced by independent third parties, including pricing services and brokers. Typically the Company receives one pricing service value or broker quote for each instrument, which represents a non-binding indication of value. The Company reviews the assumptions, inputs and methodologies used by pricing services and brokers to obtain reasonable assurance that the prices used in its valuations reflect fair value. When the Company believes a third-party quotation differs significantly from its internally developed expectation of fair value, whether higher or lower, the Company reviews its data or assumptions with the provider. This review includes comparing significant assumptions such as prepayment speeds, default ratios, forward yield curves, credit spreads and other significant quantitative inputs to internal assumptions, and working with the price provider to reconcile the differences. The price provider may subsequently provide an updated price. In the event that the price provider does not update its price, and the Company still does not agree with the price provided, the Company will try to obtain a price from another third-party provider, such as a broker, or use an internally developed price which it believes represents the fair value of the investment. The fair values of investments for which internal prices were used were not significant to the aggregate fair value of the Company’s investment portfolio as of September 30, 2013 or December 31, 2012. All challenges to third-party prices are reviewed by staff of the Company with relevant expertise to ensure reasonableness of assumptions.

In addition to challenging pricing assumptions, the Company obtains reports from the independent accountants for significant third-party pricing services attesting to the effectiveness of the controls over data provided to the Company. These reports are obtained annually and are reviewed by the Company to ensure key controls are applied by the pricing services, and that appropriate user controls are in place at the third-party pricing services organization to ensure proper measurement of the fair values of its investments. In the event that any controls in these reports are deemed as ineffective by independent accountants, the Company will take the necessary actions to ensure that internal user controls are in place to mitigate the control risks. No deficiencies were noted for significant third-party pricing services used.

Financial Liabilities (excluding derivative liabilities)

Financial liabilities, excluding derivative liabilities, issued by the Company primarily consist of investment agreements and medium-term notes (“MTNs”) within its wind-down operations, debt issued for general corporate purposes and debt in VIEs. Investment agreements, MTNs, and corporate debt are typically recorded at face value adjusted for premiums or discounts. Financial liabilities that the Company has elected to fair value or that require fair value reporting or disclosures are valued based on the estimated value of the underlying collateral, the Company’s or a third-party’s estimate of discounted cash flow model estimates, or quoted market values for similar products. These valuations include adjustments for expected nonperformance risk of the Company.

 

25


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Derivative Liabilities

The Company’s derivative liabilities are primarily insured credit derivatives that reference structured pools of cash securities and CDSs. The Company generally insured the most senior liabilities of such transactions, and at the inception of transactions its exposure generally had more subordination than needed to achieve triple-A ratings from credit rating agencies. The types of collateral underlying its insured derivatives consist of cash securities and CDSs referencing primarily corporate, asset-backed, residential mortgage-backed, commercial mortgage-backed, CRE loans, and CDO securities.

The Company’s insured credit derivative contracts are non-traded structured credit derivative transactions. Since insured derivatives are highly customized and there is generally no observable market for these derivatives, the Company estimates their fair values in a hypothetical market based on internal and third-party models simulating what a similar company would charge to assume the Company’s position in the transaction at the measurement date. This pricing would be based on the expected loss of the exposure. The Company reviews its valuation model results on a quarterly basis to assess the appropriateness of the assumptions and results in light of current market activity and conditions. This review is performed by internal staff with relevant expertise. If live market spreads or securities prices are observable for similar transactions, those spreads are an integral part of the analysis. New insured transactions that resemble existing (previously insured) transactions, if any, would be considered, as well as negotiated settlements of existing transactions.

The Company may from time to time make changes in its valuation techniques if the change results in a measurement that it believes is equally or more representative of fair value under current circumstances.

Internal Review Process

All significant financial assets and liabilities, including derivative assets and liabilities, are reviewed by committees created by the Company to ensure compliance with the Company’s policies and risk procedures in the development of fair values of financial assets and liabilities. These valuation committees review, among other things, key assumptions used for internally developed prices, significant changes in sources and uses of inputs, including changes in model approaches, and any adjustments from third-party inputs or prices to internally developed inputs or prices. The committees also review any significant impairment or improvements in fair values of the financial instruments from prior periods. From time to time, these committees will reach out to the Company’s valuation experts to better understand key methods and assumptions used for the determination of fair value, including understanding significant changes in fair values. These committees are comprised of senior finance team members with the relevant experience in the financial instruments their committee is responsible for. For each quarter, these committees document their agreement with the fair values developed by management of the Company as reported in the quarterly and annual financial statements.

Valuation Techniques

Valuation techniques for financial instruments measured at fair value or disclosed at fair value are described below.

Fixed-Maturity Securities (including short-term investments) Held as Available-For-Sale, Fixed-Maturity Securities at Fair Value, Investments Pledged as Collateral, Investments Held-to-Maturity, and Other Investments

Fixed-maturity securities (including short-term investments) held as AFS, fixed-maturity securities at fair value, investments pledged as collateral, and other investments include investments in U.S. Treasury and government agencies, foreign governments, corporate obligations, mortgage-backed securities (“MBS”) and ABS (including CMBS and CDOs), state and municipal bonds and perpetual debt and equity securities (including money market mutual funds).

These investments are generally valued based on recently executed transaction prices or quoted market prices. When quoted market prices are not available, fair value is generally determined using quoted prices of similar investments or a valuation model based on observable and unobservable inputs. Inputs vary depending on the type of investment. Observable inputs include contractual cash flows, interest rate yield curves, CDS spreads, prepayment and volatility scores, diversity scores, cross-currency basis index spreads, and credit spreads for structures similar to the financial instrument in terms of issuer, maturity and seniority. Unobservable inputs include cash flow projections and the value of any credit enhancement.

The fair value of the held-to-maturity (“HTM”) investments is determined using discounted cash flow models. Key inputs include unobservable cash flows projected over the expected term of the investment discounted using observable interest rate yield curves of similar securities.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Investments based on quoted market prices of identical investments in active markets are classified as Level 1 of the fair value hierarchy. Level 1 investments generally consist of U.S. Treasury and foreign government and agency investments. Quoted market prices of investments in less active markets, as well as investments which are valued based on other than quoted prices for which the inputs are observable, such as interest rate yield curves, are categorized in Level 2 of the fair value hierarchy. Investments that contain significant inputs that are not observable are categorized as Level 3.

Cash and Cash Equivalents, Receivable for Investments Sold, Net Cash Collateral Pledged to Swap Counterparties, Payable for Investments Purchased, Secured Loan and Accrued Investment Income

The carrying amounts of cash and cash equivalents, receivable for investments sold, net cash collateral pledged to swap counterparties, payable for investments purchased, secured loan and accrued investment income approximate fair values due to the short-term nature and credit worthiness of these instruments.

Loans Receivable at Fair Value

Loans receivable at fair value are comprised of loans held by consolidated VIEs consisting of residential mortgage loans, commercial mortgage loans and other whole business loans. Fair values of residential mortgage loans are determined using quoted prices for MBS issued by the respective VIE and adjustments for the fair values of the financial guarantees provided by MBIA Corp. on the related MBS. Fair values of commercial mortgage loans and other whole business loans are valued based on quoted prices of similar collateralized MBS. Loans receivable at fair value are categorized in Level 3 of the fair value hierarchy.

Loan Repurchase Commitments

Loan repurchase commitments are obligations owed by the sellers/servicers of mortgage loans to either MBIA as reimbursement of paid claims or to the RMBS trusts as defined in the transaction documents. Loan repurchase commitments are assets of the consolidated VIEs. This asset represents the rights of MBIA against the sellers/servicers for breaches of representations and warranties that the securitized residential mortgage loans sold to the trust to comply with stated underwriting guidelines and for the sellers/servicers to cure, replace, or repurchase mortgage loans. Fair value measurements of loan repurchase commitments represent the amounts owed by the sellers/servicers to MBIA as reimbursement of paid claims. Loan repurchase commitments are not securities and no quoted prices or comparable market transaction information are observable or available. Loan repurchase commitments at fair value are categorized in Level 3 of the fair value hierarchy. Fair values of loan repurchase commitments are determined using discounted cash flow techniques based on inputs including:

 

   

breach rates representing the rate at which the sellers/servicers failed to comply with stated representations and warranties;

 

   

recovery rates representing the estimates of future cash flows for the asset, including estimates about possible variations in the amount of cash flows expected to be collected;

 

   

expectations about possible variations in the timing of collections of the cash flows; and

 

   

time value of money, represented by the rate on risk-free monetary assets.

Investment Agreements

The fair values of investment agreements are determined using discounted cash flow techniques based on contractual cash flows and observable interest rates currently being offered for similar agreements with comparable maturity dates. Investment agreements contain collateralization and termination agreements that substantially mitigate the nonperformance risk of the Company. As the terms of the notes are private, and the contract cash flows are not observable, these investment agreements are categorized as Level 3 of the fair value hierarchy.

Medium-Term Notes

The fair values of certain MTNs are based on quoted market prices provided by third-party sources, where available. When quoted market prices are not available, the Company applies a matrix pricing grid based on the quoted market prices received and the MTNs’ stated maturity and interest rate to determine fair value. Nonperformance risk is included in the quoted market prices and the matrix pricing grid.

The Company has elected to record these MTNs at fair value as they contain embedded derivatives which cannot accurately be separated from the host debt instrument and fair valued separately, therefore, these MTNs are carried at fair value with changes in fair value reflected in earnings. The remaining MTNs, which are not carried at fair value, do not contain embedded derivatives.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

As these MTNs are illiquid and the prices reflect significant unobservable inputs, they are categorized as Level 3 of the fair value hierarchy.

Variable Interest Entity Notes

The fair values of VIE notes are determined based on recently executed transaction prices or quoted prices where observable. When position-specific quoted prices are not observable, fair values are based on quoted prices of similar securities. Fair values based on quoted prices of similar securities may be adjusted for factors unique to the securities, including any credit enhancement. When observable quoted prices are not available, fair value is determined based on discounted cash flow techniques of the underlying collateral using observable and unobservable inputs. Observable inputs include interest rate yield curves and bond spreads of similar securities. Unobservable inputs include the value of any credit enhancement. VIE notes are categorized in Level 2 or Level 3 of the fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety.

Long-term Debt

Long-term debt consists of notes, debentures, surplus notes and accrued interest on this debt. The fair value of long-term notes, debentures and surplus notes are estimated based on quoted prices for the identical or similar securities. The fair value of the accrued interest expense on the surplus notes due 2033 is determined based on the scheduled interest payments discounted by the market’s perception of the credit risk related to the repayment of the surplus notes. The credit risk related to the repayment of the surplus notes is based on recent trades of the surplus notes. The deferred interest payment will be due on the first business day on or after which the Company obtains approval to make such payment.

The carrying amounts of accrued interest expense on all other long-term debt approximate fair value due to the short-term nature of these instruments.

Derivatives—Asset/Liability Products

The asset/liability products business has entered into derivative transactions primarily consisting of interest rate swaps, cross currency swaps, and CDS contracts. Fair values of over-the-counter derivatives are determined using valuation models based on observable inputs, nonperformance risk of the Company’s own credit and nonperformance risk of the counterparties. Observable and market-based inputs include interest rate yields, credit spreads and volatilities. These derivatives are categorized in Level 2 or Level 3 of the fair value hierarchy based on the input that is significant to the fair value measurement in its entirety.

The Company has policies and procedures in place regarding counterparties, including review and approval of the counterparty and the Company’s exposure limit, collateral posting requirements, collateral monitoring and margin calls on collateral. The Company manages counterparty credit risk on an individual counterparty basis through master netting arrangements covering derivative transactions in the asset/liability products and corporate segments. These agreements allow the Company to contractually net amounts due from a counterparty with those amounts due to such counterparty when certain triggering events occur. The Company only executes swaps under master netting agreements, which typically contain mutual credit downgrade provisions that generally provide the ability to require assignment or termination in the event either the Company or the counterparty is downgraded below a specified credit rating. The netting agreements minimize the potential for losses related to credit exposure and thus serve to mitigate the Company’s nonperformance risk under these derivatives.

In certain cases, the Company also manages credit risk through collateral agreements that give the Company the right to hold or the obligation to provide collateral when the current market value of derivative contracts exceeds an exposure threshold. Under these arrangements, the Company may provide U.S. Treasury and other highly rated securities or cash to secure the derivative. The delivery of high-quality collateral can minimize credit exposure and mitigate the potential for nonperformance risk impacting the fair values of the derivatives.

Derivatives—Insurance

The derivative contracts insured by the Company cannot be legally traded and generally do not have observable market prices. The Company determines the fair values of insured credit derivatives using valuation models. The fair valuation models are consistently applied from period to period, with refinements to the fair value estimation approach being applied as and when the information becomes available. Negotiated settlements are also considered when determining fair value to provide the best estimate of how another market participant would evaluate fair value.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Approximately 98% of the balance sheet fair value of insured credit derivatives as of September 30, 2013 was valued based on the Binomial Expansion Technique (“BET”) Model. Approximately 2% of the balance sheet fair value of insured credit derivatives as of September 30, 2013 was valued based on the internally developed Direct Price Model and the dual-default model. The valuation of insured derivatives includes the impact of its credit standing. All of these derivatives are categorized as Level 3 of the fair value hierarchy as their fair value is derived using significant unobservable inputs.

Description of the BET Model

1. Valuation Model Overview

The BET Model estimates what a bond insurer would charge to guarantee a transaction at the measurement date, based on the market-implied default risk of the underlying collateral and the remaining structural protection in a deductible or subordination.

Inputs to the process of determining fair value for structured transactions using the BET Model include estimates of collateral loss, allocation of loss to separate tranches of the capital structure, and calculation of the change in value.

 

   

Estimates of aggregated collateral losses are calculated by reference to the following (described in further detail under “BET Model Inputs” below):

 

   

credit spreads of underlying collateral based on actual spreads or spreads on similar collateral with similar ratings, or in some cases, are benchmarked; for collateral pools where the spread distribution is characterized by extremes, each segment of the pool is modeled separately instead of using an overall pool average;

 

   

diversity score of the collateral pool as an indication of correlation of collateral defaults; and

 

   

recovery rate for all defaulted collateral.

 

   

Allocation of losses to separate tranches of the capital structure according to priority of payments in a transaction.

 

   

The inception-to-date unrealized gain or loss on a transaction is the difference between the original price of the risk (the original market-implied expected loss) and the current price of the risk based on the assumed market-implied expected losses derived from the model.

Additional structural assumptions of the BET Model are:

 

   

Default probabilities are determined by three factors: MBIA Corp.’s credit spread, MBIA Corp.’s recovery rate after default, and the time period under risk;

 

   

Frequencies of defaults are modeled evenly over time;

 

   

Collateral assets are generally considered on an average basis rather than being modeled on an individual basis; and

 

   

Collateral asset correlation is modeled using a diversity score which is calculated based on industry or sector concentrations. Recovery rates are based on historical averages and updated based on market evidence.

2. BET Model Inputs

a. Credit spreads

The average spread of collateral is a key input as the Company assumes credit spreads reflect the market’s assessment of default probability for each piece of collateral. Spreads are obtained from market data sources published by third parties (e.g., dealer spread tables for assets most closely resembling collateral within the Company’s transactions) as well as collateral-specific spreads on the underlying reference obligations provided by trustees or market sources. Also, when these sources are not available, the Company benchmarks spreads for collateral against market spreads or prices. This data is reviewed on an ongoing basis for reasonableness and applicability to the Company’s derivative portfolio. The Company also calculates spreads based on quoted prices and on internal assumptions about expected life, when pricing information is available and spread information is not.

The Company uses the spread hierarchy listed below in determining which source of spread information to use, with the rule being to use CDS spreads where available and cash security spreads as the next alternative.

Spread Hierarchy:

 

   

Collateral-specific credit spreads when observable;

 

   

Sector-specific spread tables by asset class and rating;

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

   

Corporate spreads, including Bloomberg spread tables based on rating; and

 

   

Benchmark from most relevant market source when corporate spreads are not directly relevant.

There were some transactions where the Company incorporated multiple levels within the hierarchy, including using actual collateral-specific credit spreads in combination with a calculated spread based on an assumed relationship. In those cases, MBIA classified the transaction as being benchmarked from the most relevant spread source even though the majority of the average spread was from actual collateral-specific spreads. As of September 30, 2013, sector-specific spreads were used in 8% of the transactions valued using the BET Model. Corporate spreads were used in 50% of the transactions and spreads benchmarked from the most relevant spread source were used for 42% of the transactions. The spread source can also be identified by whether or not it is based on collateral weighted average rating factor (“WARF”). No collateral-specific spreads are based on WARF. Sector-specific spreads, corporate spreads and some benchmarked spreads are based on WARF. WARF-sourced and/or ratings-sourced credit spreads were used for 76% of the transactions.

Over time, the data inputs change as new sources become available, existing sources are discontinued or are no longer considered to be reliable or the most appropriate. It is always the Company’s objective to use more observable spread hierarchies defined above. However, the Company may on occasion move to less observable spread inputs due to the discontinuation of data sources or due to the Company considering certain spread inputs no longer representative of market spreads.

b. Diversity Scores

Diversity scores are a means of estimating the diversification in a portfolio. The diversity score estimates the number of uncorrelated assets that are assumed to have the same loss distribution as the actual portfolio of correlated assets. While diversity score is a required input into the BET model, due to current high levels of default within the collateral of the structures, diversity score does not have a significant impact on valuation.

c. Recovery Rate

The recovery rate represents the percentage of par expected to be recovered after an asset defaults, indicating the severity of a potential loss. MBIA generally uses rating agency recovery assumptions which may be adjusted to account for differences between the characteristics and performance of the collateral used by the rating agencies and the actual collateral in MBIA-insured transactions. The Company may also adjust rating agency assumptions based on the performance of the collateral manager and on empirical market data.

d. Nonperformance Risk

The Company’s valuation methodology for insured credit derivative liabilities incorporates MBIA Corp.’s own nonperformance risk. The Company calculates the fair value by discounting the market value loss estimated through the BET Model at discount rates which include MBIA Corp.’s CDS spreads as of September 30, 2013. The CDS spreads assigned to each deal are based on the weighted average life of the deal. The Company limits the nonperformance impact so that the derivative liability could not be lower than MBIA Corp.’s recovery derivative price multiplied by the unadjusted derivative liability.

Overall Model Results

As of September 30, 2013 and December 31, 2012, the Company’s net insured derivative liability was $1.4 billion and $2.9 billion, respectively, and was primarily related to the fair values of insured credit derivatives, based on the results of the aforementioned pricing models. In the current environment, the most significant driver of changes in fair value is MBIA Corp.’s nonperformance risk. In aggregate, the nonperformance calculation resulted in a pre-tax net insured derivative liability that was $548 million and $4.4 billion lower than the net liability that would have been estimated if MBIA Corp. excluded nonperformance risk in its valuation as of September 30, 2013 and December 31, 2012, respectively. Nonperformance risk is a fair value concept and does not contradict MBIA Corp.’s internal view, based on fundamental credit analysis of MBIA Corp.’s economic condition, that MBIA Corp. will be able to pay all claims when due.

Warrants

Stock warrants issued by the Company are recorded at fair value based on a modified Black-Scholes model. Inputs into the warrant valuation include interest rates, stock volatilities and dividend data. As all significant inputs are market-based and observable, warrants are categorized in Level 2 of the fair value hierarchy.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Financial Guarantees

Gross Financial Guarantees —The fair value of gross financial guarantees is determined using discounted cash flow techniques based on inputs that include (i) assumptions of expected losses on financial guarantee policies where loss reserves have not been recognized, (ii) amount of losses expected on financial guarantee policies where loss reserves have been established, net of expected recoveries, (iii) the cost of capital reserves required to support the financial guarantee liability, (iv) operating expenses, and (v) discount rates. The MBIA Corp. CDS spread and recovery rate are used as the discount rate for MBIA Corp., while the CDS spread and recovery rate of a similar municipal bond insurance company are used as the discount rate for National, as National does not have a published CDS spread and recovery rate.

The carrying value of the Company’s gross financial guarantees consists of unearned premium revenue and loss and LAE reserves, net of the insurance loss recoverable as reported on MBIA’s consolidated balance sheets.

Ceded Financial Guarantees —The fair value of ceded financial guarantees is determined by applying the percentage ceded to reinsurers to the related fair value of the gross financial guarantees. The carrying value of ceded financial guarantees consists of prepaid reinsurance premiums and reinsurance recoverable on paid and unpaid losses as reported within “Other assets” on the Company’s consolidated balance sheets.

Significant Unobservable Inputs

The following tables provide quantitative information regarding the significant unobservable inputs used by the Company for assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. These tables exclude inputs used to measure fair value that are not developed by the Company, such as broker prices and other third-party pricing service valuations.

 

                                           

In millions

  Fair Value as of
September 30, 2013
   

Valuation Techniques

 

Unobservable Input

  Range
(Weighted Average)
 

Assets of consolidated VIEs:

       

Loans receivable at fair value

  $     1,704     Quoted market prices adjusted for financial guarantees provided to VIE obligations   Impact of financial guarantee     0% -17% (4%)   

Loan repurchase commitments

    1,116     Discounted cash flow   Recovery rates     0% - 98% (81%)   

Liabilities of consolidated VIEs:

       

Variable interest entity notes

    745     Quoted market prices of VIE assets adjusted for financial guarantees provided   Impact of financial guarantee     0% - 27% (10%)   

Credit derivative liabilities, net:

       

CMBS

    956     BET Model   Recovery rates     25% - 90% (60%)   
      Nonperformance risk     12% - 57% (28%)   
      Weighted average life (in years)     1.4 - 28.3 (3.5)   
      CMBS spreads     1% - 27% (13%)   

Multi-sector CDO

    16     Direct Price Model   Nonperformance risk     57% - 57% (57%)   

Other

    391     BET Model   Recovery rates     42% - 70% (46%)   
      Nonperformance risk     18% - 31% (27%)   
      Weighted average life (in years)     0.2 - 3.8 (2.2)   

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                           

In millions

  Fair Value as of
December 31, 2012
   

Valuation Techniques

 

Unobservable Input

  Range
(Weighted Average)
 

Assets of consolidated VIEs:

       

Loans receivable at fair value

  $ 1,881     Quoted market prices adjusted for financial guarantees provided to VIE obligations   Impact of financial guarantee     0% - 14% (3%)   

Loan repurchase commitments

    1,086     Discounted cash flow   Recovery rates     10% - 75% (47%)   
      Breach rates     66% - 94% (78%)   

Liabilities of consolidated VIEs:

       

Variable interest entity notes

    1,932     Quoted market prices of VIE assets adjusted for financial guarantees provided   Impact of financial guarantee     0% - 23% (6%)   

Credit derivative liabilities, net:

       

CMBS

    1,590     BET Model   Recovery rates     21% - 90% (51%)   
      Nonperformance risk     19% - 59% (58%)   
      Weighted average life (in years)     0.1 - 5.6 (4.4)   
      CMBS spreads     1% - 23% (13%)   

Multi-sector CDO

    525     Direct Price Model   Nonperformance risk     59% - 59% (59%)   

Other

    806     BET Model   Recovery rates     42% - 75% (47%)   
      Nonperformance risk     42% - 59% (58%)   
      Weighted average life (in years)     0.1 - 19.6 (3.0)   

Sensitivity of Significant Unobservable Inputs

The significant unobservable input used in the fair value measurement of the Company’s loans receivable at fair value of consolidated VIEs is the impact of the financial guarantee. The fair value of loans receivable is calculated by subtracting the value of the financial guarantee from the market value of VIE liabilities. The value of a financial guarantee is estimated by the Company as the present value of expected cash payments under the policy. As expected cash payments provided by the Company under the insurance policy increase, there is a lower expected cash flow on the underlying loans receivable of the VIE. This results in a lower fair value of the loans receivable in relation to the obligations of the VIE.

The significant unobservable inputs used in the fair value measurement of the Company’s loan repurchase commitments of consolidated VIEs are the recovery rates. Recovery rates reflect the estimates of future cash flows reduced for litigation delays and risks and/or potential financial distress of the sellers/servicers. The estimated recoveries of the loan repurchase commitments may differ from the actual recoveries that may be received in the future. Significant increases or decreases in the recovery rates would result in significantly higher or lower fair values of the loan repurchase commitments, respectively. Additionally, changes in the legal environment and the ability of the counterparties to pay would impact the recovery rate assumptions, which could significantly impact the fair value measurement.

The significant unobservable input used in the fair value measurement of the Company’s VIE notes of consolidated VIEs is the impact of the financial guarantee. The fair value of VIE notes is calculated by adding the value of the financial guarantee to the market value of VIE assets. The value of a financial guarantee is estimated by the Company as the present value of expected cash payments under the policy. As the value of the guarantee provided by the Company to the obligations issued by the VIE increases, the credit support adds value to the liabilities of the VIE. This results in an increase in the fair value of the liabilities of the VIE.

The significant unobservable inputs used in the fair value measurement of MBIA Corp.’s CMBS credit derivatives, which are valued using the BET Model, are CMBS spreads, recovery rates, nonperformance risk and weighted average life. The CMBS spread is an indicator of credit risk of the collateral securities. The recovery rate represents the percentage of notional expected to be recovered after an asset defaults, indicating the severity of a potential loss. The nonperformance risk is an assumption of MBIA Corp.’s own ability to pay and whether MBIA Corp. will have the necessary resources to pay the obligations as they come due. Weighted average life is based on the Company’s estimate of when the principal of the underlying collateral of the CMBS structure will be repaid. A significant increase or decrease in CMBS spreads would result in an increase or decrease in the fair value of the derivative liability, respectively. A significant increase in weighted average life can result in an increase or decrease in the fair value of the derivative liability, depending on the discount rate and the timing of significant losses. Any significant increase or decrease in recovery rates, or MBIA Corp.’s nonperformance risk would result in a decrease or increase in the fair value of the derivative liabilities, respectively. CMBS spreads, recovery rates, nonperformance risk and weighted average lives are determined independently. Changes in one input will not necessarily have any impact on the other inputs.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The significant unobservable input used in the fair value measurement of MBIA Corp.’s multi-sector CDO credit derivatives, which are valued using the Direct Price Model, is nonperformance risk. The nonperformance risk is an assumption of MBIA Corp.’s own ability to pay and whether MBIA Corp. will have the necessary resources to pay the obligations as they come due. Any significant increase or decrease in MBIA Corp.’s nonperformance risk would result in a decrease or increase in the fair value of the derivative liabilities, respectively.

The significant unobservable inputs used in the fair value measurement of MBIA Corp.’s other credit derivatives, which are valued using the BET Model, are recovery rates, nonperformance risk and weighted average life. The recovery rate represents the percentage of notional expected to be recovered after an asset defaults, indicating the severity of a potential loss. The nonperformance risk is an assumption of MBIA Corp.’s own ability to pay and whether MBIA Corp. will have the necessary resources to pay the obligations as they come due. Weighted average life is based on MBIA Corp.’s estimate of when the principal of the underlying collateral will be repaid. A significant increase in weighted average life can result in an increase or decrease in the fair value of the derivative liability, depending on the discount rate and the timing of significant losses. Any significant increase or decrease in recovery rates or MBIA Corp.’s nonperformance risk would result in a decrease or increase in the fair value of the derivative liabilities, respectively. Recovery rates, nonperformance risk and weighted average lives are determined independently. Changes in one input will not necessarily have any impact on the other inputs.

Fair Value Measurements

The following tables present the fair value of the Company’s assets (including short-term investments) and liabilities measured and reported at fair value on a recurring basis as of September 30, 2013 and December 31, 2012:

 

                                                      
     Fair Value Measurements at Reporting Date Using  
     Quoted Prices in
Active Markets for
Identical Assets
     Significant
Other
Observable
Inputs
     Significant
Unobservable
Inputs
    Counterparty
and Cash
Collateral
     Balance as of
September 30,
 

In millions

   (Level 1)      (Level 2)      (Level 3)     Netting      2013  

Assets:

             

Fixed-maturity investments:

             

U.S. Treasury and government agency

   $ 424       $ 137       $ -      $      $ 561   

State and municipal bonds

            1,551         62 (1)              1,613   

Foreign governments

     87         109         5 (1)              201   

Corporate obligations

            1,717         47 (1)              1,764   

Mortgage-backed securities:

             

Residential mortgage-backed agency

            945         17 (1)              962   

Residential mortgage-backed non-agency

            79         -               79   

Commercial mortgage-backed

            26         14 (1)              40   

Asset-backed securities:

             

Collateralized debt obligations

            70         88 (1)              158   

Other asset-backed

            89         57 (1)              146   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total fixed-maturity investments

     511         4,723         290               5,524   

Money market securities

     910                -               913   

Perpetual debt and equity securities

     27         14         11 (1)              52   

Cash and cash equivalents

     1,057                -               1,057   

Derivative assets:

             

Non-insured derivative assets:

             

Interest rate derivatives

            57         -        (53)          
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total derivative assets

            57         -        (53)          

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                                      
     Fair Value Measurements at Reporting Date Using  
     Quoted Prices in
Active Markets for
Identical Assets
     Significant
Other
Observable
Inputs
     Significant
Unobservable
Inputs
    Counterparty
and Cash
Collateral
     Balance as of
September 30,
 

In millions

   (Level 1)      (Level 2)      (Level 3)     Netting      2013  

Assets of consolidated VIEs:

             

Corporate obligations

            46         48 (1)              94   

Mortgage-backed securities:

             

Residential mortgage-backed non-agency

            255         4 (1)              259   

Commercial mortgage-backed

            103         2 (1)              105   

Asset-backed securities:

             

Collateralized debt obligations

            33         20 (1)              53   

Other asset-backed

            65         50 (1)              115   

Money market securities

     156                -               156   

Cash

     46                -               46   

Loans receivable

                   1,704               1,704   

Loan repurchase commitments

                   1,116               1,116   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total assets

   $ 2,707       $ 5,299       $ 3,245      $ (53)       $ 11,198   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Liabilities:

             

Medium-term notes

   $      $      $ 204 (1)     $      $ 204   

Derivative liabilities:

             

Insured derivatives:

             

Credit derivatives

                   1,363               1,370   

Non-insured derivatives:

             

Interest rate derivatives

            195         -        (195)          

Currency derivatives

                   -        (1)          

Other liabilities:

             

Warrants

            48         -               48   

Liabilities of consolidated VIEs:

             

Variable interest entity notes

            1,681         745               2,426   

Derivative liabilities:

             

Currency derivatives

                   15 (1)              15   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total liabilities

   $      $ 1,932       $ 2,327      $ (196)       $ 4,063   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) - Unobservable inputs are either not developed by the Company or do not significantly impact the overall fair values of the aggregate financial assets and liabilities.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                                      
     Fair Value Measurements at Reporting Date Using  
     Quoted Prices in
Active Markets for
Identical Assets
     Significant
Other
Observable
Inputs
     Significant
Unobservable
Inputs
    Counterparty
and Cash
Collateral
     Balance as of
December 31,
 

In millions

   (Level 1)      (Level 2)      (Level 3)     Netting      2012  

Assets:

             

Fixed-maturity investments:

             

U.S. Treasury and government agency

   $ 784       $ 100       $ -      $      $ 884   

State and municipal bonds

            1,429         103 (1)              1,532   

Foreign governments

     86         107         3 (1)              196   

Corporate obligations

            1,140         76 (1)              1,216   

Mortgage-backed securities:

             

Residential mortgage-backed agency

            988         -               988   

Residential mortgage-backed non-agency

            94         4 (1)              98   

Commercial mortgage-backed

            20         28 (1)              48   

Asset-backed securities:

             

Collateralized debt obligations

            65         31 (1)              96   

Other asset-backed

            119         26 (1)              145   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total fixed-maturity investments

     870         4,062         271               5,203   

Money market securities

     585                -               593   

Perpetual debt and equity securities

     23         20         14 (1)              57   

Cash and cash equivalents

     814                -               814   

Derivative assets:

             

Non-insured derivative assets:

             

Interest rate derivatives

            89         5 (1)       (90)          
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total derivative assets

            89         5        (90)          

 

35


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                                      
     Fair Value Measurements at Reporting Date Using  
     Quoted Prices in
Active Markets for
Identical Assets
     Significant
Other
Observable
Inputs
     Significant
Unobservable
Inputs
    Counterparty
and Cash
Collateral
     Balance as of
December 31,
 

In millions

   (Level 1)      (Level 2)      (Level 3)     Netting      2012  

Assets of consolidated VIEs:

             

State and municipal bonds

            41         -               41   

Corporate obligations

            215         78 (1)              293   

Mortgage-backed securities:

             

Residential mortgage-backed non-agency

            869         6 (1)              875   

Commercial mortgage-backed

            410         7 (1)              417   

Asset-backed securities:

             

Collateralized debt obligations

            215         125 (1)              340   

Other asset-backed

            120         64 (1)              184   

Money market securities

     210                -               210   

Cash

     176                -               176   

Loans receivable

                   1,881               1,881   

Loan repurchase commitments

                   1,086               1,086   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total assets

   $ 2,678       $ 6,049       $ 3,537      $ (90)       $ 12,174   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Liabilities:

             

Medium-term notes

   $      $      $ 165 (1)     $      $ 165   

Derivative liabilities:

             

Insured derivatives:

             

Credit derivatives

            13         2,921               2,934   

Non-insured derivatives:

             

Interest rate derivatives

            287         4 (1)       (293)         (2)   

Currency derivatives

                   1 (1)               

Other liabilities:

             

Warrants

                   -                

Liabilities of consolidated VIEs:

             

Variable interest entity notes

            1,727         1,932               3,659   

Derivative liabilities:

             

Interest rate derivatives

            141         -               141   

Currency derivatives

                   21 (1)              21   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Total liabilities

   $      $ 2,175       $ 5,044      $ (293)       $ 6,926   
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) - Unobservable inputs are either not developed by the Company or do not significantly impact the overall fair values of the aggregate financial assets and liabilities.

Level 3 assets at fair value, as of September 30, 2013 and December 31, 2012 represented approximately 29% of total assets measured at fair value. Level 3 liabilities at fair value, as of September 30, 2013 and December 31, 2012 represented approximately 57% and 73%, respectively, of total liabilities measured at fair value.

The following tables present the fair values and carrying values of the Company’s assets and liabilities that are disclosed at fair value but not reported at fair value on the Company’s consolidated balance sheets as of September 30, 2013 and December 31, 2012:

 

36


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                                      
     Fair Value Measurements at Reporting Date Using  
     Quoted Prices in      Significant      Significant      Fair Value      Carry Value  
     Active Markets for      Other Observable      Unobservable      Balance as of      Balance as of  
     Identical Assets      Inputs      Inputs      September 30,      September 30,  

In millions

   (Level 1)      (Level 2)      (Level 3)      2013      2013  

Assets:

              

Other investments

   $      $      $      $      $  

Accrued investment income (1)

     44                       44         44   

Receivable for investments sold (1)

     23                       23         23   

Net cash collateral pledged (1)

     62                       62         62   

Assets of consolidated VIEs:

              

Investments held-to-maturity

                   2,566         2,566         2,809   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 129       $      $ 2,572       $ 2,701       $ 2,944   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

              

Investment agreements

   $      $      $ 902       $ 902       $ 760   

Medium-term notes

                   1,035         1,035         1,350   

Long-term debt

     10         1,282                1,292         1,677   

Payable for investments purchased (2)

     150                       150         150   

Secured loan (2)

                   50         50         50   

Liabilities of consolidated VIEs:

              

Variable interest entity notes

                   2,689         2,689         2,959   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 160       $ 1,282       $ 4,676       $ 6,118       $ 6,946   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial Guarantees:

              

Gross

   $      $      $ 3,097       $ 3,097       $ 2,490   

Ceded

                   69         69         77   

 

(1) - Reported within “Other assets” on MBIA’s consolidated balance sheets.

 

(2) - Reported within “Other liabilities” on MBIA’s consolidated balance sheets.

 

37


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                                      
     Fair Value Measurements at Reporting Date Using  
     Quoted Prices in      Significant      Significant      Fair Value      Carry Value  
     Active Markets for      Other Observable      Unobservable      Balance as of      Balance as of  
     Identical Assets      Inputs      Inputs      December 31,      December 31,  

In millions

   (Level 1)      (Level 2)      (Level 3)      2012      2012  

Assets:

              

Other investments

   $      $      $      $      $  

Accrued investment income (1)

     43                       43         43   

Receivable for investments sold (1)

     17                       17         17   

Net cash collateral pledged (1)

     66                       66         66   

Assets of consolidated VIEs:

              

Investments held-to-maturity

                   2,674         2,674         2,829   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 126       $      $ 2,683       $ 2,809       $ 2,964   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

              

Investment agreements

   $      $      $ 1,175       $ 1,175       $ 944   

Medium-term notes

                   860         860         1,433   

Long-term debt

            702                711         1,732   

Payable for investments purchased (2)

     50                       50         50   

Liabilities of consolidated VIEs:

              

Variable interest entity notes

                   3,147         3,147         3,465   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 59       $ 702       $ 5,182       $ 5,943       $ 7,624   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial Guarantees:

              

Gross

   $      $      $ 650       $ 650       $ 143   

Ceded

                   97         97         91   

 

(1) - Reported within “Other assets” on MBIA’s consolidated balance sheets.

 

(2) - Reported within “Other liabilities” on MBIA’s consolidated balance sheets.

 

38


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The following tables present information about changes in Level 3 assets (including short-term investments) and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2013 and 2012:

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2013

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses) for
the Period
Included in
Earnings for
Assets still
held as of
September 30,
2013
 

Assets:

                         

Foreign governments

  $     $     $     $     $     $     $     $ (3)      $     $     $     $     $  

Corporate obligations

    63        (7)                                      (14)        (6)                    47         

Residential mortgage-backed agency

                                                          17        (3)        17         

Residential mortgage-backed non-agency

                                                                (1)               

Commercial mortgage-backed

    13                                            (1)              2             14         

Collateralized debt obligations

    85                                            (3)              10       (11)        88         

Other asset-backed

    64                    (5)                          (4)              3       (1)        57         

State and municipal bonds

    63                                            (1)                          62         

Perpetual debt and equity securities

    10                                                                    11         

Assets of consolidated VIEs:

                         

Corporate obligations

    48                                                                    48         

Residential mortgage-backed non-agency

                                                          2                    

Commercial mortgage-backed

                (1)                                (1)                                 

Collateralized debt obligations

    35                                            (4)                    (12)        20        (1)   

Other asset-backed

    63              (7)                                (1)              1       (6)        50        (1)   

Loans receivable

    1,790              (12)                                (74)                          1,704        (12)   

Loan repurchase commitments

    1,115                                                                    1,116         
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,362      $ (7)      $ (17)      $     $     $     $     $ (106)      $ (6)      $ 41     $ (34)      $ 3,245      $ (12)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
(Gains) /
Losses
    Unrealized
(Gains) /
Losses
Included
in
Earnings
    Unrealized
(Gains) /
Losses
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
(Gains)
Losses for
the Period
Included in
Earnings for
Liabilities still
held as of
September 30,
2013
 

Liabilities:

                         

Medium-term notes

  $ 188      $     $     $     $     $     $     $     $     $     $     $ 204      $ 17   

Credit derivatives, net

    1,648        28        (285)                                (28)                          1,363        (285)   

Interest rate derivatives, net

                                                                            (15)   

Liabilities of consolidated VIEs:

                         

VIE notes

    824              (6)                                (73)                          745        (6)   

Currency derivatives, net

    16                          (1)                                            15        (1)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 2,676      $ 28      $ (282)      $     $     $     $     $ (101)      $     $     $     $ 2,327      $ (290)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

 

39


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2012

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses) for
the Period
Included in
Earnings for
Assets still
held as of
September 30,
2012
 

Assets:

                         

Foreign governments

  $ 12      $     $     $     $     $     $     $ (10)      $     $     $     $ 12      $  

Corporate obligations

    98                    (2)                          (13)              10        (8)        91         

Residential mortgage-backed agency

                                              (1)                    (3)               

Residential mortgage-backed non-agency

    33        (1)              2                         (5)                    (23)               

Commercial mortgage-backed

    27                    1                                                 30         

Collateralized debt obligations

    29        (4)              9                         (4)                    (4)        30         

Other asset-backed

    69        (2)              2                         (1)                          73         

State and municipal bonds

    25                                            (2)              71              94         

Perpetual debt and equity securities

    13                                                                    14         

Assets of consolidated VIEs:

                         

Corporate obligations

    95              (10)                                (2)                    (3)        83         

Residential mortgage-backed non-agency

    10                                            (1)                    (3)               

Commercial mortgage-backed

    12                                                                    13         

Collateralized debt obligations

    140              (5)        2                         (1)              37              173        (2)   

Other asset-backed

    42              (1)                                (5)              30              66         

Loans receivable

    1,903              61                               (72)                          1,892        61   

Loan repurchase commitments

    1,032              19                                                        1,051        19   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,544      $ (7)      $ 70      $ 14     $     $ 13      $     $ (117)      $     $ 163      $ (44)      $ 3,637      $ 84   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
(Gains) /
Losses
    Unrealized
(Gains) /
Losses
Included
in
Earnings
    Unrealized
(Gains) /
Losses
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
(Gains)
Losses for
the Period
Included in
Earnings for
Liabilities still
held as of
September 30,
2012
 

Liabilities:

                         

Medium-term notes

  $ 151      $     $ 14      $     $     $     $     $     $     $     $     $ 168      $ 14   

Credit derivatives, net

    3,285        (12)        32                                12                          3,317        33   

Interest rate derivatives, net

    (4)                                                                           

Currency derivatives, net

                                                                             

Liabilities of consolidated VIEs:

                         

VIE notes

    1,867              128                                (110)                          1,885        128   

Currency derivatives, net

    21                                                                    23         
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 5,320      $ (12)      $ 176      $     $     $     $     $ (98)      $     $     $     $ 5,394      $ 182   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

 

40


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Transfers into and out of Level 3 were $41 million and $34 million, respectively, for the three months ended September 30, 2013. Transfers into and out of Level 2 were $34 million and $41 million, respectively, for the three months ended September 30, 2013. Transfers into Level 3 were principally related to RMBS agency, CDOs and foreign governments, where inputs, which are significant to their valuation, became unobservable during the quarter. CDOs and other ABS, comprised the majority of the transferred instruments out of Level 3 where inputs, which are significant to their valuation, became observable during the quarter. These inputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1.

Transfers into and out of Level 3 were $168 million and $44 million, respectively, for the three months ended September 30, 2012. Transfers into and out of Level 2 were $44 million and $168 million, respectively, for the three months ended September 30, 2012. Transfers into Level 3 were principally related to state and municipal bonds, CDOs, other ABS and corporate obligations where inputs, which are significant to their valuation, became unobservable during the quarter. RMBS non-agency and corporate obligations comprised the majority of the transferred instruments out of Level 3 where inputs, which are significant to their valuation, became observable during the quarter. These inputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1.

All Level 1, 2 and 3 designations are made at the end of each accounting period.

The following tables present information about changes in Level 3 assets (including short-term investments) and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2013 and 2012:

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2013

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Year
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses) for
the Period
Included in
Earnings for
Assets still
held as of
September 30,
2013
 

Assets:

                         

Foreign governments

  $     $     $     $     $     $     $     $ (11)      $     $ 16      $ (3)      $     $  

Corporate obligations

    76        (5)              11                          (14)        (29)                    47         

Residential mortgage-backed agency

                                                          20        (3)        17         

Residential mortgage-backed non-agency

                                              (3)                    (1)               

Commercial mortgage-backed

    28                                            (2)        (18)              (1)        14         

Collateralized debt obligations

    31        (2)              11              61              (14)        (5)        28        (22)        88         

Other asset-backed

    26                    (5)                          (9)              47        (5)        57         

State and municipal bonds

    103                    (1)                          (4)        (12)        42        (68)        62         

Perpetual debt and equity securities

    14                                                              (3)        11         

Assets of consolidated VIEs:

                         

Corporate obligations

    78        (4)        (7)                                (3)        (25)                    48         

Residential mortgage-backed non-agency

                                              (7)                    (4)               

Commercial mortgage-backed

                (1)                                      (24)        20                     

Collateralized debt obligations

    125              (8)                                (5)        (84)              (14)        20         

Other asset-backed

    64              (7)                                (10)        (2)        11        (6)        50         

Loans receivable

    1,881              208                                (211)        (174)                    1,704        194   

Loan repurchase commitments

    1,086              140                                (110)                          1,116        140   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,532      $ (9)      $ 337      $ 31      $     $ 65      $     $ (403)      $ (373)      $ 195      $ (130)      $ 3,245      $ 347   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

41


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Year
    Realized
(Gains) /
Losses
    Unrealized
(Gains) /
Losses
Included
in
Earnings
    Unrealized
(Gains) /
Losses
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
(Gains)
Losses for the
Period
Included in
Earnings for
Liabilities still
held as of
September 30,
2013
 

Liabilities:

                         

Medium-term notes

  $ 165      $     $ 34      $     $     $     $     $     $     $     $     $ 204      $ 39   

Credit derivatives, net

    2,921        1,548        (1,562)                                (1,548)                          1,363        301   

Interest rate derivatives, net

    (1)                                                              (1)              (21)   

Currency derivatives, net

                                                                (1)               

Liabilities of consolidated VIEs:

                         

VIE notes

    1,932              140                                (251)        (1,076)                    745        53   

Currency derivatives, net

    21              (5)              (1)                                            15        (6)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 5,039      $ 1,548      $ (1,391)      $     $     $     $     $ (1,799)      $ (1,076)      $     $ (2)      $ 2,327      $ 366   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2012

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Year
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses) for
the Period
Included in
Earnings for
Assets still
held as of
September 30,
2012
 

Assets:

                         

Foreign governments

  $ 11      $     $     $     $     $ 22      $     $ (19)      $ (3)      $     $     $ 12      $  

Corporate obligations

    207        (15)              24              18              (29)        (140)        25        (8)        91         

Residential mortgage-backed agency

                                              (1)                    (12)               

Residential mortgage-backed non-agency

    17        (1)              (1)                          (11)        (3)        31        (25)               

Commercial mortgage-backed

    24                                                              (1)        30         

Collateralized debt obligations

    60        (9)              18                          (12)        (10)        14        (31)        30         

Other asset-backed

    317        (58)              71                          (11)        (250)              (6)        73         

State and municipal bonds

    28                                            (5)              71              94         

Perpetual debt and equity securities

    11                                                              (3)        14         

Assets of consolidated VIEs:

                         

Corporate obligations

    69              (15)        (6)              28              (5)              15        (3)        83         

Residential mortgage-backed non-agency

    21                                            (5)        (15)              (4)               

Commercial mortgage-backed

    22                                            (3)        (8)              (6)        13         

Collateralized debt obligations

    203              (5)        (1)                          (1)        (74)        51              173         

Other asset-backed

    67                                            (8)        (35)        34              66         

Loans receivable

    2,046              52                                (204)        (2)                    1,892        52   

Loan repurchase commitments

    1,077              (26)                                                        1,051        (26)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 4,188      $ (83)      $ 29      $ 112      $     $ 78       $     $ (314)      $ (540)      $ 265      $ (99)      $ 3,637      $ 52   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

42


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Year
    Realized
(Gains) /
Losses
    Unrealized
(Gains) /
Losses
Included
in
Earnings
    Unrealized
(Gains) /
Losses
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
(Gains)
Losses for the
Period
Included in
Earnings for
Liabilities still
held as of
September 30,
2012
 

Liabilities:

                         

Medium-term notes

  $ 165      $     $     $     $     $     $     $     $     $     $     $ 168      $  

Credit derivatives, net

    4,790        420        (1,473)                                (420)                          3,317        (538)   

Interest rate derivatives, net

    (3)              (1)                                                              12   

Currency derivatives, net

                                                                             

Liabilities of consolidated VIEs:

                         

VIE notes

    2,889              348                                (369)        (983)                    1,885        292   

Credit derivatives, net

    80                                                  (82)                           

Currency derivatives, net

    17                                                                    23         
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 7,938      $ 420      $ (1,115)      $     $     $     $     $ (789)      $ (1,065)      $     $     $ 5,394      $ (224)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

Transfers into and out of Level 3 were $199 million and $132 million, respectively, for the nine months ended September 30, 2013. Transfers into and out of Level 2 were $132 million and $199 million, respectively, for the nine months ended September 30, 2013. Transfers into Level 3 were principally related to other ABS, state and municipal bonds, CDOs, RMBS agency and CMBS where inputs, which are significant to their valuation, became unobservable during the period. State and municipal bonds and CDOs comprised the majority of the transferred instruments out of Level 3 where inputs, which are significant to their valuation, became observable during the period. These inputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1.

Transfers into and out of Level 3 were $270 million and $99 million, respectively, for the nine months ended September 30, 2012. Transfers into and out of Level 2 were $99 million and $270 million, respectively, for the nine months ended September 30, 2012. Transfers into Level 3 were principally related to state and municipal bonds, CDOs, other asset backed, RMBS non-agency and corporate obligations where inputs, which are significant to their valuation, became unobservable during the period. CDOs, RMBS non-agency, RMBS agency and corporate obligations comprised the majority of the transferred instruments out of Level 3 where inputs, which are significant to their valuation, became observable during the period. These inputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1.

All Level 1, 2 and 3 designations are made at the end of each accounting period.

 

43


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Gains and losses (realized and unrealized) included in earnings related to Level 3 assets and liabilities for the three months ended September 30, 2013 and 2012 are reported on the Company’s consolidated statements of operations as follows:

 

                                           
     Three Months Ended September 30, 2013      Three Months Ended September 30, 2012  

In millions

   Total Gains
(Losses)
Included in
Earnings
     Change in Unrealized
Gains (Losses) for
the Period Included
in Earnings for
Assets and Liabilities
still held as of
September 30, 2013
     Total Gains
(Losses)
Included in
Earnings
     Change in Unrealized
Gains (Losses) for
the Period Included
in Earnings for
Assets and Liabilities
still held as of
September 30, 2012
 

Revenues:

           

Unrealized gains (losses) on insured derivatives

   $ 285       $ 285       $ (32)       $ (33)   

Realized gains (losses) and other settlements on insured derivatives

     (28)                12          

Net gains (losses) on financial instruments at fair value and foreign exchange

     (24)         (1)         (9)         (16)   

Net investment losses related to other-than-temporary impairments

                   (7)          

Revenues of consolidated VIEs:

           

Net gains (losses) on financial instruments at fair value and foreign exchange

     (11)         (6)         (65)         (49)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 222       $ 278       $ (101)       $ (98)   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

44


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Gains and losses (realized and unrealized) included in earnings relating to Level 3 assets and liabilities for the nine months ended September 30, 2013 and 2012 are reported on the Company’s consolidated statements of operations as follows:

 

                                           
     Nine Months Ended September 30, 2013      Nine Months Ended September 30, 2012  

In millions

   Total Gains
(Losses)
Included in
Earnings
     Change in
Unrealized Gains
(Losses) for the
Period Included in
Earnings for Assets
and Liabilities still
held as of
September 30, 2013
     Total Gains
(Losses)
Included in
Earnings
     Change in
Unrealized Gains
(Losses) for the
Period Included in
Earnings for Assets
and Liabilities still
held as of
September 30, 2012
 

Revenues:

           

Unrealized gains (losses) on insured derivatives

   $ 1,562       $ (301)       $ 1,473       $ 538   

Realized gains (losses) and other settlements on insured derivatives

     (1,548)                (420)          

Net gains (losses) on financial instruments at fair value and foreign exchange

     (39)         (11)         (8)         (8)   

Net investment losses related to other-than-temporary impairments

                   (67)          

Revenues of consolidated VIEs:

           

Net gains (losses) on financial instruments at fair value and foreign exchange

     193         293         (337)         (254)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 168       $ (19)       $ 641       $ 276   
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair Value Option

The Company elected to record at fair value certain financial instruments of VIEs that have been consolidated in connection with the adoption of the accounting guidance for consolidation of VIEs, among others.

The following table presents the changes in fair value included in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012 for all financial instruments for which the fair value option was elected:

 

                                           
     Net Gains (Losses) on Financial Instruments at
Fair Value and Foreign Exchange
 
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

       2013              2012              2013              2012      

Fixed-maturity securities held at fair value

   $ (37)       $ 21       $ (35)       $ (36)   

Loans receivable at fair value:

           

Residential mortgage loans

     (87)         (4)         (16)         (103)   

Other loans

            (7)         13         (48)   

Loan repurchase commitments

            19         140         62   

Variable interest entity notes

     164         12         85         140   

 

45


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of September 30, 2013 and December 31, 2012 for loans and VIE notes for which the fair value option was elected:

 

                                                                 
     As of September 30, 2013      As of December 31, 2012  

In millions

   Contractual
Outstanding
Principal
     Fair
Value
     Difference      Contractual
Outstanding
Principal
     Fair
Value
     Difference  

Loans receivable at fair value:

                 

Residential mortgage loans

   $ 1,932       $ 1,622       $ 310       $ 2,307       $ 1,735       $ 572   

Residential mortgage loans (90 days or more past due)

     221         82         139         244         54         190   

Other loans

                          22         22          

Other loans (90 days or more past due)

                          197         70         127   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans receivable at fair value

   $ 2,153       $ 1,704       $ 449       $ 2,770       $ 1,881       $ 889   

Variable interest entity notes

   $ 3,859       $ 2,426       $ 1,433       $ 9,021       $ 3,659       $ 5,362   

Substantially all gains and losses included in earnings during the periods ended September 30, 2013 and December 31, 2012 on loans receivable and VIE notes reported in the preceding table are attributable to credit risk. This is primarily due to the high rate of defaults on loans and the collateral supporting the VIE notes, resulting in depressed pricing of the financial instruments.

Note 7: Investments

Investments, excluding those elected under the fair value option, include debt and equity securities classified as either AFS or HTM. Other invested assets designated as AFS are primarily comprised of money market funds.

The following tables present the amortized cost, fair value, corresponding gross unrealized gains and losses and other-than-temporary impairments (“OTTI”) for AFS and HTM investments in the Company’s consolidated investment portfolio as of September 30, 2013 and December 31, 2012:

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

                                                      
     September 30, 2013  

In millions

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair
Value
     Other-Than-
Temporary
Impairments (1)
 

AFS Investments

              

Fixed-maturity investments:

              

U.S. Treasury and government agency

   $ 526       $ 19       $ (8)       $ 537       $  

State and municipal bonds

     1,632         30         (52)         1,610          

Foreign governments

     192                       201          

Corporate obligations

     1,616         32         (26)         1,622          

Mortgage-backed securities:

              

Residential mortgage-backed agency

     942         10         (18)         934          

Residential mortgage-backed non-agency

     67         13         (6)         74          

Commercial mortgage-backed

     34                (1)         34          

Asset-backed securities:

              

Collateralized debt obligations

     210                (57)         155         (12)   

Other asset-backed

     148                (17)         133          
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     5,367         118         (185)         5,300         (9)   

Money market securities

     911                       911          

Perpetual debt and equity securities

                          10          

Assets of consolidated VIEs:

              

Money market securities

     156                       156          
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 6,443       $ 119       $ (185)       $ 6,377       $ (9)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

HTM Investments

              

Assets of consolidated VIEs:

              

Corporate obligations

   $ 2,809       $      $ (251)       $ 2,566       $  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total HTM investments

   $ 2,809       $      $ (251)       $ 2,566       $  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Represents unrealized gains or losses on other than temporarily impaired securities recognized in AOCI, which includes the non-credit component of impairments, as well as all subsequent changes in fair value of such impaired securities reported in AOCI.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

                                                      
     December 31, 2012  

In millions

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair
Value
     Other-Than-
Temporary
Impairments (1)
 

AFS Investments

              

Fixed-maturity investments:

              

U.S. Treasury and government agency

   $ 819       $ 40       $ (1)       $ 858       $  

State and municipal bonds

     1,446         97         (12)         1,531          

Foreign governments

     183         13                196          

Corporate obligations

     1,058         54         (20)         1,092         5  

Mortgage-backed securities:

              

Residential mortgage-backed agency

     939         19         (1)         957          

Residential mortgage-backed non-agency

     86         11         (8)         89          

Commercial mortgage-backed

     46                (4)         42          

Asset-backed securities:

              

Collateralized debt obligations

     161                (71)         91         (25)   

Other asset-backed

     145                (11)         137          
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     4,883         238         (128)         4,993         (20)   

Money market securities

     580                       580          

Perpetual debt and equity securities

     22                       23          

Assets of consolidated VIEs:

              

State and municipal bonds

     38                       41          

Corporate obligations

     177                (6)         180          

Mortgage-backed securities:

              

Residential mortgage-backed non-agency

     92                (10)         82          

Asset-backed securities:

              

Collateralized debt obligations

     97                (8)         89          

Other asset-backed

     23                       23          

Money market securities

     210                       210          
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 6,122       $ 251       $ (152)       $ 6,221       $ (20)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

HTM Investments

              

Assets of consolidated VIEs:

              

Corporate obligations

   $ 2,829       $      $ (157)       $ 2,674       $  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total HTM investments

   $ 2,829       $      $ (157)       $ 2,674       $  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Represents unrealized gains or losses on other than temporarily impaired securities recognized in AOCI, which includes the non-credit component of impairments, as well as all subsequent changes in fair value of such impaired securities reported in AOCI.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

The following table presents the distribution by contractual maturity of AFS and HTM fixed-maturity securities at amortized cost and fair value as of September 30, 2013. Contractual maturity may differ from expected maturity as borrowers may have the right to call or prepay obligations.

 

                                           
     AFS Securities      HTM Securities  
                   Consolidated VIEs  

In millions

   Amortized Cost      Fair Value      Amortized Cost      Fair Value  

Due in one year or less

   $ 551       $ 552       $      $  

Due after one year through five years

     913         929                 

Due after five years through ten years

     926         925                 

Due after ten years

     1,576         1,564         2,809         2,566   

Mortgage-backed and asset-backed

     1,401         1,330                 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

   $ 5,367       $ 5,300       $ 2,809       $ 2,566   
  

 

 

    

 

 

    

 

 

    

 

 

 

Deposited and Pledged Securities

The fair value of securities on deposit with various regulatory authorities was $11 million and $10 million as of September 30, 2013 and December 31, 2012, respectively. These deposits are required to comply with state insurance laws.

The Company enters into securities borrowing and lending contracts in connection with MBIA’s collateralized investment agreement activities. Such contracts are only transacted with high-quality dealer firms. It is the Company’s policy to take possession of securities borrowed under these contracts. The Company minimizes credit risk from counterparties that might be unable to fulfill their contractual obligations by monitoring customer credit exposure and collateral values and requiring additional collateral to be deposited with the Company when deemed necessary.

Substantially all of the obligations under investment agreements require the Company to pledge securities as collateral. Securities pledged in connection with investment agreement activities may not be repledged by the investment agreement counterparty. As of September 30, 2013 and December 31, 2012, the fair value of securities pledged as collateral for these investment agreements approximated $750 million and $820 million, respectively. The Company’s collateral as of September 30, 2013 consisted principally of RMBS, U.S. Treasury and government agency bonds and state and municipal bonds, and was primarily held with major U.S. banks. Additionally, the Company pledged cash and money market securities as collateral under investment agreements in the amount of $24 million and $144 million as of September 30, 2013 and December 31, 2012, respectively.

 

49


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

Impaired Investments

The following tables present the gross unrealized losses related to AFS and HTM investments as of September 30, 2013 and December 31, 2012:

 

                                                                 
     September 30, 2013  
     Less than 12
Months
     12 Months or
Longer
     Total  

In millions

   Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
 

AFS Investments

                 

Fixed-maturity investments:

                 

U.S. Treasury and government agency

   $ 208       $ (8)       $      $      $ 210       $ (8)   

State and municipal bonds

     730         (48)         58         (4)         788         (52)   

Foreign governments

     12                              12          

Corporate obligations

     610         (23)         20         (3)         630         (26)   

Mortgage-backed securities:

                 

Residential mortgage-backed agency

     528         (18)         32                560         (18)   

Residential mortgage-backed non-agency

                   23         (6)         28         (6)   

Commercial mortgage-backed

     22         (1)                       23         (1)   

Asset-backed securities:

                 

Collateralized debt obligations

            (1)         128         (56)         137         (57)   

Other asset-backed

     22                56         (17)         78         (17)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     2,146         (99)         320         (86)         2,466         (185)   

Perpetual debt and equity securities

                                         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 2,150       $ (99)       $ 320       $ (86)       $ 2,470       $ (185)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

HTM Investments

                 

Assets of consolidated VIEs:

                 

Corporate obligations

   $      $      $ 1,174       $ (251)       $ 1,174       $ (251)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total HTM investments

   $      $      $ 1,174       $ (251)       $ 1,174       $ (251)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

50


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

                                                                 
     December 31, 2012  
     Less than 12
Months
     12 Months or
Longer
     Total  

In millions

   Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
 

AFS Investments

                 

Fixed-maturity investments:

                 

U.S. Treasury and government agency

   $ 234       $ (1)       $      $      $ 234       $ (1)   

State and municipal bonds

     69                87         (12)         156         (12)   

Foreign governments

     11                              12          

Corporate obligations

     202         (2)         57         (18)         259         (20)   

Mortgage-backed securities:

                 

Residential mortgage-backed agency

     173         (1)         38                211         (1)   

Residential mortgage-backed non-agency

                   28         (8)         32         (8)   

Commercial mortgage-backed

                   27         (4)         30         (4)   

Asset-backed securities:

                 

Collateralized debt obligations

                   80         (71)         81         (71)   

Other asset-backed

                   65         (11)         69         (11)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     701         (4)         383         (124)         1,084         (128)   

Perpetual debt and equity securities

                                         

Assets of consolidated VIEs:

                 

Corporate obligations

                   31         (6)         31         (6)   

Mortgage-backed securities:

                 

Residential mortgage-backed non-agency

                   82         (10)         82         (10)   

Asset-backed securities:

                 

Collateralized debt obligations

                   85         (8)         85         (8)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 702       $ (4)       $ 582       $ (148)       $ 1,284       $ (152)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

HTM Investments

                 

Assets of consolidated VIEs:

                 

Corporate obligations

   $ 297       $ (19)       $ 1,287       $ (138)       $ 1,584       $ (157)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total HTM investments

   $ 297       $ (19)       $ 1,287       $ (138)       $ 1,584       $ (157)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross unrealized losses on AFS securities increased as of September 30, 2013 compared with December 31, 2012 primarily due to market price depreciation caused by rising interest rates and not the result of OTTI. Gross unrealized losses on HTM securities increased as of September 30, 2013 compared with December 31, 2012 primarily due to market price depreciation driven by a credit ratings downgrade on one of the HTM corporate obligations and not the result of OTTI.

With the weighting applied on the fair value of each security relative to the total fair value, the weighted average contractual maturity of securities in an unrealized loss position as of September 30, 2013 and December 31, 2012 was 19 and 23 years, respectively. As of September 30, 2013 and December 31, 2012, there were 64 and 153 securities, respectively, that were in an unrealized loss position for a continuous twelve-month period or longer, of which the fair values of 39 and 89 securities, respectively, were below book value by more than 5%.

The following table presents the distribution of securities in an unrealized loss position for a continuous twelve-month period or longer by percentage of fair value below book value by more than 5%:

 

                                                                 
     AFS Securities      HTM Securities  

Percentage of Fair Value Below Book Value

   Number of
Securities
     Book Value
(in millions)
     Fair Value
(in millions)
     Number of
Securities
     Book Value
(in millions)
     Fair Value
(in millions)
 

> 5% to 15%

     13       $ 110       $ 101              $      $  

> 15% to 25%

     12         66         52                        

> 25% to 50%

            53         36                575         345   

> 50%

            52                               
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     38       $ 281       $ 198              $ 575       $ 345   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

51


Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

The following table presents the fair values and gross unrealized losses by credit rating category of ABS, MBS and corporate obligations included in the Company’s consolidated AFS investment portfolio as of September 30, 2013 for which fair value was less than amortized cost. The credit ratings are based on ratings from Moody’s as of September 30, 2013 or an alternate ratings source, such as S&P, when a security is not rated by Moody’s. For investments that are insured by various third-party guarantee insurers, the credit rating reflects the higher of the insurer’s rating or the underlying bond’s rating.

 

                                                                                                                                                         
                                                             Below                              

In millions

   Aaa      Aa      A      Baa      Investment Grade      Not Rated      Total  

Asset Type

   Fair
Value
     Unrealized
Loss
     Fair
Value
     Unrealized
Loss
     Fair
Value
     Unrealized
Loss
     Fair
Value
     Unrealized
Loss
     Fair
Value
     Unrealized
Loss
     Fair
Value
     Unrealized
Loss
     Fair
Value
     Unrealized
Loss
 

ABS

   $ 13       $      $ 59       $ (5)       $      $      $      $      $ 135       $ (69)       $      $      $ 215       $ (74)   

MBS

     558         (18)                                     17         (1)                (1)         15         (5)         611         (25)   

Corporate obligations

     129         (1)         205         (8)         205         (12)         74         (4)         17         (1)                       630         (26)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 700       $ (19)       $ 272       $ (13)       $ 210       $ (12)       $ 94       $ (5)       $ 161       $ (71)       $ 19       $ (5)       $ 1,456       $ (125)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The total ABS, MBS and corporate obligations reported in the preceding table include those which are guaranteed by financial guarantors. In addition, the following table presents information on ABS, MBS and corporate obligations guaranteed by the Company and third-party financial guarantors.

 

                                           
               Insured Securities Rated Below
Investment Grade without the
Effect of Guarantee
 
     Average Credit Rating with the    Average Credit Rating without the    (in millions)         

Asset Type

   Effect of Guarantee    Effect of Guarantee    Fair Value      Percentage  

ABS

   Below investment grade    Below investment grade    $ 101         64%   

MBS

   Baa    Below investment grade      20         99%   

Corporate obligations

   A    A             -  %   

Refer to the table in the “Determination of Credit Loss Guaranteed by the Company and Other Third-Party Guarantors” section within the OTTI section of this note for information on the insured securities included in the table above.

The Company concluded that it does not have the intent to sell securities in an unrealized loss position and it is more likely than not, that it would not have to sell these securities before recovery of their cost basis. In making this conclusion, the Company examined the cash flow projections for its investment portfolios, the potential sources and uses of cash in its businesses, and the cash resources available to its business other than sales of securities. It also considered the existence of any risk management or other plans as of September 30, 2013 that would require the sale of impaired securities. Impaired securities that the Company intends to sell before the expected recovery of such securities’ fair values have been written down to fair value.

Other-Than-Temporary Impairments

Evaluating AFS Securities for OTTI

The Company has an ongoing review process for all securities in its investment portfolio, including a quarterly assessment of OTTI. This evaluation includes both qualitative and quantitative considerations. In assessing whether a decline in value is related to a credit loss, the Company considers several factors, including but not limited to (i) the magnitude and duration of declines in fair value; (ii) the reasons for the declines in fair value, such as general credit spread movements in each asset-backed sector, transaction-specific changes in credit spreads, credit rating downgrades, modeled defaults, and principal and interest payment priorities within each investment structure; and (iii) any guarantees associated with a security such as those provided by financial guarantee insurance companies, including MBIA Corp. and National.

In calculating credit-related losses, the Company utilizes cash flow modeling based on the type of security. The Company’s cash flow analysis considers all sources of cash, including credit enhancement, that support the payment of amounts owed by an issuer of a security. This includes the consideration of cash expected to be provided by financial guarantors, including MBIA Corp., resulting from an actual or potential insurance policy claim. In general, any change in the amount and/or timing of cash flows received or expected to be received, whether or not such cash flows are contractually defined, is reflected in the Company’s cash flow analysis for purposes of assessing an OTTI loss on an impaired security.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

Each quarter, an internal committee, comprising staff that is independent of the Company’s evaluation process for determining OTTI of securities, reviews and approves the valuation of investments. Among other responsibilities, this committee ensures that the Company’s process for identifying and calculating OTTI, including the use of models and assumptions, is reasonable and complies with the Company’s internal policy.

Determination of Credit Loss on ABS, MBS and Corporate Obligations

Investments with unrealized losses that met the above criteria were tested for OTTI and principally related to ABS, MBS and corporate obligations.

ABS investments are evaluated for OTTI using historical collateral performance, deal waterfall and structural protections, credit ratings, and forward looking projections of collateral performance based on business and economic conditions specific to each collateral type and risk. The underlying collateral is evaluated to identify any specific performance concerns, and stress scenarios are considered in forecasting ultimate returns of principal. Based on this evaluation, if a principal default is projected for a security, estimated future cash flows are discounted at the security’s interest rate used to recognize interest income on the security. For CDO investments, the Company utilizes the same tools as for RMBS investments discussed below, aggregating the bond level cash flows to the CDO investment level. If the present value of cash flows is less than the Company’s amortized cost for the security, the difference is recorded as an OTTI loss.

RMBS investments are evaluated for OTTI using several quantitative tools. Loan level data are obtained and analyzed in a model that produces prepayment, default, and severity vectors. The model utilizes macro inputs, including housing price assumptions and interest rates. The vector outputs are used as inputs to a third-party cash flow model, which considers deal waterfall dynamics and structural features, to generate cash flows for an RMBS investment. The expected cash flows of the security are then discounted at the interest rate used to recognize interest income of the security to arrive at a present value amount. If the present value of the cash flows is less than the Company’s amortized cost for the investment, the difference is recorded as an OTTI loss.

Corporate obligation investments are evaluated for OTTI using credit analysis techniques. The Company’s analysis includes a detailed review of a number of quantitative and qualitative factors impacting the value of an individual security. These factors include the interest rate of the security (fixed or floating), the security’s current market spread, any collateral supporting the security, the security’s position in the issuer’s capital structure, and credit rating upgrades or downgrades. Additionally, these factors include an assessment of various issuer-related credit metrics including market capitalization, earnings, cash flow, capitalization, interest coverage, leverage, liquidity, management and a third-party quantitative default probability model. The Company’s analysis is augmented by comparing market prices for similar securities of other issuers in the same sector, as well as any recent corporate or government actions that may impact the ultimate return of principal. If the Company determines that, after considering these factors, a principal default is projected, a recovery analysis is performed using the above data. If the Company’s estimated recovery value for the security is less than its amortized cost, the difference is recorded as an OTTI loss.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

For the nine months ended September 30, 2012, the credit losses recognized in earnings were related to RMBS and CDOs. The following table presents a summary of the significant inputs considered in determining the measurement of the credit losses on securities in which a portion of the impairment is included in AOCI:

 

          
     Nine Months Ended September 30,  

Asset-backed Securities

   2012  

Expected size of losses (1):

  

Range (2)

     12.13% to 97.70%   

Weighted average (3)

     88.48%   

Current subordination levels (4):

  

Range (2)

     0.00% to 0.00%   

Weighted average (3)

     0.00%   

Prepayment speed (annual constant prepayment rate) (5):

  

Range (2)

     0.00% to 30.91%   

Weighted average (3)

     12.16%   

 

(1) - Represents future expected credit losses on impaired assets expressed as a percentage of total outstanding balance.

 

(2) - Represents the range of inputs/assumptions based upon the individual securities within each category.

 

(3) - Calculated by weighting the relevant input/assumption for each individual security by the outstanding notional of the security.

 

(4) - Represents current level of credit protection (subordination) for the securities, expressed as a percentage of the balance of the collateral group backing the bond.
(5) - Values represent high and low points of lifetime vectors of constant prepayment rates.

Determination of Credit Loss Guaranteed by the Company and Other Third-Party Guarantors

The Company does not record OTTI related to credit concerns about issuers of securities insured by MBIA Corp. and National since investors in these securities, including MBIA, are guaranteed payment of principal and interest when due by MBIA. Securities insured by the Company, whether or not owned by the Company, are evaluated for impairment as part of its insurance surveillance process and, therefore, losses on securities insured by the Company are recorded in accordance with its loss reserving policy. Refer to “Note 2: Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 for information about the Company’s loss reserving policy and “Note 5: Loss and Loss Adjustment Expense Reserves” for information about loss reserves.

In considering cash expected to be provided from other third-party financial guarantors, the Company assesses the financial guarantor’s ability to make claim payments under a variety of scenarios that test the guarantor’s ultimate claims paying ability. The weighted average outcome of these scenarios, combined with the cash flows provided by the insured security, are used to determine the recoverability of the Company’s amortized cost.

The following table provides information about securities held by the Company as of September 30, 2013 that were in an unrealized loss position and insured by a financial guarantor, along with the amount of insurance loss reserves corresponding to the par amount owned by the Company:

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

                                

In millions

   Fair Value      Unrealized
Loss
     Insurance Loss
Reserve  (2)
 

Asset-backed:

        

MBIA (1)

   $ 148       $ (58)       $ 15  

Other

            (5)          
  

 

 

    

 

 

    

 

 

 

Total asset-backed

     157         (63)         15  

Mortgage-backed:

        

MBIA (1)

                    

Other

     15                 
  

 

 

    

 

 

    

 

 

 

Total mortgage-backed

     20                 

Corporate obligations:

        

Other

            (2)          
  

 

 

    

 

 

    

 

 

 

Total corporate obligations

            (2)          

Other:

        

MBIA (1)

     104         (6)          

Other

     19                 
  

 

 

    

 

 

    

 

 

 

Total other

     123         (6)          
  

 

 

    

 

 

    

 

 

 

Total

   $ 306       $ (71)       $ 15   
  

 

 

    

 

 

    

 

 

 

 

(1) - Includes investments insured by MBIA Corp. and National.

 

(2) - Insurance loss reserve estimates are based on the proportion of par value owned to the total amount of par value insured.

Credit Loss Rollforward

The portion of certain OTTI losses on fixed-maturity securities that does not represent credit losses is recognized in AOCI. For these impairments, the net amount recognized in earnings represents the difference between the amortized cost of the security and the net present value of its projected future discounted cash flows prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in AOCI. The following table presents the amount of credit loss impairments recognized in earnings on fixed-maturity securities held by MBIA as of the dates indicated, for which a portion of the OTTI losses was recognized in AOCI, and the corresponding changes in such amounts.

 

                                           

In millions

   Three Months Ended September 30,      Nine Months Ended September 30,  

Credit Losses Recognized in Earnings Related to

Other-Than-Temporary Impairments

   2013      2012      2013      2012  

Beginning balance

   $ 186       $ 269       $ 197       $ 341   

Additions for credit loss impairments recognized in the current period on securities previously impaired

                           

Reductions for credit loss impairments previously recognized on securities sold during the period

     (4)         (2)         (14)         (18)   

Reductions for credit loss impairments previously recognized on securities impaired to fair value during the period (1)

            (52)                (111)   

Reductions for increases in cash flows expected to be collected over the remaining life of the security

     (4)                (5)          
  

 

 

    

 

 

    

 

 

    

 

 

 

Ending balance

   $ 178       $ 220       $ 178       $ 220   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

Sales of Available-For-Sale Investments

Gross realized gains and losses are recorded within “Net gains (losses) on financial instruments at fair value and foreign exchange” on the Company’s consolidated statements of operations. The proceeds and gross realized gains and losses from sales of AFS investments for the three and nine months ended September 30, 2013 and 2012 are as follows:

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Proceeds from sales

   $ 695       $ 1,163       $ 3,009       $ 5,697   

Gross realized gains

   $      $ 42       $ 52       $ 100   

Gross realized losses

   $ (15)       $ (6)       $ (25)       $ (101)   

Note 8: Derivative Instruments

Overview

MBIA has entered into derivative instruments through its financial guarantee of CDS and for purposes of hedging risks associated with existing assets and liabilities and forecasted transactions. The Company accounts for derivative instruments in accordance with the accounting principles for derivative and hedging activities, which requires that all such instruments be recorded on the balance sheet at fair value. Refer to “Note 6: Fair Value of Financial Instruments” for the method of determining the fair value of derivative instruments.

U.S. Public Finance Insurance

The Company’s derivative exposure within its U.S. public finance insurance operations primarily consists of insured interest rate and inflation-linked swaps related to insured U.S. public finance debt issues. These derivatives do not qualify for the financial guarantee scope exception. The Company has also purchased certain investments containing embedded derivatives. All derivatives are recorded at fair value on the Company’s consolidated balance sheets with the changes in fair value recorded on the Company’s consolidated statements of operations within “Unrealized gains (losses) on insured derivatives,” for the insured derivatives, or “Net gains (losses) on financial instruments at fair value and foreign exchange” for the embedded derivatives.

Structured Finance and International Insurance

The Company entered into derivative instruments that it viewed as an extension of its core financial guarantee business but which do not qualify for the financial guarantee scope exception and, therefore, must be recorded at fair value on the balance sheet. These insured CDS contracts, primarily referencing corporate, asset-backed, residential mortgage-backed, commercial mortgage-backed, CRE loans and CDO securities, are intended to be held for the entire term of the contract absent a negotiated settlement with the counterparty.

Changes in the fair value of derivatives, excluding insured derivatives, are recorded each period in current earnings within “Net gains (losses) on financial instruments at fair value and foreign exchange”. Changes in the fair value of insured derivatives are recorded each period in current earnings within “Net change in fair value of insured derivatives”. The net change in the fair value of the Company’s insured derivatives has two primary components: (i) realized gains (losses) and other settlements on insured derivatives and (ii) unrealized gains (losses) on insured derivatives. “Realized gains (losses) and other settlements on insured derivatives” include (i) premiums received and receivable on sold CDS contracts, (ii) premiums paid and payable to reinsurers in respect to CDS contracts, (iii) net amounts received or paid on reinsurance commutations, (iv) losses paid and payable to CDS contract counterparties due to the occurrence of a credit event or settlement agreement, (v) losses recovered and recoverable on purchased CDS contracts due to the occurrence of a credit event or settlement agreement and (vi) fees relating to CDS contracts. The “Unrealized gains (losses) on insured derivatives” include all other changes in fair value of the insured derivative contracts.

In certain instances, the Company’s structured finance and international insurance business purchased or issued securities that contain embedded derivatives. In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined by the location of the related security.

Variable Interest Entities

VIEs consolidated by the Company have entered into derivative instruments primarily consisting of interest rate swaps. Interest rate swaps are entered into to mitigate the risks associated with fluctuations in interest rates or fair values of certain contracts.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

Asset/Liability Products

The Company’s asset/liability products business has entered into derivative instruments primarily consisting of interest rate swaps, and cross currency swaps. Interest rate swaps are entered into to hedge the risks associated with fluctuations in interest rates or fair values of certain contracts. Cross currency swaps are entered into to hedge the variability in cash flows resulting from fluctuations in foreign currency rates.

In certain instances, the Company’s asset/liability products business purchased or issued securities that contain embedded derivatives. In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined by the location of the related security.

Changes in the fair value of the Company’s asset/liability products business derivatives are recorded on the Company’s consolidated statements of operations within “Net gains (losses) on financial instruments at fair value and foreign exchange”.

Credit Derivatives Sold

The following tables present information about credit derivatives sold by the Company’s insurance operations that were outstanding as of September 30, 2013 and December 31, 2012. Credit ratings represent the lower of underlying ratings assigned to the collateral by Moody’s, S&P or MBIA.

 

                                                                                       

$ in millions

   As of September 30, 2013  
     Notional Value         

Credit Derivatives Sold

   Weighted
Average
Remaining
Expected
Maturity
     AAA      AA      A      BBB      Below
Investment
Grade
     Total
Notional
     Fair Value
Asset
(Liability)
 

Insured credit default swaps

     2.7 Years      $ 7,412       $ 3,150       $ 1,705       $ 7,419       $ 6,085        $ 25,771       $ (1,355)   

Insured swaps

     19.1 Years               77         3,694         1,592                5,363         (7)   

All others

     28.3 Years                                    36         36         (8)   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total notional

      $   7,412       $   3,227       $   5,399       $   9,011       $   6,121       $ 31,170      
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total fair value

      $ (3)       $      $ (6)       $ (386)       $ (975)          $ (1,370)   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

 

 

                                                                                       

$ in millions

   As of December 31, 2012  
     Notional Value         

Credit Derivatives Sold

   Weighted
Average
Remaining
Expected
Maturity
     AAA      AA      A      BBB      Below
Investment
Grade
     Total
Notional
     Fair Value
Asset
(Liability)
 

Insured credit default swaps

     5.1 Years      $ 10,457       $ 5,862       $ 5,253       $ 11,571       $ 13,859       $ 47,002       $ (2,858)   

Insured swaps

     19.4 Years               103         3,661         1,982         71         5,817         (8)   

All others

     1.8 Years                                    195         195         (68)   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total notional

      $   10,457       $ 5,965       $   8,914       $   13,553       $   14,125       $   53,014      
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total fair value

      $ (7)       $ (70)       $ (72)       $ (732)       $ (2,053)          $ (2,934)   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

 

Internal credit ratings assigned by MBIA on the underlying collateral are derived by the Company’s surveillance group. In assigning an internal rating, current status reports from issuers and trustees, as well as publicly available transaction-specific information, are reviewed. Also, where appropriate, cash flow analyses and collateral valuations are considered. The maximum potential amount of future payments (undiscounted) on CDS contracts are estimated as the notional value plus any additional debt service costs, such as interest or other amounts owing on CDS contracts. The maximum amount of future payments that MBIA may be required to make under these guarantees as of September 30, 2013 is $26.4 billion. This amount is net of $67 million of insured derivatives ceded under reinsurance agreements in which MBIA economically hedges a portion of the credit and market risk associated with its insured derivatives and offsetting agreements with a counterparty. The maximum potential amount of future payments (undiscounted) on insured swaps are estimated as the notional value of such contracts.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

MBIA may hold recourse provisions with third parties in derivative instruments through both reinsurance and subrogation rights. MBIA’s reinsurance arrangements provide that in the event MBIA pays a claim under a guarantee of a derivative contract, MBIA has the right to collect amounts from any reinsurers that have reinsured the guarantee on either a proportional or non-proportional basis, depending upon the underlying reinsurance agreement. MBIA may also have recourse through subrogation rights whereby if MBIA makes a claim payment, it is entitled to any rights of the insured counterparty, including the right to any assets held as collateral.

Counterparty Credit Risk

The Company manages counterparty credit risk on an individual counterparty basis through master netting agreements covering derivative instruments in the asset/liability products segment. There are no master netting agreements in the structured finance and international insurance or the U.S. public finance insurance segments. The master netting agreements in the asset/liability products segment allow the Company to contractually net amounts due from a counterparty with those amounts due to such counterparty when certain triggering events occur. The Company only executes swaps under master netting agreements, which typically contain mutual credit downgrade provisions that generally provide the ability to require assignment or termination in the event either MBIA or the counterparty is downgraded below a specified credit rating.

Under these arrangements, the Company may receive or provide U.S. Treasury and other highly rated securities or cash to secure counterparties’ exposure to the Company or its exposure to counterparties, respectively. Such collateral is available to the holder to pay for replacing the counterparty in the event that the counterparty defaults. As of September 30, 2013, the Company did not hold cash collateral to derivative counterparties but posted cash collateral to derivative counterparties of $219 million. Of this amount, $143 million is netted within “Derivative liabilities”, $16 million is included within “Other liabilities” as cash collateral netted against accrued interest on derivative liabilities and an additional $60 million is included in “Other assets” on the Company’s consolidated balance sheets. As of December 31, 2012, the Company did not hold cash collateral to derivative counterparties but posted cash collateral to derivative counterparties of $285 million. Of this amount, $203 million is netted within “Derivative liabilities”, $16 million is included within “Other liabilities” as cash collateral netted against accrued interest on derivative liabilities and an additional $66 million is included in “Other assets” on the Company’s consolidated balance sheets. As of September 30, 2013 and December 31, 2012, the Company did not post securities to derivative counterparties.

As of September 30, 2013 and December 31, 2012, the fair value on one Credit Support Annex (“CSA”) was $4 million. This CSA governs collateral posting requirements between MBIA and its derivative counterparties. The Company did not receive collateral due to the Company’s credit rating, which was below the CSA minimum credit ratings level for holding counterparty collateral. As of September 30, 2013 and December 31, 2012, the counterparty was rated A2 by Moody’s and A by S&P.

Financial Statement Presentation

The fair value of amounts recognized for eligible derivative contracts executed with the same counterparty under a master netting agreement, including any cash collateral that may have been received or posted by the Company, is presented on a net basis in accordance with accounting guidance for the offsetting of fair value amounts related to derivative instruments. Insured CDSs and insured swaps are not subject to master netting agreements. VIE derivative assets and liabilities are not presented net of any master netting agreements.

As of September 30, 2013, the total fair value of the Company’s derivative assets, after counterparty netting of $53 million, was $13 million, of which $4 million was reported within “Other assets” on the Company’s consolidated balance sheets. Embedded derivatives of $9 million were reported within “Medium-term notes” on the Company’s consolidated balance sheets.

As of September 30, 2013, the total fair value of the Company’s derivative liabilities, after counterparty netting of $53 million and cash collateral posted by the Company of $143 million was $1.4 billion, which was reported within “Derivative liabilities” and “Derivative liabilities” presented under “Liabilities of consolidated variable interest entities” on the Company’s consolidated balance sheets. Embedded derivatives of $16 million were reported within “Medium-term notes” on the Company’s consolidated balance sheets.

Counterparty netting of derivative assets and liabilities offsets balances in “Interest rate swaps” and “Currency swaps” in the table below.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

The following table presents the total fair value of the Company’s derivative assets and liabilities by instrument and balance sheet location, before counterparty netting and posting of cash collateral, as of September 30, 2013:

 

                                                      

In millions

          Derivative Assets (1)      Derivative Liabilities (1)   

Derivative Instruments

   Notional
Amount
Outstanding
     Balance Sheet Location    Fair Value      Balance Sheet Location    Fair Value  

Not designated as hedging instruments:

              

Insured credit default swaps

   $ 25,771       Other assets    $      Derivative liabilities    $ (1,355)   

Insured swaps

     5,363       Other assets           Derivative liabilities      (7)   

Interest rate swaps

     1,575       Other assets      57       Derivative liabilities      (195)   

Interest rate swaps-embedded

     490       Medium-term notes           Medium-term notes      (16)   

Currency swaps

     20       Other assets           Derivative liabilities      (1)   

Currency swaps-VIE

     102       Other assets-VIE           Derivative liabilities-VIE      (15)   

All other

     36       Other assets           Derivative liabilities      (8)   

All other-VIE

     280       Other assets-VIE           Derivative liabilities-VIE       

All other-embedded

     10       Other investments           Other investments       
  

 

 

       

 

 

       

 

 

 

Total non-designated derivatives

   $ 33,647          $ 66          $ (1,597)   
  

 

 

       

 

 

       

 

 

 

 

(1) - In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined by the location of the related host contract.

As of December 31, 2012, the total fair value of the Company’s derivative assets, after counterparty netting of $90 million, was $12 million, of which $4 million was reported within “Other assets” and “Other assets” presented under “Assets of consolidated variable interest entities” on the Company’s consolidated balance sheets. Embedded derivatives of $8 million were reported within “Medium-term notes” on the Company’s consolidated balance sheets.

As of December 31, 2012, the total fair value of the Company’s derivative liabilities, after counterparty netting of $90 million and cash collateral posted by the Company of $203 million, was $3.1 billion which was reported within “Derivative liabilities” and “Derivative liabilities” presented under “Liabilities of consolidated variable interest entities” on the Company’s consolidated balance sheets. Embedded derivatives of $36 million were reported within “Medium-term notes” and “Other investments” on the Company’s consolidated balance sheets.

Counterparty netting of derivative assets and liabilities offsets balances in “Interest rate swaps” and “Currency swaps” in the table below.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

The following table presents the total fair value of the Company’s derivative assets and liabilities by instrument and balance sheet location, before counterparty netting and posting of cash collateral, as of December 31, 2012:

 

                                                      

In millions

          Derivative Assets (1)      Derivative Liabilities (1)  

Derivative Instruments

   Notional
Amount
Outstanding
     Balance Sheet Location    Fair Value      Balance Sheet Location    Fair Value  

Not designated as hedging instruments:

              

Insured credit default swaps

   $ 47,320       Other assets    $      Derivative liabilities    $ (2,858)   

Insured swaps

     5,817       Other assets           Derivative liabilities      (8)   

Non-insured credit default swaps

     10       Other assets           Derivative liabilities       

Interest rate swaps

     1,637       Other assets      94       Derivative liabilities      (290)   

Interest rate swaps-VIE

     2,728       Other assets-VIE           Derivative liabilities-VIE      (141)   

Interest rate swaps-embedded

     483       Medium-term notes           Medium-term notes      (35)   

Currency swaps

     40       Other assets           Derivative liabilities      (3)   

Currency swaps-VIE

     110       Other assets-VIE           Derivative liabilities-VIE      (21)   

All other

     195       Other assets           Derivative liabilities      (68)   

All other-VIE

     280       Other assets-VIE           Derivative liabilities-VIE       

All other-embedded

     20       Other investments           Other investments      (1)   
  

 

 

       

 

 

       

 

 

 

Total non-designated derivatives

   $ 58,640          $ 102          $ (3,425)   
  

 

 

       

 

 

       

 

 

 

 

(1) - In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of the Company’s embedded derivative instruments is determined by the location of the related host contract.

The following table presents the effect of derivative instruments on the consolidated statements of operations for the three months ended September 30, 2013:

 

                     

In millions

           

Derivatives Not Designated as

Hedging Instruments

  

Location of Gain (Loss) Recognized in Income on Derivative

   Net Gain (Loss)
Recognized  in
Income
 

Insured credit default swaps

   Unrealized gains (losses) on insured derivatives    $ 287   

Insured credit default swaps

   Realized gains (losses) and other settlements on insured derivatives      (28)   

Interest rate swaps

   Net gains (losses) on financial instruments at fair value and foreign exchange      17   

Interest rate swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE       

Currency swaps

   Net gains (losses) on financial instruments at fair value and foreign exchange      (1)   

All other

   Unrealized gains (losses) on insured derivatives      (2)   
     

 

 

 

Total

      $ 275   
     

 

 

 

The following tables present the effect of derivative instruments on the consolidated statements of operations for the three months ended September 30, 2012:

 

                                           

In millions

                         

Derivatives in Fair Value

Hedging Relationships

  

Location of Gain (Loss)

Recognized in Income on

Derivative

   Gain (Loss)
Recognized in
Income on
Derivative
     Gain (Loss)
Recognized in
Income on
Hedged Item
     Net Gain (Loss)
Recognized  in
Income
 

Interest rate swaps

   Net gains (losses) on financial
instruments at fair value and
foreign exchange
   $ (12)       $ 12       $  
     

 

 

    

 

 

    

 

 

 

Total

      $ (12)       $ 12       $  
     

 

 

    

 

 

    

 

 

 

 

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Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

                     

In millions

         

Derivatives Not Designated as

Hedging Instruments

 

Location of Gain (Loss) Recognized in Income on Derivative

  Net Gain (Loss)
Recognized in
Income
 

Insured credit default swaps

  Unrealized gains (losses) on insured derivatives   $ (40)   

Insured credit default swaps

  Realized gains (losses) and other settlements on insured derivatives     12   

Interest rate swaps

  Net gains (losses) on financial instruments at fair value and foreign exchange     (26)   

Interest rate swaps-VIE

  Net gains (losses) on financial instruments at fair value and foreign exchange-VIE      

Currency swaps

  Net gains (losses) on financial instruments at fair value and foreign exchange      

Currency swaps-VIE

  Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     (2)   

All other

  Unrealized gains (losses) on insured derivatives      
   

 

 

 

Total

    $ (40)   
   

 

 

 

The following table presents the effect of derivative instruments on the consolidated statements of operations for the nine months ended September 30, 2013:

 

                     

In millions

         

Derivatives Not Designated as

Hedging Instruments

 

Location of Gain (Loss) Recognized in Income on Derivative

  Net Gain (Loss)
Recognized  in
Income
 

Insured credit default swaps

  Unrealized gains (losses) on insured derivatives   $ 1,502   

Insured credit default swaps

  Realized gains (losses) and other settlements on insured derivatives     (1,548)   

Interest rate swaps

  Net gains (losses) on financial instruments at fair value and foreign exchange     58   

Interest rate swaps-VIE

  Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     17   

Currency swaps

  Net gains (losses) on financial instruments at fair value and foreign exchange      

Currency swaps-VIE

  Net gains (losses) on financial instruments at fair value and foreign exchange-VIE      

All other

  Unrealized gains (losses) on insured derivatives     60   
   

 

 

 

Total

    $ 96   
   

 

 

 

The following tables present the effect of derivative instruments on the consolidated statements of operations for the nine months ended September 30, 2012:

 

                                           

In millions

                     

Derivatives in Fair Value

Hedging Relationships

 

Location of Gain (Loss)

Recognized in Income on

Derivative

  Gain (Loss)
Recognized in
Income on
Derivative
    Gain (Loss)
Recognized in
Income on
Hedged Item
    Net Gain (Loss)
Recognized in
Income
 

Interest rate swaps

  Net gains (losses) on financial instruments at fair value and foreign exchange   $ 25      $ (25)      $  

Interest rate swaps

  Interest income (expense)                 (3)   
   

 

 

   

 

 

   

 

 

 

Total

    $ 25      $ (25)      $ (3)   
   

 

 

   

 

 

   

 

 

 

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

                     

In millions

         

Derivatives Not Designated as

Hedging Instruments

 

Location of Gain (Loss) Recognized in Income on Derivative

  Net Gain(Loss)
Recognized in
Income
 

Insured credit default swaps

  Unrealized gains (losses) on insured derivatives   $ 1,463   

Insured credit default swaps

  Realized gains (losses) and other settlements on insured derivatives     (420)   

Non-insured credit default swaps

  Net gains (losses) on financial instruments at fair value and foreign exchange     (1)   

Non-insured credit default swaps-VIE

  Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     (1)   

Interest rate swaps

  Net gains (losses) on financial instruments at fair value and foreign exchange     (76)   

Interest rate swaps-VIE

  Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     39   

Currency swaps

  Net gains (losses) on financial instruments at fair value and foreign exchange      

Currency swaps-VIE

  Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     (5)   

All other

  Unrealized gains (losses) on insured derivatives     10   

All other

  Net gains (losses) on financial instruments at fair value and foreign exchange     11   

All other-VIE

  Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     (2)   
   

 

 

 

Total

    $ 1,019   
   

 

 

 

Note 9: Debt

The Company has disclosed its debt in “Note 10: Debt” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. The following debt discussion provides an update to the Company’s Annual Report on Form 10-K.

Long-Term Debt

The Company’s long-term debt consists of surplus notes and MBIA Inc. corporate debt. As of September 30, 2013, accrued interest on the Company’s long-term debt was reported within “Long-term debt” on the Company’s consolidated balance sheets. Prior to September 30, 2013, the accrued interest on long-term debt was included in “Other liabilities” on the Company’s consolidated balance sheets. The accrued interest on long-term debt has been reclassified in the prior year’s financial statements to conform to the current presentation. This reclassification had no impact on total revenues, expenses, assets, liabilities, shareholders’ equity, operating cash flows, investing cash flows, or financing cash flows for all periods presented.

Surplus Notes

As of September 30, 2013 and December 31, 2012, there was $940 million of principal outstanding related to surplus notes. As of September 30, 2013 and December 31, 2012, accrued interest related to these surplus notes was $143 million and $61 million, respectively.

Interest and principal payments on the 14% Fixed to Floating Rate Surplus Notes due 2033 are subject to prior approval by the Superintendent of the NYSDFS. From the January 15, 2013 interest payment to the present, MBIA Insurance Corporation’s requests for approval of the note interest payments have been denied by the NYSDFS. MBIA Insurance Corporation provided notice to the Fiscal Agent that it has not made a scheduled interest payment. The deferred interest payment will become due on the first business day on or after which MBIA Insurance Corporation obtains approval to make such payment. No interest will accrue on the deferred interest.

MBIA Inc. Corporate Debt

As of September 30, 2013 and December 31, 2012, there was $584 million and $723 million, respectively, of principal outstanding related to MBIA Inc. corporate debt. As of September 30, 2013 and December 31, 2012, accrued interest related to MBIA Inc. corporate debt was $10 million and $9 million, respectively.

In connection with the BofA Settlement Agreement in May of 2013, MBIA Corp. received $136 million principal amount of the 5.70% Senior Notes due 2034 as consideration for the settlement. These notes were subsequently transferred to National. On a consolidated basis, receipt of these notes by the Company reduced its outstanding debt.

Medium-Term Note Obligations

During the nine months ended September 30, 2013, the Company redeemed $486 million par value outstanding of MTNs issued by the Company’s conduit segment at a cost of 100% of par value. The Company also repurchased approximately $80 million par value outstanding of MBIA Global Funding, LLC (“GFL”) MTNs issued by the Company’s asset/liability segment at a weighted average cost of approximately 92% of par value.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 9: Debt (continued)

 

Other Borrowing Arrangements

Blue Ridge Secured Loan

In connection with the BofA Settlement Agreement in May of 2013, MBIA Insurance Corporation and Blue Ridge entered into the Blue Ridge Secured Loan, pursuant to which Blue Ridge agreed to make revolving loans to MBIA Insurance Corporation in an aggregate of up to $500 million. The following is a summary of the material terms of the Loan Agreement, as amended by Amendment No. 1 entered into in June of 2013. This summary is not complete and is subject to the full text of the document described below.

During the third quarter of 2013, MBIA Insurance Corporation borrowed $50 million under the Blue Ridge Secured Loan. MBIA Insurance Corporation elected the LIBOR Loans interest rate option and the average interest rate for the three months ended September 30, 2013 was 7.76%. Accrued interest expense for the Blue Ridge Secured Loan is included within “Other liabilities” on the Company’s consolidated balance sheets.

Use of Proceeds

The proceeds of the Blue Ridge Secured Loan can be used for general corporate purposes. Once the Blue Ridge Secured Loan amount outstanding exceeds $50 million, the proceeds must be used for the purpose of meeting ordinary course liquidity requirements expected to arise during the 30 days following such borrowing.

Conditions to Borrowings

Blue Ridge’s obligation to make loans is subject to usual and customary conditions precedent, including that on the date of the borrowing (i) no default is continuing or would occur as a result of that borrowing and (ii) the representations and warranties specified in the Blue Ridge Secured Loan agreement are true and accurate in all material respects.

Security

The Loans are secured by a pledge of collateral consisting of the following: (i) MBIA Insurance Corporation’s right to receive put-back recoveries related to ineligible mortgage loans included in its insured RMBS transactions; (ii) MBIA Insurance Corporation’s future recoveries on defaulted insured RMBS transactions resulting from expected excess spread generated by performing loans in such transactions; (iii) MBIA Insurance Corporation’s future installment premiums; and (iv) 65% of the voting capital stock of MBIA Corp.’s equity interest in MBIA UK (Holdings) Limited (the collateral described in clauses (ii) and (iii) above, the (“Other Prepayment Collateral”). Under the Blue Ridge Secured Loan, the value of the collateral described in clauses (i) through (iii) above, must at all times be greater than $1.0 billion. As of September 30, 2013, the value of the collateral was approximately $2.5 billion.

Interest Rate and Fees

Borrowings under the Blue Ridge Secured Loan have a variable interest rate, at MBIA Insurance Corporation’s option based on either: (i) the adjusted LIBOR plus an applicable margin (“LIBOR Loans”), or (ii) the highest between (a) Bank of America’s prime rate and (b) the sum of the federal funds effective rate plus 0.5% and (c) the adjusted LIBOR plus 1.00%, plus an applicable margin (“Base Rate Loans”). The applicable margin for the LIBOR Loans and the Base Rate Loans is 7.50% and 6.50%, respectively. With respect to any available but undrawn amounts under the Blue Ridge Secured Loan, MBIA Insurance Corporation is obligated to pay a commitment fee on such undrawn amounts of 2.00% per annum. The amount of the commitment fee and interest expense for the nine months ended September 30, 2013 was $4 million.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 9: Debt (continued)

 

Scheduled Repayment

The maturity date of the Blue Ridge Secured Loan is three years from the closing date, at which time any then outstanding loans will be due and payable.

Mandatory Prepayments

Loans are required to be prepaid (and Blue Ridge’s commitments reduced) in an amount equal to the following: (i) 100% of the proceeds of any put-back recoveries and (ii) on and after the first anniversary of the closing date, from the proceeds of any Other Prepayment Collateral in an amount equal to (x) from the first anniversary of the closing date to the second anniversary of the closing date, 50% of such proceeds and (y) from the second anniversary of the closing date to the maturity date, 100% of such proceeds. In addition, loans must be prepaid (and Blue Ridge’s commitments reduced) in an amount equal to 100% of the proceeds of certain disposals of assets to the extent exceeding $1 million in aggregate for all such disposals. Finally, loans must be prepaid (but without any commitment reduction) to the extent the proceeds of any borrowing that is a liquidity borrowing are not in fact used for such purposes and have not otherwise been used to repay loans within the required 30-day period.

Representations and Warranties

The Blue Ridge Secured Loan contains certain customary representations and warranties for loan facilities of this type, which are given on the closing date and at each borrowing under the Blue Ridge Secured Loan agreement, including with respect to organization of MBIA Insurance Corporation, power of authority, enforceability of the loan documents, receipt of any necessary governmental approvals, financial condition and solvency, and compliance with laws.

Covenants

The Blue Ridge Secured Loan contains certain affirmative, negative and financial covenants, which are customary for loan facilities of this type in relation to, among other matters, delivery of financial statements, notice of material events, existence and conduct of business, payment of taxes and other obligations, maintenance of books and records, compliance with all material laws, and maintenance of insurance, and includes a requirement that MBIA Insurance Corporation maintain at least $750 million of statutory capital (defined as policyholders’ surplus plus contingency reserves).

In addition, MBIA Insurance Corporation may not, without Blue Ridge’s consent, consummate any amendments, compromises or commutations with respect to insurance obligations and settlements of litigation to the extent (x) that payments made in respect of such remediation efforts subsequent to June 28, 2013 exceed $260 million in the aggregate, (y) after giving effect thereto and to any borrowings of loans in connection therewith, the aggregate principal amount of loans outstanding would exceed $200 million or (z) after giving effect thereto, all remediation efforts taken as a whole since the closing date, would, cumulatively, have reduced MBIA Insurance Corporation’s statutory capital by $100 million or more.

In addition, MBIA Insurance Corporation may not prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment of principal, interest or fees or any other payment on, any of its indebtedness (including the Surplus Notes), except for payments of the loans under the Blue Ridge Secured Loan agreement and except for certain refinancings and refundings of its indebtedness.

Change of Control

MBIA Insurance Corporation may be required to prepay all amounts outstanding under the Blue Ridge Secured Loan agreement upon the occurrence of a change of control.

Events of Default

The Blue Ridge Secured Loan agreement contains certain events of default which are customary for loan facilities of this type (and with customary cure periods), including failure to pay principal, interest or fees on the loans, misrepresentation, failure to observe covenants or conditions, failure to pay other material indebtedness, insolvency and bankruptcy matters, and unlawfulness or invalidity of the loan documents.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 10: Income Taxes

The Company’s income taxes and the related effective tax rates for the three and nine months ended September 30, 2013 and 2012 are as follows:

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Income (loss) before income taxes

   $ 171      $ (57)       $ 122       $ 759  

Provision (benefit) for income taxes

   $ 39      $ (64)       $      $ 161  

Effective tax rate

     22.8%         112.3%          3.3%          21.2%   

For the nine months ended September 30, 2013, the Company’s effective tax rate applied to its pre-tax income was lower than the U.S. statutory tax rate primarily as a result of the decrease in the valuation allowance against its deferred tax asset.

For the nine months ended September 30, 2012, the Company’s effective tax rate applied to its pre-tax income was lower than the U.S. statutory tax rate as a result of the decrease in the valuation allowance, the release of a portion of the reserve for uncertain tax benefits and the benefit of tax-exempt interest income from investments.

For interim reporting purposes, the Company has calculated its effective tax rate for the full year of 2013 by adjusting annual forecasted pre-tax income for mark-to-market income, fair value adjustments, capital gains/losses, and other adjustments, when projecting its full year effective tax rate. The Company has accounted for these items at the federal applicable tax rate after applying the projected full year effective tax rate to actual nine-month results before discrete items.

Deferred Tax Asset, Net of Valuation Allowance

The Company establishes a valuation allowance against its deferred tax asset when it is more likely than not that all or a portion of the deferred tax asset will not be realized. All evidence, both positive and negative, needs to be identified and considered in making the determination. Future realization of the existing deferred tax asset ultimately depends, in part, on the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under the tax law.

As of September 30, 2013, the Company reported a net deferred tax asset of $1.2 billion. The $1.2 billion net deferred tax asset is net of a $94 million valuation allowance. As of September 30, 2013, the Company had a valuation allowance against a portion of the deferred tax asset related to losses from asset impairments as these losses are considered capital losses, have a five-year carryforward period, once recognized, and can only offset capital gain income. The September 30, 2013 valuation allowance reflects a decrease of $52 million from the December 31, 2012 valuation allowance of $146 million. The decrease in the valuation allowance for the nine months ended September 30, 2013 was primarily due to the generation of capital gain income from the termination of certain contracts.

The Company has concluded that it is more likely than not that its net deferred tax asset will be realized. In its conclusion, the Company considered the following evidence (both positive and negative):

 

   

Due to the long-tail nature of the financial guarantee business, MBIA Inc.’s insurance subsidiaries, without regard to any new business, will have a steady stream of scheduled premium earnings with respect to the existing insured portfolio. Additionally, MBIA Corp.’s announcement in February 2008 of a suspension in writing new structured finance transactions and a permanent cessation with respect to insuring new CDS contracts, except in transactions related to the reduction of existing derivative exposure, would not have an impact on the expected earnings related to the existing insured portfolio.

 

   

The Company performed taxable income projections over a twenty-year period to determine whether it will have sufficient income to offset its deferred tax asset that will generate future ordinary deductions. In this analysis, the Company concluded that premium earnings, including projected new business at National, combined with investment income, less deductible expenses, will be sufficient to recover its net deferred tax asset. The Company’s taxable income projections used to assess the recoverability of its deferred tax asset include an estimate of future loss and LAE equal to the present value discount of loss reserves already recognized on the balance sheet and an estimate of LAE which is generally insignificant. The Company does not assume additional losses, with the exception of the accretion of its existing present value loss reserves, because the Company establishes case basis reserves on a present value basis based on an estimate of probable losses on specifically identified credits that have defaulted or are expected to default.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 10: Income Taxes (continued)

 

   

While the lack of strong credit ratings assigned by the rating agencies have significantly adversely impacted the Company’s ability to write new insurance business, these ratings did not have a material impact on earnings from the existing insured portfolio, which the Company believes will be sufficient to absorb losses in the event that the cumulative unrealized losses become fully impaired.

 

   

With respect to installment policies, the Company generally does not have an automatic cancellation provision solely in connection with ratings downgrades. With regard to upfront policies, to the extent that the issuer chooses to terminate a policy, any unearned premium reserve with respect to that policy will be accelerated into earnings (i.e. refundings).

After reviewing all of the evidence available, both positive and negative, the Company believes that it has appropriately valued the recoverability of its deferred tax assets, net of the valuation allowance, as of September 30, 2013. The Company continues to assess the adequacy of its valuation allowance as additional evidence becomes available. The Company’s recent financial results have been volatile which has impacted management’s ability to accurately project future taxable income. Continued volatility or losses beyond those projected may cause the Company to conclude that certain of the deferred tax assets within the total deferred tax assets of $1.2 billion as of September 30, 2013 may not be realizable. The Company performs an analysis every quarter to review its conclusion as to the ability to realize the deferred tax asset.

Accounting for Uncertainty in Income Taxes

The Company’s policy is to record and disclose any change in UTB and related interest and/or penalties to income tax in the consolidated statements of operations.

 

          

In millions

      

Unrecognized tax benefit as of December 31, 2012

   $ 47   

The gross amount of the increase/(decrease) in the UTB as a result of tax positions taken:

  

During a prior year

      

During the current year

     11   

The amounts of decreases in the UTB related to settlements with taxing authorities

      

The reduction in the UTB as a result of the applicable statute of limitations

      
  

 

 

 

Unrecognized tax benefit as of September 30, 2013

   $ 58   
  

 

 

 

MBIA’s major tax jurisdictions include the U.S. and the U.K. MBIA and its U.S. subsidiaries file a U.S. consolidated federal income tax return.

The U.K. tax authorities are currently auditing tax years 2005 through 2010. On June 5, 2013, the Company met with the HM Revenue & Customs (“HMRC”). During the third quarter of 2013, the Company sent HMRC additional information supporting its position. Currently, discussions with HMRC are ongoing and a resolution has not been reached. As of September 30, 2013, the Company has not established a reserve for this issue.

During the third quarter of 2013, the Company met with New York State Department of Taxation and Finance to discuss the Company’s respective positions regarding certain issues related to the 2008 tax year. Currently, discussions are ongoing and a resolution has not been reached. As of September 30, 2013, the Company has not established a reserve for this issue.

As of December 31, 2012, the Company’s consolidated NOL carryforward was $1.3 billion which will expire between tax years 2029 through 2032. As a result of commutation activity in the second quarter of 2013, the Company’s NOL has significantly increased from December 31, 2012. As of September 30, 2013, the Company’s NOL is approximately $2.8 billion. As of December 31, 2012, the Company also had a capital loss carryforward of $165 million which will expire between tax years 2013 through 2017. However, as of September 30, 2013, the Company has generated year-to-date capital gain income sufficient to fully utilize the 2012 capital loss carryforward.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 11: Business Segments

MBIA manages its activities through three principal business operations: U.S. public finance insurance, structured finance and international insurance, and advisory services. The Company’s U.S. public finance insurance business is operated through National, its structured finance and international insurance business is operated through MBIA Corp., and its advisory services business is primarily operated through Cutwater. MBIA Inc. and certain of its subsidiaries also manage certain other business activities, the results of which are reported in its corporate, asset/liability products, and conduit segments. The corporate segment includes revenues and expenses that arise from general corporate activities. While the asset/liability products and conduit businesses represent separate business segments, they may be referred to collectively as “wind-down operations” as the funding programs managed through those businesses are in wind-down.

As defined by segment reporting, an operating segment is a component of a company (i) that engages in business activities from which it earns revenue and incurs expenses, (ii) whose operating results are regularly reviewed by the Chief Operating Decision Maker to assess the performance of the segment and to make decisions about the allocation of resources to the segment and, (iii) for which discrete financial information is available. The following sections provide a description of each of the Company’s reportable operating segments.

U.S. Public Finance Insurance

The Company’s U.S. public finance insurance segment is principally conducted through National. The financial guarantees issued by National provide unconditional and irrevocable guarantees of the payment of principal of, and interest or other amounts owing on, U.S. public finance insured obligations when due. The obligations are generally not subject to acceleration, except that National may have the right, at its discretion, to accelerate insured obligations upon default or otherwise. National issues financial guarantees for municipal bonds, including tax-exempt and taxable indebtedness of U.S. political subdivisions, as well as utility districts, airports, health care institutions, higher educational facilities, student loan issuers, housing authorities and other similar agencies and obligations issued by private entities that finance projects that serve a substantial public purpose. Municipal bonds and privately issued bonds used for the financing of public purpose projects are generally supported by taxes, assessments, fees or tariffs related to the use of these projects, lease payments or other similar types of revenue streams. National has not written any meaningful amount of business since its formation in 2009.

Structured Finance and International Insurance

The Company’s structured finance and international insurance segment is principally conducted through MBIA Corp. The financial guarantees issued by MBIA Corp. generally provide unconditional and irrevocable guarantees of the payment of principal of, and interest or other amounts owing on, global structured finance and non-U.S. public finance insured obligations when due, or in the event MBIA Corp. has the right, at its discretion, to accelerate insured obligations upon default or otherwise, upon MBIA Corp.’s acceleration. Certain guaranteed investment contracts written by MBIA Inc. are insured by MBIA Corp., and if MBIA Inc. were to have insufficient assets to pay amounts due upon maturity or termination, MBIA Corp. would make such payments. MBIA Corp. also insures debt obligations of the following affiliates:

 

   

MBIA Inc.;

 

   

GFL;

 

   

Meridian Funding Company, LLC;

 

   

LaCrosse Financial Products, LLC, a wholly-owned affiliate, in which MBIA Corp. has written insurance policies guaranteeing the obligations under CDS, including termination payments that may become due upon certain events including the insolvency or payment default of the financial guarantor or the CDS issuer.

MBIA Corp.’s guarantees insure structured finance and asset-backed obligations, privately issued bonds used for the financing of public purpose projects, which are primarily located outside of the U.S. and that include toll roads, bridges, airports, public transportation facilities, utilities and other types of infrastructure projects serving a substantial public purpose, and obligations of sovereign-related and sub-sovereign issuers. Structured finance and ABS typically are securities repayable from expected cash flows generated by a specified pool of assets, such as residential and commercial mortgages, insurance policies, consumer loans, corporate loans and bonds, trade and export receivables, and leases for equipment, aircraft and real estate property. The Company is no longer insuring new credit derivative contracts except for transactions related to the reduction of existing derivative exposure. MBIA Corp. has not written any meaningful amount of business since 2008.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 11: Business Segments (continued)

 

Advisory Services

The advisory services segment primarily consists of the operations of Cutwater Investor Services Corp. (“Cutwater-ISC”), Cutwater Asset Management Corp. (“Cutwater-AMC”), and Trifinium. Cutwater-ISC and Cutwater-AMC provide advisory services, including cash management, discretionary asset management and structured products on a fee-for-service basis. Cutwater offers these services to public, not-for-profit, corporate and financial services clients, including MBIA Inc. and its subsidiaries, as well as portfolio accounting and reporting services. Cutwater-ISC and Cutwater-AMC are Securities and Exchange Commission registered investment advisers. Cutwater-AMC is also a Financial Industry Regulatory Authority member firm. Trifinium provides certain advisory services primarily in the European Union and is regulated by the Financial Conduct Authority in the U.K.

Corporate

The Company’s corporate segment is principally conducted through Optinuity Alliance Resources Corporation (“Optinuity”), which provides general support services to the corporate segment and other operating businesses. Optinuity is a reportable segment that includes revenues and expenses that arise from general corporate activities, such as fees, net investment income, net gains and losses, interest expense on MBIA Inc. debt and general corporate expenses. Employees of the service company provide various support services including management, legal, accounting, treasury, information technology, and insurance portfolio surveillance, among others, on a fee-for-service basis. The service company’s revenues and expenses are included in the results of the corporate segment.

Wind-down Operations

The Company’s wind-down operations consist of the asset/liability products and conduit segments. The asset/liability products segment principally consists of the activities of MBIA Inc., MBIA Investment Management Corp. (“IMC”) and GFL. IMC, along with MBIA Inc., provided customized investment agreements, guaranteed by MBIA Corp., for bond proceeds and other public funds for such purposes as construction, loan origination, escrow and debt service or other reserve fund requirements. It also provided customized products for funds that are invested as part of asset-backed or structured product transactions. GFL raised funds through the issuance of MTNs with varying maturities, which were, in turn, guaranteed by MBIA Corp. GFL lent the proceeds of these MTN issuances to MBIA Inc. (“GFL Loans”). MBIA Inc. invested the proceeds of investment agreements and GFL Loans in eligible investments, which consisted of investment grade securities rated investment grade at the time of purchase and maintained a minimum average double-A credit quality rating at the time of purchase. MBIA Inc. primarily purchases domestic securities, which are pledged to MBIA Corp. as security for its guarantees on investment agreements and MTNs.

The Company’s conduit segment administers one conduit through MBIA Asset Finance, LLC. Assets financed by this conduit are currently funded by MTNs.

The ratings downgrades of MBIA Corp. have resulted in a substantial reduction of funding activities and the termination and collateralization of certain investment agreements, as well as winding down of existing asset/liability products and conduit obligations.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 11: Business Segments (continued)

 

Segments Results

The following tables provide the Company’s segment results for the three months ended September 30, 2013 and 2012:

 

                                                                            
     Three Months Ended September 30, 2013  

In millions

   U.S.
Public
Finance
Insurance
     Structured
Finance and
International
Insurance
    Advisory
Services
    Corporate      Wind-down
Operations
     Eliminations     Consolidated  

Revenues (1)

   $ 93       $ 39      $     $ 10       $      $      $ 151   

Net change in fair value of insured derivatives

            257                                   257   

Net gains (losses) on financial instruments at fair value and foreign exchange

            (3)              37         (29)                 

Net gains (losses) on extinguishment of debt

                                      (1)         

Other net realized gains (losses)

     (29)                                          (29)   

Revenues of consolidated VIEs

            30              (1)                       30   

Inter-segment revenues (2)

     10         20              35         (3)         (70)         
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total revenues

     74         343        11        81         (18)         (71)        420   

Losses and loss adjustment

     35         63                                   98   

Operating

     13         22        16        29                       80   

Interest

            27              13         19                59   

Expenses of consolidated VIEs

            12                                   12   

Inter-segment expenses (2)

     20         23                     17         (66)         
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

     68         147        19        45         36         (66)        249   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Income (loss) before income taxes

   $      $ 196      $ (8)      $ 36       $ (54)       $ (5)      $ 171   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Identifiable assets

   $ 6,509       $ 12,096     $ 47     $ 910       $ 1,785       $ (3,714) (3)     $ 17,633   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements, investment management fees and other fees.

 

(2) - Represents intercompany premium income and expense, intercompany asset management fees and expenses, and intercompany interest income and expense pertaining to intercompany receivables and payables.

 

(3) - Consists of intercompany reinsurance balances, repurchase agreements and deferred income taxes.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 11: Business Segments (continued)

 

                                                                            
     Three Months Ended September 30, 2012  

In millions

   U.S. Public
Finance
Insurance
     Structured
Finance and
International
Insurance
     Advisory
Services
     Corporate      Wind-down
Operations
     Eliminations     Consolidated  

Revenues (1)

   $ 149       $ 59       $      $      $      $      $ 225   

Net change in fair value of insured derivatives

            (21)                                     (21)   

Net gains (losses) on financial instruments at fair value and foreign exchange

     22         14                11         (40)                 

Net investment losses related to other-than-temporary impairments

            (4)                (4)                       (8)   

Other net realized gains (losses)

                                                

Revenues of consolidated VIEs

            57                       20                77   

Inter-segment revenues (2)

     43         29                53         (1)         (132)         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenues

     214         134         13         64         (12)         (132)        281   

Losses and loss adjustment

            167                                     171   

Operating

     14         29         12         24                       80   

Interest

            33                14         22                69   

Expenses of consolidated VIEs

            15                                     18   

Inter-segment expenses (2)

     32         54                       39         (132)         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

     50         298         15         42         65         (132)        338   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Income (loss) before income taxes

   $ 164       $ (164)       $ (2)       $ 22       $ (77)       $      $ (57)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Identifiable assets

   $ 7,134       $ 17,399       $ 53       $ 843       $ 2,861       $ (6,158) (3)     $ 22,132   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

 

(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements, investment management fees and other fees.

 

(2) - Represents intercompany premium income and expense, intercompany asset management fees and expenses, and intercompany interest income and expense pertaining to intercompany receivables and payables.

 

(3) - Consists of intercompany reinsurance balances, repurchase agreements and loans.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 11: Business Segments (continued)

 

The following tables provide the Company’s segment results for the nine months ended September 30, 2013 and 2012:

 

                                                                            
     Nine Months Ended September 30, 2013  

In millions

   U.S. Public
Finance
Insurance
     Structured
Finance and
International
Insurance
     Advisory
Services
     Corporate      Wind-down
Operations
     Eliminations     Consolidated  

Revenues (1)

   $ 314       $ 120       $ 13       $ 15       $ 21       $      $ 483   

Net change in fair value of insured derivatives

            14                                     14   

Net gains (losses) on financial instruments at fair value and foreign exchange

     30         31                39         (38)                62   

Net gains (losses) on extinguishment of debt

                                 11         38 (3)       49   

Other net realized gains (losses)

     (29)                                            (29)   

Revenues of consolidated VIEs

            174                (10)                       172   

Inter-segment revenues (2)

     81         52         20         56         (5)         (204)         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenues

     396         391         33         100         (3)         (166)        751   

Losses and loss adjustment

     105         (13)                                     92   

Operating

     57         91         42         125                       316   

Interest

            84                36         59                179   

Expenses of consolidated VIEs

            38                                     42   

Inter-segment expenses (2)

     72         115                       32         (233)         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

     234         315         48         169         96         (233)        629   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Income (loss) before income taxes

   $ 162       $ 76       $ (15)       $ (69)       $ (99)       $ 67       $ 122   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Identifiable assets

   $ 6,509       $ 12,096       $ 47       $ 910       $ 1,785       $ (3,714) (4)     $ 17,633   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements, investment management fees and other fees.

 

(2) - Represents intercompany premium income and expense, intercompany asset management fees and expenses, intercompany interest income, expenses pertaining to intercompany receivables and payables and intercompany loans.

 

(3) - Represents the gain on the debt received as consideration in connection with the BofA Settlement Agreement.

 

(4) - Consists of intercompany reinsurance balances, repurchase agreements and deferred income taxes.

 

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Table of Contents

MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 11: Business Segments (continued)

 

                                                                            
     Nine Months Ended September 30, 2012  

In millions

   U.S. Public
Finance
Insurance
     Structured
Finance and
International
Insurance
     Advisory
Services
     Corporate      Wind-down
Operations
     Eliminations     Consolidated  

Revenues (1)

   $ 419       $ 194       $ 16       $ 10       $ 44       $      $ 683   

Net change in fair value of insured derivatives

            1,053                                     1,053   

Net gains (losses) on financial instruments at fair value and foreign exchange

     43         80                19         (160)                (18)   

Net investment losses related to other-than-temporary impairments

            (45)                (4)         (56)                (105)   

Other net realized gains (losses)

                                                

Revenues of consolidated VIEs

            23                       60                83   

Inter-segment revenues (2)

     123         10         26         132         (19)         (272)         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total revenues

     585         1,316         42         163         (131)         (272)        1,703   

Losses and loss adjustment

     15         315                                     330   

Operating

     112         120         38         69                       343   

Interest

            99                43         72                214   

Expenses of consolidated VIEs

            46                       11                57   

Inter-segment expenses (2)

     91         154         10         10         87         (352)         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total expenses

     218         734         48         122         174         (352)        944   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Income (loss) before income taxes

   $ 367       $ 582       $ (6)       $ 41       $ (305)       $ 80       $ 759   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Identifiable assets

   $ 7,134       $ 17,399       $ 53       $ 843       $ 2,861       $ (6,158) (3)     $ 22,132   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) - Represents the sum of third-party financial guarantee net premiums earned, net investment income, insurance-related fees and reimbursements, investment management fees and other fees.

 

(2) - Represents intercompany premium income and expense, intercompany asset management fees and expenses, and intercompany interest income and expense pertaining to intercompany receivables and payables.

 

(3) - Consists of intercompany reinsurance balances, repurchase agreements and loans.

Premiums on financial guarantees and insured derivatives reported within the Company’s insurance segments are generated within and outside the U.S. The following table summarizes premiums earned on financial guarantees and insured derivatives by geographic location of risk for the three and nine months ended September 30, 2013 and 2012:

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Total premiums earned:

           

United States

   $ 82       $ 141       $ 297       $ 402   

United Kingdom

                   26         27   

Europe (excluding United Kingdom)

                          12   

Internationally diversified

                          13   

Central and South America

     13                28         40   

Asia

                           

Other

                           
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 112       $ 168       $ 377       $ 506   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 11: Business Segments (continued)

 

The following tables provide the results of the segments within the wind-down operations for the three months ended September 30, 2013 and 2012:

 

                                           
     Three Months Ended September 30, 2013  

In millions

   Asset /
Liability
Products
     Conduits      Eliminations      Total Wind-
down
Operations
 

Revenues (1)

   $      $      $      $  

Net gains (losses) on financial instruments at fair value and foreign exchange

     (29)                       (29)   

Net gains (losses) on extinguishment of debt

                           

Revenues of consolidated VIEs

                           

Inter-segment revenues (2)

     (1)         (2)                (3)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     (17)         (1)                (18)   

Interest

     19                       19   

Inter-segment expenses (2)

            15                17   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     21         15                36   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

   $ (38)       $ (16)       $      $ (54)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Identifiable assets

   $ 1,586       $ 198       $      $ 1,785   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Represents the sum of third-party interest income, investment management services fees and other fees.

 

(2) - Represents intercompany asset management fees and expenses plus intercompany interest income and expense pertaining to intercompany debt.

 

                                           
     Three Months Ended September 30, 2012  

In millions

   Asset /
Liability
Products
     Conduits      Eliminations      Total Wind-
down
Operations
 

Revenues (1)

   $      $      $      $  

Net gains (losses) on financial instruments at fair value and foreign exchange

     (40)                       (40)   

Revenues of consolidated VIEs

            20                20   

Inter-segment revenues (2)

     (1)                       (1)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     (32)         20                (12)   

Operating

                           

Interest

     22                       22   

Expenses of consolidated VIEs

                           

Inter-segment expenses (2)

            36                39   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     26         39                65   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

   $ (58)       $ (19)       $      $ (77)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Identifiable assets

   $ 2,219       $ 693       $ (51)       $ 2,861   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Represents the sum of third-party interest income, investment management services fees and other fees.

 

(2) - Represents intercompany asset management fees and expenses plus intercompany interest income and expense pertaining to intercompany debt.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 11: Business Segments (continued)

 

The following tables provide the results of the segments within the wind-down operations for the nine months ended September 30, 2013 and 2012:

 

                                           
     Nine Months Ended September 30, 2013  

In millions

   Asset /
Liability
Products
     Conduits      Eliminations      Total Wind-
down
Operations
 

Revenues (1)

   $ 21       $      $      $ 21   

Net gains (losses) on financial instruments at fair value and foreign exchange

     (38)                       (38)   

Net gains (losses) on extinguishment of debt

     11                       11   

Revenues of consolidated VIEs

                           

Inter-segment revenues (2)

     (3)         (8)                (5)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     (9)                       (3)   

Operating

                           

Interest

     59                       59   

Expenses of consolidated VIEs

                           

Inter-segment expenses (2)

            26                32   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     66         30                96   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

   $ (75)       $ (30)       $      $ (99)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Identifiable assets

   $ 1,586       $ 198       $      $ 1,785   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Represents the sum of third-party interest income, investment management services fees and other fees.

 

(2) - Represents intercompany asset management fees and expenses plus intercompany interest income and expense pertaining to intercompany debt.

 

                                           
     Nine Months Ended September 30, 2012  

In millions

   Asset /
Liability
Products
     Conduits      Eliminations      Total Wind-
down
Operations
 

Revenues (1)

   $ 44       $      $      $ 44   

Net gains (losses) on financial instruments at fair value and foreign exchange

     (160)                       (160)   

Net investment losses related to other-than-temporary impairments

     (56)                       (56)   

Revenues of consolidated VIEs

            60                60   

Inter-segment revenues (2)

     (15)         (2)         (2)         (19)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     (187)         58         (2)         (131)   

Operating

                           

Interest

     72                       72   

Expenses of consolidated VIEs

            11                11   

Inter-segment expenses (2)

     16         71                87   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     92         82                174   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

   $ (279)       $ (24)       $ (2)       $ (305)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Identifiable assets

   $ 2,219       $ 693       $ (51)       $ 2,861   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Represents the sum of third-party interest income, investment management services fees and other fees.

 

(2) - Represents intercompany asset management fees and expenses plus intercompany interest income and expense pertaining to intercompany debt.

 

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Notes to Consolidated Financial Statements (Unaudited)

 

Note 12: Earnings Per Share

Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the dilutive effect of all stock options, warrants and other items outstanding during the period that could potentially result in the issuance of common stock. For the three months ended September 30, 2013 and 2012, there were 26,988,764 and 28,732,318, respectively, of stock options and warrants outstanding that were not included in the diluted earnings per share calculation because they were antidilutive. For the nine months ended September 30, 2013 and 2012, there were 27,369,789 and 28,785,415, respectively, of stock options and warrants outstanding that were not included in the diluted earnings per share calculation because they were antidilutive.

The following table presents the computation of basic and diluted earnings per share for the three and nine months ended September 30, 2013 and 2012:

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  

$ in millions except share and per share amounts

   2013      2012      2013      2012  

Net income (loss)

   $ 132       $      $ 118       $ 598   

Basic weighted average shares (1)

     192,711,608         193,879,994         193,440,078         193,760,654   

Effect of common stock equivalents:

           

Stock options and warrants

     4,035,163         1,097,648         4,322,410         1,074,883   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted weighted average shares

     196,746,771         194,977,642         197,762,488         194,835,537   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) per common share:

           

Basic

   $ 0.68       $ 0.04       $ 0.61       $ 3.09   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted

   $ 0.67       $ 0.04       $ 0.60       $ 3.07   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes 4,349,481 and 5,524,396 of unvested restricted stock and units that receive nonforfeitable dividends or dividend equivalents for the three months ended September 30, 2013 and 2012, respectively. Includes 4,981,970 and 5,442,143 of unvested restricted stock and units that receive nonforfeitable dividends or dividend equivalents for the nine months ended September 30, 2013 and 2012, respectively.

Note 13: Accumulated Other Comprehensive Income

The following table presents the changes in the components of AOCI for the nine months ended September 30, 2013:

 

                                

In millions

   Unrealized
Gains (Losses)
on AFS
Securities, Net
     Foreign Currency
Translation, Net
     Total  

Balance, January 1, 2013

   $ 43       $ 13       $ 56   

Other comprehensive income before reclassifications

     (91)         (8)         (99)   

Amounts reclassified from AOCI

     (7)                (7)   
  

 

 

    

 

 

    

 

 

 

Net current period other comprehensive income (loss)

     (98)         (8)         (106)   
  

 

 

    

 

 

    

 

 

 

Balance, September 30, 2013

   $ (55)       $      $ (50)   
  

 

 

    

 

 

    

 

 

 

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 13: Accumulated Other Comprehensive Income (continued)

 

The following table presents the details of the reclassifications from AOCI for the nine months ended September 30, 2013:

 

                     

In millions

           

Details about AOCI Components

   Amounts
Reclassified
from AOCI
    

Affected Line Item on the Consolidated Statements of Operations

Unrealized gains (losses) on AFS securities:

     

Realized gain on sale of securities

   $ 15      

Net gains (losses) on financial instruments at fair value and foreign exchange

Amortization on securities

     (4)      

Net investment income

  

 

 

    
     11      

Income (loss) before income taxes

         

Provision (benefit) for income taxes

  

 

 

    

Total reclassifications for the period

   $     

Net income (loss)

  

 

 

    

Note 14: Commitments and Contingencies

The following commitments and contingencies provide an update of those discussed in “Note 20: Commitments and Contingencies” in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, and should be read in conjunction with the complete descriptions provided in the aforementioned Form 10-K.

Recovery Litigation

MBIA Insurance Corp. v. Countrywide Home Loans, Inc., et al.; Index No. 602825/08 (N.Y. Sup. Ct., N.Y. County)

In May of 2013, the parties reached an agreement to resolve MBIA’s claims in this action. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the comprehensive settlement agreement.

MBIA Insurance Corp. v. Bank of America Corp.; Countrywide Home Loans, Inc., Countrywide Securities Corp., and Countrywide Financial Corp. et al.; Case No. BC417572 (Ca. Super. Ct., County of Los Angeles)

In May of 2013, the parties reached an agreement to resolve MBIA’s claims in this action. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the comprehensive settlement agreement.

MBIA Insurance Corp. v. Federal Deposit Insurance Corporation (in its corporate capacity and as conservator and receiver for IndyMac Federal Bank, F.S.B.); Civil Action No. 09-01011 (ABJ) (D.D.C.)

On March 8, 2013, the United States Court of Appeals for the D.C. Circuit affirmed the district court’s ruling dismissing MBIA Corp.’s amended complaint.

MBIA Insurance Corp. v. Credit Suisse Securities (USA) LLC, et al. ; Index No. 603751/2009 (N.Y. Sup. Ct., N.Y. County)

On March 8, 2013, the defendants filed their answer to the amended complaint. On April 19, 2013, the court issued an order scheduling fact discovery to close by June 30, 2014.

MBIA Insurance Corp. v. J.P. Morgan Securities LLC (f/k/a Bear, Stearns & Co. Inc.) ; Index No. 64676/2012 (N.Y. Sup. Ct., County of Westchester)

On October 9, 2013, J.P. Morgan Securities LLC filed its motion for summary judgment.

MBIA Insurance Corp. v. Ally Financial Inc. (f/k/a GMAC, LLC) et al. ; 12-cv-02563 SRN/TNL (D. Minn.)

This case is currently stayed.

MBIA Insurance Corp. v. Flagstar ABS, LLC, et al.; 13-cv-0262 (JSR) (S.D.N.Y.)

The parties filed a Stipulation of Discontinuance and Order of Dismissal with Prejudice of this action on May 2, 2013. Under the terms of the settlement, MBIA Corp. dismissed the lawsuit against Flagstar Bank in exchange for $110 million in cash and other consideration.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 14: Commitments and Contingencies (continued)

 

Transformation Litigation

ABN AMRO Bank N.V. et al. v. Eric Dinallo et al.; Index no. 601846/09 (N.Y. Sup. Ct., N.Y. County)

On March 4, 2013, the court issued a decision dismissing the Article 78 proceeding. On April 2, 2013, the remaining plaintiffs filed a Notice of Appeal to the Appellate Division, First Department. In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the settlement agreements.

ABN AMRO Bank N.V. et al. v. MBIA Inc. et al.; Index No. 601475/2009 (N.Y. Sup. Ct., N.Y. County)

In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the settlement agreements.

Barclays Bank PLC., et al. v. Wrynn et al.; Index No. 651811/2010 (N.Y. Sup. Ct., N.Y. County)

In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the settlement agreements.

CQS ABS Master Fund Ltd., CQS Select ABS Master Fund Ltd., and CQS ABS Alpha Master Fund Ltd. v. MBIA Inc. et al .; Civil Action No. 12-cv-6840 (R.S.) (S.D.N.Y.)

On October 23, 2013, the plaintiffs filed a motion for a preliminary injunction seeking to prospectively enjoin National from issuing dividends during the pendency of the litigation. Although the motion referenced the dividend that the Company previously had disclosed that National intended to pay in the fourth quarter of 2013, that dividend was paid prior to the filing of the motion and therefore is not subject to the relief requested by the motion. Refer to “Note 1: Business Developments and Risks and Uncertainties” for information regarding this dividend. National filed its reply to the motion on November 1, 2013, and believes it is not meritorious and should be denied. The court has adjourned oral argument on the motion to November 14, 2013. The court entered a revised Management Plan and Scheduling Order setting a fact discovery deadline of April 4, 2014.

Broadbill Partners LP, et al. v. MBIA Inc., et al. ; Index No. 653865/2012 (N.Y. Sup. Ct., N.Y. County)

On June 6, 2013, the plaintiffs voluntarily dismissed the litigation without prejudice. A Stipulation of Discontinuance was filed on June 7, 2013.

Corporate Litigation

Bank of America v. MBIA Inc. and The Bank of New York Mellon, as Indenture Trustee; Index No. 70444/2012 (N.Y. Sup. Ct., Westchester County)

In May of 2013, the parties reached an agreement to resolve their respective claims in this action. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the comprehensive settlement agreement.

MBIA Inc. v. Bank of America Corp. and Blue Ridge Investments, L.L.C.; Index No. 51664/2013 (N.Y. Sup. Ct., Westchester County)

In May of 2013, the parties reached an agreement to resolve their respective claims in this action. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the comprehensive settlement agreement.

Mary Crescente v. Joseph Brown, et al.; Index No. 17595/2008 (N.Y. Sup. Ct., Westchester County)

On March 25, 2013, a Stipulation of Discontinuance was filed with the court resolving the litigation.

Ambac Bond Insurance Coverage Cases , Coordinated Proceeding Case No. JCCP 4555 (Super. Ct. of Cal., County of San Francisco)

The plaintiffs filed a notice of appeal of the March 22, 2013 decision that granted the Bond Insurer defendants’ motion to strike pursuant to California’s Anti-SLAPP statute dismissing the plaintiffs’ claims under California’s Cartwright Act. On October 1, 2013, the Bond Insurer defendants’ filed a notice of cross-appeal.

Tri-City Healthcare District v. Citibank. et al.; Case No. 30-2010-00359692 (Super. Ct. of Cal., County of Orange)

The parties reached an agreement to resolve Tri-City Healthcare District’s claims in this matter.

 

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MBIA Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 14: Commitments and Contingencies (continued)

 

City of Phoenix v. AMBAC et al. , Case No. 2:10-cv-00555-TMB (D. Ariz.)

On June 4, 2013, the parties reached an agreement to resolve the City of Phoenix’s claims in this matter.

National Public Finance Guarantee Corp. et al. v City of Detroit, Michigan et al. ; Adv. Pro. No 13-05309-swr (Bkcy. E.D. MI)

On November 8, 2013, National (together with Assured Guaranty Municipal Corp.) commenced an adversary proceeding against the City of Detroit and certain individuals employees/managers in the Chapter 9 bankruptcy case titled In re: City of Detroit, Michigan; Case No. 13-53846, pending in the United States Bankruptcy Court for the Eastern District of Michigan. The complaint seeks, among other things, a declaration that the City of Detroit and its employees/managers must comply with Michigan state law in the collection, segregation and use of restricted ad valorem tax proceeds levied and pledged to repay the principal and interest on several series of Detroit’s unlimited tax general obligation bonds.

The Company is defending against the aforementioned actions in which it is a defendant and expects ultimately to prevail on the merits. There is no assurance, however, that the Company will prevail in these actions. Adverse rulings in these actions could have a material adverse effect on the Company’s ability to implement its strategy and on its business, results of operations, cash flows and financial condition. At this stage of the litigation, there has not been a determination as to the amount, if any, of damages. Accordingly, the Company is not able to estimate any amount of loss or range of loss.

There are no other material lawsuits pending or, to the knowledge of the Company, threatened, to which the Company or any of its subsidiaries is a party.

Note 15: Subsequent Events

Refer to “Note 14: Commitments and Contingencies” for information about legal proceedings that occurred after September 30, 2013.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

This quarterly report of MBIA Inc. (“MBIA”, the “Company”, “we”, “us” or “our”) includes statements that are not historical or current facts and are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe”, “anticipate”, “project”, “plan”, “expect”, “estimate”, “intend”, “will likely result”, “looking forward”, or “will continue” and similar expressions identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. MBIA cautions readers not to place undue reliance on any such forward-looking statements, which speak only to their respective dates. We undertake no obligation to publicly correct or update any forward-looking statement if the Company later becomes aware that such result is not likely to be achieved.

The following are some of the factors that could affect financial performance or could cause actual results to differ materially from estimates contained in or underlying the Company’s forward-looking statements:

 

   

the possibility that the Company will experience severe losses or liquidity needs due to increased deterioration in its insurance portfolios and in particular, due to the performance of insured credit default swaps (“CDS”) that are backed by or reference commercial mortgage-backed securities (“CMBS”) pools and commercial real estate (“CRE”) collateralized debt obligations (“CDOs”), insured residential mortgage-backed securities (“RMBS”) transactions, and insured asset-backed security (“ABS”) CDOs;

 

   

uncertainty regarding whether the Company will realize, or will be delayed in realizing, insurance loss recoveries expected in disputes with sellers/servicers of RMBS transactions and excess spread at the levels recorded in its consolidated financial statements;

 

   

failure to implement our risk reduction and liquidity strategies because of an inability to draw on expected liquidity sources or obtain regulatory approvals;

 

   

the possibility that loss reserve estimates are not adequate to cover potential claims;

 

   

our ability to access capital and our exposure to significant fluctuations in liquidity and asset values within the global credit markets, in particular within our asset/liability products segment;

 

   

our ability to fully implement our strategic plan, including our ability to achieve high stable ratings for National Public Finance Guarantee Corporation (together with its subsidiaries, “National”) or any of our other insurance companies and our ability to commute certain of our insured exposures, including as a result of limited available liquidity;

 

   

the possibility of deterioration in the economic environment and financial markets in the United States (“U.S.”) or abroad, and adverse developments in European sovereign credit performance, real estate market performance, credit spreads, interest rates and foreign currency levels;

 

   

the possibility that severe fiscal stress will result in credit losses or impairments on obligations of state and local governments that we insure;

 

   

the possibility of impairment of general obligation bonds that we insure as a result of municipal issuers that are experiencing severe financial stress filing for protection under Chapter 9 of the United States Bankruptcy Code and the unpredictable outcome of bankruptcy proceedings;

 

   

changes in the Company’s or its insurance subsidiaries’ credit ratings;

 

   

competitive conditions for bond insurance, including potential entry into the public finance market of additional insurers of municipal bonds, and changes in the demand for financial guarantee insurance;

 

   

the effects of governmental regulation, including insurance laws, securities laws, tax laws, legal precedents and accounting rules; and

 

   

uncertainties that have not been identified at this time.

The above factors provide a summary of and are qualified in their entirety by the risk factors discussed under “Risk Factors” in Part II, Item 1A of this Form 10-Q. In addition, refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements for a discussion of certain risks and uncertainties related to our financial statements.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

EXECUTIVE OVERVIEW

MBIA operates one of the largest financial guarantee insurance businesses in the industry and is a provider of asset management and advisory services. These activities are managed through three business segments: U.S. public finance insurance; structured finance and international insurance; and advisory services. Our U.S. public finance insurance business is primarily operated through National, our structured finance and international insurance business is primarily operated through MBIA Insurance Corporation and its subsidiaries (“MBIA Corp.”), and our asset management and advisory services business is primarily operated through Cutwater Holdings, LLC and its subsidiaries (“Cutwater”). We also manage certain business activities through our corporate, asset/liability products, and conduit segments. Our corporate segment includes revenues and expenses that arise from general corporate activities. Funding programs managed through our asset/liability products and conduit segments are in wind-down.

Recent Developments

Operating Cost Reductions

In order to better position the Company for future business opportunities, in the third quarter of 2013, we initiated cost reduction measures focused on our legal, consulting, staffing and head office occupancy costs. As a result, expenses for net compensation costs related to staff reductions totaled $18 million and were recorded primarily during the third quarter of 2013. These expenses are included in “Operating expenses” on our consolidated statements of operations. These staff reductions reduced our worldwide June 30, 2013 headcount by approximately 21%. We estimate that our staff reductions will result in annualized future savings of approximately $24 million, which will be offset by any future staff increases and increases in compensation. In addition, as a result of the potential sale of the office used in our operations, we recorded an impairment charge of $29 million on our Armonk, New York facility. The carrying value of the facility was adjusted to its fair market value, which was determined based on an independent third-party appraisal of the facility. This impairment charge is reflected in the results of our U.S. public finance insurance segment and is included in “Other net realized gains (losses)” on our consolidated statements of operations.

In addition, during the three and nine months ended September 30, 2013, operating expenses included $2 million and $89 million, respectively, related to settlement, consulting and legal expenses associated with the resolution of litigation matters with Bank of America, Societe Generale, and Flagstar Bank.

Bank of America Settlement Agreement

In May of 2013, MBIA Inc., together with its subsidiaries MBIA Corp. and National, entered into a comprehensive settlement agreement and related agreements (the “BofA Settlement Agreement”) with Bank of America Corporation and certain of its subsidiaries (collectively, “Bank of America”). Refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements for a discussion of the BofA Settlement Agreement. As a result of the BofA Settlement Agreement, the repayment of the remaining balance and accrued interest on MBIA Corp.’s secured loan from National (the “National Secured Loan”) and recent credit ratings upgrades, the Company is currently evaluating strategies for re-entry into the U.S. public finance market.

Societe Generale Settlement

In May of 2013, the Company entered into an agreement with Societe Generale pursuant to which MBIA commuted $4.2 billion of gross insured exposure comprising ABS CDOs, structured CMBS pools and CRE CDOs. Refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements for a description of the settlement.

Residential Capital LLC Agreement

In May of 2013, the Company, the Consenting Claimants, Residential Capital LLC (“ResCap”) and Ally Financial Inc. (“Ally”), agreed to the terms of a comprehensive plan agreement to support ResCap’s Chapter 11 plan. The confirmation of ResCap’s Chapter 11 plan would resolve MBIA Corp.’s claims against the Residential Funding Company, LLC, GMAC Mortgage LLC and ResCap estates, and Ally. In June of 2013, the bankruptcy court issued a Memorandum Opinion approving the Plan Support Agreement (the “Plan”). The Plan is now subject to voting by creditors as well as a confirmation hearing by the bankruptcy court. All creditor ballots were due back by October 21, 2013 and as of the date of this report, the results had not been tallied. There can be no assurance that the Plan will be confirmed. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a description of the agreement.

Transformation Litigation

Subsequent to the BofA Settlement Agreement and the Societe Generale settlement, all litigation brought originally by the group of eighteen domestic and international financial institutions, relating to the establishment of National, has been resolved. Refer to “Note 14: Commitments and Contingencies” in the Notes to Consolidated Financial Statements for a description of this litigation.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

EXECUTIVE OVERVIEW (continued)

 

National

As a result of the BofA Settlement Agreement and the Societe Generale settlement, Standard & Poor’s Financial Services LLC (“S&P”) upgraded National’s rating to A with a stable outlook. Also, Moody’s Investors Service, Inc. (“Moody’s”) upgraded National’s rating to Baa1 with a positive outlook. The absence of higher ratings from S&P and Moody’s has adversely impacted our ability to write new insurance business and our ability to write new premiums. The Company is seeking rating upgrades from the rating agencies and believes the current ratings of National do not fully represent the financial strength of National when compared with other companies in its industry. We expect to achieve high stable ratings for National that would be necessary to support writing new business, but there is no assurance that we will be able to achieve such ratings and the timing of such rating upgrades is uncertain. We are also considering obtaining ratings for National from additional rating agencies.

We expect National will gain market acceptance and become a competitive financial guarantor once its ratings are upgraded. We expect that the majority of its new business will be in the general obligation, tax-backed and revenue bond sectors. The Company also believes there are significant amounts of insurable bonds that have been issued on an unwrapped basis in recent years, which the Company believes meet its underwriting criteria and present attractive secondary market opportunities. In addition, we believe the increase in interest rates during 2013 and the continued issuance of new municipal debt will present attractive risk-adjusted business opportunities for National. National maintains underwriting criteria for most municipal risk types and expects opportunities for new business across the spectrum of municipal sectors. National’s underwriting criteria does not limit it to particular sectors.

While there are currently two other bond insurers actively engaged in the market, one of which was recently established, we have observed other new competitors indicating an interest in entering the bond insurance market and continue to consider strategies for launch. We will continue to monitor the impact that new and existing market participants may have on our ability to compete in the U.S. public finance insurance market in the future.

In August of 2013, the novation agreement between Financial Guaranty Insurance Corporation (“FGIC”) and National, whereby FGIC transferred, by novation, to National all the rights and liabilities under each of the policies covered under a reinsurance agreement with FGIC, became effective. This novation agreement included covered policies that previously benefited from the reinsurance agreement and second-to-pay policies entered into by MBIA Insurance Corporation in 2008 that were subsequently assigned to and reinsured by National in 2009. As a result of this novation, National is now the primary insurer under these policies.

While our U.S. public finance insured portfolio in National continued to perform satisfactorily on the whole, we did experience increased stress in this portfolio in the nine months ended September 30, 2013, as a portion of the obligations that we insure were issued by some of the state and local governments that remain under extreme financial and budgetary stress. In addition, several of these local governments have filed for protection under the United States Bankruptcy Code or have entered into state statutory proceedings established to assist municipalities in managing through periods of severe fiscal stress. This could lead to an increase in defaults by such entities on the payment of their obligations and losses or impairments on a greater number of our insured transactions. We continue to monitor and analyze these situations very closely, and the overall extent and duration of this stress is uncertain. National has exposure to the Commonwealth of Puerto Rico (the “Commonwealth”) and certain governmental issuers in the territory. The Commonwealth is experiencing fiscal stress, however it has taken pro-active actions to address its significant economic challenges. We are continuing to monitor the situation closely, but do not expect a default by the Commonwealth. In addition, during the third quarter of 2013, National participated in the restructuring of a gaming revenue transaction, in which National received marketable securities where the fair value of these securities was less than the salvage receivable recorded at the time of the transaction. We expect to recover the full value of the original salvage receivable over time. Refer to the following “Results of Operations - U.S. Public Finance Insurance Loss and Loss Adjustment Expenses” section for additional information about this remedial credit transaction.

MBIA Corp.

As a result of the BofA Settlement Agreement, MBIA Corp.’s liquidity and capital risk profile has substantially improved. MBIA Corp. still has significant risk within its insured portfolio and the amount and timing of potential claims from its second-lien RMBS and remaining insured CMBS pools are uncertain. MBIA Corp.’s strategy for managing its CMBS pool and ABS CDO exposures has been evaluating opportunities to commute exposures and successfully executing such commutations. MBIA Corp.’s ability to commute insured transactions is limited by available liquidity. MBIA Corp. believes that it continues to have sufficient capital and liquidity to meet all of its expected obligations. Refer to “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements for a discussion of significant risks and uncertainties that could affect amounts reported in the Company’s financial statements in future periods. MBIA Corp.’s business and financial results have been significantly influenced by a number of factors including, but not limited to, the matters described below:

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

EXECUTIVE OVERVIEW (continued)

 

   

Our expected liquidity and capital forecasts for MBIA Corp., which include expected availability of draws under a $500 million three-year secured revolving credit agreement with Blue Ridge Investments, L.L.C. (“Blue Ridge”), an affiliate of Bank of America (the “Blue Ridge Secured Loan”), expected recoveries from the ResCap agreement, and projected collections of excess spread and the remaining put-back recoverables, reflect more than adequate resources to pay expected claims. However, there are risks to these forecasts, as the amount and timing of potential claims from our second-lien RMBS and remaining insured CMBS pools are potentially volatile, as are the projected collections of excess spread and the remaining put-back recoverables. Further, the remaining insured portfolio, aside from these exposures, could deteriorate and result in loss reserves and claim payments. While we believe MBIA Corp. will have adequate resources to pay expected claims, if MBIA Corp. experiences higher than expected claim payments or is unable to commute the remaining exposures that represent substantial risk to the Company, MBIA Corp. may ultimately have insufficient resources to continue to pay claims, which could cause the New York State Department of Financial Services (“NYSDFS”) to put MBIA Insurance Corporation into a rehabilitation or liquidation proceeding. In addition, if MBIA Corp.’s statutory capital falls below $750 million as a result of an increase in loss reserves, claims payments or for other reasons, Blue Ridge may in its sole discretion terminate its obligations to make loans under the Blue Ridge Secured Loan, or declare all borrowings to be due and immediately payable.

 

   

For the three and nine months ended September 30, 2013, we estimated additional aggregate losses and loss adjustment expense (“LAE”) of $98 million and $459 million, respectively, related to our insured CMBS exposure. We have recorded additional impairments on our insured CMBS portfolio every quarter since the beginning of 2010 reflecting that actual deterioration has been more than expected. It is possible that we will experience severe losses or near-term liquidity needs due to increased deterioration in our insured CMBS portfolio.

 

   

During the nine months ended September 30, 2013, MBIA Corp. commuted $19.9 billion of gross insured exposure, primarily comprising structured CMBS pools, investment grade CDOs, ABS CDOs, first-lien subprime RMBS, high yield corporate CDOs, CRE CDOs, structured insurance securities and first-lien alternative A-paper RMBS. In consideration for the commutation of insured transactions, the Company has made and may in the future make payments to the counterparties, the amounts of which, if any, may be less than or greater than any statutory loss reserves established for the respective transactions. The Company enters into commutations in the ordinary course of its business and generally does not intend to make contemporaneous disclosures regarding any such transactions regardless of the amounts paid to effect such commutations in relation to the statutory loss reserves established for the respective transactions. The Company’s ability to commute insured transactions is limited by available liquidity, including the availability of the Blue Ridge Secured Loan, other available financing structures and expected put-back recoveries, and commutations may be subject to regulatory approval by the NYSDFS and/or the United Kingdom’s (“U.K.”) Prudential Regulation Authority. There can be no assurance that the Company will be able to fund further commutations by borrowing or otherwise or that it will be able to obtain required regulatory approvals.

Economic and Financial Market Trends

We believe the first nine months of 2013 continued to show modest improvements in the U.S. economy. For the three months ended September 30, 2013, the U.S. economy expanded slightly aided by stabilization in the housing market and rising home prices. The unemployment rate dropped in the third quarter of 2013 to its lowest levels in over four years. While this continued improvement in the labor market should help to increase personal incomes, the ultimate outcomes on the debt ceiling, the federal budget and the Affordable Care Act will add uncertainty to the business and consumer segments of our economy. In addition, the recent speculation that the Federal Reserve might taper their quantitative easing programs caused concerns over the level of interest rates. Information concerning our interest rate sensitivity appears in Part I, Item 3, “Quantitative and Qualitative Disclosures about Market Risk”. While Europe begins to display signs of recovering from its recession, such signs remain inconclusive and there continues to be high unemployment rates. Prolonged debt and budget issues and related austerity programs suggest that it may be some time before Europe shows sustained growth and a robust recovery. While we believe confidence in the U.S. economy should continue for the remainder of 2013, sustained job growth and resolution of fiscal policies in Washington are paramount to a complete recovery. MBIA’s business outlook should be viewed against this backdrop since these are some of the key economic conditions which, together with the volatility of gains and losses on our insured credit derivatives, significantly impact our financial results.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

EXECUTIVE OVERVIEW (continued)

 

Financial Highlights

Our financial results, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), have been extremely volatile since the fourth quarter of 2007 primarily as a result of unrealized gains and losses from fair valuing our insured credit derivatives. We do not believe that the volatility caused by these unrealized gains and losses on our insured derivatives reflects the underlying economics of our business. We expect that our reported financial results will remain volatile and uncertain during the remainder of 2013 as a result of actual and perceived future performance of our insured credit derivatives and the perception of MBIA’s credit risk. Our economic performance may also be volatile depending on changes in our loss estimates based on changes in macroeconomic conditions in the U.S. and abroad and deviations in collateral performance from our expectations.

For the three months ended September 30, 2013, we recorded consolidated net income of $132 million or $0.67 per diluted share compared with consolidated net income of $7 million, or $0.04 per diluted share for the same period of 2012.

For the nine months ended September 30, 2013, we recorded consolidated net income of $118 million or $0.60 per diluted share compared with consolidated net income of $598 million or $3.07 per diluted share, for the same period of 2012.

We also use adjusted pre-tax income (loss), a non-GAAP measure, to supplement our analysis of our periodic results. We consider adjusted pre-tax income (loss) a fundamental measure of periodic financial performance, which we believe is useful for an understanding of our results. Adjusted pre-tax income (loss) adjusts GAAP pre-tax income (loss) to remove the effects of consolidating insured variable interest entities (“VIEs”) and gains and losses related to insured credit derivatives, which we believe will reverse over time, as well as to add in changes in the present value of insurance claims we expect to pay on insured credit derivatives based on our ongoing insurance loss monitoring. Adjusted pre-tax income (loss) is not a substitute for and should not be viewed in isolation of GAAP pre-tax income (loss), and our definition of adjusted pre-tax income (loss) may differ from that used by other companies. Refer to the following “Results of Operations” section for a reconciliation of adjusted pre-tax income (loss) to GAAP pre-tax income (loss).

For the three months ended September 30, 2013, consolidated adjusted pre-tax loss was $188 million compared with an adjusted pre-tax loss of $118 million for the same period of 2012.

For the nine months ended September 30, 2013, consolidated adjusted pre-tax loss was $368 million compared with an adjusted pre-tax loss of $818 million for the same period of 2012.

Our consolidated shareholders’ equity was $3.2 billion as of September 30, 2013 and December 31, 2012. Our consolidated book value per share as of September 30, 2013 was $16.54 compared with $16.22 as of December 31, 2012.

In addition to book value per share, we also analyze adjusted book value (“ABV”) per share, a non-GAAP measure. We consider ABV a measure of fundamental value of the Company and the change in ABV an important measure of financial performance. ABV adjusts GAAP book value to remove the impact of certain items which the Company believes will reverse from GAAP book value over time through the GAAP statements of operations and GAAP statements of comprehensive income, as well as to add in the impact of certain items which the Company believes will be realized in GAAP book value in future periods. The Company has limited such adjustments to those items that it deems to be important to fundamental value and performance and which the likelihood and amount can be reasonably estimated. ABV assumes no new business activity. We have presented ABV to allow investors and analysts to evaluate the Company using the same measure that MBIA’s management regularly uses to measure financial performance and value. ABV is not a substitute for and should not be viewed in isolation of GAAP book value, and our definition of ABV may differ from that used by other companies. Refer to the following “Results of Operations” section for a further discussion of ABV and a reconciliation of GAAP book value per share to ABV per share.

As of September 30, 2013, ABV per share was $28.68, down from $30.68 as of December 31, 2012.

A detailed discussion of our financial results is presented within the “Results of Operations” section included herein. Refer to the “Capital Resources—Insurance Statutory Capital” section for a discussion of National’s and MBIA Corp.’s capital positions under statutory accounting principles (“U.S. STAT”).

CRITICAL ACCOUNTING ESTIMATES

We prepare our financial statements in accordance with GAAP, which requires the use of estimates and assumptions. Management has discussed and reviewed the development, selection, and disclosure of critical accounting estimates with the Company’s Audit Committee. Management believes that the most critical accounting estimates, since these estimates require significant judgment, are loss and LAE reserves, valuation of financial instruments, and deferred income taxes. Financial results could be materially different if other methodologies were used or if management modified its assumptions.

 

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

CRITICAL ACCOUNTING ESTIMATES (continued)

 

For a discussion of the Company’s critical accounting estimates, see “Critical Accounting Estimates” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. In addition, refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a current description of estimates used in our insurance loss reserving process.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to “Note 3: Recent Accounting Pronouncements” in the Notes to Consolidated Financial Statements for a discussion of accounting guidance recently adopted by the Company.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS

Summary of Consolidated Results

The following table presents a summary of our consolidated financial results for the three and nine months ended September 30, 2013 and 2012:

 

                                           
     Three Months Ended
September  30,
     Nine Months Ended
September  30,
 

In millions except for per share amounts

   2013      2012      2013      2012  

Total revenues

   $ 420       $ 281       $ 751       $ 1,703   

Total expenses

     249         338         629         944   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income (loss)

     171         (57)         122         759   

Provision (benefit) for income taxes

     39         (64)                161   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 132       $      $ 118       $ 598   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss) per common share:

           

Basic

   $ 0.68       $ 0.04       $ 0.61       $ 3.09   

Diluted

   $ 0.67       $ 0.04       $ 0.60       $ 3.07   

For the three months ended September 30, 2013, we recorded consolidated net income of $132 million, or $0.67 per diluted common share, compared with consolidated net income of $7 million, or $0.04 per diluted common share, for the same period of 2012. Weighted average diluted common shares outstanding totaled 197 million and 195 million for the three months ended September 30, 2013 and 2012, respectively. Consolidated total revenues for the three months ended September 30, 2013 included $257 million of net gains on insured derivatives compared with $21 million of net losses for the same period of 2012. The net gains on insured derivatives in 2013 were principally the result of the effects of unfavorable changes in the market perception of MBIA Corp.’s nonperformance risk on its derivative liabilities and changes in spreads and pricing of underlying collateral and the weighted average life on transactions. The net losses on insured derivatives in 2012 were principally due to changes in spreads and pricing of underlying collateral and collateral erosion, partially offset by the effects of unfavorable changes in the market perception of MBIA Corp.’s nonperformance risk on its derivative liabilities. Consolidated total expenses for the three months ended September 30, 2013 included $98 million of net insurance loss and LAE compared with $171 million for the same period of 2012. The decrease in net insurance loss and LAE in 2013 when compared to 2012 was principally the result of lower increases in expected payments related to CMBS and first-lien RMBS transactions, partially offset by an increase in losses related to a gaming revenue transaction.

For the nine months ended September 30, 2013, we recorded consolidated net income of $118 million, or $0.60 per diluted common share, compared with consolidated net income of $598 million, or $3.07 per diluted common share, for the same period of 2012. Weighted average diluted common shares outstanding totaled 198 million and 195 million for the nine months ended September 30, 2013 and 2012, respectively. Consolidated total revenues for the nine months ended September 30, 2013 included $14 million of net gains on insured derivatives compared with $1.1 billion of net gains for the same period of 2012. The net gains on insured derivatives in 2013 were principally the result of commuting derivative liabilities at prices below their fair values and changes in the weighted average life on transactions, partially offset by the effects of favorable changes in the market perception of MBIA Corp.’s nonperformance risk on its derivative liabilities. The net gains on insured derivatives in 2012 were principally the result of commuting derivative liabilities at prices below their fair values and the effects of unfavorable changes in the market perception of MBIA Corp.’s nonperformance risk on its derivative liabilities. Consolidated total expenses for the nine months ended September 30, 2013 included $92 million of net insurance loss and LAE compared with $330 million for the same period of 2012. The decrease in net insurance loss and LAE in 2013 when compared to 2012 was principally related to decreases in actual and expected payments related to insured second-lien RMBS and first-lien RMBS transactions, partially offset by an increase in losses related to an international road transaction and certain U.S. public finance transactions. In addition, consolidated total expenses for the nine months ended September 30, 2013 included operating expenses of approximately $89 million related to settlement, consulting and legal expenses associated with the resolution of litigation matters with Bank of America, Societe Generale and Flagstar Bank.

Included in our consolidated net income for the three months ended September 30, 2013 and 2012 was $18 million and $59 million, respectively, of income before income taxes related to consolidated VIEs, after the elimination of intercompany revenues and expenses. Included in our consolidated net income for the nine months ended September 30, 2013 and 2012 was $130 million and $26 million, respectively, of income before income taxes related to consolidated VIEs, after the elimination of intercompany revenues and expenses. The net effect of consolidated VIEs on our financial results will vary over time as VIEs are consolidated or deconsolidated by the Company, and as the values of consolidated VIE assets and liabilities change.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

European Sovereign Debt Exposure

Uncertainties regarding the European sovereign debt crisis have affected the global economy. Outside the U.S., financial guarantee insurance has been used by issuers of sovereign-related and sub-sovereign bonds, structured finance securities, utility debt and financing for public purpose projects, among others. MBIA does not insure any direct European sovereign debt. However, we do insure both structured finance and public finance obligations in select international markets. MBIA’s indirect European sovereign insured debt exposure totaled $8.0 billion as of September 30, 2013 and included obligations of sovereign-related and sub-sovereign issuers, such as regions, departments, and sovereign-owned entities that are supported by a sovereign state, region or department. Of the $8.0 billion of insured gross par outstanding, $817 million, $491 million, and $258 million related to Spain, Portugal, and Ireland, respectively. The remaining $6.4 billion related to the U.K. We closely monitor our existing insured European portfolios on an ongoing basis. We consider country risk, including economic and political factors, the type and quality of local regulatory oversight, the strength of the legal framework in each country and the stability of the local institutional framework. We also monitor local accounting, regulatory and legal requirements, local financial market developments, the impact of exchange rates and local demand dynamics. The Company has an immaterial amount of direct and indirect European sovereign debt holdings included in its investment portfolios. A default by one or more sovereign issuers could have an adverse effect on our insured debt exposures.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Adjusted Pre-Tax Income

In addition to the above results, we also analyze the operating performance of the Company using adjusted pre-tax income (loss), a non-GAAP measure. We believe adjusted pre-tax income (loss), as used by management, is useful for an understanding of the results of operations of the Company. Adjusted pre-tax income (loss) is not a substitute for pre-tax income (loss) determined in accordance with GAAP, and our definition of adjusted pre-tax income (loss) may differ from that used by other companies.

For the three months ended September 30, 2013, our consolidated adjusted pre-tax loss increased when compared with the same period of 2012 primarily as a result of decreases in premiums earned and net investment income, an increase in impairments on insured credit derivatives, losses and LAE related to a gaming revenue transaction, and an impairment charge related to our Armonk, New York facility. This increase was partially offset by decreases in other insurance losses and LAE as a result of a lower increase in the expected payments related to CMBS and first-lien RMBS transactions.

For the nine months ended September 30, 2013, our consolidated adjusted pre-tax loss decreased when compared with the same period of 2012 primarily as a result of a decrease in insurance losses and LAE, the absence of net investment losses related to other-than-temporary impairments, net gains from the sale of investments and a decrease in interest expense. These changes were partially offset by lower premiums earned and lower net investment income. In addition, our consolidated adjusted pre-tax loss for the nine months ended September 30, 2013 included operating expenses of approximately $89 million related to settlement, consulting and legal expenses associated with the resolution of litigation matters with Bank of America, Societe Generale and Flagstar Bank.

The following table presents our consolidated adjusted pre-tax income (loss) (a non-GAAP measure) and provides a reconciliation of adjusted pre-tax income (loss) to GAAP pre-tax income (loss) for the three and nine months ended September 30, 2013 and 2012:

 

                                           
     Three Months Ended
September  30,
     Nine Months Ended
September  30,
 

In millions

   2013      2012      2013      2012  

Adjusted pre-tax income (loss)

   $ (188)       $ (118)       $ (368)       $ (818)   

Additions to adjusted pre-tax income (loss):

           

Impact of consolidating certain VIEs

     20         29         18         62   

Mark-to-market gains (losses) on insured credit derivatives

     285         (33)         1,562         1,473   

Subtractions from adjusted pre-tax income (loss):

           

Impairments on insured credit derivatives

     (54)         (65)         1,090         (42)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income (loss)

   $ 171       $ (57)       $ 122       $ 759   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Adjusted Book Value

As of September 30, 2013, ABV per share (a non-GAAP measure) was $28.68, down from $30.68 as of December 31, 2012. The decrease in ABV per share was primarily driven by insurance losses and credit impairments, a decline in future installment premiums related to insured credit derivatives that were commuted during the period and an increase in operating expenses.

The following table provides a reconciliation of consolidated book value per share to consolidated ABV per share:

 

                     

In millions except share and per share amounts

   As of
September 30, 2013
     As of
December 31, 2012
 

Total shareholders’ equity of MBIA Inc.

   $ 3,180       $ 3,173   

Common shares outstanding

     192,252,644         195,671,509   

Book value per share

   $ 16.54       $ 16.22   

Adjustments for items included in book value per share (after-tax):

     

Cumulative net loss from consolidating certain VIEs (1)

     0.59         0.59   

Cumulative unrealized loss on insured credit derivatives

     4.59         9.70   

Net unrealized (gains) losses included in other comprehensive income

     0.12         (0.47)   

Adjustments for items not included in book value per share (after-tax):

     

Net unearned premium revenue (2)(3)

     8.74         9.92   

Present value of insured derivative installment revenue (4)

     0.25         0.60   

Cumulative impairments on insured credit derivatives (4)

     (1.22)         (4.85)   

Deferred acquisition costs

     (0.93)         (1.03)   
  

 

 

    

 

 

 

Total adjustments per share

     12.14         14.46   
  

 

 

    

 

 

 

Adjusted book value per share

   $ 28.68       $ 30.68   
  

 

 

    

 

 

 

 

(1) - Represents the impact on book value per share of consolidated VIEs that are not considered a business enterprise of the Company.

 

(2) - Consists of financial guarantee premiums and fees.

 

(3) - The discount rate on financial guarantee installment premiums was the risk-free rate as defined by the accounting principles for financial guarantee insurance contracts.

 

(4) - The discount rate on insured derivative installment revenue and impairments was 5% as of September 30, 2013 and December 31, 2012.

Our “Net unearned premium revenue” adjustment to book value per share consists of unearned premium revenue net of prepaid reinsurance premiums related to financial guarantee insurance contracts, the unamortized portion of installment premiums collected on insured derivative contracts, and the unamortized portion of insurance-related deferred fee revenue. Our “Present value of insured derivative installment revenue” adjustment to book value per share consists of the present value of premiums not yet collected from insured derivative contracts, which are not recorded on our balance sheet in accordance with accounting principles for financial guarantee insurance contracts but which are contractually due to the Company.

U.S. Public Finance Insurance

Our U.S. public finance insurance business is primarily conducted through National. The financial guarantees issued by National provide unconditional and irrevocable guarantees of the payment of the principal of, and interest or other amounts owing on, insured obligations when due or, in the event National has exercised, at its discretion, the right to accelerate the payment under its policies upon the acceleration of the underlying insured obligations due to default or otherwise. National’s guarantees insure municipal bonds, including tax-exempt and taxable indebtedness of U.S. political subdivisions, as well as utility districts, airports, healthcare institutions, higher educational facilities, student loan issuers, housing authorities and other similar agencies and obligations issued by private entities that finance projects that serve a substantial public purpose. Municipal bonds and privately issued bonds used for the financing of public purpose projects are generally supported by taxes, assessments, user fees or tariffs related to the use of these projects, lease payments or other similar types of revenue streams.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

The following table presents our U.S. public finance insurance segment results for the three and nine months ended September 30, 2013 and 2012:

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Net premiums earned

   $ 75       $ 134         -44%        $ 280       $ 370         -24%    

Net investment income

     26         56         -54%          110         167         -34%    

Fees and reimbursements

                    -%                        -%    

Net gains (losses) on financial instruments at fair value and foreign exchange

            22         -100%          30         43         -30%    

Other net realized gains (losses)

     (29)                n/m          (29)                n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     74         214          -65%          396         585         -32%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Losses and loss adjustment

     35                n/m          105         15         n/m    

Amortization of deferred acquisition costs

     16         26         -38%          59         75         -21%    

Operating

     17         20         -15%          70         128         -45%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     68         50         36%          234         218         7%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income

   $      $ 164         -96%        $ 162       $ 367         -56%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

For the three and nine months ended September 30, 2013 and 2012, we did not write a meaningful amount of U.S. public finance insurance. The lack of insurance writings in our U.S. public finance segment reflects the insurance financial strength credit ratings assigned to National by major rating agencies and the impact of litigation over the formation of National in 2009. Subsequent to the BofA Settlement Agreement and the Societe Generale settlement, all litigation brought originally by the group of eighteen domestic and international financial institutions relating to the establishment of National has been resolved. In addition, during 2013, the National Secured Loan was repaid in full, S&P upgraded National’s rating twice to the current rating of A with a stable outlook, and Moody’s upgraded National’s rating to Baa1 from Baa2 with a positive outlook. We are seeking ratings upgrades from the rating agencies as we believe the current ratings of National do not fully represent the financial strength of National compared with other companies in its industry. We do not expect to write a material amount of new business prior to an upgrade of our insurance financial strength ratings. The timing of any rating upgrade is uncertain and will depend on a variety of quantitative and qualitative factors used by the rating agencies in their evaluation. National maintains underwriting criteria for most municipal risk types and expects opportunities for new business across the spectrum of municipal sectors.

NET PREMIUMS EARNED Net premiums earned on non-derivative financial guarantees represent gross premiums earned net of premiums ceded to reinsurers, and include scheduled premium earnings and premium earnings from refunded issues. For the three months ended September 30, 2013, U.S. public finance net premiums earned were $75 million compared with $134 million for the same period of 2012. The decrease in 2013 resulted from a decrease in refunded premiums earned of $56 million and a decrease of $3 million in scheduled premiums earned. For the nine months ended September 30, 2013, U.S. public finance net premiums earned were $280 million compared with $370 million for the same period of 2012. The decrease in 2013 resulted from a decrease in refunded premiums earned of $79 million and a decrease in scheduled premiums earned of $11 million. Scheduled premium earnings declined due to the maturity of insured issues within our U.S. public finance portfolio with no material new insurance writings. Refundings have experienced a decline when compared to the prior periods due to an overall decrease in municipal market issuance. Refunding activity over the past several years has accelerated premium earnings in prior periods and reduced the amount of premiums that would have been earned in the current period.

NET INVESTMENT INCOME The decrease in net investment income for the three and nine months ended September 30, 2013 compared with the same periods of 2012 was primarily due to a higher balance in lower yielding short-term assets generated from the repayment of the National Secured Loan in May of 2013. The interest income on the National Secured Loan for the nine months ended September 30, 2013 totaled $41 million compared with $74 million for the same period of 2012. In connection with the BofA Settlement Agreement, MBIA Corp. repaid the remaining outstanding balance and accrued interest on the National Secured Loan in May of 2013. Refer to the “Liquidity” section included herein for additional information about the National Secured Loan.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Investment asset balances at amortized cost as of September 30, 2013 and December 31, 2012 are presented in the following table:

 

                                           
     September 30, 2013      December 31, 2012  

In millions

   Investments at
Amortized Cost
     Pre-tax
Yield (1)
     Investments at
Amortized Cost
     Pre-tax
Yield (1)
 

Fixed-income securities:

           

Tax-exempt

   $ 342         3.87%       $ 417         3.98%   

Taxable

     3,258         3.43%         2,378         2.98%   

Short-term

     1,002         0.24%         204         1.17%   
  

 

 

       

 

 

    

Total fixed-income

     4,602         2.76%         2,999         2.99%   

Secured loan to an affiliate

               1,652      

Other

     11            16      
  

 

 

       

 

 

    

Total

   $ 4,613          $ 4,667      
  

 

 

       

 

 

    

 

(1) - Estimated yield-to-maturity.

NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE The decrease in net gains (losses) on financial instruments at fair value and foreign exchange for the three months ended September 30, 2013 compared with the same period of 2012 was principally due to a decrease in net realized gains from the sales of securities from the ongoing management of our U.S. public finance insurance investment portfolio. The decrease in net gains (losses) on financial instruments at fair value and foreign exchange for the nine months ended September 30, 2013 compared with the same period of 2012 was primarily driven by losses from fair valuing financial instruments.

OTHER NET REALIZED GAINS (LOSSES) Other net realized gains (losses) for the three and nine months ended September 30, 2013 included an impairment charge of $29 million related to our Armonk, New York facility.

LOSS AND LOSS ADJUSTMENT EXPENSES National’s portfolio surveillance group is responsible for monitoring our U.S. public finance segment’s insured obligations. The level and frequency of monitoring of any insured obligation depends on the type, size, rating and performance of the insured issue. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a description of the Company’s loss reserving policy and additional information related to its loss reserves.

The following table presents information about our U.S. public finance insurance loss and LAE expenses for the three and nine months ended September 30, 2013 and 2012:

 

                                                                 
     Three Months Ended
September 30,
     Percent      Nine Months Ended
September 30,
     Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Loss and LAE related to actual and expected payments

   $ (24)       $ (10)         140%        $ 86       $ 57         51%    

Recoveries of actual and expected payments

     59         14         n/m          20         (42)         -148%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross losses incurred

     35                n/m          106         15         n/m    

Reinsurance

                   -%          (1)                n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Losses and loss adjustment expenses

   $ 35       $        n/m        $ 105       $ 15         n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Losses and LAE for the three and nine months ended September 30, 2013, included the loss related to the difference in the value of the salvage receivable recorded and the fair market value of the marketable securities received in connection with the restructuring of a gaming revenue transaction. We expect to recover the full value of the original salvage receivable in the future with the securities received as a result of this transaction. Under U.S. STAT, this salvage receivable continues to be reflected as a component of National’s loss reserves. U.S. STAT differs from GAAP in certain respects. Refer to “Note 11: Statutory Accounting Practices” in the Notes to Consolidated Financial Statements of National within exhibit 99.1 of MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 for an explanation of the differences between U.S. STAT and GAAP. Losses and LAE related to actual and expected payments for the three months ended September 30, 2013 and 2012 are driven by lower expected future payments based on National’s remediation efforts. In addition, losses and LAE for the nine months ended September 30, 2013, included losses primarily related to certain general obligation bonds. For the three and nine months ended September 30, 2012, losses and LAE primarily related to certain general obligation bonds.

Certain local governments remain under extreme financial and budgetary stress and several have filed for protection under the United States Bankruptcy Code, or have entered into state statutory proceedings established to assist municipalities in managing through periods of severe fiscal stress. This could lead to an increase in defaults by such entities on the payment of their obligations and losses or impairments on a greater number of our insured transactions. We continue to monitor and analyze these situations very closely, however the overall extent and duration of these events is uncertain.

The following tables present information about our U.S. public finance insurance loss and LAE reserves and recoverables as of September 30, 2013 and December 31, 2012:

 

                                

In millions

   September 30,
2013
     December 31,
2012
     Percent
Change
 

Gross loss and LAE reserves

   $ 212       $ 267         -21%    

Expected recoveries on unpaid losses

     (118)         (108)         9%    
  

 

 

    

 

 

    

 

 

 

Loss and LAE reserves

   $ 94       $ 159         -41%    
  

 

 

    

 

 

    

 

 

 

Insurance loss recoverable

   $ 17       $ 256         -93%    

Insurance loss recoverable-ceded (1)

   $      $        -100%    

Reinsurance recoverable on paid and unpaid losses (2)

   $      $        -88%    

 

(1) - Reported within “Other liabilities” on our consolidated balance sheets.

 

(2) - Reported within “Other assets” on our consolidated balance sheets.

Loss and LAE reserves as of September 30, 2013 decreased when compared with December 31, 2012 primarily related to the Allegheny Health, Education and Research Foundation transaction discussed below, partially offset by increases in certain general obligation bonds reserves.

Insurance loss recoverable as of September 30, 2013 decreased when compared with December 31, 2012 primarily related to the receipt of salvage in connection with the restructuring of a gaming revenue transaction.

Included in our U.S. public finance loss and LAE reserves are both reserves for insured obligations for which a payment default has occurred and National has already paid a claim and also for which a payment default has not yet occurred but a claim is expected in the future. As of September 30, 2013 and 2012, loss and LAE reserves comprised the following:

 

                                                                 
     Number of Issues (1)      Loss and LAE Reserve      Par Outstanding  

$ in millions

   September 30,
2013
     December 31,
2012
     September 30,
2013
     December 31,
2012
     September 30,
2013
     December 31,
2012
 

Gross of reinsurance:

                 

Issues with defaults

                 $ 81       $ 141       $ 732       $ 749   

Issues without defaults

                   13         18         102         113   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total gross of reinsurance

     15         18       $ 94       $ 159       $ 834       $ 862   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments.

On July 9, 2013, the Company and the Pennsylvania Higher Educational Facilities Authority gave direction to the trustee under each of the indentures for the three Allegheny Health, Education and Research Foundation Bond series to exercise the right of optional redemption at par plus accrued interest. These bonds were redeemed during the third quarter of 2013, the insurance policies were returned to National and $118 million of gross insured par was eliminated.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

POLICY ACQUISITION COSTS AND OPERATING EXPENSES U.S. public finance insurance segment expenses for the three and nine months ended September 30, 2013 and 2012 are presented in the following table:

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Gross expenses

   $ 17       $ 20         -15%        $ 70       $ 128         -45%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Amortization of deferred acquisition costs

   $ 16       $ 26         -38%        $ 59       $ 75         -21%    

Operating

     17         20         -15%          70         128         -45%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total insurance operating expenses

   $ 33       $ 46         -28%        $ 129       $ 203         -36%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross expenses represent total insurance expenses before the deferral of any policy acquisition costs. Gross expenses decreased for the three months ended September 30, 2013 compared with the same period of 2012 primarily due to decreases in legal and litigation related costs. Gross expenses decreased for the nine months ended September 30, 2013 compared with the same period of 2012 as a result of decreases in legal and litigation related costs partially offset by an increase in consulting fees. We did not defer a material amount of policy acquisition costs during 2013 or 2012.

INSURED PORTFOLIO EXPOSURE Financial guarantee insurance companies use a variety of approaches to assess the underlying credit risk profile of their insured portfolios. MBIA uses both an internally developed credit rating system as well as third-party rating sources in the analysis of credit quality measures of its insured portfolio. In evaluating credit risk, we obtain, when available, the underlying rating of the insured obligation before the benefit of its insurance policy from nationally recognized rating agencies, Moody’s and S&P. Other companies within the financial guarantee industry may report credit quality information based upon internal ratings that would not be comparable to our presentation.

The following table presents the credit quality distribution of MBIA’s U.S. public finance outstanding gross par insured as of September 30, 2013 and December 31, 2012. Capital appreciation bonds are reported at the par amount at the time of issuance of the insurance policy. All ratings are as of the period presented and represent S&P ratings. If transactions are not rated by S&P, a Moody’s equivalent rating is used. If transactions are not rated by either S&P or Moody’s, an internal equivalent rating is used.

 

                                           
     Gross Par Outstanding  

In millions

Rating

   September 30, 2013      December 31, 2012  
   Amount      %      Amount      %  

AAA

   $ 15,813         5.4%        $ 18,518         5.5%    

AA

     140,279         48.1%          162,504         48.2%    

A

     105,966         36.4%          122,743         36.4%    

BBB

     24,737         8.5%          30,496         9.0%    

Below investment grade

     4,643         1.6%          2,853         0.9%    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 291,438         100.0%        $ 337,114         100.0%    
  

 

 

    

 

 

    

 

 

    

 

 

 

The credit quality distribution of our U.S. public finance insurance exposure as of September 30, 2013 remained relatively consistent with December 31, 2012. Total U.S. public finance insurance gross par outstanding rated A or above, before giving effect to National’s guarantee, was approximately 90% and gross par outstanding rated below investment grade, before giving effect to National’s guarantee, was less than 2% as of September 30, 2013 and less than 1% as of December 31, 2012.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Structured Finance and International Insurance

Our structured finance and international insurance business is principally conducted through MBIA Corp. The financial guarantees issued by MBIA Corp. generally provide unconditional and irrevocable guarantees of the payment of the principal of, and interest or other amounts owing on, insured obligations when due or, in the event MBIA Corp. has the right, at its discretion, to accelerate the payment under its policies upon the acceleration of the underlying insured obligations due to default or otherwise. Certain guaranteed investment contracts written by MBIA Inc. or its subsidiaries are insured by MBIA Corp. If MBIA Inc. or such subsidiaries were to have insufficient assets to pay amounts due upon maturity or termination, MBIA Corp. would make such payments under its insurance policies. MBIA Corp. also insured debt obligations of other affiliates, including MBIA Global Funding, LLC (“GFL”) and Meridian Funding Company, LLC (“Meridian”). MBIA Corp. has also written insurance policies guaranteeing the obligations under CDS contracts of an affiliate, LaCrosse Financial Products, LLC, including termination payments that may become due upon certain events including the insolvency or payment default of the financial guarantor or the CDS issuer. MBIA Insurance Corporation also provides reinsurance to its insurance subsidiaries.

MBIA Corp.’s guarantees insure structured finance and asset-backed obligations, privately issued bonds used for the financing of public purpose projects that are primarily located outside of the U.S. which include toll roads, bridges, airports, public transportation facilities, utilities and other types of infrastructure projects serving a substantial public purpose, and obligations of sovereign-related and sub-sovereign issuers. Structured finance and ABS typically are securities repayable from expected cash flows generated by a specified pool of assets, such as residential and commercial mortgage loans, insurance policies, consumer loans, corporate loans and bonds, trade and export receivables, and leases and loans for equipment, aircraft and real property.

In certain cases, we may be required to consolidate entities established by issuers of insured obligations as part of securitizations when we insure the assets or liabilities of those entities and in connection with remediations under our insurance policies. These entities typically meet the definition of a VIE under accounting principles for the consolidation of VIEs. We do not believe there is any difference in the risks and profitability of financial guarantees provided to VIEs compared with other financial guarantees written by us.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

The following table presents our structured finance and international insurance segment results for the three and nine months ended September 30, 2013 and 2012:

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Net premiums earned

   $ 40       $ 38         5%        $ 111       $ 143         -22%    

Net investment income

                   -63%          12         22         -45%    

Fees and reimbursements

     18         43         -58%          65         109         -40%    

Change in fair value of insured derivatives:

                 

Realized gains (losses) and other settlements on insured derivatives

     (28)         12         n/m          (1,548)         (420)         n/m    

Unrealized gains (losses) on insured derivatives

     285         (33)         n/m          1,562         1,473         6%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change in fair value of insured derivatives

     257         (21)         n/m          14         1,053         -99%    

Net gains (losses) on financial instruments at fair value and foreign exchange

     (3)         14         -121%          31         18         72%    

Net investment losses related to other-than-temporary impairments

            (4)         -100%                 (45)         -100%    

Other net realized gains (losses)

                   -100%                        -100%    

Revenues of consolidated VIEs:

                 

Net investment income

     13         13         -%          38         40         -5%    

Net gains (losses) on financial instruments at fair value and foreign exchange

     15         42         -64%          119         (25)         n/m    

Other net realized gains (losses)

                   -%                        n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     343         134         n/m          391         1,316         -70%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Losses and loss adjustment

     63         167         -62%          (13)         315         -104%    

Amortization of deferred acquisition costs

     19         24         -21%          76         81         -6%    

Operating

     22         30         -27%          83         115         -28%    

Interest

     30         62         -52%          129         175         -26%    

Expenses of consolidated VIEs:

                 

Operating

                   -40%          10         16         -38%    

Interest

     10         10         -%          30         32         -6%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     147         298         -51%          315         734         -57%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income (loss)

   $ 196       $ (164)         n/m        $ 76       $ 582         -87%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

For the three and nine months ended September 30, 2013 and 2012, we did not write a meaningful amount of structured finance and international insurance. As of September 30, 2013, MBIA Corp.’s total insured gross par outstanding was $83.9 billion. Since December 31 2007, our total gross par outstanding has decreased approximately 75% from $331.2 billion. The lack of insurance writings in our structured finance and international insurance segment reflects the insurance financial strength credit ratings assigned to MBIA Corp. by the major rating agencies. The Company does not expect to write a material amount of new business prior to an upgrade of the insurance financial strength ratings of MBIA Corp. and market acceptance that such ratings will be stable in the future. The timing of any future upgrades is uncertain and will depend on a variety of quantitative and qualitative factors used by the rating agencies in their evaluation. Pre-tax income (loss) in each of the periods included in the preceding table was primarily driven by changes in the fair value of our insured credit derivatives, which reflects changes in the market perception of MBIA Corp.’s credit risk.

ADJUSTED PRE-TAX INCOME (LOSS) In addition to the above results, we also analyze the operating performance of our structured finance and international insurance segment using adjusted pre-tax income (loss), a non-GAAP measure. We believe adjusted pre-tax income (loss), as used by management, is useful for an understanding of the results of operations of our structured finance and international insurance segment. Adjusted pre-tax income (loss) is not a substitute for pre-tax income (loss) determined in accordance with GAAP, and our definition of adjusted pre-tax income (loss) may differ from that used by other companies.

Adjusted pre-tax loss for the three months ended September 30, 2013 decreased when compared with the same period of 2012 principally due to decreases in financial guarantee insurance losses and interest expense from the National Secured Loan, which was repaid in full in May of 2013. These changes were partially offset by an increase in impairments on insured credit derivatives.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Adjusted pre-tax loss for the nine months ended September 30, 2013 decreased when compared with the same period of 2012 principally due to a decrease in financial guarantee insurance losses, an increase in gains on sales of investments, a decrease in interest expense from the National Secured Loan and the absence of net investment losses related to other-than-temporary impairments.

The following table presents the adjusted pre-tax income (loss) of our structured finance and international insurance segment and a reconciliation of adjusted pre-tax income (loss) to GAAP pre-tax income (loss) for the three and nine months ended September 30, 2013 and 2012:

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Adjusted pre-tax income (loss)

   $ (167)       $ (224)         -25%        $ (357)       $ (970)         -63%    

Additions to adjusted pre-tax income (loss):

                 

Impact of consolidating certain VIEs

     24         28         -14%          (39)         37         n/m    

Mark-to-market gain (loss) on insured credit derivatives

     285         (33)         n/m          1,562         1,473         6%    

Subtractions from adjusted pre-tax income (loss):

                 

Impairments on insured credit derivatives

     (54)         (65)         -17%          1,090         (42)         n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income (loss)

   $ 196       $ (164)         n/m        $ 76       $ 582         -87%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

NET PREMIUMS EARNED Our structured finance and international insurance segment generates net premiums from insurance policies accounted for as financial guarantee contracts and insured derivative contracts, and certain of those premiums may be eliminated in our consolidated financial statements as a result of the Company consolidating VIEs. The following table provides net premiums earned by type of insurance contract for the three and nine months ended September 30, 2013 and 2012:

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Net premiums earned:

           

Financial guarantee contracts

   $ 40       $ 38       $ 111       $ 143   

Insured derivative contracts (1)

            12         28         42   

VIEs (eliminated in consolidation)

                   11         11   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net premiums earned

   $ 50       $ 54       $ 150       $ 196   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Premiums related to insured derivatives are included in “Realized gains (losses) and other settlements on insured derivatives” on our consolidated statements of operations.

Net premiums earned on non-derivative financial guarantee contracts for the three and nine months ended September 30, 2013 and 2012 are presented in the following table. Net premiums earned represent gross premiums earned net of premiums ceded to reinsurers, and include scheduled premium earnings and premium earnings from refunded issues.

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Net premiums earned:

                 

U.S.

   $ 12       $ 14         -14%        $ 37       $ 50         -26%    

Non-U.S.

     28         24         17%          74         93         -20%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total net premiums earned

   $ 40       $ 38         5%        $ 111       $ 143         -22%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Structured finance and international net premiums earned decreased for the nine months ended September 30, 2013 when compared with the same period of 2012 primarily due to the maturity and early settlement of insured transactions with no material writings of new insurance policies.

NET INVESTMENT INCOME The decrease in net investment income for the three and nine months ended September 30, 2013 compared with the same periods of 2012 was primarily due to declining average asset balances in 2013 due to sales of investments to fund claim and commutation payments.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Investment asset balances at amortized cost as of September 30, 2013 and December 31, 2012 are presented in the following table:

 

                                           
     September 30, 2013      December 31, 2012  

In millions

   Investments at
Amortized Cost
     Pre-tax
Yield (1)
     Investments at
Amortized Cost
     Pre-tax
Yield (1)
 

Fixed-income securities:

           

Taxable

   $ 316         2.10%       $ 725         1.60%   

Short-term

     206          1.16%         160         1.38%   
  

 

 

       

 

 

    

Total fixed-income

     522         1.73%         885         1.56%   

Other

                   
  

 

 

       

 

 

    

Total

   $ 524          $ 886      
  

 

 

       

 

 

    

 

(1) - Estimated yield-to-maturity.

FEES AND REIMBURSEMENTS The decrease in fees and reimbursements for the three and nine months ended September 30, 2013 compared with the same periods of 2012 was primarily due to a decrease in waiver and consent fees related to the ongoing management of our structured finance and international insurance business.

NET CHANGE IN FAIR VALUE OF INSURED DERIVATIVES The following table presents the net premiums and fees earned related to derivatives and the components of the net change in fair value of insured derivatives for the three and nine months ended September 30, 2013 and 2012:

 

                                                                 
     Three Months Ended
September 30,
     Percent      Nine Months Ended
September 30,
     Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Net premiums and fees earned on insured derivatives

   $      $ 12         -50%        $ 29       $ 43         -33%    

Realized gains (losses) on insured derivatives

     (34)                n/m          (1,577)         (463)         n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Realized gains (losses) and other settlements on insured derivatives

     (28)         12         n/m          (1,548)         (420)         n/m    

Unrealized gains (losses) on insured derivatives

     285         (33)         n/m          1,562         1,473         6%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net change in fair value of insured derivatives

   $ 257       $ (21)         n/m        $ 14       $ 1,053         -99%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

The Company no longer insures new credit derivative contracts except in transactions related to the restructuring or reduction of existing derivative exposure. Premiums earned related to insured credit derivatives will decrease over time as a result of settlements prior to maturity and scheduled amortizations. For the three months ended September 30, 2013, realized losses on insured derivatives resulted primarily from claim payments on CMBS transactions. For the nine months ended September 30, 2013 and 2012, realized losses on insured derivatives resulted primarily from settlements and claim payments on CMBS and ABS transactions.

For the three months ended September 30, 2013, unrealized gains on insured derivatives were principally associated with the effects of MBIA Corp.’s nonperformance risk on its derivative liabilities, favorable changes in spreads and pricing on the underlying collateral and a decline in the weighted average life on transactions. For the three months ended September 30, 2012, unrealized losses on insured derivatives were principally associated with unfavorable changes in spreads and pricing on the underlying collateral and collateral erosion of transactions, partially offset by a widening of MBIA Corp.’s credit spreads and a reduction in MBIA Corp.’s recovery rate.

For the nine months ended September 30, 2013, unrealized gains on insured derivatives were principally associated with the reversal of unrealized losses from commutations, a decline in the weighted average life on transactions and favorable changes in spread/prices on the underlying collateral, partially offset by the effects of MBIA Corp.’s nonperformance risk on its derivative liabilities and collateral erosion of transactions. For the nine months ended September 30, 2012, unrealized gains on insured derivatives were principally associated with the reversal of unrealized losses from commutations, the effects of MBIA Corp.’s nonperformance risk on its derivative liabilities and the result of favorable movements in spreads and pricing on collateral within transactions, partially offset by collateral erosion.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

As of September 30, 2013, MBIA Corp.’s five year CDS cost was 16.38% upfront plus 5% per annum compared with 35.88% upfront plus 5% per annum as of September 30, 2012. Our mark-to-market on insured credit derivatives uses the most appropriate of the one to ten year CDS cost for each transaction, and those costs ranged from 4.13% upfront plus 5% per annum to 20.63% upfront plus 5% per annum as of September 30, 2013. As of September 30, 2012, those costs ranged from 17.75% upfront plus 5% per annum to 38.25% upfront plus 5% per annum.

As of September 30, 2013, we had $25.8 billion of gross par outstanding on insured credit derivatives compared with $26.9 billion and $47.5 billion as of June 30, 2013 and December 31, 2012, respectively. The decrease in gross par outstanding was primarily due to contractual terminations, amortizations and maturities. During the three months ended September 30, 2013, three insured issues, representing $1.2 billion in gross par outstanding, either matured or were contractually settled. During the nine months ended September 30, 2013, 36 insured issues, representing $21.3 billion in gross par outstanding, either matured, contractually settled or were agreed to be contractually settled prior to maturity.

Since our insured credit derivatives have similar terms, conditions, risks, and economic profiles as our financial guarantee insurance policies, we evaluate them for impairment periodically in the same way that we estimate loss and LAE for our financial guarantee policies. Credit impairments on insured derivatives represent actual payments plus the present values of our estimates of expected future claim payments, net of expected future recoveries. MBIA Insurance Corporation’s expected future claim payments were discounted using a rate of 5.72%, the same rate used to calculate its statutory loss reserves as of September 30, 2013. We estimated that additional credit impairments on insured derivatives (excluding LAE) for the nine months ended September 30, 2013 were $483 million across 12 insured CDO issues. Beginning with the fourth quarter of 2007 through September 30, 2013, total credit impairments on insured derivatives were estimated at $6.1 billion across 74 insured CDO issues, inclusive of 71 insured issues for which we made settlement and claim payments of $5.8 billion, net of reinsurance and collections. Accordingly, we expect to realize additional net losses of $337 million. Refer to the following “Loss and Loss Adjustment Expenses” section for additional information about credit impairments on insured derivatives.

Our estimate of credit impairments, a non-GAAP measure, may differ from the fair values recorded in our consolidated financial statements. The Company believes its disclosure of credit impairments on insured derivatives provides additional meaningful information about potential realized losses on these contracts. The fair value of an insured derivative contract will be influenced by a variety of market and transaction-specific factors that may be unrelated to potential future claim payments. In the absence of credit impairments or the termination of derivatives at losses, the cumulative unrealized losses recorded from fair valuing insured derivatives should reverse before or at the maturity of the contracts. Contracts also may be settled prior to maturity at amounts that may be more or less than their recorded fair values. Those settlements can result in realized gains or losses, and will result in the reversal of unrealized gains or losses. The Company is not required to post collateral to counterparties of these contracts. Refer to “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q for the quarterly period year ended September 30, 2013 for information on legislative changes that could require collateral posting by MBIA Corp. notwithstanding the contract terms.

NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE The decrease in net gains (losses) on financial instruments at fair value and foreign exchange for the three months ended September 30, 2013 when compared with the same period of 2012 was primarily due to an increase in losses from foreign exchange. The increase in net gains (losses) on financial instruments at fair value and foreign exchange for the nine months ended September 30, 2013 when compared with the same period of 2012 was primarily due to net realized gains from the sales of securities.

NET INVESTMENT LOSSES RELATED TO OTHER-THAN-TEMPORARY IMPAIRMENTS Net investment losses related to other-than-temporary impairments for the three and nine months ended September 30, 2012 were primarily related to one impaired security that was written down to its fair value as it was our intent to sell the security before an expected recovery of fair value to its amortized cost. Refer to the “Liquidity” section included herein for additional information about impaired investments.

REVENUES OF CONSOLIDATED VIEs For the three months ended September 30, 2013, total revenues of consolidated VIEs were $28 million compared with total revenues of $55 million for the same period of 2012. The decrease in revenues of consolidated VIEs for the three months ended September 30, 2013 when compared to the same period of 2012 was primarily related to a decrease in net gains from second-lien RMBS put-back claims on ineligible mortgage loans and a decrease in net gains due to the movements of MBIA Corp.’s nonperformance risk. For the nine months ended September 30, 2013, total revenues of consolidated VIEs were $158 million compared with total revenues of $15 million for the same period of 2012. The increase in revenues of consolidated VIEs for the nine months ended September 30, 2013 when compared to the same period of 2012 was primarily related to an increase in net gains from second-lien RMBS put-back claims on ineligible mortgage loans partially offset by a decrease in net gains due to the movements of MBIA Corp.’s nonperformance risk.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

LOSS AND LOSS ADJUSTMENT EXPENSES MBIA’s insured portfolio management group within its structured finance and international insurance business is responsible for monitoring structured finance and international insured obligations. The level and frequency of monitoring of any insured issue depends on the type, size, rating and performance of the insured issue. If we identify concerns with respect to the performance of an insured issue we may designate such insured issue as “Caution List-Low,” “Caution List-Medium,” “Caution List-High,” or “Classified” depending on the likelihood of a loss. We establish case basis reserves in connection with insured issues designated as Classified credits.

The Company faces significant risks and uncertainties related to potential or actual losses from its CMBS and CRE CDO insured exposure, its second-lien RMBS insured exposure (due to the unpredictable performance of ineligible mortgage loans included in the transactions we insured) backed by home equity lines of credit (“HELOC”) or closed-end second mortgages (“CES”), its first-lien RMBS insured exposure and its ABS CDO insured exposure. Continued significant adverse developments and higher than expected payments on these exposures and/or lower than expected recoveries on the RMBS exposures, could result in a decline in the Company’s liquidity and statutory capital position.

The impact of insured exposures on the Company’s liquidity position is best understood by assessing the ultimate amount of payments that the Company will be required to make with respect to these exposures. In this regard, the Company discloses the discounted expected future net cash flows to be made under all insurance contracts, irrespective of the legal form of the guarantee (i.e., financial guarantee insurance policy or insured derivative contract) or the GAAP accounting basis.

All amounts presented in the following aggregate losses and LAE tables are calculated in accordance with GAAP, with the exception of those related to insured credit derivative impairments. The amounts reported for insured credit derivative impairments are calculated in accordance with U.S. STAT because GAAP does not contain a comparable measurement basis for these contracts. All losses and recoverables reported in the following tables are measured using discounted probability-weighted cash flows. Losses and recoverables on VIEs that are eliminated in consolidation are included because the consolidation of these VIEs does not impact whether or not we will be required to make payments under our insurance contracts. As a result of the different accounting bases of amounts included in the following tables, the total provided in each table represents a non-GAAP measure.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

The following tables present the aggregate loss and LAE reserves and insurance loss recoverables as of September 30, 2013 and December 31, 2012, and the aggregate change in the discounted values of net payments expected to be made on all insurance contracts for the three and nine months ended September 30, 2013 and 2012:

Aggregate Losses and LAE Roll Forward

 

                                                      

In millions

   Financial
Guarantee
Insurance  (1)
     Financial
Guarantee
Insurance
Related
to VIEs (2)
     Insurance
Credit
Derivative
Impairments
and LAE (3)
     Reinsurance  (4)      Total (5)  

Gross loss and LAE reserves as of December 31, 2012

   $ 694       $ 293       $ 1,458       $ (7)       $ 2,438   

Gross insurance loss recoverable as of December 31, 2012

     (3,392)         (1,338)         (31)                (4,755)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total reserves (recoverable) as of December 31, 2012

     (2,698)         (1,045)         1,427         (1)         (2,317)   

Ceded reserves

     (1)                               
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net reserves as of December 31, 2012

     (2,699)         (1,045)         1,427                (2,317)   

Total aggregate losses and LAE incurred

     (13)         (83)         483                387   

(Payments) collections and other

     2,580         53         (1,571)                1,062   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net reserves as of September 30, 2013

     (132)         (1,075)         339                (868)   

Ceded reserves

                   (1)                 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total reserves (recoverable) as of September 30, 2013

   $ (131)       $ (1,075)       $ 338       $      $ (868)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross loss and LAE reserves as of September 30, 2013

   $ 594       $ 240       $ 368       $ (6)       $ 1,196   

Gross insurance loss recoverable as of September 30, 2013

     (725)         (1,315)         (30)                (2,064)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total reserves (recoverable) as of September 30, 2013

   $ (131)       $ (1,075)       $ 338       $      $ (868)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Included in “Losses and loss adjustment,” “Loss and loss adjustment expense reserves,” and “Insurance loss recoverable” on the Company’s consolidated financial statements.

 

(2) - Represents loss expense, reserves and insurance loss recoverable eliminated upon the consolidation of insured VIEs.

 

(3) - Represents statutory losses and LAE and recoveries for insurance contracts accounted for as derivatives. Realized and unrealized gains and losses on these contracts under GAAP are recorded in “Net change in fair value of insured derivatives” on the Company’s consolidated statements of operations and the fair value of these contracts are recorded in “Derivative liabilities” on the Company’s consolidated balance sheets.

 

(4) - Represents “Losses and loss adjustment,” “Loss and loss adjustment expense reserves” and “Insurance loss recoverable” on the Company’s consolidated financial statements and are ceded to third-party reinsurers under insurance contracts. As of December 31, 2012, there was a $1 million receivable related to insured credit derivative impairments and LAE reinsurance.

 

(5) - Represents totals after ceding to third-party reinsurers under insurance contracts.

Aggregate Losses and LAE (change in discounted values of net payments)

 

                                                                 
     For the Three Months Ended September 30, 2013  

In millions

   Second-lien
RMBS (1)
     First-lien
RMBS
     ABS CDO      CMBS      Other  (2)      Total  

Change in actual and expected payments

   $ (8)       $ 14       $ (10)       $ 90       $      $ 93   

Change in actual and expected salvage

     61         (6)         (2)                       70   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total aggregate losses and LAE

   $ 53       $      $ (12)       $ 98       $ 16       $ 163   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes HELOC loans and CES.

 

(2) - Primarily represents an international road transaction.

 

                                                                 
     For the Three Months Ended September 30, 2012  

In millions

   Second-lien
RMBS (1)
     First-lien
RMBS
     ABS CDO      CMBS      Other      Total  

Change in actual and expected payments

   $ 60       $ 46       $ 21       $ 131       $      $ 261   

Change in actual and expected salvage

     (2)                       (8)         (5)         (9)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total aggregate losses and LAE

   $ 58       $ 47       $ 26       $ 123       $ (2)       $ 252   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes HELOC loans and CES.

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Aggregate Losses and LAE (change in discounted values of net payments)

 

                                                                 
     For the Nine Months Ended September 30, 2013  

In millions

   Second-lien
RMBS (1)
     First-lien
RMBS
     ABS CDO      CMBS      Other  (2)      Total  

Change in actual and expected payments

   $ 126       $ 12       $ (90)       $ 472       $ 98       $ 618   

Change in actual and expected salvage

     (262)         (11)                (13)         55         (231)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total aggregate losses and LAE

   $ (136)       $      $ (90)       $ 459       $ 153       $ 387   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes HELOC loans and CES.

 

(2) - Primarily represents an international road transaction and high yield corporate CDOs.

 

                                                                 
     For the Nine Months Ended September 30, 2012  

In millions

   Second-lien
RMBS (1)
     First-lien
RMBS
     ABS CDO      CMBS      Other      Total  

Change in actual and expected payments

   $ 266       $ 101       $ (22)       $ 602       $ 10       $ 957   

Change in actual and expected salvage

     (7)                18         (13)                 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total aggregate losses and LAE

   $ 259       $ 105       $ (4)       $ 589       $ 11       $ 960   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes HELOC loans and CES.

The decrease in total aggregate losses and LAE for the three months ended September 30, 2013 compared with the same period of 2012 was primarily due to lower increases in expected future payments on second-lien RMBS, CMBS, first-lien RMBS and ABS CDO exposures. Partially offsetting these decreases were changes in actual and expected salvage primarily related to lower recoveries resulting from ineligible mortgage loans included in insured second-lien RMBS exposures that are subject to contractual obligations by sellers/servicers to repurchase or replace such mortgage loans.

The decrease in total aggregate losses and LAE for the nine months ended September 30, 2013 compared with the same period of 2012 was primarily due to lower increases in expected future payments on second-lien RMBS, CMBS, first-lien RMBS and ABS CDO exposures. The Company also recorded increases in actual and expected salvage due to the resolution of the Company’s claims as reflected in a disclosure statement filed in August of 2013. The disclosure statement indicated a revised expected recovery for the Company of approximately $828 million which is an increase over the previously identified recovery amount of $796 million reflected in the Plan. The increased recovery amount is primarily due to the favorable disposition of assets and settlements of claims. Additionally, the Company also increased the amount of recoveries subject to contractual obligations by Credit Suisse to repurchase such ineligible mortgage loans. Partially offsetting this was a decrease in excess spread (the difference between interest inflows on mortgage loan collateral and interest outflows on insured beneficial interests) within the RMBS securitizations, reversal of recoveries related to high yield corporate CDOs and deterioration in an international road transaction.

In addition to the information presented above, the following tables present aggregate losses and LAE for the three and nine months ended September 30, 2013 and 2012 by insurance type:

Aggregate Losses and LAE by Insurance Type (change in discounted values of net payments)

 

                                                                 
     For the Three Months Ended September 30, 2013  

In millions

   Second-lien
RMBS (1)
     First-lien
RMBS
     ABS CDO      CMBS      Other  (2)      Total  

Financial guarantee insurance (3)

   $ 28       $      $      $ 10       $ 16       $ 63   

Financial guarantee insurance related to consolidated VIEs (eliminated in consolidation) (4)

     25                (13)                       12   

Insured credit derivatives (statutory basis) (5)

                          88                88   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total aggregate losses and LAE

   $ 53       $      $ (12)       $ 98       $ 16       $ 163   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes HELOC loans and CES.

 

(2) - Primarily represents an international road transaction.

 

(3) - Included in “Losses and loss adjustment” as reported on the Company’s consolidated statements of operations.

 

(4) - Represents losses eliminated upon the consolidation of insured VIEs.

 

(5) - Represents statutory losses and LAE for insurance contracts accounted for as derivatives. Realized and unrealized gains and losses on these contracts under GAAP are recorded in “Net change in fair value of insured derivatives” on the Company’s consolidated statements of operations.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

                                                                 
     For the Three Months Ended September 30, 2012  

In millions

   Second-lien
RMBS (1)
     First-lien
RMBS
     ABS CDO      CMBS      Other      Total  

Financial guarantee insurance (2)

   $ 38       $ 47       $      $ 75       $ (2)       $ 167   

Financial guarantee insurance related to consolidated VIEs (eliminated in consolidation) (3)

     20                 (2)                         18   

Insured credit derivatives (statutory basis) (4)

                     19         48                 67   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total aggregate losses and LAE

   $ 58       $ 47       $ 26       $ 123       $ (2)       $ 252   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes HELOC loans and CES.

 

(2) - Included in “Losses and loss adjustment” as reported on the Company’s consolidated statements of operations.

 

(3) - Represents losses eliminated upon the consolidation of insured VIEs.

 

(4) - Represents statutory losses and LAE for insurance contracts accounted for as derivatives. Realized and unrealized gains and losses on these contracts under GAAP are recorded in “Net change in fair value of insured derivatives” on the Company’s consolidated statements of operations.

Aggregate Losses and LAE by Insurance Type (change in discounted values of net payments)

 

                                                                 
     For the Nine Months Ended September 30, 2013  

In millions

   Second-lien
RMBS (1)
     First-lien
RMBS
     ABS CDO      CMBS      Other  (2)      Total  

Financial guarantee insurance (3)

   $ (92)       $      $ (47)       $ (28)       $ 153       $ (13)   

Financial guarantee insurance related to consolidated VIEs (eliminated in consolidation) (4)

     (44)                 (39)                         (83)   

Insured credit derivatives (statutory basis) (5)

                     (4)         487                 483   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total aggregate losses and LAE

   $ (136)       $      $ (90)       $ 459       $ 153       $ 387   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes HELOC loans and CES.

 

(2) - Primarily represents an international road transaction.

 

(3) - Included in “Losses and loss adjustment” as reported on the Company’s consolidated statements of operations.

 

(4) - Represents losses eliminated upon the consolidation of insured VIEs.

 

(5) - Represents statutory losses and LAE for insurance contracts accounted for as derivatives. Realized and unrealized gains and losses on these contracts under GAAP are recorded in “Net change in fair value of insured derivatives” on the Company’s consolidated statements of operations.

 

                                                                 
     For the Nine Months Ended September 30, 2012  

In millions

   Second-lien
RMBS (1)
     First-lien
RMBS
     ABS CDO      CMBS      Other      Total  

Financial guarantee insurance (2)

   $ 106       $ 105       $      $ 87       $ 11       $ 315   

Financial guarantee insurance related to consolidated VIEs (eliminated in consolidation) (3)

     153                 (18)                         135   

Insured credit derivatives (statutory basis) (4)

                            502                 510   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total aggregate losses and LAE

   $ 259       $ 105       $ (4)       $ 589       $ 11       $ 960   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Includes HELOC loans and CES.

 

(2) - Included in “Losses and loss adjustment” as reported on the Company’s consolidated statements of operations.

 

(3) - Represents losses eliminated upon the consolidation of insured VIEs.

 

(4) - Represents statutory losses and LAE for insurance contracts accounted for as derivatives. Realized and unrealized gains and losses on these contracts under GAAP are recorded in “Net change in fair value of insured derivatives” on the Company’s consolidated statements of operations.

Summary of Financial Guarantee Insurance Losses and LAE

The following information relates to financial guarantee insurance losses and LAE recorded in accordance with GAAP. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a description of the Company’s loss and LAE reserving policy and additional information related to its loss reserves.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

The following table presents information about our loss and LAE incurred for the three and nine months ended September 30, 2013 and 2012:

 

                                                                 
     Three Months Ended
September 30,
     Percent      Nine Months Ended
September 30,
     Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Loss and LAE related to actual and expected payments

   $ 18       $ 185         -90%        $ 119       $ 396         -70%    

Recoveries of actual and expected payments

     45         (18)         n/m          (132)         (81)         63%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross losses incurred

     63         167         -62%          (13)         315         -104%    

Reinsurance

                     -%                          -%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Losses and loss adjustment expenses

   $ 63       $ 167         -62%        $ (13)       $ 315         -104%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

Losses and LAE incurred in our structured finance and international insurance segment totaled $63 million for the three months ended September 30, 2013. Included in the $63 million were decreases in gross recoveries of actual and expected payments of $45 million and gross losses related to actual and expected future payments of $18 million. The $45 million decrease in recoveries of actual and expected payments includes $42 million of recoveries related to insured second-lien RMBS transactions, primarily driven by a reduction in excess spread within the securitizations. The $18 million of actual and expected payments includes $14 million related to insured first-lien RMBS exposures and $18 million of other loss activity, primarily related to CMBS and an international road transaction, partially offset by a $14 million decrease in actual and expected payments related to insured second-lien RMBS transactions.

Losses and LAE incurred in our structured finance and international insurance segment totaled $167 million for the three months ended September 30, 2012. Included in the $167 million were gross losses related to actual and expected future payments of $185 million, of which $140 million primarily related to CMBS and insured first-lien RMBS transactions and $45 million related to insured second-lien RMBS transactions. Partially offsetting these losses were recoveries of actual and expected payments of $18 million, including $7 million related to insured second-lien RMBS transactions. The $7 million of recoveries related to second-lien RMBS transactions included $44 million of recoveries resulting from ineligible mortgage loans included in insured exposures that are subject to contractual obligations by sellers/servicers to repurchase or replace such mortgage loans, partially offset by a $37 million reduction in excess spread within the securitizations.

Losses and LAE incurred in our structured finance and international insurance segment was a benefit of $13 million for the nine months ended September 30, 2013. Included in the $13 million benefit were increases in recoveries of actual and expected payments of $132 million, of which $177 million related to insured second-lien RMBS transactions, partially offset by $45 million of other activity. The $177 million of recoveries related to insured second-lien RMBS transactions included $316 million of recoveries primarily resulting from ineligible mortgage loans included in insured exposures that are subject to contractual obligations by sellers/servicers to repurchase or replace such mortgage loans, partially offset by a $139 million reduction in excess spread within the securitizations. The $45 million of other activity was primarily the result of a reversal of recoveries related to high yield corporate CDOs, partially offset by an increase in recoveries related to an international road transaction. These recoveries were partially offset by gross losses related to actual and expected future payments of $119 million, of which $85 million related to insured second-lien RMBS transactions and $12 million related to first-lien RMBS transactions.

Losses and LAE incurred in our structured finance and international insurance segment totaled $315 million for the nine months ended September 30, 2012. Included in the $315 million were gross losses related to actual and expected future payments of $396 million, of which $216 million primarily related to insured first-lien RMBS transactions and CMBS transactions and $180 million related to insured second-lien RMBS transactions. Partially offsetting these losses were recoveries of actual and expected payments of $81 million, including $74 million related to insured second-lien RMBS transactions. The $74 million of recoveries related to insured second-lien RMBS transactions included $154 million of recoveries resulting from ineligible mortgage loans included in insured exposures that are subject to contractual obligations by sellers/servicers to repurchase or replace such mortgage loans, partially offset by an $80 million reduction in excess spread within the securitizations.

For the three and nine months ended September 30, 2013, losses and LAE incurred included the elimination of a $12 million expense and an $83 million benefit, respectively, as a result of the consolidation of VIEs. The $12 million expense elimination included recoveries of actual and expected payments of $18 million, partially offset by gross losses related to actual and expected future payments of $6 million. The $83 million benefit elimination included gross recoveries of actual and expected payments of $85 million, partially offset by gross losses related to actual and expected future payments of $2 million.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

For the three and nine months ended September 30, 2012, losses and LAE incurred included the elimination of $18 million and $135 million of expense, respectively, as a result of the consolidation of VIEs. The $18 million elimination included gross losses related to actual and expected future payments of $11 million and a decrease in recoveries of actual and expected payments of $7 million. The $135 million elimination included gross losses related to actual and expected future payments of $68 million and a decrease in recoveries of actual and expected payments of $67 million.

The following table presents information about our insurance reserves and recoverable as of September 30, 2013 and December 31, 2012. The Company’s insurance loss recoverable represents expected potential recoveries of paid claims based on probability-weighted net cash inflows discounted at applicable risk-free rates as of the measurement date. Our insurance loss recoverable includes expected recoveries related to put-backs of ineligible mortgage loans within second-lien RMBS transactions and other amounts due to MBIA under the terms and conditions of the respective transactional documents (inclusive of subrogation rights).

 

                                

In millions

   September 30,
2013
     December 31,
2012
     Percent
Change
 

Gross loss and LAE reserves

   $ 802       $ 918         -13%    

Expected recoveries on unpaid losses

     (208)         (224)         -7%    
  

 

 

    

 

 

    

 

 

 

Loss and LAE reserves

   $ 594       $ 694         -14%    
  

 

 

    

 

 

    

 

 

 

Insurance loss recoverable

   $ 725       $ 3,392         -79%    

Insurance loss recoverable-ceded (1)

   $      $        -17%    

Reinsurance recoverable on paid and unpaid losses (2)

   $      $        -14%    

 

(1) - Reported within “Other liabilities” on our consolidated balance sheets.

 

(2) - Reported within “Other assets” on our consolidated balance sheets.

Included in the Company’s loss and LAE reserves are both reserves for insured obligations for which a payment default has occurred and MBIA Corp. has already paid a claim and also for which a payment default has not yet occurred but a claim is expected in the future. The following table includes LAE reserves as of September 30, 2013 and December 31, 2012 for four issues that had no expected future claim payments or par outstanding, but for which the Company was obligated to pay LAE incurred in prior periods. As of September 30, 2013 and December 31, 2012, loss and LAE reserves comprised the following:

 

                                                                 
     Number of Issues (1)      Loss and LAE Reserve      Par Outstanding  

$ in millions

   September 30,
2013
     December 31,
2012
     September 30,
2013
     December 31,
2012
     September 30,
2013
     December 31,
2012
 

Gross of reinsurance:

                 

Issues with defaults

     105         97       $ 403       $ 448       $ 6,494       $ 7,194   

Issues without defaults

     19         25         191         246         1,004         1,402   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total gross of reinsurance

     124         122       $ 594       $ 694       $ 7,498       $ 8,596   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments.

MBIA reports expected potential recoveries of certain paid claims within “Insurance loss recoverable” and the corresponding estimated recovery amounts due to reinsurers within “Other liabilities” on the Company’s consolidated balance sheets. As of September 30, 2013 and December 31, 2012, our insurance loss recoverable in our structured finance and international insurance segment was $725 million and $3.4 billion, respectively. The decrease in our insurance loss recoverable primarily resulted from the collections of previously established recoveries related to the BofA Settlement Agreement related to insured second-lien RMBS securitizations. As of September 30, 2013 and December 31, 2012, our insurance loss recoverable also included estimated recoveries of approximately $669 million and $780 million, respectively, primarily from excess spread within insured second-lien RMBS securitizations. Insurance loss recoverables due to reinsurers totaled $5 million and $6 million as of September 30, 2013 and December 31, 2012, respectively. Insurance loss recoverables are only paid to reinsurers upon receipt of such amounts by MBIA.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Residential Mortgage Exposure

MBIA Corp. insures mortgage-backed securities (“MBS”) backed by residential mortgage loans, including second-lien RMBS transactions (revolving HELOC loans and CES). For the three months ended September 30, 2013, we recorded losses and LAE of $28 million related to insured second-lien RMBS transactions. The $28 million consolidated losses and LAE was due to a decrease in gross recoveries of actual and expected payments of $42 million, partially offset by a decrease in gross losses and LAE related to actual and expected payments of $14 million. For the nine months ended September 30, 2013, we recorded a $92 million benefit related to insured second-lien RMBS transactions. The $92 million benefit was due to gross recoveries of actual and expected payments of $177 million, partially offset by gross losses and LAE related to actual and expected payments of $85 million.

MBIA Corp. also insures MBS backed by first-lien subprime mortgage loans directly through RMBS securitizations. There has been considerable stress and continued deterioration in the subprime mortgage market since 2008 reflected by increased delinquencies and losses, particularly related to subprime mortgage loans originated during 2005, 2006 and 2007. As of September 30, 2013 and December 31, 2012, the Company had $1.1 billion and $2.2 billion, respectively, of gross par outstanding from direct exposure to subprime mortgage loans. While subprime transactions directly guaranteed by MBIA Corp. include collateral comprising mortgage loans that originated during 2005, 2006, and 2007, we currently do not expect ultimate material losses on these transactions given the amount of subordination below MBIA Corp.’s insured portion of such transactions available to absorb losses from collateral defaults. As of September 30, 2013, the Company had $59 million of gross par outstanding in two insured direct subprime mortgage transactions with 2005 or 2006 subprime mortgage collateral appearing on the Company’s Classified or Caution Lists.

The following table presents the gross par outstanding by vintage year of MBIA Corp.’s total direct RMBS insured exposure as of September 30, 2013. Amounts include the gross par outstanding related to transactions that the Company consolidates under accounting guidance for VIEs.

 

                                                                 
     Gross Par Outstanding  

In millions

   Prime
First-
lien
     Alternative
A-paper
First-lien
    Subprime
First-lien
    HELOC
Second-
lien
     CES
Second-
lien
     Total  

2005 - 2007

   $ 15       $ 1,733      $ 360      $ 2,263       $ 2,684       $ 7,055   

2004 and prior

     175         761        763        528         52         2,279   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Total gross par

   $ 190       $ 2,494 (1)     $ 1,123 (2)     $ 2,791       $ 2,736       $ 9,334   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

(1) - Includes international exposure of $662 million.

 

(2) - Includes international exposure of $9 million.

During the nine months ended September 30, 2013, we collected approximately $2.7 billion, net of reinsurance and $243 million in payments, on insured second-lien RMBS transactions, or $2.6 billion after eliminating $130 million of collections and $75 million of payments made on behalf of consolidated VIEs. Through September 30, 2013, we paid a cumulative total of $3.9 billion, net of reinsurance and collections, or $1.7 billion after eliminating $2.2 billion of net payments on insured second-lien RMBS transactions that are currently consolidated as VIEs. As of September 30, 2013, we had loss and LAE reserves related to our remaining insured second-lien RMBS exposure of $124 million before eliminating $44 million of loss and LAE reserves related to our consolidated VIEs. The loss and LAE reserves represent the present value of the difference between cash payments we expect to make on the insured transactions and the cash receipts we expect from the performing mortgage loans in the securitizations. As payments are made, a portion of those expected future receipts is recorded within “Insurance loss recoverable” in our consolidated balance sheets. The payments that we make virtually all go to reduce the principal balances of the securitizations.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

The following table provides information about insured second-lien RMBS transactions included in MBIA Corp.’s insured portfolio “Classified List” as of September 30, 2013. The total payments of consolidated VIEs are not reflected as insurance losses in our consolidated financial statements.

Second-Lien RMBS Transactions with Claim Payments

 

                                           

$ in millions

   Number of
Issues
     Original Par
Insured
     Gross Par
Outstanding
     Claim Payments
and LAE Net of
Collections
Since Inception
 

Non-Consolidated VIEs:

           

HELOC

     14       $ 16,253       $ 1,830       $ 762   

CES

            8,198         1,760         956   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     23       $ 24,451       $ 3,590       $ 1,718   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net of reinsurance

            $ 1,609   
           

 

 

 

Consolidated VIEs:

           

HELOC

          $ 3,657       $ 842       $ 701   

CES

            4,683         956         1,591   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     12       $ 8,340       $ 1,798       $ 2,292   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net of reinsurance

            $ 2,220   
           

 

 

 

The preceding table excludes gross and net claim and LAE payments of $35 million for one issue that has been removed from our “Classified List” and has no outstanding exposure.

Non-Consolidated VIEs

The gross par outstanding on insured second-lien RMBS transactions decreased from $4.0 billion as of December 31, 2012 to $3.6 billion as of September 30, 2013. As of September 30, 2013, we expect to pay an additional $167 million (on a present value basis) on these transactions and expect to receive a total of $756 million (on a present value basis) in reimbursement of past and future expected claims through excess spread in these transactions. Of our expected reimbursement from excess spread, $669 million is included in “Insurance loss recoverable” and $87 million is included in “Loss and loss adjustment expense reserves”. In addition, we expect to receive $18 million (on a present value basis) with respect to amounts contemplated in the ResCap disclosure statement filed in August of 2013, which is included in “Insurance loss recoverable”.

Consolidated VIEs

The gross par outstanding on insured second-lien RMBS transactions decreased from $2.2 billion as of December 31, 2012 to $1.8 billion as of September 30, 2013. The total payments before reinsurance, includes $751 million that was eliminated subsequent to consolidation. As of September 30, 2013, we expect to pay an additional $60 million (on a present value basis) on these transactions and expect to receive a total of $216 million (on a present value basis) in reimbursement of past and future expected claims through excess spread in these transactions. In addition, we expect to receive $1.1 billion (on a present value basis) as of September 30, 2013 with respect to amounts contemplated in the ResCap disclosure statement filed in August of 2013 as well as Credit Suisse’s obligation to repurchase ineligible mortgage loans, which is reported in “Loan repurchase commitments” under “Assets of consolidated variable interest entities” on the consolidated balance sheets.

Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for additional information about assumptions used to estimate recoveries on our RMBS exposure.

Other

We may seek to purchase, from time to time, directly or indirectly, obligations guaranteed by MBIA or seek to commute policies. The amount of insurance exposure reduced, if any, and the nature of any such actions will depend on market conditions, pricing levels from time to time, and other considerations. In some cases, these activities may result in a reduction of expected loss reserves, but in all cases they are intended to limit our ultimate losses and reduce the future volatility in loss development on the related policies. Our ability to purchase guaranteed obligations and to commute policies will depend on management’s assessment of available liquidity.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

POLICY ACQUISITION COSTS AND OPERATING EXPENSES Structured finance and international insurance segment expenses for the three and nine months ended September 30, 2013 and 2012 are presented in the following table:

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Gross expenses

   $ 23       $ 30         -23%        $ 88       $ 118         -25%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Amortization of deferred acquisition costs

   $ 19       $ 24         -21%        $ 76       $ 81         -6%    

Operating

     22         30         -27%          83         115         -28%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total insurance operating expenses

   $ 41       $ 54         -24%        $ 159       $ 196         -19%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross expenses represent total insurance expenses before the deferral of any policy acquisition costs. Gross expenses decreased for the three months ended September 30, 2013 compared with the same period of 2012 primarily due to decreases in legal and litigation related costs and compensation expenses. The decrease in the amortization of deferred acquisition costs for the three months ended September 30, 2013 compared with the same period of 2012 principally reflects the acceleration of deferred costs into earnings in prior periods as polices were terminated. Gross expenses decreased for the nine months ended September 30, 2013 compared with the same period of 2012 as a result of decreases in legal and litigation related costs and compensation expenses partially offset by an increase in consulting fees.

Operating expenses decreased for the three and nine months ended September 30, 2013 compared with the same periods of 2012 due to decreases in gross expenses. We did not defer a material amount of policy acquisition costs during 2013 or 2012. Policy acquisition costs in these periods were primarily related to ceding commission income and premium taxes on installment policies written in prior periods.

INTEREST EXPENSE Interest expense incurred by our structured finance and international insurance segment decreased for the three and nine months ended September 30, 2013 when compared to the same periods of 2012 primarily due to the repayment of the National Secured Loan in May of 2013. In addition, during 2013, the interest rate on MBIA Corp.’s surplus notes decreased as a result of the conversion to a floating rate.

INSURED PORTFOLIO EXPOSURE The credit quality of our structured finance and international insured portfolio is assessed in the same manner as our U.S. public finance insured portfolio. As of September 30, 2013 and December 31, 2012, 23% and 26%, respectively, of our structured finance and international insured portfolio, was rated below investment grade, before giving effect to MBIA’s guarantees, based on MBIA’s internal ratings, which are more current than the underlying ratings provided by S&P and Moody’s for this subset of our insured portfolio.

Structured Finance and International Insurance Selected Portfolio Exposures

The following is a summary of selected significant exposures within the insured portfolio of our structured finance and international insurance segment. The Company has large exposures to many of these sectors. Moreover, many of these sectors are and have been considered volatile over the past several years. As described below, considerable incurred losses and future expected payments are attributable to many of these sectors.

Collateralized Debt Obligations and Related Instruments

As part of our structured finance and international insurance activities, MBIA Corp. typically provided guarantees on senior and, in a limited number of cases, mezzanine tranches of CDOs, as well as protection on structured CMBS pools and corporate securities, and CDS referencing such securities. The following discussion, including reported amounts and percentages, includes insured CDO transactions consolidated by the Company as VIEs.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

As of September 30, 2013, MBIA Corp.’s $31.0 billion CDO portfolio represented 37% of its total insured gross par outstanding of $83.9 billion. As of December 31, 2012, MBIA Corp.’s $51.8 billion CDO portfolio represented 46% of its total insured gross par outstanding of $112.4 billion. The distribution of the Company’s insured CDO and related instruments portfolio by collateral type is presented in the following table:

 

                                

In billions

   Gross Par Outstanding as of  

Collateral Type

   September 30,
2013
     December 31,
2012
     Percent
Change
 

Multi-sector CDOs

   $ 1.6       $ 4.3         -63%    

Investment grade CDOs and structured corporate credit pools

     16.6         24.1         -31%    

High yield corporate CDOs

     4.3         5.7         -25%    

Commercial real estate pools and CRE CDOs

     8.5         17.7         -52%    
  

 

 

    

 

 

    

 

 

 

Total

   $ 31.0       $ 51.8         -40%    
  

 

 

    

 

 

    

 

 

 

Multi-Sector CDOs

The multi-sector CDO portfolio is comprised of 12 transactions insured in the primary market between 2002 and 2006 and 21 transactions insured in the secondary market between 2000 and 2004. The underlying collateral in MBIA Corp.’s insured multi-sector CDO transactions is comprised of RMBS, other multi-sector CDOs, corporate CDOs, collateralized loan obligations, ABS (e.g., securitizations of auto receivables, credit cards, etc.), CRE CDOs, CMBS and corporate credits. Our remaining insured multi-sector CDO transactions primarily rely on underlying collateral originally rated triple-B.

Generally, we are subject to a claim on a multi-sector CDO when the insured tranche incurs an interest or principal shortfall. Such shortfalls result once the underlying collateral supporting the transaction no longer generates enough cash flow to support the insured notes. MBIA Corp.’s payment obligation after a default insures current interest and ultimate principal. Original subordination levels for transactions insured in the primary market ranged from 10% to 31%. Current subordinations range from 0% to 81%.

The significant erosion of subordination in our multi-sector CDO transactions principally resulted from the underperformance of RMBS and CDO collateral. As discussed above, the erosion of subordination in these transactions increases the likelihood that MBIA Corp. will pay claims. As of September 30, 2013, there were credit impairment estimates for 21 classified multi-sector CDO transactions for which MBIA Corp. expects to incur actual net claims in the future (14 of which are insured in the secondary market), representing 64% of all MBIA Corp.-insured multi-sector CDO transactions (including both CDS and non-CDS contracts). Of the remaining transactions, 15% are on our “Caution List” and 21% continue to perform at or close to our original expectations. In the event of further performance deterioration of the collateral referenced or held in our multi-sector CDO transactions, the amount of credit impairments could increase materially.

Total gross par exposure in our multi-sector CDO portfolio was $37.3 billion as of December 31, 2007. Since the end of 2007 through September 30, 2013, our multi-sector CDO gross par exposure has decreased by approximately $35.7 billion primarily from negotiated commutations of $23.6 billion and contractual terminations without any payment from MBIA Corp. of $5.4 billion. The remaining reduction in gross par was due to the amortization and maturity of transactions. As of September 30, 2013, our gross par exposure to multi-sector CDOs of $1.6 billion represented 5% of MBIA Corp.’s CDO exposure and 2% of MBIA Corp.’s total gross par insured.

Investment Grade Corporate CDOs

Our 12 investment grade corporate CDO exposures insured in 2006 and 2007 reference pools of predominantly investment grade corporate credits. Three of these pools include limited exposure to other asset classes, including structured finance securities (such as RMBS and CDOs). Our investment grade corporate CDO policies guarantee coverage of losses on collateral assets once a deductible has been eroded, and are highly customized structures. Our gross par exposure to investment grade corporate CDOs of $16.6 billion represents 54% of MBIA Corp.’s CDO exposure and 20% of MBIA Corp.’s total gross par insured. The Company’s insured investment grade corporate CDOs have experienced erosion of subordination due to the default of underlying referenced corporate and structured finance securities, but we currently do not expect losses on MBIA Corp.’s insured tranches. As of September 30, 2013, the collateral amount in the portfolio exceeds the gross par outstanding as a result of credit enhancement. Original subordination levels for nine of the investment grade corporate CDO policies ranged from 15% to 30%. Current subordination levels for these nine policies are between 11% and 28%.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Our gross par of insured investment grade corporate CDOs includes $7.1 billion across three transactions that were structured to include buckets (typically 30% to 35% of the overall CDO) of references to specific tranches of other investment grade corporate CDOs (monotranches). In such transactions, MBIA Corp.’s insured investment grade corporate CDOs include, among direct corporate or structured credit reference risks, and monotranche or single layer credit risk referencing a diverse pool of corporate assets or obligors with a specific attachment and a specific detachment point. The referenced monotranches in such CDOs were typically rated double-A and sized to approximately 3% of the overall reference risk pool. The inner referenced monotranches are not subject to acceleration and do not give control rights to a senior investor. The inner referenced monotranches have also experienced erosion of subordination due to defaults in their referenced corporate assets. These transactions had original subordination of 25% and current subordination ranges from 15% to 18%.

High Yield Corporate CDOs

Our high yield corporate CDO portfolio, totaling $4.3 billion of gross par exposure, largely comprises middle-market/special- opportunity corporate loan transactions. Our gross par exposure to high yield corporate CDOs represents 14% of MBIA Corp.’s CDO exposure and 5% of MBIA Corp.’s total gross par insured as of September 30, 2013. Original subordination for our high yield corporate portfolio ranged from 22% to 33%. Current subordination is between 10% and 30%. Declines in subordination levels result from defaults in underlying collateral, as well as sales of underlying collateral at discounted prices. Subordination within CDOs may decline further over time as a result of additional collateral deterioration. We do not expect insured losses on our high yield corporate CDO portfolio. Accordingly, as of September 30, 2013, there is no loss reserve established for this portfolio. However, there can be no assurance that the Company will not incur losses as a result of further deterioration in subordination.

Commercial Real Estate Pools and CRE CDOs

As of September 30, 2013, we had $8.5 billion of gross par exposure to the CRE sector through insured structured transactions primarily comprising CRE collateral. In addition, MBIA Corp. insures approximately $1.5 billion in CRE loan pools, primarily comprising European assets. These CRE loans are not included in the following “Structured CMBS Pools” and “CRE CDOs” sections. During the nine months ended September 30, 2013, the Company commuted $8.9 billion of gross par exposure related to CRE exposure. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a discussion of credit impairments on our CRE pools and CDO exposure, including the methodology used to calculate these impairments.

Structured CMBS Pools

As of September 30, 2013, our gross par exposure to structured CMBS pools totaled $7.2 billion and represented approximately 9% of MBIA Corp.’s total gross par insured. Since the end of 2007 through September 30, 2013, our structured CMBS pools gross par exposure has decreased by approximately $33.5 billion, primarily from negotiated commutations and early settlements. Our structured CMBS pool insured transactions are pools of CMBS bonds, Real Estate Investment Trust (“REIT”) debt and other CRE CDOs structured with first loss deductibles such that MBIA Corp.’s obligation attached at a minimum of a triple-A level when the policies were issued. The deductible sizing was a function of the underlying collateral ratings and certain structural attributes. MBIA Corp.’s guarantees for most structured CMBS pool transactions cover losses on collateral assets once the deductibles have been eroded. These deductibles provide credit enhancement and subordination to MBIA’s insured position.

The collateral in the pools are generally CMBS bonds or CDSs referencing CMBS bonds (collectively, “CMBS bonds”). MBIA Corp.’s guarantee generally is in the form of a CDS referencing the static pooled transactions. MBIA Corp. would have a payment obligation if the volume of CMBS bond defaults exceeds the deductible level in the transaction. Each pool comprising CMBS bonds is ultimately backed by the commercial mortgage loans securitized within each CMBS trust. The same CMBS bonds may be referenced in multiple pools. The Company’s structured CMBS pools are static, meaning that the collateral pool of securitizations cannot be and has not been changed since the origination of the policy. Most transactions comprised similarly rated underlying tranches at inception. The deductible for each transaction varies according to the ratings of the underlying collateral. For example, a transaction which comprised originally BBB rated underlying CMBS bonds would typically include a 30-35% deductible to MBIA Corp.’s position whereas a transaction comprising all originally AAA rated underlying CMBS bonds would typically have required a 5-10% deductible.

Original deductibles for our structured CMBS pools ranged from 5.0% to 82.3%. As of September 30, 2013, the deductibles for these transactions ranged from 0% to 81.7%. Deductibles are eroded as bonds experience realized losses which are ultimately due to liquidations of underlying loan collateral. During the second and third quarters of 2013, we paid claims on a CMBS pool transaction which experienced deterioration such that all of the remaining deductible was eliminated. We expect to experience additional claims on this transaction.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

As of September 30, 2013, we have significantly reduced our exposure to pools comprised of 2006 and 2007 vintage CMBS collateral originally rated BBB. As of September 30, 2013, we had exposure to four static CMBS pools, having $800 million of gross par outstanding, that were originally insured in 2006 and 2007, and in which substantially all of the underlying collateral comprised CMBS tranches originally rated BBB and lower. Additionally, we insure two static CMBS pools, totaling $3.0 billion of gross par outstanding as of September 30, 2013, that were originally insured in 2007, and are comprised of CMBS collateral which was originally rated A. Ultimate loss rates remain uncertain. If the economy does not continue to improve, it is possible that we will experience severe losses, particularly if the underlying loans are unable to pay off at their expected maturity dates. Although we believe MBIA Corp. will have adequate resources to pay expected claims, there can be no assurance that this will be the case. The remaining insured CMBS portfolio primarily consists of transactions backed by collateral originally rated AAA and originated in 2004, 2005, 2006 or 2007.

Delinquencies increased markedly in the CRE market during and immediately after the economic crisis, however they have stabilized over the last twelve months. As of September 30, 2013, 30-day and over delinquencies in the fixed-rate conduit CMBS market were 7.8%, and in MBIA Corp.’s insured static pooled CMBS portfolio were 11.2%. The higher delinquency rate in MBIA Corp.’s portfolio was primarily due to a concentration in the 2006 and early 2007 vintages. Additionally, the market includes newer vintage transactions from 2010 to 2012, which have virtually no material delinquencies. Although we have also seen stabilization in the delinquency rate over the past several months, some of the moderation is attributable to increased liquidations, and loan modifications and extensions granted by the special servicers. The special servicers are responsible for managing loans that have defaulted and for conducting the remediation and foreclosure process with the objective of maximizing proceeds for all bondholders by avoiding or minimizing loan level losses.

Actual losses will be a function of the proportion of loans in the pools that are foreclosed and liquidated and the loss severities associated with those liquidations. If the deductibles in the Company’s insured transactions and underlying referenced CMBS transactions are fully eroded, additional property level losses upon foreclosures and liquidations could result in substantial losses for MBIA. Ultimate loss rates remain uncertain and it is possible that we will experience severe losses or liquidity needs due to increased deterioration in our insured CMBS portfolio or our failure to commute the policies, in particular if macroeconomic stress escalates, there is a new recession, increased delinquencies, higher levels of liquidations of delinquent loans, and/or higher severities of loss upon liquidation. Although we still believe the likelihood of a new recession is low, we do consider the possibility in our estimates for future claims.

CRE CDOs

As of September 30, 2013, our gross par exposure to CRE CDOs totaled $1.3 billion and represented approximately 2% of MBIA Corp.’s total gross par insured. CRE CDOs are managed pools of CMBS, CRE whole loans, B-Notes, mezzanine loans, REIT debt, and other securities (including, in some instances, buckets for RMBS and CRE CDOs) that allow for reinvestment during a defined time period. These transactions benefit from typical CDO structural features such as cash diversion triggers, collateral quality tests, and manager replacement provisions. MBIA Corp. guarantees timely interest and ultimate principal of these CDOs. As with our other insured CDOs, these transactions were structured with credit protection originally rated triple-A, or a multiple of triple-A, below our guarantee. As of September 30, 2013, our CRE CDO insured portfolio did not contain any CDOs of ABS exposures. Some of the CRE CDO transactions do contain some RMBS collateral, but overall this comprises less than 1% of the collateral in the CRE CDO portfolio. To the extent losses do occur on these transactions, the payments are due at the maturity date, which range from the years 2036 through 2056. Current subordination levels are between 0% and 42%.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

U.S. Public Finance and Structured Finance and International Reinsurance

Reinsurance enables the Company to cede exposure for purposes of syndicating risk and increasing its capacity to write new business while complying with its single risk and credit guidelines. When a reinsurer is downgraded by one or more of the rating agencies, less capital credit is given to MBIA under rating agency models and the overall value of the reinsurance to MBIA is reduced. The Company generally retains the right to reassume the business ceded to reinsurers under certain circumstances, including a reinsurer’s rating downgrade below specified thresholds. The following table presents information about our reinsurance agreements as of September 30, 2013 for our U.S. public finance and structured finance and international insurance operations:

 

                                                      

In millions

   Standard &                Letters of         

Reinsurers

  

Poor’s Rating

(Status)

  

Moody’s Rating

(Status)

   Ceded Par
Outstanding
     Credit/Trust
Accounts
     Reinsurance
Recoverable  (1)
 

Assured Guaranty Re Ltd.

   AA- (Stable Outlook)    Baa1 (Stable Outlook)    $ 4,009       $      $  

Assured Guaranty Corp.

  

AA-

(Stable Outlook)

  

A3

(Stable Outlook)

     2,773                   

Overseas Private
Investment Corporation

  

AA+

(Stable Outlook)

  

Aaa

(Stable Outlook)

     337                   

Others

   A+ or above    A2 or above      132                  
        

 

 

    

 

 

    

 

 

 

Total

         $ 7,251       $      $  
        

 

 

    

 

 

    

 

 

 

 

(1) - Total reinsurance recoverable of $7 million is primarily recoverables on unpaid losses.

MBIA requires certain unauthorized reinsurers to maintain bank letters of credit or establish trust accounts to cover liabilities ceded to such reinsurers under reinsurance contracts. As of September 30, 2013, the total amount available under these letters of credit and trust accounts was $7 million. The Company remains liable on a primary basis for all reinsured risk, and although MBIA believes that its reinsurers remain capable of meeting their obligations, there can be no assurance of such in the future.

As of September 30, 2013, the aggregate amount of insured par outstanding ceded by MBIA to reinsurers under reinsurance agreements was $7.3 billion compared with $3.4 billion as of December 31, 2012. Of the $7.3 billion of ceded par outstanding as of September 30, 2013, $5.8 billion was ceded from our U.S. public finance insurance segment and $1.5 billion was ceded from our structured finance and international insurance segment. Under National’s reinsurance agreement with MBIA Corp., if a reinsurer of MBIA Corp. is unable to pay claims ceded by MBIA Corp. on U.S. public finance exposure, National will assume liability for such ceded claim payments. As of September 30, 2013, the total amount for which National would be liable in the event that the reinsurers of MBIA Corp. were unable to meet their obligations is $1.6 billion.

In August of 2013, the novation agreement between FGIC and National, whereby FGIC transfers, by novation, to National all the rights and liabilities under each of the policies covered under a reinsurance agreement with FGIC, became effective. This novation agreement includes covered policies that previously benefited from the reinsurance agreement and second-to-pay policies entered into by MBIA Insurance Corporation in 2008 that were subsequently assigned to and reinsured by National in 2009. As a result of this novation, National is now the primary insurer under these policies. The amount of third-party reinsurance available to National via the novation agreement totals $4.2 billion.

Advisory Services

Our asset management and advisory business is primarily conducted through Cutwater and Trifinium Advisors (UK) Limited (“Trifinium”). Cutwater provides advisory services, including cash management, discretionary asset management and structured products on a fee-for-service basis. Cutwater offers these services to public, not-for-profit, corporate and financial services clients, including MBIA Inc. and its other subsidiaries. Trifinium provides certain advisory services primarily in the European Union.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

The following table summarizes the results and assets under management of our advisory services segment for the three and nine months ended September 30, 2013 and 2012. These results include revenues and expenses from transactions with the Company’s insurance, corporate, and wind-down operations.

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Fees

   $ 11       $ 13         -15%        $ 33       $ 42         -21%    

Operating expenses

     19         15         27%          48         48         -%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income (loss)

   $ (8)       $ (2)         n/m        $ (15)       $ (6)         150%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Ending assets under management:

                 

Third-party

   $ 15,010       $ 17,624         -15%        $ 15,010       $ 17,624         -15%    

Insurance and corporate

     6,807         7,530         -10%          6,807         7,530         -10%    

Asset/liability products and conduits

     4,040         5,061         -20%          4,040         5,061         -20%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending assets under management

   $ 25,857       $ 30,215         -14%        $ 25,857       $ 30,215         -14%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

For the three and nine months ended September 30, 2013, the unfavorable changes in pre-tax income (loss) compared with the same periods of 2012 were primarily driven by decreases in fees due to declines in asset balances managed for our other segments and for third parties. Operating expenses for the three months ended September 30, 2013 increased compared with the same period of 2012 due to increases in legal costs, compensation expense related to severance and consulting fees.

Average third-party assets under management for the nine months ended September 30, 2013 and 2012 were $16.9 billion and $19.7 billion, respectively. This decrease was principally due to declines in our pool products and CDO management business.

Corporate

General corporate activities are conducted through our corporate segment. Our corporate operations primarily consist of holding company activities, including our service company, Optinuity Alliance Resources Corporation (“Optinuity”). Revenues and expenses for Optinuity are included in the results of our corporate segment. Optinuity provides support services such as management, legal, accounting, treasury, information technology, and insurance portfolio surveillance, among others, to our corporate segment and other operating businesses on a fee-for-service basis.

The following table summarizes the consolidated results of our corporate segment for the three and nine months ended September 30, 2013 and 2012. The results include revenues and expenses that arise from general corporate activities and from providing support to our other segments.

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Net investment income

   $      $        100%        $ 15       $ 10         50%    

Fees

     32         54         -41%          76         133         -43%    

Net gains (losses) on financial instruments at fair value and foreign exchange

     43         11         n/m          19         19         -%    

Net investment losses related to other-than-temporary impairments

             (4)         -100%                  (4)         -100%    

Other net realized gains (losses)

                     -%                         -100%    

Revenues of consolidated VIEs:

                 

Other net realized gains (losses)

                     -%          (10)                 n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     81         64         27%          100         163         -39%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating

     32         27         19%          133         79         68%    

Interest

     13         15         -13%          36         43         -16%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     45         42         7%          169         122         39%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income (loss)

   $ 36       $ 22         64%        $ (69)       $ 41         n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

FEES Fees are generated from support services provided to business units within the Company on a fee-for-service basis. Fees for the three and nine months ended September 30, 2013 decreased compared with the same periods of 2012 primarily due to decreases in fees paid by our conduit segment for administrative and other services. Such fees may vary significantly from period to period.

NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE The increase in net gains (losses) on financial instruments at fair value and foreign exchange for the three months ended September 30, 2013 compared with the same period of 2012 was primarily due to the changes in the fair value of outstanding warrants issued on MBIA Inc. common stock. These changes were attributable to fluctuations in MBIA Inc.’s stock price and volatility, which are used in the valuation of the warrants. Under the terms of the BofA Settlement Agreement, Blue Ridge received a five-year warrant to purchase 9.94 million shares of MBIA common stock in May of 2013. Under the terms of the Investment Agreement with Warburg Pincus Private Equity X, L.P. and certain of its affiliates (“Warburg Pincus”), the Company issued Warburg Pincus a five-year warrant to purchase 1.91 million shares of MBIA common stock in August of 2013.

OTHER NET REALIZED GAINS (LOSSES) Other net realized gains and losses for the nine months ended September 30, 2012, consisted of insurance recoveries received from our directors’ and officers’ insurance policy. These insurance recoveries reimbursed the Company for a portion of the expenses incurred by the Company related to private securities litigation.

REVENUES OF CONSOLIDATED VIEs For the nine months ended September 30, 2013, total revenues of consolidated VIEs related to net losses as a result of the deconsolidation of VIEs.

OPERATING EXPENSES Operating expenses for the three months ended September 30, 2013 increased compared with the same period of 2012 due to an increase in compensation expense related to severance. Operating expenses for the nine months ended September 30, 2013 increased compared with the same period of 2012 due to expenses related to the BofA Settlement Agreement.

Wind-down Operations

We operate an asset/liability products business in which we historically issued debt and investment agreements insured by MBIA Corp. to capital markets and municipal investors. The proceeds of the debt and investment agreements were used initially to purchase assets that largely matched the duration of those liabilities. We also operate a conduit business in which we historically funded transactions by issuing debt insured by MBIA Corp. The rating downgrades of MBIA Corp. resulted in the termination and collateralization of certain derivatives and investment agreements and, together with the rising cost and declining availability of funding and liquidity within many of the asset classes in which proceeds were invested, caused the Company to begin winding down its asset/liability products and conduit businesses in 2008. Since the downgrades of MBIA Corp., we have not issued debt in connection with either business and, as a result, the outstanding liability balances and corresponding asset balances will continue to decline over time as liabilities mature, terminate or are redeemed or repurchased by us.

Asset/Liability Products

The following table presents the results of our asset/liability products segment for the three and nine months ended September 30, 2013 and 2012. These results include revenues and expenses from transactions with the Company’s other segments.

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Net investment income

   $      $        -29%        $ 18       $ 37         -51%    

Net gains (losses) on financial instruments at fair value and foreign exchange

     (29)         (39)         -26%          (38)         (168)         -77%    

Net investment losses related to other-than-temporary impairments

                     -%                  (56)         -100%    

Net gains (losses) on extinguishment of debt

                    n/m          11                 n/m    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     (17)         (32)         -47%          (9)         (187)         -95%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating

                   -50%                 12         -42%    

Interest expense

     19         22         -14%          59         80         -26%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     21         26         -19%          66         92         -28%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income (loss)

   $ (38)       $ (58)         -34%        $ (75)       $ (279)         -73%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

NET INVESTMENT INCOME The decrease in net investment income for the three and nine months ended September 30, 2013 compared with the same periods of 2012 was primarily due to lower average asset balances as investments were sold to generate liquidity and repay liabilities.

NET GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FAIR VALUE AND FOREIGN EXCHANGE The favorable change in net gains (losses) on financial instruments at fair value and foreign exchange for the three months ended September 30, 2013 compared with the same period of 2012 was primarily the result of derivative gains in 2013 compared with losses in 2012 partially offset by a decline in gains related to the sale of investments. The favorable change in net gains (losses) on financial instruments at fair value and foreign exchange for the nine months ended September 30, 2013 compared to the same period of 2012 was primarily the result of derivative gains in 2013 compared with losses in 2012 and a decline in losses related to the sale of investments, partially offset by higher losses on medium-term notes (“MTNs”) carried at fair value.

NET INVESTMENT LOSSES RELATED TO OTHER-THAN-TEMPORARY IMPAIRMENTS The Company has an ongoing review process for all securities to assess whether a decline in value is related to a credit loss. The Company utilizes cash flow modeling for purposes of assessing other-than-temporary impairments. Net investment losses related to other-than-temporary impairments for the nine months ended September 30, 2012 related to impairing certain securities to their fair values, as it was our intent to sell these securities before a recovery of their fair values to amortized cost. Refer to the “Liquidity” section included herein for additional information about impaired investments.

NET GAINS (LOSSES) ON EXTINGUISHMENT OF DEBT For the three and nine months ended September 30, 2013, net gains (losses) on extinguishment of debt was primarily due to gains from terminations of MTNs and investment agreements issued by the Company.

INTEREST EXPENSE The decrease in interest expense for the three and nine months ended September 30, 2013 compared with the same periods of 2012 was primarily due to the continued maturity and repurchases of liabilities by the Company.

Conduits

The following table presents the results of our conduit segment for the three and nine months ended September 30, 2013 and 2012. These results include revenues and expenses from transactions with the Company’s other segments.

 

                                                                 
     Three Months Ended September 30,      Percent      Nine Months Ended September 30,      Percent  

In millions

   2013      2012      Change      2013      2012      Change  

Revenues of consolidated VIEs:

                 

Net investment income

   $ (1)       $        -125%        $      $        -67%    

Net gains (losses) on financial instruments at fair value and foreign exchange

                     -%          (3)                 n/m    

Net gains (losses) on extinguishment of debt

             16         -100%                  49         -100%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     (1)         20         -105%                  58         -100%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Expenses of consolidated VIEs:

                 

Operating

     15         37         -59%          26         72         -64%    

Interest

                    -100%                 10         -60%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     15         39         -62%          30         82         -63%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Pre-tax income (loss)

   $ (16)       $ (19)         -16%        $ (30)       $ (24)         25%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

n/m- Percent change not meaningful.

Our conduit segment is operated through Meridian. Certain of MBIA’s consolidated subsidiaries have received compensation for services provided to Meridian.

For the three and nine months ended September 30, 2013, total revenues decreased compared with the same periods of 2012 primarily due to the absence of net gains from the repurchases of debt issued by Meridian. Total expenses decreased compared with the same periods of 2012, primarily due to a decline in fees paid to our corporate segment for administrative and other services.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

RESULTS OF OPERATIONS (continued)

 

Taxes

Provision for Income Taxes

The Company’s income taxes and the related effective tax rates for the three and nine months ended September 30, 2013 and 2012 are presented in the following table:

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Pre-tax income (loss)

   $ 171      $ (57)       $ 122      $ 759  

Provision (benefit) for income taxes

   $ 39      $ (64)       $ 4      $ 161  

Effective tax rate

     22.8%         112.3%         3.3%         21.2%   

For the nine months ended September 30, 2013, our effective tax rate applied to our pre-tax income was lower than the U.S. statutory tax rate of 35% primarily due to a reduction in our valuation allowance against our deferred tax asset.

For the nine months ended September 30, 2012, our effective tax rate applied to our pre-tax income was lower than the U.S. statutory tax rate of 35% as a result of the decrease in the Company’s valuation allowance, the release of a portion of the reserve for uncertain tax benefits and the benefit of tax-exempt interest income from investments.

As of December 31, 2012, the Company’s consolidated net operating loss (“NOL”) carryforward was $1.3 billion which will expire between tax years 2029 through 2032. As a result of commutation activity in the second quarter of 2013, the Company’s NOL has significantly increased from December 31, 2012. As of September 30, 2013, the Company’s NOL is approximately $2.8 billion. As of December 31, 2012, the Company had a capital loss carryforward of $165 million which will expire between tax years 2013 and 2017. However, as of September 30, 2013, the Company has generated year-to-date capital gain income sufficient to fully utilize the 2012 capital loss carryforward.

Refer to “Note 10: Income Taxes” in the Notes to Consolidated Financial Statements for a further discussion of income taxes, including the Company’s valuation allowance against deferred tax assets and its accounting for tax uncertainties.

CAPITAL RESOURCES

The Company manages its capital resources to minimize its cost of capital while maintaining appropriate claims-paying resources (“CPR”) for National and MBIA Corp. The Company’s capital resources consist of total shareholders’ equity, total debt issued by MBIA Inc. for general corporate purposes, and surplus notes issued by MBIA Insurance Corporation. Total capital resources were $4.7 billion and $4.8 billion as of September 30, 2013 and December 31, 2012, respectively. MBIA Inc. utilizes its capital resources to support the business activities of its subsidiaries. As of September 30, 2013, MBIA Inc.’s investments in subsidiaries totaled $4.1 billion.

In addition to managing the capital resources of MBIA Inc.’s subsidiaries, we also manage the capital resources of MBIA Inc. supporting our corporate and asset/liability products segments. This includes our corporate unsecured debt issued for general corporate purposes and debt and investment agreements for operating leverage purposes in support of our asset/liability products business. MBIA Inc. seeks to maintain sufficient liquidity and capital resources to meet its general corporate needs as well as the needs of the asset/liability products business. As of September 30, 2013 and December 31, 2012, the combined net debt of MBIA Inc.’s corporate segment and asset/liability products segment, which primarily comprised long-term debt, MTNs, investment agreements and derivative liabilities net of cash and investments at amortized cost and a tax receivable from subsidiaries, totaled $1.3 billion and $1.2 billion, respectively. The Company expects that MBIA Inc. will generate sufficient cash to satisfy its net debt and its general corporate needs over time from distributions from its operating subsidiaries. In addition, the Company may also consider raising third-party capital. There can be no assurance that the aforementioned factors will generate sufficient cash to satisfy its net debt. Refer to the following “Liquidity—MBIA Inc. Liquidity” section for additional information about MBIA Inc.’s liquidity.

Securities Repurchases

Repurchases of debt and/or common stock may be made from time to time in the open market or in private transactions as permitted by securities laws and other legal requirements. We may also choose to redeem debt obligations where permitted by the relevant agreements. We believe that debt and/or share repurchases and redemptions can be an appropriate deployment of capital in excess of amounts needed to support our liquidity while maintaining the CPR of MBIA Corp. and National as well as other business needs.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

CAPITAL RESOURCES (continued)

 

Debt securities

MBIA Inc. or its subsidiaries may repurchase or redeem their outstanding debt at prices that we deem to be economically advantageous. During the nine months ended September 30, 2013, the Company redeemed $486 million par value outstanding of MTNs issued by the Company’s conduit segment at a cost of 100% of par value. The Company also repurchased approximately $80 million par value outstanding of GFL MTNs issued by the Company’s asset/liability segment at a weighted average cost of approximately 92% of par value.

Insurance Statutory Capital

National and MBIA Insurance Corporation are incorporated and licensed in, and are subject to primary insurance regulation and supervision by, the State of New York. National and MBIA Insurance Corporation each are required to file detailed annual financial statements, as well as interim financial statements, with the NYSDFS and similar supervisory agencies in each of the other jurisdictions in which it is licensed. These financial statements are prepared in accordance with New York State and the National Association of Insurance Commissioners’ statements of U.S. STAT and assist our regulators in evaluating minimum standards of solvency, including minimum capital requirements, and business conduct. U.S. STAT differs from GAAP in a number of ways. Refer to the statutory accounting practices note to consolidated financial statements of National and MBIA Corp. within exhibits 99.1 and 99.2, respectively, of MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 for an explanation of the differences between U.S. STAT and GAAP.

National

Capital and Surplus

National reported total statutory capital of $3.4 billion as of September 30, 2013 compared with $3.2 billion as of December 31, 2012. As of September 30, 2013, statutory capital comprised $1.2 billion of contingency reserves and $2.2 billion of policyholders’ surplus. The increase in National’s statutory capital is primarily due to statutory net income of $153 million for the nine months ended September 30, 2013. Consistent with our plan to transform our insurance business, the Company received approval from the NYSDFS to reset National’s unassigned surplus to zero, which was effective January 1, 2010. As of September 30, 2013, National’s unassigned surplus was $1.6 billion. In October 2010, the plaintiffs in the litigation challenging the establishment of National initiated a court proceeding challenging the approval of the surplus reset. Subsequent to the BofA Settlement Agreement and the Societe Generale settlement, all litigation brought originally by the group of eighteen domestic and international financial institutions, related to the establishment of National, has been resolved. Refer to “Note 14: Commitments and Contingencies” in the Notes to Consolidated Financial Statements for a discussion of this action.

In order to maintain its New York State financial guarantee insurance license, National is required to maintain a minimum of $65 million of policyholders’ surplus. National is also required to maintain contingency reserves to provide protection to policyholders in the event of extreme losses in adverse economic events. Refer to the following “MBIA Insurance Corporation—Capital and Surplus” section for additional information about contingency reserves under the New York Insurance Law (“NYIL”). National’s policyholders’ surplus will grow over time from the recognition of unearned premiums and investment income and the expected release of the contingency reserves. Conversely, incurred losses would reduce policyholders’ surplus. As of September 30, 2013 and December 31, 2012, National was not in compliance with its single risk limits requirements but was in compliance with its aggregate risk limits.

NYIL regulates the payment of dividends by financial guarantee insurance companies and provides that such companies may not declare or distribute dividends except out of statutory earned surplus. Under NYIL, the sum of (i) the amount of dividends declared or distributed during the preceding 12-month period and (ii) the dividend to be declared may not exceed the lesser of (a) 10% of policyholders’ surplus, as reported in the latest statutory financial statements or (b) 100% of adjusted net investment income for such 12-month period (the net investment income for such 12-month period plus the excess, if any, of net investment income over dividends declared or distributed during the two-year period preceding such 12-month period), unless the Superintendent of the NYSDFS approves a greater dividend distribution based upon a finding that the insurer will retain sufficient surplus to support its obligations.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

CAPITAL RESOURCES (continued)

 

National is subject to NYIL with respect to the payment of dividends as described above. National had a positive earned surplus as of September 30, 2013, which provides National with dividend capacity. In connection with the court proceeding challenging the approval of the National surplus reset described above, we agreed that National would not pay dividends while the proceeding was adjourned. This agreement terminated in connection with the resolution of the proceeding. In addition, in connection with the approval of a release of excessive contingency reserves during 2011 for MBIA Insurance Corporation, the Company agreed that National would not pay dividends without the prior regulatory approval of the NYSDFS prior to July 19, 2013. Finally, as a condition to the NYSDFS’ approval of the Asset Swap between MBIA Inc. and National, the NYSDFS requested that, until the notional amount of the Asset Swap has been reduced to 5% or less of National’s admitted assets, each of MBIA Inc., MBIA Insurance Corporation and National provide the NYSDFS with three months prior notice, or such shorter period as the NYSDFS may permit, of its intent to initiate cash dividends on shares of its common stock. National provided the NYSDFS with such notice. Subsequent to September 30, 2013, National declared and paid a dividend of $214 million to its ultimate parent, MBIA Inc.

National’s statutory policyholders’ surplus was lower than its GAAP shareholder’s equity by $1.7 billion as of September 30, 2013. U.S. STAT differs from GAAP in certain respects. Refer to “Note 11: Statutory Accounting Practices” in the Notes to Consolidated Financial Statements of National within exhibit 99.1 of MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 for an explanation of the differences between U.S. STAT and GAAP.

Claims-Paying Resources (Statutory Basis)

CPR is a key measure of the resources available to National to pay claims under its insurance policies. CPR consists of total financial resources and reserves calculated on a statutory basis. CPR has been a common measure used by financial guarantee insurance companies to report and compare resources and continues to be used by MBIA’s management to evaluate changes in such resources. We have provided CPR to allow investors and analysts to evaluate National using the same measure that MBIA’s management uses to evaluate National’s resources to pay claims under its insurance policies. There is no directly comparable GAAP measure. Our calculation of CPR may differ from the calculation of CPR reported by other companies.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

CAPITAL RESOURCES (continued)

 

National’s CPR and components thereto, as of September 30, 2013 and December 31, 2012 are presented in the following table:

 

                     

In millions

   As of September 30,
2013
     As of December 31,
2012
 

Policyholders’ surplus

   $ 2,162       $ 1,999   

Contingency reserves

     1,203         1,249   
  

 

 

    

 

 

 

Statutory capital

     3,365         3,248   

Unearned premium reserve

     1,772         2,041   

Present value of installment premiums (1)

     207         217   
  

 

 

    

 

 

 

Premium resources (2)

     1,979         2,258   

Net loss and LAE reserves (1)

     (81)         (109)   

Salvage reserves

     185         262   
  

 

 

    

 

 

 

Gross loss and LAE reserve

     104         153   
  

 

 

    

 

 

 

Total claims-paying resources

   $ 5,448       $ 5,659   
  

 

 

    

 

 

 

 

  (1) - Calculated using a discount rate of 4.54% as of September 30, 2013 and December 31, 2012.

 

  (2) - Includes financial guarantee and insured credit derivative related premiums.

MBIA Insurance Corporation

Capital and Surplus

MBIA Insurance Corporation reported total statutory capital of $1.0 billion as of September 30, 2013 compared with $1.5 billion as of December 31, 2012. As of September 30, 2013, statutory capital comprised $428 million of contingency reserves and $612 million of policyholders’ surplus. For the nine months ended September 30, 2013, MBIA Insurance Corporation had a statutory net loss of $358 million, primarily due to losses and LAE incurred partially offset by net premiums earned. MBIA Insurance Corporation’s policyholders’ surplus as of September 30, 2013 included a negative unassigned surplus of $1.4 billion. As of September 30, 2013, MBIA Insurance Corporation’s policyholders’ surplus was negatively impacted by $39 million because under NYIL it was not permitted to treat as an admitted asset the portion of its investment in subsidiaries in excess of the greater of 50% of policyholders’ surplus or 60% of surplus. This overage was caused by a decrease in MBIA Insurance Corporation’s policyholders’ surplus due to additional insured losses during the third quarter of 2013. MBIA Insurance Corporation’s policyholders’ surplus may be further negatively impacted if future additional insured losses are incurred and the percentage of its assets invested in subsidiaries continues to increase.

As of September 30, 2013, MBIA Insurance Corporation recognized estimated recoveries of $714 million, net of reinsurance and income taxes at a rate of 35%, on a statutory basis related to put-backs of ineligible mortgage loans in its insured transactions. These expected insurance recoveries represented 69% of MBIA Insurance Corporation’s statutory capital as of September 30, 2013. There can be no assurance that we will be successful or that we will not be delayed in realizing these recoveries. Refer to “Executive Overview—MBIA Corp.” included herein for factors that may influence MBIA Corp.’s ability to realize these recoveries.

In order to maintain its New York State financial guarantee insurance license, MBIA Insurance Corporation is required to maintain a minimum of $65 million of policyholders’ surplus. MBIA Insurance Corporation’s policyholders’ surplus is expected to grow over time from the recognition of unearned premiums and investment income and the expected release of the contingency reserves. In addition, MBIA Insurance Corporation’s policyholders’ surplus could be enhanced by the settlement, commutation or repurchase of insured transactions at prices less than its statutory loss reserves for such transactions. Conversely, incurred losses or an inability to collect on our ineligible mortgage loan put-back claims would reduce policyholders’ surplus.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

CAPITAL RESOURCES (continued)

 

Under NYIL, MBIA Insurance Corporation is also required to establish a contingency reserve to provide protection to policyholders in the event of extreme losses in adverse economic events. The amount of the reserve is based on the percentage of principal insured or premiums earned, depending on the type of obligation (net of collateral, reinsurance, refunding, refinancings and certain insured securities). Under NYIL, MBIA Insurance Corporation is required to invest its minimum surplus and contingency reserves, and 50% of its loss reserves and unearned premium reserves, in certain qualifying assets. Reductions in the contingency reserve may be recognized based on excessive reserves and under certain stipulated conditions, subject to the approval of the Superintendent of the NYSDFS. As of September 30, 2013, MBIA Insurance Corporation had a deficit of $321 million of qualifying assets required to support its contingency reserves. The deficit was caused by the failure of certain mortgage originators to honor contractual obligations to repurchase ineligible mortgage loans from securitizations we insured thus requiring MBIA Insurance Corporation to sell liquid assets in order to make claim payments. The deficit may grow due to additional commutation and claim payments until such time as MBIA Corp. collects additional put-back recoveries. MBIA Insurance Corporation has reported the deficit to the NYSDFS. For risks associated with MBIA Insurance Corporation’s failure to meet its contingency reserve requirement, see Part II, Item 1A “Risk Factors—Capital, Liquidity and Market Related Risk Factors—If our insurance companies fail to meet regulatory capital requirements they may become subject to regulatory action” of this Quarterly Report on Form 10-Q.

As of September 30, 2013, MBIA Insurance Corporation exceeded its aggregate risk limits under the NYIL by $61 million. The overage was caused by the decrease in statutory capital described above. MBIA Insurance Corporation plans to notify the NYSDFS of the overage and submit a plan to achieve compliance with the limits in accordance with the NYIL. If MBIA Insurance Corporation is not in compliance with its aggregate risk limits, the NYSDFS may prevent MBIA Insurance Corporation from transacting any new financial guarantee insurance business until it no longer exceeds the limitations. In 2013 and 2012, MBIA Insurance Corporation reported additional overages to the NYSDFS with respect to its single risk limits due to changes in its statutory capital.

In connection with MBIA Insurance Corporation obtaining approval from the NYSDFS to release excessive contingency reserves in previous periods, MBIA Insurance Corporation agreed that it would not pay any dividends without prior approval from the NYSDFS. Due to its significant negative earned surplus, MBIA Insurance Corporation has not had the statutory capacity to pay dividends since December 31, 2009 and is not expected to have any statutory capacity to pay any dividends in the near term.

MBIA Insurance Corporation’s statutory policyholders’ surplus is lower than its GAAP shareholders’ equity by $6 million as of September 30, 2013. U.S. STAT differs from GAAP in certain respects. Refer to “Note 14: Statutory Accounting Practices” in the Notes to Consolidated Financial Statements of MBIA Corp. within exhibit 99.2 of MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 for an explanation of the differences between U.S. STAT and GAAP.

Claims-Paying Resources (Statutory Basis)

CPR is a key measure of the resources available to MBIA Insurance Corporation to pay claims under its insurance policies. CPR consists of total financial resources and reserves calculated on a statutory basis. CPR has been a common measure used by financial guarantee insurance companies to report and compare resources, and continues to be used by MBIA’s management to evaluate changes in such resources. We have provided CPR to allow investors and analysts to evaluate MBIA Insurance Corporation, using the same measure that MBIA’s management uses to evaluate MBIA Insurance Corporation’s resources to pay claims under its insurance policies. There is no directly comparable GAAP measure. Our calculation of CPR may differ from the calculation of CPR reported by other companies.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

CAPITAL RESOURCES (continued)

 

MBIA Insurance Corporation’s CPR and components thereto, as of September 30, 2013 and December 31, 2012 are presented in the following table:

 

                     

In millions

   As of September 30,
2013
     As of December 31,
2012
 

Policyholders’ surplus

   $ 612       $ 965   

Contingency reserves

     428         493   
  

 

 

    

 

 

 

Statutory capital

     1,040         1,458   

Unearned premium reserve

     551         600   

Present value of installment premiums (1)

     841         1,035   
  

 

 

    

 

 

 

Premium resources (2)

     1,392         1,635   

Net loss and LAE reserves (1)

     (843)         (2,448)   

Salvage reserves (3)

     1,941         4,628   
  

 

 

    

 

 

 

Gross loss and LAE reserve

     1,098         2,180   
  

 

 

    

 

 

 

Total claims-paying resources

   $ 3,530       $ 5,273   
  

 

 

    

 

 

 

 

 

  (1) - Calculated using a discount rate of 5.72% as of September 30, 2013 and December 31, 2012.

 

  (2) - Includes financial guarantee and insured credit derivative related premiums.

 

  (3) - This amount primarily consists of expected recoveries related to the Company’s put-back claims.

LIQUIDITY

As a financial services company, MBIA has been materially adversely affected by conditions in global financial markets. Current conditions and events in these markets, in addition to delays in obtaining recoveries related to ineligible mortgage loans in securitizations that we had insured, have put substantial stress on our liquidity resources.

We have utilized a liquidity risk management framework, the primary objectives of which are to monitor liquidity positions and projections in our legal entities and guide the matching of liquidity resources to needs. We monitor our cash and liquid asset resources using stress-scenario testing. Members of MBIA’s senior management meet regularly to review liquidity metrics, discuss contingency plans and establish target liquidity cushions on an enterprise-wide basis. As part of our liquidity risk management framework, we evaluate and manage liquidity on a legal-entity basis to take into account the legal, regulatory and other limitations on available liquidity resources within the enterprise.

The majority of our liquidity management efforts focus on:

 

   

The liquidity resources of MBIA Inc., which are subject to: uncertainty in the timing and amount of cash inflows from dividends paid by National and MBIA Insurance Corporation; the necessity of having to meet the scheduled principal and interest on its corporate debt and investment agreements issued by the asset/liability products business; payments on derivative contracts related to the asset/liability products business; and ongoing operating expense needs. MBIA Inc. has a net debt, which comprised long-term debt, MTN’s, investment agreements and derivative liabilities net of cash and investments at amortized cost and a tax receivable from subsidiaries, of $1.3 billion as of September 30, 2013. In addition, the liquidity resources of MBIA Inc. are subject to collateralization requirements in connection with the liabilities it has issued to third parties and affiliates and in connection with third-party derivative contracts.

 

   

The liquidity resources of MBIA Corp., which are subject to: ongoing payments related to second-lien RMBS exposures; payments on its remaining CMBS exposures, due to the deterioration in such exposures; payments to counterparties in consideration for the commutation of insured transactions; payments on insured exposures that in some cases may be large bullet payments; and the availability of borrowing under the Blue Ridge Secured Loan. MBIA Corp. is currently subject to negative cash flow as a result of these payments and delays in collecting recoveries.

We also monitor the liquidity resources of National in order to ensure it maintains sufficient liquidity to pay claims and satisfy its other obligations. We do not believe there is material liquidity risk in National, although there is no assurance that there will not be material liquidity risk in National in the future in the event of material defaults and claims payments in National’s insured portfolio. National’s liquidity resources are subject to loss payments on its insured transactions and negative cash flow, primarily due to tax payments resulting from embedded earnings and investment income.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

In order to efficiently manage liquidity across the entire enterprise, certain of our subsidiaries, which are less liquidity constrained have entered into intercompany agreements that provide resources to subsidiaries that are more liquidity constrained. These resources include intercompany agreements described further below between our primary insurance subsidiaries and between these insurance subsidiaries and MBIA Inc., which in each case were approved by the NYSDFS and are subject to ongoing monitoring by the NYSDFS. MBIA Insurance Corporation may also draw on liquidity through the Blue Ridge Secured Loan described below.

Key Lending Agreements

Blue Ridge Secured Loan

In connection with the BofA Settlement Agreement in May of 2013, MBIA Insurance Corporation and Blue Ridge entered into the Blue Ridge Secured Loan, pursuant to which Blue Ridge agreed to make revolving loans to MBIA Insurance Corporation in an aggregate amount of up to $500 million. During the third quarter of 2013, MBIA Insurance Corporation borrowed $50 million under this facility. As of September 30, 2013, the remaining amount available under the Blue Ridge Secured Loan was $450 million. Refer to “Note 9: Debt “ in the Notes to Consolidated Financial Statements for a description of prepayment conditions and other material terms of the Blue Ridge Secured Loan.

National Secured Loan

In 2011, National provided a $1.1 billion National Secured Loan to MBIA Insurance Corporation in order to enable MBIA Insurance Corporation to fund settlements and commutations of its insurance policies. This loan was approved by the NYSDFS as well as by the boards of directors of MBIA Inc., MBIA Insurance Corporation and National. During 2012, MBIA Insurance Corporation borrowed an additional $443 million under the National Secured Loan with the approval of the NYSDFS at the same terms as the original loan to fund additional commutations of its insurance policies. In connection with the BofA Settlement Agreement, in May of 2013, MBIA Insurance Corporation repaid this loan in full and it was extinguished.

Asset Swap

National maintains simultaneous repurchase and reverse repurchase agreements, (“Asset Swap”), with MBIA Inc. The Asset Swap provides MBIA Inc. with eligible assets to pledge under investment agreements and derivative contracts in the asset/liability products business. As of September 30, 2013, the notional amount utilized under each of these agreements was $444 million and the fair value of collateral pledged by National and MBIA Inc. under these agreements was $470 million and $475 million, respectively. The net average interest rate on these transactions was 0.23% and 0.56% for the nine months ended September 30, 2013 and 2012, respectively. The NYSDFS approved the Asset Swap in connection with the re-domestication of National to New York. National has committed to the NYSDFS to use commercially reasonable efforts to reduce the amount of the Asset Swap over time.

MBIA Insurance Corporation Secured Loan

MBIA Insurance Corporation, as lender, maintained a master repurchase agreement, the MBIA Insurance Corporation Secured Loan, with MBIA Inc. for the benefit of MBIA Inc.’s asset/liability products business, which totaled $2.0 billion at inception. This loan was repaid in May of 2012 and there were no further draws. This loan facility expired on May 3, 2013.

Conduit Repurchase Agreement

MBIA Inc. maintains a repurchase agreement with Meridian with a maximum funded amount of $1.0 billion, subject to a pledge of collateral. As of September 30, 2013, there was no balance outstanding under this agreement.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

MBIA Inc. Liquidity

MBIA Inc.’s liquidity resources support our corporate and asset/liability products segments. The activities of MBIA Inc. consist of holding and managing investments, servicing outstanding corporate debt instruments, investment agreements and MTNs issued by the asset/liability products and conduit segments, posting collateral under financing and hedging arrangements and investment agreements, making payments and collateral postings related to interest rate and foreign exchange swaps, and paying operating expenses. The primary sources of cash within MBIA Inc. used to meet its liquidity needs include available cash and liquid assets not subject to collateral posting requirements, scheduled principal and interest on assets held in its investment portfolio, dividends from subsidiaries, payments under tax sharing agreements with these subsidiaries (once the payments become unrestricted) and the ability to issue debt and equity. There can be no assurance as to the amount and timing of any such dividends or payments under the tax sharing agreements. MBIA Inc.’s corporate debt, investment agreements, and derivatives and the GFL MTNs may be accelerated by the holders of such instruments upon the occurrence of certain events, such as a breach of covenant or representation, a bankruptcy of MBIA Inc., in the case of the corporate debt, investment agreements and derivatives, the filing of an insolvency proceeding with respect to National, in the case of the corporate debt, a bankruptcy of GFL, in the case of the GFL MTNs, or the filing of an insolvency proceeding with respect to MBIA Insurance Corporation, in the cases of the investment agreements and GFL MTNs. MBIA Inc.’s obligations under its loans from GFL may be accelerated only upon the occurrence of a bankruptcy or liquidation of MBIA Inc. Refer to “Note 11: Business Segments” in the Notes to Consolidated Financial Statements for a description of the GFL loans and MTNs. In the event of any acceleration of all of our obligations, including under our corporate debt, investment agreements, GFL MTNs, or derivatives, we likely would not have sufficient liquid resources to pay amounts due. We provided the NYSDFS with notice of our intention to have National pay a dividend in the fourth quarter of 2013. Subsequent to September 30, 2013, National declared and paid a dividend of $214 million to its ultimate parent, MBIA Inc. Refer to the “Capital Resources – Insurance Statutory Capital” section for additional information on this dividend.

During the nine months ended September 30, 2013, pursuant to the tax sharing agreement, National settled its taxes related to the 2012 tax year of $16 million with MBIA Inc. In addition, National paid to MBIA Inc. estimated 2013 taxes of $81 million. Consistent with the tax sharing agreement, this amount was placed in an escrow account until the expiration of National’s two-year NOL carry-back period under U.S. tax rules. At the expiration of National’s carry-back period, any funds remaining after any reimbursement to National in respect of any NOL carry-backs would be available for general corporate purposes, including to satisfy any other obligations under the tax sharing agreement. During the first nine months of 2013, MBIA Inc. received $115 million that was previously held in escrow under the MBIA group tax sharing agreement. The amount represents National’s liability under the tax sharing agreement for the 2010 tax year, and was released pursuant to the terms of the agreement following the expiration of National’s two-year NOL carry-back period under U.S. tax rules. As of September 30, 2013, $427 million remained in escrow for the 2011 through the 2013 tax years. We expect to release up to $160 million of this escrow related to the 2011 tax year in January 2014 which will increase MBIA Inc.’s liquidity position.

MBIA Inc. is subject to material liquidity risks and uncertainty. To mitigate these risks, we seek to maintain cash and liquidity resources that we believe will be sufficient to make all payments due on our obligations and to meet other financial requirements, such as posting collateral, at least through the next twelve months.

Liquidity risk within MBIA Inc. is primarily a result of the following factors:

 

   

Currently, the majority of the cash and securities of MBIA Inc. is pledged against investment agreement liabilities, intercompany financing arrangements and derivatives, which limit its ability to raise liquidity through asset sales. A significant portion of MBIA Inc.’s assets that are pledged against intercompany financing arrangement liabilities are structured finance securities which have been particularly susceptible to price fluctuations during periods of market volatility. In addition, if the market value or rating eligibility of the assets which are pledged against MBIA Inc.’s obligations were to decline, we would be required to pledge additional eligible assets in order to meet minimum required collateral amounts against these liabilities. In such event, we may sell additional assets, potentially with substantial losses, finance unencumbered assets through intercompany facilities, or use free cash or other assets, in some cases with NYSDFS approval, although there can be no assurance that these strategies will be available or adequate to meet liquidity requirements.

 

   

Uncertainty of the timing and amount of cash inflows from dividends paid by MBIA’s principal operating subsidiaries. Refer to the “Capital Resources-Insurance Statutory Capital” section for a discussion on our insurance subsidiaries’ dividend restrictions.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

Because most of MBIA Inc.’s assets are pledged against the obligations described above, the widening of credit spreads would have an adverse impact on the market value of these assets and increase collateralization requirements for the portfolio. The following table presents the estimated pre-tax change in the aggregate fair value of the asset/liability products business’ assets as of September 30, 2013 from instantaneous shifts in credit spread curves. This table assumes that all credit spreads move by the same amount; however, it is more likely that the actual changes in credit spreads will vary by investment sector and individual security. The table presents hypothetical increases and decreases in credit spreads of 50 and 200 basis points. Because downward movements of these amounts in some cases would result in negative spreads, a floor was assumed for minimum spreads.

 

                                           
     Change in Credit Spreads
(Asset/Liability Products Business)
 

In millions

   200 Basis Point
Decrease
     50 Basis Point
Decrease
     50 Basis Point
Increase
     200 Basis Point
Increase
 

Estimated change in fair value

   $ 96      $ 31       $ (29)       $ (107)   

During the first nine months of 2013, MBIA Inc. maintained three intercompany financing facilities to provide it with additional resources to meet its liquidity requirements within the asset/liability products business: the Asset Swap, the MBIA Insurance Corporation Secured Loan and the Conduit Repurchase Agreement. The MBIA Insurance Corporation Secured Loan expired in May of 2013. Refer to the preceding “Key Lending Agreements” section for a description of these facilities.

We believe that asset sales undertaken to date have reduced volatility in MBIA Inc.’s portfolio in the event of stressed market conditions. However, stressed credit market conditions could cause MBIA Inc. to have insufficient resources to cover collateral and/or other liquidity requirements. Management has identified certain actions to mitigate this risk. These contingent actions include: (1) accessing the capital markets; (2) additional sales of invested assets exposed to credit spread stress risk, which may occur at losses and increase MBIA Inc.’s net debt; (3) termination and settlement of interest rate swap agreements; and (4) other available advances from subsidiaries. These actions, if taken, are expected to result in either additional liquidity or reduced exposure to adverse credit spread movements. There can be no assurance that these actions will be sufficient to fully mitigate this risk. In the event that we cannot implement the contingent actions identified above to raise liquidity, we may have insufficient assets to make all payments on our obligations as they come due, which could result in a default by MBIA Inc. on its obligations and the potential for MBIA Corp., as guarantor of the investment agreements and GFL MTNs, to be called upon to satisfy obligations on those instruments as they come due. In addition, the Company expects that MBIA Inc. will generate sufficient cash to satisfy its net debt and its general corporate needs over time from distributions from its operating subsidiaries and by raising third-party capital, although there can be no assurance that such factors will generate sufficient cash to satisfy its net debt.

As of September 30, 2013, the liquidity position of MBIA Inc., which consists of the liquidity positions of its corporate and asset/liability products activities, was $282 million and comprised cash and liquid assets of $228 million available for general corporate liquidity purposes, excluding the amounts held in escrow under its tax sharing agreement, and $54 million not pledged directly as collateral for its asset/liability products activities. As of December 31, 2012, MBIA Inc. had $239 million of cash and liquid assets comprising $170 million available for general corporate liquidity purposes, excluding the amounts held in escrow under its tax sharing agreement, and $69 million not pledged directly as collateral for its asset/liability products activities. We believe this liquidity position provides MBIA Inc. with sufficient funds to cover expected obligations at least through the next twelve months.

MBIA Corp. Liquidity

Liquidity available in the structured finance and international insurance segment is affected by our ability to collect on recoveries associated with loss payments, the payment of claims on insured exposures, payments made to commute insured exposures, the repayment of outstanding borrowings, a reduction in investment income, any unanticipated expenses, or the impairment or a significant decline in the fair value of invested assets. We may also experience liquidity constraints as a result of NYIL requirements that we maintain specified, high quality assets to back our reserves and surplus.

We believe the current liquidity position of MBIA Corp. is adequate to make expected future claim payments. MBIA Corp.’s liquidity position has been substantially strengthened as a result of the BofA Settlement Agreement, including the elimination of potential claims on Bank of America/Merrill Lynch CMBS exposures and the execution of the Blue Ridge Secured Loan entered into in May of 2013. The liquidity position of MBIA Corp. has been stressed due to ongoing payments on second-lien RMBS exposures, payments on its remaining CMBS exposures and the payments to counterparties in consideration for the commutation of insured transactions, which have resulted in a substantial reduction of exposure and potential loss volatility. While MBIA Corp. has made and may in the future make payments to counterparties in consideration for the commutation of insured transactions, MBIA Corp.’s ability to commute insured transactions will depend on management’s assessment of available liquidity or ability to secure other sources of financing. Depending on the amounts of claims on policies issued by MBIA Corp., MBIA Corp. may not have sufficient liquid assets to pay such claims when due.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

Payment requirements for the structured finance and international financial guarantee contracts fall into three categories: (i) timely interest and ultimate principal; (ii) ultimate principal only at final maturity; and (iii) payments upon settlement of individual collateral losses as they occur after any deductible or subordination has been exhausted, which payments are unscheduled and therefore more difficult to predict, and which category applies to most of the transactions on which we have recorded loss reserves. Insured transactions that require payment in full of the principal insured at maturity could present liquidity risks for MBIA Corp. since payment of the principal is due at maturity but any salvage could be recovered over time after payment of the principal amount. MBIA Corp. has insured transactions with substantial principal amounts due at maturity that are scheduled to mature in the near term. MBIA Corp. expects the transactions to be repaid on or prior to the maturity date. MBIA Corp. is generally required to satisfy claims within one to three business days, and as a result seeks to identify potential claims in advance through our monitoring process. While our financial guarantee policies generally cannot be accelerated, thereby helping to mitigate liquidity risk, the insurance of CDS contracts may, in certain circumstances, including the occurrence of certain insolvency or payment defaults under the CDS contracts, be subject to termination by the counterparty, triggering a claim for the fair value of the contract. In order to monitor liquidity risk and maintain appropriate liquidity resources, we use the same methodology as we use to monitor credit quality and losses within our insured portfolio, including stress scenarios. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a discussion of our loss process.

Our structured finance and international insurance segment also requires cash for the payment of operating expenses, as well as principal and interest related to its surplus notes. Pursuant to Section 1307 of the NYIL and the Fiscal Agency Agreement governing MBIA Corp.’s surplus notes, any payment on the notes may be made only with the prior approval of the Superintendent of the NYSDFS “whenever, in his judgment, the financial condition of [MBIA Corp.] warrants” and payment may be made only out of MBIA Corp.’s “free and divisible surplus”. If these conditions are not met, MBIA Corp. is not permitted to make any applicable interest payment and no default or event of default would occur under the Fiscal Agency Agreement or any of the Company’s other agreements. From the January 15, 2013 interest payment to the present, MBIA Corp.’s requests for approval of the note interest payments have not been approved by the NYSDFS. In accordance with the terms of the Fiscal Agency Agreement, MBIA Corp. is required to provide, and has provided, notice to the Fiscal Agent that it has not made these scheduled interest payments. The deferred interest payments will become due on the first business day on or after which MBIA Corp. obtains approval to make such payments. No interest will accrue on the deferred interest. There can be no assurance that the NYSDFS will approve these or any subsequent interest payments, or that it will approve any principal payments at maturity or any optional redemption payment that MBIA Corp. may seek to make. Subsequent to September 30, 2013, S&P revised their criteria related to the ratings for certain hybrid capital instruments. As a result, S&P lowered the ratings of MBIA Corp.’s surplus notes and MBIA Corp.’s preferred stock to D.

Since the fourth quarter of 2007 through September 30, 2013, MBIA Corp. has made $13.5 billion of cash payments, before reinsurance and collections and excluding LAE (including payments made to debt holders of consolidated VIEs), associated with second-lien RMBS securitizations and with commutations and claim payments primarily relating to CDS contracts. These cash payments include loss payments of $1.0 billion made on behalf of MBIA Corp.’s consolidated VIEs. Of the $13.5 billion, MBIA Corp. has paid $6.9 billion of gross claims (before reinsurance and collections and excluding LAE) on policies insuring second-lien RMBS securitizations, driven primarily by an extensive number of ineligible mortgage loans being placed in the securitizations in breach of the representations and warranties of the sellers/servicers. In addition, MBIA Corp. has paid $6.6 billion of gross settlement and claim payments (before reinsurance and collections and excluding LAE) on insured credit derivatives. Also, since the fourth quarter of 2007 through September 30, 2013, MBIA Corp. has collected $1.8 billion in cash and securities related to put-back recoveries and $224 million of excess spread before reinsurance.

MBIA Corp. is seeking to enforce its rights to have mortgage sellers/servicers cure, replace or repurchase ineligible mortgage loans from securitizations and has recorded a total of $1.1 billion of related expected recoveries on our consolidated balance sheets as of September 30, 2013, including expected recoveries recorded in our consolidated VIEs. To date, the Company has resolved or agreed to resolve substantially all of its claims related to ineligible loans, with the exception of those loans securitized by Credit Suisse Securities (USA) LLC. However, there can be no assurance that we will be successful or that we will not be delayed in realizing these recoveries. Such risks are contemplated in the scenarios we utilize to calculate these recoveries, which are recognized on our consolidated balance sheets. We collected our put-back claim against Bank of America in May of 2013, which substantially reduced our remaining consolidated expected recoveries. In May of 2013, MBIA Insurance Corporation also consented to a plan to resolve its claims against ResCap and certain of its affiliates. We anticipate that we will receive an initial distribution of funds from ResCap in late 2013 or early 2014, which will further substantially reduce our remaining consolidated expected recoveries. The Plan is subject to bankruptcy court approval. This anticipated timeline may change due to developments related to the Junior Secured Note litigation which occurred in October of 2013 or other matters that develop in the course of events in the bankruptcy court plan confirmation process. Furthermore, there can be no assurance that the Plan will ultimately be approved in its current form, or that MBIA will receive its expected recoveries. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements for a discussion of the claims related to Credit Suisse Securities (USA) LLC and the ResCap agreement.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

A portion of the commutation payments made since the fourth quarter of 2011 were financed through the National Secured Loan, which was paid in full and extinguished in May of 2013 in connection with the BofA Settlement Agreement and the settlement of Flagstar Bank’s put-back obligation. Future commutation payments may be financed through draws on the Blue Ridge Secured Loan subject to its continued availability. MBIA Insurance Corporation’s ability to repay the Blue Ridge Secured Loan and any accrued interest will be largely dependent on MBIA Corp.’s ability to collect on its future receivables, including its ability to successfully enforce its rights to have the mortgage sellers/servicers cure, replace or repurchase ineligible mortgage loans from insured securitizations.

MBIA Corp. also insures third-party holders of our asset/liability products segment’s obligations. MBIA Insurance Corporation, as lender, maintained a master repurchase agreement, the MBIA Insurance Corporation Secured Loan, with MBIA Inc. for the benefit of MBIA Inc.’s asset/liability products business, which totaled $2.0 billion at inception. This loan was repaid in May of 2012 and there were no further draws. This loan facility expired on May 3, 2013.

As of September 30, 2013, MBIA Corp. held cash and available-for-sale investments of $866 million, of which $97 million comprised cash and highly liquid assets that was immediately available to MBIA Insurance Corporation. Included in the $866 million was $634 million of cash and available-for-sale investments held by its subsidiaries and not immediately available to MBIA Insurance Corporation. In connection with the BofA Settlement Agreement, MBIA Insurance Corporation, entered into the Blue Ridge Secured Loan, which provides MBIA Corp. with an additional maximum amount of $500 million in liquidity. During the third quarter of 2013, MBIA Insurance Corporation borrowed $50 million from this facility at 7.76%. As of September 30, 2013, the remaining amount available under the Blue Ridge Secured Loan was $450 million. As of December 31, 2012, MBIA Corp. held cash and available-for-sale investments of $1.3 billion, of which $345 million comprised cash and highly liquid assets that was immediately available to MBIA Insurance Corporation. Included in the $1.3 billion was $659 million of cash and available-for-sale investments held by its subsidiaries and not immediately available to MBIA Insurance Corporation. We believe that MBIA Corp.’s liquidity resources, including expected cash inflows, will adequately provide for anticipated cash outflows. Depending on the amount of actual claims on the policies issued by MBIA Corp., including claims on insured exposures that in some cases may require large bullet payments, MBIA Corp. may not have sufficient liquid assets to pay such claims. In the event of unexpected liquidity requirements, we may have insufficient resources to meet our obligations or insufficient qualifying assets to support our surplus and reserves, and may seek to increase our cash holdings position by drawing on the Blue Ridge Secured Loan or raising external capital, and there can be no assurance that we will be able to draw on these additional sources of liquidity.

National Liquidity

Despite continued adverse macroeconomic conditions in the U.S., the incidence of default among U.S. public finance issuers remains extremely low and we believe that the liquidity position of our U.S. public finance insurance segment is sufficient to meet cash requirements in the ordinary course of business.

Liquidity risk arises in our U.S. public finance insurance segment primarily from the following:

 

   

The insurance policies issued or reinsured by National, the entity from which we conduct our U.S. public finance insurance business, provide unconditional and irrevocable guarantees of payments of the principal of, and interest or other amounts owing on, insured obligations when due or, in the event that the insurance company has the right, at its discretion, to accelerate the payment under its policies upon the acceleration of the underlying insured obligations due to default or otherwise. In the event of a default in payment of principal, interest or other insured amounts by an issuer, National generally promises to make funds available in the insured amount within one to three business days following notification. In some cases, the amount due can be substantial, particularly if the default occurs on a transaction to which National has a large notional exposure or on a transaction structured with large, bullet-type principal maturities. The fact that the U.S. public finance insurance segment’s financial guarantee contracts generally cannot be accelerated by a party other than the insurer helps to mitigate liquidity risk in this segment.

 

   

National has entered into certain intercompany transactions to support the liquidity needs of its affiliates. One of these transactions includes the Asset Swap through which National exchanges liquid assets with MBIA Inc. As a result of this transaction, National is subject to repayment risk, which may adversely affect its liquidity. In addition, changes in the market value of securities sold to National under its Asset Swap with the asset/liability products business may adversely affect its liquidity position if MBIA Inc. were unable to pledge additional eligible assets in order to meet minimum required collateral amounts.

National held cash and short-term investments of $1.5 billion as of September 30, 2013, which was highly liquid and consisted predominantly of highly rated municipal, U.S. agency and corporate bonds. As of December 31, 2012, National held cash and short-term investments of $470 million, of which $419 million was highly liquid and consisted predominantly of highly rated municipal, U.S. agency and corporate bonds.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

Consolidated Cash Flows

Information about our consolidated cash flows by category is presented on our consolidated statements of cash flows. The following table presents a summary of our consolidated cash flows for the nine months ended September 30, 2013 and 2012:

 

                                
     Nine Months Ended September 30,      Percent
Change
 

In millions

           2013                      2012             

Net cash provided (used) by:

        

Operating activities

   $ 1,033       $ (955)         n/m   

Investing activities

     297         3,106         -90%   

Financing activities

     (1,224)         (2,343)         -48%   

 

n/m - Percent change not meaningful.

Operating activities

Net cash provided by operating activities increased for the nine months ended September 30, 2013 when compared with the same period of 2012 primarily due to an increase in financial guarantee recoveries received and decreases in losses and loss adjustment expense and interest expense paid. This is partially offset by a decrease in cash received from investment income.

Investing activities

Net cash provided by investing activities decreased for the nine months ended September 30, 2013 when compared with the same period of 2012 primarily due to declines in proceeds from net sales and redemptions of securities for purposes of funding commutation and loss payments.

Financing activities

Net cash used by financing activities decreased for the nine months ended September 30, 2013 when compared with the same period of 2012 primarily due to decreases in payments for drawdowns of investment agreements, payments to retire debt related to our conduit segment, and payments for securities sold under agreements to repurchase.

Investments

The following discussion of investments, including references to consolidated investments, excludes cash and investments reported under “Assets of consolidated variable interest entities” on our consolidated balance sheets. Cash and investments of VIEs support the repayment of VIE obligations and are not available to settle obligations of MBIA.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

Our available-for-sale investments comprise high-quality fixed-income securities and short-term investments. As of September 30, 2013 and December 31, 2012, the fair values of our consolidated available-for-sale investments were $6.2 billion and $5.6 billion, respectively, as presented in the following table. Additionally, consolidated cash and cash equivalents as of September 30, 2013 and December 31, 2012 were $1.1 billion and $814 million, respectively.

 

                                

In millions

   As of September 30,
2013
     As of December 31,
2012
     Percent Change  

Available-for-sale investments:

        

U.S. public finance insurance

        

Amortized cost

   $ 4,496       $ 3,006         50%    

Unrealized net gain (loss)

     (54)         105         n/m    
  

 

 

    

 

 

    

 

 

 

Fair value

     4,442         3,111         43%    
  

 

 

    

 

 

    

 

 

 

Structured finance and international insurance

        

Amortized cost

     524         886         -41%    

Unrealized net gain (loss)

     16         22         -27%    
  

 

 

    

 

 

    

 

 

 

Fair value

     540         908         -41%    
  

 

 

    

 

 

    

 

 

 

Corporate

        

Amortized cost

     468         543         -14%    

Unrealized net gain (loss)

     (57)         (36)         58%    
  

 

 

    

 

 

    

 

 

 

Fair value

     411         507         -19%    
  

 

 

    

 

 

    

 

 

 

Advisory services

        

Amortized cost

            11         -55%    

Unrealized net gain (loss)

                   -%    
  

 

 

    

 

 

    

 

 

 

Fair value

            11         -55%    
  

 

 

    

 

 

    

 

 

 

Wind-down operations

        

Amortized cost

     794         1,039         -24%    

Unrealized net gain (loss)

     29         20         45%    
  

 

 

    

 

 

    

 

 

 

Fair value

     823         1,059         -22%    
  

 

 

    

 

 

    

 

 

 

Total available-for-sale investments:

        

Amortized cost

     6,287         5,485         15%    

Unrealized net gain (loss)

     (66)         111         n/m    
  

 

 

    

 

 

    

 

 

 

Total available-for-sale investments at fair value

     6,221         5,596         11%    
  

 

 

    

 

 

    

 

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

                                

In millions

   As of September 30,
2013
     As of December 31,
2012
     Percent Change  

Investments carried at fair value:

        

U.S. public finance insurance

        

Amortized cost

     185         190         -3%    

Unrealized net gain (loss)

     (8)                 n/m    
  

 

 

    

 

 

    

 

 

 

Fair value

     177         190         -7%    
  

 

 

    

 

 

    

 

 

 

Structured finance and international insurance

        

Amortized cost

     27         27         -%    

Unrealized net gain (loss)

                   -33%    
  

 

 

    

 

 

    

 

 

 

Fair value

     29         30         -3%    
  

 

 

    

 

 

    

 

 

 

Corporate

        

Amortized cost

     60         38         58%    

Unrealized net gain (loss)

     (3)         (10)         -70%    
  

 

 

    

 

 

    

 

 

 

Fair value

     57         28         104%    
  

 

 

    

 

 

    

 

 

 

Advisory services

        

Amortized cost

                   -%    

Unrealized net gain (loss)

                    n/m    
  

 

 

    

 

 

    

 

 

 

Fair value

                   25%    
  

 

 

    

 

 

    

 

 

 

Wind-down operations

        

Amortized cost

                    -100%    

Unrealized net gain (loss)

                     -%    
  

 

 

    

 

 

    

 

 

 

Fair value

                    -100%    
  

 

 

    

 

 

    

 

 

 

Total investments carried at fair value:

        

Amortized cost

     276         264         5%    

Unrealized net gain (loss)

     (8)         (7)         14%    
  

 

 

    

 

 

    

 

 

 

Total investments carried at fair value

     268         257         4%    
  

 

 

    

 

 

    

 

 

 

Other investments at amortized cost:

        

U.S. public finance insurance operations segment

                   -33%    
  

 

 

    

 

 

    

 

 

 

Total other investments at amortized cost

                   -33%    
  

 

 

    

 

 

    

 

 

 

Consolidated investments at carrying value

   $ 6,495       $ 5,862         11%    
  

 

 

    

 

 

    

 

 

 

 

n/m - Percent change not meaningful.

The fair value of the Company’s investments is based on prices which include quoted prices in active markets and prices based on market-based inputs that are either directly or indirectly observable, as well as prices from dealers in relevant markets. Differences between fair value and amortized cost arise primarily as a result of changes in interest rates and general market credit spreads occurring after a fixed-income security is purchased, although other factors may also influence fair value, including specific credit-related changes, supply and demand forces and other market factors. When the Company holds an available-for-sale investment to maturity, any unrealized gain or loss currently recorded in accumulated other comprehensive income (loss) in the shareholders’ equity section of the balance sheet is reversed. As a result, the Company would realize a value substantially equal to amortized cost. However, when investments are sold prior to maturity, the Company will realize any difference between amortized cost and the sale price of an investment as a realized gain or loss within its consolidated statements of operations.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

Credit Quality

The credit quality distribution of the Company’s available-for-sale fixed-maturity investment portfolios, excluding short-term investments, based on ratings from Moody’s as of September 30, 2013 is presented in the following table. Alternate ratings sources, such as S&P or the best estimate of the ratings assigned by the Company, have been used for a small percentage of securities that are not rated by Moody’s.

 

                                                                                                                                   
    U.S. Public
Finance
    Structured
Finance and
International
    Advisory
Services
    Corporate     Wind-down
Operations
    Total  

In millions

  Fair
Value
    % of
Fixed-
Income
Investments
    Fair
Value
    % of
Fixed-
Income
Investments
    Fair
Value
    % of
Fixed-
Income
Investments
    Fair
Value
    % of
Fixed-
Income
Investments
    Fair
Value
    % of
Fixed-
Income
Investments
    Fair
Value
    % of
Fixed-
Income
Investments
 

Available-for-sale:

                       

Aaa

  $ 1,494        43%       $ 210        63%       $       50%       $        0%       $ 191        26%       $ 1,896        40%    

Aa

    1,118        33%         85        26%                0%               1%         107        15%         1,312        28%    

A

    533        16%         11        3%               50%         10        5%         208        28%         763        16%    

Baa

    118        3%               2%                0%               1%         201        27%         327        7%    

Below investment grade

    27        1%         17        5%                0%         157        82%         16        2%         217        5%    

Not rated

    143        4%               1%                0%         20        11%         15        2%         181        4%    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 3,433        100%       $ 332        100%       $       100%       $ 191        100%       $ 738        100%       $ 4,696        100%    

Short-term investments

    1,003          207                  221          82          1,515     

Investments carried at fair value

    177          29                  57                   268     

Other investments

    11                                           16     
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Consolidated investments at carrying value

  $ 4,624        $ 569        $ 10        $ 469        $ 823        $ 6,495     
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

As of September 30, 2013, the weighted average credit quality of the Company’s available-for-sale investment portfolios, excluding short-term and other investments, as presented in the preceding table are as follows:

 

                                                      
     U.S. Public
Finance
   Structured
Finance and
International
Insurance
   Advisory
Services
   Corporate    Wind-down
Operations

Weighted average credit quality ratings

   Aa    Aa    Aa    Below investment grade    A

Insured Investments

MBIA’s consolidated investment portfolio includes investments that are insured by various financial guarantee insurers (“Insured Investments”), including investments insured by MBIA Corp. and National (“Company-Insured Investments”). As of September 30, 2013, Insured Investments at fair value represented $643 million or 10% of consolidated investments, of which $393 million or 7% of consolidated investments were Company-Insured Investments.

As of September 30, 2013, based on the actual or estimated underlying ratings of our consolidated investment portfolio, without giving effect to financial guarantees, the weighted average rating of the consolidated investment portfolio would be in the Aa range, the weighted average rating of only the Insured Investments in the investment portfolio would be in the Baa range, and 3% of the total investment portfolio would be rated below investment grade in the Insured Investments.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

The distribution of our Insured Investments by financial guarantee insurer as of September 30, 2013 is presented in the following table:

 

                                                                                                             
     U.S. Public Finance      Structured Finance
and International
     Corporate      Wind-Down
Operations
     Total  

In millions

   Fair
Value
     % of Total
Investments
     Fair
Value
     % of Total
Investments
     Fair
Value
     % of Total
Investments
     Fair
Value
     % of Total
Investments
     Fair
Value
     % of Total
Investments
 

MBIA Corp.

   $        0%        $        0%        $ 106         2%        $ 117         2%        $ 223         4%    

National

     65         1%                 0%                 0%          105         2%          170         3%    

Assured Guaranty Municipal Corp.

     56         1%                 0%                 0%          123         2%          179         3%    

Ambac Financial Group, Inc.

            0%                 0%                 0%          24         0%          41         0%    

FGIC

            0%                 0%          15         0%                 0%          27         0%    

Other

            0%                 0%                 0%                 0%                 0%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 136         2%        $        0%        $ 129         2%        $ 375         6%        $ 643         10%    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

In purchasing Insured Investments, the Company independently assesses the underlying credit quality, structure and liquidity of each investment, in addition to the creditworthiness of the insurer. Insured Investments are diverse by sector, issuer and size of holding. The Company assigns underlying ratings to its Insured Investments without giving effect to financial guarantees based on underlying ratings assigned by Moody’s, or another external agency when a rating is not published by Moody’s. When an external underlying rating is not available, the underlying rating is based on the Company’s best estimate of the rating of such investment. A downgrade of a financial guarantee insurer will likely have an adverse effect on the fair value of investments insured by the downgraded financial guarantee insurer. If MBIA determines that declines in the fair values of Insured Investments are other-than-temporary, the Company will record a realized loss through earnings.

The underlying ratings of the Company-Insured Investments as of September 30, 2013 are reflected in the following table. Amounts represent the fair value of such investments including the benefit of the MBIA guarantee. The ratings in the following table are based on ratings from Moody’s. Alternate ratings sources, such as S&P, have been used for a small percentage of securities that are not rated by Moody’s.

 

                                                      

In millions

   U.S. Public
Finance
Insurance
     Structured
Finance and
International
Insurance
            Wind-down
Operations
        
                        

Underlying Ratings Scale

         Corporate         Total  

National:

              

Aa

   $ 30       $      $      $ 14       $ 44   

A

     35                       16         51   

Baa

                          75         75   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total National

   $ 65       $      $      $ 105       $ 170   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

MBIA Corp.:

              

Aa

   $      $      $      $ 56       $ 56   

A

                          12         12   

Baa

                          49         52   

Below investment grade

                   103                103   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total MBIA Corp.

   $      $      $ 106       $ 117       $ 223   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total MBIA Insured Investments

   $ 65       $      $ 106       $ 222       $ 393   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Without giving effect to the MBIA guarantee of the Company-Insured Investments in the consolidated investment portfolio, as of September 30, 2013, based on actual or estimated underlying ratings, the weighted average rating of the consolidated investment portfolio was in the Aa range, the weighted average rating of only the Company-Insured Investments was in the Baa range, and investments rated as below investment grade in the Company-Insured Investments were 2% of the total consolidated investment portfolio.

Impaired Investments

As of September 30, 2013 and December 31, 2012, we held impaired available-for-sale investments (investments for which fair value was less than amortized cost) with a fair value of $2.5 billion and $1.3 billion, respectively.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

 

LIQUIDITY (continued)

 

We analyze impaired investments within our investment portfolio for other-than-temporary impairments on a quarterly basis. Key factors considered when assessing other-than-temporary impairments include but are not limited to: (a) structural and economic factors among security types that represent our largest exposure to credit impairment losses; (b) the duration and severity of the unrealized losses (i.e., a decline in the market value of a security by 20% or more at the time of the review, or 5% impaired at the time of review with a fair value below amortized cost for a consecutive 12-month period); and (c) the results of various cash flow modeling techniques. Our cash flow analysis considers all sources of cash, including credit enhancement, that support the payment of amounts owed by an issuer of a security. This includes the consideration of cash expected to be provided by financial guarantors, including MBIA Corp., resulting from an actual or potential insurance policy claim.

Refer to “Note 7: Investments” in the Notes to Consolidated Financial Statements for a detailed discussion about impaired investments.

Debt Obligations

Principal payments due under our debt obligations for the three months ending December 31, 2013 and each of the subsequent four years ending December 31 and thereafter are presented in the following table. The repayment of principal on our surplus notes is reflected in 2018, which is the next call date. Principal payments under investment agreements are based on expected withdrawal dates. All other principal payments are based on contractual maturity dates. Foreign currency denominated liabilities are presented in U.S. dollars using applicable exchange rates as of September 30, 2013, and liabilities issued at a discount reflect principal amounts due at maturity.

 

                                                                            
     As of September 30, 2013  

In millions

   Three Months
Ending
December 31,
2013
     2014      2015      2016      2017      Thereafter      Total  

Structured finance and international insurance segment:

                    

Variable interest entity notes

   $ 97       $ 333       $ 439       $ 324       $ 387       $ 4,109       $ 5,689   

Surplus notes

                                        940         940   

Blue Ridge secured loan

     50                                            50   

Corporate segment:

                    

Long-term debt

                                        583         583   

Asset/liability products segment:

                    

Investment agreements

     37         136         44         49         57         518         841   

Medium-term notes

     17         32         239         131         54         1,710         2,183   

Conduit segment:

                    

Medium-term notes

                                        149         149   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 201       $ 501       $ 722       $ 504       $ 498       $ 8,009       $ 10,435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

In general, MBIA’s market risk relates to changes in the value of financial instruments that arise from adverse movements in factors such as interest rates, foreign exchange rates and credit spreads. MBIA is exposed to changes in interest rates, foreign exchange rates and credit spreads that affect the fair value of its financial instruments, namely investment securities, investment agreement liabilities, MTNs, debentures and certain derivative transactions. The Company’s investment portfolio holdings are primarily U.S. dollar-denominated fixed-income securities including municipal bonds, U.S. government bonds, MBS, collateralized mortgage obligations, corporate bonds and ABS. In periods of rising and/or volatile interest rates, foreign exchange rates and credit spreads, profitability could be adversely affected should the Company have to liquidate these securities.

MBIA minimizes its exposure to interest rate risk, foreign exchange risk and credit spread movement through active portfolio management to ensure a proper mix of the types of securities held and to stagger the maturities of its fixed-income securities. In addition, the Company enters into various swap agreements that hedge the risk of loss due to interest rate and foreign currency volatility.

Interest Rate Sensitivity

Interest rate sensitivity can be estimated by projecting a hypothetical instantaneous increase or decrease in interest rates. The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of September 30, 2013 from instantaneous shifts in interest rates:

 

                                                                 
     Change in Interest Rates  

In millions

   300 Basis
Point
Decrease
     200 Basis
Point
Decrease
     100 Basis
Point
Decrease
     100 Basis
Point
Increase
     200 Basis
Point
Increase
     300 Basis
Point
Increase
 

Estimated change in fair value

   $ (51)       $ (12)       $ 6      $ (34)       $ (71)       $ (111)   

Foreign Exchange Sensitivity

Foreign exchange rate sensitivity can be estimated by projecting a hypothetical instantaneous increase or decrease in foreign exchange rates. The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of September 30, 2013 from instantaneous shifts in foreign exchange rates:

 

                                           
     Change in Foreign Exchange Rates  
     Dollar Weakens      Dollar Strengthens  

In millions

      20%            10%            10%            20%     

Estimated change in fair value

   $ (51)       $ (26)       $ 26      $ 51  

Credit Spread Sensitivity

Credit spread sensitivity can be estimated by projecting a hypothetical instantaneous increase or decrease in credit spreads. The following table presents the estimated pre-tax change in fair value of the Company’s financial instruments as of September 30, 2013 from instantaneous shifts in credit spread curves. For this table it was assumed that all credit spreads move by the same amount. It is more likely that the actual changes in credit spreads will vary by security. National’s investment portfolio would generally be expected to experience lower credit spread volatility than the investment portfolio of the asset/liability products segment because of higher credit quality and portfolio composition in sectors that have been less volatile historically. The table shows hypothetical increases and decreases in credit spreads of 50 and 200 basis points. Because downward movements of these amounts in some cases would result in negative spreads, a floor was assumed for minimum spreads. The changes in fair value reflect partially offsetting effects as the value of the investment portfolios generally changes in an opposite direction from the liability portfolio.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk (continued)

 

                                           
     Change in Credit Spreads  

In millions

   200 Basis
Point
Decrease
     50 Basis
Point
Decrease
     50 Basis
Point
Increase
     200 Basis
Point
Increase
 

Estimated change in fair value

   $ (44)       $ 35      $ (59)       $ (259)   

Credit Derivatives Sensitivity

MBIA issued insurance policies insuring payments due on structured credit derivative contracts and directly entered into credit derivative contracts, which are marked-to-market through earnings under the accounting principles for derivatives and hedging activities. All these transactions were insured by the Company’s structured finance and international insurance operations. The majority of these structured CDSs related to structured finance transactions with underlying reference obligations of cash securities and CDSs referencing liabilities of corporations or of other structured finance securitizations. The asset classes of the underlying reference obligations included corporate, ABS, RMBS and CMBS. These transactions were usually underwritten at or above a triple-A credit rating level. As of September 30, 2013, approximately 29% of the tranches insured by the Company were rated triple-A.

In the first nine months of 2013, MBIA Corp. has observed a tightening of its own credit spreads. As changes in fair value can be caused by factors unrelated to the performance of MBIA Corp.’s business and credit portfolio, including general market conditions and perceptions of credit risk, as well as market use of credit derivatives for hedging purposes unrelated to the specific referenced credits in addition to events that affect particular credit derivative exposures, the application of fair value accounting will cause the Company’s earnings to be more volatile than would be suggested by the underlying performance of MBIA’s business operations and credit portfolio.

The following tables reflect sensitivities to changes in credit spreads, collateral prices, rating migrations, recovery rates and MBIA Corp.’s own credit spreads and recovery rates. Each table stands on its own and should be read independently of each other. Refer to “Note 6: Fair Value of Financial Instruments” in the Notes to Consolidated Financial Statements for further information about the Company’s financial assets and liabilities that are accounted for at fair value, including valuation techniques and disclosures required by GAAP.

Sensitivity to changes in credit spreads can be estimated by projecting a hypothetical instantaneous shift in credit spread curves. The following table presents the estimated pre-tax change in fair value and the cumulative estimated net fair value of MBIA Corp.’s credit derivatives portfolio of instantaneous shifts in credit spreads as of September 30, 2013. In scenarios where credit spreads decreased, a floor of zero was used.

 

                                                                            
     Change in Credit Spreads
(Structured Finance and International Insurance)
 

In millions

   600 Basis
Point
Decrease
     200 Basis
Point
Decrease
     50 Basis
Point
Decrease
     0 Basis
Point
Change
     50 Basis
Point
Increase
     200 Basis
Point
Increase
     600 Basis
Point
Increase
 

Estimated pre-tax net gains (losses)

   $ 613       $ 286       $ 74       $      $ (76)       $ (306)       $ (925)   

Estimated net fair value

   $ (750)       $ (1,077)       $ (1,289)       $ (1,363)       $ (1,439)       $ (1,669)       $ (2,288)   

Actual shifts in credit spread curves will vary based on the credit quality of the underlying reference obligations. In general, within any asset class, higher credit rated reference obligations will exhibit less credit spread movement than lower credit rated reference obligations. Additionally, the degree of credit spread movement can vary significantly for different asset classes. The basis point change presented in the preceding table, however, represents a fixed basis point change in referenced obligation credit spreads across all credit quality rating categories and asset classes and, therefore, the actual impact of spread changes would vary from this presentation depending on the credit rating and distribution across asset classes, both of which will adjust over time depending on new business written and runoff of the existing portfolio.

MBIA Corp. uses collateral prices as an input into the Direct Price Model for certain multi-sector insured CDOs, a sensitivity analysis below shows the estimated pre-tax change in fair value and the cumulative estimated net fair value of MBIA Corp.’s insured credit derivatives portfolio of a 10% and 20% change in collateral prices as of September 30, 2013.

 

                                                      
     Change in Collateral Prices
(Structured Finance and International Insurance)
 

In millions

   20% Increase      10% Increase      No Change      10% Decrease      20% Decrease  

Estimated pre-tax net gains (losses)

   $      $      $      $ (2)       $ (5)   

Estimated net fair value

   $ (1,359)       $ (1,361)       $ (1,363)       $ (1,365)       $ (1,368)   

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk (continued)

 

Sensitivity to changes in the collateral portfolio credit quality can be estimated by projecting a hypothetical change in rating migrations. The following table presents the estimated pre-tax change in fair value and the cumulative estimated net fair value of MBIA Corp.’s insured credit derivatives portfolio of a one and three notch rating change in the credit quality as of September 30, 2013. A notch represents a one step movement up or down in the credit rating.

 

                                                      
     Change in Credit Ratings  
     (Structured Finance and International Insurance)  

In millions

   Three Notch
Increase
     One Notch
Increase
     No Change      One Notch
Decrease
     Three Notch
Decrease
 

Estimated pre-tax net gains (losses)

   $ 612       $ 188       $      $ (192)       $ (877)   

Estimated net fair value

   $ (751)       $ (1,175)       $ (1,363)       $ (1,555)       $ (2,240)   

Recovery rates on defaulted collateral are an input into MBIA Corp.’s valuation model. Sensitivity to changes in the recovery rate assumptions used by MBIA Corp. can be estimated by projecting a hypothetical change in these assumptions. The following table presents the estimated pre-tax change in fair value and the cumulative estimated net fair value of MBIA Corp.’s insured credit derivatives portfolio of a 10% and 20% change in the recovery rate assumptions as of September 30, 2013.

 

                                                      
     Change in Recovery Rates  
     (Structured Finance and International Insurance)  

In millions

   20% Increase      10% Increase      No Change      10% Decrease      20% Decrease  

Estimated pre-tax net gains (losses)

   $ 142       $ 67       $      $ (62)       $ (120)   

Estimated net fair value

   $ (1,221)       $ (1,296)       $ (1,363)       $ (1,425)       $ (1,483)   

Accounting principles for fair value measurements require MBIA Corp. to incorporate its own nonperformance risk in its valuation methodology. Sensitivity to changes in MBIA Corp.’s credit spreads can be estimated by projecting a hypothetical change in this assumption. The following table presents the estimated pre-tax change in fair value and the cumulative estimated net fair value of MBIA Corp.’s insured credit derivative portfolio using upfront credit spreads of 0%, an increase of 7 percentage points, and an increase of 15 percentage points. The actual upfront spread used in the valuation as of September 30, 2013 ranged from 4.13% to 20.63% based on the tenor of each transaction. The below amounts include an additional annual running credit spread of 5%.

 

                                           
     MBIA Corp.’s Upfront Credit Spread  
     (Structured Finance and International Insurance)  

In millions

   Increase by
15  Percentage
Points
     Increase by
7 Percentage
Points
     No Change      Decrease to
0 Percentage
Points
 

Estimated pre-tax net gains (losses)

   $ 277       $ 129       $      $ (224)   

Estimated net fair value

   $ (1,086)       $ (1,234)       $ (1,363)       $ (1,587)   

With the inclusion of MBIA Corp.’s recovery rate in the calculation of nonperformance risk for MBIA Corp.’s insured credit derivatives portfolio, the following sensitivity table presents the estimated pre-tax change in fair value of insured credit derivatives due to changes in that recovery rate. The values shown below reflect an approximate trading range of MBIA Corp.’s recovery rate.

 

                                
     MBIA Corp.’s Recovery Rate  
     (Structured Finance and International Insurance)  

In millions

   Decrease to 30
Percentage  Points
     No Change      Increase to 60
Percentage Points
 

Estimated pre-tax net gains (losses)

   $      $      $ (10)   

Estimated net fair value

   $ (1,356)       $ (1,363)       $ (1,373)   

MBIA Corp.’s insurance of structured credit derivatives typically remain in place until the maturity of the derivative. With respect to MBIA Corp.’s insured structured credit derivatives, in the absence of credit impairments or the termination of derivatives at losses, the cumulative unrealized losses should reverse before or at maturity of the contracts. Additionally, in the event of the termination and settlement of a contract prior to maturity, any resulting gain or loss upon settlement will be recorded in our consolidated financial statements. In February 2008, the Company announced its intention not to insure credit derivatives in the future, except in transactions that are intended to reduce its overall exposure to insured derivatives.

 

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Item 4. Controls and Procedures

As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934) was performed under the supervision and with the participation of the Company’s senior management, including the Chief Executive Officer and the Chief Financial Officer. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report. In addition, there have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the fiscal quarter to which this report relates that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.

 

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of the Company’s litigation and related matters, see “Note 14: Commitments and Contingencies” in the Notes to Consolidated Financial Statements of MBIA Inc. and Subsidiaries in Part I, Item 1. In the normal course of operating its businesses, MBIA Inc. may be involved in various legal proceedings. As a courtesy, the Company posts on its website under the section “Legal Proceedings,” selected information and documents in reference to selected legal proceedings in which the Company is the plaintiff or the defendant. The Company will not necessarily post all documents for each proceeding and undertakes no obligation to revise or update them to reflect changes in events or expectations. The complete official court docket can be publicly accessed by contacting the clerk’s office of the respective court where each litigation is pending.

Item 1A. Risk Factors

References in the risk factors to the “Company” are to MBIA Inc., together with its domestic and international subsidiaries. References to “we,” “our” and “us” are to MBIA Inc. or the Company, as the context requires. Our risk factors are grouped into categories and are presented in the following order: “Insured Portfolio Loss Related Risk Factors”, “Capital, Liquidity and Market Related Risk Factors”, “Strategic Plan Related Risk Factors” and “General Risk Factors”. Risk factors are listed in order of significance within each category. These risk factors and their order of significance supersede the risk factors discussed under “Risk Factors” in Part I, Item 1A of MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012.

Insured Portfolio Loss Related Risk Factors

Deteriorating performance of CMBS and CRE loans in our structured finance insured portfolio due to adverse developments in the CRE segment of the credit markets may materially and adversely affect our financial condition, results of operations and future business.

MBIA Corp. has insured a substantial amount of credit default swaps (“CDS”) contracts that are backed by structured commercial mortgage-backed securities (“CMBS”) pools and commercial real estate (“CRE”) collateralized debt obligations (“CDOs”). Through September 30, 2013 we have recorded impairments and loss adjustment expense (“LAE”) of $4.1 billion (including $487 million of impairments and LAE in the first nine months of 2013) related to CMBS and CRE exposure. MBIA Corp. has experienced ratings erosion in the total CMBS collateral underlying our insured static pools. Whereas approximately 16% of the total CMBS collateral underlying the pools outstanding as of September 30, 2013 was originally rated BBB and below and approximately 49% was originally rated AAA, approximately 68% of the total CMBS collateral underlying these pools as of September 30, 2013 was rated below investment grade.

Currently, we insure four static CMBS pools that were originally insured in 2006 and 2007, and in which substantially all of the underlying collateral comprised CMBS tranches originally rated BBB and lower. Total gross par outstanding on these pools was $800 million as of September 30, 2013. Additionally, we insure two static CMBS pools, totaling $3.0 billion of gross par outstanding as of September 30, 2013, that were originally insured in 2007, and are comprised of CMBS collateral which was originally rated A. If the economy does not continue to improve, it is possible that we will experience severe losses on these transactions, particularly if the underlying loans are unable to pay off at their expected maturity dates. Although we believe MBIA Corp. will have adequate resources to pay expected claims, there can be no assurance that this will be the case.

Ultimate loss rates remain uncertain, and we have recorded additional impairments on our insured CMBS portfolio every quarter since the beginning of 2010 as actual deterioration has been more than expected during that time period. It is possible that we will experience severe losses or near-term liquidity needs due to increased deterioration in our insured CMBS portfolio or our failure to commute the policies, primarily on the four static CMBS pools in which substantially all of the underlying collateral comprised CMBS tranches originally rated BBB and lower, in particular if the economy does not continue to improve, there is a new recession, increased delinquencies, higher levels of liquidations of delinquent loans, or higher severities of loss upon liquidation. Furthermore, MBIA Corp.’s guarantees of structured CMBS pools generally are in the form of CDS referencing the CMBS bonds in static pooled transactions, and the same CMBS bonds may be referenced in multiple pools. Accordingly, a collateral failure on a small number of CMBS bonds may require MBIA Corp. to make payments on several insured CDS transactions. In the event MBIA Corp. fails to make these payments, MBIA Corp.’s CDS contract obligations could be accelerated, which could materially and adversely affect our financial condition and results of operations.

 

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Item 1A. Risk Factors (continued)

 

Continued poor performance of ineligible loans in the transactions that we insured in the residential mortgage sector and any delay or failure in collecting expected recoveries may materially and adversely affect our financial condition, results of operations and future business.

As of September 30, 2013, we recorded expected receipts of $756 million (on a present value basis) from excess spread (the difference between interest inflows on assets and interest outflows on liabilities) in our second-lien residential mortgage-backed securities (“RMBS”) transactions, in reimbursement of our past and future expected claims. Of this amount, $669 million is included in “Insurance loss recoverable” and $87 million is included in “Loss and loss adjustment expense reserves” on the Company’s consolidated balance sheets. The amount of excess spread depends on future interest rates, borrower refinancing and defaults. There can be no assurance that the $756 million will be received in its entirety or in the expected timeframe.

In addition, we continue to be exposed to risk of losses as a result of poor performance of ineligible loans included in our insured second-lien RMBS transactions, including transactions where we have reached settlements with the sellers/servicers but continue to insure the transaction. Furthermore, Credit Suisse continues to breach its obligations under the relevant contracts to repurchase, replace or cure ineligible mortgage loans. We believe that the inclusion of these ineligible mortgage loans has substantially contributed to the RMBS losses that the Company has incurred to date. Since the fourth quarter of 2007, MBIA Corp. has paid $6.9 billion of claims before reinsurance and collections, excluding LAE and including $1.0 billion of claims made on behalf of consolidated variable interest entities (“VIEs”), on policies insuring second-lien RMBS securitizations. Losses in these transactions and in other transactions due to the inclusion of ineligible loans could continue. In sizing loss reserves relating to these transactions, we take into account expected recoveries from those sellers/servicers arising from our contractual rights of put-back of ineligible loans. As of September 30, 2013, we recorded estimated recoveries of $1.1 billion related to insured transactions. The recovery amount is based upon a number of factors, including an assessment of the financial abilities of the sellers/servicers using external credit ratings. The impact of such factors on cash flows related to expected recoveries is incorporated into the Company’s probability-weighted scenarios.

Finally, although we sought to underwrite RMBS and other structured finance transactions with levels of subordination and other credit enhancements designed to protect us from loss in the event of poor performance of the underlying assets collateralizing the securities, the misrepresentations concerning the quality of the collateral backing those transactions has rendered insufficient the original level of subordination and other credit enhancements to prevent losses. No assurance can be given that any remaining credit enhancements will prove to be adequate to protect us from incurring additional material losses.

There can be no assurance that we will be successful, or that we will not be delayed, in realizing our remaining estimated loan put-back recoveries of $1.1 billion, or $737 million net of reinsurance and income taxes, which is 23% of the consolidated total shareholders’ equity of MBIA Inc., excluding preferred stock of subsidiary and noncontrolling interest.

As of September 30, 2013, we have recognized remaining estimated loan put-back recoveries of $1.1 billion related to our insured transactions. As of September 30, 2013, the estimated loan put-back recoveries net of reinsurance and income taxes are $737 million, which is 23% of the consolidated total shareholders’ equity of MBIA Inc., excluding preferred stock of subsidiary and noncontrolling interest. If we fail to ultimately realize the expected recoveries, our current loss reserve estimates may not be adequate for MBIA Corp. to cover potential claims, and MBIA Corp. may have insufficient resources to meet its obligations.

To date, the Company has resolved substantially all of its claims related to ineligible loans with the exception to those loans securitized by Credit Suisse and included in the home equity mortgage trust securitization. The Company’s assessment of the ineligibility of individual mortgage loans has been challenged by Credit Suisse in litigation and there is no assurance that the Company’s determinations will prevail, or that the Company will be successful in collecting its estimated recoveries. Estimated recoveries may differ from realized recoveries due to the uncertainty of litigation, the cost of litigation, error in determining breach rates, counterparty credit risk, the potential for delay and other sources of uncertainty. In addition, the litigation may take several years to resolve, during which time we will be required to pay losses on the subject transaction.

 

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Item 1A. Risk Factors (continued)

 

We have also recorded substantial recoveries related to put-backs against two wholly-owned subsidiaries of Residential Capital, LLC (“ResCap”), GMAC Mortgage, LLC (“GMAC”) and Residential Funding Company, LLC (“RFC”), whose ultimate parent company is Ally Financial Inc. (“Ally”). On May 14, 2012, ResCap, RFC and GMAC each filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. As of May 23, 2013, Ally, ResCap, RFC, GMAC and the Consenting Claimants (which includes the Company), among other parties, executed a term sheet and supplemental term sheet agreeing to, among other things, a settlement amount of $796 million to be paid to the Company as part of a proposed plan to resolve claims against Ally and RFC, GMAC and ResCap. In August 2013, a disclosure statement filed indicated an increased expected recovery for the Company of approximately $828 million. The increased recovery was primarily due to the favorable disposition of assets and settlements of claims. The settlement and anticipated recoveries are consistent with the put-back recoveries recorded by the Company. In June of 2013, the bankruptcy court issued a Memorandum Opinion approving the Plan Support Agreement (the “Plan”). The Plan is subject to confirmation by the bankruptcy court, with confirmation hearings currently scheduled in November 2013. MBIA anticipates an initial distribution of funds to the Company and other claimants in late 2013 or early 2014. This anticipated timeline may change in the course of events in the bankruptcy court plan confirmation process. Furthermore, there can be no assurance that the Plan will ultimately be confirmed in its current form, or that MBIA will receive its expected recoveries.

Continued poor performance of RMBS and ABS CDOs in our structured finance insured portfolio due to adverse developments in the residential mortgage sector and the broader economy may materially and adversely affect our financial condition, results of operations and future business.

The Company is exposed to credit risks in our portfolio that have arisen from the deterioration and continued poor performance of certain segments of the credit markets, particularly our RMBS and CDOs of asset-backed securities (“ABS”) portfolios, which has led to the deterioration in the quality of assets and the collection of cash flows from such assets within structured securities that we have guaranteed. Beginning in the second half of 2007, deterioration of the global credit markets coupled with the re-pricing of credit risk created extremely difficult market conditions and volatility in the credit markets. The concerns on the part of market participants were initially focused on the subprime segment of the United States (“U.S.”) mortgage-backed securities market and expanded to include a broad range of mortgage and asset-backed and other fixed-income securities, including those rated investment grade, the U.S. and international credit and interbank money markets generally, and a wide range of financial institutions and markets, asset classes and sectors. The deterioration in the credit markets was accompanied by a severe economic recession precipitated, in part, by the collapse of U.S. residential home prices. The U.S. economy continues to show sluggish growth in the employment, housing and financial sectors. While many segments of the global credit markets and the economy have since recovered, the performance of certain credits we insure, in particular RMBS and CDOs of ABS have deteriorated significantly since 2007 and those credits continue to perform poorly.

In the first nine months of 2013, we recorded $312 million of losses and LAE related to insured second-lien RMBS exposures in our structured finance portfolio before the $448 million benefit related to an increase in recoveries of ineligible mortgage loans and before the elimination of a $44 million benefit as a result of consolidating VIEs. Furthermore, since the fourth quarter of 2007, we have recorded losses and LAE of $2.0 billion, before the elimination of a $73 million benefit as a result of consolidating VIEs, (including a benefit of $136 million in the first nine months of 2013 before the elimination of a $44 million benefit as a result of consolidating VIEs) related to insured second-lien RMBS exposures. We have made $6.9 billion of claims payments before reinsurance and collections, excluding LAE and including $1.0 billion of claims on behalf of consolidated VIEs. In addition, to date, we have recorded losses and LAE of $380 million, before the elimination of a $52 million expense as a result of consolidating VIEs (including a $86 million benefit in the first nine months of 2013 before the elimination of a $39 million benefit as a result of consolidating VIEs), on the financial guarantee CDOs of ABS and could continue to experience poor performance in some of the structured finance securities we insure and losses on these portions of our insured portfolio.

Our ability to implement our risk reduction and liquidity strategies is dependent on our ability to draw on our credit facility, collect expected put-back recoveries, and obtain regulatory approvals.

In recent years key components of our strategy have included commuting volatile insured exposures, purchasing instruments issued or guaranteed by us in order to reduce future expected economic losses and managing the liquidity requirements and risk in our insured portfolios and asset/liability products segment. In order to implement this strategy, we put in place intercompany agreements that allocate liquidity resources among our entities in order to fund commutations and provide liquidity where needed. The intercompany agreements with our insurance subsidiaries have required the approval of the New York State Department of Financial Services (“NYSDFS”) and are described further under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity––Key Lending Agreements” in Part I, Item 2 of this Form 10-Q.

 

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Item 1A. Risk Factors (continued)

 

In addition, during the second quarter of 2013, MBIA Insurance Corporation entered into a $500 million three-year secured revolving credit agreement with Blue Ridge Investments, L.L.C., an affiliate of Bank of America (the “Blue Ridge Secured Loan”), which is required to be prepaid with, among other things, proceeds from any put-back recoveries. MBIA Corp. expects to rely on available borrowings under the Blue Ridge Secured Loan and put-back recoveries to fund commutations and other expenses. If MBIA Corp.’s access to the Blue Ridge Secured Loan or other financing were unavailable, reduced or were to become significantly more expensive for any reason, including, without limitation, due to its inability to meet any condition in the facility, it may not have sufficient liquidity to commute volatile exposures or to meet its obligations generally. In addition, if it is unable to collect expected put-back recoveries prior to the termination of the facility and is not able to refinance the facility, it may not be able to repay its borrowings.

Our counterparties may also request as a condition to commuting their policies with us that the transaction receive approval from the NYSDFS or the United Kingdom Prudential Regulation Authority. There can be no assurance that we will be able to obtain such approvals. In the event that we do not obtain such regulatory approvals, we do not expect to be able to effect additional commutations of volatile exposures.

Finally, if we do not obtain approvals to draw on intercompany financing, MBIA Inc. may not have sufficient assets to meet its collateral posting requirements and other liquidity needs, as described further under “Adverse developments in the credit markets may materially and adversely affect MBIA Inc.’s ability to meet liquidity needs”. Furthermore, in connection with obtaining required insurance regulatory approvals to enter into certain transactions, MBIA Inc. and its insurance subsidiaries have agreed, and may in the future agree, to comply with certain conditions, including providing notice to the NYSDFS prior to entering into transactions or taking other corporate actions (such as paying dividends when applicable statutory tests are satisfied), that would not otherwise require regulatory approval.

Loss reserve estimates and credit impairments are subject to additional uncertainties and loss reserves may not be adequate to cover potential claims.

The financial guarantees issued by our insurance companies insure the financial performance of the obligations guaranteed over an extended period of time, in some cases over 30 years, under policies that we have, in most circumstances, no right to cancel. We do not use traditional actuarial approaches to determine our loss reserves. The establishment of the appropriate level of loss reserves is an inherently uncertain process involving numerous estimates and subjective judgments by management, and therefore, there can be no assurance that actual paid claims in our insured portfolio will not exceed its loss reserves. Additionally, we use both internal models as well as models generated by third-party consultants and customized by us to project future paid claims on our insured portfolio and establish loss reserves. Since our insured credit derivatives have similar terms, conditions, risks, and economic profiles to our financial guarantee insurance policies, we evaluate them for impairment periodically in the same way that we estimate loss and LAE for our financial guarantee policies. There can be no assurance that the future loss projections based on these models are accurate.

Small changes in the assumptions underlying loss reserve estimates could significantly impact loss expectations. For example, our loss reserves are discounted to a net present value reflecting MBIA’s general obligation to pay claims over time and not on an accelerated basis. Risk-free rates are used to discount our loss reserves under GAAP, and the yield-to-maturity of each insurer’s investment portfolio as of year-end is used to discount each insurer’s loss reserves under U.S. STAT. Accordingly, changes in the risk-free rates or the yield in our insurers’ investment portfolios may materially impact loss reserves. Losses on second-lien RMBS caused by the large number of ineligible mortgage loans included in second-lien RMBS securitizations that we insured as well as unprecedented volatility in the credit markets that began in the fourth quarter of 2007 have caused us to increase our loss projections substantially several times especially for second-lien RMBS transactions, where expected losses are significantly greater than originally projected and in many cases exceed the worst historical losses in this category. As a result, historical loss data may have limited value in predicting future second-lien RMBS losses. Moreover, in sizing loss reserves with respect to our insured transactions, we take into account expected recoveries from sellers/servicers of the transactions arising from our contractual rights of put-back of ineligible loans, and these estimated recoveries may differ from realized recoveries due to the outcome of litigation, the cost of litigation, error in determining breach rates, counterparty credit risk, the potential for delay and other sources of uncertainty. Our balance sheet also reflects estimated recoveries in reimbursement of past and future expected claims through excess spread in insured second-lien RMBS transactions. Excess spread is primarily included on our GAAP consolidated balance sheet in “Insurance loss recoverable”. Excess spread is included on MBIA Corp.’s U.S. STAT balance sheets in “Losses”. Excess spread is generated by performing loans within insured RMBS securitizations and is the difference between interest inflows on mortgage loan collateral and interest outflows on insured beneficial interests. The amount of excess spread depends on the future delinquency and loss trends, future prime and LIBOR interest rates and borrower refinancing behavior, which results in voluntary prepayments. There can be no assurance that we will collect excess spread recoveries in the amounts we have recorded.

We recorded our first credit impairments related to CMBS and CRE exposure in 2010, and have increased our credit impairments on these exposures during each subsequent quarter as a result of the deterioration of our CMBS and CRE portfolio and the increased cost of commuting our exposures. While our credit impairments reflect our current estimate of ultimate losses, if the deterioration of the CRE market worsens, we could incur substantial additional losses on our CMBS and CRE portfolio in excess of these estimates.

Future deterioration in the performance of RMBS, CMBS, ABS CDOs or other obligations we insure or reinsure could lead to the establishment of additional loss reserves or impairments and further losses or reductions in income. There can be no assurance that the estimates of probable and estimable losses are accurate. Actual paid claims could exceed our estimate and could significantly exceed our loss reserves. If our loss reserves are not adequate to cover actual paid claims, our results of operations and financial condition could be materially adversely affected.

 

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Item 1A. Risk Factors (continued)

 

Economic conditions in the United States and the Eurozone may materially adversely affect our business and results of operations.

Our results of operations are materially affected by general economic conditions, both in the U.S. and elsewhere around the world. While the U.S. economy has consistently grown since the fourth quarter of 2009 and many segments of the global capital markets have recovered from the financial crisis that began in the second half of 2007, markets have continued to experience periods of extreme volatility, and economic activity in Europe remains weak. While we do not insure any direct European sovereign debt, our indirect European sovereign debt exposure totaled $8.0 billion as of September 30, 2013 and included obligations of sovereign-related and sub-sovereign issuers, such as regions, departments, and sovereign-owned entities that are supported by a sovereign state, region or department. Of the $8.0 billion of insured gross par outstanding, $817 million, $491 million, and $258 million related to Spain, Portugal, and Ireland, respectively. The remaining $6.4 billion related to the United Kingdom. A default by one or more sovereigns, or sovereign-related or sub-sovereign entities that rely on sovereign support, could have an adverse effect on our insured and investment portfolios. Moreover, budget deficits at all levels of government in the U.S., continued concerns over the availability and cost of credit for certain borrowers, austerity measures imposed by certain European governments and slowdowns in certain international economies have contributed to diminished expectations for certain parts of the global economy and certain markets going forward.

Losses resulting from poor economic conditions and the related weak performance of RMBS (including due to the inclusion of ineligible loans in second-lien RMBS we insured), ABS CDOs and CMBS, have adversely impacted, and continue to impact our results and financial condition. In addition, recessions, increases in corporate, municipal, sovereign, sub-sovereign or consumer default rates and other general economic conditions may adversely impact the Company’s prospects for future business, as well as the performance of our insured portfolios and the Company’s investment portfolio. In addition, public finance obligations supported by specified revenue streams, such as revenue bonds issued by toll road authorities, municipal utilities or airport authorities, may be adversely affected by revenue declines resulting from economic recession, reduced demand, changing demographics or other factors.

Termination payments on insured credit derivatives could present a material liquidity risk.

The structured finance and international segment’s financial guarantee contracts and CDS contracts generally cannot be accelerated, thereby mitigating liquidity risk. However, with respect to the insurance of CDS contracts, in certain circumstances, including the occurrence of certain insolvency or payment defaults under the CDS contracts, the CDS contracts may be subject to termination by the counterparty, triggering a claim for the fair value of the contract. In addition, credit derivative transactions are governed by International Swaps and Derivatives Association (“ISDA”) documentation and operate differently from financial guarantee insurance policies. For example, the Company’s control rights with respect to a reference obligation under a credit derivative may be more limited than when it issues a financial guarantee insurance policy on a direct primary basis. In addition, a credit derivative may be terminated for a breach of the ISDA documentation or other specific events, unlike financial guarantee insurance policies. If a credit derivative is terminated, the Company could be required to make a mark-to-market payment as determined under the ISDA documentation.

Servicer risk could adversely impact performance of structured finance transactions.

Structured finance obligations contain certain risks including servicer risk, which relates to problems with the transaction servicer (the entity which is responsible for collecting the cash flow from the asset pool) that could affect the servicing and performance of the underlying assets. Structural risks primarily involve bankruptcy risks, such as whether the servicer of the assets may be required to delay the remittance of any cash collections held by it or received by it after the time it becomes subject to bankruptcy or insolvency proceedings. Structured finance transactions are usually structured to reduce the risk to the investors from the bankruptcy or insolvency of the servicer. The ability of the servicer to properly service and collect on the underlying assets can contribute to the performance of a transaction. In addition, the lawsuit we have filed against Credit Suisse alleges that the servicer has failed to perform its duties as contractually required.

Some of the state and local governments and finance authorities that issue public finance obligations we insure are experiencing unprecedented fiscal stress that could result in increased credit losses or impairments on those obligations.

We have historically experienced low levels of defaults in our U.S. public finance insured portfolio, including during the financial crisis that began in mid-2007. However, many state and local governments that issue some of the obligations we insure have reported unprecedented fiscal stress that has required them to significantly raise taxes and/or cut spending in order to satisfy their obligations. While there has been some support provided by the U.S. federal government designed to provide aid to state and local governments, certain state and local governments remain under extreme financial stress. In particular, certain jurisdictions have significant unfunded pension liabilities which are placing additional stress on their finances and are particularly challenging to restructure either through negotiation or under Chapter 9 of the United States Bankruptcy Code. If the issuers of the obligations in our public finance portfolio are unable to raise taxes, cut spending, or receive federal assistance, we may experience losses or impairments on those obligations, which could materially and adversely affect our business, financial condition and results of operations. In particular, an increasing number of municipalities are experiencing severe financial stress and, as a consequence, more municipal issuers are considering filing for protection under Chapter 9. The outcome of a Chapter 9 proceeding is unpredictable and could result in impairments on a greater number of general obligation bonds and other insured transactions. For example, the City of Detroit has proposed treating certain National insured general obligation bonds as unsecured debt with no right to specific voter-approved revenues, which could result in significant impairments on those bonds if the city’s proposal succeeds. While National intends to vigorously challenge this treatment, there can be no assurance that it will ultimately be successful. Refer to “Note 14: Commitments and Contingencies” in the Notes to Consolidated Financial Statements for a description of this litigation.

 

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Item 1A. Risk Factors (continued)

 

Financial modeling contains uncertainty over ultimate outcomes, which makes it difficult to estimate liquidity, potential paid claims, loss reserves and mark-to-market.

The Company uses third-party and internal financial models to estimate liquidity, potential paid claims, loss reserves and mark-to-market. We use internal financial models to conduct liquidity stress-scenario testing to ensure that we maintain cash and liquid securities in an amount in excess of all stress scenario payment requirements. These measurements are performed on a legal entity and operating segment basis. We also rely on financial models, generated internally and supplemented by models generated by third parties, to estimate factors relating to the highly complex securities we insure, including future credit performance of the underlying assets, and to evaluate structures, rights and our potential obligations over time. We also use internal models for ongoing portfolio monitoring and to estimate case basis loss reserves and, where applicable, to mark our obligations under our contracts to market and may supplement such models with third-party models or use third-party experts to consult with our internal modeling specialists. Both internal and external models are subject to model risk and there can be no assurance that these models are accurate or comprehensive in estimating our liquidity, potential future paid claims and related loss reserves or that they are similar to methodologies employed by our competitors, counterparties or other market participants. Estimates of our future paid claims, in particular, may materially impact our liquidity position. In addition, changes to our paid claims, loss reserve or mark-to-market models have been made recently and may be warranted in the future. These changes could materially impact our financial results.

Our risk management policies and procedures may not detect or prevent future losses.

We assess our risk management policies and procedures on a periodic basis. As a result of such assessment, we may take steps to change our internal risk assessment capabilities and procedures, our portfolio management policies, systems and processes and our policies and procedures for monitoring and assessing the performance of our insured portfolio in changing market conditions. There can be no assurance, however, that these steps will be adequate to avoid future losses. In some cases, losses can be substantial, particularly if a loss occurs on a transaction in which we have a large notional exposure or on a transaction structured with large, bullet-type principal maturities.

Geopolitical conditions may adversely affect our business prospects and insured portfolio.

General global unrest, fraud, terrorism, catastrophic events, natural disasters, pandemics or similar events could disrupt the economy in the U.S. and the other countries where we have insured exposure or operate our businesses and could have a direct material adverse impact on certain industries and on general economic activity. Furthermore, in certain jurisdictions outside the U.S. we face higher risks of governmental intervention through nationalization or expropriation of assets, an inability to enforce our rights in court or otherwise and corruption, which may cause us to incur losses on the assets we insure or reputational harm. The Company has exposure in certain sectors that could suffer increased delinquencies and defaults as a direct result of these types of events. Moreover, we are exposed to correlation risk as a result of the possibility that multiple credits will experience losses as a result of any such event or series of events, in particular exposures that are backed by revenues from business and personal travel, such as aircraft securitizations and bonds backed by hotel taxes and car rental fleet securitizations. To the extent that certain corporate sectors may be vulnerable to credit deterioration and increased defaults in the event of future global unrest, CDOs backed by pools of corporate debt issuances in those stressed sectors could also be adversely impacted.

The Company’s insurance operations underwrite exposures to the Company’s reasonable expectation of future performance as well as at various stress levels estimating defaults and other conditions at levels higher than are reasonably expected to occur. There can be no assurance, however, that the Company will not incur material losses if the economic stress and increased defaults in certain sectors caused by global unrest, fraud, terrorism, catastrophic events, natural disasters, pandemics or similar events in the future is or will be more severe than the Company currently foresees and had assumed in underwriting its exposures and estimating loss reserves.

Capital, Liquidity and Market Related Risk Factors

Continuing elevated loss payments and ongoing delays in our ability to realize expected recoveries on insured RMBS transactions as well as certain other factors may materially and adversely affect MBIA Corp.’s ability to meet liquidity needs, which could in turn have an adverse impact on the Company.

As an insurance company MBIA Corp. is particularly sensitive to liquidity risk, which is the probability that an enterprise will not have sufficient resources to meet contractual payment obligations when due. Management of liquidity risk is of critical importance to financial services companies, and most failures of financial institutions have occurred in large part due to their inability to maintain sufficient liquidity resources under adverse circumstances. Generally, lack of sufficient resources results from an enterprise’s inability to sell assets at values necessary to satisfy payment obligations, the inability to access new capital and/or an unexpected acceleration of payments required to settle liabilities.

 

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Item 1A. Risk Factors (continued)

 

The effects of the credit crisis which began in the subprime segment of the U.S. mortgage-backed securities market and spread to a wide range of financial institutions and markets, asset classes, sectors and countries, have caused the Company to experience material increased liquidity risk pressures. In particular, since the fourth quarter of 2007, MBIA Corp. has paid $6.9 billion of claims before reinsurance and collections, excluding LAE and including $1.0 billion of claims made on behalf of consolidated VIEs, on policies insuring second-lien RMBS securitizations, which we believe were driven by a substantial number of ineligible mortgage loans being placed in the securitizations in breach of the representations and warranties of the sellers/servicers. Furthermore, since the fourth quarter of 2007, total credit impairments on insured derivatives were estimated at $6.1 billion across 74 CDO insured issues, inclusive of 71 insured issues for which we made settlement and claim payments of $5.8 billion, net of reinsurance and collections. Accordingly, we expect to realize additional net losses of $337 million. If current trends worsen and result in substantial defaults and losses on the underlying loans, we could incur substantial additional losses on our insured exposures in the future. In addition, portions of MBIA Corp.’s outstanding insured portfolio have exhibited high degrees of payment volatility and continue to pose material liquidity risk to MBIA Corp.

Management’s expected liquidity and capital forecasts for MBIA Corp. for 2013 reflect adequate resources to pay expected claims. In addition, MBIA Corp. can borrow under the Blue Ridge Secured Loan and use its expected recoveries from the ResCap agreement to pay claims. However, there is risk to the liquidity forecast as the Company’s second-lien RMBS and remaining insured CMBS pools are potentially volatile. There are risks to the capital forecast due to those potential liabilities, potential volatility in the collection of put-back recoverables and potential volatility associated with remaining ABS CDO exposures. Further, the remaining insured portfolio, aside from these exposures, could deteriorate and result in loss reserves and claim payments. While management believes MBIA Corp. will have adequate resources to pay expected claims, if it experiences higher than expected claims payments or is unable to commute exposures that represent substantial risk to the Company, it may ultimately have insufficient resources to continue paying claims, which could cause the NYSDFS to put MBIA Insurance Corporation into a rehabilitation or liquidation proceeding. An MBIA Insurance Corporation proceeding could accelerate certain of the Company’s other obligations and have other adverse consequences.

Adverse developments in the credit markets may materially and adversely affect MBIA Inc.’s ability to meet liquidity needs.

MBIA Inc. is subject to material liquidity risks and uncertainty. To mitigate these risks, we seek to maintain cash and liquidity resources that we believe will be sufficient to make all payments due on our obligations and to meet other financial requirements, such as posting collateral, at least through the next twelve months.

Liquidity risk to MBIA Inc. is primarily a result of the following factors:

 

   

Currently, the majority of the cash and securities of MBIA Inc. is pledged against investment agreement liabilities, intercompany financing arrangements and derivatives, which limit its ability to raise liquidity through asset sales. A significant portion of MBIA Inc.’s assets that are pledged against intercompany financing arrangement liabilities are structured finance securities which have been particularly susceptible to price fluctuations during periods of market volatility. In addition, if the market value or rating eligibility of the assets which are pledged against MBIA Inc.’s obligations were to decline, we would be required to pledge additional eligible assets in order to meet minimum required collateral amounts against these liabilities. In such event, we may sell additional assets, potentially with substantial losses, finance unencumbered assets through intercompany facilities, or use free cash or other assets, in some cases with NYSDFS approval, although there can be no assurance that these strategies will be available or adequate to meet liquidity requirements.

 

   

The timing and amount of cash inflows from dividends paid by MBIA’s principal operating subsidiaries is uncertain. See “Our holding company structure and certain regulatory and other constraints could affect our ability to pay dividends and make other payments” below.

Stressed credit market conditions could cause MBIA Inc. to have insufficient resources to cover collateral and/or other liquidity requirements. Management has identified certain actions to mitigate this risk. These contingent actions include: (1) accessing the capital markets, which may not be open to us on favorable terms, or at all; (2) additional sales of invested assets exposed to credit spread stress risk, which may occur at losses and increase the deficit of invested assets to liabilities; (3) termination and settlement of interest rate swap agreements; and (4) other available advances from subsidiaries. These actions, if taken, are expected to result in either additional liquidity or reduced exposure to adverse credit spread movements. There can be no assurance that these actions will be sufficient to fully mitigate this risk. In the event that we cannot implement the contingent actions identified above to raise liquidity, or eliminate the deficit, we may have insufficient assets to make all payments on our obligations as they come due, which could result in a default by MBIA Inc. on its obligations and the potential for MBIA Corp., as guarantor of the investment agreements and MBIA Global Funding, LLC medium-term notes (“MTNs”), to be called upon to satisfy obligations on those instruments as they come due.

 

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Item 1A. Risk Factors (continued)

 

An inability to access capital could adversely affect our business, operating results and financial condition and ultimately adversely affect liquidity.

The Company’s access to external sources of financing, as well as the cost of such financing, is dependent on various factors, including (i) the long-term debt ratings of the Company, (ii) the insurance financial strength ratings and long-term business prospects of our insurance companies, (iii) the perceptions of the financial strength of our insurance companies and MBIA Inc. and (iv) the outcome of our undertakings to collect recoveries in connection with ineligible mortgage loans in our insured RMBS securitizations. Our debt ratings are influenced by numerous factors, either in absolute terms or relative to our peer group, such as financial leverage, balance sheet strength, capital structure and earnings trends. If we cannot obtain adequate capital on favorable terms or at all, our business, future growth, operating results and financial condition could be adversely affected. While MBIA Corp. currently maintains a credit facility, there can be no assurance that replacement facilities will be available in the future on favorable terms or at all. Refer to “Our ability to implement our risk reduction and liquidity strategies is dependent on our ability to draw on our credit facility, collect expected put-back recoveries, and obtain regulatory approvals” above. The inability to obtain adequate replacement capital on favorable terms or at all could have an adverse impact on the Company’s business and financial condition.

To the extent that we are unable to access capital, our insurance companies may not have sufficient liquidity to meet their obligations, will have less capacity to write business and may not be able to pay dividends to us without experiencing adverse rating agency action. Accordingly, our inability to maintain access to capital on favorable terms could have an adverse impact on our ability to pay losses and debt obligations, to pay dividends on our capital stock, to pay principal and interest on our indebtedness, to pay our operating expenses and to make capital investments in our subsidiaries. See “Our holding company structure and certain regulatory and other constraints could affect our ability to pay dividends and make other payments” below.

Our holding company structure and certain regulatory and other constraints could affect our ability to pay dividends and make other payments.

We are a holding company and rely to a significant degree on the operations of our principal operating subsidiaries, National, MBIA Corp. and Cutwater, and certain other smaller subsidiaries. As such, we are largely dependent on dividends or advances in the form of intercompany loans from our insurance companies to pay dividends, to the extent payable, on our capital stock, to pay principal and interest on our indebtedness and to make capital investments in our subsidiaries, among other items. Our insurance companies are subject to various statutory and regulatory restrictions, applicable to insurance companies generally, that limit the amount of cash dividends, loans and advances that those subsidiaries may pay to us. Other regulations relating to capital requirements affecting some of our other subsidiaries may also restrict their ability to pay dividends and other distributions and make loans to us.

Under New York law, National and MBIA Corp. may generally pay stockholder dividends only out of statutory earned surplus and subject to additional limits, as described in “Business—Insurance Regulation” in Part I, Item 1 and “Note 14: Insurance Regulations and Dividends” in the Notes to Consolidated Financial Statements of MBIA Inc. and Subsidiaries in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2012. In connection with MBIA Insurance Corporation obtaining approval from the NYSDFS to release excessive contingency reserves as of September 30, 2011, December 31, 2011 and March 31, 2012, MBIA Insurance Corporation agreed that it would not pay any dividends without prior approval from the NYSDFS. Due to its significant negative earned surplus, MBIA Insurance Corporation has not had the statutory capacity to pay dividends since December 31, 2009 and is not expected to have any statutory capacity to pay any dividends in the near term. In addition, as a condition to the NYSDFS’ approval of the asset swap between MBIA Inc. and National, the NYSDFS requested that, until the notional amount of the Asset Swap has been reduced to 5% or less of National’s admitted assets, each of MBIA Inc., MBIA Insurance Corporation and National provide the NYSDFS with three months prior notice, or such shorter period as the NYSDFS may permit, of its intent to initiate cash dividends on shares of its common stock. National has provided the NYSDFS with such notice.

Dividend payments by MBIA UK and MBIA Mexico to MBIA Insurance Corporation are also limited by laws and regulatory consideration in their respective jurisdictions. The inability of our insurance companies to pay dividends in an amount sufficient to enable us to meet our cash requirements at the holding company level could affect our ability to repay our debt and have a material adverse effect on our operations.

 

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Item 1A. Risk Factors (continued)

 

MBIA Inc. has long-term debt, MTNs, investment agreements and derivative liabilities in excess of its cash, investments at amortized cost and tax receivables.

As of September 30, 2013 and December 31, 2012, the combined net debt of MBIA Inc.’s corporate segment and asset/liability products segment, which primarily comprised long-term debt, MTNs, investment agreements and derivative liabilities net of cash and investments at amortized cost and a tax receivable from subsidiaries, totaled $1.3 billion and $1.2 billion, respectively. The Company expects that MBIA Inc. will generate sufficient cash to satisfy its net debt over time from distributions from its operating subsidiaries and by raising third-party capital, although there can be no assurance that such factors will generate sufficient cash to satisfy its net debt.

We have substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect our financial health and our ability to obtain financing in the future, react to changes in our business and satisfy our obligations.

As of September 30, 2013, we had $1.7 billion of consolidated long-term debt, $1.6 billion of consolidated medium-term note liabilities and $760 million of consolidated investment agreement liabilities. Our substantial indebtedness and other liabilities could have material consequences, including:

 

   

our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes and our ability to satisfy our obligations with respect to our debt may be impaired in the future;

 

   

a large portion of MBIA Inc.’s financial resources must be dedicated to the payment of principal and interest on our debt, thereby reducing the funds available to us for other purposes;

 

   

it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such debt;

 

   

we may be more vulnerable to general adverse economic and industry conditions;

 

   

our ability to refinance debt may be limited or the associated costs may increase;

 

   

our flexibility to adjust to changing market conditions could be limited, or we may be prevented from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins of our businesses; and

 

   

we are exposed to the risk of fluctuations in interest rates and foreign currency exchange rates because a portion of our liabilities are at variable rates of interest or denominated in foreign currencies.

If our insurance companies fail to meet regulatory capital requirements they may become subject to regulatory action.

Our insurance companies are subject to various statutory and regulatory restrictions that require them to maintain qualifying investments to support their reserves and minimum surplus. Furthermore, our insurance companies may be restricted from making commutation or other payments if doing so would cause them to fail to meet such requirements, and the NYSDFS may impose other remedial actions on us as described further below to the extent the Company does not meet such requirements. While National currently satisfies its statutory capital requirements, as of September 30, 2013, MBIA Corp. had a deficit of $321 million of qualifying assets required to support its contingency reserves. The deficit was caused by MBIA Corp.’s sale of liquid assets in order to make claim payments and the failure of certain RMBS sellers/servicers to honor their contractual obligations to repurchase ineligible mortgage loans from securitizations the Company insured. The deficit is expected to grow due to additional commutation and claim payments until such time as MBIA Corp. collects additional put-back recoveries. The Company has reported the deficit to the NYSDFS. MBIA Corp. previously requested approval from the NYSDFS to release an aggregate of $321 million of contingency reserves, which was disapproved by the NYSDFS. Prior to September 30, 2012, MBIA Corp. released to surplus an aggregate of $1.1 billion of contingency reserves pursuant to approvals granted by the NYSDFS in accordance with the New York Insurance Law during 2011 and 2012. Absent these releases MBIA Corp. would have had deficits of qualifying assets to meet its contingency reserve requirements.

Additionally, under New York law, the Superintendent of the NYSDFS may apply for an order directing the rehabilitation or liquidation of a domestic insurance company under certain circumstances, including upon the insolvency of the company, if the company has willfully violated its charter or New York law or if the company is found, after examination, to be in such condition that further transaction of business would be hazardous to its policyholders, creditors or the public. The Superintendent of the NYSDFS may also suspend an insurer’s license, restrict its license authority, or limit the amount of premiums written in New York if, after a hearing, the Superintendent of the NYSDFS determines that the insurer’s surplus to policyholders is not adequate in relation to its outstanding liabilities or financial needs. If the Superintendent of the NYSDFS were to take any such action with respect to National or MBIA Insurance Corporation, it would likely result in the reduction or elimination of the payment of dividends to MBIA Inc.

 

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Item 1A. Risk Factors (continued)

 

Changes in interest rates and foreign currency exchange rates could adversely affect our financial condition and future business.

Increases in prevailing interest rate levels can adversely affect the value of MBIA’s investment portfolio and, therefore, our financial condition. In the event that investments must be sold in order to make payments on insured exposures or other liabilities, including the liabilities of our asset/liability products segment, such investments would likely be sold at discounted prices. Lower interest rates can also result in lower net interest income since a substantial portion of assets are now held in cash and cash equivalents given the increased focus on liquidity. Additionally, in the insurance operations, increasing interest rates could lead to increased credit stress on transactions in our insured portfolio, while a decline in interest rates could result in larger loss reserves on a present value basis.

While we are not currently writing a meaningful amount of new financial guarantee insurance, we expect to do so in the future. Prevailing interest rate levels can affect demand for financial guarantee insurance. Lower interest rates are typically accompanied by narrower spreads between insured and uninsured obligations. The purchase of insurance during periods of relatively narrower interest rate spreads will generally provide lower cost savings to the issuer than during periods of relatively wider spreads. These lower cost savings could be accompanied by a corresponding decrease in demand for financial guarantee insurance. Increased interest rates may decrease attractiveness for issuers to enter into capital markets transactions, resulting in a corresponding decreasing demand for financial guarantee insurance in the future.

In addition, the Company is exposed to foreign currency exchange rate fluctuation risk in respect of assets and liabilities denominated in currencies other than U.S. dollars. In addition to insured liabilities denominated in foreign currencies, some of the remaining liabilities of our asset/liability management business are denominated in currencies other than U.S. dollars and the assets of our asset/liability management business are generally denominated in U.S. dollars. Accordingly, the weakening of the U.S. dollar versus foreign currencies could substantially increase our potential obligations and statutory capital exposure. Conversely, the Company regularly makes investments denominated in a foreign currency, in particular as part of a remediation strategy or as an economic hedge against potential future loss payments, and the weakening of the foreign currency versus the U.S. dollar will diminish the value of such non-U.S. dollar denominated asset. Exchange rates have fluctuated significantly in recent periods and may continue to do so in the future, which could adversely impact the Company’s financial position, results of operations and cash flows.

Revenues and liquidity would be adversely impacted by a decline in realization of installment premiums.

Due to the installment nature of a significant percentage of its premium income, MBIA Corp. has an embedded future revenue stream. The amount of installment premiums actually realized by MBIA Corp. could be reduced in the future due to factors such as not insuring new transactions, early termination of insurance contracts, accelerated prepayments of underlying obligations, commutation of existing financial guarantee insurance policies or non-payment. Such a reduction would result in lower revenues and reduced liquidity.

We are required to report credit derivatives at fair value, which subjects our results of operations to volatility and losses and could lead to negative shareholders’ equity for the Company or MBIA Corp. on a GAAP basis.

Any event causing credit spreads on an underlying security referenced in a credit derivative we insure, or on a credit derivative referencing an MBIA Inc. security, to either widen or tighten will affect the fair value of the credit derivative and may increase the volatility of our earnings.

Since changes in fair value can be caused by factors unrelated to the performance of our business and structured finance credit portfolio, including general market conditions and perceptions of credit risk, as well as market use of credit derivatives for hedging purposes unrelated to the specific referenced credits in addition to events that affect particular credit derivative exposure, the application of fair value accounting may cause our earnings to be more volatile than would be suggested by the underlying performance of our business operations and structured finance credit portfolio. Furthermore, volatility in our asset values, loss reserves, impairments or fair value of insured credit derivatives could cause our shareholders’ equity, and/or that of MBIA Corp., to be negative under accounting principles generally accepted in the United States of America (“GAAP”) basis in a future period, which may adversely impact investors’ perceptions of the value of the Company.

The global re-pricing of credit risk that began in the fourth quarter of 2007 caused unprecedented volatility and markdowns in the valuation of these credit derivatives. In addition, due to the complexity of fair value accounting and the application of the accounting guidance for derivative instruments and the accounting guidance for fair value measurement, future amendments or interpretations of derivative and fair value accounting may cause us to modify our accounting methodology in a manner which may have an adverse impact on our financial results. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in Part II, Item 7 of Form 10-K for the year ended December 31, 2012 for additional information on the valuation of derivatives.

 

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Item 1A. Risk Factors (continued)

 

Current accounting standards mandate that we measure the fair value of our insurance policies of CDS. Market prices are generally available for traded securities and market standard CDS but are less available or accurate for highly customized CDS. Most of the derivative contracts the Company insures are the latter as they are non-traded structured credit derivative transactions. Moreover, at the present time, we do not have access to the fair value estimates of the insurance beneficiaries and there can be no assurance that those counterparties’ (or any other market participants’) estimates would be the same as our fair values.

The mark-to-market for the insured credit derivative portfolio has fluctuated significantly during the last five years, resulting in volatility in MBIA’s earnings. Since the fourth quarter of 2007, MBIA’s mark-to-market on insured credit derivatives fluctuated from a high quarterly loss of $3.6 billion in the first quarter of 2008 to a high quarterly gain of $3.3 billion in the second quarter of 2008, and the mark-to-market caused several quarter over quarter fluctuations in earnings of more than $1 billion and frequent quarter over quarter shifts in earnings from a gain to a loss or a loss to a gain. The mark-to-market volatility was primarily a result of fluctuations in MBIA’s credit spreads and recovery rates, changes in credit spreads on the underlying collateral, collateral erosion, rating migration and model and input enhancements.

Strategic Plan Related Risk Factors

An inability to achieve high stable insurer financial strength ratings for National or any of our other insurance companies from the major rating agencies or to generate investor demand for their financial guarantees may adversely affect our results of operations and business prospects.

National’s and our other insurance companies’ ability to write new business and to compete with other financial guarantors is currently largely dependent on the financial strength ratings assigned to them by the major rating agencies and the financial enhancement rating also assigned by Standard & Poor’s Financial Services LLC (“S&P”), as well as the financial strength of our insurance companies and investors’ perceptions of their financial strength. Many requirements imposed by the rating agencies in order for our insurance companies to achieve and maintain high insurer financial strength ratings are outside of our control, and such requirements may necessitate that we raise additional capital or take other remedial actions in a relatively short time frame in order to achieve or maintain the ratings necessary to attract new business and compete with other financial guarantee insurers and could make the conduct of the business uneconomical. Our inability to raise capital on favorable terms could therefore materially adversely affect the business prospects of our insurance companies. Furthermore, no assurance can be given that we will successfully comply with rating agency requirements, that these requirements or the related models and methodologies will not change or that, even if we comply with these requirements, one or more rating agency will not lower or withdraw its financial strength ratings with respect to any of our insurance companies. The absence of higher ratings from S&P’s and Moody’s Investor Service, Inc. (“Moody’s”), which have typically been required to write financial guarantee insurance, has adversely impacted the premiums our insurers can charge and could diminish the acceptance of our financial guarantee insurance products.

In addition, no assurance can be given that investor demand for our guarantees will increase regardless of our ratings. Finally, our inability to come into compliance with the rating agency and regulatory single risk limits that National and MBIA Corp. exceeded may also prevent us from writing future new business in the categories of risks that were exceeded, in the case of the regulatory limits, or result in an inability to achieve or maintain our desired ratings, in the case of rating agency limits, and may adversely affect our business prospects, and our failure to come into compliance with these guidelines and rules increases the risk of experiencing a large single loss or series of losses.

Downgrades of the ratings of securities that we insure may materially adversely affect our business, results of operations and financial condition.

Individual credits in our insured portfolio (including potential new credits) are assessed a rating agency “capital charge” based on a variety of factors, including the nature of the credits’ risk types, underlying ratings, tenor and expected and actual performance. In the event of an actual or perceived deterioration in creditworthiness, a reduction in the underlying rating or a change in the rating agency capital methodology, we may be required to hold more capital in reserve against credits in the insured portfolio, regardless of whether losses actually occur, or against potential new business. Significant reductions in underlying ratings of credits in an insured portfolio can produce significant increases in assessed “capital charges”. There can be no assurance that each of our insurance company’s capital position will be adequate to meet any increased rating agency reserve requirements or that each insurance company will be able to secure additional capital necessary to support increased reserve requirements, especially at a time of actual or perceived deterioration in creditworthiness of new or existing credits. Unless we were able to increase available capital, an increase in capital charges could reduce the amount of capital available to support our ratings and could have an adverse effect on our ability to write new business.

 

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Item 1A. Risk Factors (continued)

 

Since 2008, Moody’s and S&P announced the downgrade of, or other negative ratings actions with respect to, certain transactions that we insure, as well as a large number of structured finance transactions that serve as collateral in structured finance transactions that we insure. There can be no assurance that additional securities in our insured portfolio will not be reviewed and downgraded in the future. Moreover, we do not know if, and when, the rating agencies might review additional securities in our insured portfolio or review again securities that have already been reviewed and/or downgraded. Downgrades of credits that we insure will result in higher capital charges to that insurance company under the relevant rating agency model or models, which could adversely affect our results of operations and financial condition going forward.

Competition may have an adverse effect on our businesses.

Our financial guarantee insurers face competition from other financial guarantee insurance companies and other forms of credit enhancement, including senior-subordinated structures, credit derivatives, letters of credit and guarantees (for example, mortgage guarantees where pools of mortgage loans secure debt service payments) provided by banks and other financial institutions. In addition, alternative financing structures may be developed that do not employ third-party credit enhancement. Furthermore, while one financial guarantee insurance company has written the vast majority of U.S. public finance new business since 2009, an additional recently established bond insurer is actively engaged in the market, and we have observed other new competitors indicating an interest in entering the bond insurance market and continue to consider strategies for launch. Increased competition, either in terms of price, alternative structures, or the emergence of new providers of credit enhancement, could have an adverse effect on our insurance companies’ business prospects. The uncertainty created by market conditions and the related unpredictable actions of the regulators in the U.S. and foreign markets we serve may create unforeseen competitive advantages for our competitors due to, among other things, explicit or implied support from the government.

Cutwater faces intense competition from banks, insurance companies and independent companies who provide investment advisory services, as well as with companies who manage their investments in-house. Competition varies by product and typically can range from very large asset management firms to very small operations. Cutwater’s ability to compete for new advisory services business and to retain existing accounts is largely dependent on its investment performance for a specific client or in general (typically versus established benchmark indices), the consistency of performance through market cycles, fee levels charged and the level of client service provided. A decline in our competitive position as to one or more of these factors could adversely affect our profitability and assets under management. Furthermore, many of Cutwater’s competitors are large and well established and some have greater market share and breadth of distribution and offer a broader range of products, services or features. In order to compete for business, Cutwater may be required to expend a significant portion of its earnings on attracting new business, which would diminish the amount of dividends it can pay to MBIA Inc. Such competition could have an adverse impact on its ability to attract and retain business, which could have an adverse effect on our financial position and results of operations.

Future demand for financial guarantee insurance depends on market and other factors that we do not control.

The demand for financial guarantee insurance depends upon many factors, some of which are beyond the control of the Company. Our ability to attract and compete for financial guarantee business is largely dependent on the financial strength ratings assigned to our insurance companies by the major rating agencies. In addition, the perceived financial strength of all financial guarantee insurers also affects demand for financial guarantee insurance. Since 2008, all financial guarantee insurers’ insurer financial strength ratings have been downgraded, placed on review for a possible downgrade or had their outlooks changed to “negative,” and the industry-wide downgrades may have eroded investors’ confidence in the benefits of bond insurance. We do not expect the demand for financial guarantee insurance to regain its former levels in the near term, if ever.

We believe that issuers and investors distinguish among financial guarantors on the basis of various factors, including rating agency assessment, capitalization, size, insured portfolio concentration and financial performance. These distinctions may result in differentials in trading levels for securities insured by particular financial guarantors which, in turn, may provide a competitive advantage to those financial guarantors with better trading characteristics. In addition, various investors may, due to regulatory or internal guidelines, lack additional capacity to purchase securities insured by certain financial guarantors, which may provide a competitive advantage to guarantors with fewer insured obligations outstanding. Differentials in trading values or investor capacity constraints that do not favor us would have an adverse effect on our ability to attract new business at appropriate pricing levels.

 

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Item 1A. Risk Factors (continued)

 

Regulatory change could adversely affect our businesses, and regulations limit investors’ ability to effect a takeover or business combination that shareholders might consider in their best interests.

The financial guarantee insurance industry has historically been and will continue to be subject to the direct and indirect effects of governmental regulation, including insurance laws, securities laws, tax laws, legal precedents and accounting rules affecting asset-backed and municipal obligations, as well as changes in those laws. These laws limit investors’ ability to affect a takeover or business combination without the approval of our insurance regulators, and the failure to comply with applicable laws and regulations could expose our insurance companies, their directors or shareholders to fines, the loss of their insurance licenses, and the inability to engage in certain business activity, as the case may be.

In addition, future legislative, regulatory or judicial changes could adversely affect our insurance companies’ ability to pursue business, materially impacting our financial results. Since 2009, both the NYSDFS and the New York legislature have proposed enhanced regulation of financial guarantee insurers which would impose limits on the manner and amount of business written by the Company. On the U.S. federal level, we could become subject to federal oversight or enhanced capital requirements, including if we are deemed “systemically important” under the Dodd-Frank Reform and Consumer Protection Act (the “Dodd-Frank Act”). Internationally, MBIA UK could also become subject to enhanced capital requirements as a result of the Solvency II Directive.

While it is not possible to predict if new laws, regulations or interpretations will be enacted or the impact they would have, any changes to such laws and regulations or the NYSDFS’ interpretation thereof could subject MBIA to further restrictions on the type of business that it is authorized to insure, especially in the structured finance area. Any such restrictions could have a material effect on the amount of premiums that MBIA earns in the future. Additionally, any changes to such laws and regulations could subject our insurance companies to increase reserving and capital requirements or more stringent regulation generally, which could materially adversely affect our financial condition, results of operations and future business. Finally, changes to accounting standards and regulations may require modifications to our accounting methodology, both prospectively and for prior periods; and such changes could have an adverse impact on our reported financial results and/or make it more difficult for investors to understand the economics of our business, and may thus influence the types or volume of business that we may choose to pursue.

Developments in the regulation of derivatives may create additional burdens on the Company.

In July 2010, the Dodd-Frank Act was signed into law for the purpose of enacting broad financial industry regulatory reform, including by enhancing regulation of the over-the-counter derivatives markets. Among other reforms, the Dodd-Frank Act requires “swap dealers” and “major swap participants” to register with either or both of the Commodity Futures Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC”), and to be subject to enhanced regulation, including capital requirements. The CFTC and SEC have promulgated rules to implement this enhanced regulatory framework, including final rules that require the Company to include its legacy insured derivatives in tests used to determine whether it is a major swap participant. MBIA Insurance Corporation registered with the CFTC as a major swap participant and on an ongoing basis is required to comply with the CFTC’s business conduct rules as applied to portfolios in place prior to the enactment of the Dodd-Frank Act. As further rules are enacted, we expect to seek exemptions from certain of the rules that we do not believe we will be able to comply with, including capital requirements.

Because the CFTC has not yet issued final rules establishing capital requirements for major swap participants, the ultimate impact of such requirements on the Company is not yet clear. However, to the extent that the Company becomes subject to significant additional capital requirements, it is unlikely that the Company will be able to meet those standards.

General Risk Factors

Any impairment in the Company’s future taxable income can materially affect the recoverability of our deferred tax assets.

The basis for evaluating the recoverability of a deferred tax asset is the existence of future taxable income of appropriate character. To the extent that the Company’s ability to recognize future taxable income from its existing insurance portfolio through scheduled premium earnings and net investment income becomes impaired, the recoverability of certain deferred tax assets may be materially affected by a corresponding increase to its valuation allowance.

A different view of the Internal Revenue Service from our current tax treatment of realized losses relating to insured CDS contracts can adversely affect our financial position.

As part of the Company’s financial guarantee business, we have insured credit derivative contracts that were entered into by LaCrosse Financial Products, LLC with various financial institutions. We treat these insured derivative contracts as insurance contracts for statutory accounting purposes, which is the basis for computing U.S. federal taxable income. As such, the realized losses in connection with an insured event are considered loss reserve activities for tax purposes. Because the federal income tax treatment of CDS contracts is an unsettled area of tax law, in the event that the Internal Revenue Service has a different view with respect to the tax treatment, our results of operations and financial condition could be materially adversely affected.

 

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Item 1A. Risk Factors (continued)

 

Private litigation claims could materially adversely affect our reputation, business, results of operations and financial condition.

As further set forth in “Note 14: Commitments and Contingencies” in the Notes to Consolidated Financial Statements of MBIA Inc. and Subsidiaries in Part I, Item 1 of this Form 10-Q, the Company is named as a defendant in certain litigations. In the ordinary course of business, the Company and its subsidiaries may be defendants in or parties to pending and threatened legal actions and proceedings brought on behalf of various classes of claimants, including counterparties in various transactions. Although the Company intends to vigorously defend against the aforementioned actions and against other potential actions, an adverse ultimate outcome in these actions could result in a loss and have a material adverse effect on our reputation, business, results of operations or financial condition.

Ownership Change under Section 382 of the Internal Revenue Code can have adverse tax consequences.

In connection with transactions in our shares from time to time, we may in the future experience an “ownership change” within the meaning of Section 382 of the Internal Revenue Code. In general terms, an ownership change may result from transactions increasing the aggregate ownership of certain stockholders in our stock by more than 50 percentage points over a testing period (generally three years). If an ownership change were to occur, our ability to use certain tax attributes, including certain losses, credits, deductions or tax basis, may be limited. Calculating whether a Section 382 ownership change has occurred is subject to uncertainties, including the complexity and ambiguity of Section 382 and limitations on a publicly traded company’s knowledge as to the ownership of, and transactions in, its securities. The Company performs detailed calculations during each quarter to determine if an ownership change has occurred and, based on the Company’s current methodology of calculation, a Section 382 ownership change has not taken place.

Interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality or privacy of sensitive data residing on such systems, could harm our business.

We depend heavily on our telecommunication, information technology and other operational systems and on the integrity and timeliness of data we use to run our businesses. These systems may fail to operate properly or become disabled as a result of events or circumstances wholly or partly beyond our control. Further, we face the risk of operational and technology failures by others, including various financial intermediaries and of vendors and parties to which we outsource the provision of services or business operations. If these parties do not perform as anticipated, we may experience operational difficulties, increased costs and other adverse effects on our business.

Despite our implementation of a variety of security measures, our information technology and other systems could be subject to physical or electronic break-ins, unauthorized tampering or other security breaches, resulting in a failure to maintain the security, confidentiality or privacy of sensitive data, including personal information relating to clients or transaction counterparties.

Interruption in telecommunication, information technology and other operational systems, or a failure to maintain the security, confidentiality or privacy of sensitive data residing on such systems, whether due to actions by us or others, could delay or disrupt our ability to do business, harm our reputation, subject us to regulatory sanctions and other claims, lead to a loss of clients and revenues and otherwise adversely affect our business.

The Company is dependent on key executives and the loss of any of these executives, or its inability to retain other key personnel, could adversely affect its business.

The Company’s success substantially depends upon its ability to attract and retain qualified employees and upon the ability of its senior management and other key employees to implement its business strategy. The Company believes there are only a limited number of available qualified executives in the business lines in which the Company competes. Although the Company is not aware of any planned departures, the Company relies substantially upon the services of Joseph W. Brown, Chief Executive Officer, and other senior executives. There is no assurance that the Company will be able to retain the services of key executives. The loss of the services of any of these individuals or other key members of the Company’s management team could adversely affect the implementation of its business strategy.

 

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In connection with the Bank of America Settlement Agreement described in “Note 1: Business Developments and Risks and Uncertainties” in the Notes to Consolidated Financial Statements, on May 6, 2013, MBIA Inc. issued Blue Ridge Investments, L.L.C. (“Blue Ridge”), a subsidiary of Bank of America, a warrant to purchase 9,942,458 million shares of MBIA Inc. common stock at an exercise price of $9.59 per share. The warrants were issued in reliance on an exemption from registration under Section 4(a)(2) under the 1933 Act as transactions by an issuer not involving any public offering.

Pursuant to the anti-dilution provisions of warrants that were issued by MBIA Inc. to Warburg Pincus Private Equity X, L.P. and certain of its affiliates (“Warburg Pincus”) under the Investment Agreement by and between MBIA Inc. and Warburg Pincus, dated as of December 10, 2007, as amended and restated as of February 6, 2008, (the “Investment Agreement”), as a result of the issuance of the warrant to Blue Ridge (a) Warburg Pincus’s 21,327,646 warrants exercisable at $30.25 per share were revised to 21,914,446 warrants exercisable at $29.44 per share and (b) Warburg Pincus’s 4,000,000 of warrants exercisable at $16.20 per share were revised to 4,004,945 warrants exercisable at $16.18 per share. In addition, under the Investment Agreement Warburg has certain gross up rights that are triggered in connection with the offering by the Company of any equity securities. As a settlement of any such gross-up rights Warburg Pincus may have had under the Investment Agreement due to the issuance of the warrant to Blue Ridge, on August 5, 2013 MBIA Inc. issued Warburg Pincus a warrant to purchase 1,910,417 shares of MBIA Inc. common stock at an exercise price of $9.59 per share in exchange for Warburg Pincus delivering to the Company 536,375 shares of MBIA Inc. common stock having a value of $7,262,518 based on the closing price of the Company’s stock as of the close of business on July 23, 2013. The warrants issued pursuant to the anti-dilution adjustments and the gross-up rights were issued in reliance on an exemption from registration under Section 4(a)(2) under the 1933 Act as transactions by an issuer not involving any public offering.

The table below presents repurchases made by the Company in each month during the third quarter of 2013:

 

                                           

Month

   Total Number of
Shares Purchased  (1)
    Average Price
Paid Per Share
     Total Number of
Shares Purchased as
Part of Publicly
Announced Plan
     Maximum Amount
That May Be Purchased
Under the Plan
(in millions) (2)
 

July

     330      $ 13.54              $ 23   

August

     649,038 (3)        13.35                23   

September

     85,148        11.40                23   
  

 

 

      

 

 

    
     734,516      $ 13.12                     -       $ 23   

 

(1) - 196,255 shares were repurchased by the Company in open market transactions for settling awards under the Company’s long-term incentive plans and 1,886 shares were purchased in open market transactions as an investment in the Company’s non-qualified deferred compensation plan.

 

(2) - On February 1, 2007, the Company’s Board of Directors authorized the repurchase of common stock up to $1 billion under a new share repurchase program, which superseded the previously authorized program.

 

(3) - Includes 536,375 shares, having a value of $13.54 per share as of the close of business on July 23, 2013, received from Warburg Pincus in exchange for the issuance to Warburg Pincus of a warrant to purchase 1,910,417 shares of MBIA Inc. common stock at an exercise price of $9.59 per share as a settlement of any gross-up rights Warburg Pincus may have had, as described further above.

Item 5. Other Information

On November 11, 2013 Kewsong Lee resigned from the Board of Directors of MBIA Inc. Mr. Lee was elected to the Board of Directors in January 2008.

Mr. Lee was nominated by Warburg Pincus Private Equity X, L.P. (“Warburg Pincus”) to be elected to the Board of Directors pursuant to the amended and restated Investment Agreement dated as of February 6, 2008 (the “Investment Agreement”) between MBIA Inc. and Warburg Pincus. Under the Investment Agreement, David A. Coulter, Warburg Pincus’s remaining member of the Board of Directors, has the right to designate Mr. Lee’s replacement on the Board of Directors, and the Board of Directors is required to use its reasonable best efforts to take all action required to fill the vacancy resulting from Mr. Lee’s resignation with Mr. Coulter’s designee.

 

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Item 6. Exhibits

 

4.1.    Warrant Agreement, dated as of August 5, 2013, between MBIA Inc. and Warburg Pincus Private Equity X, L.P., incorporated by reference to Exhibit 4.2 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013.
+31.1.    Chief Executive Officer - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
+31.2.    Chief Financial Officer - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*32.1.    Chief Executive Officer - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*32.2.    Chief Financial Officer - Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
+99.1.    Additional Exhibits - National Public Finance Guarantee Corporation and Subsidiaries GAAP Consolidated Financial Statements.
+99.2.    Additional Exhibits - MBIA Insurance Corporation and Subsidiaries GAAP Consolidated Financial Statements.
+99.3.    Novation Agreement, dated as of September 14, 2012, between Financial Guaranty Insurance Company and National Public Finance Guarantee Corporation.
+101.   

Additional Exhibits - MBIA Inc. and Subsidiaries Consolidated Financial Statements and Notes to Consolidated

Financial Statements from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, formatted in XBRL.

 

+ Filed Herewith

* Furnished Herewith

 

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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.

 

 

 MBIA Inc.

 Registrant

Date: November 12, 2013  

 /s/ C. Edward Chaplin

   C. Edward Chaplin
   Chief Financial Officer
Date: November 12, 2013  

 /s/ Douglas C. Hamilton

   Douglas C. Hamilton
   Controller (Principal Accounting Officer)

 

151

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph W. Brown, certify that:

 

  1. I have reviewed the Quarterly Report of MBIA Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”);

 

  2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report;

 

  4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

  (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

 

  (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

 

  (d) disclosed in this Report that there were no changes in the Company’s internal control over financial reporting that occurred during the Company’s third quarter of 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

 

  5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the audit committee of the board of directors:

 

  (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

 

  (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

/s/ Joseph W. Brown

Joseph W. Brown
Chief Executive Officer
November 12, 2013

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, C. Edward Chaplin, certify that:

 

  1. I have reviewed the Quarterly Report of MBIA Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”);

 

  2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

 

  3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Report;

 

  4. The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

  (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

 

  (b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  (c) evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

 

  (d) disclosed in this Report that there were no changes in the Company’s internal control over financial reporting that occurred during the Company’s third quarter of 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

 

  5. The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and to the audit committee of the board of directors:

 

  (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

 

  (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

 

/s/ C. Edward Chaplin

C. Edward Chaplin

Chief Financial Officer

November 12, 2013

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MBIA Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph W. Brown, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Joseph W. Brown

Joseph W. Brown

Chief Executive Officer

November 12, 2013

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of MBIA Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, C. Edward Chaplin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ C. Edward Chaplin

C. Edward Chaplin

Chief Financial Officer

November 12, 2013

Exhibit 99.1

NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2013 and December 31, 2012

and for the periods ended September 30, 2013 and 2012


NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION AND SUBSIDIARIES

INDEX

 

          
    

PAGE

 

Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 (Unaudited)

     1  

Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (Unaudited)

     2  

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2013 and 2012 (Unaudited)

     3  

Consolidated Statement of Changes in Shareholder’s Equity for the nine months ended September 30, 2013 (Unaudited)

     4  

Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (Unaudited)

     5  

Notes to Consolidated Financial Statements (Unaudited)

     6  


NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands except share and per share amounts)

 

                     
     September 30, 2013      December 31, 2012  

Assets

     

Investments:

     

Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $3,125,396 and $2,335,832)

   $ 3,075,730       $ 2,425,240   

Investments carried at fair value

     177,275         190,321   

Investments pledged as collateral, at fair value (amortized cost $475,297 and $487,880)

     469,573         501,873   

Short-term investments held as available-for-sale, at fair value (amortized cost $1,001,399 and $175,763)

     1,001,901         176,015   

Other investments (includes investments at fair value of $5,810 and $7,554)

     10,954         16,216   
  

 

 

    

 

 

 

Total investments

     4,735,433         3,309,665   

Cash and cash equivalents

     516,392         265,409   

Securities purchased under agreements to resell

     443,500         480,500   

Secured loan to an affiliate

            1,651,408   

Accrued investment income

     30,875         54,465   

Premiums receivable

     241,362         254,363   

Deferred acquisition costs

     344,215         400,970   

Insurance loss recoverable

     16,721         248,925   

Property and equipment at cost (less accumulated depreciation of $1,735 and $9,725)

     30,351         61,719   

Receivable for investments sold

     5,836         16,457   

Other assets

     9,337         10,031   
  

 

 

    

 

 

 

Total assets

   $ 6,374,022       $ 6,753,912   
  

 

 

    

 

 

 

Liabilities and equity

     

Liabilities:

     

Unearned premium revenue

   $ 1,645,270       $ 1,928,351   

Loss and loss adjustment expense reserves

     93,311         151,892   

Securities sold under agreements to repurchase

     443,500         480,500   

Current income taxes

     40,384         16,418   

Deferred income taxes, net

     106,048         232,165   

Payable for investments purchased

     144,107         49,893   

Derivative liabilities

     7,045         7,336   

Other liabilities

     13,953         11,653   
  

 

 

    

 

 

 

Total liabilities

     2,493,618         2,878,208   
  

 

 

    

 

 

 

Commitments and contingencies (See Note 9)

     

Equity:

     

Common stock, par value $30 per share; authorized, issued and outstanding shares—500,000

     15,000         15,000   

Additional paid-in capital

     2,341,486         2,341,599   

Retained earnings

     1,550,145         1,441,992   

Accumulated other comprehensive income (loss), net of tax of $19,045 and $36,598

     (35,369)         67,967   
  

 

 

    

 

 

 

Total shareholder’s equity

     3,871,262         3,866,558   

Noncontrolling interest

     9,142         9,146   
  

 

 

    

 

 

 

Total equity

     3,880,404         3,875,704   
  

 

 

    

 

 

 

Total liabilities and equity

   $ 6,374,022       $ 6,753,912   
  

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

1


NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands)

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  
     2013      2012      2013      2012  

Revenues:

           

Premiums earned:

           

Scheduled premiums earned

   $ 48,315       $ 50,621       $ 156,450       $ 164,784   

Refunding premiums earned

     26,947         79,338         120,950         190,088   
  

 

 

    

 

 

    

 

 

    

 

 

 

Premiums earned (net of ceded premiums of $0, $0, $0, and $1)

     75,262         129,959         277,400         354,872   

Net investment income

     26,213         56,392         109,452         166,513   

Fees, reimbursements and other

     1,640         1,730         4,892         4,905   

Change in fair value of insured derivatives:

           

Realized gains (losses) and other settlements on insured derivatives

     103         147         315         356   

Unrealized gains (losses) on insured derivatives

     10         28         (19)        50   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net change in fair value of insured derivatives

     113         175         296         406   

Net gains (losses) on financial instruments at fair value and foreign exchange

     (859)         22,501         29,151         43,445   

Other net realized gains (losses)

     (29,331)                (29,331)         
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     73,038         210,757         391,860         570,141   

Expenses:

           

Losses and loss adjustment

     34,912         3,842         105,118         15,139   

Amortization of deferred acquisition costs

     15,839         26,922         58,385         75,030   

Operating

     17,078         19,701         69,593         128,175   

Interest

                   11         20   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     67,832         50,470         233,107         218,364   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before income taxes

     5,206         160,287         158,753         351,777   

Provision (benefit) for income taxes

     (969)         45,593         50,760         102,717   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

     6,175         114,694         107,993         249,060   

Net income (loss) attributable to noncontrolling interest

     63         166         (160)        518   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income available to common shareholder

   $ 6,112       $ 114,528       $ 108,153       $ 248,542   
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

2


NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In thousands)

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  
     2013      2012      2013      2012  

Net income (loss)

   $ 6,175       $ 114,694       $ 107,993       $ 249,060   

Other comprehensive income (loss):

           

Unrealized gains (losses) on available-for-sale securities:

           

Unrealized gains (losses) arising during the period

     (6,013)         31,912         (128,660)         84,082   

Provision (benefit) for income taxes

     (2,104)         11,145         (45,031)         29,424   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     (3,909)         20,767         (83,629)         54,658   

Reclassification adjustments for (gains) losses included in net income (loss)

     (898)         (6,611)         (30,318)         (15,403)   

Provision (benefit) for income taxes

     (314)         (2,314)         (10,611)         (5,391)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     (584)         (4,297)         (19,707)         (10,012)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other comprehensive income (loss)

     (4,493)         16,470         (103,336)         44,646   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss)

     1,682         131,164         4,657         293,706   

Less: comprehensive income (loss) attributable to noncontrolling interest

     63         166         (160)         518   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss) attributable to common shareholder

   $ 1,619       $ 130,998       $ 4,817       $ 293,188   
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3


NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER’S EQUITY (Unaudited)

For The Nine Months Ended September 30, 2013

(In thousands except share amounts)

 

                                                                                       
    Common Stock     Additional
Paid-in
Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income (Loss)
    Total
Shareholder’s
Equity
    Noncontrolling
Interest
    Total
Equity
 
    Shares     Amount              

Balance, December 31, 2012

    500,000      $ 15,000      $ 2,341,599      $ 1,441,992      $ 67,967      $ 3,866,558      $ 9,146      $ 3,875,704   

Net income

                        108,153               108,153        (160)        107,993   

Other comprehensive income (loss)

                                (103,336)        (103,336)               (103,336)   

Share-based compensation, net of tax of $113

                  (113)                      (113)               (113)   

Distributions to noncontrolling interest

                                              (994)        (994)   

Contributions by noncontrolling interest

                                              1,150        1,150   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2013

    500,000      $ 15,000      $ 2,341,486      $ 1,550,145      $ (35,369)      $ 3,871,262      $ 9,142      $ 3,880,404   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4


NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

                     
     Nine Months Ended September 30,  
     2013      2012  

Cash flows from operating activities:

     

Premiums, fees and reimbursements received

   $ 13,560       $ 15,254   

Return of refunded premiums

     (3,038)         (17,711)   

Investment income received

     100,370         123,683   

Financial guarantee losses and loss adjustment expenses paid

     (133,969)         (101,948)   

Proceeds from recoveries and reinsurance

     84,784         7,185   

Operating and employee related expenses paid

     (73,624)         (129,701)   

Income taxes (paid) received

     (97,383)         (106,195)   
  

 

 

    

 

 

 

Net cash provided (used) by operating activities

     (109,300)         (209,433)   
  

 

 

    

 

 

 

Cash flows from investing activities:

     

Purchase of fixed-maturity securities

     (1,516,881)         (777,518)   

Sale and redemption of fixed-maturity securities

     1,115,852         1,061,082   

Repayment (issuance) of secured loan to an affiliate

     1,595,620         (443,000)   

Sale (purchase) of short-term investments, net

     (839,187)         293,431   

Sale (purchase) of other investments, net

     5,440         1,776   

Capital expenditures

     (717)         (3,610)   
  

 

 

    

 

 

 

Net cash provided (used) by investing activities

     360,127         132,161   
  

 

 

    

 

 

 

Cash flows from financing activities:

     

Contributions by noncontrolling interest

     1,150          

Distributions to noncontrolling interest

     (994)         (1,730)   
  

 

 

    

 

 

 

Net cash provided (used) by financing activities

     156         (1,730)   
  

 

 

    

 

 

 

Net increase (decrease) in cash and cash equivalents

     250,983         (79,002)   

Cash and cash equivalents - beginning of period

     265,409         137,170   
  

 

 

    

 

 

 

Cash and cash equivalents - end of period

   $ 516,392       $ 58,168   
  

 

 

    

 

 

 

Reconciliation of net income to net cash provided (used) by operating activities:

     

Net income

   $ 107,993       $ 249,060   

Adjustments to reconcile net income to net cash provided (used) by operating activities:

     

Change in:

     

Accrued investment income

     (34,513)         (69,497)   

Premiums receivable

     13,003         17,330   

Deferred acquisition costs

     56,755         76,792   

Unearned premium revenue

     (283,081)         (380,769)   

Loss and loss adjustment expense reserves

     (58,581)         (38)   

Insurance loss recoverable

     114,514         (79,583)   

Payable to affiliates

     (2,480)         (4,859)   

Accrued expenses

     (476)         5,611   

Current income taxes

     23,966         23,716   

Amortization (accretion) of bond premiums (discounts), net

     14,411         15,780   

Depreciation

     2,755         2,632   

Other net realized (gains) losses

     29,331          

Unrealized (gains) losses on insured derivatives

     19         (50)   

Net (gains) losses on financial instruments at fair value and foreign exchange

     (29,151)         (43,445)   

Deferred income tax provision (benefit)

     (70,588)         (27,194)   

Other operating

     6,823         5,081   
  

 

 

    

 

 

 

Total adjustments to net income

     (217,293)         (458,493)   
  

 

 

    

 

 

 

Net cash provided (used) by operating activities

   $ (109,300)       $ (209,433)   
  

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

5


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 1: Business Developments and Risks and Uncertainties

Summary

National Public Finance Guarantee Corporation is a wholly-owned subsidiary of MBIA Inc. through an intermediary holding company, National Public Finance Guarantee Holdings, Inc. National Public Finance Guarantee Corporation and its subsidiaries are referred to as “National.” National Real Estate Holdings of Armonk, LLC is a wholly-owned subsidiary of National.

Through its reinsurance of United States (“U.S.”) public finance financial guarantees from MBIA Insurance Corporation and transfers by novation of all policies under a reinsurance agreement with Financial Guaranty Insurance Company (“FGIC”) as discussed below, National’s insurance portfolio consists of municipal bonds, including tax-exempt and taxable indebtedness of U.S. political subdivisions, as well as utility districts, airports, health care institutions, higher educational facilities, student loan issuers, housing authorities and other similar agencies and obligations issued by private entities that finance projects that serve a substantial public purpose. Municipal bonds and privately issued bonds used for the financing of public purpose projects generally are supported by taxes, assessments, user fees or tariffs related to the use of these projects, by lease payments or by other similar types of revenue streams.

Business Developments and Risks and Uncertainties

As of September 30, 2013, National was rated A with a stable outlook by Standard & Poor’s Financial Services LLC and Baa1 with a positive outlook by Moody’s Investors Service, Inc. In addition, National is considering seeking ratings from additional rating agencies.

In May of 2013, MBIA Inc., together with its subsidiaries MBIA Insurance Corporation and National, entered into a comprehensive settlement agreement and related agreements (the “BofA Settlement Agreement”) with Bank of America Corporation and certain of its subsidiaries (collectively, “Bank of America”). Additionally, in May of 2013, MBIA Inc., together with its subsidiaries, MBIA Insurance Corporation and National, entered into a settlement agreement with Societe Generale. As a result of the BofA Settlement Agreement, the repayment of MBIA Insurance Corporation’s secured loan from National and recent credit ratings upgrades, National is currently evaluating strategies for such re-entry into the U.S. public finance market. Subsequent to the BofA Settlement Agreement and the Societe Generale settlement, all litigation brought originally by the group of eighteen domestic and international financial institutions, relating to the establishment of National, has been resolved.

Subsequent to September 30, 2013, National declared and paid a dividend of $214 million to its ultimate parent, MBIA Inc.

In August of 2013, the novation agreement between FGIC and National, whereby FGIC transfers, by novation, to National all the rights and liabilities under each of the policies covered under a reinsurance agreement with FGIC, became effective. This novation agreement included covered policies that previously benefited from the reinsurance agreement and second-to-pay policies entered into by MBIA Insurance Corporation in 2008 that were subsequently assigned to and reinsured by National in 2009. As a result of this novation, National is now the primary insurer under these policies.

In order to better position MBIA Inc. for future business opportunities, in the third quarter of 2013, MBIA Inc. initiated cost reduction measures, one of which focused on head office occupancy costs. As a result of the potential sale of the office used in its operations, National recorded an impairment charge of $29 million on its Armonk, New York facility. The carrying value of the facility was adjusted to its fair market value, which was determined based on an independent third-party appraisal of the facility. This impairment charge is reported within “Other net realized gains (losses)” on National’s consolidated statements of operations.

National maintains simultaneous repurchase and reverse repurchase agreements (“Asset Swap”) with MBIA Inc. The Asset Swap provides MBIA Inc. with eligible assets to pledge under investment agreements and derivative contracts in MBIA Inc.’s asset/liability products business. As of September 30, 2013, the notional amount utilized under each of these agreements was $444 million and the fair value of collateral pledged by National and MBIA Inc. under these agreements was $470 million and $475 million, respectively. The net average interest rate on these transactions was 0.23% and 0.56% for the nine months ended September 30, 2013 and 2012, respectively. The New York State Department of Financial Services (“NYSDFS”) approved the Asset Swap in connection with the re-domestication of National to New York. National has committed to the NYSDFS to use commercially reasonable efforts to reduce the amount of the Asset Swap over time.

 

6


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1: Business Developments and Risks and Uncertainties (continued)

 

Extreme financial and budgetary stress in certain local governments has increased the risk of losses within National’s insured portfolio. Refer to “Note 4: Loss and Loss Adjustment Expense Reserves” for information about National’s insured losses. National’s claim paying resources are supported by its investment portfolio, which primarily consists of fixed-maturity securities. Fixed-maturity securities are subject to a number of risks, including interest rate risk and default risk, among others. National manages these risks by maintaining a diversification across issuers and maturities of investments. Refer to “Note 6: Investments” for information about National’s investment portfolio.

Note 2: Significant Accounting Policies

National has disclosed its significant accounting policies in “Note 2: Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Exhibit 99.1 to MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012. The following significant accounting policies provide an update to those included under the same captions in Exhibit 99.1 to MBIA Inc.’s Annual Report on Form 10-K.

Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of National and its wholly-owned subsidiaries and do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual periods. These statements should be read in conjunction with National’s consolidated financial statements and notes thereto included in Exhibit 99.1 to MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of National’s consolidated financial position and results of operations.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results.

The results of operations for the three and nine months ended September 30, 2013 may not be indicative of the results that may be expected for the year ending December 31, 2013. The December 31, 2012 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP for annual periods. Certain amounts in prior years’ financial statements have been reclassified to conform to the current presentation. Such reclassifications had no impact on total revenues, expenses, assets, liabilities, or shareholder’s equity for all periods presented.

Subsequent Events

National evaluated all subsequent events as of November 12, 2013, the date of issuance of the consolidated financial statements, for inclusion in National’s consolidated financial statements and/or accompanying notes.

Note 3: Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02)

In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-02, “Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” that requires an entity to present information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component and to present significant amounts reclassified out of AOCI by the respective line items of net income. The amendment only affects National’s disclosures and does not affect National’s consolidated balance sheets, results of operations, or cash flows. National adopted this standard in the first quarter of 2013.

Refer to the Notes to Consolidated Financial Statements of National included in Exhibit 99.1 to MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 for further information regarding the effects of recently adopted accounting standards on prior year financial statements.

 

7


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 4: Loss and Loss Adjustment Expense Reserves

U.S. public finance insured transactions consist of municipal bonds, including tax-exempt and taxable indebtedness of U.S. political subdivisions, as well as utility districts, airports, health care institutions, higher educational facilities, student loan issuers, housing authorities and other similar agencies and obligations issued by private entities that finance projects that serve a substantial public purpose. National estimates future losses by utilizing probability-weighted scenarios that are customized to each insured transaction. Future loss estimates consider debt service due for each insured transaction, which includes par outstanding and interest due.

Certain local governments remain under extreme financial and budgetary stress and several have filed for protection under the United States Bankruptcy Code, or have entered into state statutory proceedings established to assist municipalities in managing through periods of severe fiscal stress. This could lead to an increase in defaults by such entities on the payment of their obligations and losses or impairments on a greater number of National’s insured transactions. National monitors and analyzes these situations closely; however, the overall extent and duration of such events are uncertain.

National has exposure to the Commonwealth of Puerto Rico and certain governmental issuers in the territory. The Commonwealth is experiencing fiscal stress; however, it has taken proactive actions to address its significant economic challenges. National continues to monitor the situation closely, but does not expect a default by Puerto Rico.

As of September 30, 2013, National had $131.5 billion of gross par outstanding on general obligations, of which $251 million was reflected on National’s Classified List. Capital appreciation bonds are reported at the par amount at the time of issuance of the insurance policy.

For the nine months ended September 30, 2013, National recognized $105 million of loss and loss adjustment expense (“LAE”) primarily related to certain general obligation bonds and the loss related to the difference in the value of the salvage receivable recorded and the fair market value of the marketable securities received in connection with the restructuring of a gaming revenue transaction.

Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” in the Notes to Consolidated Financial Statements included in Exhibit 99.1 to MBIA Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 for information about National’s monitoring of outstanding insured obligations and for additional information about its loss reserving process.

The following table provides information about the financial guarantees and related claim liability included in each of National’s surveillance categories as of September 30, 2013:

 

                                                      
     Surveillance Categories  

$ in millions

   Caution List
Low
     Caution List
Medium
     Caution List
High
     Classified
List
     Total  

Number of policies

     66                       39         113   

Number of issues (1)

     16                       15         38   

Remaining weighted average contract period (in years)

     13.2         2.6         9.6         13.4         13.1   

Gross insured contractual payments outstanding: (2)

              

Principal

   $ 3,174       $      $ 65       $ 820       $ 4,068   

Interest

     2,741                32         998         3,773   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,915       $ 11       $ 97       $ 1,818       $ 7,841   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross claim liability

   $       $       $       $ 249       $ 249   

Less:

              

Gross potential recoveries

                             209         209   

Discount, net

                             (14)         (14)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net claim liability (recoverable)

   $       $       $       $ 54       $ 54   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unearned premium revenue

   $ 25       $       $       $ 16       $ 41   

 

(1) - An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments.
(2) - Represents contractual principal and interest payments due by the issuer of the obligations insured by National.

 

8


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 4: Loss and Loss Adjustment Expense Reserves (continued)

 

The following table provides information about the financial guarantees and related claim liability included in each of National’s surveillance categories as of December 31, 2012:

 

                                                      
     Surveillance Categories  

$ in millions

   Caution List
Low
     Caution List
Medium
     Caution List
High
     Classified
List
     Total  

Number of policies

     20                       48         84   

Number of issues (1)

                          18         38   

Remaining weighted average contract period (in years)

     11.1         7.4         12.8         13.1         11.7   

Gross insured contractual payments outstanding: (2)

              

Principal

   $ 817       $ 190       $ 122       $ 843       $ 1,972   

Interest

     1,161         88         80         999         2,328   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 1,978       $ 278       $ 202       $ 1,842       $ 4,300   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross claim liability

   $       $       $       $ 310       $ 310   

Less:

              

Gross potential recoveries

                             387         387   

Discount, net

                             (6)         (6)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net claim liability (recoverable)

   $       $       $       $ (71)       $ (71)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unearned premium revenue

   $ 12       $      $      $ 18       $ 36   

 

(1) - An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments.
(2) - Represents contractual principal and interest payments due by the issuer of the obligations insured by National.

National’s potential recoveries are typically based on either salvage rights, the rights conferred to National through the transactional documents (inclusive of the insurance agreement), or subrogation rights embedded within financial guarantee insurance policies. Expected salvage and subrogation recoveries, as well as recoveries from other remediation efforts, reduce National’s claim liability. Once a claim payment has been made, the claim liability has been satisfied and National’s right to recovery is no longer considered an offset to future expected claim payments, it is recorded as a salvage asset. The amount of recoveries recorded by National is limited to paid claims plus the present value of projected future claim payments. As claim payments are made, the recorded amount of potential recoveries may exceed the remaining amount of claim liability for a given policy.

While National believes it will be successful in realizing recoveries from contractual claims, the ultimate amounts recovered may be materially different from those recorded by National given the inherent uncertainty in the manner of resolving the claims (e.g. litigation) and the assumptions used in the required estimation process for accounting purposes which are based, in part, on judgments and other information that are not easily corroborated by historical data or other relevant benchmarks.

The following table presents the components of National’s loss and LAE reserves and insurance loss recoverable as reported on National’s consolidated balance sheets as of September 30, 2013 and December 31, 2012 for insured obligations within National’s “Classified List.” The loss reserves (claim liability) and insurance claim loss recoverable included in the following table represent the present value of the probability-weighted future claim payments and recoveries reported in the preceding tables.

 

                     

In millions

   As of September 30,
2013
     As of December 31,
2012
 

Loss reserves (claim liability)

   $ 67       $ 143   

LAE reserves

     26          
  

 

 

    

 

 

 

Loss and LAE reserves

   $ 93       $ 152   
  

 

 

    

 

 

 

Insurance claim loss recoverable

   $ (15)       $ (216)   

LAE insurance loss recoverable

     (2)         (33)   
  

 

 

    

 

 

 

Insurance loss recoverable

   $ (17)       $ (249)   
  

 

 

    

 

 

 

 

9


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 4: Loss and Loss Adjustment Expense Reserves (continued)

 

The following table presents changes in National’s loss and LAE reserves for the nine months ended September 30, 2013. Changes in the loss and LAE reserves attributable to the accretion of the claim liability discount, changes in discount rates, changes in the timing and amounts of estimated payments and recoveries, changes in assumptions and changes in LAE reserves are recorded in “Losses and loss adjustment” expenses in National’s consolidated statements of operations. LAE reserves are expected to be settled within a one-year period and are not discounted. The weighted average risk-free rate used to discount the claim liability was 2.48% as of September 30, 2013.

 

                                                                                       
In millions    

Changes in Loss and LAE Reserves for Nine Months Ended September 30,  2013

       
Gross Loss
and LAE
Reserve as of
December 31,
2012
   

Loss Payments
for Cases

with

Reserves

  Accretion of
Claim
Liability
Discount
    Changes in
Discount
Rates
    Changes in
Assumptions
    Changes in
Unearned
Premium
Revenue
    Changes in
LAE
Reserves
    Other (1)     Gross Loss
and LAE
Reserve as of
September 30,
2013
 
$ 152      $           (120)   $     $     $ 45      $     $ 17      $ (2)      $ 93   

 

 

   

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Primarily changes in amount and timing of payments.

The decrease in case reserves for the nine months ended September 30, 2013 primarily related to the change in loss payments for cases with reserves, partially offset by changes in assumptions due to an increase in reserves associated with certain general obligation bond exposures.

The following table presents changes in National’s insurance loss recoverable for the nine months ended September 30, 2013. Changes in the insurance loss recoverable attributable to the accretion of the discount on the recoverable, changes in discount rates, changes in the timing and amounts of estimated collections, changes in assumptions and changes in LAE recoverable are recorded in “Losses and loss adjustment” expenses in National’s consolidated statements of operations.

 

                                                                            
In millions    

Changes in Insurance Loss Recoverable for the Nine Months Ended September 30,  2013

     
Insurance Loss
Recoverable

as of
December 31,
2012
   

Collections

for Cases

with
Recoverables

  Accretion of
Insurance
Loss
Recoverable
    Changes in
Discount
Rates
    Changes in
Assumptions
    Changes in
LAE
Recoverable
   

Other (1)

  Insurance Loss
Recoverable

as of
September 30,
2013
 
$ 249      $           (170)   $     $ (1)      $ (46)      $ (32)      $    17    $ 17   

 

 

   

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

(1) - Primarily changes in amount and timing of collections.

The decrease in insurance loss recoverable for the nine months ended September 30, 2013 primarily related to the receipt of salvage in the form of investment notes related to a gaming revenue transaction, which resulted in transferring the recoverable to an investment asset.

Remediation actions may involve, among other things, waivers or renegotiations of financial covenants or triggers, waivers of contractual provisions, the granting of consents, transfer of servicing, consideration of restructuring plans, acceleration, security or collateral enforcement, actions in bankruptcy or receivership, litigation and similar actions. The types of remedial actions pursued are based on the insured obligation’s risk type and the nature and scope of the event giving rise to the remediation. As part of any such remedial actions, National seeks to improve its security position and to obtain concessions from the issuer of the insured obligation. From time to time, the issuer of a National-insured obligation may, with the consent of National, restructure the insured obligation by extending the term, increasing or decreasing the par amount or decreasing the related interest rate, with National insuring the restructured obligation.

 

10


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 4: Loss and Loss Adjustment Expense Reserves (continued)

 

Costs associated with remediating insured obligations assigned to National’s “Caution List—Low,” “Caution List—Medium,” “Caution List—High” and “Classified List” are recorded as LAE. LAE is primarily recorded as part of National’s provision for its loss reserves and included in “Losses and loss adjustment” expense on National’s consolidated statements of operations. The following table presents the gross expenses related to remedial actions for insured obligations:

 

                     
     Nine Months Ended September 30,  

In millions

   2013      2012  

LAE incurred, gross

   $ 24      $ 10  

Note 5: Fair Value of Financial Instruments

Fair value is a market-based measure considered from the perspective of a market participant. Therefore, even when market assumptions are not readily available, National’s own assumptions are set to reflect those which it believes market participants would use in pricing an asset or liability at the measurement date. The fair value measurements of financial instruments held or issued by National are determined through the use of observable market data when available. Market data is obtained from a variety of third-party sources, including dealer quotes. If dealer quotes are not available for an instrument that is infrequently traded, National uses alternate valuation methods, including either dealer quotes for similar instruments or modeling using market data inputs. The use of alternate valuation methods generally requires considerable judgment in the application of estimates and assumptions, and changes to such estimates and assumptions may produce materially different fair values.

The accounting guidance for fair value measurement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available and reliable. Observable inputs are those National believes that market participants would use in pricing an asset or liability based on available market data. Unobservable inputs are those that reflect National’s beliefs about the assumptions market participants would use in pricing an asset or liability based on the best information available. The fair value hierarchy is broken down into three levels based on the observability and reliability of inputs, as follows:

 

   

Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that National can access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail any degree of judgment.

 

   

Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 2 assets include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, securities which are priced using observable inputs and derivative contracts whose values are determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

 

   

Level 3—Valuations based on inputs that are unobservable and supported by little or no market activity and that are significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques where significant inputs are unobservable, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The availability of observable inputs can vary from product to product and period to period and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the product. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, National assigns the level in the fair value hierarchy for which the fair value measurement in its entirety falls, based on the least observable input that is significant to the fair value measurement.

 

11


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Fair Value of Financial Instruments (continued)

 

Financial Instruments

Financial instruments held by National primarily consist of investments in debt securities. Substantially all of National’s investments are priced by independent third parties, including pricing services and brokers. Typically National receives one pricing service value or broker quote for each instrument, which represents a non-binding indication of value. National reviews the assumptions, inputs and methodologies used by pricing services to obtain reasonable assurance that the prices used in its valuations reflect fair value. When National believes a third-party quotation differs significantly from its internally developed expectation of fair value, whether higher or lower, National reviews its data or assumptions with the provider. This review includes comparing significant assumptions such as prepayment speeds, default ratios, forward yield curves, credit spreads and other significant quantitative inputs to internal assumptions, and working with the price provider to reconcile the differences. The price provider may subsequently provide an updated price. In the event that the price provider does not update their price, and National still does not agree with the price provided, National will try to obtain a price from another third-party provider, such as a broker, or use an internally developed price which it believes represents the fair value of the investment. The fair values of investments for which internal prices were used were not significant to the aggregate fair value of National’s investment portfolio as of September 30, 2013 or December 31, 2012. All challenges to third-party prices are reviewed by the staff of National with relevant expertise to ensure reasonableness of assumptions.

In addition to challenging pricing assumptions, National obtains reports from the independent accountants for significant third-party pricing services attesting to the effectiveness of the controls over data provided to National. These reports are obtained annually and are reviewed by National to ensure key controls are applied by the pricing services, and that appropriate user controls are in place at the third-party pricing services organization to ensure proper measurement of the fair values of its investments. In the event that any controls in these reports are deemed as ineffective by independent accountants, National will take the necessary actions to ensure that internal user controls are in place to mitigate the control risks. No deficiencies were noted for significant third-party pricing services used.

Internal Review Process

All significant financial instruments are reviewed by committees created by National to ensure compliance with National’s policies and risk procedures in the development of fair values of financial assets and liabilities. These valuation committees review, among other things, key assumptions used for internally developed prices, significant changes in sources and uses of inputs, including changes in model approaches, and any adjustments from third-party inputs or prices to internally developed inputs or prices. The committees also review any significant impairment or improvements in fair values of the financial instruments from prior periods. From time to time, these committees will reach out to National’s valuation experts to better understand key methods and assumptions used for the determination of fair value, including understanding significant changes in fair values. These committees are comprised of senior finance team members with the relevant experience in the financial instruments their committee is responsible for. Each quarter, these committees document their agreement with the fair values developed by management of National as reported in the quarterly and annual financial statements.

Valuation Techniques

Valuation techniques for financial instruments measured at fair value or disclosed at fair value are described below.

Fixed-Maturity Securities (and Short-Term Investments) Held as Available-For-Sale, Investments Carried at Fair Value, Investments Pledged as Collateral, and Other Investments

Fixed-maturity securities (and short-term investments) held as available-for-sale (“AFS”), investments carried at fair value, investments pledged as collateral, and other investments include investments in U.S. Treasury and government agencies, foreign governments, corporate obligations, mortgage-backed securities and asset-backed securities (“ABS”) (including commercial mortgage-backed securities and collateralized debt obligations (“CDOs”)), state and municipal bonds and other investments (including perpetual debt securities, loans receivables and money market mutual funds).

These investments are generally valued based on recently executed transaction prices or quoted market prices. When quoted market prices are not available, fair value is generally determined using quoted prices of similar investments or a valuation model based on observable and unobservable inputs. Inputs vary depending on the type of investment. Observable inputs include contractual cash flows, interest rate yield curves, credit default swap (“CDS”) spreads, prepayment and volatility scores, diversity scores, cross-currency basis index spreads, and credit spreads for structures similar to the financial instrument in terms of issuer, maturity and seniority. Unobservable inputs include cash flow projections and the value of any credit enhancement.

 

12


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Fair Value of Financial Instruments (continued)

 

Investments based on quoted market prices of identical investments in active markets are classified as Level 1 of the fair value hierarchy. Level 1 investments generally consist of U.S. Treasury and government agency and money market securities. Quoted market prices of investments in less active markets, as well as investments which are valued based on other than quoted prices for which the inputs are observable, such as interest rate yield curves, are categorized in Level 2 of the fair value hierarchy. Investments that contain significant inputs that are not observable are categorized as Level 3.

Cash and Cash Equivalents, Receivable for Investments Sold, Accrued Investment Income and Payable for Investments Purchased

The carrying amounts of cash and cash equivalents, receivable for investments sold, accrued investment income and payable for investments purchased approximate their fair values due to the short-term nature and credit worthiness of these instruments.

Securities Purchased Under Agreements to Resell

The fair values of securities purchased under agreements to resell are determined based on the underlying securities posted as collateral for the resell agreements.

Secured Loan to an Affiliate

The fair value of the secured loan as of December 31, 2012, that was repaid in the second quarter of 2013, was determined using the net present value of expected cash flows from the loan. The discount rate is the yield to maturity of a comparable corporate bond index.

Securities Sold Under Agreements to Repurchase

The fair values of securities sold under agreements to repurchase are determined based on the underlying securities posted as collateral for the repurchase agreements.

Derivative Liabilities

Derivative liabilities are valued using market-based inputs, including interest rate yield curves, foreign exchange rates, and credit spreads. Derivative liabilities are classified as Level 2 within the fair value hierarchy.

Financial Guarantees

Gross Financial Guarantees—The fair value of gross financial guarantees is determined using discounted cash flow techniques based on inputs that include (i) assumptions of expected losses on financial guarantee policies where loss reserves have not been recognized, (ii) amount of losses expected on financial guarantee policies where loss reserves have been established, net of expected recoveries, (iii) the cost of capital reserves required to support the financial guarantee liability, (iv) operating expenses, and (v) discount rates. The CDS spread and recovery rates of a similar municipal bond insurance company are used as the discount rate for National, as National does not have a published CDS spread and recovery rate.

The carrying value of National’s gross financial guarantees consists of unearned premium revenue and loss and LAE reserves, net of the insurance loss recoverable as reported on National’s consolidated balance sheets.

Ceded Financial Guarantees—The fair value of ceded financial guarantees is determined by applying the percentage ceded to reinsurers to the related fair value of the gross financial guarantees. The carrying value of ceded financial guarantees consists of prepaid reinsurance premiums as reported within “Other assets” on National’s consolidated balance sheets.

 

13


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Fair Value of Financial Instruments (continued)

 

Fair Value Measurements

The following tables present the fair value of National’s assets (including short-term investments) and liabilities measured and reported at fair value on a recurring basis as of September 30, 2013 and December 31, 2012:

 

                                           
     Fair Value Measurements at Reporting Date Using     Balance as of
September 30,
2013
 

In millions

   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
     Significant Other
Observable Inputs

(Level 2)
     Significant
Unobservable
Inputs (Level 3)
   

Assets:

          

Fixed-maturity investments:

          

U.S. Treasury and government agency

   $ 260       $ 53       $ -      $ 313   

State and municipal bonds

             1,299         17 (1)       1,316   

Foreign governments

             18         -        18   

Corporate obligations

             1,417         1 (1)       1,418   

Mortgage-backed securities:

          

Residential mortgage-backed agency

             901         17 (1)       918   

Residential mortgage-backed non-agency

             19         -        19   

Commercial mortgage-backed

             22         3 (1)       25   

Asset-backed securities:

          

Collateralized debt obligations

                    13 (1)       18   

Other asset-backed

             73         7 (1)       80   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed-maturity investments

     260         3,807         58       4,125   

Money market securities

     596                 -        596   

Perpetual debt securities

                   -         

Cash and cash equivalents

     516                 -        516   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,375       $ 3,813       $ 58     $ 5,246   
  

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities:

          

Derivative liabilities

   $       $      $ -      $  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

   $       $      $ -      $  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) - Unobservable inputs are either not developed by National or do not significantly impact the overall fair values of the aggregate financial assets and liabilities.

 

14


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Fair Value of Financial Instruments (continued)

 

                                           
     Fair Value Measurements at Reporting Date Using     Balance as of
December 31,
2012
 

In millions

   Quoted Prices in
Active Markets for
Identical Assets

(Level 1)
     Significant Other
Observable Inputs

(Level 2)
     Significant
Unobservable
Inputs (Level 3)
   

Assets:

          

Fixed-maturity investments:

          

U.S. Treasury and government agency

   $ 340       $      $ -     $ 344   

State and municipal bonds

             1,183         33 (1)       1,216   

Foreign governments

                    -         

Corporate obligations

             573         1 (1)       574   

Mortgage-backed securities:

          

Residential mortgage-backed agency

             936         -        936   

Residential mortgage-backed non-agency

             19         1 (1)       20   

Commercial mortgage-backed

             20         1 (1)       21   

Asset-backed securities:

          

Collateralized debt obligations

             11         6 (1)       17   

Other asset-backed

             61         4 (1)       65   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed maturity investments

     340         2,808         46       3,194   

Money market securities

     98                 -        98   

Perpetual debt securities

                   2 (1)        

Cash and cash equivalents

     265                 -        265   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 705       $ 2,813       $ 48     $ 3,566   
  

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities:

          

Derivative liabilities

   $       $      $ -      $  
  

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

   $       $      $ -      $  
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) - Unobservable inputs are either not developed by National or do not significantly impact the overall fair values of the aggregate financial assets and liabilities.

Level 3 Analysis

Level 3 assets at fair value were $58 million and $48 million as of September 30, 2013 and December 31, 2012, respectively, and represented 1.1% and 1.3%, respectively, of total assets measured at fair value.

 

15


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Fair Value of Financial Instruments (continued)

 

The following tables present the fair values and carrying values of National’s assets and liabilities that are disclosed at fair value but not reported at fair value on National’s consolidated balance sheets as of September 30, 2013 and December 31, 2012:

 

                                                      
     Fair Value Measurements at Reporting Date Using      Fair Value
Balance as of
September 30,
2013
     Carry Value
Balance as of
September 30,
2013
 

In millions

   Quoted Prices in
Active Markets for
Identical Assets

(Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant
Unobservable
Inputs (Level 3)
       

Assets:

              

Securities purchased under agreements to resell

   $       $       $ 475       $ 475       $ 444   

Receivable for investments sold

                                    

Accrued investment income

     31                         31         31   

Other investments

                                    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 37       $       $ 480       $ 517       $ 486   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

              

Securities sold under agreements to repurchase

   $       $ 470       $       $ 470       $ 444   

Payable for investments purchased

     144                         144         144   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 144       $ 470       $       $ 614       $ 588   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial Guarantees:

              

Gross

   $       $       $ 1,822       $ 1,822       $ 1,721   

Ceded

                     43         43           

 

                                                      
     Fair Value Measurements at Reporting Date Using      Fair Value
Balance as of
December 31,
2012
     Carry Value
Balance as of
December 31,
2012
 

In millions

   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant
Unobservable
Inputs (Level 3)
       

Assets:

              

Securities purchased under agreements to resell

   $       $       $ 529       $ 529       $ 481   

Secured loan to an affiliate

             1,685                 1,685         1,651   

Receivable for investments sold

     16                         16         16   

Accrued investment income

     25         29                 54         54   

Other investments

                                    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 41       $ 1,714       $ 538       $ 2,293       $ 2,211   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

              

Securities sold under agreements to repurchase

   $       $ 502       $       $ 502       $ 481   

Payable for investments purchased

     50                         50         50   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 50       $ 502       $       $ 552       $ 531   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial Guarantees:

              

Gross

   $       $       $ 2,186       $ 2,186       $ 1,831   

Ceded

                     77         77           

 

16


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Fair Value of Financial Instruments (continued)

 

The following tables present information about changes in Level 3 assets (including short-term investments) measured at fair value on a recurring basis for the three months ended September 30, 2013 and 2012:

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2013

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses)

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2013
 

Assets:

                         

State and municipal bonds

  $ 18      $      $      $      $      $      $      $ (1)      $      $      $      $ 17      $   

Corporate obligations

                                                                                        

Residential mortgage-backed agency

                                                                  17        (3)        17          

Residential mortgage-backed non-agency

                                                                         (1)                 

Commercial mortgage-backed

                                                                                       

Collateralized debt obligations

                                                                        (1)        13          

Other asset-backed

                                                    (2)                     (1)                
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 38      $      $      $      $      $      $      $ (3)      $      $ 29      $ (6)      $ 58      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2012

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses)

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2012
 

Assets:

                         

Corporate obligations

  $     $      $      $      $      $      $      $      $      $     $      $ 10      $   

State and municipal bonds

    25                                                  (2)                             23          

Residential mortgage-backed agency

                        (1)                                                  (3)                 

Residential mortgage-backed non-agency

                                                           (1)              (1)                

Commercial mortgage-backed

                                                                                      

Collateralized debt obligations

                                                                        (1)                

Other asset-backed

                                                                              11          

Perpetual debt securities

                                                                                        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 46      $      $      $ (1)      $      $     $      $ (2)      $ (1)      $ 16      $ (5)      $ 56      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

 

17


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Fair Value of Financial Instruments (continued)

 

Transfers into and out of Level 3 were $29 million and $6 million, respectively, for the three months ended September 30, 2013. Transfers into and out of Level 2 were $6 million and $29 million, respectively, for the three months ended September 30, 2013. Transfers into Level 3 were principally related to RMBS agency, CDOs and other ABS securities where inputs, which are significant to their valuation, became unobservable during the quarter. Transfers out of Level 3 were principally for RMBS agency, RMBS non-agency, CDOs and other ABS securities where inputs, which are significant to their valuation, became observable during the quarter. These inputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs.

Transfers into and out of Level 3 were $16 million and $5 million, respectively, for the three months ended September 30, 2012. Transfers into and out of Level 2 were $5 million and $16 million, respectively, for the three months ended September 30, 2012. Transfers into Level 3 were principally related to corporate obligations and other asset backed securities where inputs, which are significant to their valuation, became unobservable during the quarter. Transfers out of Level 3 were principally for RMBS agency securities where inputs, which are significant to their valuation, became observable during the year. These inputs include spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs.

There were no transfers into or out of Level 1 during the three months ended September 30, 2013 and 2012. All fair value hierarchy designations are made at the end of each accounting period.

There were no changes and no balances in Level 3 liabilities measured at fair value on a recurring basis for the three months ended September 30, 2013 and 2012.

The following tables present information about changes in Level 3 assets (including short-term investments) measured at fair value on a recurring basis for the nine months ended September 30, 2013 and 2012.

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2013

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses)

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2013
 

Assets:

                         

State and municipal bonds

  $ 33      $     $      $ (1)      $      $      $      $ (4)      $ (13)      $      $      $ 17      $   

Corporate obligations

                                                    (1)                                    

Residential mortgage-backed agency

                                                                   20        (3)        17          

Residential mortgage-backed non-agency

                                                                         (1)                 

Commercial mortgage-backed

                                                                        (1)                

Collateralized debt obligations

                                                    (3)               17        (7)        13          

Other asset-backed

                                                   (4)               11        (5)                

Perpetual debt securities

                                                                         (2)                 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 48      $     $      $ (1)      $      $     $      $ (12)      $ (13)      $ 52      $ (19)      $ 58      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

 

 

18


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Fair Value of Financial Instruments (continued)

 

Changes in Level 3 Assets Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2012

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses)

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2012
 

Assets:

                         

Corporate obligations

  $      $      $      $      $      $      $      $      $      $ 10      $      $ 10      $   

State and municipal bonds

    28                                                  (5)                             23          

Residential mortgage-backed agency

                         (1)                                                 (3)                 

Residential mortgage-backed non-agency

                                                           (2)              (1)                

Commercial mortgage-backed

                                                                       (1)                

Collateralized debt obligations

                                                           (2)              (2)                

Other asset-backed

                                                                       (6)        11          

Perpetual debt securities

                                                                       (2)                
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 49      $      $      $      $      $     $      $ (5)      $ (4)      $ 26      $ (15)      $ 56      $   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

Transfers into and out of Level 3 were $52 million and $19 million, respectively, for the nine months ended September 30, 2013. Transfers into and out of Level 2 were $19 million and $52 million, respectively, for the nine months ended September 30, 2013. Transfers into Level 3 were principally for RMBS agency, CDOs and other ABS securities where inputs, which are significant to their valuation, became unobservable during the period. Transfers out of Level 3 were principally for CDOs, other ABS and RMBS agency securities, where inputs, which are significant to their valuation, became observable during the period. These inputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs.

Transfers into and out of Level 3 were $26 million and $15 million, respectively, for the nine months ended September 30, 2012. Transfers into and out of Level 2 were $15 million and $26 million, respectively, for the nine months ended September 30, 2012. Transfers into Level 3 were principally for corporate obligations, other asset-backed securities, RMBS agency securities, CDOs and perpetual debt securities where inputs, which are significant to their valuation, became unobservable during the period. Transfers out of Level 3 were principally for other ABS, RMBS agency securities, CDOs and perpetual debt securities where inputs, which are significant to their valuation, became observable during the period. These inputs included spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs.

There were no transfers into or out of Level 1 during the nine months ended September 30, 2013 and 2012. All fair value hierarchy designations are made at the end of each accounting period.

There were no changes and no balances in Level 3 liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2013 and 2012.

 

19


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 6: Investments

National’s AFS investments include debt and equity securities. Other invested assets designated as AFS are primarily comprised of money market funds.

The following tables present the amortized cost, fair value and corresponding gross unrealized gains and losses for AFS investments in National’s investment portfolios as of September 30, 2013 and December 31, 2012:

 

                                           
     September 30, 2013  

In millions

   Amortized
Cost
     Gross Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  

Fixed-maturity investments:

           

U.S. Treasury and government agency

   $ 295       $      $ (7)       $ 289   

State and municipal bonds

     1,345         15         (47)         1,313   

Foreign governments

     18                         18   

Corporate obligations

     1,337                (21)         1,325   

Mortgage-backed securities:

           

Residential mortgage-backed agency

     899         10         (18)         891   

Residential mortgage-backed non-agency

     13                        15   

Commercial mortgage-backed

     19                (1)         19   

Asset-backed securities:

           

Collateralized debt obligations

     16                         16   

Other asset-backed

     66                        67   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     4,008         39         (94)         3,953   

Money market securities

     594                         594   

Perpetual debt securities

                             
  

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 4,608       $ 39       $ (94)       $ 4,553   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

                                           
     December 31, 2012  

In millions

   Amortized
Cost
     Gross Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  

Fixed-maturity investments:

           

U.S. Treasury and government agency

   $ 318       $      $ (1)       $ 318   

State and municipal bonds

     1,142         74         (1)         1,215   

Foreign governments

                             

Corporate obligations

     471         11         (2)         480   

Mortgage-backed securities:

           

Residential mortgage-backed agency

     888         17                 905   

Residential mortgage-backed non-agency

     13                        15   

Commercial mortgage-backed

     14                        15   

Asset-backed securities:

           

Collateralized debt obligations

     13                         13   

Other asset-backed

     55                        57   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     2,915         108         (4)         3,019   

Money market securities

     85                         85   

Perpetual debt securities

                             
  

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 3,007       $ 108       $ (4)       $ 3,111   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

20


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Investments (continued)

 

The following table presents the distribution by contractual maturity of AFS fixed-maturity securities at amortized cost and fair value as of September 30, 2013. Contractual maturity may differ from expected maturity as borrowers may have the right to call or prepay obligations.

 

                     

In millions

   Amortized Cost      Fair Value  

Due in one year or less

   $ 372       $ 373   

Due after one year through five years

     584         582   

Due after five years through ten years

     735         716   

Due after ten years

     1,304         1,274   

Mortgage-backed and asset-backed

     1,013         1,008   
  

 

 

    

 

 

 

Total fixed-maturity investments

   $ 4,008       $ 3,953   
  

 

 

    

 

 

 

Deposited Securities

The fair value of securities on deposit with various regulatory authorities was $6 million as of September 30, 2013 and December 31, 2012. These deposits are required to comply with state insurance laws.

Impaired Investments

The following tables present the gross unrealized losses related to AFS investments as of September 30, 2013 and December 31, 2012:

 

                                                                 
     September 30, 2013  
     Less than 12 Months      12 Months or Longer      Total  

In millions

   Fair Value      Unrealized
Losses
     Fair Value      Unrealized
Losses
     Fair Value      Unrealized
Losses
 

Fixed-maturity investments:

                 

U.S. Treasury and government agency

   $ 191       $ (7)       $      $       $ 193       $ (7)   

State and municipal bonds

     668         (46)         36         (1)         704         (47)   

Foreign governments

                                             

Corporate obligations

     582         (21)                         582         (21)   

Mortgage-backed securities:

                 

Residential mortgage-backed agency

     526         (18)                        527         (18)   

Residential mortgage-backed non-agency

                                             

Commercial mortgage-backed

            (1)                               (1)   

Asset-backed securities:

                 

Collateralized debt obligations

                                             

Other asset-backed

     19                                 19           
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     2,009         (93)         40         (1)         2,049         (94)   

Perpetual debt securities

                                             
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,011       $ (93)       $ 40       $ (1)       $ 2,051       $ (94)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

21


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Investments (continued)

 

                                                                 
     December 31, 2012  
     Less than 12 Months      12 Months or Longer      Total  

In millions

   Fair Value      Unrealized
Losses
     Fair Value      Unrealized
Losses
     Fair Value      Unrealized
Losses
 

Fixed-maturity investments:

                 

U.S. Treasury and government agency

   $ 68       $ (1)       $       $       $ 68       $ (1)   

State and municipal bonds

     63                 41         (1)         104         (1)   

Corporate obligations

     189         (2)                        192         (2)   

Mortgage-backed securities:

                 

Residential mortgage-backed agency

     172                                 172           

Residential mortgage-backed non-agency

                                             

Commercial mortgage-backed

                                             

Asset-backed securities:

                 

Collateralized debt obligations

                                            

Other asset-backed

                                             
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     500         (3)         50         (1)         550         (4)   

Perpetual debt securities

                                            
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 501       $ (3)       $ 51       $ (1)       $ 552       $ (4)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With the weighting applied on the fair value of each security relative to the total fair value, the weighted average contractual maturity of securities in an unrealized loss position as of September 30, 2013 and December 31, 2012 was 15 and 16 years, respectively. As of September 30, 2013 and December 31, 2012, there were 14 and 27 securities, respectively, that were in an unrealized loss position for a continuous twelve month period or longer, of which the fair values of 5 and 7 securities, respectively, were below book value by more than 5%.

National has evaluated on a security-by-security basis whether the unrealized losses in its investment portfolios were other-than-temporary considering the duration and severity of unrealized losses, the circumstances that gave rise to the unrealized losses, and whether National has the intent to sell the securities or more likely than not will be required to sell the securities before their anticipated recoveries. Based on its evaluation, National determined that the unrealized losses on these securities were temporary in nature because its impairment analysis, including projected discounted future cash flows, indicated that National would be able to recover the amortized cost of impaired assets. National also concluded that it does not have the intent to sell securities in an unrealized loss position and it is more likely than not that it would not have to sell these securities before recovery of their cost basis. In making this conclusion, National examined the cash flow projections for its investment portfolios, the potential sources and uses of cash in its business, and the cash resources available to its business other than sales of securities. It also considered the existence of any risk management or other plans as of September 30, 2013 that would require the sale of impaired securities. On a quarterly basis, National re-evaluates the unrealized losses in its investment portfolios to determine whether an impairment loss should be realized in current earnings based on adverse changes in its expectation of cash flows and changes in its intent to sell securities.

Sales of Available-For-Sale Investments

Gross realized gains and losses are recorded in “Net gains (losses) on financial instruments at fair value and foreign exchange” on National’s consolidated statements of operations. The proceeds and gross realized gains and losses from sales of AFS investments for the three and nine months ended September 30, 2013 and 2012 were as follows:

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Proceeds from sales

   $ 274       $ 309       $ 816       $ 1,622   

Gross realized gains

   $       $ 18       $ 35       $ 32   

Gross realized losses

   $ (3)       $       $ (5)       $ (1)   

 

22


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 7: Income Taxes

National’s income taxes and the related effective tax rates for the three and nine months ended September 30, 2013 and 2012 are as follows:

 

                                                                                       
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Income (loss) before income taxes

   $         $ 160          $ 159          $ 352      

Provision (benefit) for income taxes

   $ (1)         (20.0)%       $ 46         28.8%       $ 51         32.1%       $ 103         29.3%   

For the nine months ended September 30, 2013 and 2012, National’s effective tax rate was lower than the U.S. statutory rate of 35% primarily due to tax exempt interest, net of proration.

Accounting for Uncertainty in Income Taxes

As of September 30, 2013 and 2012, National did not have any uncertain tax positions and corresponding interest and/or penalties related to income taxes. National is a member of MBIA Inc.’s consolidated U.S. tax group and its only income tax jurisdiction is the U.S. National also files premium and franchise taxes in various states.

Tax Sharing Arrangement

National files its U.S. Corporation Income Tax Return as a member of MBIA Inc.’s consolidated group. National participates in a tax sharing agreement with MBIA Inc. under which it is allocated its share of consolidated tax liability or tax benefit, determined on a separate company basis. In the nine months ended September 30, 2013, National has, under the tax sharing agreement, made a tax payment to MBIA Inc. of $17 million which represented the initial payment of the additional tax liability for the tax year ended 2012. Further, National made additional tax payments to MBIA Inc. totaling $81 million which relate to the tax year ending 2013. National’s payments are being placed in escrow by MBIA Inc. and will remain in escrow until the expiration of a two-year carryback period which would allow National to carryback a separate company tax loss and recover all or a portion of the escrowed funds. After the two year period, the escrow, to the extent not recovered upon carrying back a loss, is released to MBIA Inc. During the first half of 2013, $115 million was released from escrow.

Note 8: Accumulated Other Comprehensive Income

The following table presents the changes in the components of AOCI for the nine months ended September 30, 2013:

 

          

In millions

   Unrealized
Gains (Losses)
on  AFS

Securities, Net (1)
 

Balance, January 1, 2013

   $ 68   

Other comprehensive income before reclassifications

     (83)   

Amounts reclassified from AOCI

     (20)   
  

 

 

 

Net current period other comprehensive income

     (103)   
  

 

 

 

Balance, September 30, 2013

   $ (35)   
  

 

 

 

 

  (1) - All amounts are presented net of tax. Amounts in parentheses indicate debits.

The following table presents the details of the reclassifications from AOCI for the nine months ended September 30, 2013:

 

                     

In millions

  Amounts
Reclassified
from AOCI
    

Affected Line Item on the Consolidated Statements of Operations

      

Details about AOCI Components

    

Reclassification adjustments on sale of securities

  $ 30       Net gains (losses) on financial instruments at fair value and foreign exchange
    10       Provision (benefit) for income taxes
 

 

 

    

Total reclassifications for the period

  $ 20       Net income (loss)
 

 

 

    

 

23


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 9: Commitments and Contingencies

The following commitments and contingencies provide an update of those discussed in “Note 14: Commitments and Contingencies” in the Notes to Consolidated Financial Statements included in Exhibit 99.1 of MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 and should be read in conjunction with the complete descriptions provided in the aforementioned note included in Exhibit 99.1 of Form 10-K. In the normal course of operating its business, National may be involved in various legal proceedings. Additionally, MBIA Inc. together with its subsidiaries (“MBIA”) may be involved in various legal proceedings that directly or indirectly impact National.

Transformation Litigation

ABN AMRO Bank N.V. et al. v. Eric Dinallo et al.; Index no. 601846/09 (N.Y. Sup. Ct., N.Y. County)

On March 4, 2013, the court issued a decision dismissing the Article 78 proceeding. On April 2, 2013, the remaining plaintiffs filed a Notice of Appeal to the Appellate Division, First Department. In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims.

ABN AMRO Bank N.V. et al. v. MBIA Inc. et al.; Index No. 601475/2009 (N.Y. Sup. Ct., N.Y. County)

In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims.

Barclays Bank PLC., et al. v. Wrynn et al.; Index No. 651811/2010 (N.Y. Sup. Ct., N.Y. County)

In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims.

CQS ABS Master Fund Ltd., CQS Select ABS Master Fund Ltd., and CQS ABS Alpha Master Fund Ltd. v. MBIA Inc. et al .; Civil Action No. 12-cv-6840 (R.S.) (S.D.N.Y.)

On October 23, 2013, the plaintiffs filed a motion for a preliminary injunction seeking to prospectively enjoin National from issuing dividends during the pendency of the litigation. Although the motion referenced the dividend that National previously had disclosed it intended to pay in the fourth quarter of 2013, that dividend was paid prior to the filing of the motion and therefore is not subject to the relief requested by the motion. Refer to “Note 1: Business Developments and Risks and Uncertainties” for information regarding this dividend. National filed its reply to the motion on November 1, 2013, and believes it is not meritorious and should be denied. The court has adjourned oral argument on the motion to November 14, 2013. The court entered a revised Management Plan and Scheduling Order setting a fact discovery deadline of April 4, 2014.

Broadbill Partners LP, et al. v. MBIA Inc., et al. ; Index No. 653865/2012 (N.Y. Sup. Ct., N.Y. County)

On June 6, 2013, the plaintiffs voluntarily dismissed the litigation without prejudice. A Stipulation of Discontinuance was filed on June 7, 2013.

Corporate Litigation

Bank of America v. MBIA Inc. and The Bank of New York Mellon, as Indenture Trustee; Index No. 70444/2012 (N.Y. Sup. Ct., Westchester County)

In May of 2013, the parties reached an agreement to resolve their respective claims in this action.

MBIA Inc. v. Bank of America Corp. and Blue Ridge Investments, L.L.C.; Index No. 51664/2013 (N.Y. Sup. Ct., Westchester County)

In May of 2013, the parties reached an agreement to resolve their respective claims in this action.

Mary Crescente v. Joseph Brown, et al.; Index No. 17595/2008 (N.Y. Sup. Ct., Westchester County)

On March 25, 2013, a Stipulation of Discontinuance was filed with the court resolving the litigation.

Ambac Bond Insurance Coverage Cases , Coordinated Proceeding Case No. JCCP 4555 (Super. Ct. of Cal., County of San Francisco)

The plaintiffs have filed a notice of appeal of the March 22, 2013 decision that granted the Bond Insurer defendants’ motion to strike pursuant to California’s Anti-SLAPP statute dismissing the plaintiffs’ claims under California’s Cartwright Act. On October 1, 2013, the Bond Insurer defendants’ filed a notice of cross-appeal.

 

24


National Public Finance Guarantee Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 9: Commitments and Contingencies (continued)

 

Tri-City Healthcare District v. Citibank. et al.; Case No. 30-2010-00359692 (Super. Ct. of Cal., County of Orange)

The parties reached an agreement to resolve Tri-City Healthcare District’s claims in this matter.

City of Phoenix v. AMBAC et al. , Case No. 2:10-cv-00555-TMB (D. Ariz.)

On June 4, 2013, the parties reached an agreement to resolve the City of Phoenix’s claims in this matter.

National Public Finance Guarantee Corp. et al. v City of Detroit, Michigan et al. ; Adv. Pro. No 13-05309-swr (Bkcy. E.D. MI)

On November 8, 2013, National (together with Assured Guaranty Municipal Corp.) commenced an adversary proceeding against the City of Detroit and certain individuals employees/managers in the Chapter 9 bankruptcy case titled In re: City of Detroit, Michigan; Case No. 13-53846, pending in the United States Bankruptcy Court for the Eastern District of Michigan. The complaint seeks, among other things, a declaration that the City of Detroit and its employees/managers must comply with Michigan state law in the collection, segregation and use of restricted ad valorem tax proceeds levied and pledged to repay the principal and interest on several series of Detroit’s unlimited tax general obligation bonds.

MBIA and National are defending against the aforementioned actions in which they are defendants and expect ultimately to prevail on the merits. There is no assurance, however, that they will prevail in these actions. Adverse rulings in these actions could have a material adverse effect on National’s ability to implement its strategy and on its business, results of operations, cash flows and financial condition. At this stage of the various litigations, there has not been a determination as to the amount, if any, of damages. Accordingly, National is not able to estimate any amount of loss or range of loss.

There are no other material lawsuits pending or, to the knowledge of National, threatened, to which National is a party.

Note 10: Subsequent Events

Subsequent to September 30, 2013, National declared and paid a dividend of $214 million to its ultimate parent, MBIA Inc.

Refer to “Note 9: Commitments and Contingencies” for information about legal proceedings that occurred after September 30, 2013.

 

25

Exhibit 99.2

MBIA INSURANCE CORPORATION

AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2013 and December 31, 2012

and for the periods ended September 30, 2013 and 2012


MBIA INSURANCE CORPORATION AND SUBSIDIARIES

INDEX

 

     PAGE  

Consolidated Balance Sheets as of September 30, 2013 and December 31, 2012 (Unaudited)

     1  

Consolidated Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (Unaudited)

     2  

Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2013 and 2012 (Unaudited)

     3  

Consolidated Statement of Changes in Shareholders’ Equity (Deficit) for the nine months ended September 30, 2013 (Unaudited)

     4  

Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012 (Unaudited)

     5  

Notes to Consolidated Financial Statements (Unaudited)

     6  


MBIA INSURANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In thousands except share and per share amounts)

 

                     
     September 30, 2013      December 31, 2012  

Assets

     

Investments:

     

Fixed-maturity securities held as available-for-sale, at fair value (amortized cost $300,241 and $708,068)

   $ 314,118       $ 730,440   

Investments carried at fair value

     4,610         3,825   

Short-term investments held as available-for-sale, at fair value (amortized cost $205,970 and $157,791)

     206,364         158,610   

Other investments (includes investments at fair value of $1,432 and $611)

     28,407         28,139   
  

 

 

    

 

 

 

Total investments

     553,499         921,014   

Cash and cash equivalents

     345,748         396,788   

Accrued investment income

     6,735         7,085   

Premiums receivable

     1,084,559         1,228,381   

Deferred acquisition costs

     435,166         508,600   

Prepaid reinsurance premiums

     1,200,064         1,370,711   

Insurance loss recoverable

     742,055         3,648,025   

Reinsurance recoverable on paid and unpaid losses

     88,165         159,338   

Property and equipment, at cost (less accumulated depreciation of $57,084 and $60,186)

     1,350         1,633   

Receivable for investments sold

     55         65   

Derivative assets

     6,484         6,764   

Current income taxes

     5,880         7,071   

Deferred income taxes, net

     1,263,497         1,239,427   

Other assets

     18,799         19,744   

Assets of consolidated variable interest entities:

     

Cash

     46,177         176,342   

Investments held-to-maturity, at amortized cost (fair value of $2,566,396 and $2,674,336)

     2,809,400         2,829,200   

Fixed-maturity securities at fair value

     626,320         1,734,774   

Loans receivable at fair value

     1,703,964         1,880,586   

Loan repurchase commitments

     1,115,725         1,086,040   

Derivative assets

     423         333   
  

 

 

    

 

 

 

Total assets

   $ 12,054,065       $ 17,221,921   
  

 

 

    

 

 

 

Liabilities and Equity (Deficit)

     

Liabilities:

     

Unearned premium revenue

   $ 2,191,794       $ 2,507,839   

Loss and loss adjustment expense reserves

     675,104         845,573   

Reinsurance premiums payable

     293,966         313,287   

Long-term debt

     1,097,606         2,694,699   

Deferred fee revenue

     352,355         409,458   

Derivative liabilities

     1,369,698         2,933,229   

Other liabilities

     119,345         312,679   

Liabilities of consolidated variable interest entities:

     

Variable interest entity notes (includes financial instruments carried at fair value of $2,510,925 and $3,675,182)

     5,320,325         6,504,382   

Derivative liabilities

     15,235         161,745   
  

 

 

    

 

 

 

Total liabilities

     11,435,428         16,682,891   
  

 

 

    

 

 

 

Commitments and contingencies (See Note 12)

     

Equity (deficit):

     

Series A non-cumulative perpetual preferred stock, par value $1,000 per share, liquidation value $100,000 per share, authorized - 4,000, issued and outstanding - 2,759

     27,598         27,598   

Common stock, par value $220.80 per share; authorized, issued and outstanding - 67,936 shares

     15,000         15,000   

Additional paid-in capital

     980,218         981,735   

Retained earnings (deficit)

     (416,937)         (510,283)   

Accumulated other comprehensive income (loss), net of tax of $5,459 and $1,642

     12,758         24,980   
  

 

 

    

 

 

 

Total equity (deficit)

     618,637         539,030   
  

 

 

    

 

 

 

Total liabilities and equity (deficit)

   $ 12,054,065       $ 17,221,921   
  

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

1


MBIA INSURANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(In thousands)

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  
     2013      2012      2013      2012  

Revenues:

           

Premiums earned:

           

Scheduled premiums earned

   $ 40,009       $ 39,071       $ 111,512       $ 146,215   

Refunding premiums earned

     431         2,769         2,733         12,408   
  

 

 

    

 

 

    

 

 

    

 

 

 

Premiums earned (net of ceded premiums of $48,085, $80,175, $166,108 and $226,526)

     40,440         41,840         114,245         158,623   

Net investment income

     1,570         5,755         7,085         15,786   

Fees and reimbursements

     16,682         42,407         62,087         104,169   

Change in fair value of insured derivatives:

           

Realized gains (losses) and other settlements on insured derivatives

     (27,703)         11,549         (1,548,268)         (420,432)   

Unrealized gains (losses) on insured derivatives

     284,848         (32,823)         1,561,876         1,473,161   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net change in fair value of insured derivatives

     257,145         (21,274)         13,608         1,052,729   

Net gains (losses) on financial instruments at fair value and foreign exchange

     (5,650)         15,200         28,344         20,809   

Investment losses related to other-than-temporary impairments:

           

Investment losses related to other-than-temporary impairments

             (2,625)                 (5,830)   

Other-than-temporary impairments recognized in accumulated other comprehensive income (loss)

                             (37,086)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net investment losses related to other-than-temporary impairments

             (2,625)                 (42,916)   

Other net realized gains (losses)

     220         244         462         975   

Revenues of consolidated variable interest entities:

           

Net investment income

     12,763         13,091         38,153         40,208   

Net gains (losses) on financial instruments at fair value and foreign exchange

     14,491         42,278         118,781         (25,305)   

Other net realized gains (losses)

                     765           
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenues

     337,661         136,916         383,530         1,325,078   

Expenses:

           

Losses and loss adjustment

     62,733         167,184         (13,389)         314,888   

Amortization of deferred acquisition costs

     19,598         23,611         76,744         81,571   

Operating

     21,748         28,426         82,536         109,213   

Interest

     30,613         62,153         129,387         174,797   

Expenses of consolidated variable interest entities:

           

Operating

     2,627         4,780         9,426         15,808   

Interest

     9,877         10,416         29,968         32,221   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total expenses

     147,196         296,570         314,672         728,498   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income (loss) before income taxes

     190,465         (159,654)         68,858         596,580   

Provision (benefit) for income taxes

     70,748         (79,811)         (24,488)         201,290   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ 119,717       $ (79,843)       $ 93,346       $ 395,290   
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

2


MBIA INSURANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In thousands)

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  
     2013      2012      2013      2012  

Net income (loss)

   $ 119,717       $ (79,843)       $ 93,346       $ 395,290   

Other comprehensive income (loss):

           

Unrealized gains (losses) on available-for-sale securities:

           

Unrealized gains (losses) arising during the period

     (3,633)         23,295         (3,872)         33,869   

Provision (benefit) for income taxes

     (1,586)         713         (1,290)         (220)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     (2,047)         22,582         (2,582)         34,089   

Reclassification adjustments for (gains) losses included in net income (loss)

             99         (2,660)         (7,609)   

Provision (benefit) for income taxes

             35         (929)         (2,663)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

             64         (1,731)         (4,946)   

Reclassification adjustments for other-than-temporary impairments included in net income (loss)

                             37,086   

Provision (benefit) for income taxes

                             12,980   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

                             24,106   

Foreign currency translation:

           

Foreign currency translation gains (losses)

     31,726         (12,355)         (7,224)         (23,261)   

Provision (benefit) for income taxes

     881         (3,715)         685         (2,975)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     30,845         (8,640)         (7,909)         (20,286)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other comprehensive income (loss)

     28,798         14,006         (12,222)         32,963   
  

 

 

    

 

 

    

 

 

    

 

 

 

Comprehensive income (loss)

   $ 148,515       $ (65,837)       $ 81,124       $ 428,253   
  

 

 

    

 

 

    

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

3


MBIA INSURANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (Unaudited)

For The Nine Months Ended September 30, 2013

(In thousands except share amounts)

 

                                                                                       
    Preferred Stock     Common Stock    

Additional

Paid-in

    Retained
Earnings
    Accumulated
Other
Comprehensive
    Total
Shareholders’
Equity
 
    Shares     Amount     Shares     Amount     Capital     (Deficit)     Income (Loss)     (Deficit)  

Balance, December 31, 2012

    2,759      $ 27,598        67,936      $ 15,000      $ 981,735      $ (510,283)      $ 24,980      $ 539,030   

Net income (loss)

                                       93,346              93,346   

Other comprehensive income (loss)

                                              (12,222)        (12,222)   

Share-based compensation, net of tax of $2,062

                                (1,517)                     (1,517)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, September 30, 2013

    2,759      $ 27,598        67,936      $ 15,000      $ 980,218      $ (416,937)      $ 12,758      $ 618,637   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

4


MBIA INSURANCE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In thousands)

 

                     
     Nine Months Ended September 30,  
     2013      2012  

Cash flows from operating activities:

     

Premiums, fees and reimbursements received

   $ 120,289       $ 203,721   

Investment income received

     190,383         275,139   

Insured derivative commutations and losses paid

     (452,686)         (463,652)   

Financial guarantee losses and loss adjustment expenses paid

     (464,440)         (518,000)   

Proceeds from recoveries and reinsurance

     1,928,448         123,863   

Operating and employee related expenses paid

     (93,184)         (91,282)   

Interest paid

     (120,950)         (264,169)   

Income taxes (paid) received

     (510)         (6,493)   
  

 

 

    

 

 

 

Net cash provided (used) by operating activities

     1,107,350         (740,873)   
  

 

 

    

 

 

 

Cash flows from investing activities:

     

Purchase of fixed-maturity securities

     (13,927)         (170,134)   

Sale and redemption of fixed-maturity securities

     487,771         812,124   

Proceeds from paydowns on variable interest entity loans

     211,111         202,726   

Proceeds from paydowns on secured loan to Parent

     -          300,000   

Redemptions of held-to-maturity investments

     19,800         7,200   

Sale (purchase) of short-term investments, net

     45,287         (158,871)   

Sale (purchase) of other investments, net

     (599)         8,995   

Consolidation (deconsolidation) of variable interest entities, net

     (26,385)         (50,901)   

(Payments) proceeds for derivative settlements

     (27,911)         (66,483)   

Capital expenditures

     (334)         (520)   

Disposal of fixed assets

            -    
  

 

 

    

 

 

 

Net cash provided (used) by investing activities

     694,818         884,136   
  

 

 

    

 

 

 

Cash flows from financing activities:

     

Principal paydowns of variable interest entity notes

     (537,247)         (680,560)   

Issuance of variable interest entity notes

     92,720         -    

Proceeds from (repayment of) secured loan with an affiliate

     (1,595,620)         443,000   

Proceeds from secured loan

     50,000         -    
  

 

 

    

 

 

 

Net cash provided (used) by financing activities

     (1,990,147)         (237,560)   
  

 

 

    

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     6,774         -    

Net increase (decrease) in cash and cash equivalents

     (181,205)         (94,297)   

Cash and cash equivalents - beginning of period

     573,130         296,484   
  

 

 

    

 

 

 

Cash and cash equivalents - end of period

   $ 391,925       $ 202,187   
  

 

 

    

 

 

 

Reconciliation of net income (loss) to net cash provided (used) by operating activities:

     

Net income (loss)

   $ 93,346       $ 395,290   

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

     

Change in:

     

Accrued investment income

     380         3,251   

Premiums receivable

     138,013         99,843   

Deferred acquisition costs

     73,518         83,720   

Unearned premium revenue

     (312,872)         (346,336)   

Prepaid reinsurance premiums

     170,647         241,883   

Reinsurance premiums payable

     (19,321)         (20,063)   

Loss and loss adjustment expense reserves

     (172,452)         101,718   

Reinsurance recoverable on paid and unpaid losses

     71,173         8,700   

Insurance loss recoverable

     2,917,057         (270,606)   

Payable to affiliates

     (1,261)         6,406   

Payable to reinsurers on recoverables

     (239,415)         81,501   

Accrued interest payable

     112,459         40,890   

Accounts receivable

     17         47   

Accrued expenses

     (2,453)         17,371   

Deferred fee revenue

     (57,103)         (77,509)   

Current income taxes

     1,191         (4,253)   

Amortization (accretion) of bond premiums (discounts), net

     1,494         5,902   

Depreciation

     612         383   

Other net realized (gains) losses

     (1,227)         (975)   

Net investment losses related to other-than-temporary impairments

     -          42,916   

Unrealized (gains) losses on insured derivatives

     (1,561,876)         (1,473,161)   

Net (gains) losses on financial instruments at fair value and foreign exchange

     (147,124)         4,496   

Deferred income tax provision (benefit)

     (26,201)         198,955   

Share-based compensation

     545         1,124   

Interest on variable interest entities, net

     65,131         112,994   

Other operating

     3,072         4,640   
  

 

 

    

 

 

 

Total adjustments to net income (loss)

     1,014,004         (1,136,163)   
  

 

 

    

 

 

 

Net cash provided (used) by operating activities

   $ 1,107,350       $ (740,873)   
  

 

 

    

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

5


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

Note 1: Business Developments and Risks and Uncertainties

Summary

MBIA Insurance Corporation is a wholly-owned subsidiary of MBIA Inc. (the “Parent” or “MBIA”). The guarantees of MBIA Insurance Corporation and its subsidiaries, (“MBIA Corp.”) insure structured finance and asset-backed obligations, privately issued bonds used for the financing of public purpose projects, which are primarily located outside of the United States (“U.S.”) and that include toll roads, bridges, airports, public transportation facilities, utilities and other types of infrastructure projects serving a substantial public purpose, and obligations of sovereign and sub-sovereign issuers. Structured finance and asset-backed securities (“ABS”) typically are securities repayable from expected cash flows generated by a specified pool of assets, such as residential and commercial mortgages, insurance policies, consumer loans, corporate loans and bonds, trade and export receivables, leases for equipment, aircraft and real property.

Business Developments

In May of 2013, MBIA Inc., together with its subsidiaries, MBIA Corp. and National Public Finance Guarantee Corporation (“National”), entered into a comprehensive settlement agreement and related agreements (the “BofA Settlement Agreement”) with Bank of America Corporation and certain of its subsidiaries (collectively, “Bank of America”), discussed below under “Bank of America Settlement.” As a result of the BofA Settlement Agreement, MBIA Corp. repaid its secured loan from National (the “National Secured Loan”). As of September 30, 2013, MBIA Corp. was rated B with a stable outlook by Standard & Poor’s Financial Services LLC (“S&P”) and B3 with a positive outlook by Moody’s Investors Service, Inc. (“Moody’s”).

Bank of America Settlement

Under the terms of the BofA Settlement Agreement, MBIA Corp. received a payment of approximately $1.7 billion, consisting of $1.6 billion of cash and $136 million principal amount of MBIA Inc.’s 5.70% Senior Notes due 2034. In exchange for such payment, MBIA Corp. agreed to dismiss the litigation commenced in September 2008 against Countrywide Home Loans, Inc. (“Countrywide”), among other parties, and later amended to include claims against Bank of America, relating to breaches of representations and warranties on certain MBIA-insured securitizations sponsored by Countrywide. Bank of America and MBIA also agreed to the commutation of all of the MBIA Corp. policies held by Bank of America, which had a notional insured amount of approximately $7.4 billion, of which $6.1 billion were policies insuring credit default swaps (“CDS”) held by Bank of America referencing commercial real estate (“CRE”) exposures. MBIA Corp. has no further payment obligations under the commuted policies. The New York State Department of Financial Services (“NYSDFS”) advised MBIA Corp. that the NYSDFS did not object to the BofA Settlement Agreement. The $1.6 billion of cash received in connection with the BofA Settlement Agreement is included in “Proceeds from recoveries and reinsurance” presented under the heading “Cash flows from operating activities” on MBIA Corp.’s consolidated statements of cash flows.

Under the terms of the BofA Settlement Agreement, Blue Ridge Investments, L.L.C. (“Blue Ridge”), an affiliate of Bank of America, received a five-year warrant to purchase 9.94 million shares of MBIA common stock at a price of $9.59 per share. Bank of America has also agreed to dismiss the pending litigation between the parties concerning the restructuring transactions announced by MBIA on February 18, 2009 (the “Transformation”) and the pending litigation between the parties concerning the senior debt consent solicitation completed by MBIA in the fourth quarter of 2012. In addition, Bank of America agreed to withdraw the purported “notice of default” it sent in connection with such consent solicitation.

Under the terms of the BofA Settlement Agreement, the dismissals of the litigations referenced above are initially being filed on a “without prejudice” basis. The parties will refile such dismissals on a “with prejudice” basis provided that, within the one-year period following execution of the BofA Settlement Agreement, none of the claims released pursuant to the BofA Settlement Agreement are reinstated and neither party is required to make a payment on any such released claims. MBIA Corp. views the likelihood of such an event as remote, and thus expects that the litigation dismissals will be filed on a “with prejudice” basis at the expiration of such one-year period.

MBIA Corp.’s policies insuring the residential mortgage-backed securities (“RMBS”) securitizations originated by Countrywide will continue to be in full force and effect, and MBIA Corp. will continue to make timely payments of principal and interest if there are shortfalls when due under such policies. Bank of America will have no further representation and warranty liability with respect to the origination of the mortgage loans in the MBIA-insured Countrywide and certain other securitizations.

In addition, MBIA Corp. has entered into a $500 million three-year secured revolving credit agreement with Blue Ridge (the “Blue Ridge Secured Loan”). During the third quarter of 2013, MBIA Insurance Corporation borrowed $50 million under this agreement. Refer to “Note 9: Debt” for a discussion of the Blue Ridge Secured Loan.

 

6


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1: Business Developments and Risks and Uncertainties (continued)

 

The payment from Bank of America, including the MBIA Inc. notes, was used by MBIA Corp. to repay the outstanding balance and accrued interest on the National Secured Loan. The National Secured Loan balance of $1.7 billion as of March 31, 2013 was reduced to approximately $1.6 billion prior to the Bank of America settlement as a result of the receipt of $110 million in settlement of Flagstar Bank’s put-back obligation.

The value of the settlement is consistent with amounts recorded on MBIA Corp.’s statutory balance sheet as of December 31, 2012. MBIA Corp.’s liquidity and capital risk profile has substantially improved as a result of the settlement.

Societe Generale Settlement

In May of 2013, MBIA Inc., together with its subsidiaries, MBIA Corp. and National, entered into an agreement with Societe Generale pursuant to which MBIA commuted $4.2 billion of gross insured exposure comprising ABS collateralized debt obligations (“CDOs”), structured commercial mortgage-backed securities (“CMBS”) pools and CRE CDOs. The amount MBIA paid to Societe Generale in consideration of commuting its insured exposure is consistent with MBIA Corp.’s December 31, 2012 aggregate statutory loss reserves for the exposures commuted. Also, pursuant to the agreement, Societe Generale agreed to dismiss the pending litigation between the parties concerning the Transformation, which includes any appeals of the decision denying the Article 78 petition and the plenary case.

Residential Capital LLC Agreement

In May of 2013, MBIA Corp. and the other Consenting Claimants, Residential Capital LLC (“ResCap”) and Ally Financial Inc. (“Ally”), agreed to the terms of a comprehensive plan agreement to support ResCap’s Chapter 11 plan. The confirmation of ResCap’s Chapter 11 plan would resolve MBIA Corp.’s claims against the Residential Funding Company, LLC (“RFC”), GMAC Mortgage LLC (“GMAC”) and ResCap estates, and Ally. In June of 2013, the bankruptcy court issued a Memorandum Opinion approving the Plan Support Agreement (the “Plan”). The Plan is now subject to voting by creditors as well as a confirmation hearing by the bankruptcy court. All creditor ballots were due back by October 21, 2013 and as of the date of this report, the results had not been tallied. There can be no assurance that the Plan will be confirmed. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” for a discussion of the ResCap agreement.

Transformation Litigation

Subsequent to the BofA Settlement Agreement and the Societe Generale settlement, all litigation brought originally by the group of eighteen domestic and international financial institutions relating to the establishment of National has been resolved.

Other

As of September 30, 2013 and December 31, 2012, MBIA Corp.’s cash and liquid assets, that were immediately available totaled $97 million and $345 million, respectively. Management believes MBIA Corp.’s current liquidity position, together with future cash inflows and amounts available under the Blue Ridge Secured Loan, is adequate to make expected future claim payments. The combination of commutation payments to reduce liabilities and claim payments have placed liquidity pressure on MBIA Corp. MBIA Corp. continues to seek to reduce both the absolute amount and the volatility of its obligations and potential future claim payments through the execution of commutations of insurance policies. During the nine months ended September 30, 2013, MBIA Corp. commuted $19.9 billion of gross insured exposure, primarily comprising structured CMBS pools, investment grade CDOs, ABS CDOs, first-lien subprime RMBS, high yield corporate CDOs, CRE CDOs, structured insurance securities and first-lien alternative A-paper (“Alt-A”) RMBS.

Risks and Uncertainties

MBIA Corp.’s consolidated financial statements include estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. The outcome of certain significant risks and uncertainties could cause MBIA Corp. to revise its estimates and assumptions or could cause actual results to differ from MBIA Corp.’s estimates. While MBIA Corp. believes that it continues to have sufficient capital and liquidity to meet all of its expected obligations, if one or more possible adverse outcomes were to be realized, its statutory capital, financial position, results of operations and cash flows could be materially and adversely affected.

 

7


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1: Business Developments and Risks and Uncertainties (continued)

 

Significant risks and uncertainties that could affect amounts reported in MBIA Corp.’s financial statements in future periods include, but are not limited to, the following:

 

   

The amount and timing of potential claims from MBIA Corp.’s second-lien RMBS and remaining insured CMBS pools are potentially volatile, as are the projected collections of excess spread and the remaining put-back recoverables. However, management’s expected liquidity and capital forecasts for MBIA Corp., which include expected availability of draws under the Blue Ridge Secured Loan and expected recoveries from the ResCap agreement, reflect adequate resources to pay expected claims. Further, the remaining insured portfolio, aside from these exposures, could deteriorate and result in loss reserves and claim payments. While management believes it will have adequate resources to pay expected claims, if MBIA Corp. experiences higher than expected claim payments or is unable to commute the remaining exposures that represent substantial risk, MBIA Corp. may ultimately have insufficient resources to continue to pay claims, which could cause the NYSDFS to put MBIA Corp. into a rehabilitation or liquidation proceeding (an “MBIA Corp. Proceeding”), as per Article 74 of the New York Insurance Law (“NYIL”). Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” for information about MBIA Corp.’s reserves and recoveries.

 

   

Management believes that MBIA Corp. has sufficient liquidity resources to meet all of its obligations for the foreseeable future. In order to meet its liquidity requirements, MBIA Corp. may use its ability to finance through third-party facilities, although there can be no assurance that this strategy will be available or adequate. A failure by MBIA Inc. to settle liabilities that are also insured by MBIA Corp. could result in claims on MBIA Corp.

 

   

MBIA Corp.’s ability to commute insured transactions is limited by available liquidity, including the availability of the Blue Ridge Secured Loan, recoveries from the ResCap agreement and the use of other available financing structures and liquidity, some of which could be subject to regulatory approval by the NYSDFS and/or the United Kingdom’s (“U.K.”) Prudential Regulation Authority. MBIA Corp.’s primary strategy for managing its CMBS pool and ABS CDO exposures has been commutations. There can be no assurance that MBIA Corp. will be able to fund further commutations through borrowings or otherwise. Refer to “Note 5: Loss and Loss Adjustment Expense Reserves” for information about MBIA Corp.’s estimate of losses on its exposures.

 

   

As of September 30, 2013, MBIA Corp. was not in compliance with a requirement under the NYIL to hold qualifying assets in an amount necessary to satisfy its contingency reserves. MBIA Corp. has reported the deficit to the NYSDFS. In addition, as of September 30, 2013, MBIA Corp. exceeded its aggregate risk limits and reported an overage related to its single risk limits under NYIL. MBIA Corp. plans to notify the NYSDFS of these overages and submit a plan to achieve compliance with its limits. While the NYSDFS has not taken action against MBIA Corp., the NYSDFS may impose remedial actions for failing to meet these requirements.

 

   

Changes in fair value of insured credit derivatives can be caused by general market conditions, volatility in MBIA Corp.’s credit spreads and volatility on the underlying collateral assets on insured credit derivatives. This may result in significant unrealized gains and losses in MBIA Corp.’s reported results of operations. Refer to “Note 6: Fair Value of Financial Instruments” for information about MBIA Corp.’s valuation of insured credit derivatives.

As a result of the BofA Settlement Agreement, the risk of an MBIA Corp. Proceeding has been significantly reduced. While MBIA Corp. believes it will have adequate resources to pay expected claims, in the event it does not have adequate resources in the future and the NYSDFS were to commence an MBIA Corp. Proceeding, MBIA Corp. may be subject to the following:

 

   

CDS counterparties may seek to terminate CDS contracts insured by MBIA Corp. and MBIA UK Insurance Limited and make market-based damage claims (irrespective of whether actual credit-related losses are expected under the underlying exposure). MBIA Corp. believes that such an acceleration would likely terminate any residual value.

 

   

Medium-term notes (“MTNs”) issued by MBIA’s subsidiaries, MBIA Global Funding, LLC (“GFL”) and Meridian Funding Company, LLC (“Meridian”), which are insured by MBIA Corp., would accelerate. To the extent GFL failed to pay the accelerated amounts under the GFL MTNs or the collateral securing the Meridian MTNs was deemed insufficient to pay the accelerated amounts under the Meridian MTNs, the MTN holders would have policy claims against MBIA Corp. for scheduled payments of interest and principal.

 

   

An MBIA Corp. Proceeding may accelerate certain investment agreements issued by MBIA Inc. including, in some cases, with make-whole payments. To the extent MBIA fails to pay the accelerated amounts under these investment agreements or the collateral securing these investment agreements is deemed insufficient to pay the accelerated amounts due, the holders of the investment agreements would have policy claims against MBIA Corp.

 

   

Payments under MBIA Corp. insurance policies could be suspended, delayed or reduced, in whole or in part.

 

   

An acceleration of the surplus notes issued by MBIA Corp. and a possible reduction or further delay or suspension of the amounts due.

 

8


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 1: Business Developments and Risks and Uncertainties (continued)

 

   

MBIA Corp.’s ability to carry out its tax planning strategies. This may cause it to record additional allowances against a portion or all of its deferred tax assets. Refer to “Note 10: Income Taxes” for information about MBIA Corp.’s deferred tax assets. In addition, MBIA Corp. is currently included in the consolidated tax return of MBIA Inc. An MBIA Corp. Proceeding could result in challenges to the tax sharing arrangement among the MBIA affiliates that might adversely affect management’s ability to manage taxes efficiently.

 

   

Approval of the rehabilitator and the rehabilitation court (or liquidator and liquidation court, as the case may be) may be required for a variety of actions of importance to MBIA Corp. and its policyholders, including, without limitation, settlement of MBIA Corp.’s put-back litigation and commutation of MBIA Corp.-insured exposures.

 

   

The rehabilitator or liquidator would replace the Board of Directors of MBIA Corp. and take control of the operations and assets of MBIA Corp., which would result in changes to its strategies and management.

 

   

An MBIA Corp. Proceeding would be an event of default under the Blue Ridge Secured Loan and, as a result, the loan could be accelerated and Bank of America would have rights to the loan’s collateral.

 

   

MBIA Corp. would be subject to significant additional expenses arising from the appointment of the rehabilitator or liquidator, as receiver, and payment of the fees and expenses of the advisors to such rehabilitator or liquidator.

Note 2: Significant Accounting Policies

MBIA Corp. has disclosed its significant accounting policies in “Note 2: Significant Accounting Policies” in the Notes to Consolidated Financial Statements included in Exhibit 99.2 to MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012. The following significant accounting policies provide an update to those included under the same captions in Exhibit 99.2 to MBIA Inc.’s Annual Report on Form 10-K.

Basis of Presentation

The accompanying unaudited consolidated financial statements do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual periods. These statements should be read in conjunction with MBIA Corp.’s consolidated financial statements and notes thereto included in Exhibit 99.2 to MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012. The accompanying consolidated financial statements have not been audited by an independent registered public accounting firm in accordance with the standards of the Public Company Accounting Oversight Board (U.S.), but in the opinion of management such financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of MBIA Corp.’s consolidated financial position and results of operations. All material intercompany balances and transactions have been eliminated.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. As additional information becomes available or actual amounts become determinable, the recorded estimates are revised and reflected in operating results.

The results of operations for the three and nine months ended September 30, 2013 may not be indicative of the results that may be expected for the year ending December 31, 2013. The December 31, 2012 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP for annual periods. Certain amounts have been reclassified in the prior years’ financial statements to conform to the current presentation. This includes the reclassification of accrued interest on surplus notes and the National Secured Loan from “Other liabilities” to “Long-term debt” on MBIA Corp.’s consolidated balance sheets. Refer to “Note 9: Debt” for information about the amounts of this reclassification. This reclassification had no impact on total revenues, expenses, assets, liabilities, shareholders’ equity, operating cash flows, investing cash flows, or financing cash flows for all periods presented.

Subsequent Events

MBIA Corp. has evaluated all subsequent events as of November 12, 2013, the date of issuance of the consolidated financial statements, for inclusion in MBIA Corp.’s consolidated financial statements and/or accompanying notes.

 

9


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 3: Recent Accounting Pronouncements

Recently Adopted Accounting Standards

Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02)

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02, “Comprehensive Income (Topic 220)—Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” that requires an entity to present information about the amounts reclassified out of accumulated other comprehensive income (“AOCI”) by component and to present significant amounts reclassified out of AOCI by the respective line items of net income. The amendment only affects MBIA Corp.’s disclosures and does not affect MBIA Corp.’s consolidated balance sheets, results of operations, or cash flows. MBIA Corp. adopted this standard in the first quarter of 2013.

Disclosures about Offsetting Assets and Liabilities (ASU 2011-11)

In December 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 creates new disclosure requirements about the nature of MBIA Corp.’s rights of setoff and related arrangements associated with its financial instruments and derivative instruments. This amendment does not change the existing offsetting eligibility criteria or the permitted balance sheet presentation for those instruments that meet the eligibility criteria. The disclosure requirement was effective for MBIA Corp. beginning in the first quarter of 2013. In January 2013, the FASB issued ASU 2013-01, “Balance Sheet (Topic 210)—Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” ASU 2013-01 clarifies that ASU 2011-11 applies only to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement. These standards only affect MBIA Corp.’s disclosures and do not affect MBIA Corp.’s consolidated balance sheets, results of operations, or cash flows. MBIA Corp. adopted this standard in the first quarter of 2013.

Refer to the Notes to Consolidated Financial Statements of MBIA Corp. included in Exhibit 99.2 to MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012 for further information regarding the effects of recently adopted accounting standards on prior year financial statements.

Note 4: Variable Interest Entities

MBIA Corp. provides credit protection to issuers of obligations that may involve issuer-sponsored special purpose entities (“SPEs”). An SPE may be considered a variable interest entity (“VIE”) to the extent the SPE’s total equity at risk is not sufficient to permit the SPE to finance its activities without additional subordinated financial support or its equity investors lack any one of the following characteristics: (i) the power to direct the activities of the SPE that most significantly impact the entity’s economic performance or (ii) the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity. A holder of a variable interest or interests in a VIE is required to assess whether it has a controlling financial interest, and thus is required to consolidate the entity as primary beneficiary. An assessment of a controlling financial interest identifies the primary beneficiary as the variable interest holder that has both of the following characteristics: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The primary beneficiary is required to consolidate the VIE. An ongoing reassessment of controlling financial interest is required to be performed based on any substantive changes in facts and circumstances involving the VIE and its variable interests.

MBIA Corp. evaluates issuer-sponsored SPEs initially to determine if an entity is a VIE, and is required to reconsider its initial determination if certain events occur. For all entities determined to be VIEs, MBIA Corp. performs an ongoing reassessment to determine whether its guarantee to provide credit protection on obligations issued by VIEs provides MBIA Corp. with a controlling financial interest. Based on its ongoing reassessment of controlling financial interest, MBIA Corp. determines whether a VIE is required to be consolidated or deconsolidated.

 

10


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 4: Variable Interest Entities (continued)

 

MBIA Corp. makes its determination for consolidation based on a qualitative assessment of the purpose and design of a VIE, the terms and characteristics of variable interests of an entity, and the risks a VIE is designed to create and pass through to holders of variable interests. MBIA Corp. generally provides credit protection on obligations issued by VIEs, and holds certain contractual rights according to the purpose and design of a VIE. MBIA Corp. may have the ability to direct certain activities of a VIE depending on facts and circumstances, including the occurrence of certain contingent events, and these activities may be considered the activities of a VIE that most significantly impact the entity’s economic performance. MBIA Corp. generally considers its guarantee of principal and interest payments of insured obligations, given nonperformance by a VIE, to be an obligation to absorb losses of the entity that could potentially be significant to the VIE. At the time MBIA Corp. determines it has the ability to direct the activities of a VIE that most significantly impact the economic performance of the entity based on facts and circumstances, MBIA Corp. is deemed to have a controlling financial interest in the VIE and is required to consolidate the entity as primary beneficiary. MBIA Corp. performs an ongoing reassessment of controlling financial interest that may result in consolidation or deconsolidation of any VIE.

Nonconsolidated VIEs

The following tables present the total assets of nonconsolidated VIEs in which MBIA Corp. holds a variable interest as of September 30, 2013 and December 31, 2012. The following tables also present MBIA Corp.’s maximum exposure to loss for nonconsolidated VIEs and carrying values of the assets and liabilities for its interests in these VIEs as of September 30, 2013 and December 31, 2012. MBIA Corp. has aggregated nonconsolidated VIEs based on the underlying credit exposure of the insured obligation. The nature of MBIA Corp.’s variable interests in nonconsolidated VIEs is related to financial guarantees, insured CDS contracts and any investments in obligations issued by nonconsolidated VIEs.

 

                                                                                       
    September 30, 2013  
                Carrying Value of Assets     Carrying Value of Liabilities  

In millions

  VIE Assets     Maximum
Exposure
to Loss
    Investments (1)     Premiums
Receivable (2)
    Insurance  Loss
Recoverable (3)
    Unearned
Premium
Revenue (4)
    Loss and Loss
Adjustment
Expense
Reserves (5)
    Derivative
Liabilities (6)
 

Insurance:

               

Global structured finance:

               

Collateralized debt obligations

  $ 13,564     $ 7,972     $ 118     $ 45     $ 5     $ 38     $ 26     $ 94  

Mortgage-backed residential

    22,400       9,915       11       57       696       56       374       5  

Mortgage-backed commercial

    2,010       1,102       -        1       -        1       -        -   

Consumer asset-backed

    6,788       2,888       9       21       -        20       17       -   

Corporate asset-backed

    14,258       7,817       -        87       19       103       -        -   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total global structured finance

    59,020       29,694       138       211       720       218       417       99  

Global public finance

    51,060       20,258       -        205       -        250       5       -   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total insurance

  $ 110,080     $ 49,952     $ 138     $ 416     $ 720     $ 468     $ 422     $ 99  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Reported within “Investments” on MBIA Corp.’s consolidated balance sheets.
(2) - Reported within “Premiums receivable” on MBIA Corp.’s consolidated balance sheets.
(3) - Reported within “Insurance loss recoverable” on MBIA Corp.’s consolidated balance sheets.
(4) - Reported within “Unearned premium revenue” on MBIA Corp.’s consolidated balance sheets.
(5) - Reported within “Loss and loss adjustment expense reserves” on MBIA Corp.’s consolidated balance sheets.
(6) - Reported within “Derivative liabilities” on MBIA Corp.’s consolidated balance sheets.

 

11


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 4: Variable Interest Entities (continued)

 

                                                                                       
    December 31, 2012  
                Carrying Value of Assets     Carrying Value of Liabilities  

In millions

  VIE Assets     Maximum
Exposure
to Loss
    Investments (1)     Premiums
Receivable (2)
    Insurance
Loss
Recoverable (3)
    Unearned
Premium
Revenue (4)
    Loss and Loss
Adjustment
Expense
Reserves (5)
    Derivative
Liabilities (6)
 

Insurance:

               

Global structured finance:

               

Collateralized debt obligations

  $ 16,925     $ 10,873     $ -     $ 62     $ 5     $ 55     $ 37     $ 74  

Mortgage-backed residential

    34,061       13,075       11       77       3,278       75       440       4  

Mortgage-backed commercial

    4,801       2,432       -       2       -        2       -       -   

Consumer asset-backed

    5,820       3,086       10       19       -        19       21       -   

Corporate asset-backed

    19,980       9,981       -        123       13       140       -        -   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total global structured finance

    81,587       39,447       21       283       3,296       291       498       78  

Global public finance

    39,259       21,346       -       220       -        267       4      
-
  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total insurance

  $ 120,846     $ 60,793     $ 21     $ 503     $ 3,296     $ 558     $ 502     $ 78  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Reported within “Investments” on MBIA Corp.’s consolidated balance sheets.
(2) - Reported within “Premiums receivable” on MBIA Corp.’s consolidated balance sheets.
(3) - Reported within “Insurance loss recoverable” on MBIA Corp.’s consolidated balance sheets.
(4) - Reported within “Unearned premium revenue” on MBIA Corp.’s consolidated balance sheets.
(5) - Reported within “Loss and loss adjustment expense reserves” on MBIA Corp.’s consolidated balance sheets.
(6) - Reported within “Derivative liabilities” on MBIA Corp.’s consolidated balance sheets.

The maximum exposure to loss as a result of MBIA Corp.’s variable interests in VIEs is represented by insurance in force. Insurance in force is the maximum future payments of principal and interest, net of cessions to reinsurers, which may be required under commitments to make payments on insured obligations issued by nonconsolidated VIEs.

Consolidated VIEs

The carrying amounts of assets and liabilities of consolidated VIEs were $6.3 billion and $5.3 billion, respectively, as of September 30, 2013, and $7.7 billion and $6.7 billion, respectively, as of December 31, 2012. The carrying amounts of assets and liabilities are presented separately in “Assets of consolidated variable interest entities” and “Liabilities of consolidated variable interest entities” on MBIA Corp.’s consolidated balance sheets. Additional VIEs are consolidated or deconsolidated based on an ongoing reassessment of controlling financial interest, when events occur or circumstances arise, and whether the ability to exercise rights that constitute power to direct activities of any VIEs are present according to the design and characteristics of these entities. No additional VIEs were consolidated during the nine months ended September 30, 2013 and 2012. There were no net realized gains or losses recorded in the three months ended September 30, 2013 and 2012. During the nine months ended September 30, 2013, MBIA Corp. recorded a net realized gain of $1 million related to the deconsolidation of VIEs. There were no net realized gains or losses recorded in the nine months ended September 30, 2012.

Holders of insured obligations of issuer-sponsored VIEs related to MBIA Corp. do not have recourse to the general assets of MBIA Corp. In the event of nonpayment of an insured obligation issued by a consolidated VIE, MBIA Corp. is obligated to pay principal and interest, when due, on the respective insured obligation only. MBIA Corp.’s exposure to consolidated VIEs is limited to the credit protection provided on insured obligations and any additional variable interests held by MBIA Corp.

Note 5: Loss and Loss Adjustment Expense Reserves

Loss and Loss Adjustment Expense Process

As of September 30, 2013, the majority of MBIA Corp.’s case basis reserves and insurance loss recoveries recorded in accordance with GAAP were related to insured second-lien and first-lien RMBS transactions. These reserves and recoveries do not include estimates for policies insuring credit derivatives and does not include losses and recoveries on financial guarantee VIEs that are eliminated in consolidation. Policies insuring credit derivative contracts are accounted for as derivatives and carried at fair value under GAAP. The fair values of insured derivative contracts are influenced by a variety of market and transaction-specific factors that may be unrelated to potential future claim payments under MBIA Corp.’s insurance policies. In the absence of credit impairments on insured derivative contracts or the early termination of such contracts at a loss, the cumulative unrealized losses recorded from fair valuing these contracts should reverse before or at the maturity of the contracts.

 

12


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

Notwithstanding the difference in accounting under GAAP for financial guarantee policies and MBIA Corp.’s insured derivatives, insured derivatives have similar terms, conditions, risks, and economic profiles to financial guarantee insurance policies, and therefore, are evaluated by MBIA Corp. for loss (referred to as credit impairment herein) and loss adjustment expense (“LAE”) periodically in a manner similar to the way that loss and LAE reserves are estimated for financial guarantee insurance policies. Credit impairments represent actual payments and collections plus the present value of estimated expected future claim payments, net of recoveries. MBIA Insurance Corporation’s expected future claim payments for insured derivatives were discounted using a rate of 5.72%, the same rate it used to calculate its statutory loss reserves as of September 30, 2013. These credit impairments, calculated in accordance with statutory accounting principles (“U.S. STAT”), differ from the fair values recorded in MBIA Corp.’s consolidated financial statements. MBIA Corp. considers its credit impairment estimates as critical information for investors as it provides information about loss payments MBIA Corp. expects to make on insured derivative contracts. As a result, the following loss and LAE process discussion includes information about loss and LAE activity recorded in accordance with GAAP for financial guarantee insurance policies and credit impairments estimated in accordance with U.S. STAT for insured derivative contracts. Refer to “Note 6: Fair Value of Financial Instruments” included herein for additional information about MBIA Corp.’s insured credit derivative contracts.

To date, MBIA Corp. has resolved or agreed to resolve substantially all of its contract claims (referred to as “put-back” claims) related to those mortgage loans whose inclusion in insured securitizations failed to comply with representations and warranties (“ineligible loans”), with the exception of those ineligible loans securitized by Credit Suisse 2007-2 in the home equity mortgage trust (“HEMT”) securitization. Credit Suisse has challenged MBIA Corp.’s assessment of the ineligibility of individual mortgage loans and the dispute is the subject of litigation for which there is no assurance that MBIA Corp. will prevail.

RMBS Case Basis Reserves and Recoveries ( Financial Guarantees )

MBIA Corp.’s RMBS reserves and recoveries relate to financial guarantee insurance policies. MBIA Corp. calculated RMBS case basis reserves as of September 30, 2013 for both second-lien and first-lien RMBS transactions using a process called the “Roll Rate Methodology.” The Roll Rate Methodology is a multi-step process using a database of loan level information, a proprietary internal cash flow model, and a commercially available model to estimate expected ultimate cumulative losses on insured bonds. “Roll Rate” is defined as the probability that current loans become delinquent and that loans in the delinquent pipeline are charged-off or liquidated. Generally, Roll Rates are calculated for the previous three months and averaged. The loss reserve estimates are based on a probability-weighted average of three scenarios of loan losses (base case, stress case, and an additional stress case).

In calculating ultimate cumulative losses for RMBS, MBIA Corp. estimates the amount of loans that are expected to be charged-off (deemed uncollectible by servicers of the transactions) or liquidated in the future. MBIA Corp. assumes that charged-off loans have zero recovery values.

Second-lien RMBS Reserves

MBIA Corp.’s second-lien RMBS case basis reserves as of September 30, 2013 relate to RMBS backed by home equity lines of credit (“HELOC”) and closed-end second mortgages (“CES”).

The Roll Rates for 30-59 day delinquent loans and 60-89 day delinquent loans are calculated on a transaction-specific basis. MBIA Corp. assumes that the Roll Rate for 90+ day delinquent loans, excluding foreclosures and Real Estate Owned (“REO”) is 95%. The Roll Rates are applied to the amounts in the respective delinquency buckets based on delinquencies as of August 31, 2013 to estimate future losses from loans that are delinquent as of the current reporting period.

 

13


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

Roll Rates for loans that are current as of August 31, 2013 (“Current Roll to Loss”) are also calculated on a transaction-specific basis. A proportion of loans reported current as of August 31, 2013 is assumed to become delinquent every month, at a Current Roll to Loss rate that persists at a high level for a time and subsequently starts to decline. A key assumption in the model is the period of time in which MBIA Corp. projects high levels of Current Roll to Loss to persist. MBIA Corp. runs multiple scenarios, each with varying periods of time, for which the high levels of Current Roll to Loss rates persist. Loss reserves are calculated by using a weighted average of these scenarios, with the majority of the probability assigned to stressful scenarios where the high levels of Current Roll to Loss rates persist for six or twenty four months before reverting to historic levels. In the base case scenario, MBIA Corp. assumes that the Current Roll to Loss begins to decline immediately and continues to decline over the next six months to 25% of their levels as of August 31, 2013. For example, in the base case, as of August 31, 2013, if the amount of current loans which become 30-59 days delinquent is 10%, and recent performance suggests that 30% of those loans will be charged-off, the Current Roll to Loss for the transaction is 3%. In the base case, it is then assumed that the Current Roll to Loss will reduce linearly to 25% of its original value over the next six months (i.e., 3% will linearly reduce to 0.75% over the six months from September 2013 to February 2014). After that six-month period, MBIA Corp. further reduces the Current Roll to Loss to 0% by early to mid-2014 with the expectation that the performing seasoned loans will eventually result in loan performance reverting to lower levels of default consistent with history.

In addition, in MBIA Corp.’s loss reserve models for transactions secured by HELOCs, MBIA Corp. considers borrower draw and prepayment rates and factors that could affect the excess spread generated by current loans, which offsets losses and reduces payments. For HELOCs, the current three-month average draw rate is generally used to project future draws on the line. For HELOCs and transactions secured by fixed-rate CES, the three-month average conditional prepayment rate is generally used to start the projection for trends in voluntary principal prepayments. Due to the current volatility in mortgage prepayment rates, which influence mortgage refinancing and voluntary principal prepayment rates, MBIA Corp. used historical average mortgage rates to model its loss reserves in the third quarter of 2013. Projected cash flows are also based on an assumed constant basis spread between floating rate assets and floating rate insured debt obligations (the difference between prime and London Interbank Offered Rate (“LIBOR”) interest rates, minus any applicable fees). For all transactions, cash flow models consider allocations and other structural aspects of the transactions, including managed amortization periods, rapid amortization periods and claims against MBIA Corp.’s insurance policy consistent with such policy’s terms and conditions. In developing multiple loss scenarios, stress is applied by elongating the Current Roll to Loss rate for various periods, simulating a slower improvement in the transaction performance. The estimated net claims from the procedure above are then discounted using a risk-free rate to a net present value reflecting MBIA Corp.’s general obligation to pay claims over time and not on an accelerated basis. The above assumptions represent MBIA Corp.’s probability-weighted estimates of how transactions will perform over time.

MBIA Corp. monitors portfolio performance on a monthly basis against projected performance, reviewing delinquencies, Roll Rates, and prepayment rates (including voluntary and involuntary). However, loan performance remains difficult to predict and losses may exceed expectations. In the event of a material deviation in actual performance from projected performance, MBIA Corp. would increase or decrease the case basis reserves accordingly. If actual performance were to remain at the peak levels for six additional months compared to the probability-weighted outcome currently used by MBIA Corp., the addition to the case basis reserves would be approximately $85 million.

Second-lien RMBS Recoveries

MBIA Corp. primarily records two types of recoveries related to insured second-lien RMBS exposures; recoveries related to put-back claims on ineligible mortgages and excess spread that is generated from performing loans in the insured transactions.

Ineligible Mortgage Loans

As of September 30, 2013, MBIA Corp. recorded estimated recoveries of $1.1 billion, gross of income taxes, related to second-lien RMBS put-back claims on ineligible mortgage loans, consisting of $18 million included in “Insurance loss recoverable” and $1.1 billion included in “Loan repurchase commitments” presented under the heading “Assets of consolidated variable interest entities” on MBIA Corp.’s consolidated balance sheets. As of September 30, 2013 and December 31, 2012, MBIA Corp.’s estimated recoveries after income taxes calculated at the federal statutory rate of 35%, were $737 million and $2.3 billion, respectively, which was 119% and 432% of the consolidated total shareholders’ equity, respectively. As of September 30, 2013, the remaining estimated recoveries relate to MBIA Corp.’s claims based on ineligible mortgage loans asserted against Credit Suisse and the agreed to claims and recoveries against the bankruptcy estates of RFC, GMAC and ResCap as reflected in a disclosure statement filed in August of 2013.

On May 14, 2012, ResCap and its wholly-owned subsidiary companies, RFC and GMAC, each filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code. MBIA Corp. asserted claims based on the inclusion of ineligible loans against RFC, GMAC and ResCap, based upon the direct contractual relationship between MBIA Corp., RFC and GMAC.

 

14


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

As of May 23, 2013, Ally, ResCap, RFC, GMAC and the Consenting Claimants (which includes MBIA Corp.), among other parties, executed a term sheet and supplemental term sheet agreeing to, among other things, a settlement amount of $796 million to be paid to MBIA Corp. as part of a proposed plan to resolve claims against Ally and RFC, GMAC and ResCap. In August of 2013, a disclosure statement filed indicated an increased expected recovery for MBIA Corp. of approximately $828 million. The increased recovery was primarily due to the favorable disposition of assets and settlements of claims. The settlement and anticipated recoveries are consistent with the put-back recoveries recorded by MBIA Corp. The agreement will be implemented through a plan of reorganization in ResCap’s Chapter 11 cases, subject to bankruptcy court approval. In June of 2013, the bankruptcy court issued a Memorandum Opinion approving the Plan. The Plan is subject to confirmation by the bankruptcy court, with confirmation hearings currently scheduled in November 2013. MBIA Corp. anticipates an initial distribution of funds to MBIA Corp. and other claimants in late 2013 or early 2014. This anticipated timeline may change due to developments related to the Junior Secured Note litigation, which occurred in October of 2013, or other matters that develop in the course of events in the bankruptcy court plan confirmation process.

MBIA Corp. continues to refine the indicative scenarios used to calculate put-back recoveries for ResCap based upon information received during the bankruptcy process. MBIA Corp. has made additional adjustments to its recovery calculations related to ResCap in consideration of the agreed upon recovery amount as described in the executed term sheet, supplemental term sheet and plan support agreement submitted in motions filed in May of 2013. During the third quarter of 2013, MBIA Corp. made additional refinements to the probability assumptions utilized to calculate MBIA Corp.’s expected recoveries. The revisions were based upon the submission of documents related to the Plan.

In addition, MBIA Corp. believes that it will prevail in enforcing its contractual put-back rights against Credit Suisse. Based on MBIA Corp.’s assessment of the strength of these claims, MBIA Corp. believes it is entitled to collect the full amount of its incurred losses, and interest on amounts paid. However, uncertainty remains with respect to the ultimate outcome of the litigation with Credit Suisse, which is contemplated in the scenario based-modeling MBIA Corp. utilizes. The Credit Suisse recovery scenarios are based on the amount of incurred losses measured against certain probabilities of ultimate resolution of the dispute with Credit Suisse over the inclusion of ineligible mortgage loans in the HEMT securitization. Most of the probability weight is assigned to partial recovery scenarios.

Expected cash inflows from put-back recoveries are discounted using the current risk-free discount rates associated with the underlying transaction’s cash flows which ranged from 1.4% to 2.7%, depending upon the transaction’s expected average life, which ranged from 5.0 years to 10.4 years.

MBIA Corp. consistently reviews the approach and assumptions it applies to calculate put-back recoveries. The same transactional documents that provide MBIA Corp. with its put-back rights against Credit Suisse also provide that MBIA Corp. is entitled to reimbursement of interest on paid claims at a prescribed interest rate. Following Judge Jed Rakoff’s decision on February 7, 2013 in the Assured Guaranty v. Flagstar case (Assured Guaranty Municipal Corp. v. Flagstar Bank, 11-cv-02375, U.S. District Court, Southern District of New York (Manhattan)), in which he confirmed Assured Guaranty’s analogous right to recover contractual interest in addition to claims paid, MBIA Corp. has refined its put-back recovery assumptions against Credit Suisse to increase the probability that it will be reimbursed for contractual interest owed on paid claims. Consistent with MBIA Corp.’s probability based put-back recovery calculations, it has determined the interest owed contemplating litigation risk and repayment risk, as well as the potential value in the context of a settlement. MBIA Corp. continues to maintain that in the context of its put-back litigation, MBIA Corp. is entitled to receive interest at the New York State statutory rate. However, MBIA Corp. currently calculates its put-back recoveries using the contractual interest rate, which is lower than the New York State statutory rate.

To date, MBIA Corp. has either settled or agreed to settle the majority of MBIA Corp.’s put-back claims, with only Credit Suisse remaining as an outstanding dispute. The settlement amounts have been consistent with the put-back recoveries previously included in MBIA Corp.’s financial statements. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the BofA Settlement Agreement. Additional information on the status of the litigation against Credit Suisse can be found in the “Recovery Litigation” discussion within “Note 12: Commitments and Contingencies.”

MBIA Corp.’s assessment of the remaining unsettled recoveries related to insured Credit Suisse second-lien RMBS is principally based on the following factors:

 

  1. the settlement of the majority of MBIA Corp.’s put-back claims with sellers/servicers, including those with Bank of America and Flagstar Bank in May of 2013;

 

  2. Assured Guaranty’s favorable court ruling in its put-back litigation against Flagstar Bank, awarding it the vast majority of the claims paid on the relevant transactions plus interest, fees and expenses, as well as their subsequent settlement with Flagstar Bank, which resolved Assured Guaranty’s put-back claims; and

 

  3. the court rulings in MBIA Corp.’s put-back litigations.

 

15


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

MBIA Corp. continues to consider all relevant facts and circumstances, including the factors described above, in developing its assumptions on expected cash inflows, probability of potential recoveries (including the outcome of litigation) and recovery period. The estimated amount and likelihood of potential recoveries are expected to be revised and supplemented to the extent there are developments in the pending litigation and/or changes to the financial condition of Credit Suisse. While MBIA Corp. believes it will be successful in realizing recoveries from contractual claims, the ultimate amounts recovered may be materially different from those recorded by MBIA Corp. given the inherent uncertainty of the manner of resolving the claims (e.g., litigation) and the assumptions used in the required estimation process for accounting purposes which are based, in part, on judgments and other information that are not easily corroborated by historical data or other relevant benchmarks.

All of MBIA Corp.’s policies insuring second-lien RMBS for which litigation has been initiated against sellers/servicers are in the form of financial guarantee insurance contracts. In accordance with GAAP, MBIA Corp. has not recorded a gain contingency with respect to pending litigation.

Excess Spread

As of September 30, 2013, MBIA Corp. recorded estimated recoveries of $756 million in reimbursement of past and future expected claims through excess spread in insured second-lien RMBS transactions. Of the expected reimbursement from excess spread, $669 million is included in “Insurance loss recoverable” and $87 million is included in “Loss and loss adjustment expense reserves” on MBIA Corp.’s consolidated balance sheets. Excess spread is generated by performing loans within insured RMBS securitizations and is the difference between interest inflows on mortgage loan collateral and interest outflows on insured beneficial interests. The amount of excess spread depends on the future delinquency and loss trends, future prime and LIBOR interest rates and borrower refinancing behavior, which results in voluntary prepayments.

First-lien RMBS Reserves

MBIA Corp.’s first-lien RMBS case basis reserves as of September 30, 2013, which primarily relate to RMBS backed by Alt-A and subprime mortgage loans, were determined using the Roll Rate Methodology. MBIA Corp. assumes that the Roll Rate for loans in foreclosure, REO and bankruptcy are 90%, 90% and 75%, respectively. Roll Rates for current, 30-59 day delinquent loans, 60-89 day delinquent loans and 90+ day delinquent loans are calculated on a transaction-specific basis. The Current Roll to Loss rates stay at the August 31, 2013 level for one month before declining to 25% of this level over a 24-month period.

MBIA Corp. estimates future losses by utilizing three different probability-weighted scenarios: base; stress; and additional stress. The three scenarios differ in the roll rates to loss of 90+ day delinquent loans. In the base scenario, MBIA Corp. uses deal-specific roll rates obtained from historic loan level roll rate data. In the stress scenario, MBIA Corp. assumes a 90% roll rate for all 90+ day delinquent loans. In the additional stress scenario, the roll rates for each deal are an average of the deal-specific roll rate used in the base scenario and the 90% rate. The Roll Rates are applied to the amounts in each deal’s respective 90+ delinquency bucket based on delinquencies as of August 31, 2013 in order to estimate future losses from loans that are delinquent as of September 30, 2013.

In calculating ultimate cumulative losses for first-lien RMBS, MBIA Corp. estimates the amount of loans that are expected to be liquidated through foreclosure or short sale. The time to liquidation for a defaulted loan is specific to the loan’s delinquency bucket with the latest three-month average loss severities generally used to start the projection for trends in loss severities at loan liquidation. The loss severities are reduced over time to account for reduction in the amount of foreclosure inventory, anticipated future increases in home prices, principal amortization of the loan and government foreclosure moratoriums.

ABS CDOs (Financial Guarantees and Insured Derivatives)

MBIA Corp.’s insured ABS CDOs are transactions that include a variety of collateral ranging from corporate bonds to structured finance assets (which includes but are not limited to RMBS related collateral, ABS CDOs, corporate CDOs and collateralized loan obligations). These transactions were insured as either financial guarantee insurance policies or credit derivatives with the majority currently insured in the form of financial guarantees. Since the fourth quarter of 2007, MBIA Corp.’s insured par exposure within the ABS CDO portfolio has been substantially reduced through a combination of terminations and commutations. Accordingly, as of September 30, 2013, the insured par exposure of the ABS CDO financial guarantee insurance policies and credit derivatives portfolio has declined by approximately 96% of the insured amount as of December 31, 2007.

 

16


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

MBIA Corp.’s ABS CDOs originally benefited from two sources of credit enhancement. First, the subordination in the underlying securities collateralizing the transaction must be fully eroded and second, the subordination below the insured tranche in the CDO transaction must be fully eroded before the insured tranche is subject to a claim. MBIA Corp.’s payment obligations after a default are timely interest and ultimate principal.

The primary factor in estimating reserves on insured ABS CDO policies written as financial guarantee insurance policies and in estimating impairments on insured ABS CDO credit derivatives is the losses associated with the underlying collateral in the transactions. MBIA Corp.’s approach to establishing reserves or impairments in this portfolio employs a methodology which is similar to other structured finance asset classes insured by MBIA Corp. MBIA Corp. utilizes up to a total of four probability-weighted scenarios in order to estimate its reserves or impairments for ABS CDOs.

As of September 30, 2013, MBIA Corp. established loss and LAE reserves totaling $87 million related to ABS CDO financial guarantee insurance policies after the elimination of $196 million as a result of consolidating VIEs. For the nine months ended September 30, 2013, MBIA Corp. had a benefit of $47 million of losses and LAE recorded in earnings related to ABS CDO financial guarantee insurance policies after the elimination of a $39 million benefit as a result of consolidating VIEs. In the event of further deteriorating performance of the collateral referenced or held in ABS CDO transactions, the amount of losses estimated by MBIA Corp. could increase substantially.

Credit Impairments Related to Structured CMBS Pools, CRE CDOs and CRE Loan Pools (Financial Guarantees and Insured Derivatives)

Most of the structured CMBS pools, CRE CDOs and CRE loan pools insured by MBIA Corp. are accounted for as insured credit derivatives and are carried at fair value in MBIA Corp.’s consolidated financial statements. Since MBIA Corp.’s insured credit derivatives have similar terms, conditions, risks, and economic profiles to its financial guarantee insurance policies, MBIA Corp. evaluates them for impairment in the same way that it estimates loss and LAE for its financial guarantee policies. The following discussion provides information about MBIA Corp.’s process for estimating credit impairments on these contracts using its statutory loss reserve methodology, determined as the present value of the probability-weighted potential future losses, net of estimated recoveries, across multiple scenarios, plus actual payments and collections.

MBIA Corp. has developed multiple scenarios to consider the range of potential outcomes in the CRE market and their impact on MBIA Corp. The approaches require substantial judgments about the future performance of the underlying loans, and include the following:

 

   

The first approach considers the range of commutation agreements achieved over the past several years with multiple counterparties and results in an estimated price to commute the remaining policies. It is customized by counterparty and is dependent upon the level of dialogue with the counterparty and the credit quality and payment profile of the underlying exposure.

 

   

The second approach considers current delinquency rates and uses current and projected net operating income (“NOI”) and capitalization rates (“Cap Rates”) to project losses under two scenarios. These scenarios assume that property performance remains flat for the near term and then improves gradually. Additionally, certain large loans are reviewed individually so that performance and loss severity can be more accurately determined. Other loans are reviewed for factors that may mitigate potential performance. This approach utilizes two scenarios which vary in the levels of expected future defaults.

 

   

The last approach is based on a proprietary model developed by reviewing performance data on over 80,000 securitized CRE loans originated between 1992 and 2011. The time period covered during the performance review includes the years 2006 through 2011 because they encompass a period of extreme stress in the economy and the CRE markets. MBIA Corp. found property type and the debt service coverage ratio to be the most significant determinants of a loan’s average annual default probability, and developed a model based on these factors. MBIA Corp. then ran Monte Carlo simulations to estimate the timing of defaults and losses at the property level by applying property type-based Cap Rates to estimate the property’s NOI.

 

17


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The loss severities projected by these scenarios vary widely, from moderate to substantial losses. Actual losses will be a function of the proportion of loans in the pools that are foreclosed and liquidated and the loss severities associated with those liquidations. If the deductibles in MBIA Corp.’s insured transactions and underlying referenced CMBS transactions are fully eroded, additional property level losses upon foreclosures and liquidations could result in substantial losses for MBIA Corp. Ultimate loss rates remain uncertain because many loans are still delinquent and have not yet been resolved, others have been modified and others do not mature for another three to four years at which time they will face the need to refinance. MBIA Corp. assigns a wide range of probabilities to these scenarios and incorporates views that liquidations will continue to be mitigated by loan extensions and modifications, and that property values and NOIs have bottomed for many sectors and markets in the U.S. The weightings are customized for each counterparty. If macroeconomic stress were to increase or the U.S. enters into a recession, higher delinquencies, liquidations and/or higher severities of loss upon liquidation may result and MBIA Corp. may incur substantial additional losses. The foreclosure and REO pipelines are still relatively robust, with several restructurings and liquidations yet to occur, so the range of possible outcomes is wider than those for MBIA Corp.’s exposures to ABS CDOs and second-lien RMBS. Prior to June 30, 2013, MBIA Corp. incorporated an additional approach based on recent Roll Rates experienced within each of the commercial mortgage-backed index series. This actuarial approach was eliminated as a result of more emphasis being placed on loan-specific scenarios.

In the CRE CDO portfolio, transaction-specific structures require certain reporting and management protocols and often require MBIA Corp. to incorporate these structural distinctions into its models. None of the CRE CDOs insured by MBIA Corp. allow for reinvesting at this time, and many of the senior bonds have begun to amortize.

For the nine months ended September 30, 2013, MBIA Corp. had a benefit of $28 million of losses and LAE recorded in earnings related to CRE CDO financial guarantee insurance policies. For the nine months ended September 30, 2013, additional credit impairments and LAE for insured derivatives on structured CMBS pools, CRE CDOs and CRE loan pools were estimated to be $487 million as a result of additional delinquencies and loan level liquidations, as well as continued refinements of MBIA Corp.’s assessment of various commutation possibilities. The cumulative credit impairments and LAE on structured CMBS pools, CRE CDOs and CRE loan pools were estimated to be $4.1 billion through September 30, 2013. Though the pace of increases in the delinquency rate has slowed, many loans are being modified and liquidations continue to take place. Loan level losses have ranged from 1% to 2%, to near complete losses, and in a few cases severities exceeded 100%. These liquidations have led to bond level losses which have reduced the level of enhancement to the individual CMBS bonds referenced by the insured structured CMBS pools and in certain cases have resulted in deductible erosion. Bond level enhancement and pool level deductibles are structural features intended to mitigate losses to MBIA Corp., however, some of the transactions reference similar rated subordinate tranches of CMBS bonds. When there are broad-based declines in property performance, this leverage can result in rapid deterioration in pool performance. Beginning in the second quarter of 2013, MBIA Corp. paid claims on a CMBS pool transaction that experienced deterioration such that all remaining deductible was eliminated.

Loss and LAE Activity

Financial Guarantee Insurance Losses (Non-Derivative)

MBIA Corp.’s financial guarantee insurance losses and LAE for the nine months ended September 30, 2013 are presented in the following table:

 

                                           
Losses and LAE    Nine Months Ended September 30, 2013  

In millions

   Second-lien
RMBS
     First-lien
RMBS
     Other     Total  

Losses and LAE related to actual and expected payments

   $ 85       $ 12       $ 97       $ 194   

Recoveries of actual and expected payments

     (177)         (11)         80         (108)   
  

 

 

    

 

 

    

 

 

   

 

 

 

Gross losses incurred

     (92)                177         86   

Reinsurance

                   (99)        (99)   
  

 

 

    

 

 

    

 

 

   

 

 

 

Losses and LAE

   $ (92)       $      $ 78 ( 1)     $ (13)   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) - Includes ABS CDOs, CMBS and other issues.

 

18


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The losses and LAE related to actual and expected payments in the preceding table includes $97 million in other exposures primarily related to U.S. public finance transactions which MBIA Corp. cedes to National. The second-lien RMBS losses and LAE related to actual and expected payments comprise net increases of previously established reserves. The recoveries of actual and expected payments were primarily related to second-lien RMBS recoveries of $177 million, including $316 million in recoveries primarily resulting from ineligible mortgage loans included in insured exposures that are subject to contractual obligations by sellers/servicers to repurchase or replace such mortgages, partially offset by a $139 million reduction in excess spread. Partially offsetting increases in second-lien RMBS recoveries of actual and expected payments were decreases of $80 million related to other issues primarily resulting from a reversal of recoveries related to high yield corporate CDOs.

The following table provides information about the financial guarantees and related claim liability included in each of MBIA Corp.’s surveillance categories as of September 30, 2013:

 

                                                      
     Surveillance Categories  

$ in millions

   Caution List
Low
     Caution List
Medium
     Caution List
High
     Classified
List
     Total  

Number of policies

     65         20                189         279   

Number of issues (1)

     28         15                133         180   

Remaining weighted average contract period (in years)

     10.0         5.3         8.4         9.6         9.4   

Gross insured contractual payments outstanding: (2)

              

Principal

   $ 4,528       $ 1,099       $ 44       $ 8,242       $ 13,913   

Interest

     3,211         279         18         4,755         8,263   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 7,739       $ 1,378       $ 62       $ 12,997       $ 22,176   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross claim liability

   $      $      $      $ 1,465       $ 1,465   

Less:

              

Gross potential recoveries

                          1,231         1,231   

Discount, net

                          278         278   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net claim liability (recoverable)

   $      $      $      $ (44)       $ (44)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unearned premium revenue

   $ 125       $ 20       $      $ 100       $ 245   

 

(1) - An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments.
(2) - Represents contractual principal and interest payments due by the issuer of the obligations insured by MBIA Corp.

The following table provides information about the financial guarantees and related claim liability included in each of MBIA Corp.’s surveillance categories as of December 31, 2012:

 

                                                      
     Surveillance Categories  

$ in millions

   Caution List
Low
     Caution List
Medium
     Caution List
High
     Classified
List
     Total  

Number of policies

     49         25                204         286   

Number of issues (1)

     27         15                135         185   

Remaining weighted average contract period (in years)

     8.2         4.0         6.0         9.5         8.6   

Gross insured contractual payments outstanding: (2)

              

Principal

   $ 4,126       $ 1,176       $ 307       $ 9,412       $ 15,021   

Interest

     2,690         256         69         5,231         8,246   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 6,816       $ 1,432       $ 376       $ 14,643       $ 23,267   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Gross claim liability

   $      $      $      $ 1,569       $ 1,569   

Less:

              

Gross potential recoveries

                          4,090         4,090   

Discount, net

                          233         233   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net claim liability (recoverable)

   $      $      $      $ (2,754)       $ (2,754)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unearned premium revenue

   $ 142       $ 11       $      $ 121       $ 276   

 

(1) - An “issue” represents the aggregate of financial guarantee policies that share the same revenue source for purposes of making debt service payments.
(2) - Represents contractual principal and interest payments due by the issuer of the obligations insured by MBIA Corp.

 

19


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The gross claim liability as of September 30, 2013 and December 31, 2012 in the preceding tables represents MBIA Corp.’s estimate of undiscounted probability-weighted future claim payments, which principally relate to insured first and second-lien RMBS transactions and U.S. public finance transactions. The gross potential recoveries represent MBIA Corp.’s estimate of undiscounted probability-weighted recoveries of actual claim payments and recoveries of estimated future claim payments, and principally relate to insured second-lien RMBS transactions and U.S. public finance transactions. MBIA Corp.’s recoveries have been, and remain based on either salvage rights, the rights conferred to MBIA Corp. through the transactional documents (inclusive of the insurance agreement), or subrogation rights embedded within financial guarantee insurance policies. Expected salvage and subrogation recoveries, as well as recoveries from other remediation efforts, reduce MBIA Corp.’s claim liability. Once a claim payment has been made, the claim liability has been satisfied and MBIA Corp.’s right to recovery is no longer considered an offset to future expected claim payments, it is recorded as a salvage asset. The amount of recoveries recorded by MBIA Corp. is limited to paid claims plus the present value of projected future claim payments. As claim payments are made, the recorded amount of potential recoveries may exceed the remaining amount of the claim liability for a given policy. The gross claim liability and gross potential recoveries reflect the elimination of claim liabilities and potential recoveries related to VIEs consolidated by MBIA Corp.

The following table presents the components of MBIA Corp.’s loss and LAE reserves and insurance loss recoverable as reported on MBIA Corp.’s consolidated balance sheets as of September 30, 2013 and December 31, 2012 for insured obligations within MBIA Corp.’s “Classified List.” The loss reserves (claim liability) and insurance claim loss recoverable included in the following table represent the present value of the probability-weighted future claim payments and recoveries reported in the preceding tables.

 

                     

In millions

   As of September 30,
2013
     As of December 31,
2012
 

Loss reserves (claim liability)

   $ 625       $ 786   

LAE reserves

     50         60   
  

 

 

    

 

 

 

Loss and LAE reserves

   $ 675       $ 846   
  

 

 

    

 

 

 

Insurance claim loss recoverable

   $ (737)       $ (3,610)   

LAE insurance loss recoverable

     (5)         (38)   
  

 

 

    

 

 

 

Insurance loss recoverable

   $ (742)       $ (3,648)   
  

 

 

    

 

 

 

Reinsurance recoverable on unpaid losses

   $ 63       $ 152   

Reinsurance recoverable on LAE reserves

     25          

Reinsurance recoverable on paid losses

             
  

 

 

    

 

 

 

Reinsurance recoverable on paid and unpaid losses

   $ 88       $ 159   
  

 

 

    

 

 

 

As of September 30, 2013, loss and LAE reserves include $985 million of reserves for expected future payments offset by expected recoveries of such future payments of $310 million. As of December 31, 2012, loss and LAE reserves included $1.2 billion of reserves for expected future payments offset by expected recoveries of such future payments of $320 million. As of September 30, 2013, the insurance loss recoverable principally related to expected future recoveries on second-lien RMBS transactions resulting from expected excess spread generated by performing loans in such transactions. As of December 31, 2012, the insurance loss recoverable principally related to estimated recoveries of payments made by MBIA Corp. resulting from ineligible mortgage loans in certain insured second-lien residential mortgage loan securitizations that are subject to a contractual obligation by the sellers/servicers to repurchase or replace the ineligible mortgage loans and expected future recoveries on second-lien RMBS transactions resulting from expected excess spread generated by performing loans in such transactions.

To date, as a result of the Bank of America and Flagstar Bank settlements, as well as the agreement between Consenting Claimants, ResCap and Ally, in the ResCap bankruptcy proceeding discussed above, MBIA Corp. expects to be reimbursed for the majority of its potential recoveries related to ineligible mortgage loans by the end of 2013 or early 2014, which are primarily included in “Loan repurchase commitments” presented under the heading “Assets of consolidated variable interest entities” on MBIA Corp.’s consolidated balance sheets.

For the nine months ended September 30, 2013, MBIA Corp. collected approximately $2.8 billion, net of reinsurance, primarily related to insured second-lien RMBS transactions. MBIA Corp. made payments of $238 million, of which $166 million related to insured second-lien RMBS transactions.

For the nine months ended September 30, 2013, the decrease in insurance loss recoverable related to paid losses totaled $2.9 billion, and primarily resulted from the collections of previously established recoveries related to the settlement with Bank of America on the ineligible mortgage loans related to insured second-lien RMBS transactions.

 

20


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The following table presents the amounts of MBIA Corp.’s second-lien RMBS exposure, gross undiscounted claim liability and potential recoveries related to non-consolidated VIEs and consolidated VIEs, included in MBIA Corp.’s “Classified List,” as of September 30, 2013.

 

                                                      
Second-lien RMBS Exposure           Outstanding      Gross Undiscounted  

$ in billions

   Issues      Gross
Principal
     Gross
Interest
     Claim
Liability
     Potential
Recoveries
 

Non-consolidated VIEs

     23       $ 3.6       $ 1.3       $ 0.2       $ 0.9   

Consolidated VIEs

     11       $ 1.8       $ 0.7       $ 0.1       $ 1.4   

The following table presents changes in MBIA Corp.’s loss and LAE reserves for the nine months ended September 30, 2013. Changes in the loss and LAE reserves attributable to the accretion of the claim liability discount, changes in discount rates, changes in the timing and amounts of estimated payments and recoveries, changes in assumptions and changes in LAE reserves are recorded in “Losses and loss adjustment” expenses in MBIA Corp.’s consolidated statements of operations. As of September 30, 2013, the weighted average risk-free rate used to discount MBIA Corp.’s loss reserves (claim liability) was 2.10%. LAE reserves are expected to be settled within a one-year period and are not discounted.

 

                                                                                       
In millions      Changes in Loss and LAE Reserves for the Nine Months  Ended September 30, 2013         

Gross Loss and

LAE Reserves

as of December 31,

2012

    

Loss
Payments
for Cases

with
Reserves

    

Accretion
of Claim
Liability
Discount

    

Changes in
Discount
Rates

    

Changes in
Assumptions

    

Changes in
Unearned
Premium
Revenue

    

Changes
in LAE
Reserves

    

Other (1)

    

Gross Loss and
LAE Reserves
as of September 30,
2013

 
$ 846       $ (292)       $ 10       $ (71)       $ 109       $      $ (10)       $ 81       $ 675   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) - Primarily changes in amount and timing of payments.

The decrease in MBIA Corp.’s gross loss and LAE reserves reflected in the preceding table was primarily due to a decrease in reserves related to loss payments on insured first and second-lien RMBS securitizations and U.S. public finance issues, partially offset by changes in assumptions.

Current period changes in MBIA Corp.’s estimate of potential recoveries may be recorded as an insurance loss recoverable asset, netted against the gross loss and LAE reserve liability, or both. The following table presents changes in MBIA Corp.’s insurance loss recoverable and changes in recoveries on unpaid losses reported within MBIA Corp.’s claim liability for the nine months ended September 30, 2013. Changes in insurance loss recoverable attributable to the accretion of the discount on the recoverable, changes in discount rates, changes in the timing and amounts of estimated collections, changes in assumptions and changes in LAE recoveries are recorded in “Losses and loss adjustment” expenses on MBIA Corp.’s consolidated statements of operations.

 

                                                                                       
          Changes in Insurance Loss Recoverable and Recoveries on Unpaid Losses for the        
          Nine Months Ended September 30, 2013        

In millions

  Gross
Reserve as of
December  31,

2012
    Collections
for Cases
with
Recoveries
    Accretion of
Recoveries
    Changes in
Discount
Rates
    Changes in
Assumptions
    Changes in
LAE
Recoveries
    Other (1)     Gross
Reserve as of
September  30,
2013
 

Insurance loss recoverable

  $ 3,648      $ (2,981)      $ 16      $ (25)      $ 129      $ (33)      $ (12)      $ 742   

Recoveries on unpaid losses

    320                    (25)                    —         310   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 3,968      $ (2,981)      $ 20      $ (50)      $ 138      $ (31)      $ (12)      $ 1,052   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Primarily changes in amount and timing of collections.

MBIA Corp.’s insurance loss recoverable decreased during 2013 primarily due to recoveries associated with issues outstanding as of December 31, 2012, which related to the settlement with Bank of America on the ineligible mortgage loans included in insured second-lien residential mortgage securitization exposures that are subject to contractual obligations by sellers/servicers to repurchase or replace such mortgages. Recoveries on unpaid losses decreased primarily due to changes in discount rates, partially offset by changes in assumptions.

 

21


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 5: Loss and Loss Adjustment Expense Reserves (continued)

 

The following table presents MBIA Corp.’s total estimated recoveries from ineligible mortgage loans included in certain insured second-lien mortgage loan securitizations as of September 30, 2013. The total estimated recoveries from ineligible mortgage loans of $1.1 billion include $18 million recorded as “Insurance loss recoverable” and $1.1 billion recorded as “Loan repurchase commitments” presented under the heading “Assets of consolidated variable interest entities” on MBIA Corp.’s consolidated balance sheets.

 

                                                                 
In millions                                            

Total Estimated

Recoveries from

Ineligible Mortgage

Loans as of

December 31,

2012

    

Accretion of
Future
Collections

    

Changes in
Discount Rates

    

Recoveries
(Collections)

    

Changes in
Assumptions

    

Other (1)

    

Total Estimated
Recoveries from
Ineligible Mortgage
Loans as of
September 30,
2013

 
$ 3,583       $ 20       $ (7)       $ (2,897)       $ 433       $      $ 1,133   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Primarily changes in amount and timing of collections.

The decrease in MBIA Corp.’s total estimated recoveries from ineligible mortgage loans in the preceding table primarily resulted from the collections of previously established recoveries related to the settlement with Bank of America and Flagstar Bank on the ineligible mortgage loans related to insured second-lien RMBS securitizations.

Remediation actions may involve, among other things, waivers or renegotiations of financial covenants or triggers, waivers of contractual provisions, the granting of consents, transfer of servicing, consideration of restructuring plans, acceleration, security or collateral enforcement, actions in bankruptcy or receivership, litigation and similar actions. The types of remedial actions pursued are based on the insured obligation’s risk type and the nature and scope of the event giving rise to the remediation. As part of any such remedial actions, MBIA Corp. seeks to improve its security position and to obtain concessions from the issuer of the insured obligation. From time to time, the issuer of an MBIA Corp.-insured obligation may, with the consent of MBIA Corp., restructure the insured obligation by extending the term, increasing or decreasing the par amount or decreasing the related interest rate, with MBIA Corp. insuring the restructured obligation.

Costs associated with remediating insured obligations assigned to MBIA Corp.’s “Caution List—Low,” “Caution List—Medium,” “Caution List—High” and “Classified List” are recorded as LAE. LAE is primarily recorded as part of MBIA Corp.’s provision for its loss reserves and included in “Losses and loss adjustment” expenses on MBIA Corp.’s consolidated statements of operations. The following table presents the gross expenses related to remedial actions for insured obligations:

 

                     
     Nine Months Ended September 30,  

In millions

   2013      2012  

Loss adjustment expense incurred, gross

   $ 31       $ 108   

Note 6: Fair Value of Financial Instruments

Fair Value Measurement

Fair value is a market-based measure considered from the perspective of a market participant. Therefore, even when market assumptions are not readily available, MBIA Corp.’s own assumptions are set to reflect those which it believes market participants would use in pricing an asset or liability at the measurement date. The fair value measurements of financial instruments held or issued by MBIA Corp. are determined through the use of observable market data when available. Market data is obtained from a variety of third-party sources, including dealer quotes. If dealer quotes are not available for an instrument that is infrequently traded, MBIA Corp. uses alternate valuation methods, including either dealer quotes for similar instruments or modeling using market data inputs. The use of alternate valuation methods generally requires considerable judgment in the application of estimates and assumptions, and changes to such estimates and assumptions may produce materially different fair values.

 

22


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The accounting guidance for fair value measurement establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available and reliable. Observable inputs are those MBIA Corp. believes that market participants would use in pricing an asset or liability based on available market data. Unobservable inputs are those that reflect MBIA Corp.’s beliefs about the assumptions market participants would use in pricing an asset or liability based on the best information available. The fair value hierarchy is broken down into three levels based on the observability and reliability of inputs, as follows:

 

   

Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that MBIA Corp. can access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail any degree of judgment.

 

   

Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. Level 2 assets include debt securities with quoted prices that are traded less frequently than exchange-traded instruments, securities which are priced using observable inputs and derivative contracts whose values are determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

 

   

Level 3—Valuations based on inputs that are unobservable and supported by little or no market activity and that are significant to the overall fair value measurement. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques where significant inputs are unobservable, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The availability of observable inputs can vary from product to product and period to period and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new and not yet established in the marketplace, and other characteristics particular to the product. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, MBIA Corp. assigns the level in the fair value hierarchy for which the fair value measurement in its entirety falls, based on the least observable input that is significant to the fair value measurement.

Financial Assets (excluding derivative assets)

Financial assets, excluding derivative assets, held by MBIA Corp. primarily consist of investments in debt securities. Substantially all of MBIA Corp.’s investments are priced by independent third parties, including pricing services and brokers. Typically MBIA Corp. receives one pricing service value or broker quote for each instrument, which represents a non-binding indication of value. MBIA Corp. reviews the assumptions, inputs and methodologies used by pricing services to obtain reasonable assurance that the prices used in its valuations reflect fair value. When MBIA Corp. believes a third-party quotation differs significantly from its internally developed expectation of fair value, whether higher or lower, MBIA Corp. reviews its data or assumptions with the provider. This review includes comparing significant assumptions such as prepayment speeds, default ratios, forward yield curves, credit spreads and other significant quantitative inputs to internal assumptions, and working with the price provider to reconcile the differences. The price provider may subsequently provide an updated price. In the event that the price provider does not update its price, and MBIA Corp. still does not agree with the price provided, MBIA Corp. will try to obtain a price from another third-party provider, such as a broker, or use an internally developed price which it believes represents the fair value of the investment. The fair values of investments for which internal prices were used were not significant to the aggregate fair value of MBIA Corp.’s investment portfolio as of September 30, 2013 or December 31, 2012. All challenges to third-party prices are reviewed by staff of MBIA Corp. with relevant expertise to ensure reasonableness of assumptions.

In addition to challenging pricing assumptions, MBIA Corp. obtains reports from the independent accountants for significant third-party pricing services attesting to the effectiveness of the controls over data provided to MBIA Corp. These reports are obtained annually and are reviewed by MBIA Corp. to ensure key controls are applied by the pricing services, and that appropriate user controls are in place at the third-party pricing services organization to ensure proper measurement of the fair values of its investments. In the event that any controls in these reports are deemed ineffective by independent accountants, MBIA Corp. will take the necessary actions to ensure that internal user controls are in place to mitigate the control risks. No deficiencies were noted for significant third-party pricing services used.

Derivative Assets and Liabilities

MBIA Corp.’s derivative liabilities are primarily insured credit derivatives that reference structured pools of cash securities and CDSs. MBIA Corp. generally insured the most senior liabilities of such transactions, and at the inception of transactions its exposure generally had more subordination than needed to achieve triple-A ratings from credit rating agencies. The types of collateral underlying its insured derivatives consist of cash securities and CDSs referencing primarily corporate, asset-backed, residential mortgage-backed, commercial mortgage-backed, CRE loans, and CDO securities.

 

23


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

MBIA Corp.’s insured credit derivative contracts are non-traded structured credit derivative transactions. Since insured derivatives are highly customized and there is generally no observable market for these derivatives, MBIA Corp. estimates their fair values in a hypothetical market based on internal and third-party models simulating what a similar company would charge to assume MBIA Corp.’s position in the transaction at the measurement date. This pricing would be based on the expected loss of the exposure. MBIA Corp. reviews its valuation model results on a quarterly basis to assess the appropriateness of the assumptions and results in light of current market activity and conditions. This review is performed by internal staff with relevant expertise. If live market spreads or securities prices are observable for similar transactions, those spreads are an integral part of the analysis. New insured transactions that resemble existing (previously insured) transactions, if any, would be considered, as well as negotiated settlements of existing transactions.

MBIA Corp. may from time to time make changes in its valuation techniques if the change results in a measurement that it believes is equally or more representative of fair value under current circumstances.

Internal Review Process

All significant financial assets and liabilities, including derivative assets and liabilities, are reviewed by committees created by MBIA Corp. to ensure compliance with MBIA Corp. policies and risk procedures in the development of fair values of financial assets and liabilities. These valuation committees review, among other things, key assumptions used for internally developed prices, significant changes in sources and uses of inputs, including changes in model approaches, and any adjustments from third-party inputs or prices to internally developed inputs or prices. The committees also review any significant impairment or improvements in fair values of the financial instruments from prior periods. From time to time, these committees will reach out to MBIA Corp. valuation experts to better understand key methods and assumptions used for the determination of fair value, including understanding significant changes in fair values. These committees are comprised of senior finance team members with the relevant experience in the financial instruments their committee is responsible for. Each quarter, these committees document their agreement with the fair values developed by management of MBIA Corp. as reported in the quarterly and annual financial statements.

Valuation Techniques

Valuation techniques for financial instruments measured at fair value or disclosed at fair value are described below:

Fixed-Maturity Securities (and Short-Term Investments) Held as Available-For-Sale, Investments (including fixed-maturity securities) Carried at Fair Value, Other Investments, and Investments Held-to-Maturity, at Amortized Cost.

Fixed-maturity securities (and short-term investments) held as available-for-sale (“AFS”), investments carried at fair value, other investments, and investments held-to-maturity (“HTM”), at amortized cost include investments in U.S. Treasury and government agencies, foreign governments, corporate obligations, mortgage-backed and asset-backed securities (including CMBS and CDOs), state and municipal bonds, perpetual debt and equity securities (including money market mutual funds), and loans receivable with an affiliate.

These investments are generally valued based on recently executed transaction prices or quoted market prices. When quoted market prices are not available, fair value is generally determined using quoted prices of similar investments or a valuation model based on observable and unobservable inputs. Inputs vary depending on the type of investment. Observable inputs include contractual cash flows, interest rate yield curves, CDS spreads, prepayment and volatility scores, diversity scores, cross-currency basis index spreads, and credit spreads for structures similar to the financial instrument in terms of issuer, maturity and seniority. Unobservable inputs include cash flow projections and the value of any credit enhancement.

The fair value of the HTM investments is determined using discounted cash flow models. Key inputs include unobservable cash flows projected over the expected term of the investment discounted using observable interest rate yield curves of similar securities.

Investments based on quoted market prices of identical investments in active markets are classified as Level 1 of the fair value hierarchy. Level 1 investments generally consist of U.S. Treasury and foreign government and agency investments. Quoted market prices of investments in less active markets, as well as investments which are valued based on other than quoted prices for which the inputs are observable, such as interest rate yield curves, are categorized in Level 2 of the fair value hierarchy. Investments that contain significant inputs that are not observable are categorized as Level 3.

Cash and Cash Equivalents, Accrued Investment Income, Secured Loan and Payable for Investments Purchased

The carrying amounts of cash and cash equivalents, accrued investment income, secured loan and payable for investments purchased approximate fair values due to the short-term nature and credit worthiness of these instruments.

 

24


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Loans Receivable at Fair Value

Loans receivable at fair value are comprised of loans held by consolidated VIEs consisting of residential mortgage loans, commercial mortgage loans and other whole business loans. Fair values of residential mortgage loans are determined using quoted prices for mortgage-backed securities (“MBS”) issued by the respective VIE and adjustments for the fair values of the financial guarantees provided by MBIA Corp. on the related MBS. Fair values of commercial mortgage loans and other whole business loans are valued based on quoted prices of similar collateralized MBS. Loans receivable at fair value are categorized in Level 3 of the fair value hierarchy.

Loan Repurchase Commitments

Loan repurchase commitments are obligations owed by the sellers/servicers of mortgage loans to either MBIA Corp. as reimbursement of paid claims or to the RMBS trusts as defined in the transaction documents. Loan repurchase commitments are assets of the consolidated VIEs. This asset represents the rights of MBIA Corp. against the sellers/servicers for breaches of representations and warranties that the securitized residential mortgage loans sold to the trust to comply with stated underwriting guidelines and for the sellers/servicers to cure, replace, or repurchase mortgage loans. Fair value measurements of loan repurchase commitments represent the amounts owed by the sellers/servicers to MBIA Corp. as reimbursement of paid claims. Loan repurchase commitments are not securities and no quoted prices or comparable market transaction information are observable or available. Loan repurchase commitments at fair value are categorized in Level 3 of the fair value hierarchy. Fair values of loan repurchase commitments are determined using discounted cash flow techniques based on inputs including:

 

   

breach rates representing the rate at which the sellers/servicers failed to comply with stated representations and warranties;

 

   

recovery rates representing the estimates of future cash flows for the asset, including estimates about possible variations in the amount of cash flows expected to be collected;

 

   

expectations about possible variations in the timing of collections of the cash flows; and

 

   

time value of money, represented by the rate on risk-free monetary assets.

Variable Interest Entity Notes

The fair values of VIE notes are determined based on recently executed transaction prices or quoted prices where observable. When position-specific quoted prices are not observable, fair values are based on quoted prices of similar securities. Fair values based on quoted prices of similar securities may be adjusted for factors unique to the securities, including any credit enhancement. When observable quoted prices are not available, fair value is determined based on discounted cash flow techniques of the underlying collateral using observable and unobservable inputs. Observable inputs include interest rate yield curves and bond spreads of similar securities. Unobservable inputs include the value of any credit enhancement. VIE notes are categorized in Level 2 or Level 3 of the fair value hierarchy based on the lowest level input that is significant to the fair value measurement in its entirety.

Variable Interest Entity Derivatives

The VIE’s have entered into derivative transactions primarily consisting of interest rate swaps, cross currency swaps, and interest rate caps. Fair values of over-the-counter derivatives are determined using valuation models based on observable inputs. These observable and market-based inputs include interest rate and volatilities. These derivatives are categorized in Level 2 or Level 3 of the fair value hierarchy based on the input that is significant to the fair value measurement in its entirety.

Long-term Debt

Long-term debt consists of surplus notes and related accrued interest. As of December 31, 2012, there was a secured loan from an affiliate which was repaid in the second quarter of 2013. The fair value of the surplus notes is estimated based on quoted market prices for identical or similar securities. The fair value of the secured loan was determined as the net present value of expected cash flows from the loan. The discount rate is the yield to maturity of a comparable corporate bond index. The fair value of the accrued interest expense on the surplus notes is determined based on the scheduled interest payments discounted by the market’s perception of the credit risk related to the repayment of the surplus notes. The credit risk related to the repayment of the surplus notes is based on recent trades of the surplus notes. The deferred interest payment will be due on the first business day on or after which MBIA Corp. obtains approval to make such payment.

The carrying amounts of accrued interest expense on all other long-term debt approximate fair value due to the short-term nature of these instruments. Long-term debt is categorized as Level 2 of the fair value hierarchy.

 

25


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Insured Credit Derivatives

MBIA Corp. derivative contracts primarily consist of insured credit derivatives which cannot be legally traded and generally do not have observable market prices. MBIA Corp. determines the fair values of insured credit derivatives using valuation models. The fair valuation models are consistently applied from period to period, with refinements to the fair value estimation approach being applied as and when the information becomes available. Negotiated settlements are also considered when determining fair value to provide the best estimate of how another market participant would evaluate fair value.

Approximately 98% of the balance sheet fair value of insured credit derivatives as of September 30, 2013 was valued based on the Binomial Expansion Technique (“BET”) Model. Approximately 2% of the balance sheet fair value of insured credit derivatives as of September 30, 2013 was valued based on the internally developed Direct Price Model and a dual-default model. The valuation of insured derivatives includes the impact of its credit standing. All of these derivatives are categorized as Level 3 of the fair value hierarchy as their fair value is derived using significant unobservable inputs.

Description of the BET Model

1. Valuation Model Overview

The BET Model estimates what a bond insurer would charge to guarantee a transaction at the measurement date, based on the market-implied default risk of the underlying collateral and the remaining structural protection in a deductible or subordination.

Inputs to the process of determining fair value for structured transactions using the BET Model include estimates of collateral loss, allocation of loss to separate tranches of the capital structure and calculation of the change in value.

 

   

Estimates of aggregated collateral losses are calculated by reference to the following (described in further detail under “BET Model Inputs” below):

 

   

credit spreads of underlying collateral based on actual spreads or spreads on similar collateral with similar ratings, or in some cases, are benchmarked; for collateral pools where the spread distribution is characterized by extremes, MBIA Corp. models each segment of the pool separately instead of using an overall pool average;

 

   

diversity score of the collateral pool as an indication of correlation of collateral defaults; and

 

   

recovery rate for all defaulted collateral.

 

   

Allocation of losses to separate tranches of the capital structure according to priority of payments in a transaction.

 

   

The inception-to-date unrealized gain or loss on a transaction is the difference between the original price of the risk (the original market-implied expected loss) and the current price of the risk based on the assumed market-implied expected losses derived from the model.

Additional structural assumptions of the BET Model are:

 

   

Default probabilities are determined by three factors: credit spread, recovery rate after default and the time period under risk;

 

   

Frequencies of defaults are modeled evenly over time;

 

   

Collateral assets are generally considered on an average basis rather than being modeled on an individual basis; and

 

   

Collateral asset correlation is modeled using a diversity score, which is calculated based on industry or sector concentrations. Recovery rates are based on historical averages and updated based on market evidence.

2. BET Model Inputs

a. Credit spreads

The average spread of collateral is a key input as MBIA Corp. assumes credit spreads reflect the market’s assessment of default probability for each piece of collateral. Spreads are obtained from market data sources published by third parties (e.g., dealer spread tables for assets most closely resembling collateral within MBIA Corp.’s transactions) as well as collateral-specific spreads on the underlying reference obligations provided by trustees or market sources. Also, when these sources are not available, MBIA Corp. benchmarks spreads for collateral against market spreads or prices. This data is reviewed on an ongoing basis for reasonableness and applicability to MBIA Corp.’s derivative portfolio. MBIA Corp. also calculates spreads based on quoted prices and on internal assumptions about expected life when pricing information is available and spread information is not.

MBIA Corp. uses the spread hierarchy listed below in determining which source of spread information to use, with the rule being to use CDS spreads where available and cash security spreads as the next alternative.

 

26


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Spread Hierarchy:

 

   

Collateral-specific credit spreads when observable;

 

   

Sector-specific spread tables by asset class and rating;

 

   

Corporate spreads, including Bloomberg spread tables based on rating; and

 

   

Benchmark from most relevant market source when corporate spreads are not directly relevant.

There were some transactions where MBIA Corp. incorporated multiple levels within the hierarchy, including using actual collateral-specific credit spreads in combination with a calculated spread based on an assumed relationship. In those cases, MBIA Corp. classified the transaction as being benchmarked from the most relevant spread source even though the majority of the average spread was from actual collateral-specific spreads. As of September 30, 2013, sector-specific spreads were used in 8% of the transactions valued using the BET Model. Corporate spreads were used in 50% of the transactions and spreads benchmarked from the most relevant spread source were used for 42% of the transactions. The spread source can also be identified by whether or not it is based on collateral weighted average rating factor (“WARF”). No collateral-specific spreads are based on WARF. Sector-specific spreads, corporate spreads and some benchmarked spreads are based on WARF. WARF-sourced and/or ratings-sourced credit spreads were used for 76% of the transactions.

Over time, the data inputs change as new sources become available, existing sources are discontinued or are no longer considered to be reliable or the most appropriate. It is always MBIA Corp.’s objective to use more observable spread hierarchies defined above. However, MBIA Corp. may on occasion move to less observable spread inputs due to the discontinuation of data sources or due to MBIA Corp. considering certain spread inputs no longer representative of market spreads.

b. Diversity Scores

Diversity scores are a means of estimating the diversification in a portfolio. The diversity score estimates the number of uncorrelated assets that are assumed to have the same loss distribution as the actual portfolio of correlated assets. While diversity score is a required input into the BET model, due to current high levels of default within the collateral of the structures, diversity score does not have a significant impact on valuation.

c. Recovery Rate

The recovery rate represents the percentage of par expected to be recovered after an asset defaults, indicating the severity of a potential loss. MBIA Corp. generally uses rating agency recovery assumptions which may be adjusted to account for differences between the characteristics and performance of the collateral used by the rating agencies and the actual collateral in MBIA Corp.-insured transactions. MBIA Corp. may also adjust rating agency assumptions based on the performance of the collateral manager and on empirical market data.

d. Nonperformance Risk

MBIA Corp.’s valuation methodology for insured credit derivative liabilities incorporates MBIA Corp.’s own nonperformance risk. MBIA Corp. calculates the fair value by discounting the market value loss estimated through the BET Model at discount rates which include MBIA Corp.’s CDS spreads as of September 30, 2013. The CDS spreads assigned to each deal are based on the weighted average life of the deal. MBIA Corp. limits the nonperformance impact so that the derivative liability could not be lower than MBIA Corp.’s recovery derivative price multiplied by the unadjusted derivative liability.

Overall Model Results

As of September 30, 2013 and December 31, 2012, MBIA Corp.’s net insured derivative liability was $1.4 billion and $2.9 billion, respectively, and was primarily related to the fair values of insured credit derivatives based on the results of the aforementioned pricing models. In the current environment the most significant driver of changes in fair value is nonperformance risk. In aggregate, the nonperformance calculation resulted in a pre-tax net insured derivative liability that was $548 million and $4.4 billion lower than the net liability that would have been estimated if MBIA Corp. excluded nonperformance risk in its valuation as of September 30, 2013 and December 31, 2012, respectively. Nonperformance risk is a fair value concept and does not contradict MBIA Corp.’s internal view, based on fundamental credit analysis of MBIA Corp.’s economic condition, that MBIA Corp. will be able to pay all claims when due.

 

27


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Financial Guarantees

Gross Financial Guarantees —The fair value of gross financial guarantees is determined using discounted cash flow techniques based on inputs that include (i) assumptions of expected losses on financial guarantee policies where loss reserves have not been recognized, (ii) amount of losses expected on financial guarantee policies where loss reserves have been established, net of expected recoveries, (iii) the cost of capital reserves required to support the financial guarantee liability, (iv) operating expenses, and (v) discount rates. MBIA Corp.’s CDS spread and recovery rate are used as its discount rate.

The carrying value of MBIA Corp.’s gross financial guarantees consists of unearned premium revenue and loss and LAE reserves, net of the insurance loss recoverable as reported on MBIA Corp.’s consolidated balance sheets.

Ceded Financial Guarantees —The fair value of ceded financial guarantees is determined by applying the percentage ceded to reinsurers to the related fair value of the gross financial guarantees. The carrying value of ceded financial guarantees consists of prepaid reinsurance premiums and reinsurance recoverable on paid and unpaid losses as reported on MBIA Corp.’s consolidated balance sheets.

Significant Unobservable Inputs

The following tables provide quantitative information regarding the significant unobservable inputs used by MBIA Corp. for assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012. These tables exclude inputs used to measure fair value that are not developed by MBIA Corp., such as broker prices and other third-party pricing service valuations.

 

                                           

In millions

   Fair Value
as of
September 30,
2013
    

Valuation Techniques

  

Unobservable Input

  

Range
(Weighted
Average)

Assets of consolidated VIEs:

           

Loans receivable at fair value

   $ 1,704      Quoted market prices adjusted for financial guarantees provided to VIE obligations    Impact of financial guarantee    0% - 17% (4%)

Loan repurchase commitments

     1,116      Discounted cash flow    Recovery rates    0% - 98% (81%)

Liabilities of consolidated VIEs:

           

Variable interest entity notes

     753      Quoted market prices of VIE assets adjusted for financial guarantees provided    Impact of financial guarantee    0% - 27% (10%)

Credit derivative liabilities, net:

           

CMBS

     956      BET Model    Recovery rates    25% - 90% (60%)
         Nonperformance risk    12% - 57% (28%)
         Weighted average life (in years)    1.4 - 28.3 (3.5)
         CMBS spreads    1% - 27% (13%)

Multi-sector CDO

     16      Direct Price Model    Nonperformance risk    57% - 57% (57%)

Other

     391      BET Model    Recovery rates    42% - 70% (46%)
         Nonperformance risk    18% - 31% (27%)
         Weighted average life (in years)    0.2 - 3.8 (2.2)

 

28


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                           

In millions

   Fair Value
as of
December 31,
2012
    

Valuation Techniques

  

Unobservable Input

  

Range

(Weighted
Average)

Assets of consolidated VIEs:

           

Loans receivable at fair value

   $ 1,881      Quoted market prices adjusted for financial guarantees provided to VIE obligations    Impact of financial guarantee    0% - 14% (3%)

Loan repurchase commitments

     1,086      Discounted cash flow    Recovery rates    10% - 75% (47%)
         Breach rates    66% - 94% (78%)

Liabilities of consolidated VIEs:

           

Variable interest entity notes

     1,948      Quoted market prices of VIE assets adjusted for financial guarantees provided    Impact of financial guarantee    0% - 23% (6%)

Credit derivative liabilities, net:

           

CMBS

     1,590      BET Model    Recovery rates    21% - 90% (51%)
         Nonperformance risk    19% - 59% (58%)
         Weighted average life (in years)    0.1 - 5.6 (4.4)
         CMBS spreads    1% - 23% (13%)

Multi-sector CDO

     525      Direct Price Model    Nonperformance risk    59% - 59% (59%)

Other

     806      BET Model    Recovery rates    42% - 75% (47%)
         Nonperformance risk    42% - 59% (58%)
         Weighted average life (in years)    0.1 - 19.6 (3.0)

Sensitivity of Significant Unobservable Inputs

The significant unobservable input used in the fair value measurement of MBIA Corp.’s loans receivable at fair value of consolidated VIEs is the impact of the financial guarantee. The fair value of loans receivable is calculated by subtracting the value of the financial guarantee from the market value of VIE liabilities. The value of a financial guarantee is estimated by MBIA Corp. as the present value of expected cash payments under the policy. As expected cash payments provided by MBIA Corp. under the insurance policy increase, there is a lower expected cash flow on the underlying loans receivable of the VIE. This results in a lower fair value of the loans receivable in relation to the obligations of the VIE.

The significant unobservable inputs used in the fair value measurement of MBIA Corp.’s loan repurchase commitments of consolidated VIEs are recovery rates. Recovery rates reflect the estimates of future cash flows reduced for litigation delays and risks and/or potential financial distress of the sellers/servicers. The estimated recoveries of the loan repurchase commitments may differ from the actual recoveries that may be received in the future. Significant increases or decreases in the recovery rates would result in significantly higher or lower fair values of the loan repurchase commitments, respectively. Additionally, changes in the legal environment and the ability of the counterparties to pay would impact the recovery rate assumptions, which could significantly impact the fair value measurement.

The significant unobservable input used in the fair value measurement of MBIA Corp.’s variable interest entity notes of consolidated VIEs is the impact of the financial guarantee. The fair value of VIE notes is calculated by adding the value of the financial guarantee to the market value of VIE assets. The value of a financial guarantee is estimated by MBIA Corp. as the present value of expected cash payments under the policy. As the value of the guarantee provided by MBIA Corp. to the obligations issued by the VIE increases, the credit support adds value to the liabilities of the VIE. This results in an increase in the fair value of the liabilities of the VIE.

 

29


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The significant unobservable inputs used in the fair value measurement of MBIA Corp.’s CMBS credit derivatives, which are valued using the BET Model, are CMBS spreads, recovery rates, nonperformance risk and weighted average life. The CMBS spread is an indicator of credit risk of the collateral securities. The recovery rate represents the percentage of notional expected to be recovered after an asset defaults, indicating the severity of a potential loss. The nonperformance risk is an assumption of MBIA Corp.’s own ability to pay and whether MBIA Corp. will have the necessary resources to pay the obligations as they come due. Weighted average life is based on MBIA Corp.’s estimate of when the principal of the underlying collateral of the CMBS structure will be repaid. A significant increase or decrease in CMBS spreads can result in an increase or decrease in the fair value of the derivative liability, respectively. A significant increase in weighted average life can result in an increase or decrease in the fair value of the derivative liability, depending on the discount rate and the timing of significant losses. Any significant increase or decrease in recovery rates or MBIA Corp.’s nonperformance risk would result in a decrease or increase in the fair value of the derivative liabilities, respectively. CMBS spreads, recovery rates, nonperformance risk and weighted average lives are determined independently. Changes in one input will not necessarily have any impact on the other inputs.

The significant unobservable input used in the fair value measurement of MBIA Corp.’s multi-sector CDO credit derivatives, which are valued using the Direct Price Model, is nonperformance risk. The nonperformance risk is an assumption of MBIA Corp.’s own ability to pay and whether MBIA Corp. will have the necessary resources to pay the obligations as they come due. Any significant increase or decrease in MBIA Corp.’s nonperformance risk would result in a decrease or increase in the fair value of the derivative liabilities, respectively.

The significant unobservable inputs used in the fair value measurement of MBIA Corp.’s other credit derivatives, which are valued using the BET Model, are recovery rates, nonperformance risk and weighted average life. The recovery rate represents the percentage of notional expected to be recovered after an asset defaults, indicating the severity of a potential loss. The nonperformance risk is an assumption of MBIA Corp.’s own ability to pay and whether MBIA Corp. will have the necessary resources to pay the obligations as they come due. Weighted average life is based on MBIA Corp.’s estimate of when the principal of the underlying collateral will be repaid. A significant increase in weighted average life can result in an increase or decrease in the fair value of the derivative liability, depending on the discount rate and the timing of significant losses. Any significant increase or decrease in recovery rates or MBIA Corp.’s nonperformance risk would result in a decrease or increase in the fair value of the derivative liabilities, respectively. Recovery rates, nonperformance risk and weighted average lives are determined independently. Changes in one input will not necessarily have any impact on the other inputs.

 

30


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The following tables present the fair value of MBIA Corp.’s assets (including short-term investments) and liabilities measured and reported at fair value on a recurring basis as of September 30, 2013 and December 31, 2012:

 

                                           
     Fair Value Measurements at Reporting Date Using        

In millions

   Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
     Significant Other
Observable
Inputs
(Level 2)
     Significant
Unobservable

Inputs
(Level 3)
    Balance as of
September 30,
2013
 

Assets:

          

Fixed-maturity investments:

          

U.S. Treasury and government agency

   $ 86       $       $ -      $ 86   

State and municipal bonds

                    -         

Foreign governments

     87         91         5 (1)       183   

Corporate obligations

             203         -        203   

Mortgage-backed securities:

          

Residential mortgage-backed agency

                    -         

Residential mortgage-backed non-agency

                    -         
  

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed-maturity investments

     173         313         5        491   

Money market securities

     29                 -        29   

Perpetual debt and equity securities

                    5 (1)        

Cash and cash equivalents

     346                 -        346   

Derivative assets:

          

Credit derivatives

                    -         
  

 

 

    

 

 

    

 

 

   

 

 

 

Total derivative assets

                    -         

Assets of consolidated VIEs:

          

Cash

     46                 -        46   

Corporate obligations

             46         48 (1)       94   

Mortgage-backed securities:

          

Residential mortgage-backed non-agency

             255         4 (1)       259   

Commercial mortgage-backed

             103         2 (1)       105   

Asset-backed securities:

          

Collateralized debt obligations

             33         20 (1)       53   

Other asset-backed

             65         50 (1)       115   

Loans receivable

                     1,704        1,704   

Loan repurchase commitments

                     1,116        1,116   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 594       $ 822       $ 2,954      $ 4,370   
  

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities:

          

Derivative liabilities:

          

Credit derivatives

   $      $      $ 1,363      $ 1,370   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total derivative liabilities

                    1,363        1,370   

Liabilities of consolidated VIEs:

          

Variable interest entity notes

             1,758         753        2,511   

Derivative liabilities:

          

Currency rate derivatives

                     15 (1)       15   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total derivative liabilities

                     15        15   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

   $  -        $ 1,765       $ 2,131      $ 3,896   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) - Unobservable inputs are either not developed by MBIA Corp. or do not significantly impact the overall fair values of the aggregate financial assets and liabilities.

 

31


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                           
     Fair Value Measurements at Reporting Date Using        

In millions

   Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
     Significant Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
    Balance as of
December 31,
2012
 

Assets:

          

Fixed-maturity investments:

          

U.S. Treasury and government agency

   $ 353       $       $ -      $ 353   

State and municipal bonds

                    -         

Foreign governments

     86         106         3 (1)       195   

Corporate obligations

             261         -        261   

Mortgage-backed securities:

          

Residential mortgage-backed agency

                    -         

Residential mortgage-backed non-agency

             29         3 (1)       32   

Asset-backed securities:

          

Collateralized debt obligations

                    -         

Other asset-backed

             16         5 (1)       21   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed-maturity investments

     439         423         11        873   

Money market securities

     15                 -        15   

Perpetual debt and equity securities

                    4 (1)        

Cash and cash equivalents

     397                 -        397   

Derivative assets:

          

Credit derivatives

                    -         
  

 

 

    

 

 

    

 

 

   

 

 

 

Total derivative assets

                    -         

Assets of consolidated VIEs:

          

Cash

     176                 -        176   

Corporate obligations

             58         56 (1)       114   

Mortgage-backed securities:

          

Residential mortgage-backed non-agency

             787         6 (1)       793   

Commercial mortgage-backed

             409         7 (1)       416   

Asset-backed securities:

          

Collateralized debt obligations

             185         66 (1)       251   

Other asset-backed

             99         62 (1)       161   

Loans receivable

                     1,881        1,881   

Loan repurchase commitments

                     1,086        1,086   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 1,027       $ 1,969       $ 3,179      $ 6,175   
  

 

 

    

 

 

    

 

 

   

 

 

 

Liabilities:

          

Derivative liabilities:

          

Credit derivatives

   $       $ 12       $ 2,921      $ 2,933   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total derivative liabilities

             12         2,921        2,933   

Liabilities of consolidated VIEs:

          

Variable interest entity notes

             1,727         1,948        3,675   

Derivative liabilities:

          

Interest rate derivatives

             141         -        141   

Currency rate derivatives

                     21 (1)       21   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total derivative liabilities

             141         21        162   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

   $       $ 1,880       $ 4,890      $ 6,770   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

(1) - Unobservable inputs are either not developed by MBIA Corp. or do not significantly impact the overall fair values of the aggregate financial assets and liabilities.

Level 3 assets at fair value, as of September 30, 2013 and December 31, 2012 represented approximately 68% and 51%, respectively, of total assets measured at fair value. Level 3 liabilities at fair value, as of September 30, 2013 and December 31, 2012, represented approximately 55% and 72%, respectively, of total liabilities measured at fair value.

 

32


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The following tables present the fair values and carrying values of MBIA Corp.’s assets and liabilities that are disclosed at fair value but not reported at fair value on MBIA Corp.’s consolidated balance sheets as of September 30, 2013 and December 31, 2012:

 

                                                      
     Fair Value Measurements at Reporting Date Using                

In millions

   Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
     Fair Value
Balance as of
September 30, 2013
     Carry Value
Balance as of
September 30, 2013
 

Assets:

              

Other investments

   $       $       $ 27       $ 27       $ 27   

Accrued investment income

                                    

Assets of consolidated VIEs:

              

Investments held-to-maturity

                     2,566         2,566         2,809   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $      $       $ 2,593       $ 2,600       $ 2,843   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

              

Long-term debt

   $       $ 735       $       $ 735       $ 1,098   

Secured loan (1)

                     50         50         50   

Liabilities of consolidated VIEs:

              

VIE notes

                     2,566         2,566         2,809   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $       $ 735       $ 2,616       $ 3,351       $ 3,957   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial Guarantees:

              

Gross

   $       $       $ 2,597       $ 2,597       $ 2,125   

Ceded

                     1,348         1,348         1,288   

 

(1) - Reported within “Other liabilities” on MBIA Corp.‘s consolidated balance sheets.

 

                                                      
     Fair Value Measurements at Reporting Date Using                

In millions

   Quoted Prices in
Active Markets  for
Identical Assets
(Level 1)
     Significant Other
Observable Inputs
(Level 2)
     Significant
Unobservable
Inputs
(Level 3)
     Fair Value
Balance as of
December 31, 2012
     Carry Value
Balance as of
December 31, 2012
 

Assets:

              

Other investments

   $       $       $ 28       $ 28       $ 28   

Accrued investment income

                                    

Assets of consolidated VIEs:

              

Investments held-to-maturity

                     2,675         2,675         2,829   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $      $       $ 2,703       $ 2,710       $ 2,864   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

              

Long-term debt

   $       $ 1,886       $       $ 1,886       $ 2,694   

Liabilities of consolidated VIEs:

              

VIE notes

                     2,675         2,675         2,829   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $       $ 1,886       $ 2,675       $ 4,561       $ 5,523   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial Guarantees:

              

Gross

   $       $       $ (114)       $ (114)       $ (294)   

Ceded

                     1,442         1,442         1,530   

 

33


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The following tables present information about changes in Level 3 assets (including short-term investments) and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2013 and 2012:

 

                                                                                                                                              
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2013  

In millions

  Balance,
Beginning
of Period
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in

OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses)

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2013
 

Assets:

                         

Foreign governments

  $     $     $     $     $     $     $     $ (3)      $     $     $     $     $  

Perpetual debt and equity securities

                (2)                                                               

Assets of consolidated VIEs:

                         

Corporate obligations

    48                                                                    48         

Residential mortgage-backed non-agency

                                                                             

Commercial mortgage-backed

                (1)                                (1)                                 

Collateralized debt obligations

    35                                            (4)                    (12)        20        (1)   

Other asset-backed

    63              (7)                                (1)                    (6)        50        (1)   

Loans receivable

    1,790              (12)                                (74)                          1,704        (12)   

Loan repurchase commitments

    1,115                                                                    1,116         
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,067      $   -      $   (20)      $     $    -      $     $     $   (83)      $     $     $ (18)      $ 2,954      $   (13)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
(Gains) /
Losses
    Unrealized
(Gains) /
Losses
Included
in
Earnings
    Unrealized
(Gains) /
Losses
Included
in

OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
(Gains)
Losses

for  the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2013
 

Liabilities:

                         

Credit derivative, net

  $ 1,648      $ 28      $ (285)      $     $     $     $     $ (28)      $     $     $     $ 1,363      $ (285)   

Liabilities of consolidated VIEs:

                         

VIE notes

    832              (6)                                (73)                          753        (6)   

Currency derivative, net

    16                          (1)                                            15        (1)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 2,496      $ 28      $ (291)      $     $ (1)      $     $     $ (101)      $     $     $     -      $ 2,131      $ (292)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

 

34


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

 

                                                                                                                                              
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Three Months Ended September 30, 2012  

In millions

  Balance,
Beginning
of Period
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in

OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses)

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2012
 

Assets:

                         

Foreign governments

  $ 12      $     $     $     $     $     $     $ (9)      $     $     $     $ 12      $  

Corporate obligations

    22                                            (12)                    (8)               

Residential mortgage-backed non-agency

                                              (1)                                 

Other asset-backed

    31        (2)                                      (2)                          27         

Perpetual debt and equity securities

                                                                             

Assets of consolidated VIEs:

                         

Corporate obligations

    72              (10)                                (1)                    (3)        61         

Residential mortgage-backed non-agency

    10                                            (1)                    (3)               

Commercial mortgage-backed

    12                                                                    13         

Collateralized debt obligations

    84              (5)                                                        82        (2)   

Other asset-backed

    38              (1)                                (4)              30              63         

Loans receivable

    1,903              61                                (72)                          1,892        61   

Loan repurchase commitments

    1,032              19                                                        1,051        19   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,222      $   (2)      $   68      $     $     $     $     $ (102)      $     $ 38      $ (14)      $ 3,219      $   81   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Period
    Realized
(Gains) /
Losses
    Unrealized
(Gains) /
Losses
Included
in
Earnings
    Unrealized
(Gains) /
Losses
Included
in

OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
(Gains)
Losses

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2012
 

Liabilities:

                         

Credit derivative, net

  $ 3,285      $ (12)      $ 32      $     $     $     $     $ 12      $     $           $ 3,317      $ 33   

Liabilities of consolidated VIEs:

                         

VIE notes

    1,883              128                                (109)                          1,902        128   

Currency derivative, net

    21                                                                    23         
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 5,189      $ (12)      $ 162      $     $     $     $     $   (97)      $     $     $     -      $ 5,242      $ 163   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

Transfers into and out of Level 3 were $8 million and $18 million, respectively, for the three months ended September 30, 2013. Transfers into and out of Level 2 were $18 million and $8 million, respectively, for the three months ended September 30, 2013. Transfers into Level 3 were principally related to foreign government and RMBS non-agency securities where inputs, which are significant to their valuation, became unobservable during the quarter. Transfers out of Level 3 were CDOs and other ABS securities where inputs, which are significant to their valuation, became observable. These inputs include spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1.

 

35


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Transfers into and out of Level 3 were $38 million and $14 million, respectively, for the three months ended September 30, 2012. Transfers into and out of Level 2 were $14 million and $38 million, respectively, for the three months ended September 30, 2012. Transfers into Level 3 were principally for other ABS securities where inputs, which are significant to their valuation, became unobservable during the quarter. Transfers out of Level 3 were principally corporate obligations and RMBS non-agency securities where inputs, which are significant to their valuation, became observable. These inputs include spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1.

All Level 1, 2 and 3 designations are made at the end of each accounting period.

The following tables present information about changes in Level 3 assets (including short-term investments) and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2013 and 2012:

 

                                                                                                                                              
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2013  

In millions

  Balance,
Beginning
of Year
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in

OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses)

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2013
 

Assets:

                         

Foreign governments

  $     $     $     $     $     $     $     $ (11)      $     $ 16      $ (3)      $     $  

Residential mortgage-backed non-agency

                                              (3)                                 

Commercial mortgage-backed

                                              (1)                                 

Other asset-backed

                                                    (5)                           

Perpetual debt and equity securities

                                              (1)                                 

Assets of consolidated VIEs:

                         

Corporate obligations

    56              (7)                                (4)                          48         

Residential mortgage-backed non-agency

                                              (7)                    (4)               

Commercial mortgage-backed

                (1)                                      (24)        20                     

Collateralized debt obligations

    66              (8)                                (3)        (22)              (14)        20         

Other asset-backed

    62              (7)                                (10)              11        (6)        50         

Loans receivable

    1,881              208                                (211)        (174)                    1,704        194   

Loan repurchase commitments

    1,086              140                                (110)                          1,116        140   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,179      $         -      $    333      $     $    -      $     $     $    (361)      $    (225)      $ 54      $ (27)      $ 2,954      $ 340   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Year
    Realized
(Gains) /
Losses
    Unrealized
(Gains) /
Losses
Included
in
Earnings
    Unrealized
(Gains) /
Losses
Included
in

OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
(Gains)
Losses

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2013
 

Liabilities:

                         

Credit derivatives, net

  $ 2,921      $ 1,548      $ (1,562)      $     $     $     $     $ (1,548)      $     $     $     $ 1,363      $ 301   

Liabilities of consolidated VIEs:

                         

VIE notes

    1,948              141                                (251)        (1,085)                    753        54   

Currency derivatives, net

    21              (5)              (1)                                            15        (6)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 4,890      $ 1,548      $ (1,426)      $     $ (1)      $     $     $ (1,799)      $ (1,085)      $   4     $      -      $ 2,131      $ 349   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

 

36


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                                                                                                                              
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis for the Nine Months Ended September 30, 2012  

In millions

  Balance,
Beginning
of Year
    Realized
Gains /
(Losses)
    Unrealized
Gains /
(Losses)
Included
in
Earnings
    Unrealized
Gains /
(Losses)
Included
in

OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
Gains
(Losses)

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2012
 

Assets:

                         

Foreign

governments

    11                                21              (18)        (3)                    12         

Corporate obligations

                            (1)                    (14)              13        (8)               

Residential mortgage-backed non-agency

                                              (2)                    (2)               

Other asset-backed

    42        (43)              38                          (4)        (6)                    27         

Perpetual debt and equity securities

                                                                             

Assets of consolidated VIEs:

                         

Corporate obligations

    67              (15)                                (3)              15        (3)        61         

Residential mortgage-backed non-agency

    21                                            (5)        (15)              (4)               

Commercial mortgage-backed

    22                                            (3)        (8)              (6)        13         

Collateralized debt obligations

    149              (5)                                (1)        (74)        13              82         

Other asset-backed

    67                                            (7)        (35)        34              63         

Loans receivable

    2,046              52                                (204)        (2)                    1,892        52   

Loan repurchase commitments

    1,077              (26)                                                        1,051        (26)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 3,513      $ (43)      $ 24      $ 38      $     $ 29      $     $ (261)      $ (143)      $ 85      $ (23)      $ 3,219      $ 44   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                                                                                              

In millions

  Balance,
Beginning
of Year
    Realized
(Gains) /
Losses
    Unrealized
(Gains) /
Losses
Included
in
Earnings
    Unrealized
(Gains) /
Losses
Included
in

OCI
    Foreign
Exchange
Recognized
in OCI or
Earnings
    Purchases     Issuances     Settlements     Sales     Transfers
into
Level 3 (1)
    Transfers
out of
Level 3 (1)
    Ending
Balance
    Change in
Unrealized
(Gains)
Losses

for the
Period
Included

in
Earnings
for Assets
Still Held

as of
September 30,
2012
 

Liabilities:

                         

Credit derivatives, net

  $ 4,790      $ 420      $ (1,473)      $     $     $     $     $ (420)      $     $     $     $ 3,317      $ (538)   

Liabilities of consolidated VIEs:

                         

VIE notes

    2,922              332                                (369)        (983)                    1,902        293   

Credit derivatives, net

    80                                                  (82)                           

Currency derivatives, net

    17                                                                    23         
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ 7,809      $ 420      $ (1,133)      $     $     $     $     $ (789)      $ (1,065)      $     $     $ 5,242      $ (239)   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) - Transferred in and out at the end of the period.

Transfers into and out of Level 3 were $58 million and $27 million, respectively, for the nine months ended September 30, 2013. Transfers into and out of Level 2 were $27 million and $58 million, respectively, for the nine months ended September 30, 2013. Transfers into Level 3 were principally related to CMBS, foreign governments and other ABS securities, where inputs, which are significant to their valuation, became unobservable during the period. Transfers out of Level 3 were principally for CDOs, other ABS and RMBS non-agency securities, where inputs, which are significant to their valuation, became observable during the period. These inputs include spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1.

 

37


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

Transfers into and out of Level 3 were $85 million and $23 million, respectively, for the nine months ended September 30, 2012. Transfers into and out of Level 2 were $23 million and $85 million, respectively, for the nine months ended September 30, 2012. Transfers into Level 3 were principally related to other ABS, corporate obligations and CDOs where inputs, which are significant to their valuation, became unobservable during the period. Transfers out of Level 3 were principally for corporate obligations, CMBS and RMBS non-agency securities where inputs, which are significant to their valuation, became observable during the period. These inputs include spreads, prepayment speeds, default speeds, default severities, yield curves observable at commonly quoted intervals, and market corroborated inputs. There were no transfers into or out of Level 1.

All Level 1, 2 and 3 designations are made at the end of each accounting period.

Gains and losses (realized and unrealized) included in earnings related to Level 3 assets and liabilities for the three and nine months ended September 30, 2013 and 2012 are reported on MBIA Corp.’s consolidated statements of operations as follows:

 

                                           
     Three Months Ended September 30, 2013      Three Months Ended September 30, 2012  

In millions

   Total Gains
(Losses)
included
in earnings
     Change in
unrealized

gains (losses)
for the
period included
in earnings
for assets
and
liabilities still
held as of
September 30,

2013
     Total Gains
(Losses)
included
in earnings
     Change in
unrealized

gains (losses)
for the
period included
in earnings
for assets
and
liabilities still
held as of
September 30,

2012
 

Revenues:

           

Unrealized gains (losses) on insured derivatives

   $ 285       $ 285       $ (32)       $ (33)   

Realized gains (losses) and other settlements on insured derivatives

     (28)                12          

Net gains (losses) on financial instruments at fair value and foreign exchange

     (2)                        

Net investment losses related to other-than-temporary impairments

                   (2)          

Revenues of consolidated VIEs:

           

Net gains (losses) on financial instruments at fair value and foreign exchange

     (11)         (6)         (65)         (49)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 244       $ 279       $ (84)       $ (82)   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

38


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

                                           
     Nine Months Ended September 30, 2013      Nine Months Ended September 30, 2012  

In millions

   Total Gains
(Losses)
included
in earnings
     Change in
unrealized

gains (losses)
for the
period included
in earnings
for assets
and
liabilities still
held as of
September 30,
2013
     Total Gains
(Losses)
included
in earnings
     Change in
unrealized

gains (losses)
for the
period included
in earnings
for assets
and
liabilities still
held as of
September 30,
2012
 

Revenues:

           

Unrealized gains (losses) on insured derivatives

     1,562         (301)         1,473         538   

Realized gains (losses) and other settlements on insured derivatives

     (1,548)                (420)          

Net gains (losses) on financial instruments at fair value and foreign exchange

                           

Net investment losses related to other-than-temporary impairments

                   (43)          

Revenues of consolidated VIEs:

           

Net gains (losses) on financial instruments at fair value and foreign exchange

     196         292         (321)         (255)   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 212       $ (9)       $ 694       $ 283   
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair Value Option

MBIA Corp. elected to record at fair value certain financial instruments of VIEs that have been consolidated in connection with the adoption of the accounting guidance for consolidation of VIEs, among others.

The following table presents the changes in fair value included in MBIA Corp.’s consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012, for all financial instruments for which the fair value option was elected:

 

                                           
     Net Gains (Losses) on  Financial
Instruments at Fair Value and Foreign
Exchange
 
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Fixed-maturity securities held at fair value

   $ (37)       $ 21       $ (35)       $ (36)   

Loans receivable at fair value:

           

Residential mortgage loans

     (87)         (4)         (16)         (103)   

Other loans

            (7)         13         (48)   

Loan repurchase commitments

            19         140         62   

Variable interest entity notes

     176         12         97         140   

 

39


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 6: Fair Value of Financial Instruments (continued)

 

The following table reflects the difference between the aggregate fair value and the aggregate remaining contractual principal balance outstanding as of September 30, 2013 and December 31, 2012, for loans and VIE notes for which the fair value option was elected:

 

                                                                 
     As of September 30, 2013      As of December 31, 2012  

In millions

   Contractual
Principal
Outstanding
     Fair Value      Difference      Contractual
Principal
Outstanding
     Fair Value      Difference  

Loans receivable at fair value:

                 

Residential mortgage loans

   $ 1,932       $ 1,622       $ 310       $ 2,307       $ 1,735       $ 572   

Residential mortgage loans (90 days or more past due)

     221         82         139         244         54         190   

Other loans

                          22         22          

Other loans (90 days or more past due)

                          197         70         127   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans receivable at fair value

   $ 2,153       $ 1,704       $ 449       $ 2,770       $ 1,881       $ 889   

Variable interest entity notes

   $ 3,949       $ 2,511       $ 1,438       $ 9,079       $ 3,675       $ 5,404   

Substantially all gains and losses included in earnings during the periods ended September 30, 2013 and December 31, 2012 on loans receivable and VIE notes reported in the preceding table are attributable to credit risk. This is primarily due to the high rate of defaults on loans and the collateral supporting the VIE notes, resulting in depressed pricing of the financial instruments.

Note 7: Investments

MBIA Corp.’s investments, excluding those elected under the fair value option, include debt and equity securities classified as either AFS or HTM. Other invested assets designated as AFS are primarily comprised of money market funds.

The following tables present the amortized cost, fair value and corresponding gross unrealized gains and losses for AFS and HTM investments in MBIA Corp.’s investment portfolios as of September 30, 2013 and December 31, 2012:

 

                                           
     September 30, 2013  

In millions

   Amortized
Cost
     Gross Unrealized
Gains
     Gross
Unrealized
Losses
     Fair Value  

AFS Investments

           

Fixed-maturity investments:

           

U.S. Treasury and government agency

   $ 86       $      $      $ 86   

State and municipal bonds

                           

Foreign governments

     174                       183   

Corporate obligations

     199                       204   

Mortgage-backed securities:

           

Residential mortgage-backed agency

                           

Residential mortgage-backed non-agency

                           
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     477         15                492   

Money market securities

     29                       29   

Perpetual debt and equity securities

                           
  

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 507       $ 15       $      $ 522   
  

 

 

    

 

 

    

 

 

    

 

 

 

HTM Investments

           

Assets of consolidated VIEs:

           

Corporate obligations

   $ 2,809       $      $ (251)       $ 2,566   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total HTM investments

   $ 2,809       $      $ (251)       $ 2,566   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

40


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

                                           
     December 31, 2012  

In millions

   Amortized
Cost
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Fair Value  

AFS Investments

           

Fixed-maturity investments:

           

U.S. Treasury and government agency

   $ 352       $      $      $ 353   

State and municipal bonds

                           

Foreign governments

     183         13                196   

Corporate obligations

     254                       261   

Mortgage-backed securities:

           

Residential mortgage-backed agency

                           

Residential mortgage-backed non-agency

     31                       33   

Commercial mortgage-backed

                   (1)          

Asset-backed securities:

           

Collateralized debt obligations

                           

Other asset-backed

     20                       21   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     850         25         (1)         874   

Money market securities

     15                       15   

Perpetual debt and equity securities

                           
  

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 866       $ 25       $ (1)       $ 890   
  

 

 

    

 

 

    

 

 

    

 

 

 

HTM Investments

           

Assets of consolidated VIEs:

           

Corporate obligations

   $ 2,829       $      $ (157)       $ 2,674   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total HTM investments

   $ 2,829       $      $ (157)       $ 2,674   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the distribution by contractual maturity of AFS and HTM fixed-maturity securities at amortized cost and fair value as of September 30, 2013. Contractual maturity may differ from expected maturity as borrowers may have the right to call or prepay obligations.

 

                                           
     AFS Securities      HTM Securities  
                   Consolidated VIEs  

In millions

   Amortized
Cost
     Fair Value      Amortized
Cost
     Fair Value  

Due in one year or less

   $ 177       $ 177       $      $  

Due after one year through five years

     219         226                 

Due after five years through ten years

     59         66                 

Due after ten years

     10         11         2,809         2,566   

Mortgage-backed and asset-backed

     12         12                 
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

   $ 477       $ 492       $ 2,809       $ 2,566   
  

 

 

    

 

 

    

 

 

    

 

 

 

Deposited Securities

The fair value of securities on deposit with various regulatory authorities was $5 million as of September 30, 2013 and December 31, 2012. These deposits are required to comply with state insurance laws.

 

41


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

Impaired Investments

The following tables present the gross unrealized losses related to AFS and HTM investments as of September 30, 2013 and December 31, 2012:

 

                                                                 
     September 30, 2013  
     Less than 12 Months      12 Months or Longer      Total  

In millions

   Fair Value      Unrealized
Losses
     Fair Value      Unrealized
Losses
     Fair Value      Unrealized
Losses
 

AFS Investments

                 

Fixed-maturity investments:

                 

U.S. Treasury and government agency

   $      $      $      $      $      $  

State and municipal bonds

                                         

Foreign governments

                                         

Corporate obligations

                                         

Mortgage-backed securities:

                 

Residential mortgage-backed agency

                                         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     17                              17          

Perpetual debt and equity securities

                                         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $   18       $      $      $      $ 18       $  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

HTM Investments

                 

Assets of consolidated VIEs:

                 

Corporate obligations

   $      $      $ 1,174       $ (251)       $ 1,174       $ (251)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total HTM investments

   $      $      $ 1,174       $ (251)       $ 1,174       $ (251)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

                                                                 
     December 31, 2012  
     Less than 12 Months      12 Months or Longer      Total  

In millions

   Fair Value      Unrealized
Losses
     Fair Value      Unrealized
Losses
     Fair Value      Unrealized
Losses
 

AFS Investments

                 

Fixed-maturity investments:

                 

U.S. Treasury and government agency

   $ 151       $      $      $      $ 151       $  

State and municipal bonds

                                         

Foreign governments

     11                              12          

Corporate obligations

                                 12          

Mortgage-backed securities:

                 

Residential mortgage-backed non-agency

                                         

Commercial mortgage-backed

                          (1)                (1)   

Asset-backed securities:

                 

Other asset-backed

                   10                10          
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed-maturity investments

     173                21         (1)         194         (1)   

Perpetual debt and equity securities

                                         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total AFS investments

   $ 174       $      $ 21       $ (1)       $ 195       $ (1)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

HTM Investments

                 

Assets of consolidated VIEs:

                 

Corporate obligations

   $ 297       $ (19)       $ 1,287       $ (138)       $ 1,584       $ (157)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total HTM investments

   $ 297       $ (19)       $ 1,287       $ (138)       $ 1,584       $ (157)   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

With the weighting applied on the fair value of each security relative to the total fair value, the weighted average contractual maturity of securities in an unrealized loss position as of September 30, 2013 and December 31, 2012 was 26 and 27 years, respectively. As of September 30, 2013 and December 31, 2012, there were 5 and 36 securities, respectively, that were in an unrealized loss position for a continuous twelve-month period or longer, of which the fair values of 4 and 6 securities, respectively, were below book value by more than 5%.

 

42


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 7: Investments (continued)

 

Other-Than-Temporary Impairments

MBIA Corp. has evaluated on a security-by-security basis whether the unrealized losses in its investment portfolios were other-than-temporary considering duration and severity of unrealized losses, the circumstances that gave rise to the unrealized losses, and whether MBIA Corp. has the intent to sell the securities or more likely than not will be required to sell the securities before their anticipated recovery. Based on its evaluation, MBIA Corp. determined that the unrealized losses on the remaining securities were temporary in nature because its impairment analysis, including projected future cash flows, indicated that MBIA Corp. would be able to recover the amortized cost of impaired assets. MBIA Corp. also concluded that it does not have the intent to sell securities in an unrealized loss position and it is more likely than not that it would not have to sell these securities before recovery of their cost basis. In making this conclusion, MBIA Corp. examined the cash flow projections for its investment portfolios, the potential sources and uses of cash in its business, and the cash resources available to its business other than sales of securities. It also considered the existence of any risk management or other plans as of September 30, 2013 that would require the sale of impaired securities. On a quarterly basis, MBIA Corp. re-evaluates the unrealized losses in its investment portfolios to determine whether an impairment loss should be realized in current earnings. Impaired securities that MBIA Corp. intends to sell before the expected recovery of such securities’ fair values have been written down to fair value.

Credit Loss Rollforward

The portion of certain other-than-temporary impairment (“OTTI”) losses on fixed-maturity securities that does not represent credit losses is recognized in AOCI. For these impairments, the net amount recognized in earnings represents the difference between the amortized cost of the security and the net present value of its projected future discounted cash flows prior to impairment. Any remaining difference between the fair value and amortized cost is recognized in AOCI.

The following table presents the amount of credit loss impairments recognized in earnings on fixed-maturity securities held by MBIA Corp. as of the dates indicated, for which a portion of the OTTI losses was recognized in AOCI, and the corresponding changes in such amounts. There were no OTTI losses for which a portion was recognized in AOCI for the nine months ended September 30, 2013.

 

          

In millions

   Nine Months
Ended September 30,
 

Credit Losses Recognized in Earnings Related to Other-Than-Temporary Impairments

   2012  

Beginning balance

   $ 57   

Reductions for credit loss impairments previously recognized on securities impaired to fair value during the period (1)

     (57)   
  

 

 

 

Ending balance

   $  
  

 

 

 

 

(1) - Represents circumstances where MBIA Corp. determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.

Sales of Available-for-Sale Investments

Gross realized gains and losses are recorded in “Net gains (losses) on financial instruments at fair value and foreign exchange” on MBIA Corp.’s consolidated statements of operations. The proceeds and gross realized gains and losses from sales of AFS investments for the three and nine months ended September 30, 2013 and 2012 are as follows:

 

                                           
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Proceeds from sales

   $ 25       $ 151       $ 509       $ 819   

Gross realized gains

   $      $      $ 22       $ 11   

Gross realized losses

   $      $ (1)       $ (1)       $ (2)   

 

43


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments

Overview

MBIA Corp. accounts for derivative instruments in accordance with the accounting principles for derivative and hedging activities, which requires that all such instruments be recorded on MBIA Corp.’s consolidated balance sheets at fair value. Refer to “Note 6: Fair Value of Financial Instruments” for the method used for determining the fair value of derivative instruments.

MBIA Corp. has entered into derivative instruments that it viewed as an extension of its core financial guarantee business but which do not qualify for the financial guarantee scope exception and, therefore, must be recorded at fair value in MBIA Corp.’s consolidated balance sheets. MBIA Corp. insures CDS contracts, primarily referencing corporate, asset-backed, residential mortgage-backed, commercial mortgage-backed, CRE loans, and CDO securities that are intended to be held for the entire term of the contract absent a negotiated settlement with the counterparty.

Changes in the fair value of derivatives, excluding insured derivatives, are recorded each period in current earnings within “Net gains (losses) on financial instruments at fair value and foreign exchange.” Changes in the fair value of insured derivatives are recorded each period in current earnings within “Net change in fair value of insured derivatives.” The net change in the fair value of MBIA Corp.’s insured derivatives has two primary components: (i) realized gains (losses) and other settlements on insured derivatives and (ii) unrealized gains (losses) on insured derivatives. “Realized gains (losses) and other settlements on insured derivatives” include (i) premiums received and receivable on sold CDS contracts, (ii) premiums paid and payable to reinsurers in respect to CDS contracts, (iii) net amounts received or paid on reinsurance commutations, (iv) losses paid and payable to CDS contract counterparties due to the occurrence of a credit event or settlement agreement, (v) losses recovered and recoverable on purchased CDS contracts due to the occurrence of a credit event or settlement agreement and (vi) fees relating to CDS contracts. The “Unrealized gains (losses) on insured derivatives” include all other changes in fair value of the insured derivative contracts.

In certain instances, MBIA Corp. purchased or issued securities that contain embedded derivatives. In accordance with the accounting guidance for derivative instruments and hedging activities, the balance sheet location of MBIA Corp.’s embedded derivative instruments is determined by the location of the related security.

Variable Interest Entities

VIEs consolidated by MBIA Corp. have entered into derivative instruments primarily consisting of interest rate swaps. Interest rate swaps are entered into to hedge the risks associated with fluctuations in interest rates or fair values of certain contracts.

Credit Derivatives Sold

The following tables present information about credit derivatives sold by MBIA Corp. that were outstanding as of September 30, 2013 and December 31, 2012. Credit ratings represent the lower of underlying ratings assigned to the collateral by Moody’s, S&P or MBIA.

 

                                                                                       

$ in millions

   As of September 30, 2013  
            Notional Value         

Credit Derivatives Sold

   Weighted
Average
Remaining
Expected
Maturity
     AAA      AA      A      BBB      Below
Investment
Grade
     Total
Notional
     Fair Value
Asset
(Liability)
 

Insured credit default swaps

     2.7 Years      $ 7,412       $ 3,150       $ 1,705       $ 7,419       $ 6,085       $ 25,771       $ (1,355)   

Insured swaps

     20.6 Years               77         2,623         1,302                4,002         (7)   

All others

     28.3 Years                                    36         36         (8)   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total notional

      $ 7,412       $ 3,227       $ 4,328       $ 8,721       $ 6,121       $ 29,809      
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total fair value

      $ (3)       $      $ (6)       $ (386)       $ (975)          $ (1,370)   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

 

 

44


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

                                                                                       

$ in millions

   As of December 31, 2012  
            Notional Value         

Credit Derivatives Sold

   Weighted
Average
Remaining
Expected
Maturity
     AAA      AA      A      BBB      Below
Investment
Grade
     Total
Notional
     Fair Value
Asset
(Liability)
 

Insured credit default swaps

     5.1 Years      $ 10,457       $ 5,862       $ 5,253       $ 11,571       $ 13,859       $ 47,002       $ (2,858)   

Insured swaps

     20.8 Years               103         2,520         1,627         71         4,321         (7)   

All others

     1.8 Years                                    195         195         (68)   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total notional

      $ 10,457       $ 5,965       $ 7,773       $ 13,198       $ 14,125       $ 51,518      
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total fair value

      $ (7)       $ (70)       $ (72)       $ (732)       $ (2,052)          $ (2,933)   
     

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

 

Internal credit ratings assigned by MBIA on the underlying collateral are derived by MBIA Corp.’s surveillance group. In assigning an internal rating, current status reports from issuers and trustees, as well as publicly available transaction-specific information, are reviewed. Also, where appropriate, cash flow analyses and collateral valuations are considered. The maximum potential amount of future payments (undiscounted) on CDS contracts are estimated as the notional value plus any additional debt service costs, such as interest or other amounts owing on CDS contracts. The maximum amount of future payments that MBIA Corp. may be required to make under these guarantees as of September 30, 2013 is $26.4 billion. This amount is net of $67 million of insured derivatives ceded under reinsurance agreements in which MBIA Corp. economically hedges a portion of the credit and market risk associated with its insured derivatives and offsetting agreements with a counterparty. The maximum potential amount of future payments (undiscounted) on insured swaps are estimated as the notional value of such contracts.

MBIA Corp. may hold recourse provisions with third parties in derivative instruments through both reinsurance and subrogation rights. MBIA Corp.’s reinsurance arrangements provide that in the event MBIA Corp. pays a claim under a guarantee of a derivative contract, MBIA Corp. has the right to collect amounts from any reinsurers that have reinsured the guarantee on either a proportional or non-proportional basis, depending upon the underlying reinsurance agreement. MBIA Corp. may also have recourse through subrogation rights whereby if MBIA Corp. makes a claim payment, it is entitled to any rights of the insured counterparty, including the right to any assets held as collateral.

Financial Statement Presentation

Insured CDSs and insured swaps are not subject to master netting agreements. VIE derivative assets and liabilities are not presented net of any master netting agreements.

As of September 30, 2013 and December 31, 2012, MBIA Corp. reported derivative assets of $7 million, and derivative liabilities of $1.4 billion and $3.1 billion, respectively, which are shown separately on MBIA Corp.’s consolidated balance sheets. The following table presents the total fair value of MBIA Corp.’s derivative assets and liabilities by instrument and balance sheet location as of September 30, 2013:

 

                                                      

In millions

   Notional      Derivative Assets      Derivative Liabilities  

Derivative Instruments

   Amount
Outstanding
     Balance Sheet Location    Fair Value      Balance Sheet Location    Fair Value  

Not designated as hedging instruments:

              

Insured credit default swaps

   $ 25,771       Derivative assets    $      Derivative liabilities    $ (1,355)   

Insured swaps

     7,297       Derivative assets           Derivative liabilities      (7)   

Cross currency swaps-VIE

     102       Derivative assets-VIE           Derivative liabilities-VIE      (15)   

All other

     36       Derivative assets           Derivative liabilities      (8)   

All other-VIE

     280       Derivative assets-VIE           Derivative liabilities-VIE       

All other-embedded

          Derivative assets           Derivative liabilities       
  

 

 

       

 

 

       

 

 

 

Total derivatives

   $ 33,487          $         $ (1,385)   
  

 

 

       

 

 

       

 

 

 

 

45


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

The following tables present the total fair value of MBIA Corp.’s derivative assets and liabilities by instrument and balance sheet location as of December 31, 2012:

 

                                                      

In millions

   Notional      Derivative Assets      Derivative Liabilities  

Derivative Instruments

   Amount
Outstanding
     Balance Sheet Location    Fair Value      Balance Sheet Location    Fair Value  

Not designated as hedging instruments:

              

Insured credit default swaps

   $ 47,320       Derivative assets    $      Derivative liabilities    $ (2,858)   

Insured swaps

     7,890       Derivative assets           Derivative liabilities      (7)   

Interest rate swaps -VIE

     2,728       Derivative assets-VIE           Derivative liabilities-VIE      (141)   

Cross currency swaps -VIE

     110       Derivative assets-VIE           Derivative liabilities-VIE      (21)   

All other

     195       Derivative assets           Derivative liabilities      (68)   

All other-VIE

     280       Derivative assets-VIE           Derivative liabilities-VIE       
  

 

 

       

 

 

       

 

 

 

Total derivatives

   $ 58,523          $         $ (3,095)   
  

 

 

       

 

 

       

 

 

 

The following table presents the effect of derivative instruments on the consolidated statements of operations for the three months ended September 30, 2013:

 

                     

In millions

          

Derivatives Not Designated as

Hedging Instruments

  

Location of Gain (Loss) Recognized in Income on Derivative

  Net Gain (Loss)
Recognized in Income
 

Insured credit default swaps

   Unrealized gains (losses) on insured derivatives   $ 287   

Insured credit default swaps

   Realized gains (losses) and other settlements on insured derivatives     (28)   

Interest rate swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE      

All other

   Unrealized gains (losses) on insured derivatives     (2)   
    

 

 

 

Total

     $ 259   
    

 

 

 

The following table presents the effect of derivative instruments on the consolidated statements of operations for the three months ended September 30, 2012:

 

                     

In millions

          

Derivatives Not Designated as

Hedging Instruments

  

Location of Gain (Loss) Recognized in Income on Derivative

  Net Gain (Loss)
Recognized in Income
 

Insured credit default swaps

   Unrealized gains (losses) on insured derivatives   $ (40)   

Insured credit default swaps

   Realized gains (losses) and other settlements on insured derivatives     12   

Interest rate swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE      

Currency swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     (2)   

All other

   Unrealized gains (losses) on insured derivatives      
    

 

 

 

Total

     $ (15)   
    

 

 

 

 

46


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 8: Derivative Instruments (continued)

 

The following table presents the effect of derivative instruments on the consolidated statements of operations for the nine months ended September 30, 2013:

 

                     

In millions

          

Derivatives Not Designated as

Hedging Instruments

  

Location of Gain (Loss) Recognized in Income on Derivative

  Net Gain (Loss)
Recognized in Income
 

Insured credit default swaps

   Unrealized gains (losses) on insured derivatives   $ 1,502   

Insured credit default swaps

   Realized gains (losses) and other settlements on insured derivatives     (1,548)   

Interest rate swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     17   

Currency swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE      

All other

   Unrealized gains (losses) on insured derivatives     60   
    

 

 

 

Total

     $ 37   
    

 

 

 

The following table shows the effect of derivative instruments on the consolidated statements of operations for the nine months ended September 30, 2012:

 

                     

In millions

          

Derivatives Not Designated as

Hedging Instruments

  

Location of Gain (Loss) Recognized in Income on Derivative

  Net Gain (Loss)
Recognized in Income
 

Insured credit default swaps

   Unrealized gains (losses) on insured derivatives   $ 1,463   

Insured credit default swaps

   Realized gains (losses) and other settlements on insured derivatives     (420)   

Non-insured credit default swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     (1)   

Interest rate swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     39   

Currency swaps-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     (6)   

All other

   Unrealized gains (losses) on insured derivatives     10   

All other-VIE

   Net gains (losses) on financial instruments at fair value and foreign exchange-VIE     (2)   
    

 

 

 

Total

     $ 1,083   
    

 

 

 

Note 9: Debt

MBIA Insurance Corporation has disclosed its debt in “Note 10: Debt” in the Notes to Consolidated Financial Statements included in Exhibit 99.2 to MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012. The following debt discussion provides an update to those included under the same captions in Exhibit 99.2 to MBIA Inc.’s Annual Report on Form 10-K.

Long-Term Debt

Interest and principal payments on the 14% Fixed to Floating Rate Surplus Notes due 2033 are subject to prior approval by the Superintendent of the NYSDFS. From the January 15, 2013 interest payment to the present, MBIA Insurance Corporation’s requests for approval of the note interest payments have been denied by the NYSDFS. MBIA Insurance Corporation provided notice to the Fiscal Agent that it has not made a scheduled interest payment. The deferred interest payment will become due on the first business day on or after which MBIA Insurance Corporation obtains approval to make such payment. No interest will accrue on the deferred interest.

As of September 30, 2013 and December 31, 2012, there was $953 million of principal outstanding related to surplus notes. As of September 30, 2013 and December 31, 2012, accrued interest related to these surplus notes was $145 million and $61 million, respectively.

National Secured Loan

In connection with the BofA Settlement Agreement, in May 2013, MBIA Insurance Corporation repaid the National Secured Loan and extinguished the agreement. As of December 31, 2012, the outstanding principal amount and accrued interest under this loan was $1.7 billion and $29 million, respectively.

 

47


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 9: Debt (continued)

 

Other Borrowing Arrangements

Blue Ridge Secured Loan

In connection with the BofA Settlement Agreement in May of 2013, MBIA Insurance Corporation and Blue Ridge entered into the Blue Ridge Secured Loan, pursuant to which Blue Ridge agreed to make revolving loans to MBIA Insurance Corporation in an aggregate of up to $500 million. The following is a summary of the material terms of the Loan Agreement, as amended by Amendment No. 1 entered into in June of 2013. This summary is not complete and is subject to the full text of the document described below.

During the third quarter of 2013, MBIA Insurance Corporation borrowed $50 million under the Blue Ridge Secured Loan. MBIA Insurance Corporation elected the LIBOR Loans interest rate option and the average interest rate for the three months ended September 30, 2013 was 7.76%. Accrued interest expense for the Blue Ridge Secured Loan is included in “Other liabilities” on MBIA Corp.’s consolidated balance sheets.

Use of Proceeds

The proceeds of the Blue Ridge Secured Loan can be used for general corporate purposes. Once the Blue Ridge Secured Loan amount outstanding exceeds $50 million, the proceeds must be used for the purpose of meeting ordinary course liquidity requirements expected to arise during the 30 days following such borrowing.

Conditions to Borrowings

Blue Ridge’s obligation to make loans is subject to usual and customary conditions precedent, including that on the date of the borrowing (i) no default is continuing or would occur as a result of that borrowing and (ii) the representations and warranties specified in the Blue Ridge Secured Loan agreement are true and accurate in all material respects.

Security

The loans are secured by a pledge of collateral consisting of the following: (i) MBIA Insurance Corporation’s right to receive put-back recoveries related to ineligible mortgage loans included in its insured RMBS transactions; (ii) MBIA Insurance Corporation’s future recoveries on defaulted insured RMBS transactions resulting from expected excess spread generated by performing loans in such transactions; (iii) MBIA Insurance Corporation’s future installment premiums; and (iv) 65% of the voting capital stock of MBIA Insurance Corporation’s equity interest in MBIA UK (Holdings) Limited (the collateral described in clauses (ii) and (iii) above, the (“Other Prepayment Collateral”). Under the Blue Ridge Secured Loan, the value of the collateral described in clauses (i) through (iii) above, must at all times be greater than $1.0 billion. As of September 30, 2013, the value of the collateral was approximately $2.5 billion.

Interest Rate and Fees

Borrowings under the Blue Ridge Secured Loan have a variable interest rate, at MBIA Insurance Corporation’s option, based on either: (i) the adjusted LIBOR plus an applicable margin (“LIBOR Loans”), or (ii) the highest between (a) Bank of America’s prime rate and (b) the sum of the federal funds effective rate plus 0.5%, and (c) the adjusted LIBOR plus 1.00%, plus an applicable margin (“Base Rate Loans”). The applicable margin for the LIBOR Loans and the Base Rate Loans is 7.50% and 6.50%, respectively. With respect to any available but undrawn amounts under the Blue Ridge Secured Loan, MBIA Insurance Corporation is obligated to pay a commitment fee on such undrawn amounts of 2.00% per annum. The amount of the commitment fee and interest expense for the nine months ended September 30, 2013 was $4 million.

Scheduled Repayment

The maturity date of the Blue Ridge Secured Loan is three years from the closing date, at which time any then outstanding loans will be due and payable.

 

48


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 9: Debt (continued)

 

Mandatory Prepayments

Loans are required to be prepaid (and Blue Ridge’s commitments reduced) in an amount equal to the following: (i) 100% of the proceeds of any put-back recoveries and (ii) on and after the first anniversary of the closing date, from the proceeds of any Other Prepayment Collateral in an amount equal to (x) from the first anniversary of the closing date to the second anniversary of the closing date, 50% of such proceeds and (y) from the second anniversary of the closing date to the maturity date, 100% of such proceeds. In addition, loans must be prepaid (and Blue Ridge’s commitments reduced) in an amount equal to 100% of the proceeds of certain disposals of assets to the extent exceeding $1 million in aggregate for all such disposals. Finally, loans must be prepaid (but without any commitment reduction) to the extent the proceeds of any borrowing that is a liquidity borrowing are not in fact used for such purposes and have not otherwise been used to repay loans within the required 30-day period.

Representations and Warranties

The Blue Ridge Secured Loan contains certain customary representations and warranties for loan facilities of this type, which are given on the closing date and at each borrowing under the Blue Ridge Secured Loan agreement, including with respect to organization of MBIA Insurance Corporation, power of authority, enforceability of the loan documents, receipt of any necessary governmental approvals, financial condition and solvency, and compliance with laws.

Covenants

The Blue Ridge Secured Loan contains certain affirmative, negative and financial covenants, which are customary for loan facilities of this type in relation to, among other matters, delivery of financial statements, notice of material events, existence and conduct of business, payment of taxes and other obligations, maintenance of books and records, compliance with all material laws, and maintenance of insurance, and includes a requirement that MBIA Insurance Corporation maintain at least $750 million of statutory capital (defined as policyholders’ surplus plus contingency reserves).

In addition, MBIA Insurance Corporation may not, without Blue Ridge’s consent, consummate any amendments, compromises or commutations with respect to insurance obligations and settlements of litigation to the extent (x) that payments made in respect of such remediation efforts subsequent to June 28, 2013 exceed $260 million in the aggregate, (y) after giving effect thereto and to any borrowings of loans in connection therewith, the aggregate principal amount of loans outstanding would exceed $200 million or (z) after giving effect thereto, all remediation efforts taken as a whole since the closing date, would, cumulatively, have reduced MBIA Insurance Corporation’s statutory capital by $100 million or more.

In addition, MBIA Insurance Corporation may not prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner, or make any payment of principal, interest or fees or any other payment on, any of its indebtedness (including the Surplus Notes), except for payments of the loans under the Blue Ridge Secured Loan agreement and except for certain refinancings and refundings of its indebtedness.

Change of Control

MBIA Insurance Corporation may be required to prepay all amounts outstanding under the Blue Ridge Secured Loan agreement upon the occurrence of a change of control.

Events of Default

The Blue Ridge Secured Loan agreement contains certain events of default which are customary for loan facilities of this type (and with customary cure periods), including failure to pay principal, interest or fees on the loans, misrepresentation, failure to observe covenants or conditions, failure to pay other material indebtedness, insolvency and bankruptcy matters, and unlawfulness or invalidity of the loan documents.

 

49


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 10: Income Taxes

MBIA Corp.’s income taxes and the related effective tax rates for the three and nine months ended September 30, 2013 and 2012 are as follows:

 

                                                                                       
     Three Months Ended September 30,      Nine Months Ended September 30,  

In millions

   2013      2012      2013      2012  

Income (loss) before income taxes

   $ 190          $ (160)          $ 69          $ 597      

Provision (benefit) for income taxes

   $ 71         37.4%       $ (80)         50.0%       $ (24)         (34.8)%       $ 201         33.7%   

For the nine months ended September 30, 2013 and 2012, MBIA Corp.’s effective tax rate applied to its pre-tax income was less than the U.S. statutory tax rate primarily as a result of the decrease in the valuation allowance.

For interim reporting purposes, MBIA Corp. has calculated its effective tax rate for the full year of 2013 by adjusting annual forecasted pre-tax income for mark-to-market income, fair value adjustments, capital gains/losses, and other tax adjustments when projecting its full year effective tax rate. MBIA Corp. has accounted for these items at the federal applicable tax rate after applying the projected full year effective tax rate to its actual nine-month results before discrete items.

Deferred Tax Asset, Net of Valuation Allowance

MBIA Corp. recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on tax assets and liabilities is recognized in income in the period that includes the enactment date.

MBIA Corp. establishes a valuation allowance against its deferred tax asset when it is more likely than not that all or a portion of the deferred tax asset will not be realized. All evidence, both positive and negative, needs to be identified and considered in making the determination. Future realization of the existing deferred tax asset ultimately depends, in part, on the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under the tax law.

As of September 30, 2013, MBIA Corp. reported a net deferred tax asset of $1.3 billion. The $1.3 billion net deferred tax asset is net of a $3.4 million valuation allowance. As of September 30, 2013, MBIA Corp. had a valuation allowance against a portion of the deferred tax asset related to capital loss carryforwards and losses from asset impairments as these losses are considered capital losses, have a five-year carryforward period, once recognized, can only offset capital gain income. The September 30, 2013 valuation allowance reflects a decrease of $50 million from the December 31, 2012 valuation allowance of $54 million. The decrease in the valuation allowance for the nine months ended September 30, 2013 was primarily due to the generation of capital gain income from the termination of certain contracts.”

MBIA Corp. has concluded that it is more likely than not that its net deferred tax asset will be realized. MBIA Corp. relied on MBIA Inc.’s tax sharing agreement and the Parent’s assurance that it intended for no net operating loss (“NOL”) or capital loss generated by MBIA Corp., to the extent used in consolidation, to expire without compensation.

Accounting for Uncertainty in Income Taxes

MBIA Corp.’s policy is to record and disclose any change in unrecognized tax benefit and related interest and/or penalties to income tax in the consolidated statements of operations. As of September 30, 2013 and 2012, MBIA Corp. did not have any uncertain tax positions and corresponding interest or penalties.

MBIA Corp.’s major tax jurisdictions include the U.S. and U.K. MBIA and its U.S. subsidiaries file a U.S. consolidated federal income tax return.

The U.K. tax authorities are currently auditing tax years 2005 through 2010. On June 5, 2013, MBIA Corp. met with the HM Revenue and Customs (“HMRC”). During the third quarter of 2013, MBIA Corp. sent HMRC additional information supporting its position, and discussions with HMRC are ongoing and a resolution has not been reached. As of September 30, 2013, MBIA Corp. has not established a reserve for this issue.

 

50


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 10: Income Taxes (continued)

 

As of December 31, 2012, MBIA Corp. had a NOL carryforward of $907 million, which will expire between tax years 2031-2032. As a result of commutation activity in the first three quarters of 2013, MBIA Corp.’s NOL has significantly increased from the 2012 year end amount as of September 30, 2013. MBIA Corp. also had a capital loss carryforward of $165 million, which will expire in tax year 2017. However, as of September 30, 2013, MBIA Corp. has generated year-to-date capital gain income sufficient to fully utilize the 2012 capital loss.

Tax Sharing Arrangement

MBIA Corp. files its U.S. Corporation Income Tax Return as a member of the MBIA Inc. consolidated group and participates in a tax sharing agreement between MBIA Corp. and MBIA Inc. under which MBIA Corp. is allocated its share of consolidated tax liability or tax benefit as determined on a standalone basis under the tax sharing agreement.

As of September 30, 2013, MBIA Corp. has not made tax payments under this tax sharing agreement for 2013 and 2012. If tax payments had been made, all funds would have been placed in escrow by MBIA Inc. and would remain in escrow until the expiration of a two-year carryback period which would allow MBIA Corp. to carryback a separate company tax loss and recover all or a portion of the escrowed funds.

As of September 30, 2013, MBIA Corp. has not received any payment with respect to tax losses contributed to the consolidated group. MBIA Corp. will receive benefits of its losses as it is able to earn out those losses in the future. However, it is MBIA Inc.’s intention not to allow any tax loss generated by MBIA Corp., to the extent used in consolidation, to expire without compensation.

Note 11: Accumulated Other Comprehensive Income

The following table presents the changes in the components of AOCI for the nine months ended September 30, 2013:

 

                                

In millions

   Unrealized
Gains (Losses)
on AFS
Securities, Net (1)
     Foreign Currency
Translation, Net (1)
     Total (1)  

Balance, January 1, 2013

   $ 16       $      $ 25   

Other comprehensive income before reclassification

     (2)         (8)         (10)   

Amounts reclassified from AOCI

     (2)                (2)   
  

 

 

    

 

 

    

 

 

 

Net current period other comprehensive income

     (4)         (8)         (12)   
  

 

 

    

 

 

    

 

 

 

Balance, September 30, 2013

   $ 12       $      $ 13   
  

 

 

    

 

 

    

 

 

 

 

(1) - All amounts are presented net of tax. Amounts in parentheses indicate debits.

The following table presents the details of the reclassifications from AOCI for the nine months ended September 30, 2013:

 

                     

In millions

  Amounts       

Details about AOCI Components

  Reclassified
From AOCI
    

Affected Line Item on the Consolidated Statements of Operations

Reclassification adjustment on sale of securities

  $      Net gains (losses) on financial instruments at fair value and foreign exchange
         Provision (benefit) for income taxes
 

 

 

    

Total reclassifications for the period

  $      Net income (loss)
 

 

 

    

Note 12: Commitments and Contingencies

The following commitments and contingencies provide an update of those discussed in “Note 18: Commitments and Contingencies” in the Notes to Consolidated Financial Statements included in Exhibit 99.2 of MBIA Inc.’s Annual Report on Form 10-K for the year ended December 31, 2012, and should be read in conjunction with the complete descriptions provided in the aforementioned note included in Exhibit 99.2 of Form 10-K. In the normal course of operating its business, MBIA Corp. may be involved in various legal proceedings. Additionally, MBIA may be involved in various legal proceedings that directly or indirectly impact MBIA Corp.

 

51


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 12: Commitments and Contingencies (continued)

 

Recovery Litigation

MBIA Insurance Corp. v. Countrywide Home Loans, Inc., et al.; Index No. 602825/08 (N.Y. Sup. Ct., N.Y. County)

In May of 2013, the parties reached an agreement to resolve MBIA Corp.’s claims in this action. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the comprehensive settlement agreement.

MBIA Insurance Corp. v. Bank of America Corp.; Countrywide Home Loans, Inc., Countrywide Securities Corp., and Countrywide Financial Corp. et al.; Case No. BC417572 (Ca. Super. Ct., County of Los Angeles)

In May of 2013, the parties reached an agreement to resolve MBIA Corp.’s claims in this action. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the comprehensive settlement agreement.

MBIA Insurance Corp. v. Federal Deposit Insurance Corporation (in its corporate capacity and as conservator and receiver for IndyMac Federal Bank, F.S.B.); Civil Action No. 09-01011 (ABJ) (D.D.C.)

On March 8, 2013, the United States Court of Appeals for the D.C. Circuit affirmed the district court’s ruling dismissing MBIA Corp.’s amended complaint.

MBIA Insurance Corp. v. Credit Suisse Securities (USA) LLC, et al. ; Index No. 603751/2009 (N.Y. Sup. Ct., N.Y. County)

On March 8, 2013, the defendants filed their answer to the amended complaint. On April 19, 2013, the court issued an order scheduling fact discovery to close by June 30, 2014.

MBIA Insurance Corp. v. J.P. Morgan Securities LLC (f/k/a Bear, Stearns & Co. Inc) ; Index No. 64676/2012 (N.Y. Sup. Ct., County of Westchester)

On October 9, 2013, J.P. Morgan Securities LLC filed its motion for summary judgment.

MBIA Insurance Corp. v. Ally Financial Inc. (f/k/a GMAC, LLC) et al. ; 12-cv-02563 SRN/TNL (D. Minn.)

This case is currently stayed.

MBIA Insurance Corp. v. Flagstar ABS, LLC, et al.; 13-cv-0262 (JSR) (S.D.N.Y.)

The parties filed a Stipulation of Discontinuance and Order of Dismissal with Prejudice of this action on May 2, 2013. Under the terms of the settlement, MBIA Corp. dismissed the lawsuit against Flagstar Bank in exchange for $110 million in cash and other consideration.

Transformation Litigation

ABN AMRO Bank N.V. et al. v. Eric Dinallo et al.; Index no. 601846/09 (N.Y. Sup. Ct., N.Y. County)

On March 4, 2013, the court issued a decision dismissing the Article 78 proceeding. On April 2, 2013, the remaining plaintiffs filed a Notice of Appeal to the Appellate Division, First Department. In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the settlement agreements.

ABN AMRO Bank N.V. et al. v. MBIA Inc. et al.; Index No. 601475/2009 (N.Y. Sup. Ct., N.Y. County)

In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the settlement agreements.

Barclays Bank PLC., et al. v. Wrynn et al.; Index No. 651811/2010 (N.Y. Sup. Ct., N.Y. County)

In May of 2013, following the Bank of America and Societe Generale settlements, all plaintiffs in this matter dismissed their claims. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the settlement agreements.

 

52


MBIA Insurance Corporation and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

 

Note 12: Commitments and Contingencies (continued)

 

CQS ABS Master Fund Ltd., CQS Select ABS Master Fund Ltd., and CQS ABS Alpha Master Fund Ltd. v. MBIA Inc. et al .; Civil Action No. 12-cv-6840 (R.S.) (S.D.N.Y.)

On October 23, 2013, the plaintiffs filed a motion for a preliminary injunction seeking to prospectively enjoin National from issuing dividends during the pendency of the litigation. Although the motion referenced the dividend that MBIA previously had disclosed that National intended to pay in the fourth quarter of 2013, that dividend was paid prior to the filing of the motion, and therefore is not subject to the relief requested by the motion. National filed its reply to the motion on November 1, 2013 and believes it is not meritorious and should be denied. The court has adjourned oral argument on the motion to November 14, 2013. The court entered a revised Management Plan and Scheduling Order setting a fact discovery deadline of April 4, 2014.

Broadbill Partners LP, et al. v. MBIA Inc., et al. ; Index No. 653865/2012 (N.Y. Sup. Ct., N.Y. County)

On June 6, 2013, the plaintiffs voluntarily dismissed the litigation without prejudice. A Stipulation of Discontinuance was filed on June 7, 2013.

Corporate Litigation

Bank of America v. MBIA Inc. and The Bank of New York Mellon, as Indenture Trustee; Index No. 70444/2012 (N.Y. Sup. Ct., Westchester County)

In May of 2013, the parties reached an agreement to resolve their respective claims in this action. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the comprehensive settlement agreement.

MBIA Inc. v. Bank of America Corp. and Blue Ridge Investments, L.L.C.; Index No. 51664/2013 (N.Y. Sup. Ct., Westchester County)

In May of 2013, the parties reached an agreement to resolve their respective claims in this action. Refer to “Note 1: Business Developments and Risks and Uncertainties” included herein for a description of the comprehensive settlement agreement.

Mary Crescente v. Joseph Brown, et al.; Index No. 17595/2008 (N.Y. Sup. Ct., Westchester County)

On March 25, 2013, a Stipulation of Discontinuance was filed with the court resolving the litigation.

Ambac Bond Insurance Coverage Cases , Coordinated Proceeding Case No. JCCP 4555 (Super. Ct. of Cal., County of San Francisco)

The plaintiffs filed a notice of appeal of the March 22, 2013 decision that granted the Bond Insurer defendants’ motion to strike pursuant to California’s Anti-SLAPP statute dismissing the plaintiffs’ claims under California’s Cartwright Act. On October 1, 2013, the Bond Insurer defendants’ filed a notice of cross-appeal.

Tri-City Healthcare District v. Citibank. et al.; Case No. 30-2010-00359692 (Super. Ct. of Cal., County of Orange)

The parties reached an agreement to resolve Tri-City Healthcare District’s claims in this matter.

City of Phoenix v. AMBAC et al. , Case No. 2:10-cv-00555-TMB (D. Ariz.)

On June 4, 2013, the parties reached an agreement to resolve the City of Phoenix’s claims in this matter.

MBIA and MBIA Corp. are defending against the aforementioned actions in which they are defendants and expect ultimately to prevail on the merits. There is no assurance, however, that they will prevail in these actions. Adverse rulings in these actions could have a material adverse effect on MBIA Corp.’s ability to implement its strategy and on its business, results of operations, cash flows and financial condition. At this stage of the various litigations, there has not been a determination as to the amount, if any, of damages. Accordingly, MBIA Corp. is not able to estimate any amount of loss or range of loss.

There are no other material lawsuits pending or, to the knowledge of MBIA Corp., threatened, to which MBIA Corp. or any of its subsidiaries is a party.

Note 13: Subsequent Events

Refer to “Note 12: Commitments and Contingencies” for information about legal proceedings that occurred after September 30, 2013.

 

53

Exhibit 99.3

NOVATION AGREEMENT

This NOVATION AGREEMENT, dated as of September 14, 2012 (this “ Agreement” ), by and between Financial Guaranty Insurance Company, a New York stock insurance company (“ FGIC ”), and National Public Finance Guarantee Corporation (formerly named MBIA Insurance Corp. of Illinois), a New York stock insurance company (“ National ” and, together with FGIC, the “ Parties ”).

RECITALS

WHEREAS , FGIC and MBIA Insurance Corporation, a New York stock insurance company (“ MBIA ”), entered into (i) a Reinsurance Agreement, dated as of September 30, 2008 (the “ Reinsurance Agreement ”), pursuant to which FGIC ceded as reinsurance to MBIA, and MBIA assumed as reinsurance from FGIC, the interest of FGIC in and to, and the risks associated with each of the Covered Policies (as defined below) (net of certain pre-existing third party reinsurance relating to the Covered Policies provided to FGIC), and (ii) an Administrative Services Agreement, dated as of December 1, 2008 (the “ Administrative Services Agreement ”), pursuant to which MBIA agreed to provide all administrative and other services on behalf of and for FGIC with respect to the Covered Policies;

WHEREAS , pursuant to an Assignment and Assumption Agreement, dated as of February 17, 2009 (the “ Assignment and Assumption Agreement ”), MBIA assigned to National all of its rights, interests, obligations and liabilities under the Reinsurance Agreement, effective as of January 1, 2009, and National assumed the same;

WHEREAS , in connection with the Assignment and Assumption Agreement, National and MBIA entered into a subcontracting arrangement, whereby National agreed to provide all services required to be performed by MBIA under the Administrative Services Agreement; and

WHEREAS , FGIC desires to transfer by novation to National the Covered Policies, the Covered Policy Liabilities (as defined below) and the Covered Policy Rights (as defined below), and National desires to accept such transfer by novation and assume the Covered Policies, the Covered Policy Liabilities and the Covered Policy Rights, all on the terms and subject to the conditions provided herein.

NOW, THEREFORE , in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:


ARTICLE I

DEFINITIONS

1.1       Definitions .  As used in this Agreement, the following terms shall have the meanings set forth below:

 

  (a) Administrative Services Agreement ” shall have the meaning set forth in the recitals to this Agreement.

 

  (b) Affiliate ” means, with respect to any particular Person, any other Person which, directly or indirectly, controls or is controlled by or under common control with such particular Person. A Person will be “controlled by” any other Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, contract, or otherwise.

 

  (c) Agreement ” shall have the meaning set forth in the preamble to this Agreement.

 

  (d) Assignment and Assumption Agreement ” shall have the meaning set forth in the recitals to this Agreement.

 

  (e) Business Day ” means any day other than a day on which banks in the State of New York are permitted or required to be closed.

 

  (f) Court Order ” means an order of the Rehabilitation Court in the Proceeding approving this Agreement and ordering that the Covered Policies, the Covered Policy Rights and the Covered Policy Liabilities shall be legally novated from FGIC to National in accordance with the terms and conditions of this Agreement.

 

  (g) Covered Policy ” means each Policy written by FGIC and reinsured by National (as assignee of MBIA) pursuant to the Reinsurance Agreement, as set forth on Schedule 1 .

 

  (h)

Covered Policy Liabilities ” means the Liabilities of FGIC pursuant to the terms and conditions of the Covered Policies. For the avoidance of doubt, neither the term “Covered Policy” nor the term “Covered Policy Liabilities” shall include (i) any FGIC Extra Contractual Obligations, (ii) any Liabilities of FGIC arising out of or relating to any agreement, contract, instrument or other document included in the definition of Covered Policy Rights, other than to the extent (x) pursuant to the terms and conditions of the Covered Policies or (y) arising out of any action or inaction of National or any of its Affiliates, (iii) any Liabilities of FGIC arising out of FGIC’s entry into this Agreement and the consummation of

 

2


 

the transactions contemplated hereby and (iv) any Liabilities of FGIC or any of its Affiliates arising from or relating to litigation known as AMBAC Bond Insurance Cases and the City of Phoenix vs. Ambac Assurance Corporation, MBIA Insurance Corporation and Financial Guaranty Insurance Company or litigation on substantially similar matters; provided that this exclusion (iv) shall not include amounts payable pursuant to the terms and conditions of the Covered Policies.

 

  (i) Covered Policy Rights ” means the rights of FGIC under or with respect to the Covered Policies and the rights of FGIC, as the original insurer, surety or similar capacity under the Covered Policies, under any agreement, contract, instrument or other document relating to the Covered Policies or any obligations insured by the Covered Policies. For the avoidance of doubt, Covered Policy Rights shall not include Third Party Reinsurance or any other reinsurance coverage of risks under any of the Covered Policies or FGIC’s rights thereunder.

 

  (j) Covered Policyholder ” means for each Covered Policy the holder or beneficiary of such Covered Policy as set forth therein.

 

  (k) Documents ” shall have the meaning set forth in Section 3.1(b) of this Agreement.

 

  (l) Extra Contractual Obligations ” means, with respect to any Person, all liabilities (i) for compensatory, consequential, exemplary, punitive or similar damages which directly relate to any alleged or actual act, error, omission, fraud or misrepresentation by such Person, any of its Affiliates or any of its or its Affiliates’ officers or employees, whether intentional or otherwise or (ii) from any actual or alleged reckless conduct or bad faith by such Person, any of its Affiliates or any of its or its Affiliates’ officers or employees in connection with such Person’s handling of any claim under any of the Covered Policies (including the settlement, defense of, or appeal of any claim) or in connection with the issuance, offer, sale, delivery, cancellation or administration by such Person or any of its Affiliates or any of its or its Affiliates’ officers or employees of any of the Covered Policies.

 

  (m) FGIC ” shall have the meaning set forth in the preamble to this Agreement.

 

  (n) FGIC Extra Contractual Obligations ” means any and all Extra Contractual Obligations to the extent arising out of any action or inaction of FGIC or any of its Affiliates.

 

  (o)

Final Order ” means an order or judgment of a court of competent jurisdiction entered on the docket maintained by the clerk of such court that has not been reversed, vacated or stayed and as to which (i) the time

 

3


 

to appeal, petition for certiorari or move for a new trial, reargument or rehearing has expired and as to which no appeal, petition for certiorari or other proceedings for a new trial, reargument or rehearing shall then be pending, or (ii) if an appeal, writ of certiorari , new trial, reargument or rehearing thereof has been sought, (a) such order or judgment shall have been affirmed by the highest court to which such order was appealed, leave to appeal or certiorari shall have been denied or a new trial, reargument or rehearing shall have been denied or resulted in no modification of such order or otherwise been dismissed with prejudice, and (b) the time to take any further appeal, petition for certiorari , or move for a new trial, reargument or rehearing shall have expired; provided , however , that the possibility that a motion under Rule 60 of the Federal Rules of Civil Procedure, Rule 5015 of the New York Civil Practice Law and Rules, or any analogous rule, may be filed relating to such order shall not prevent such order from being a Final Order.

 

  (p) Governmental Authority ” means any federal, state, local or foreign government or any subdivision, agency, instrumentality, authority, self-regulatory organization, department, commission, board or bureau thereof or any federal, state, local or foreign court or tribunal.

 

  (q) Liabilities ” means any and all claims, losses, exposures, risks, liabilities, expenses and other obligations of any kind or nature, whether based in contract, tort or otherwise, whether known, unknown, asserted, not asserted, absolute, contingent, accrued, unaccrued, disputed, undisputed, or otherwise, and whether incurred, existing or arising before, on or after the Novation Effective Date.

 

  (r) Master Agreement ” shall have the meaning set forth in Section 2.3(a) of this Agreement.

 

  (s) Material Adverse Effect ” means a material adverse effect on (i) the ability of the applicable Party to consummate the transactions contemplated by this Agreement, (ii) the ability of the applicable Party to perform its obligations under this Agreement or (iii) the effectiveness of the novation of the Covered Policies, the Covered Policy Rights or the Covered Policy Liabilities as contemplated by this Agreement.

 

  (t) MBIA ” shall have the meaning set forth in the recitals to this Agreement.

 

  (u) National ” shall have the meaning set forth in the preamble to this Agreement.

 

  (v) National Extra Contractual Obligations ” means any and all Extra Contractual Obligations to the extent arising out of any action or inaction of National or any of its Affiliates (including, for the avoidance of doubt, any such action or inaction during the term of the Administrative Services Agreement).

 

4


  (w) Novation Effective Date ” means the earliest date on which both (i) all conditions to the effectiveness of the Plan are either satisfied or waived pursuant to the terms of the Plan and (ii) the Court Order is in full force and effect and is a Final Order, provided that FGIC may waive in writing the requirement that the Court Order be a Final Order.

 

  (x) Novation Endorsement ” shall have the meaning set forth in Section 2.4 of this Agreement.

 

  (y) Parties ” shall have the meaning set forth in the preamble to this Agreement.

 

  (z) Person ” means an individual, corporation, limited liability company, association, joint-stock company, business trust or other similar organization, partnership, joint venture, trust, unincorporated organization or government or any agency, instrumentality or political subdivision thereof.

 

  (aa) Plan ” means the Plan of Rehabilitation for FGIC (or, if the Proceeding is converted to a liquidation proceeding, the Plan of Liquidation for FGIC) as approved by an order entered by the Rehabilitation Court in the Proceeding.

 

  (bb) Policy ” means a policy, insurance contract, surety bond, financial guarantee, or similar instrument or contract (but not including forward commitments to issue any of the foregoing), issued or written by FGIC in the United States, the District of Columbia, Puerto Rico or the U.S. Virgin Islands, and shall include primary policies, secondary market policies and ancillary policies or guaranties guarantying debt service reserve fund obligations, interest rate swaps and liquidity facilities or similar obligations in connection with primary policies.

 

  (cc) Proceeding ” means the rehabilitation proceeding for FGIC pursuant to Article 74 of the New York Insurance Law (“Article 74”) currently pending before the Rehabilitation Court, captioned as In the Matter of the Rehabilitation of Financial Guaranty Insurance Company, Index No. 401265/2012, as such proceeding may be converted to a liquidation proceeding pursuant to Article 74.

 

  (dd) Records ” shall have the meaning set forth in Section 3.2(b) of this Agreement.

 

  (ee) Rehabilitation Court ” means the court having jurisdiction over the Proceeding.

 

5


  (ff) Rehabilitation Order ” means the Order of Rehabilitation signed by the Honorable Doris Ling-Cohan of the Rehabilitation Court on June 28, 2012 in the Matter of the Application of Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York , for an order to take possession of the property of and rehabilitate Financial Guaranty Insurance Company, Index No. 401265/2012.

 

  (gg) Reinsurance Agreement ” shall have the meaning set forth in the recitals to this Agreement.

 

  (hh) Second-to-Pay Policy ” means the second-to-pay policy (policy No. MBNA-0002), as amended or supplemented, issued by National, whereby National agreed, among other things, to guarantee any shortfall in amounts due from FGIC under the Covered Policies.

 

  (ii) Third Party Reinsurance ” means, as of any date of determination, all reinsurance coverage of risks under any of the Covered Policies provided to FGIC by a Third Party Reinsurer as of such date.

 

  (jj) Third Party Reinsurers ” means, as applicable, each third party reinsurer of FGIC, including Assured Guaranty Corp. and its Affiliates, American Overseas Reinsurance Company Limited (fka RAM Reinsurance Company Ltd.) and The TOA Reinsurance Company of America.

1.2       Interpretation .  When a reference is made in this Agreement to an Article, Section, Exhibit, or Schedule, such reference shall be to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The Article and Section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the Parties and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes. References to a Person are also to its permitted successors and assigns.

 

6


ARTICLE II

NOVATION OF THE COVERED POLICIES

2.1       Novation .  As of the Novation Effective Date, without the need for any action on the part of either Party or any other Person (including any consent or other action on the part of any Covered Policyholder or any other interested Person):

 

  (a) FGIC hereby transfers by novation to National, and National hereby accepts such transfer by novation of, the Covered Policies, the Covered Policy Rights and the Covered Policy Liabilities, with the effect that National is hereby irrevocably designated the successor in interest to, and substituted in the place and stead of, FGIC as if it were the original insurer, surety or Person acting in a similar capacity under the Covered Policies and with respect to the Covered Policy Rights and the Covered Policy Liabilities, and National will be the sole insurer, surety or Person acting in a similar capacity, respectively, under the Covered Policies and with respect to the Covered Policy Rights and the Covered Policy Liabilities.

 

  (b) National hereby irrevocably accepts the Covered Policy Rights, including all rights to premiums, recoveries, subrogation and salvage that have accrued or may accrue under or with respect to the Covered Policies but excluding any such amounts paid by any Person to MBIA or National pursuant to the Administrative Services Agreement prior to the Novation Effective Date, and shall have the sole and direct benefit of such Covered Policy Rights in substitution for FGIC; provided , however , that, for the avoidance of doubt, it is acknowledged and agreed that pursuant to the Reinsurance Agreement FGIC has previously ceded and paid to National (as assignee of MBIA) all unearned premiums relating to the Covered Policies net of the ceding commissions payable to FGIC thereunder and that FGIC shall not have any obligation to pay or remit to National any additional or further premiums relating to the Covered Policies except as and to the extent provided in the next sentence. FGIC shall promptly remit to National one hundred percent (100%) of the premiums, recoveries, subrogation and salvage under or with respect to the Covered Policies, if any, that FGIC may receive after the Novation Effective Date. All monies, checks, drafts, money orders and other instruments received by FGIC after the Novation Effective Date for such amounts will be promptly transferred and delivered to National and any such instruments, when so delivered, will bear all endorsements required to effect the transfer to National.

 

  (c)

National hereby irrevocably assumes the Covered Policy Liabilities, and shall have the sole and direct liability and responsibility for, and shall fully and timely perform, the Covered Policy Liabilities in substitution for FGIC. National shall have the direct benefit of, and be fully subrogated to,

 

7


 

any and all defenses, setoffs and counterclaims to which FGIC would have been entitled under or with respect to the Covered Policies or the Covered Policy Liabilities. The Parties agree that no such defenses, set-offs or counterclaims are waived by the execution of this Agreement or the consummation of the transactions contemplated hereby.

 

  (d) The Covered Policyholders, the issuers or obligors of the obligations insured by the Covered Policies and all other interested Persons are authorized and directed to pay all future premiums and recoveries, if any, and to submit all future claims, if any, under or with respect to the Covered Policies solely and directly to National and to treat National for all purposes as if it had originally issued or written the Covered Policies instead of FGIC.

 

  (e) The Covered Policies shall remain in full force and effect and will be subject in all respects to the same terms and conditions of the Covered Policies, respectively, as in effect immediately prior to the Novation Effective Date, except as modified hereby or by the Novation Endorsement.

2.2       Release and Discharge of FGIC .  As of the Novation Effective Date, without the need for any action on the part of either Party or any other Person (including any consent or other action on the part of any Covered Policyholder or any other interested Person), FGIC is hereby irrevocably released and fully, finally and forever discharged from the Covered Policy Liabilities, and National shall indemnify, defend and hold FGIC harmless against all Covered Policy Liabilities.

2.3       Reinsurance Agreement, Administrative Services Agreement and Master Agreement .

 

  (a)

Without the need for any action on the part of either Party or any other Person (including any consent or other action on the part of any Covered Policyholder or any other interested Person), the Parties hereby agree that each of the (i) Reinsurance Agreement, following settlement as of the Novation Effective Date of all amounts then known to be owed and remaining unpaid on such date as between FGIC and National under or with respect to the Reinsurance Agreement, (ii) Administrative Services Agreement, and (iii) Master Agreement, dated as of August 27, 2008, by and among FGIC, MBIA Inc. and MBIA (the “ Master Agreement ”), shall terminate as of the Novation Effective Date, and each Party shall be irrevocably released and fully, finally and forever discharged from any and all Liabilities to the other Party thereunder or with respect thereto, including any Liability of National to FGIC to return premium on any Policies determined after the Novation Effective Date to have been refinanced or otherwise not in-force as of the effective date of the Reinsurance Agreement, in each case subject to Sections 2.3(c) and (d) below. Notwithstanding anything to the contrary herein or in any of the

 

8


 

foregoing agreements, in the event of any commutation or recapture of any or all the Third Party Reinsurance, whether before, at or after the Novation Effective Date, no amount or other obligation shall be payable or owed by FGIC to National in connection therewith.

 

  (b) National has informed FGIC, and FGIC acknowledges, that pursuant to Section 3 of the Second-to-Pay Policy, upon the termination of the Reinsurance Agreement, the Second-to-Pay Policy will be cancelled automatically and immediately without any further action on the part of National.

 

  (c) In the event that an applicable Governmental Authority should finally determine that all or any portion of any Covered Policies, Covered Policy Rights and/or Covered Policy Liabilities are not, by virtue of this Agreement, legally novated to National, the Parties hereby agree that the Reinsurance Agreement and the Administrative Services Agreement and the Parties’ respective rights and obligations thereunder shall be deemed to be reinstated and in full force and effect (continuously from and after the Novation Effective Date, but without giving effect to any provisions concerning Third Party Reinsurance), solely as to such Covered Policies, Covered Policy Rights and/or Covered Policy Liabilities (or portion thereof, as applicable) that were subject to such final determination, as the case may be, automatically and without any further action of the Parties or any other Person notwithstanding Section 2.3(a) of this Agreement. Furthermore, with respect to any such determination (final, pending, threatened, potential or otherwise) or similar matter, facts or circumstances, notwithstanding anything herein to the contrary (i) automatic reinstatement of the Reinsurance Agreement and Administrative Services Agreement and the Parties’ respective rights and obligations thereunder, solely if and to the extent provided under the foregoing sentence, shall be the sole and exclusive remedy of the Parties and (ii) this Agreement shall terminate with respect to such Covered Policies, Covered Policy Rights and/or Covered Policy Liabilities, or any such portion thereof, as applicable, and neither Party shall have any Liability under or arising out of this Agreement with respect thereto.

 

  (d)

In the event that an applicable Governmental Authority should issue a stay or injunction preventing the implementation of this Agreement with respect to all or any portion of any Covered Policies, Covered Policy Rights and/or Covered Policy Liabilities, the Parties hereby agree that the Reinsurance Agreement and the Administrative Services Agreement and the Parties’ respective rights and obligations thereunder shall be deemed to be reinstated and in full force and effect (continuously from and after the Novation Effective Date, but without giving effect to any provisions concerning Third Party Reinsurance), during the pendency of such stay or injunction solely as to such Covered Policies, Covered Policy Rights and/or Covered Policy Liabilities (or portion thereof, as applicable) that

 

9


 

were subject to such stay or injunction, as the case may be, automatically and without any further action of the Parties or any other Person notwithstanding Section 2.3(a) of this Agreement. Furthermore, with respect to any such stay or injunction (final, pending, threatened, potential or otherwise) or similar matter, facts or circumstances, notwithstanding anything herein to the contrary (i) automatic reinstatement of the Reinsurance Agreement and Administrative Services Agreement and the Parties’ respective rights and obligations thereunder, solely if and to the extent provided under the foregoing sentence, shall be the sole and exclusive remedy of the Parties and (ii) neither Party shall have any Liability under or arising out of this Agreement with respect thereto.

2.4       Novation Endorsement .  National will use its commercially reasonable efforts to deliver an assumption and novation endorsement substantially in the form attached hereto as Exhibit A (the “ Novation Endorsement ”) to the Covered Policyholders on or as soon as practicable after the Novation Effective Date. On or promptly following the Novation Effective Date, National shall (i) post to its website the Novation Endorsement and a notice relating to the consummation of the transactions contemplated hereby in a form mutually acceptable to the Parties and (ii) use its commercially reasonable efforts to post the Novation Endorsement and the foregoing notice to the Electronic Municipal Market Access system. Notwithstanding the foregoing, in no event shall the effectiveness of this Agreement, including for the avoidance of doubt the novation, assumptions, discharges and releases effected hereby and the other agreements hereunder, be conditioned on National’s fulfillment of its obligations under this Section 2.4.

2.5       Errors and Omissions .  Inadvertent errors or omissions will not relieve any Party from liability hereunder provided that the error or omission is rectified as soon as reasonably practicable after discovery. Upon discovery of an error or omission, the discovering Party will notify the other Party. The Parties will agree to work together in good faith to resolve, consistent with the terms of this Agreement, problems, issues or disputes caused by any such error or omission.

ARTICLE III

REPRESENTATIONS AND WARRANTIES AND COVENANTS

3.1       Representations and Warranties .  As of the date hereof and as of the Novation Effective Date, each Party hereby represents and warrants to the other Party as follows:

 

  (a) Good Standing .  Such Party is duly organized, validly existing and in good standing (except, in the case of FGIC, for any adverse effect resulting from the commencement of the Proceeding) under the laws of the jurisdiction of its organization with full power and authority to execute and deliver, and to perform and observe the terms and provisions of, this Agreement.

 

10


  (b) Power and Authority .  Such Party has all requisite power and authority to execute and deliver this Agreement as contemplated hereby and each other agreement, document, instrument or certificate to be executed by such Party as contemplated hereby or in connection with the consummation of the transactions contemplated hereby (the “ Documents ”) and, subject to the occurrence of the Novation Effective Date, to perform its obligations under this Agreement and the Documents. In the case of National, it has all insurance and other licenses required for the consummation of the transactions contemplated hereby and the performance of its obligations under this Agreement and the Documents, except those (i) as to which the failure to be obtained by such Party would not reasonably be expected to have a Material Adverse Effect, or (ii) which will be obtained, on or prior to the Novation Effective Date. No judgment, order or regulatory action has been entered or taken that would reasonably be expected to lead to the revocation, amendment, failure to renew, limitation, suspension or restriction of any such insurance or other license.

 

  (c) Authorization .  Such Party’s execution and delivery of, and performance of its obligations under, this Agreement and the Documents to be executed and delivered by such Party have been duly authorized by all necessary corporate action on its part (in the case of FGIC, including by the Superintendent of Financial Services of the State of New York (or his designee), as court-appointed rehabilitator of FGIC, pursuant to and as contemplated by the Rehabilitation Order).

 

  (d) Enforceability .  This Agreement constitutes, and each of the Documents to be executed and delivered by such Party (when so executed and delivered) will constitute, a legal, valid and binding obligation of such Party, enforceable against such Party in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).

 

  (e) No Consent or Approval .  No consent, approval, order or authorization is required to be obtained from, and no notice or filing is required to be provided or made to, any Governmental Authority by such Party in order to execute, deliver and perform its obligations under this Agreement and each of the Documents to be executed and delivered by it, except those (i) as to which the failure to be obtained, provided or made, as applicable, by such Party would not reasonably be expected to have a Material Adverse Effect or (ii) which have already been obtained, provided or made, as applicable, by such Party or, as to performance, which will be obtained, provided or made, as applicable, by such Party on or prior to the Novation Effective Date and except, as to performance, for the Court Order which must be in full force and effect on the Novation Effective Date.

 

11


  (f) No Conflicts .  Such Party’s execution and delivery of, and performance of its obligations under, this Agreement and each of the Documents to be executed and delivered by such Party does not and will not, subject to obtaining, providing or making, as applicable, the consents, approvals, orders, authorizations, notices and filings contemplated to be obtained, provided or made in Section 3.1(e) hereof or required for the Novation Effective Date to occur: (i) violate any provision of law, rule or regulation applicable to such Party or of such Party’s certificate of incorporation, bylaws or other organizational documents; or (ii) conflict with, result in a breach of or constitute (with due notice or lapse of time or both) a default under any material contractual obligation to which it is a party.

 

  (g) No Judgment or Order .  To its knowledge, there is no judgment, order or regulatory action invalidating this Agreement or enjoining the transactions contemplated hereby.

 

  3.2 Covenants .

 

  (a) Rehabilitation Court Approval .  Each Party agrees to use its commercially reasonable efforts to seek to facilitate the Rehabilitation Court’s approval of this Agreement and the consummation of the transactions contemplated hereby.

 

  (b) Transfer of Records .  Promptly following the Novation Effective Date, FGIC shall transfer and deliver to National all the underwriting and surveillance files and records relating to the Covered Policies in FGIC’s possession or under its control to the extent that such files and records are material and such other files and records relating to the Covered Policies as may be reasonably requested by National promptly following such request (the “ Records ”). National agrees that after such delivery, FGIC will be entitled, upon reasonable request, during normal business hours and at FGIC’s expense to inspect and copy the Records. Any and all correspondence, records or documents coming into the possession of FGIC after the Novation Effective Date, which directly pertain to any Covered Policy or Covered Policy Rights, will be promptly delivered to National by FGIC.

 

  (c) Accounting .  From and including the Novation Effective Date, National shall account for the Covered Policies as direct business of National, National shall maintain all unearned premium, contingency, loss and loss adjustment expense and other statutory reserves required with respect to the Covered Policies, and FGIC shall have no further obligations for reserving or accounting for the Covered Policies.

 

12


ARTICLE IV

GENERAL PROVISIONS

4.1       Termination .  If the Novation Effective Date does not occur on or prior to December 31, 2013, then National shall have the option to terminate this Agreement by giving FGIC written notice of its election to terminate at any time after such date if and so long as the Novation Effective Date shall not have occurred prior to the delivery of such notice or the termination date specified in such notice. Either Party shall have the option to terminate this Agreement (by delivering written notice to the other Party) if the Plan or supplements thereto as submitted to the Rehabilitation Court (either initially, or on any subsequent submission date) and as may be modified, amended or supplemented thereafter do not include this Agreement in the form as executed by the Parties, or with such changes as the Parties may approve in writing.

4.2       Amendments and Waivers .  This Agreement may not be amended, modified, supplemented or changed, and any provision hereof may not be waived or extended, without a writing signed by each Party. The waiver by any Party of any breach of any provision hereof shall be limited to its specific terms and shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of a Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies at law.

4.3       Notices and Reports .  All notices and other communications under this Agreement shall be in writing and shall be deemed given when delivered personally by hand, when sent by facsimile transmission (with confirmation of such transmission), or one Business Day following the day sent by next day delivery service using a nationally recognized overnight courier, in each case at the following addressed and facsimile numbers (or to such other address or facsimile number as a Party may have specified by notice given to the other Party pursuant to this provision):

 

  If to FGIC:    Financial Guaranty Insurance Company
   125 Park Avenue
   New York, New York 10017
   Attention : General Counsel
   Facsimile: (212) 312-3221
  If to National:    National Public Finance Guarantee Corporation
   113 King Street
   Armonk, NY 10504
   Attention : General Counsel
   Facsimile: 914-765-3919

 

13


4.4       Severability .  The invalidity or unenforceability of any provision or portion hereof shall not affect the validity or enforceability of the other provisions or portions hereof, all of which shall remain in full force and effect.

4.5       Incontestability .  In consideration of the mutual covenants and agreements contained herein, each Party does hereby agree that this Agreement, and each and every provision hereof, is and shall be enforceable by and between them according to its terms, and each Party does hereby agree that it shall not, directly or indirectly, contest the validity or enforceability this Agreement or any provision hereof.

4.6       Entire Agreement .  This Agreement constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, and negotiations, both written and oral, relating thereto.

4.7       Further Assurances .  Upon the terms and subject to the conditions herein, each Party agrees to use its commercially reasonable efforts to take or cause to be taken all actions, and to do or cause to be done, and to assist and cooperate with the other Party in doing, all things, in each case as are necessary, proper or advisable and in compliance with applicable law to carry out the purposes of this Agreement and the consummation of the transactions contemplated hereby. In furtherance of the foregoing, FGIC agrees to use its commercially reasonable efforts on and after the Novation Effective Date, at the reasonable request of National, to execute and deliver any instruments, consents, waivers, amendments, notices and other documents, to take any actions or refrain from taking any actions, and to make any filings, appearances or other steps before a Governmental Authority or otherwise as are necessary and appropriate and in compliance with applicable law in order to permit National to seek to exercise and enforce the Covered Policy Rights, including seeking to commence litigation or any other proceeding before a Governmental Authority in order to seek to mitigate a loss or potential loss or protect, perfect or exercise any subrogation, salvage or reimbursement rights or security interests with respect to any Covered Policy. For the avoidance of doubt, neither Party shall institute, prosecute or maintain any legal proceedings on behalf of the other Party without the prior written consent of such other Party. Upon FGIC’s request and from time to time, National shall reimburse FGIC for all reasonable out-of-pocket costs and expenses incurred by FGIC in connection with any activities contemplated by this Section that are undertaken or made at the request or direction of National, including the costs and expenses of defending or participating in any legal or other proceedings; provided , however , that FGIC shall use its commercially reasonable efforts to notify National if FGIC determines that, in connection with any such request or direction of National, it would expect to incur out-of-pocket costs and expenses exceeding $10,000.

4.8       Indemnification by National .  The provisions of Exhibit B attached hereto are hereby incorporated into this Agreement by reference in their entirety and made a part of this Agreement as if fully set forth herein.

4.9       Costs and Expenses .  Unless provided herein (including Sections 4.7 and 4.8), each Party will pay its own costs and expenses (including legal fees) incurred in connection with the negotiation, preparation and execution of this Agreement and the Documents and the consummation of the novation transaction specified herein.

 

14


4.10     Counterparts .  This Agreement may be executed in counterparts (or by counterpart signature pages), each of which shall be deemed an original and all of which constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by facsimile, email or other electronic imaging means shall be as effective as delivery of an original manually executed counterpart of this Agreement.

4.11     Parties in Interest .  Nothing in this Agreement is intended or shall be construed to give any Person, other than the Parties and their successors and permitted assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

4.12     Submission to Jurisdiction .  Each Party irrevocably submits to the exclusive jurisdiction of the Rehabilitation Court for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby; provided , that in the event that the Rehabilitation Court is not available, each Party irrevocably submits to the exclusive jurisdiction of any state court located in New York County in the State of New York for such purposes. Each Party agrees to commence any such action, suit or proceeding in the Rehabilitation Court or, in the event that the Rehabilitation Court is not available for such purposes, the Supreme Court of the State of New York, New York County. Each Party further agrees that service of any process, summons, notice or document by U.S. registered mail to such Party’s respective address set forth above shall be effective service of process for any action, suit or proceeding in the State of New York with respect to any matters to which it has submitted to jurisdiction in this Section. Each Party irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in such court, and hereby and thereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. The Parties intend the broadest possible exclusive jurisdiction of the Rehabilitation Court. Notwithstanding the foregoing, any judgment against any Party hereto may be enforced using the assistance of such courts as may be available to aid in the enforcement of judgments.

4.13     WAIVER OF RIGHT TO JURY TRIAL .  EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MIGHT HAVE TO A TRIAL BY JURY IN ANY ACTION, MATTER OR PROCEEDING REGARDING THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).

4.14     Binding Effect; Assignment .  This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. No Party may assign or delegate all or any portion of its rights, obligations or liabilities under this Agreement without the prior written consent of the other Party, which consent

 

15


may be given or withheld in such other Party’s sole discretion; and any attempt to assign or delegate any rights, obligations or liabilities under this Agreement without such consent shall be void.

4.15     Governing Law .  This Agreement shall be construed in accordance with and be governed by the law of the State of New York applicable to contracts entered into therein, without regard to principles of choice of law or conflicts of laws that might lead to the application of laws other than the laws of the State of New York.

4.16     Specific Performance .  Each Party acknowledges and agrees that irreparable injury to the other Party would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and that such injury would not be adequately compensable in damages. It is accordingly agreed that each Party shall be entitled to seek specific enforcement of, and injunctive relief to prevent any violation of, the terms hereof and the other Party will not take action, directly or indirectly, in opposition to such Party seeking such relief on the grounds that any other remedy or relief is available at law or in equity, nor shall such other Party seek the posting of a bond as a condition for obtaining any such relief. An application for specific performance pursuant to this Section shall not preclude such Party from seeking other relief available at law or in equity.

[ signature page follows ]

 

16


IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the date first above written.

 

FINANCIAL GUARANTY INSURANCE COMPANY   
By:       
  BENJAMIN M. LAWSKY   
  Superintendent of Financial Services of the State of New York, in his capacity as Rehabilitator of Financial Guaranty Insurance Company   
  By:   /s/ Peter A. Giacone                                   
    Name:     
    Title:  

Chief Financial Officer

and Agent of Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, in his capacity as Rehabilitator of Financial Guaranty Insurance Company

  
NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION   
By:   /s/ Daniel E. McManus, Jr.                               
  Name:  Daniel E. McManus, Jr.   
 

Title:  Managing Director, General Counsel

            And Secretary

  

 

17


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

00010008     Allentown City SD, PA GO 2000
00010012   Peotone CUSD #207-U IL GO 00AB
00010013   2525000Pampa (City of), TX GO
00010017   Keller, TX GO Ltd Tax 99A
00010020   Perry CSD, NY GO 2000
00010022   KAUAI COUNTY, HAWAII GO 2000AB
00010023   Willington (Town of) CT 2000
00010028   MORIARTY MUNIC SD #8, NM GO 00
00010030   Bridgeport,ConnecticutGO 2000A
00010032   Gardner USD # 231,KS GO. 2000
00010033   East Lyme (Town of), CT GO 00
00010034   Chetek SD, WI GO 2000
00010035   Campbellsport SD, WI 2000
00010037   Altoona SD, Wisconsin 2000
00010038   Sedgwick USD #260, Derby KS GO
00010039   Monroe County, IL GO LT 2000A
00010040   Monroe County,IL GO AltRev 00B
00010041   Williamson County, TX ULT 2000
00010043   Waco, Texas GO Ltd Tax 2000
00010044   Granby (Town of), CT GO 00
00010045   Fairfield (Twp), NJ GO 2000
00010047   Federal Way SD #210, WA GO 00
00010054   De Pere (City), WI GO 2000A
00010058   National Park Bd of ED, NJ 00
00010059   Stow (Town of) MA 2000
00010061   Grantsburg SD, WI GO 2000A
00010062   Flemington-Raritan RSD NJ 2000
00010066   Sparta ASD, WI GO 99B
00010068   Illinois State GO/Lse 1/2000
00010070   CHICAGO (CITY OF), IL GO 2000
00010071   Champaign County, IL GO 2000AB
00010072   Kingman Co., KS USD #331 GO 00
00010073   Hopkins County, Kentucky GO 00
00010076   Kewaskum SD, WI GO Ref 2000
00010079   Macomb Township Bldg Auth, MI
00010081   Bellevue Union SD, CA GO 99
00010082   Jefferson Township, NJ GO 2000
00010084   Upper Twp BOE, NJ GO 2000
00010089   Vicksburg Comm Schs, MI GO 00
00010094   Waxahachie, TX GO Ltd Tax 2000
00010097   Keyport (Boro of) BOE, NJ
00010100   Giles County, TN GO Ser 2000
00010101   Joshua, TX GO 2000
00010102   Saginaw, Texas Ltd Tax GO 2000
00010107   Perry Community SD, IA GO 00A
00010109   Lowell (City) MA GO 2000
00010118   Capistrano USD SFID No1,CA 99A
00010120   Sterling (Town) MA GO
00010123   Quinton Twp BOE, NJ GO 2000
00010124   Mauston SD, WI GO Ref
00010125   Mount Horeb ASD, WI GO 2000
00010128   Jersey Village, TX GO 2000
00010129   Cabrillo Cmnty CD, CA GO 98B
00010134   Washougal SD #112-6, WA GO 00
00010138   Johnston County, NC GO 2000

 

Policy Id

 

 

Policy

00010142     Clinton Commun SD WI 2000
00010143   Holden, MA GOLT 2000
00010144   Valley Stream CHSD, NY GO 2000
00010145   Paris, TX Ltd Tax COO 2000
00010146   Freehold Reg. HSD, NJ GO 2000
00010147   Oshkosh (City of),WI GO 00 A/B
00010150   Sunnyvale Sch Dist, CA GO 00C
00010152   Penns Grove-Carneys Pt SD NJ
00010154   TRENTON (CITY OF), NJ GO
00010155   Galesburg, IL GO 2000
00010160   Chicago (City of), Ill GO 2000
00010162   Clark County, NV GO Ltd Tax
00010163   Richardson City, TX Ltd Tax GO
00010164   Hilliard City SD, OH GO 2000
00010166   Lake Local SD, OH GO 2000
00010167   Wyoming (City of) MI GOULT2000
00010168   Grapevine, TX Cert Oblig 2000
00010170   Garland, TX Ltd Tax GO/COO 00
00010171   Clinton Commun SD WI dtd4/1/00
00010172   Lakeway MUD, Texas GO 2000
00010173   Grapevine, Texas GO 2000
00010177   ABC Unified SD, CA GO 2000 B
00010178   Cardinal Local SD, OH 2000
00010180   Essex County Imprv Auth, NJ GO
00010181   North Attleborough, MA GO
00010182   Triad Local SD, OH 2000
00010184   Northwest HarrisCtyMUD#20,TXGO
00010188   Warren Twp. BOE, NJ GO 2000
00010192   Canastota CSD, NY GO 2000
00010194   Southeast Town, NY GO 2000
00010202   Lincoln Co., WI GO 2000
00010203   J. Sterling Morton HSD #201,IL
00010204   East Ouachita SD, LA GO 2000
00010207   Harris County MUD #24, TX 2000
00010208   Dallas Center-Grimes CSD, IA
00010209   Meadows Place, TX Ltd GO 2000
00010212   Channahon (Vlg), IL GO 2000
00010213   Colony, Texas Ltd Tax GO 2000
00010217   Stillwater (City), MN 2000D
00010218   Morgan City, LA GO Series 2000
00010219   Newport, TN GO 2000
00010224   Many Sch Dist #34, LA GO Ser00
00010227   Malden (City), MA 2000
00010228   Haltom City, TX GO 2000
00010229   Santa Ana USD, CA GO Ser 2000
00010231   Sandusky (City), OH LTD
00010232   Westland Building Auth,MI 2000
00010234   WESTFORD (TOWN OF), MA GO
00010236   Fern Bluff MUD, TX GO Ser 2000
00010238   Roane County, TN GO 2000
00010240   Laredo, Texas GO Ser 2000
00010241   Frankfort-Schuyler CSD,NY 2000
00010244   Espanola Pub SD 45, NM GO 2000
00010246   Allen, Texas Limited Tax GO 00
00010249   Auburn, MA GO LTD
 

 

-1-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

00010251     Wills Point, TX GO Series 2000
00010252   Trenton Pkg Auth (GO),NJ 1999
00010254   Brookfield (Village), Ill 2000
00010255   West Bend, WI GO 2000
00010256   Little Elm (Town of),TX GO2000
00010259   Athens (City of), Texas GO 00
00010260   Wayne Highlands SD, PA GO 2000
00010265   Dudley (Town), MA GO 2000
00010269   Randolph CSD, NY GO 2000
00010270   Cape Girardeau SD 63, MO GO 00
00010272   Somerset Sch Dist, WI GO 2000A
00010273   Lake Co SD(Diamond Lake)#76,IL
00010274   Manitowoc County, WI GO 2000A
00010275   Odessa, Texas Ltd GO 2000
00010280   Wadsworth City SD, OH GO 2000
00010282   Putnam County, TN GO 2000
00010283   Niles Twp CHSD #219, IL GO 00
00010284   Calcasieu Par SD #31, LA GO 00
00010289   Warrensville Hts. CSD,OHGO2000
00010290   Washington State GO 2000S-5
00010291   Douglass USD #396, KS GO 2000
00010292   Harris Cnty MUD #132, TX GO 00
00010295   Rowlett, Texas Ltd Tax GO 2000
00010304   Grant Com HSD #124, IL GO 00
00010306   Rialto Unified SD, CA GO 2000A
00010307   Evergreen SD, CA 00GO Series C
00010310   Festus Reorg. SD R-6, MO GO 00
00010312   Midland, TX Ltd Tax COO 2000
00010313   Volney (Town of), NY GO 2000
00010315   Lakewood Twp BOE, NJ GO
00010324   New York City, NY GO 2000ABC
00010325   New York City, NY GO 2000BCD
00010327   Mokena SD #159, IL GO 2000
00010328   Benbrook, TX GO Ltd Tax 2000
00010329   Vienna Elem. SD #55, IL GO 00
00010330   Vandalia CUSD #203, IL GO 00
00010333   Freeport (Village), NYGO 2000A
00010334   Freeport (Village), NYGO 2000B
00010335   Loomis Union SD, CA GO Ser2000
00010336   Westfield, MA GO, dtd 5/1/00
00010339   Brazoria Cnty MUD #4, TX GO 00
00010340   Dracut (Town of) MA Ltd GO
00010341   Tinley Park (Vlg), IL GO 2000
00010344   Douglas County, Nevada GO 2000
00010345   Hawthorne BOE, NJ GO 2000
00010347   Perris Union HSD, CA GO Ser A
00010348   Eldorado CUSD4,IL Saline Co 00
00010350   Brownsville, Texas GO 2000A&B
00010353   Summit County, OH Series 2000
00010354   Montevideo (City), MN GO 2000
00010355   Bloomfield SD #6, NM GO 2000
00010358   Westfall LSD, OH GO 00
00010361   Alisal Union SD, CA GO Ser 99A
00010362   Milpitas USD, CA GO Ser. 2000
00010364   Placer UHSD, CA GO 2000

 

Policy Id

 

 

Policy

00010366     Arlington SD No. 16 WA GO 2000
00010368   Fortuna Union HSD, CA GO 2000
00010371   Fox River Grove SD 3, IL GO 00
00010372   Crowley (City), Texas GO 2000
00010375   Pattonville R-3 SD, MO GO 2000
00010376   Brunswick County, NC GO 2000
00010379   Hewitt (City of), TX GOLT 2000
00010380   Grant Park CUSD #6, IL GO 2000
00010382   Brockton (City of), MA GOLT 00
00010383   Southampton (Vlg), NY GO 2000B
00010386   Minooka (Vill.), IL GO 2000 AR
00010387   San Benito (City), TX GO 2000
00010389   Palmer (Town) MA GOLT 2000
00010390   Huntley Park Dist., IL GO 2000
00010391   Plain Local SD, OH GO 2000
00010393   Elba CSD, NY GO 2000
00010397   Frankenmuth SD, Mi GO QSBLF 00
00010402   Ashland, OR GO Ser. 2000
00010403   Ashland (Town of), MA GOLT 00
00010410   Romeoville (Village) IL 2000AB
00010415   Auburn (City of), NY GO 2000A
00010419   Willow Springs, IL Alt GO 00
00010420   Harrison (City of), OH GOLT 00
00010421   Foxborough(Town of),MA GOLT 00
00010422   Grapevine, Texas GO 2000
00010423   Marana USD #6, Arizona GO 2000
00010426   South Kingstown (Twn), RI 2000
00010427   Ellinwood USD #355, KS GO 2000
00010435   Randolph (Town of), MA LTD
00010436   Harris Cnty MUD #151, TX GO 00
00010438   Xenia, Ohio GO Lmtd Tax 00
00010441   Van Alstyne (City of),TX GO 00
00010442   Laguna Salada Union SD CA GO00
00010443   Mt. Vernon Knox Co.PubLbr,OH00
00010444   Scioto Valley Local SD,OH 2000
00010446   Yuba City USD SFID #99-1,CA GO
00010448   Cascade HSD No. B, MT GO 2000
00010449   Cleveland Hill UFSD, NY 2000
00010450   Islip (Town), NY GO 00
00010453   Barren County, KY GO 2000
00010454   Tuscola CUSD #301, IL GO 2000
00010455   Washington County, MD GO 2000
00010456   Santa Barbara HSD, CA GO 2000
00010457   Woodstock (City),IL GO2000ABCD
00010459   Lancaster County, PA GO 2000A
00010471   Campbell City SD, OH GO 2000
00010474   Anacortes (City of), WA GO 00
00010476   Long Beach USD, CA GO 99 Ser B
00010478   Baltimore, MD GO 2000 A&B
00010479   Hartford (City of), CT GO 2000
00010480   Ardsley UFSD, NY GO 2000
00010481   Rockwall (City of), TX GO 2000
00010484   North Babylon UFSD, NY GO 00A
00010485   North Babylon UFSD, NY GO 00B
00010486   Holland CSD, New York GO 2000
 

 

-2-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

00010488     Rhode Island (State Of) GO 00
00010490   Port Chester-Rye UFSD,NY GO 00
00010491   CHARLES STEWART MOTT CCD,MI GO
00010492   Goddard USD#265, Kansas GO 00
00010495   TRENTON (CITY OF), NJ GO
00010496   Grayslake CCSD #46, IL GO 2000
00010497   Santa Clara USD, CA GO Ser 00
00010498   Chicago CSR BOE, Il GO ULT 00A
00010499   Faulkey Gully MUD, TX GO 2000
00010500   Lakewood Twp, NJ GO NJEDA 2000
00010505   Williamson-Travis Cos.MUD#1 00
00010506   Anchor Bay SD, MI GO 2000 II
00010507   Marble Falls, TX Ltd GO 2000
00010514   Winters Joint USD, CA GO 2000
00010517   BurntHills-BallstonLake CSD,NY
00010518   San Juan USD, CA GO Ser 2000
00010520   Orland PK SD 135 (Cook Cty),IL
00010526   Medford Twp, New Jersey GO 00
00010528   Dickinson, TX Ltd Tax GO Ser00
00010531   Cardiff Sch Dist, CA GO 2000A
00010533   South Glens Falls CSD, NYGO 00
00010535   Dodgeland SD, WI GO Ref. 2000
00010537   Palo Verde USD, CA GO 2000 B
00010546   Toledo, Ohio GO Ltd Tax 2000
00010548   San Bruno Park SD, CA GO 2000
00010549   Jersey Village, TX GO LTX 2000
00010550   Atlanta, TX GO LTD Tax 2000
00010554   Easton (Town of), MA GO 2000
00010558   Cinnaminson (Twp) SD, NJ GO 00
00010559   Waverly Comm Sch, MI GO 2000
00010561   North Haledon Borough, NJ GO
00010563   Queen Anne’s Co., MD GO 2000
00010564   Providence (City of), RI GO 00
00010565   Bethalto, Il GO 2000
00010566   Tinley Park Prk Dist, IL GO 00
00010567   Leander, Texas GO 2000
00010568   Marana USD #6, AZ GO Ser A 00
00010572   Montgomery Cnty MUD #46, TX 00
00010573   Athens, Ohio GO Ltd Tax 2000
00010574   Jackson County, Oregon GO 2000
00010575   Heath City SD, Ohio GO 2000
00010576   Liberty Central S.D., NY GO 00
00010582   West Mifflin Boro, PA GO 00ABC
00010585   CHICAGO (CITY OF), IL GO 2000C
00010587   Sonoma Valley USD, CA GO 2000
00010588   Huntington, NY GO 2000
00010589   Worcester (City) MA GO 2000
00010592   Kankakee (City), IL GO 2000A
00010594   Genesee County, MI LTD Tax 00
00010595   Bridgeport, Connecticut GO 00
00010597   Grand Prairie, Texas GO 2000A
00010598   Teays Valley LSD, OH GO 2000
00010599   Windfern Forest Ut Dst,TX GO00
00010600   Bedford, Texas Ltd Tax GO 2000
00010601   Saginaw, Texas Ltd Tax GO 2000

 

Policy Id

 

 

Policy

00010603     Azle (City of), TX Ltd Tax 00
00010605   Buckeye LSD, Ohio GO 2000
00010609   Calhoun (County of), MI GO LTD
00010612   Shavano Park (City), TX GO 00
00010613   Carl Sandburg CCD #518, IL 00
00010614   Pinelands Reg SD BOE, NJ GO 00
00010615   Larkspur SD, CA GO 2000 A
00010616   Horsepen Bayou MUD, TX GO 2000
00010618   Reid Road MUD #1, TX GO 2000
00010619   Abbeville County, SC GO 2000
00010621   North Franklin Twp, PA GO 00
00010625   West Deptford (Twp), NJ GO 00
00010626   Willingboro (Twp of), NJ GO 00
00010627   Chaffey JT UHSD, CA GO 2000 B
00010630   Washington Terrace, UT GO 2000
00010633   Salem (City), MA GOLT 2000
00010634   Beverly, MA GO 2000
00010635   North Mankato (City), MN GO00A
00010637   Frisco, Texas GO Ltd Tax 2000
00010639   Lakeville, Minnesota GO 2000C
00010641   Rosenberg, Texas GO 2000
00010649   Saratoga Fire Dist, CA GO 2000
00010653   Wharton, Texas Ltd Tax GO 2000
00010654   Ripon (City), WI GO 00
00010655   Massapequa Park (V), NY GO 00
00010656   East Lansing (City), MI GO 00
00010657   Gonzales Cnty, TX LtdTax GO 00
00010658   Cinco MUD #1, TX Contract Revs
00010659   New Milford (Borough), NJ GO00
00010660   California State GO 2000
00010661   Waterford Jt. #1 SD,WI GO 2000
00010663   Licking Heights LSD, OH GO 00A
00010664   Pittsburgh SD, PA GO 2000
00010665   Hays, Kansas GO 2000
00010666   Springfield (Twp), MI GO 00
00010667   Agua Fria UHSD#216, AZ GO 00D
00010673   Albany (City of), NY GO 2000
00010674   North Dansville, NY GO 2000
00010676   South River (Borough),NJ GO 00
00010677   Cobden CUSD #17, IL GO 2000
00010678   Coudersport ASD, PA GO 2000
00010679   Anchorage, Alaska GO 2000B
00010682   Yonkers, New York GO 2000AB
00010683   Cleveland (City), OH GO LTD 00
00010684   Jennings SD, MO GO Ref/Imp 00
00010685   Livonia Muni Bldg Auth, MI 00
00010686   Texarkana, Texas Ltd GO 2000
00010688   Wappinger (Town), NY GO 00
00010689   Victoria, Texas LTGO Ser 2000
00010690   Bordentown Swrage Ath, NJ GO00
00010691   Woonsocket, RI GO 2000
00010692   Austin, Texas GO Ltd Tax 2000
00010693   Haltom City, Texas LTGO Ser00
00010697   Dolton (Village), IL GO 2000
00010703   Rockford (City), IL GO 2000D
 

 

-3-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

00010704     Woodstock, Connecticut GO 2000
00010705   Penn Hills, PA (PFA) GO 00
00010706   Bryan, Texas LTGO Series 2000A
00010707   Forrestville Comm USD#221,IL00
00010708   Wellington, KS GO 2000
00010710   East Holmes Local SD, OH GO 00
00010712   Southgate (City of), MI 2000
00010713   Caswell County, NC GO 2000
00010714   Keller (City of), TX GO LT 00
00010716   Greenwood County, SC GO 2000
00010717   East Moline SD#37, IL GO 2000B
00010718   Los Lunas SD #1, NM GO 2000
00010725   Stewart Manor (Vlg), NY GO 00
00010726   River Falls SD, WI GO 2000B
00010727   Cattaraugus CO. NY GO 2000
00010730   Dormont (Borough), PA GO 2000
00010732   Erie County, OH GOLT 2000
00010733   Waupaca (City of), WI GO 2000
00010736   Northampton (City), MA ULT ‘00
00010741   Hawthorne (Borough), NJ GO 00
00010743   Madison Co Pub Lib KY GOULT 00
00010749   Fort Bend Ct WCID2 TX GOULT 00
00010752   Mesa (City of), AZ GO 2000
00010754   Fond du Lac SD, Wi GO Rfg
00010755   Milford Charter Twp, MI GO
00010757   Methuen (City), MA GO Ltd 2000
00010759   Fort Bend Co MUD41 TX GOULT 00
00010761   Lincoln County, NC GO 2000
00010763   Lynn (City of), MA GOLT 2000
00010770   Suffolk County, NY GO 2000 B
00010773   West Linn, Oregon GO 2000
00010779   Fairview Hgts (City), IL GO 00
00010782   Wolcott (Town), CT GO 2000
00010783   Hueneme SD, California GO 00 A
00010791   Brentwood Union SD, CA GO 2000
00010792   VALLIVUE SD #139, ID GO 2000
00010795   Wiseburn SD, CA GO 2000A
00010796   McKinney, Texas LTGO Ser 2000
00010797   Pojoaque Valley SD No.1, NM 00
00010800   Grapevine, Texas GO & CO 2000A
00010804   Burnet, TX GOLT 2000
00010805   Rockland (County), NY GO 2000
00010806   Kyle, Texas GO Ltd Tax 2000
00010807   Leesburg, Virginia GO 2000
00010808   FARMINGDALE UFSD, NY GO 2000
00010809   Mount Vernon City SD, NY GO 00
00010810   Bear Lake Schools, MI GO 2000
00010811   Mashpee (Town), MA GOLT 2000
00010818   American Fork City, UT GO 00
00010821   Alton (City), IL GO 2000B
00010825   Chicago, Illinois GO 2000D
00010840   Malcomson Rd Util Dist, TX 00
00010844   Norton (Town of) MA GO, 2000
00010845   Huntsville (City of), TX GO 00
00010846   Mercer Cnty Imp Auth, NJ GO 00

 

Policy Id

 

 

Policy

00010847     Harris Cnty MUD #341, TX GO 00
00010854   St Francis (City of), MN GO
00010855   Savage (City), MN GO 2000C
00010859   Conroe, Texas GOLT 2000
00010861   Mifflin County, PA GO 2000
00010864   Monroe, Georgia GO Series 2000
00010865   Spokane Co Fire Dist 8 WA GO00
00010867   Temple, Texas Ltd Tax GO 2000
00010868   Randall Cnty, Texas GO 2000
00010870   Butler Area SD, PA GO 2000
00010871   Mercer Cnty Imp Auth, NJ GO 00
00010872   East St.Louis SD 189, IL G0 00
00010876   Veteran’s Park Dist,IL GOLT 00
00010878   Oaklyn (Boro of), NJ GO 00
00010883   Madison LSD, OH GO ULT 2000
00010885   Waunakee (Village), WI GO SerB
00010886   Ledyard (Town of), CT GO 2000
00010887   Louisiana State GO 2000A
00010888   Massachusetts Comwlth GO00DEFG
00010894   Woodland CCSD #50, IL GO 2000
00010895   Antioch CHSD #117, IL GO 2000
00010896   Rayford Road MUD, TX GO 00B
00010897   Ulster (County of), NY GO 2000
00010898   Barrington SD #220, IL GO 00
00010905   WEST UNIVERSITY PLACE TX GO 00
00010907   Claremont (City of), NH GO 00
00010913   Berkley (Twn),MA GO 2000 Lot A
00010914   Clarkstown (Town), NY GO 2000
00010916   Poudre SD R-1, Colorado GO2000
00010917   Southwick, MA GO 2000
00010920   Lake Zurich CUSD #95, IL GO 00
00010921   Calumet City, Illinois GO 2000
00010928   Montgomery Cnty, Texas LTGO 00
00010929   LaPorte County, IN GO 2000
00010930   Colony, Texas Ltd Tax GO 2000A
00010931   Stanwood, WA GO ULT 2000
00010932   CAROL STREAM PD, IL GO 2000C
00010934   Gail Borden PLD, IL GO 2000A
00010936   Allegheny Co. PA GO C-52, C-53
00010937   Easley, South Carolina GO 2000
00010938   Huntley CCSD #158, IL GO ‘00
00010939   Belleville SD #118, IL GO 2000
00010943   Willow Springs, IL GO 2000C
00010944   Community Unit SD#100, IL 00
00010945   Smith County, TN GO ULT 2000
00010946   Maize Unified SD #266,KS GO 00
00010949   Rock Valley CCD #511, IL GO 00
00010950   Mercer Cnty Imp Auth,NJ GO 00A
00010953   Ridgeland SD# 122, IL GO 2000
00010956   Central RHSD BOE, NJ GO 2000
00010957   Calumet Park (Village),IL GO00
00010958   Wayne County, IN GO 2000
00010959   Mercer Cnty Imp Auth,NJ GO 00B
00020015   CALIFORNIA STATE GO 12-1-98
00020016   CALIFORNIA STATE GO 90
 

 

-4-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

00020022     CALIFORNIA STATE GO 10-1-97
00020073   Fuquay-Varina, NC GO W&S Ser00
00020074   California State GO 6-1-00
00020075   California State GO 6-1-00
00020083   California State GO 6-1-00
00020086   HONOLULU (CITY & CNTY), HI-94A
00020087   CALIFORNIA STATE GO 10-1-98
00020091   Licking Heights LSD, OH GO 00
00020094   California State GO 1998
00020099   New York City, NY GO 99H
00020100   New York City, NY GO 99 F/G
00020101   California State GO 10-1-00
00020106   CALIFORNIA STATE GO 10-1-98
00020107   McLENNAN COUNTY, TEXAS GO LT
00020110   New York City, NY GO 99E
00020113   New York City, NY GO 99 F/G
00020114   California State GO 1998
00020117   California State GO 1998
00020119   New York City, NY GO 99H
00020120   New York City, NY GO 99C
00020122   New York City, NY GO 98JK
00020124   California State GO 1998
00020128   NEW YORK CITY, NY GO 98G
00020129   NEW YORK CITY, NY GO 98G
00020130   New York City, NY GO 99 F/G
00020131   California State GO 12-1-00
00020132   New York City, NY GO 99 F/G
00020133   California State GO 12-1-00
00020135   California State GO 12-1-00
00020136   CALIFORNIA STATE GO 4-1-99
00020138   New York City, NY GO 99C
00020140   NEW YORK CITY, NY GO 98EF
00020141   New York City, NY GO 99C
00020143   CALIFORNIA STATE GO 12-1-98
00020144   New York City, NY GO 99H
00020145   CALIFORNIA STATE GO 12-1-98
01010001   Canon-McMillan SD, PA GO 2000
01010003   CNP Utility District, TX GO 00
01010004   Eastmont SD #206, WA GO 2001
01010006   Frisco, Texas GO Ltd Tax 2000A
01010007   Monrovia Unified SD, CA GO 01B
01010008   Sparta Township, NJ GO ‘01
01010009   Lakeway MUD, Texas GO 2000A
01010011   ABC Unified SD, CA GO 2001C
01010013   Smith County, TN GO ULT 2001
01010014   Harris Cnty MUD #150, TX GO 01
01010016   Conneaut Area CSD, OH GO 2000
01010024   Wallenpaupack ASD, PA GO 2001
01010027   Sparta CUSD #140, IL GO 2000
01010028   Plainfield Twp PD, IL GO 2000
01010030   CAROL STREAM PD, IL GO 2001
01010032   Laredo, Texas LTGO Ser00 & 00A
01010033   Aztec Municipal SD #2,NM GO 01
01010034   Greenport (Village),NY GO 2001
01010036   Bridgewater (Town), MA GOLT 01

 

Policy Id

 

 

Policy

01010037     Pleasanton (City of), TX GO 01
01010038   Antioch Pub Lib Dist, IL GO-AR
01010040   Greenwood Pub Lib,IN GO 00
01010041   Wayne Highlands SD, PA GO 2001
01010045   Northwest Park MUD, TX GO 01
01010047   Union Beach (Boro of),NJ GO 01
01010048   Friess Lake SD, WI GO 2001
01010049   Las Virgenes USD,CA GO Ser C
01010050   Plattsburgh, NY GO 2001
01010051   Juda SD, WI GO ‘01
01010052   Oregon SD, WI GO ‘01
01010054   Butler County, PA GO 00
01010056   Polk County, WI GO
01010059   Batavia, New York GO 2001
01010060   Ringwood (Borough), NJ GO 2001
01010062   Lincoln SD 27, IL GO 2001
01010063   Carlyle CUSD #1, IL GO 2001
01010065   Warwick (City), RI GO 2001
01010066   Grant Com HSD #124, IL GO 01
01010067   Atwood Hammond CUSD#39,IL GO01
01010069   Fox Lake Sch Dist #114, IL GO
01010070   Centennial SD#28-302Jt,OR GO01
01010072   Regional SD #16, CT GO 2001
01010073   Burnet County, TX GO 2001
01010074   Mecosta Cnty BA, MI GOLT 2001
01010075   Delano Union ESD, CA GO 2000 A
01010076   East St.Louis SD 189, IL GO 01
01010077   Belle Vernon ASD,PA GO 2001ABC
01010079   Serena CUSD #2, IL GO 2001
01010080   Jefferson Co Sch Dist251,ID 01
01010082   Spring Grove ASD, PA GO 2001
01010084   Rocky Point UFSD, NY GO 2001
01010085   Nottingham Cntry MUD, TX GO 01
01010087   Aspen SD No. 1 (RE), CO 01
01010089   Saline (City), MI GO Unltd 01
01010091   West Middlesex ASD, PA GO 2001
01010092   Gloucester Twp, NJ GO 2001
01010093   Dover ASD, PA GO 2001
01010094   Blue Mountain SD, PA GO 2001
01010096   Tolleson ESD #17, AZ GO Ser01A
01010102   Rhode Island (State)GO 2001A&B
01010103   Paradise Vly USD 69, AZ GO 01B
01010104   Colleyville, Texas LTGO Ser 01
01010105   Grants/Cibola Co SD#1,NM GO 01
01010111   Freshwater Sch Dist, CA GO 01
01010112   McHenry Comm HSD #156,IL GO 01
01010115   Hillview, Kentucky GO Ser 2001
01010117   Richland Prsh SD#3, LA GO 2001
01010118   Clackamas CCD, OR GO 2001
01010120   El Paso, Texas GO Ltd Tax 2001
01010122   Haysville, KS GO 2001
01010125   Jackson Cnty.CCSD #140, IL ‘01
01010129   Sherwood, Oregon GO 2001
01010130   Mechanicsburg ASD, PA GO 2001
01010131   Penn Manor SD, PA GO 2001
 

 

-5-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

01010133     Redmond SD No. 2J, OR GO Ser01
01010134   Buffalo, New York GO 2001 A&B
01010135   Buffalo, New York GO 2001-C
01010136   Penn Hills, PA GO 2001
01010137   Cook County, Illinois GO 2001A
01010139   Lincoln Parish, LA GO 2001
01010140   Lake Villa CCSD 41, IL GO 2000
01010144   O’Fallon, Missouri GO 2001
01010145   Danville Area SD, PA GO 01 Rf
01010146   Brentwood Borough SD, PA GO 01
01010147   Ascension Parish SD, LA GO2001
01010152   Linn-Benton CCD, OR GO 2001
01010154   Northwood SD, WI GO 2001
01010155   Goshen CSD, New York GO 2001
01010158   Bloomingdale (Boro), NJ GO 01
01010160   Desoto (City), TX GO LTD 2001
01010162   Iroquois Sch Dist, PA GO 2001
01010164   Iron Cnty, WI GO Ref 2001
01010166   QUEEN CREEK USD #95 AZ GO D 01
01010167   Mokena (Village), IL GO 2001
01010169   Ennis, Texas GO Ltd Tax 2001
01010170   Olathe USD #233, KS GO 2001B
01010172   Peoria USD #11, Arizona GO 01
01010173   Fallsburg Central SD, NY GO 01
01010177   Metro Nash-David Ct TN GO 01AB
01010179   Oshkosh (City of), WI GO 2001
01010180   Galveston County, TX GO LT 01
01010181   Taunton (City), MA GO 2001
01010182   Galveston County, TX GO ULT 01
01010184   East Stroudsburg ASD, PA GO 01
01010185   Harris Co FWSD #51, TX GO 2001
01010196   Ocean City, MD GO 2001
01010197   California State GO 3-1-01
01010199   Mansfield, TX GO Ltd Tax 2001
01010200   Gray County, Texas LTGO Ser 01
01010201   Orcutt Union SD, CA GO Ser 01C
01010203   Stoughton Area SD, WI GO 2001
01010204   Pocono Mountain SD, PA GO 2001
01010205   Conewago Valley SD, PA GO 2001
01010206   Andover USD #385, KS GO 2001
01010207   Frisco, Texas GO Ltd Tax 2001
01010208   Corinth, TX GO Ltd Tax 2001
01010209   Archbold ALSD, OH Unltd GO
01010210   Arlington SD #16, WA GO 2001
01010213   Wyandotte Co USD 202, KS GO 01
01010216   Hopewell Valley RSD, NJ GO
01010217   Washington, DC GO 2001B
01010218   Merrill (City), WI GO 2001
01010219   Cotati-Rohnert Pk USD,CA GO H
01010220   Livonia Mun Bldg Auth, MI GO01
01010221   Hampton Township SD, PA GO 01
01010222   South Eastern SD, PA GO 2001
01010223   Portales Muni SD No 1,NM GO 01
01010224   North Attleborough, MA GO 2001
01010233   Flagstaff, Arizona GO 2001

 

Policy Id

 

 

Policy

01010234     Golden Valley USD, CA GO 2001
01010235   Chicago Park District, IL Ltd GO 2001A
01010236   Oak Creek-Franklin Jt.SD,WI GO
01010238   Black River Local SD, OH 2001
01010239   Brooke Cnty Bd of Ed, WV GO 01
01010241   Manitowoc (City), WI GO 2001A
01010244   Harris Cnty,TX GO Toll Rd 2001
01010245   Beardsley Elem SD, CA GO 2001A
01010250   Sebastopol USD, CA GO Ser 2001
01010252   Norwich (City), CT GO 2001
01010254   Lafourche Hosp Dist#1,LA GO 01
01010258   Fond du Lac (City), WI 2001
01010259   Franklin (City of), WI GO
01010260   Fairview Hghts (City),IL GO 01
01010265   Tipp City Ex. Vlg.SD, OH GO 01
01010267   Fairfield City SD, OH GO 2001
01010268   Cinco MUD#1,TX Contract Rev 01
01010269   Martinez Unified School District, CA GO 2001
01010271   Fort Bend County, TX UTGO 2001
01010272   Medfield (Town), MA GO 2001
01010273   Sacramento City USD, CA GO 01
01010274   Monroe(Twp) Middlesex NJ MUA
01010277   Marion, Illinois, GO 2001
01010281   Apache Junction USD#43,AZ GO01
01010282   San Lorenzo Val USD,CA GO 00 A
01010304   Triton Reg SD MA GO dtd 4/1/01
01010306   East Stroudsburg Area SD, PA GO 2001 AA
01010307   Mishicot SD, WI GO 2001
01010308   Evergreen Union SD, CA GO 01
01010309   Lacy Twp Brd of Ed, NJ GO 2001
01010313   Salt Lake Cnty Reg Srv, UT GO 01
01010315   Brookhaven (Town of), NY GO 01
01010316   Lucas Co, OH Juv Jus GO Ltd 01
01010322   Rock Island, Illinois GO 2001
01010325   Lakota Local Sch Dist, OH 01
01010327   Tenafly BOE, NJ GO 2001
01010330   Enterprise SD, CA GO 2001
01010331   Mauston SD, WI GO 2001
01010333   Hoisington USD #431, KS GO 01
01010334   Halifax (Town of), MA GO 2001
01010336   Hamilton Local SD, OH GO 2001
01010337   Lake Worth, Texas Limited Tax GO Series 2001
01010338   Brownsville, Texas GO 2001
01010339   Washoe County SD, NV GO 2001
01010340   Brazoria Co. MUD#6 TX GOULT 01
01010341   East Muskingum LSD, OH GO 2001
01010342   TIGARD SD #23J, OREGON GO 01
01010345   Madison County, OH GO LT
01010346   Matanuska-Susitna Boro,AK GO01
01010348   Racine (City) WI 2001
01010350   Northampton Township, PA GO 2001
01010351   Crestwood Local School District, OH GO 2001
01010352   Alachua Cnty Lib Dist, FL GO01
01010353   Pacific Grove USD, CA GO 2001
01010355   Liberty Union High School District, CA GO 2001
 

 

-6-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

01010357     Maywood-Melrose Park School District #89, IL GO 01
01010361   Center Unified SD, CA GO Ser01
01010366   Ocean Twp BOE, NJ (Ocean Co)
01010367   Waterloo Local SD, OH GO 01
01010368   Monmouth (City of), IL GO
01010369   Waukegan (City), IL GO 01
01010370   Farmington, Minnesota GO 2001 B&C
01010371   Baraboo (City of), WI GO 01
01010373   Newburyport, MA GO 01
01010374   Torrance County, New Mexico GO 2001
01010377   Eau Claire Area SD, WI GO 01
01010378   Wausau SD, WI GO 2001
01010380   Chandler USD #80, AZ GO 2001
01010381   Los Lunas SD #1, New Mexico GO
01010382   Las Vegas, Nevada GO Limited Tax 2001
01010383   Sto-Rox SD, PA GO 2001
01010384   Port Chester (Village), NY GO 2001 A
01010385   Gurnee Park Dist, IL GO 2001 (Alternate Rev.)
01010387   West Babylon USFD, NY GO 01
01010388   Oswego Comm Unit SD #308, IL GO 01
01010390   Salem CHSD 600, IL GO
01010391   Alexander Central School District, NY GO 2001
01010392   Amherst Exmpt Vlg SD, OH GO 01
01010394   New Bedford (City of), MA GO 01
01010395   Mifflin County School District, PA GO 2001
01010396   Fleetwood Area School District, PA GO 2001
01010397   Brunswick County, NC GO
01010398   Colony, Texas Ltd Tax GO 2001
01010400   Moreland SD, CA GO 2001
01010402   Peralta CCD, CA GO 2001
01010404   Beaufort County, SC GO Series 2001
01010405   Keller (City of), TX GO Ltd 01
01010407   Georgetown, Texas GO Limited Tax 2001
01010408   Fort Bend Co. LID #2, TX GO
01010409   Lake Oswego (City of), OR GO Ser 01
01010410   Mercer County, PA GO 2001
01010413   Sidney City School District, Ohio 01A&B
01010415   Washoe County, NV GO LTD TX 2001
01010416   Sylvania City SD, OH GO 2001
01010417   Allen (City), TX Ltd GO Ref 01
01010418   Santa Rosa City HSD, CA GO 2001
01010419   Richland County, OH Ltd GO 01
01010420   Franklin (City of), WI GO ‘01
01010421   Kanabec County MN GO 01
01010424   Katy, TX GO Ltd Tax 2001
01010425   Fruitvale SD, CA GO 2001C
01010427   Midland, Texas Ltd Tax GO COO Series 2001A
01010429   Brick Township, NJ GO 01
01010430   Desoto (City of), TX GO Ltd 01
01010431   Lebanon Comm SD No. 9, OR GO 2001
01010432   East Lyme (Town of), CT GO
01010433   Duarte USD, CA GO 98 Series C
01010435   Chicago Park Dist, IL GO
01010436   Hartford (City of), CT GO ‘01
01010439   Richardson, Texas GO Series 2001

 

Policy Id

 

 

Policy

01010440     Washington Unified SD, CA GO 2001 Series A
01010441   Lyndhurst (Twp.), NJ GO 01
01010444   Sevier County, Utah GO 2001
01010445   Greenville (City of), TX LT GO 01
01010446   Kankakee (County), Illinois GO 2001
01010448   Stoughton Area SD, WI GO
01010450   Oak Lawn (Village), IL GO 01A
01010451   Southeast Local School District, OH GO 2001
01010452   Shelton Sch Dist No. 309 Mason Co., WA GO ULT 01
01010453   Northport (Village), NY GO 01
01010454   Egg Harbor Township BOE, NJ GO 2001
01010455   Spirit Lake CSD, IA GO 2001
01010456   North Olmsted, OH Ltd Tx GO
01010457   North Olmsted, OH unlimited tax
01010459   Maywood Public Library District, IL GO
01010462   Rockford (City of), IL GO 01A
01010463   Springfield City SD, OH GO 01
01010464   Aurora (City of), IL GO
01010467   Superior (City of), WI GO 01B
01010470   Genesee Co., NY GO ‘01
01010471   Rockford (City of), IL GO, Series B
01010472   Middle Country CSD, NY GO 01
01010473   Manhattan Beach USD, CA GO 2001A
01010474   South Pasadena USD, CA GO Series D
01010475   West Contra Costa USD, CA GO 2001A
01010476   Hamburg Township, MI GO 01
01010481   Bethlehem CSD, NY GO 01
01010485   Southington (Town of), CT GO 01
01010486   Nevada (State of) GO 01A,B&C
01010487   Peralta CCD, CA GO 2001, Elections 92E, 96A, 00A
01010488   Chippewa Falls, Wisconsin GO 2001
01010490   Wilson Area SD, PA GO 01
01010491   Summit County, OH GO Limited Tax 2001
01010492   Shoreline Unified SD, CA GO 2001
01010493   Hurst, TX GO Ltd Tax 2001
01010494   Stillwater (City), OK GO 2001
01010495   Johnston County, NC GO
01010496   OAK GROVE SD, CA GO 2001
01010499   Irondequoit (Town), NY GO 01
01010500   McLENNAN COUNTY, TEXAS GO LT 2001
01010501   East Providence, RI GO
01010503   River Forest Park District, Illinois GO 2001
01010509   Towanda Area School District, PA GO 2001
01010510   Will Cnty, CCSD # 30-C, IL GO
01010511   Conway Springs USD # 356, KS GO 2001
01010513   Valley Stream (Village), NY GO 2001
01010514   Western Wisconsin Technical College District, Wisc
01010515   Canon-McMillan School District, PA GO 2001C
01010516   Parkland SD, PA GO 2001
01010518   Emeral Forest Utility District, TX GO ULT
01010519   Pecatonica CUSD #321, IL GO 2001
01010520   Libertyville (Village), Illinois
01010521   PENDERGAST ELEM SD #92, AZ GO 2001
01010522   Mount Morris CSD, NY GO
01010523   Odessa, Texas LTGO Series 2001
 

 

-7-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

01010524     Rice Lake (City), Wisconsin
01010526   Goffstown School District, NH GO 2001
01010527   Grant SD 110, Il GO 01
01010529   Deer Park, Texas GO 2001
01010530   Macomb Township Building Authority, MI 2001
01010531   Little Elm (Town of), TX GO 2001
01010532   Sedgwick Co. (Cheney) USD #268, KS GO 01
01010533   Verona Area SD, WI GO
01010534   Monroe (City of), WI GO 2001A
01010535   Rockwall County, TX LTGO Ser01
01010536   Romeoville (Village), IL 01A&B
01010537   Westport (Town of), WI GO 01
01010540   Paulding Exempted Vlg SD, OH 01
01010541   Fall River, Massachusetts GO 2001
01010543   D.C. Everest ASD, WI GO 2001
01010544   New Haven, Connecticut GO 2001 A&B
01010545   Ukiah Unified School District, CA GO Ser 2001
01010546   Cocalico SD, PA GO 01
01010547   Huntley Park District, IL GO
01010548   Washoe County, NV GO LT 01A
01010549   Pleasant Hills Auth, PA Gtd Swr Rev 01
01010552   St. Michael (City), MN GO 2001A
01010553   Ypsilanti, Michigan GO 2001
01010554   Osceola Sch Dist, WI GO 2001A & B
01010555   Atchison (City of), KS GO W/S Series 2001-A
01010557   Colchester, Connecticut GO 2001
01010560   Lakewood City SD, OH GO 01
01010563   Warrensburg-Latham CUSD #11, IL GO 01
01010564   Maricopa USD #20, AZ GO 2001
01010565   Clark County, Nevada LTGO Series 2001
01010566   Farmington-Central CUSD #265, IL GO 2001
01010567   White Settlement, Texas LTGO Series 2001
01010569   Center Township, PA GO 2001
01010570   Montgomery County MUD #18, TX GO 2001
01010572   Elizabeth Forward SD, PA GO 01A&B
01010576   McHenry Co Conserv. Dist., IL GO 01A&B
01010578   Seven Hills (City of), OH GO 01
01010579   Anchorage, AL GO Series A & Ref 2001
01010581   Collinsville CUSD #10, IL GO 2001
01010582   Gibsonburg Exempted Vlg SD, OH GO 01
01010585   West Branch Local School District, OH GO 2001
01010586   Swanton Local SD, OH GO 2001
01010587   CLARENDON CNTY, SC GO
01010588   Spring Valley SD, WI GO 2001
01010589   Medina, Ohio GO Ltd Tax 2001
01010592   Cary CCSD #26, IL GO 2001
01010595   Weston (Village of), WI GO 2001A
01010598   LaGRANGE PARK SD #102, IL GO
01010600   Marshfield (Town of), MA GO dtd 6/15
01010601   Sleepy Eye (City), MN GO 2001
01010603   Chelsea, MA GO Limited Tax 2001
01010605   Orion CUSD #223, IL GO 2001
01010606   Carteret Borough, NJ GO 01
01010607   Pennsauken Township, NJ GO 2001
01010608   Huntley CCSD #158, IL GO 2001

 

Policy Id

 

 

Policy

01010609     Plainville (Town of), MA GO 2001
01010610   Tioga CSD, NY GO 2001
01010612   Bismarck-Henning Community Unit SD #1, IL GO 2001
01010614   Bourne (Town of), MA GO LTD 01
01010615   Hilliard City SD, OH GO 2001
01010616   Waterloo (City Of), IA GO 2001
01010619   Pandora-Gilboa Local SD, OH GO 01
01010620   Reading School District, PA 01
01010622   Louisiana State GO 2001-A
01010623   Niagara Wheatfield CSD, NY GO 2001
01010626   Dyer County, Tennessee GO 01
01010627   Islip (Town of), NY GO 2001
01010628   Riverdale Local School District, OH GO 2001
01010629   Portsmouth (City of), VA GO 2001 A&B
01010630   Sandusky (City), OH GOLT 2001
01010632   Hanover (Town of), MA GO 01
01010634   Cobleskill (Village), New York GO 2001
01010637   Milton (City of), WI GO dtd 6/1
01010638   Central Greene Sch Dist, PA GO SERIES 2001AB
01010639   Tonawanda, New York GO 2001
01010640   Sisters School District #6, OR GO 2001
01010641   Valley CSD (Orange County), NY GO 2001
01010643   Lubbock, Texas GO - Ltd Tax COO 2001
01010646   New Milford BOE, NJ GO
01010647   Dickson County, Tennessee GO 2001
01010650   Des Plaines (City), IL GO 2001
01010651   Burleson (City of), TX GO 2001
01010655   Elgin CCD 509, IL GO
01010657   Livingston (Township), NJ GO 2001A
01010658   Haverstraw-Stony Point CSD, NY GO 2001
01010659   Baltimore, MD GO 2001 A, B & C
01010660   General McLane Area Sch Dist, PA GO 2001 A&B
01010661   Weatherford, TX Limited Tax COO 2001
01010662   Paducah (city of), Kentucky
01010663   West Seneca CSD, NY GO
01010664   Amarillo, Texas GO - Limited Tax 2001
01010669   Lansing, KS GO
01010671   Canyon Co SD # 131 (Nampa), ID GO 2001
01010677   Gaston County, NC GO
01010678   New Windsor (Town), NY GO 2001
01010681   Portage, MI GOLT 2001
01010683   Sterling (Town) MA GO ‘01
01010685   Pharr, Texas GO Limited Tax 2001
01010687   Big Spring School District, PA GO 2001
01010688   McGUFFEY SD, PENNSYLVANIA GO 01
01010691   Moraine Park Technical College Dist, WI GO 2001
01010692   Menasha (Town of) WI GO ‘01
01010694   Ludlow (Town), MA GO 2001
01010695   Township of Vernon (Sussex Cnty), NJ
01010700   Mattoon CUSD #2, IL GO ‘01
01010702   Copperas Cove, Texas LTGO Series 2001 & 2001A
01010706   St. Joseph Cnty Redevelopment Dist, IN GO ULT 2001
01010707   Harris County MUD #24, TX GO 2001
01010708   Merchantville (Borough), NJ GO 2001
01010709   Derry Township Municipal Authority, PA GO 2001
 

 

-8-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

01010710     Whitefish Bay (Village), WI GO 2001
01010711   McKinney, Texas LTGO 2001
01010712   New Ulm (City), Minnesota GO 2001
01010715   Bethlehem BOE, NJ GO 2001
01010716   North Mission Glen MUD, Texas GO 2001
01010717   Arbor Park SD#145, IL
01010719   Gloucester County, NJ GO 01
01010720   Woodbridge (Twp), NJ GO 2001
01010723   Tamaqua Borough Auth, PA GO 2001
01010728   Watertown (City), WI GO
01010730   Syosset Central School District, NY GO 2001B
01010731   Waunakee (Village), WI GO 2001
01010732   Delaware Township BOE, NJ GO 2001
01010733   South Plainfield Borough BOE, NJ GO 2001
01010734   Greenwich (T) BOE, NJ GO 2001
01010735   Durand (City of), MI GO 2001
01010736   North Babylon UFSD, NY GO 2001
01010737   St. Clair County, Michigan
01010740   Randolph County, IL GOLT
01010741   Palmyra (Vlg), NY GO 2001
01010742   Abilene, Texas
01010743   San Jose Unified School District, CA GO 2001
01010744   Manheim Twsp Gen Mun Auth, PA Gtd Lse 01
01010746   Verona (City of), WI GO 2001
01010748   Palantine CCSD #15, IL GO Ltd Tx 01
01010749   Fountain Hills USD #98, AZ GO 2001 B
01010750   Wentzville R-IV School District, MO GO 2001
01010752   Upper Saucon Township, PA GO 2001
01010753   Harris County MUD #82, TX GO 01
01010754   Orchard School District, CA GO 2001A
01010755   Highland CSD, IA GO
01010757   Fairview Township Authority, PA 2001
01010758   Knox County, OH GO 2001
01010761   Hamlin (Town of), NY GO 01
01010762   Hartland-Lakeside Joint SD No. 3, WI GO 2001
01010763   NEW LENOX SD #122, IL GO 2001AB
01010764   Warren Building Authority (City), MI GOLT 2001
01010765   Fairview Sch Dist, PA GO Series 2001
01010766   Bridgeport, Connecticut GO 2001 C&D
01010768   Onondaga, NY GO 2001
01010769   Dodge Center, Minnesota GO 2001
01010770   Wilsonville, OR GO ULT 2001
01010771   Tarrytowns (Union Free SD), NY GO 2001
01010774   Cassia JT SD #151, ID GO Ser01
01010775   Rochelle Park (Twp), NJ GO ‘01
01010779   Camden County Imp. Auth, NJ GO 2001
01010780   Pine-Richland School District, PA GO 2001 D&E
01010784   Hawaii County, Hawaii GO 2001A
01010785   Saginaw Intermediate Sch Dist, MI GOLT 2001
01010788   Lawton, Oklahoma GO 2001
01010789   Pima County Flood Control District, AZ GO Ref 01
01010790   Stratford (Town of), CT GO 2001
01010791   South Park SCH Dist, PA GO 2001
01010792   Hartland Township, MI GOLT 2001
01010793   Mashpee Water Dist, MA GO 01 LOTA

 

Policy Id

 

 

Policy

01010794     Mashpee Water Dist, MA GO 01 LOT B
01010798   Waukee (City), IA GO 2001B
01010800   Lindenhurst Park Dist, IL GO 01A&B
01010801   Harrington Park BOE, NJ GO 01
01010802   Muhlenberg School District, PA GO 2001
01010803   Central York School District, PA GO 2001
01010804   Liberty Elementary School District, CA GO 2001
01010806   Maize Unified SD #266, KS GO 2001
01010813   Delran (Township of), NJ GO 2001
01010814   Essex Co, NJ GO 2001
01010815   Essex Co, NJ GO 2001 (2)
01010817   Robinson (City of), IL GO 01
01010818   Jersey City MUA, New Jersey GO 2001
01010819   Jersey City MUA, New Jersey GO 2001 Surety
01010821   Fernandina Beach, FL GO 01
01010823   Alsip (Village), IL GO 01A
01010824   Gloucester, Massachusetts GO 2001
01010825   St. Charles Park District, IL GO 01
01010826   WICKENBURG USD #9, AZ GO 2001
01010827   Osseo (City of), MN GO 2001A
01010829   Commercial Township BOE, NJ GO 2001
01010830   Madison ESD #38, Arizona GO 2001
01010831   Upper Deerfield (Twp) BOE, NJ GO 2001
01010832   Charter Township of Redford, MI GO ULT 2001
01010833   Grapevine (City of), Texas GO 01
01010834   BEAUMONT, TX GO Ltd Tax 2001
01010835   Oxnard School District, California GO Series E
01010836   Melrose Park (Vlg of), IL GO 01A
01010837   Melrose Park (Vlg of), IL GO Series B
01010838   BOUND BROOK (BOROUGH OF),NJ GO
01010839   Crockett County, TN GO 2001
01010840   Ramapo (Town), New York GO 2001
01010842   Springfield (City), MA GOLT 2001
01010844   Rosemont (Village), IL GO 2001
01010845   Berwick Area SD, PA GO 01A&B
01010847   Broken Arrow, Oklahoma GO 2001
01010848   Block House Municipal Utility District, TX GO 2001
01010849   Central Decatur Community SD, IA GO 2001A
01010850   Tallmadge (City), OH GO 2001
01010851   McMinnville (City), OR
01010853   Monroe County, Wisconsin GO 2001
01010854   Sherwood (Village of), WI GO 2001A
01010855   Louetta North Public Util Dist, TX GO 01
01010856   GARNET VALLEY SD, PA GO 2001
01010857   Patterson Joint USD, CA GO 2001 Series A
01010858   Oxford Township BOE, NJ GO 2001
01010861   Closter (Borough), New Jersey GO 2001
01010862   Mount Laurel Township, NJ GO 2001
01010863   Peoria (City of), IL GO 20001CD
01010864   Fort Bend County, Texas GOLT FCWSC 01
01010865   Branchburg Twp BOE, NJ GO dtd 8/15
01010866   School Dist #23 of Calcasieu Parish, LA GO 01
01010869   Virginia (City of), MN GO 2001A&B
01010872   Newbury (Town of), MA GO 2001
01010873   Rensselaer County, NY GO
 

 

-9-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

01010878     Hawaii State GO & Refunding 2001 Series CV & CW
01010879   Westerly (Town), RI GO ULT
01010880   Lafayette Yard CDC, NJ Rev Ref 01
01010883   Pleasantville Union Free SD, NY GO 2001
01010884   Hillsborough Twp., NJ GO ‘01
01010886   Lincoln County, Tennessee, GO Series 2001
01010887   Putnam County, Tennessee GO
01010888   De Pere (City), WI GO
01010889   New Prague, MN GO ‘01
01010890   De Soto USD No. 232, Kansas GO Series 2001
01010891   Edgerton SD, WI 01
01010893   Runnemede (Borough), NJ GO 2001
01010894   Twinsburg (City of), OH
01010895   Rochelle Park BOE, NJ GO 2001
01010896   Hortonville SD, WI GO 2001
01010897   Little Egg Harbor (Twp of), NJ 01
01010898   Flower Mound (Town), TX GO LT 2001 Certs of Obl
01010899   Willow Fork Drainage Dist, TX 01
01010900   MARION, ILLINOIS GO (MFT) 2001
01010901   Cedar Park, Texas GO Ltd Tax 2001
01010904   Rosemount Port Authority, MN GO 01C
01010905   Industry (City of), California GO 2001
01010906   Piscataway Township, New Jersey GO 2001
01010908   Worcester (City), MA GO 2001 A&B
01010909   Montgomery Cnty MUD #46, TX GO2001
01010910   Clarkstown (Town), New York GO 2001
01010911   East Peoria SD #86 IL GO 01
01010913   Angelina County, Texas GO 2001
01010916   Waynesboro Area School District, PA GO 2001
01010919   Mt. Pleasant Building Auth, MI GO 2001
01010920   Thurston Co Fire Protection Dist #3, WA GO ULT 00
01010921   Reavis Township HSD #220, IL GO 2001
01010922   Pleasant Prairie, WI GO 2001ABCD
01010923   Temple City Unified School District, CA GO Ser B
01010927   North Lincoln FRD No.1, OR GO
01010930   Delhi (Charter Twsp. of), MI GO 01
01010931   Cuyahoga Falls, Ohio GOLT 2001
01010932   East Lansing (City), MI GO 2001B
01010933   Campton Township, IL GO 2001
01010936   Belle Plaine (City), Minnesota
01010937   Marengo Comm HSD #154, IL GO 2001
01010938   Traverse City ASD, Michigan GO 2001
01010939   Coshocton (City of), OH GO 01
01010940   Pembroke (Town), MA GO 2001
01010942   Long Hill (Twp), NJ GO 2001
01010945   Rowlett (City), Texas GOLT 2001
01010946   Middleburgh CSD, NY GO 2001
01010947   McKeesport Area School District, PA GO 2001
01010948   De Pere Unified SD, WI GO 2001
01010951   Dodgeland SD, WI GO 2001
01010952   Pittston Area School District, PA GO 2001 A&B
01010956   Elmira (City of), NY GO
01010957   Kenosha County, WI GO 01A
01010959   Unicoi County, Tennessee GO
01010964   Lopatcong Twp BOE, NJ GO 2001

 

Policy Id

 

 

Policy

01010967     Sylvania City SD, OH GO 2001
01010968   Colerain (Twp of), OH GO LTX
01010969   Sullivan County, NY GO 2001
01010970   West Greene SD PA GO Series 2001
01010971   Beaver Area SD, PA GO
01010973   Chicago (City), Illinois GO 2001 A&B
01010975   Hays County, Texas GO 2001ULT
01010976   Point Pleasant Beach (Borough) BOE, NJ GO 2001
01010978   Cumberland City, WI GO 2001
01010985   Clark County School District, NV GOLT 2001C
01010986   Clark County School District, NV GOLT 2001D
01010989   Thief River Falls (City), MN GO 2001
01010990   Arcade (Village), NY GO 2001
01010992   Rosendale-Brandon SD, WI GO dtd 9/15/01
01010993   Monroe County, PA GO 2001 CDE&F
01010994   Harbor Creek SD, PA GO 2001AB
01012000   Webb County, Texas GOLT 2001
01012001   Cumberland Valley SD, PA GO 2001
01012006   Victoria, Texas Ltd Tax GO 01
01012008   South Western SD, PA GO 2001
01012009   Lampeter-Strasburg SD, PA GO 2001
01012010   Ocean City, NJ GO 2001
01012012   Willingboro Township, NJ GO 2001
01012019   Chetek School District, WI GO 2001
01012020   Oak Creek-Franklin Jt. SD, WI GO 2001
01012031   Atlantic Highlands/HRSA, NJ GO 2001
01012032   Harris County MUD #53, Texas 01
01012036   Farmington Hills Bldg Auth, MI GO 01
01012037   Sea Isle City, New Jersey GO 2001
01012039   Williamson (Cnty of), IL GO Taxable 2001A&B
01012040   Middleborough (Town) MA Ltd dtd 9/15/01
01012043   Roanoke, TX GOLT
01012045   Franklin-McKinley SD, CA GO 2001A
01012046   Cypress Creek Utility District, TX GOULT Ser 2001
01012047   Grand Ledge (City of), MI GO LTD 2001
01012049   Sacramento City USD, California GO Series 2001
01012053   Octorara Area SD, PA GO 2001
01012054   Horry Cnty, South Carolina GO 01ABC
01012056   Southwestern Ill Dev Auth (O’Fallon)
01012057   Goodview (City of), MN GO 2001
01012058   Paris (City), TX LTX GO 2001
01012061   San Marcos (City), Texas GOLT 2001
01012062   Florida State PECO GO 2001E
01012063   Evansville Cmnty SD, WI GO 2001
01012067   Freehold Township, NJ GO 2001
01012068   Addison Town, Texas GO Ltd Tax 2001
01012071   Wasco Union School District, CA GO 2001
01012072   Prosper, Texas LTGO Series 2001
01012075   Mount Laurel Fire District No. 1, New Jersey
01012076   Platteville (City of), WI GO 2001
01012077   Lenox (Town), MA 2001
01012078   Westside Union School District, CA GO 2001
01012079   Toledo Sch Dist #237, WA GO 2001
01012080   Lemont (Township), IL GO 2001
01012081   Kane County, IL GO 2001
 

 

-10-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

 

Policy

01012089     Trenton (City of), NJ GO 2001
01012090   Rochester Hills, MI GO
01012092   Charter Twp of Oakland, MI
01012096   Las Vegas-Clark County Lib Dist, NV GO LT 2001
01012097   Lawrence County, TN GO 2001
01012098   Rio Rancho Pub SD #94, NM GO 2001
01012102   Unadilla Valley Central SD, NY GO 2001
01012103   Murrieta Valley Unified SD, CA 2001 98 Ser B
01012108   Fort Bend County LID #14, TX GO ULT 2001
01012109   Manheim Township School District, PA GO 2001A
01012110   Clovis USD, California GO 2001A
01012112   Gloucester Township, NJ GO 2001
01012113   Gloucester City BOE, NJ GO 2001
01012116   Elkhorn (City of), WI GO 01
01012118   Mercedes (City of), TX 2001
01012119   Henderson County, TN GO 01 Rfdg
01012120   Erie County, NY GO 2001 A&B
01012122   Lynn (City of), MA
01012123   Romulus, MI GOLT 2001
01012124   Athens Area SD, PA GO 01
01012125   Strongsville (City), OH GO LT 2001
01012129   Rockford SD #205, Illinois GO 2001
01012130   Rossford (City), OH GOLT 2001
01012132   London City SD, OH GO 2001
01012136   Minneapolis Spec SD #1, MN GO 2001B
01012137   Muncy School Dist, PA GO 2001
01012138   Brookhaven (Town of), NY GO2001B
01012139   Brookhaven (Town of), NY GO2001A
01012140   Cheshire Cnty, NH GO
01012141   Brown City Community Schools, MI GO 2001
01012145   Warrior Run SD PA GO 2001
01012146   Walworth County Metro Swr Dist, Wisconsin GO 01
01012149   Forest Preserve Dist (Cook Cnty) IL GO 2001 LTD
01012151   Belleville SD #118, IL GO 2001
01012152   Monroe County Area V-Tech Sch Auth, PA 2001
01012153   North Aurora (Vlg of), IL GO 01
01012154   Wayne County, TN GO ‘01- Ind.Dev.Brd.
01012155   Weymouth (Town), MA GO 2001
01012157   Sartell (City), Minnesota GO 2001C
01012161   Burlington (City of), WI GO 2001A
01012162   West Valley School District #208, WA GO 2001
01012164   West Paterson (Boro of), NJ GO 2001
01012165   SANTA CRUZ CITY HIGH SD, CA GO 98C
01012166   Hammonton Town BOE, NJ GO 2001
01012171   Tallmadge (Charter Twsp. of), MI GO 2001
01012172   Cibolo (City of), Texas GO Ltdtx
01012174   Atlantic Highlands (Borough of), NJ
01012175   West Bloomfield SD, MI GO 2001
01012181   Piscataway (Township of), NJ GO 2001
01012182   Plover (Village), WI GO 2001
01012183   Millville (City of) New Jersey
01012184   Greene Co., TN GO 2001A
01012185   Greene Co, TN GO 2001B
01012186   Pampa (City of), TX GO 2001
01012188   Jersey County, IL GO 2001

 

Policy Id

 

 

Policy

01012189     Rayford Road MUD, TX GO 2001
01012191   Mount Prospect (Vlg of), IL GO 2001
01012193   Northern Burlington Cnty Reg SD BOE, NJ GO 2001
01012194   East Granby (Town of), CT 2001
01012196   Louisville CSD, OH GO 2001
01012197   Saginaw County, Michigan GOLT 2001
01012200   Hopewell Valley RSD, NJ GO 2001
01012201   Maui County, Hawaii GO Ser 01 B&C
01012202   Bethlehem Area School District, PA GO 2001
01012203   Monroe MUA (Monroe Township), NJ GO 2001
01012204   Portage County, OH GO Ltd Tax 2001
01012205   Sioux City (City of), Iowa GO 2001
01012206   Ardsley Union Free School District, NY GO 2001
01012207   Cranberry Township, PA GO Ser B&C 2001
01012208   Tioga County, New York GO 2001
01012211   Port of Houston Auth, TX GO 01AB
01012216   Elm Grove (Village of), WI GO
01012218   Lawrence County, TN GO
01012220   Barre (Town of), MA GO
01012221   Derby (City), Kansas GO 2001
01012224   Greene Community SD, IA GO 2001
01012227   Deer Valley Unified SD #97, AZ GO 2001
01012228   Port of Houston Auth, TX GO 2001A
01012229   Middletown, Rhode Island GO Series 2001
01012230   Blue Earth, MN GO ‘01
01012231   Brentwood Union SD, CA GO Series 2001 D&E
01012232   Munroe Falls (City of), OH Series 2001 A & B
01012235   Quaboag Regional School District, MA GO 2001
01012238   Kutztown (Borough of), PA GO 2001A
01012240   Crete, Illinois GO Series 2001A
01012241   Crete, Illinois GO Series 2001B
01012245   Frisco, Texas Limited Tax GO, Series 2001
01012246   Wiseburn School District, California GO Ser 2001
01012247   West Des Moines (City), IA GO 2001C
01012249   Pueblo County SD #70, CO GO
01012250   Pickerington Local SD, OH GO 01
01012251   North Smithfield, RI GO
01012252   Catasauqua Borough, PA GO GTY
01012254   Racine Unified School District, WI GO 2001
01012255   Cambria Somerset Authority, PA GO 2001
01012257   Bradley SD #61, IL LTGO 2001
01012261   Illinois State GO Illinois 2001
01012262   Clermont-Northeastern LSD, OH GO 2001
01012263   Canton (Town), CT GO 2001
01012264   Charlevoix County, MI GO 01
01012268   Arlington Heights Park District, IL GO 2001
01012269   Brockport CSD, NY GO 2001
01012271   South Haven Bldg Auth, MI Go 2001
01012274   Pearland, Texas LTGO Series 2001
01012275   Pine Valley CSD, NY GO 2001
01012276   Westmorland Union Elem SD, CA GO 2001
01012277   Pacific Cnty Pub Hosp Dist No. 2, WA GO 01
01012278   Pulaski (City of), TN GO 2001
01012281   North Mankato (City), MN GO 2001 A
01012282   Pasadena (City), Texas GOLT 2001
 

 

-11-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
01012285     Frisco (City), Texas GOLT 2001 A&B
01012286   Canal Winchester LSD OH GO 2001B
01012287   Strongsville, Ohio UTGO Series 2001
01012289   Cudahy (City), WI GO 2001
01012290   Big Rapids (City of), MI GO 2001
01012292   Franklin County, TN GO ULT 2001
01012293   Erie County, Ohio GO Series 2001
01012294   Los Gatos Union SD, CA GO 2001A
01012295   Flambeau School District, WI GO 2001
01012296   Grafton (Village), WI GO 2001
01012297   Conestoga Valley SD, PA GO 2001
01012298   Hillsboro City School District, Ohio UTGO Ser 2001
01012299   Jersey Shore ASD, PA GO 2001
01012304   South Park School District, PA GO 2001 C&D
01012305   Freehold Regional HSD, NJ GO 2001
01012307   Elizabeth (City), New Jersey GO 2001
01012308   Sauk County, Wisconsin GO 2001 A
01012309   Albany County, NY GO ULT 2001
01012310   Jordan, MN GO 2001
01012311   Falconer Central SD, NY GO 2001
01012314   Montour School District, PA GO 2001
01012315   Gladewater (City of), Texas GO 2001
01012316   Oconto City, WI GO 2001
01012317   Sidney, Ohio LTGO 2001
01012318   Mansfield Township BOE, NJ GO 2001 A&B
01012319   Oyster River Cooperative SD, NH GO 2001
01012320   Las Vegas, NV LTGO 2001
01012321   Burlington (Twp), NJ GO 2001
01012322   Bellwood SD #88, IL GO 2001
01012325   McLean County, Public Building Commission
01012326   American Fork City, Utah GO 2001
01012329   Robinson, Texas LTGO Series 2001
01012332   La Habra City School District, CA GO Series 2001A
01012335   HUDSON COUNTY, NJ GO
01012336   National Park (Borough) BOE, NJ GO 2001
01012339   Norwich City SD, NY GO 2001
01012343   Huntsville (City), Texas GOLT 2001
01012344   Northfield (Twp of), MI GO 2001
01012345   Annville-Cleona Sch Dist,PA GO 2001
01012346   Conroe, Texas GO LTX 2001
01012348   Meadowhill Regional MUD, TX GO 2001
01012350   Tacoma School District #10, WA GO 2001
01012351   Caledonia Charter Township, MI 2001
01012352   Agawam, Mass LTGO 2001
01012354   Kankakee (City of), IL
01012355   Farmingdale (Village of), NY GO 2001
01012356   Grand Blanc Community Schools, MI GO 2001
01012357   North Branch (City of), MN 2001
01012358   Forest Park (City), OH GO 2001
01012360   Shreveport, Louisiana GO
01012361   Dilworth (City), MN GO 2001A
01012362   Dilworth (City), MN GO 2001B
01012364   Haverhill (City), MA GO 2001
01012365   Belton City, MO, GO Ref 2001
01012366   Lexington County, SC GO 2001

 

Policy Id

  Policy
01012368     Hewitt (City), TX GOLT 2001
01012370   Highland Heights (City of), OH GOLT 2001
01012371   Haverstraw (Town of), NY GO 2001
01012372   Blaine (City), MN GO 2001A
01012375   Floral Park (Village), NY GO 2001
01012376   Remsen Central School District, NY GO
01012377   Harbor Springs Public Schools
01012378   Watauga County, NC GO
01012381   Oyster Bay (Town of), NY GO 2001B
01012388   Warner Baird District Library, MI GO 2001
01012389   Harris County WC&ID #110, TX 2001 GO ULT
01012390   San Jacinto Coll Dist, TX GOLT 2001
01012391   San Jacinto Coll Dist, TX GOLT Cont Oblig 2001
01012394   Christian County, Ilinois GO 2001A (LTD)& 2001B
01012395   Elizabeth (City), New Jersey GO 2001
01012399   Collinsville CUSD #10, IL GO 2001
01012402   Southern York Co. SD, PA GO
01012403   Providence, Rhode Island GO
01012404   Twinsburg (City of), OH LMTX GO 01
01012406   Harris County MUD No. 153, Texas GO Series 2001
01012407   Moline (City of), IL GO 01
01012409   Lancaster County, PA GO 2001 A&B
01012412   Fort Bend County MUD #113, TX GO 2001
01012416   Whitman-Hanson Regional SD, MA
01012417   Conemaugh Twp Area SD, PA GO 2001
01012418   Washoe County, Nevada LTGO Series 2001A
01012421   Dobbs Ferry (Village), NY GO 2001
01012423   Orland Park Village, IL GO 2001
01012427   Waukegan (City), Il GO 2001A
01012428   Coventry, CT GO
01012434   Tinley Park (Vlg), IL GO 2001
01012437   Parma Heights (City of), OH GO LTX 2001
01012440   Canyon Cnty SD #132, ID GO 2001
01012443   Ypsilanti Community UA, Mi Twn LMTX GO 01
01012448   Rockport (City), Texas GOLT 2001
01012451   North Mission Glen MUD, TX GO 2001A
01012454   Northshore Park & Rec Svc Area, WA GO ULT 2001
01012455   Queen Bee SD #16, IL GOLT 01A&B
01012456   Laurens County Health Care Sys, SC GO Series 2001
01012459   Berwyn North SD #98, IL GO 2001
01012460   Park Forest Village, IL GO 2001
01012461   Rahway (City), NJ GO 2001
01012464   East Haven (Town), CT GO 2001
01012465   Vancouver School District No. 37, WA 2001
01012466   Upton Town, MA GO ULT 2001
01012467   Oxford Area SD, PA GO 2001ABC
01012471   Hattiesburg, Mississippi GO Series 2001
01012473   Chicago Park Dist, IL GO Ltd 2001C
01012474   Chicago Park Dist, IL GO ULT 2001D
01012475   Shenango Area SD, PA GO 2001
01012479   Corona-Norco USD, CA GO 2001
01012481   West Paterson (Borough) BOE, NJ GO 2001
01012482   DENVER SD #1, CO GO
01012488   Suffolk County, New York GO 2001
01012489   North Allegheny SD, PA GO 01A&B
 

 

-12-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
01012493     East Pennsboro Area SD, PA GO 2001A
01012494   Harrison School District #2, CO GO 2001
01012496   Montgomery County, TN GO 2001
01012498   Fort Bend County MUD No.1, GO, Series 2001
01012502   Prince George’s County, MD GO/COP 2001
01012503   East Richland CUSD #1, IL GO 2001
01012504   Mankato, MN GO 2001A
01012505   Medina Central School District, NY GO 2001
01012507   Pullman Mem Hosp Pub Hosp Diist # 1-A, WA 01
01012509   Marlboro Central School District, NY GO 2001
01012510   Lumberton BOE, NJ GO 2001
01012511   Lewiston, ME GO 2001
01012513   AMSTERDAM ENLARGED CSD, NY GO
01012514   Montgomery County, TX MUD #60 GO 2001
01012515   Davenport (City of), IA GO 2001 Series C
01012520   Union Elementary School District, CA GO 2001B
01012521   Baldwin City USD No. 348, Kansas GO Series 2001
01012523   Honeoye CSD, NY GO
01012525   Voorhees (Twp), NJ GO 2001
01012527   Dodgeville (City), WI GO 2001
01012528   BRAZOS COUNTY, TEXAS GO 2001 GO
01012529   Fargo (City), ND GO 2001B
01012530   Carl Sandburg CCD #518, IL 2001A
01012531   Buffalo (City), New York GO 2001-D
01012532   Harrisburg Redev. Auth, PA (Harrisburg GO) 01
01012533   Illini Hosp Dist, IL GO 2001
01012535   RICHMOND, VIRGINIA GO
01012536   LaVergne, TN GO ULT 2001
01012538   Hamburg Municipal Authority, PA GO 2001
01012540   Homewood-FlossmoorPkDistILAlt Ser A&B 2001
01020009   CALIFORNIA STATE GO 4-1-99
01020010   California State GO 10-1-00
01020011   California State GO 12-1-00
01020013   CALIFORNIA STATE GO 4-1-99
01020020   California State GO 10-1-00
01020021   California State GO 12-1-99
01020023   California State GO 10-1-00
01020024   California State GO 10-1-00
01020025   CALIFORNIA STATE GO 10-1-97
01020026   CALIFORNIA STATE GO 10-1-97
01020029   CALIFORNIA (STATE OF) GO 1993
01020030   CALIFORNIA STATE GO 10-1-97
01020031   CALIFORNIA STATE GO 10-1-98
01020032   CALIFORNIA STATE GO 2-1-99
01020033   CALIFORNIA STATE GO 2-1-99
01020034   California State GO 12-1-00
01020035   CALIFORNIA ST VAR PURP GO 91
01020036   Florida GO Refg PECO 2001B
01020039   Washington State GO 2001 C & D
01020042   New York City, NY GO 99H
01020049   California State GO 12-1-00
01020050   California (State Of) GO
01020051   New York City, NY GO 99H
01020052   New York City, NY GO 98JK
01020053   CALIFORNIA STATE GO 2-1-99

 

Policy Id

  Policy
01020059     New York City,NY GO Series F&G
01020060   NEW YORK CITY, NY GO 98EF
01020064   New York City,NY GO Series F&G
01020065   New York City,NY GO Series F&G
01020069   New York City,NY GO Series F&G
01020071   California State GO 1998
01020073   California State GO 6-1-00
01020074   New York City,NY GO Series F&G
01020077   New York City,NY GO Series F&G
01020079   New York City,NY GO Series F&G
01020080   California State GO 3-1-01
01020081   New York City,NY GO Series F&G
01020082   New York City, NY GO 99H
01020097   NEW YORK CITY, NY GO 98EF
01020098   New York City, NY GO 01 H Fix
01020099   New York City, NY GO 01 H Fix
01020100   New York City, NY GO 01 H Fix
01020105   New York City,NY GO Series F&G
01020106   New York City, NY GO 01DEF
01020109   New York City, NY GO 01DEF
01020110   New York City, NY GO 99H
01020117   California State GO 12-1-99
01020119   California State GO 6-1-00
01020120   CALIFORNIA STATE GO 91
01020121   CALIFORNIA STATE GO 91
01020122   California (State Of) GO
01020123   California State GO 12-1-00
01020124   California State GO 12-1-00
01020128   California State GO 10-1-00
01020129   CALIFORNIA ST VAR PURP GO 92
01020130   CALIFORNIA STATE GO 91
01020132   California State GO 1998
01020134   CALIFORNIA (STATE OF) GO OCT90
01020135   California State GO 3-1-01
01020136   CALIFORNIA STATE GO 10-1-98
01020137   CALIFORNIA STATE GO 12-1-98
01020140   California State GO 3-1-01
01020141   California State GO 4-1-00
01020143   California State GO 3-1-01
01020144   California State GO 3-1-01
01020146   California State GO 3-1-01
01020152   New York City, NY GO 99H
01020154   New York City, NY GO 99A
01020157   New York City, NY GO 01 H Fix
01020158   New York City, NY GO 01 H Fix
01020165   New York City, NY GO 98JK
01020166   New York City, NY GO 98JK
01020167   NEW YORK CITY, NY GO 98EF
01020169   New York City, NY GO 01DEF
01020175   Washington County, MD GO 2001
01020176   Washington County, MD GO 2001
01020177   Washington County, MD GO 2001
01020178   Washington County, MD GO 2001
01020180   New York City, NY GO 2000A
01020187   Denton County, Texas Ltd GO 99
 

 

-13-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
01020208     Los Angeles, CA GO
01020251   Florida State Bd of Ed GO 98 D
01020256   Washington St GO & Lease 98C
01020276   California State GO 6-1-00
01020277   CALIFORNIA STATE GO 12-1-98
01020278   California State GO 3-1-01
01020280   Byron Center Public Schools,MI 2001
01020290   New York City, NY GO 01 H Fix
01020297   Washington St GO & Lease 98C
01020303   Rockland County, NY GO 2001A&B
02010003   Jersey City MUA, NJ GO Surety 2002
02010004   Howard-Winneshiek Community SD, IA GO 2002
02010005   Worthington City SD, OH GO01
02010008   Garnet Valley SD, PA GO 2002
02010009   Lancaster County, PA GO 2002
02010014   FALCON SD #49, COLORADO GO
02010016   Longview School Dist. #122, WA GO 2002
02010017   Lackawanna County, PA GO 2002A and 2002B
02010018   St. Peter ISD #508, MN GO Ref 2002A
02010019   Goodhue ISD #253, MN GO 2002
02010022   LaVergne, TN GO ULT W&S Rev 2001
02010023   Penn Hills (Municipality), PA GO 2002
02010026   Riverside USD, CA GO 2002
02010028   Syracuse, New York GO 2001C
02010029   Syracuse, New York GO
02010030   Reading (Town), MA GO
02010031   Greensburg (City), PA GO 2001
02010032   Shelton SD #309, WA GO ULT 2001
02010034   North Allegheny SD, PA GO Rfdg 2002
02010035   Monroe-Woodbury CSD, NY GO 2001
02010036   First Colony MUD No. 9, Texas GO Series 2002
02010039   Pequot Lakes ISD #186, MN GO 2002
02010040   West Milford (Township), NJ GO 2002
02010041   Trophy Club, Texas LTGO Series 2002
02010042   Prior Lake-Savage ISD #719, MN GO 2002A
02010043   Cedar Rapids Community SD, IA GO 2002
02010044   Medford Area Public SD, WI GO Ref2002
02010046   Jenks, OK GO 02
02010050   Yough School District, PA GO 2001
02010051   Florida State GO PECO, 2001C
02010052   Milford (Town of) MA GO, 1-15-02
02010053   Gail Borden Pub Lib Dist, IL GO 2002
02010054   Amery School District, WI GO 2002A
02010055   Monticello CUSD #25, IL GO
02010056   Franklin Square UFSD, NY GO 2002
02010057   Elmhurst CUSD #205, IL GO
02010059   Sylvan Union Sch Dist, CA GO
02010060   Patchogue, NY GO ‘02
02010061   Mesa (City), AZ GO 2002
02010064   Washtenaw County, MI GO 2002
02010065   Bloomsburg ASD, PA 2001
02010067   Woodbine Community School District, IA GO 2002
02010068   Howard-Suamico SD, WI GO
02010069   Lower Southampton TWP,PA GO
02010071   Livingston (Parish of) SD No. 22, LA

 

Policy Id

  Policy
02010072     Alum Rock Union ESD, CA GO 2001D
02010073   Door County, WI GO ULT 2002A
02010074   Lemont-Bromerek SD #113A, IL 2001
02010076   Asotin County, Washington GO 2002
02010077   Canyon Cnty SD #134, ID 2002
02010078   Bristol Borough, PA GO 2002
02010079   Muskegon County, MI GOLT 2002
02010080   Muskegon County Building Authority, MI GOLT 2002
02010081   College Community School District, IA GO 2002A
02010082   College Community School District, IA GO 2002B
02010084   Clinton Commun SD WI ‘01
02010085   Pullman Memorial Hosp Pub Hosp Dist #1-A, WA 02
02010086   Mohave Cnty Hosp Dist#1, AZ GO 2001
02010088   Shelby Elementary School District #14, MT GO 2002
02010089   Gananda Central School District, NY GO 2002
02010091   Waupaca School District, WI GO 2002
02010092   Bedford County, TN GO 2001
02010094   Taylor (City), Michigan GOLT 2002
02010096   East Richland CUSD #1, IL GO 2002
02010097   INDIANOLA COMMUNITY SD,IA GO 2002
02010100   Lake Saint Louis (City), MO GO 2002
02010102   El Paso County SD #20, CO GO
02010103   Galesburg, IL GO 2001
02010108   Indian Prairie CUSD#204, IL GO 2002
02010109   Stafford, Texas GO Cert, 2002
02010110   Nicollet County, MN GO State Aid Road 02
02010112   Massachusetts Commonwealth GO 2002A
02010118   Black Hawk (County), IA GO 2002
02010119   Cohoes City School District, NY GO 2002
02010120   Keystone School District, PA GO 2002
02010122   Leroy Community Park District, IL GOLT 2002A
02010123   Oley Valley School District, PA GO 2002
02010124   Manhattan Beach USD, CA GO Elec2000B
02010125   Oak Lawn (Village), IL GO ‘02
02010126   Manhattan Beach USD, CA GO 2002E
02010128   Hastings (City), MN GO 2002AB
02010129   Hudson Falls Central SD, NY GO 2002
02010130   West Haven (City of), CT GO 2002
02010131   Wakefield (Town), MA
02010134   Murrysville (Munic.),PA GO 2001
02010136   Plain Local SD, OH GO, 2002
02010137   Moscow, Idaho GO ULT 2002
02010138   Northern Burlington County Reg SD BOE, NJ GO
02010139   Dublin USD, California GO 2002
02010141   Meigs County, Tennessee GO 2002AB
02010142   Jamestown Public SD No. 1, ND GO 2002
02010143   Lacey (City of), WA GOULT 2002
02010145   Greenfield (Town), MA GO 2002
02010146   Monroe County, PA GO, 2002 A&B
02010150   Clinton, NJ, Bd. of Ed. GO 2001
02010151   Glenview Community Consol SD #34, IL GO 2002
02010152   Ocean Township NJ Sewer GO 2002A
02010153   Berkeley County Board of Education, WV GO Ser 2002
02010154   Moosic (Borough), PA GO 2002
02010155   Peoria School Dist 150 IL GO 2002
 

 

-14-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
02010157     Leavenworth, KS GO ULT 2002A
02010158   St. Charles CUSD #303, IL GO
02010159   Brooklyn Center SD #286, MN GO 2002
02010160   Ocean Township NJ Sewer GO 2002B
02010161   Orchard Park (Town), NY 2002
02010162   Palmyra Area School District, PA GO 2002
02010164   Florida State GO PECO 2002G
02010165   Mukwonago (Village), WI GO 2002
02010166   Atlantic County, NJ GO 2002
02010168   West Allegheny SD, PA GO 2002B
02010170   Western Wayne Sch Dist,PA GO 2002
02010171   Hopewell Area Sch Dist, PA GO
02010173   Tennessee State GO 2002A
02010174   Umatilla County, OR GO 2001
02010175   Trophy Club, Texas LTGO Series 2002
02010179   Belleville Township, NJ GO 2002
02010180   Midwest City, OK GO 2002
02010181   Kent (Town of), CT GO 2002
02010182   Montgomery, IL GO 02.
02010183   Bloomingdale (Vill. of) IL GO 2002
02010184   Quincy SD #172, IL GO 2002A&B
02010185   Somerville (City of), MA (LT) 2002
02010187   Florida State DOT GO 2002
02010188   Inkster (City), MI GO LTD Tax (MTF Receipts)
02010189   Olathe Unified School District #233, KS GO 2002
02010191   Ingham County Building Authority, MI 2002
02010192   Bath Central SD, New York GO 2002
02010193   Leavenworth, KS GO ULT
02010194   Westlake MUD No. 1, TX 2002
02010195   Illinois State GO 2002
02010196   Spartanburg Sanitary Sewer Dist, SC GO 2002
02010197   McGregor ISD No. 4, MN GO 2002
02010198   St. Charles Par SD #1, LA GO 2002
02010199   New York State GO 2002A
02010200   New York State GO 2002B
02010201   New York State GO 2002C
02010205   Oklahoma County ISD No. 89, Oklahoma GO 2002
02010207   Municipal Imp Corp Los Angeles, CA Lease 2002 F
02010209   Little Chute Area Sch Dist, WI GO
02010210   Raytown School District #2, MO GO 2002
02010212   Oklahoma City, Oklahoma GO 2002
02010213   Carmel Unified SD, CA GO 2002
02010215   Wicomico County, MD GOLT 2002
02010217   Sioux County, Iowa GO 2002
02010219   Essexville, MI GO 2002
02010220   Delano Union Elem SD, CA GO
02010222   New Hartford (Town), NY GO 2002
02010224   Alpena (City of), MI GO 2002
02010227   St. Peters (City of), MO GO 2002
02010229   Johnson County, Illinois GO 2002
02010230   Roanoke (City), Virginia GO 2002 A&B
02010231   El Centro Sch Dist, CA GO 2001
02010234   Linn-Benton Community College District, OR GO 2002
02010235   Lansing Community College, MI GOLT 2002
02010236   Ladysmith-Hawkins SD, WI 2002

 

Policy Id

  Policy
02010237     Eugene School District #4J, OR 2002
02010238   West Contra Costa USD, CA GO 2002B
02010240   Columbus (City of), WI GO 2002
02010242   Eastham (Town), MA GO
02010245   Monroe County, NY GO 2002
02010246   Winnebago County, IL GO 2002
02010247   Oshkosh (City of), WI GO 2002B
02010249   Binghamton (City), NY GO 2002
02010250   Oshkosh (City of), WI GO 2002 A
02010253   Paradise Valley Unified SD #69, AZ GO 2001
02010254   Milford Central SD, NY GO 2002
02010257   Titusville ASD, PA GO 2002
02010263   Bedford (City), TX GOLT 2002
02010265   Lock Haven (City), PA GO 2002
02010266   Moline (City of), IL GO 2002A
02010267   Donegal School District, PA GO 2002
02010268   Madison Central SD, NY GO 2002
02010269   Cambria Heights School District, PA GO 2002
02010270   Fort Lee (Boro of), NJ GO 2002
02010271   Novato USD, CA GO 2002
02010272   Saugatuck (Twsp of), MI GO 2002
02010275   Portola Valley School District, CA GO 2002
02010276   Bangor (City), Maine GO 2002B
02010277   Palmdale School District, CA GO 2002
02010278   Galt Joint Union Elementary Sch Dist, CA GO 2002
02010279   Elizabethtown ASD, PA GO 2002
02010283   Washington USD, CA GOB 2002
02010284   Oakland USD, California GO 2002
02010285   West, Texas LTGO Series 2002
02010288   Northeastern York County SD PA GO 2002
02010289   EWING-LAWRENCE SWG AUTH, NJ GO ‘02
02010291   Margaretville CSD, NY GO 2002
02010292   Louisiana State GO 2002-A
02010293   Menomonee Falls, WI GO 2002AB
02010297   Emporia USD #253, KS GO 2002
02010298   Municipal Imp Corp of Los Angeles, CA Lease 2002G
02010299   White Bear Lake ISD #624, MN GO 2002B
02010300   Scio Central School District, NY GO 2002
02010302   Candor CSD, NY GO 2002
02010306   Jefferson Davis Parish SD #2, LA GO
02010307   Vestal Central SD, NY GO 02
02010308   Wisconsin (State of), GO 2002A
02010311   Shasta Union HSD, CA GO 2002
02010312   Coudersport Area School District, PA GO 2002
02010313   Wolcott (Town), CT GO 2002 Lot B
02010314   Chanhassen (City), MN GO 2002
02010315   Moses Lake SD #161, WA GO 2001
02010316   Piatt Co Pub Bldg Comm, IL GO 2002
02010319   McGuffey SD, PA GO 2002
02010322   Pflugerville, Texas LTGO 2002
02010323   Jefferson County School District #509J, OR GO 2002
02010324   Atlantic City MUA, NJ GO 2002
02010325   Algonquin (Village), Illinois 2002A
02010326   Kinnelon (Boro of), NJ GO 2002
02010327   Briarcliff Manor (Village of), NY GO 2002
 

 

-15-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
02010328     Lubbock, Texas GO Ltd Tax 2002
02010330   Medford Township BOE, NJ GO 2002
02010332   Hillside (Village), IL GO 2002
02010333   Broome County, NY GO 2002
02010334   Cornell School District, PA GO 2002
02010335   Oconomowoc (Town of), WI GO 2002AB
02010336   Peoria School District #150, IL GO 2002
02010337   Garrison Union Free School District, NY GO 2002
02010338   Algonquin (Village), Illinois 2002B
02010339   Live Oak (City of), TX GO 2002
02010340   San Francisco Comm College Dist, CA GO 2002
02010342   Tri-Valley Local School District, OH GO 2002
02010343   Red Oak Community SD, IA GO 2002
02010346   West Bend (City of), WI GO ‘02 Bonds
02010347   Bethlehem (City of), PA GO 2002
02010348   Bolivar-Richburg Central SD, NY GO 2002 A&B
02010349   Scotch Plains Township, NJ GO 2002
02010350   Fresno (County), CA 2002
02010351   Deer Park Union Free School District, NY GO 2002
02010353   Starpoint Central School District, NY GO 2002
02010354   Allegany-Limestone CSD, NY GO 2002
02010356   Barstow USD, CA GO Election 2001 SerA
02010359   Ilion Central School District, NY GO 2002
02010360   Cedar Hill I.S.D., TX GO 2002
02010361   Grand Valley Local SD, OH
02010362   Palos Verdes Pen. USD, CA GO
02010363   Sayreville (Borough) BOE, NJ GO 2002
02010366   Orono (Town of), ME GO 2002
02010367   Canon-McMillan SD, PA GO 2002 A&B
02010368   Topsfield (Town), MA GO ‘02
02010369   Freeport (Village), NY GO 2002 A&B
02010371   Center Moriches Union Free SD, NY GO 2002 A&B
02010373   Warren County, NC GO 2002
02010374   Creston Community SD, Iowa 2002
02010375   College Station, Texas LTGO 2002
02010378   Oak Creek (City), WI GO 2002
02010379   Lake Zurich (Village of), IL GO 2002
02010380   Holland City Sch Dist, MI GO 2002
02010382   Heath (City), Ohio GOLT 2002
02010384   St. Charles (City of) IL 2002
02010386   Walnut Valley USD, CA GO Series C
02010387   Sartell ISD #748, MN GO
02010390   Tarrytown (Village), NY GO 2002A
02010391   Colton Joint USD, CA GO 2002
02010392   Pennsbury SD, PA GO 2002
02010393   Denair Unified SD, CA GO Elec 2001 Series A
02010394   Downers Grove Comm HSD No 99, IL
02010395   Newman-Crows Landing USD, CA 2002
02010396   Mad River Local School District BOE, OH 2002
02010397   Clifton (City of), NJ GO 2002
02010401   Tucson, Arizona Lease Conv Ctr 2002
02010402   Tucson, Arizona Lease Conv Ctr 2002
02010403   Oriskany CSD, NY GO 2002
02010404   North Colonie CSD, NY GO 2002
02010405   Caledonia-Mumford CSD, NY GO

 

Policy Id

  Policy
02010406     Garfield Heights (City), OH GOLT 2002
02010407   Washingtonville Central Sch Dist, NY GO 2002
02010408   Longwood Central School District, NY GO 2002
02010411   Jackson-Brownfield Redevel Auth, MI GO LT 02
02010414   Somerdale (Borough), NJ GO 2002
02010420   Port Arthur (City), Texas GOLT 2002B
02010421   Port Arthur (City), Texas GOLT 2002C
02010422   Manitowoc (City), WI GO 2002A
02010423   Deer Valley Unified SD #97, AZ GO 2002
02010426   Calumet Park (Village), IL GO 2002
02010427   Jefferson County, TX GOLT 2002A
02010428   Willsboro Central School District, NY GO 2002
02010431   Meadville, PA GO 2002
02010432   League City (City), Texas GOLT 2002
02010433   Polk County, WI GO ‘02
02010434   West Bend (City of), WI GO ‘02 Notes
02010436   Sheboygan Falls (City of), WI GO 2002
02010439   Smith County, TN GO ULT 2002
02010440   WEST CHICAGO, IL GO IDFA 02
02010443   Queen Anne’s County, MD GO 2002
02010445   Scio Township, MI GOLT 2002
02010448   Ausable Valley Central SD, NY GO 2002
02010449   Washington County, MD GO 2002
02010452   Jurupa Unified School District, CA GO 2002
02010453   Ocean City BOE, NJ GO 2002
02010455   Wayne County Community College, MI GOLT 2002
02010457   Modesto City Elem SD, CA GO 2002
02010458   Modesto High Sch Dist, CA GO Ser A
02010459   Clinton Central SD, NY GO 2002
02010460   Marathon CSD, NY GO 2002
02010461   Los Banos Unified SD, CA GO 2002
02010466   Wilson County, NC GO 2002
02010467   Crockett County, TN GO 2002
02010469   Bolingbrook (Village of), IL GO 2002A&B
02010470   Proctor ISD #704, MN GO 2002A
02010472   Chemung County, NY GO 2002
02010476   Little Silver BOE, NJ GO 2002
02010477   Harris County MUD #53, TX 2002
02010483   Genesee Valley CSD at Angelica-Belmont, NY GO 2002
02010484   Mesa (City), Arizona GO 2002
02010485   Rolling Meadows (City), IL GO 2002
02010488   Attleboro (City of), MA GO LTX 2002
02010489   Grove City Area Hosp Auth, PA GO 2002
02010492   Traverse City, MI GO LTX 2002AB
02010493   Eaton City SD, OH GO
02010494   Lucas City, TX GO Ltd
02010499   Lovington Muni SD No. 1, NM GO
02010500   Wellington Unified SD #353, KS GO 2002
02010501   Florida State PECO 2002, Series B
02010502   Onalaska, WI GO 2002
02010503   Portage City Building Authority, MI GOLT 2002
02010504   Leavenworth Co. USD No. 449 (Easton), KS GO 2002
02010507   Mexico Central School District, NY GO 2002 Ser A
02010508   Vilas County, WI GO 2002
02010509   Mt. San Antonio Com Clg Dist, CA GO 2002
 

 

-16-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

02010510     Garland (City), Texas GOLT 2002
02010511   Ceres USD, CA GO (Elec 2001) 2002A
02010512   Prattsburg CSD, NY GO 2002
02010513   Sidney City School District, Ohio 2002
02010516   Dansville Central School District, NY GO 2002 A&B
02010517   Chula Vista Elementary SD, CA GO 2002
02010522   St. Clairsville-Richland City SD, OH GO 02
02010523   West Harris Co MUD #10, TX GO 2002
02010525   Pulaski CSD, NY GO 2002
02010531   Sharon Springs CSD, NY GO 2002
02010532   Eastside Union SD, CA GO 2002
02010533   Montgomery County, NY GO 2002
02010535   Hampton Township, PA GO 2002 A&B
02010536   Warrensburg CSD, NY GO 2002
02010541   Moonachie (Boro of) BOE, NJ GO dated April 1, 2002
02010542   Leander (City), Texas GOLT 2002
02010544   Manistique, Mi GO LMTX 02
02010545   East Hartford(Town of)CT GO 2002
02010548   Benbrook, Texas GO Ltd Tax 2002
02010551   Philadelphia Redev Auth, PA 2002
02010553   Wilkinsburg SD, PA GO 2002
02010557   Ennis, Texas GO Ltd Tax 2002
02010558   Knoxville, Tennessee GO 2002
02010560   Valley Stream (Village), NY GO 2002
02010561   Tillamook County, OR GO 2002
02010562   West Fargo Public SD#6, ND GO 2002
02010563   Brockton, Mass GO 2002 A & B
02010564   Summit County, OH Limited Tax GO 2002R
02010565   Bloomfield (Twp), NJ GO 2002
02010566   Union Co, Il GO Pen 02
02010567   El Monte City SD, CA GO 2002B
02010569   Desoto (City of), TX GO Ltd Tx ‘02
02010570   Desoto (City of), TX GO Ltd 02
02010572   Lorain County, OH GOLT 2002
02010574   Phoenix CSD NY GO 2002
02010576   Moorehead ISD #152, MN GO 2002
02010577   Floodwood ISD #698, MN GO 2002A
02010578   Lewisville (City), Texas GOLT 2002
02010579   Jenison Pub Sch,MI GO 2002 Non-SBLF
02010580   Ambridge ASD PA GO AB 02
02010583   Ringgold School District, PA GO 2002
02010584   Elgin (City of), Illinois GO 2002
02010585   Butler Area School District, PA GO 2002 ABC&D
02010586   Jackson Township BOE, NJ GO 2002
02010587   Morristown (Town), NJ GO 2002B
02010588   Morristown (Town), NJ GO 2002A
02010590   Highline SD #401, WA GO 2002
02010591   Hammond Central SD, NY GO 2002
02010593   Beavercreek (City), OH GO 2002
02010594   Southgate (City of) Building Authority, MI 2002
02010597   Tullahoma (City), TN GO 2002
02010598   Channahon Park District IL GO Alternate Rev 2002
02010600   Abilene, (City of) TX GO & CO 2002
02010601   Brownwood, Texas LTGO 2002
02010602   Lufkin, Texas LTGO 2002

 

Policy Id

 

Policy

02010606     South-Western City SD, OH GO LMTX 2002A
02010607   South-Western City SD, OH GO 2002B
02010610   Waxahachie, Texas GO Ltd Tax
02010611   Kellogg Comm Coll, MI LTGO 2002
02010612   Gilbert (Town), AZ GO Ref 2002
02010613   Lincoln County, NC GO 2002
02010614   Santa Clarita CCD, CA 2002
02010615   Florence, Kentucky GO 2002 B
02010616   Florence, Kentucky GO 2002 A
02010617   Pearland, Texas LTGO 2002
02010618   Syracuse, New York GO 2002B
02010619   Urbana SD #116, IL GO 2002
02010623   Grayslake Community HSD #127, IL GO 2002 A&B
02010624   Methow Valley SD #350, WA (Okanogan Co.) GO ULT
02010628   NORTH HEMPSTEAD (TOWN), NY GO 2002
02010630   Plattsburgh City School District, NY GO 2002
02010632   Pen Argyl Area SD, PA GO 2002
02010633   Williams Valley SD, PA GO 2002
02010635   Fremont Unif Sch Dist,CA GO 02
02010636   Mansfield, OH GOLT ‘02
02010637   Zion (City of), IL GO 2002 (Alt Rev)
02010638   Ewing Twp, NJ GO 2002
02010639   Hancock CSD, NY 2002
02010640   Berne-Knox-Westerlo CSD, NY GO 2002
02010643   Kendall-Kane Cos. CUSD 115 (Yorkville), IL GO 02
02010644   Clifton (City) BOE NJ GO 2002
02010645   Aurora West SD #129, IL GO 2002
02010646   Aurora West SD #129, IL LTD GO 2002
02010647   Chambersburg Area SD, PA GO 2002
02010650   Fairfax Sch Dist, CA GO 2002
02010651   Gettysburg Muni Auth, PA GTD 02
02010652   Mantua Twp, NJ GO 2002
02010656   Espanola Public SD 45, NM GO 02
02010657   Sharpsville Area SD, PA GO 02 A&B
02010658   Titusville ASD, PA GO 2002A
02010659   Philadelphia SD, PA GO 2002B
02010660   Douglas County, WI GO 2002
02010661   Huntington Beach City SD, Ca
02010662   Carteret Borough, NJ G.O. 02
02010666   Hortonville SD, WI GO 02
02010668   Saddle Brook Twp BOE, NJ 2002
02010669   Summit County, Ohio GO Limited Tax 2002
02010670   Upper Scioto Valley Local SD, OH GO 2002
02010671   West Valley School District #208, WA GO 2002
02010673   Flemington Borough, NJ GO 2002
02010674   Liberty Union High School District, CA GO 2002B
02010675   Liberty Union High School District, CA GO 2002A
02010676   Grundy Co., IL GO 02
02010678   Silver Creek CSD, NY GO 2002
02010679   Morrisville-Eaton CSD NY GO 2002A&B
02010680   Camden CSD, NY GO 02 A&B
02010681   Hannibal CSD, NY GO 2002
02010682   Indian River CSD, NY Series 2002
02010683   Ilion Central School District, NY GO 2002 A & B
02010684   Bunker Hill Vlg,TX LT GO 02
 

 

-17-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

02010686     Lakeland CSD, NY 2002
02010687   Kendall CSD, NY GO 2002
02010688   Dorchester County, MD GO 2002
02010689   Harris Co TX WC&ID #119, GO 02
02010691   Carpentersville CUSD 300, IL GO Working Cash 2002
02010694   Hobbs Municipal SD # 16, NM GO 2002
02010695   Elizabethton (City), TN GO 2002 A&B
02010696   Tullahoma (City), TN GO 2002
02010697   Harrisonville R-IX SD, MO GO ULT 2002
02010699   Brick Township, NJ GO & MUA 02
02010700   Absecon (City of), NJ GO 02
02010701   Seneca Falls Central Sch Dist, NY GO 2002 A&B
02010702   Miller Place UFSD, NY Ser. ‘02
02010703   South Side ASD, PA 2002
02010704   Sanger, Texas LTGO 2002
02010705   Greensburg Salem SD, PA GO 2002
02010709   Schenectady City SD, NY GO 02
02010710   Attica Central School District, NY GO 2002
02010712   Islip (Town of), NY GO 2002
02010713   Sodus Central School District, NY GO 2002
02010714   Oklahoma County ISD #89, OK GO 2002 Ref
02010715   Great Bend Unified SD#428, KS GO 2002
02010716   Harpursville Central School District, NY GO 2002
02010718   Copenhagen SD, NY GO 02
02010719   Yorkshire-Pioneer CSD, NY GO 2002
02010720   Brunswick CSD, NY GO 2002
02010721   McGraw CSD, NY GO 02
02010722   Sherburne Cnty, MN GO 2002
02010724   New York City, NY GO 2002 DEFG
02010725   Clyde-Savannah CSD, NY GO 2002
02010726   Brockport CSD, NY GO 2002
02010727   Tacoma, WA ULT GO 2002
02010728   Wilmington, Delaware GO 2002
02010730   Central York School District, PA GO 2002
02010731   Chillicothe Pub Library Dist 2002
02010733   Santa Rosa Elem SD, CA GO 2002
02010735   Greenwich CSD, NY GO 2002
02010736   Milford Central School District, NY GO 2002
02010740   Gainesville (City), TX GOLT 2002
02010742   New Haven (City of), Connecticut GO 2002B
02010743   Northern Adirondack CSD at Ellenburg, NY GO 02
02010744   Bedford (City) Ohio GOLT 2002
02010745   Chateaugay Central School District, NY GO 2002
02010746   Caledonia-Mumford CSD, NY GO 2002 Refunding
02010747   Green Twp BOE, NJ GO 2002
02010748   Randolph Central School District, NY GO 2002
02010753   Montgomery Cnty USD #445(Coffeyville), KS GO 2002
02010754   Harrisonburg, Virginia GO Series 2002A
02010755   Harrisonburg, Virginia GO 2002B
02010756   Schenevus CSD, NY GO 2002
02010757   Hamilton CSD, NY GO ULT 2002
02010760   Plano Community Library District, IL GO 2002
02010761   Brainerd ISD #181, MN GO 2002
02010762   San Mateo Cnty Comm Coll Dist,CA GO 02A
02010765   Warren County, PA GO 2002

 

Policy Id

 

Policy

02010766     Ada Exempted Village SD, OH GO ULT 2002
02010768   Dulce Independent SD #21, NM GO 2002
02010769   O’Fallon (City), IL Development Finance Auth 2002
02010770   Harrisburg Authority, PA GO SD Proj 2002 Series A
02010771   Warren, MI Ltd Tax GO2002;Downtwn
02010772   Heuvelton CSD, NY GO 2002
02010774   Spencer-Van Etten CSD, NY GO 2002
02010778   Lower Cape May Regional SD BOE, NJ GO 2002
02010779   Fort Plain CSD, NY GO 2002
02010780   Greene Central School District, NY GO 2002
02010781   Heartland Community College Dist #540, IL GO 2002
02010782   Gibbsboro Bd of Ed, NJ GO 2002
02010784   Galway Central School District, NY GO 2002
02010785   Bellevue SD #405, WA GO 2002
02010786   Placentia-Yorba Linda USD, CA GO 2002
02010789   Fort Cherry SD, PA GO 2002
02010790   Cairo-Durham CSD, NY GO 2002
02010791   Macomb Township, MI GO LTX 2002
02010793   Peoria (City of), IL GO
02010794   Etowah W&S Authority
02010795   Greenfield Union School District, CA GO 2002 A
02010796   Greenfield Union School District, CA GO 2000 C
02010800   Sherrill City SD, NY GO 2002
02010801   Carman-Ainsworth Community Schools, MI GO
02010802   Alta Loma School Dist, CA GO 2002
02010803   Moshannon Valley SD, PA GO 2002
02010807   Wallkill CSD, NY GO 2002
02010808   Scott Cnty Schools USD #466, KS GO 2002
02010809   Geneva (City of), IL GO 2002
02010810   Brazoria Cnty MUD #4, TX GO 02
02010811   Groton CSD, NY GO 02
02010814   Edmeston CSD, NY GO 2002
02010815   Victor ESD, CA GO Series 2001 A
02010816   West Haven (City of), CT GO Ref 2002
02010819   Anaheim City SD, CA GO 2002
02010820   Lyndonville CSD, NY GO 2002
02010821   Penn-Delco School District GO 2002
02010822   Bridgewater-Leonardsville CSD, NY GO 2002
02010825   Perth Amboy BOE, NJ GO
02010827   Fullerton School District, CA GO 2002
02010829   Marcellus CSD, NY GO 99A
02010830   Morton Road MUD, TX GO 2002
02010831   Bath Central School District, NY GO 2002
02010832   Scio Central School District, NY GO
02010833   East Islip UFSD, NY GO
02010834   Peru Central School District, NY GO 2002 A&B
02010836   Chenango Forks CSD, NY GO 02
02010837   Canonsburg (Borough), PA GO 2002
02010839   Mojave USD SFID #1, GO ULT 2002
02010840   Ranch at Cypress Creek MUD No. 1, Texas GO Ser. 02
02010841   Plymouth (City of) MI, LT 2002
02010842   Burlington (City), Iowa GO 2002
02010843   Mars Area School Dist PA GO AB02
02010844   Morristown CSD, NY GO 2002
02010845   Trophy Club MUD
 

 

-18-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

02010846     Jefferson CSD, NY GO 02
02010847   Massachusetts Commonwealth GO C 02
02010848   Windsor Central School District, NY GO 2002
02010849   Addison Central School District, NY GO 2002
02010850   Solanco Sch Dist, PA GO 2002
02010851   Huron County, Michigan GO 2002
02010852   Jamesville-Dewitt CSD, NY GO2002
02010853   Tinton Falls (Bororough), NJ GO 2002
02010854   Burbank Unified SD, CA GO 97C
02010855   Evans-Brant CSD, NY GO Refg 2002A,B&C
02010856   Franklinville CSD, NY GO 2002A&B
02010857   Gloucester Twp BOE, NJ GO 2002
02010860   Springville-Griffith CSD NY GO Refg 2002
02010861   South Milwaukee SD,WI GO Ref 02
02010862   Fayetteville-Manlius CSD,NY
02010865   Binghamton City SD, NY GO 2002
02010866   Greenwood CSD, NY 2002 GO
02010867   Amityville Union SD, NY GO
02010868   Whitestown, New York GO 2002
02010869   Westfield CSD, NY GO 2002A&B
02010870   Forestville CSD, NY GO 99
02010872   Plumsted BOE NJ GO, dated June 15, 2002
02010873   Livonia Central School District, NY GO 2002
02010874   Red Oak, TX GO Ltd Tax 2002
02010875   Franklin Twp. (Gloucester Cnty), NJ
02010876   Charlotte Valley CSD, NY 2002A&B GO
02010877   Contra Costa CCD, CA GO 2002
02010878   EAST WILLISTON UFSD, NY GO 2002
02010879   Forest Hill, Texas GO 2002
02010880   Amsterdam Enlarged City SD, NY GO 2002
02010881   Bastrop County, Texas GO 2002
02010882   Georgetown-South Otselic Valley CSD GO 2002
02010884   Hesston Unified SD No. 460, KS
02010885   Butler County, PA GO 02 FWD
02010886   Central Square CSD, NY GO A&B
02010887   La Mesa-Spring Valley SD, CA
02010889   Schenectady City SD, NY GO 02
02010890   Honeoye CSD, NY GO 02
02010891   Johnstown City SD, NY GO 2002
02010892   Jordan-Elbridge CSD, NY GO
02010893   Oklahoma City, Oklahoma GO 2002
02010894   Potsdam Central School District, NY GO 2002
02010896   Waubun-Ogema-White Earth ISD #435, MN GO 2002
02010897   East Peoria, IL GO Alternate Rev 2002A
02010898   Kaneland CUSD #302 IL (Kane/Dekalb) GO 2002
02010901   Bridgeport, Connecticut GO 2002
02010903   Lakeville ISD #194, MN GO 2002 B
02010904   Middle Twp BOE, NJ GO 2002
02010905   Williamson CSD, NY GO Refg 2002A&B
02010906   Osseo-Fairchild SD, WI GO 2002
02010908   Washington Township BOE, NJ GO
02010911   Charleroi Area SD, PA GO 02
02010912   Oakfield-Alabama CSD, NY GO 2002
02010913   Greenburgh CSD #7, NY GO 2002
02010914   Fulton City SD, NY GO 2002

 

Policy Id

 

Policy

02010915     Fort Bend Co MUD 119 Ult GO 2002
02010916   Wheatland-Chili Central SD, NY GO 2002
02010919   Avon Central SD, NY GO 2002
02010921   West Irondequoit Central School District, NY 2002
02010927   Trumansburg CSD, NY GO 02A&B
02010929   Canastota CSD, NY GO 02
02010931   Bainbridge-Guilford CSD, NY GO Refg 2002A&B
02010933   Gurnee (Village), IL GO 2002
02010935   Darke County, OH GO 2002
02010936   Cabrillo Comm Coll Dist, CA 2002
02010937   Washington (City), PA GO 02AB
02010938   Morris CSD, NY GO Ref 2002
02010939   Clinton Central SD, NY GO 2002
02010940   Redwood City SD, CA GO 2002
02010942   San Mateo Union HSD,CA GO 02B
02010944   Watertown (City), WI GO 2002
02010949   Stillwater Central SD,NY GO 02
02010950   Essex County Improvement Auth, NJ (Cogen Fac GO)
02010951   Johnsburg CSD, NY 2002
02010953   Aromas-San Juan USD, CA GO 2002A
02010954   Montgomery Village, IL Alt Rev GO 2002
02010955   Alexandria Twp BOE, NJ GO, dated July 15, 2002
02010956   Merrick UFSD, NY GO 2002
02010957   Gouverneur CSD, NY GO Refg 2002
02010958   Hudson City SD, NY GO 2002
02010959   Letchworth CSD, NY GO 2002
02010960   Menomonee Falls, WI GO Notes 2002D
02010961   Winona County, MN GO 2002
02010962   Paxton, IL GO Alt. Rev., 2002
02010963   Wilson County, TN GO ULT School Refg 2002
02010964   Wilson County, TN GO ULT Rural School Refg 2002
02010967   Hurst, TX COO GO Ltd Tax 2002
02010968   Bordentown Reg SD, NJ GO, dated July 15, 2002
02010970   Avalon (Borough of), NJ GO 2002
02010971   City-County of Butte-Silver Bow, MT ‘02
02010972   Mauston SD, WI GO 2002
02010973   INDIANOLA COMMUNITY SD,IA GO Refunding Bonds
02010974   Salem CSD, NY GO 2002
02010975   Lumberton MUD GO ULT 2002
02010978   Penn-Delco School District GO 2002A
02010979   Paramus (Boro of), NJ GO 2002
02010980   Lockport City SD, NY GO 2002
02010981   Argyle CSD, NY GO 2002
02010982   West Ottawa PS, MI GO 2002 AB
02010983   North Harris Montgomery CCD, TX GOLT 2002 Bd/Ref
02010986   Dickson Co, Tn
02010987   Maize Unified SD #266 (Sedgewick Co), KS GO 2002
02010988   Coronado USD, CA GO 2002B (Election 1998)
02010989   North Brunswick TWP BOE, NJ GO dated July 15, 2002
02010991   Mullica Twp BOE, NJ GO dated July 15, 2002
02010992   St. Charles Park District, IL GO 02A
02010995   Livingston, Tennessee GO 2002
02010996   Taconic Hills CSD, NY GO 2002
02010997   Marion Central SD, NY GO Refg 2002
02010999   LA PORTE, TEXAS GO 02
 

 

-19-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

02011000     Sauk Centre, MN GO ‘02A
02011001   Sauk Centre, MN GO ‘02B
02011002   Auburn City SD, NY GO 2002ABCD
02011003   Granville CSD, NY GO 2002
02011004   Southern Lehigh SD, PA GO 2002A
02011006   Mount Morris CSD, NY GO 2002
02011007   Stratford (Town of), CT GO 2002
02011008   Marshall SD, WI
02011011   Olean City SD, NY GO 2002
02011013   Big Lake, MN GO 2002
02011014   Island Trees UFSD, NY GO 2002
02011015   Cumberland County, NJ GO 200
02011018   Ocean Shores, WA GO ‘02
02011019   Muhlenberg School District, PA GO 2002A
02011020   Homer SD #13 (Clairborne Prsh), LA GO 2002
02011021   Tehachapi Unified SD, CA GO 2002C
02011022   West Babylon USFD, NY GO 2002
02011024   Washoe County SD, NV GO 2002B
02011026   Rocklin USD, CA GO 2002
02011028   King Cnty Rural Lib Dist, WA UTGO 02
02011029   Hinsdale CSD, New York GO 2002
02011030   Meriden (City of), CT GO Taxable 02
02011032   Kings Canyon JUSD, CA GO 2002
02011033   Clear Brook City MUD, TX GO ULT 2002
02011034   Granville CSD, NY GO 2002
02011036   Onalaska, WI GO Rfdg 2002
02011037   St. Joseph, MN GO 2002
02011038   Readington (Twsp of) NJ GO 02
02011039   Central UHSD CA GO Rfg 2002
02011040   Panhandle, Texas GO 2002
02011041   Willard Pub Library, MI LTGO 2002
02011042   Gorham-Middlesex CSD, NY ‘02
02011043   Antietam School District, PA GO 2002AA
02011047   Harrisville CSD, NY GO 2002
02011048   Saginaw City SD, MI LTGO 2002
02011049   Harris Cnty MUD #196, TX GO 2002
02011050   Oneida City SD, NY GO 02
02011051   East Irondequoit CSD, NY GO 2002ABCDE
02011052   Sienna Plantation MUD #2, TX 02
02011056   Ashtabula Area CSD, OH GO ULT 2002
02011057   Lowville CSD, NY GO 2002
02011058   Keystone Oaks SD, PA GO 2002
02011059   Avoca CSD, NY GO 2002
02011060   Lighthouse Point (City), FL GO 2002
02011061   Washington State GO Series 2003A & 2003T
02011064   Akron-Summit Co. Pub Lib, OH 02
02011066   Churchville-Chili CSD, NY GO 2002
02011067   Leesville SD#16 of Vernon Parish, LA GO ‘02
02011068   Hudson Falls Central SD, NY GO Rfdg 02
02011069   Watervliet City SD, NY 2002A
02011070   New Jersey (State of) GO 02
02011071   Hidalgo County, Texas GO 2002
02011073   Temple (City of), TX LTX GO 2002
02011074   Ridgefield, NJ GO 02
02011075   Pequea Valley SD, PA GO 2002

 

Policy Id

 

Policy

02011076     Huntingdon ASD, PA GO 2002
02011077   Ovilla, TX, LT Series 2002
02011078   Giles County, Tennessee GO 2002
02011079   South Barrington Park District, IL
02011086   Wheelerville UFSD, NY
02011087   Cambridge CSD, NY GO Refg 2002
02011088   Kendall CSD, NY GO 2002
02011089   Fayette (County of), PA GO
02011091   North Washington Fire Prot Dist, CO GO 2002
02011092   Kane County, IL GO Alt Rev 2002
02011094   Palmer (Township), PA GO 2002
02011095   South Milwaukee SD,WI GO Ref 2002B
02011096   Addison (Village of), IL GO Ref 02
02011097   Babylon Union Free SD, NY 2002
02011101   Festus Reorg. SD R-6, MO GO 02
02011102   Fillmore CSD, New York GO 2002
02011103   Albany County, NY GO ULT Refg 2002
02011106   Starpoint Central School District, NY GO 2002
02011107   Cinco MUD No. 1, Texas Contract Revs 2002
02011108   Holley Central SD, NY GO Refg 2002
02011109   Harris Co. MUD # 71, TX GO 2002
02011110   Woodlands Metro Center MUD, TX 2002
02011111   Lansing (Village of), IL GO ‘02 Ser.A
02011112   Swedesboro-Woolwich SD, NJ 02
02011113   Bellaire (City of), TX GO LTX 2002A
02011115   Homewood (Village of) IL GO 02
02011119   Elizabeth Forward School District, PA GO 2002
02011121   Fairfield Area SD, PA 2002
02011123   Ambridge (Borough of), PA GO 2002
02011124   Morrow (Cnty), OH Ltd Tx
02011125   Lufkin, Texas GO Ltd Tx 2002
02011126   Montgomery Cnty MUD #46, TX GO2002
02011127   Pittsburgh SD, PA GO 2002
02011128   Dolton SD #148(Cook)IL GO LT 2002
02011129   San Diego USD, CA GO 02
02011132   Monmouth Reg HSD NJ
02011134   Delaware (City of) Ohio Var Purp 2002
02011135   Boston, Massachusetts GO 2002B
02011137   East Allegheny SD, PA GO 2002
02011138   Somerset (Boro of) Muni Auth, PA Swr Rev Ref, 2002
02011139   Harris Cnty MUD #152, TX GO 02
02011141   Normal CUSD #5, IL GO 2002
02011142   Butler (Borough), NJ G.O. Bonds 2002
02011143   Loyalsock Township SD, PA GO 2002
02011144   Twinsburg (City of), OH LMTX GO 2002
02011145   East Bloomfield CSD, NY GO 02
02011148   Horsepen Bayou MUD, TX GO ULT Refg 2002
02011149   Kingsport (City), TN GO Ref 2002A
02011153   Paris (City), TX LTX GO 2002
02011154   Saucon Valley SD, PA GO Refg 2002
02011155   Ellington (Town of), CT GO 2002
02011156   Sisters School District #6, OR GO 2002
02011160   Montebello USD, CA GO Elec. of 1998, Series 2002
02011161   Arcadia SD, WI GO Ref, dated September 1, 2002
02011162   Northfield (City of), NJ GO 2002
 

 

-20-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

02011163     Glenwood CSD IA GO
02011164   Indiana Bond Bank Taxable Severance Funding, Ser 2
02011165   Yuba City USD SFID #99-1,CA GO 2002
02011166   Littlestown Borough, PA GO 2002
02011168   Pendergast Elem SD #92, AZ GO ‘02 B
02011169   Bloomfield Twp BOE, NJ GO 02
02011170   Rowlett (City), Texas GOLT 2002
02011175   Greater Johnstown SD, PA GO 2002
02011176   Monroe County, PA GO Notes Series A of ‘02
02011177   Houston (City), Texas GO LTX 2002A
02011179   Saugerties CSD, NY GO Ref 2002
02011181   South Lewis CSD, NY GO 2002AB
02011182   Harris Co FWSD #51, TX GO 2002
02011183   Adams County, PA GO Refg 2002
02011184   Montgomery Cnty MUD #60, TX GO 2002
02011186   Corry Area SD, PA GO Ser 2002
02011190   Mitchell Co Pub Bldg Comm, KS (Mchll. Co Hos. Prj)
02011191   Mesa (City), Arizona GO 2002A
02011192   Sch Dist of the City of River Rouge, MI GO 2002
02011193   Middlesex County IA (No. Brunswick) NJ GO 2002
02011195   Arnold (City), PA GO 2002
02011197   Chippewa County, WI GO Ref, dtd 9/15/02
02011198   Saugus USD, CA GO ULT 2002A
02011199   Rondout Valley CSD, NY GO 2002
02011201   Monroe Twp BOE, NJ (Middlesex) 2002
02011202   Colleton County, SC GO 2002B
02011203   Riverhead Central SD, NY GO 2002
02011204   Jackson County Bldg Auth. LTGO , MI
02011205   Willow Springs, IL GO ULT Alt Rev 2002A
02011206   Willow Springs, IL GO LTX 2002B
02011207   Erie County, NY GO 2002 A&B
02011208   Tuscola Cnty Sanitary Sewer Sys Ref LTGO, MI, 2002
02011209   Big Beaver Falls ASD PA GO Ref 2002 A
02011210   Fort Bend County MUD #1 GO, 2002
02011212   Chilton SD, WI GO
02011215   Memorial MUD, TX GO ULT 2002
02011216   Weymouth (Town), MA GO 2002
02011217   Cleveland Hill UFSD, NY GO Ref 2002 A & B
02011218   Clifton-Fine CSD, NY GO Ref 2002
02011219   Union Springs CSD, NY GO Ref 2002
02011220   Martin (City of), TN GO Pub Imp Ref, 2002
02011222   Nanty-Glo Sanitary Sewer Auth, PA Gtd Swr Rev 02
02011223   Urbandale (City), IA GO 2002
02011224   Middletown Bd. of Ed., NJ 2002
02011225   Greater Latrobe School Dist Auth, PA GO Ref 2002AB
02011227   Webb County, TX GOLT 2002
02011231   Bastrop (City of), TX GO 2002
02011232   San Francisco, California GO IMP 2002
02011233   Edgerton LSD, OH GO 2002
02011234   Cohoes (City of), NY GO 2002
02011235   Johnston (City), IA GO 2002B
02011236   Brazoria County MUD #3, TX 2002
02011237   Patchogue-Medford USD, NY GO 2002
02011238   Van Hornesville-Owen D. Young CSD, NY GO Ref 02
02011239   West Allegheny SD, PA GO 2002D

 

Policy Id

 

Policy

02011240     Derry Area School District, PA GO Ref C 02
02011241   Patrick Henry LSD, OH GO 2002
02011242   Rowlett (City), Texas GOLT COB - 2002
02011245   Chichester SD, PA GO 2002
02011248   Jefferson Twp Bd of Educ, NJ GO 2002
02011249   Chambersburg (Borough of), PA GO 2002
02011250   Bismarck Public SD #1, ND GO 2002 Series B
02011252   Dodge City USD #443, KS GO Ref 2002
02011253   Bridgeview (Village of), IL GO Ref 2002
02011254   Ellwood City Area SD, PA GO 2002
02011255   West Marshall CSD, IA GO Ref 2002
02011256   Oswego USD No. 504, KS GO Ref, 2002
02011257   Greencastle-Antrim SD, PA GO 2002
02011258   West Harris Co MUD #10, TX GO 2002B
02011259   Lebanon (Town of), VA GO 2002ABC
02011260   Oppenheim-Ephratah CSD,NY GO Ref 2002
02011261   Fort Lupton Fire Protection Dist, CO GO 2002
02011262   Albany County, NY GO Refg 2002B
02011263   Lancaster (City of), TX GO LTX Ref, 2002
02011264   Newport, KY GO
02011265   Las Virgenes USD, CA GO 1997 Election, Ser D 02
02011266   Huntington (Town), NY GO 2002
02011268   Lyons (Village), IL GO Alt Rev Series 2002
02011269   Sevierville, Tennessee GO 02
02011270   Dallas Center-Grimes CSD, IA GO dtd 11/01/02
02011271   Towanda Area School District, PA GO 2002
02011272   Panama Central SD, NY GO Ref 2002
02011273   Millcreek Township SD, PA GO 2002AB
02011274   Fort Bend MUD #68, TX GO Ref 2002
02011275   West Mifflin ASD, PA GO 2002A&B
02011276   Bensalem (Township) SD, PA GO 2002
02011277   Oconomowoc (City of), WI GO Ref 2002
02011278   Waco (City), TX GOLT Ref 2002
02011280   East Lampeter (Township), PA GO, 2002
02011281   Foothill-De Anza CCD, CA GO Ref 2002
02011283   Newburgh City SD, NY GO Ref 2002
02011284   Galena Park (City of), TX GO Ref & COO, 2002
02011286   Pasadena (City), TX GOLT 2002
02011287   Cinco MUD No. 9, TX GO Ref, 2002
02011288   West Harris MUD #11, TX GO 2002
02011290   Alsip (Village), IL GO 2002 & Taxable 2002B
02011291   Chilton SD, WI GO 2002B
02011292   Clovis USD, CA GO Election of 2001, Series B
02011293   Bradford CSD, NY Ref GO 2002
02011294   Walton Central SD, NY GO 2002
02011296   Glen Rock Boro BOE, NJ GO 2002
02011297   Smoky Valley (McPherson Cty) USD#400, KS GO Ref 02
02011298   Johnston County, NC GO 2002A
02011299   Clinton Central SD, NY GO 2002
02011300   Dauphin County, PA GO 2002A
02011301   Addison (Town), TX GO LTX 2002
02011302   Cleveland Municipal SD, OH 2002 Rfd
02011303   Ambridge ASD PA GO C 02
02011304   Byron-Bergen CSD, NY GO 02
02011306   Brockway Area SD, PA GO 2002
 

 

-21-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

02011307     Atlantic City Bd Of Ed, NJ GO 02
02011308   Queen Creek USD #95 AZ GO Ref 2002
02011309   Oregon School Bd Assoc Limited Tax Pension Ser 02
02011311   Evergreen Local SD, OH GO 2002
02011313   Edison (Township) BOE, NJ GO 2002
02011314   Emerald Isle (Town), NC GO 2002
02011315   Anoka (City of), MN GO 02A
02011316   Phelps-Clinton Springs CSD, NY GO Ref 2002
02011319   Northampton Township, PA GO 2002
02011320   Johnson City CSD, NY GO Ref 2002
02011322   Westby Area SD, WI GO Ref 2002
02011323   Venango (County of), PA GO 2002
02011324   Warren County SD, PA GO 2002
02011325   Tuslaw Local SD, OH GO 2002
02011326   Union City ASD, PA GO 2002
02011327   Montgomery Cnty MUD #46, TX Refunding Bds 2002
02011328   Tuxedo UFSD, NY GO 2002
02011329   Ladysmith-Hawkins SD, WI GO Ref dated 10/1/02
02011330   Plover (Village), WI GO Ref 2002
02011331   Racine (City), WI GO 2002
02011333   North Allegheny SD, PA GO 02
02011336   Brookville ASD, PA GO 2002A
02011338   Stroudsburg ASD, PA GO 2002
02011339   Upper Adams SD PA GO 2002
02011340   Blacksburg (Town of), VA GO 2002
02011343   Rahway (City) Redev Agy, NJ GO 2002
02011344   Otsego County, NY GO Ref 2002
02011345   Galveston Cnty. MUD#3, TX Rfd. 2002
02011346   Calcasieu Parish SD No. 34, LA GO Pub Imp 2002AB
02011347   Mid Valley Metro Dist, CO GO Ref & Imp 2002
02011350   Borger (City of), TX GOLT 2002
02011351   South Eastern SD, PA GO Series A of 2002
02011352   Powell (City of), OH GO Var Purp, 2002
02011354   McKinney (City of), Texas GO 2002
02011355   Fleetwood Area School District, PA GO 2002
02011363   Catasauqua Area SD, PA GO 2002
02011365   Ford Heights SD No. 169, IL GO LT 2002AC
02011367   Hamburg CSD, NY GO Ref 2002
02011368   Montgomery County MUD No. 67, TX Ref 2002
02011371   Bethel (Town of), CT GO 2002
02011372   Cass Lake-Bena ISD #115, MN GO 02B
02011373   Hamilton County, TN GO Ref 2002
02011374   Oakland, CA GO 2002
02011375   West Liberty CSD, IA GO dtd 12/1/02
02011377   Northwest Harris Co MUD #30, TX GO 2002
02011380   Santa Ana USD, CA GO Ser 2002B
02011381   Downington ASD, PA GO 2002A
02011382   Ford Heights SD No. 169, IL GO LT 2002 B
02011383   Pasco, WA GOULT Rfd. 2002
02011384   Pickerington Local SD, OH Ref GO 02
02011387   Perris Union HSD, CA GO 1999 Elec., Ser. B
02011388   Rhode Island (State) GO 2002B
02011390   Snyder County, PA GO 2002AB
02011391   Franklin County, PA GO 2002
02011392   Elmira City SD, NY GO 2002

 

Policy Id

 

Policy

02011395     Milford (City of), CT GO 2002
02011399   Chestnut Ridge SD, PA GO 2002
02011402   Rosemont (Village of), IL GO ULT 2002A&B
02011403   Trotwood-Madison City SD, OH GO ULT 2002
02011404   Grundy Co., IL GO Ref 02
02011405   Louisville (City of), KY GO 2002B (Taxable)
02011406   Louisville (City of), KY GO 2002A
02011408   Mcminnville (City of), TN GO 2002
02011409   Camden County Imp. Auth, NJ GO 2002B
02011410   Orland Park Village, IL GO 2002A
02011412   Brandywine Heights ASD, PA GO 02 (DVRFA)
02011414   Mississippi (State of) GO 2002 (4 series)
02011415   Western Twps Utils Auth, MI LTGO 2002
02011416   Harrison Twp BOE, NJ GO Ref 2002
02011418   Green Tree (Boro), PA GO 2002
02011419   Keller (City of), TX GO Ref Ltd 02
02011421   Fort Bend Co MUD No. 41 TX GO ULT 2002
02011423   Ypsilanti Community UA, Mi Twn LMTX GO 02
02011424   Pattonville R-3 SD, MO GO Ref 2002
02011428   Port Chester (Village), NY GO 2002 A
02011429   Sanibel (City of), FL GO 2002
02011430   Rose Tree Media SD, PA GO 2002
02011431   Brookhaven (Town of), NY GO 2002A
02011432   Brookhaven (Town of), NY GO 2002B
02011434   Lancaster County, PA GO 2002AB
02011435   New Paltz CSD NY GO 02
02011436   Freeborn County, MN GO 02
02011437   Freeborn County, MN GO lse 02
02011438   Kenosha USD No. 1, WI GO Ref 2002
02011439   Batavia CSD, NY GO Ref 2002
02011440   Angleton-Danbury Hospital Dist, LT TX 2002
02011441   Hamburg CSD, NY GO Ref 2002
02011442   Las Vegas, NV Taxable LTGO 2002
02011445   Oil City (City of), PA GO 2002
02011447   Rye Neck UFSD NY GO 2002
02011449   Ballston Spa CSD, NY GO Ref 2002ABC
02011453   New Britain (City of), CT GO Ref 2002
02011454   Webb County, TX GOLT Ref 2002
02011455   North Clarion County SD,PA GO 02
02011456   Avon Grove SD, PA GO 2002AAA
02011457   Winslow Township, NJ GO 2002
02011460   Highlands Sch Dist, PA GO 2002 A&B
02011461   Oak Creek (City), WI GO Ref 2002 (CABs)
02011462   Firebaugh-Las Deltas USD, CA GO ULT 2002
02011463   Clinton (Township), MI GO 02
02011465   Fort Lauderdale, FL GO Ref 02
02011466   Davenport (City of), IA GO 2002 A
02011467   Cicero (Town of), IL GO Ref 2002
02011468   Ceres USD, CA GO (Elec 2001) 2002B
02011469   Archbold ALSD, OH GO ULT Ref 2002
02011472   West Jefferson Hills SD, PA GO 2002A
02011473   Douglas (Town of), MA GO ULT
02011475   Cranbury (Township of), NJ GO Imp 02
02011476   Redford Township Dist Lib, MI GO ULT 2002
02011480   Erie County, Ohio GO LT Series 2002
 

 

-22-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

02011481     Massachusetts Commonwealth GO E 02
02011482   Block House Municipal Utility District, TX GO 2002
02011483   Penns Manor ASD, PA GO 2002
02011484   Moreland SD, CA GO Ref 2002
02011485   Beaver Area SD, PA GO 2002
02011486   Northwest Harris County MUD #5, TX GO ULT 2002
02011488   Kingsport, TN W&S (GO) 2002
02011489   York City SD, PA GO 2002
02011492   Skippack Township (PA) GO Bonds Series 2002
02011493   New Berlin, WI Library GO 2002
02011494   Lewis Co Pub Hosp #1 (Morton), WA Ult GO 02
02011495   Aztec Municipal SD #2, NM GO 02
02011496   Upsala Area ISD #487, MN GO 02
02011497   Superior (City), WI GO 2002AB
02011498   Campbell-Savona CSD, NY GO 02
02011499   Montgomery County, NY GO 2002
02011501   Winnebago & Boone Cnty CCSD#131, IL GOULT 2002
02011502   Washington State GO Ref Series R-2003B
02011503   Newark Central SD, NY GO Ref 2002
02011504   Thomas Corners Fire District No. 7, NY GO 2002
02011505   Long Branch, NJ Sew Auth Rev and Rev Ref 2002
02011506   Santa Cruz Valley USD #35, AZ GO Ref 2002
02011507   Gananda CSD, NY GO Ref 2002
02011510   Oswego Comm Unit SD No. 308, IL GO 02B
02011511   Bethel SD #403, WA GO 2002
02011512   Bedford (City) Ohio GOLT 2002-2
02011513   Belleville SD #118, IL GO 2002ABC
02011514   Jackson County, Oregon GO Series 2002
02011515   Argenta-Oreana CUSD Number 1, IL GO 2002
02011517   Kenosha USD No. 1, WI GO 2002C
02011519   David Douglas SD No. 40, OR GO Ref 2002
02011520   Alexander CSD, NY GO Ref 2002
02011522   Elsinore Valley MWD Imp Dist #U-2 GO, CA
02011523   Central PA Inst of Sci & Tech (SPSBA), PA Rev 2002
02011524   Northampton Area SD, PA GO 2002
02011526   Plainville, CT GO 2002
02011528   Shoreline SD #412, WA GO 2002
02011530   Arapahoe Park and Rec Dist, CO GO 2002
02011531   Jasper-Troupsburg CSD, NY GO Ref 2002
02011532   Washington Boro BOE, NJ GO 2002
02011533   Fairport (Village of), NY GO 2002
02011534   Hazelwood SD, MO GO Ref 2002
02011535   Northampton Area SD, PA GO Ref 2002
02011536   Kyrene ESD #28, AZ GO Ref 2002
02011537   Calcasieu Parish SD No. 22, LA GO Ref 2002
02011538   Ravena-Coeymans-Selkirk CSD, NY GO 2002
02011540   Reynolds SD, PA GO 2002
02011541   Lincoln (County of), NC GO 2002A
02011543   Liberty Union-Thurston LSD, OH GO ULT 2002
02011544   Oswego Comm Unit SD No. 308, IL GO 02C
02011546   Westside Union School District, CA GO 2002A
02011547   Lake Cnty SD#73 (Hawthorne), IL GO 2002
02011548   Southern Kern Unified SD, CA GO Bonds Series 2002A
02011549   Livingston (City of), TX GO&COO 2002AB
02011550   Morristown (Town), NJ GO RFD 2002

 

Policy Id

 

Policy

02011551     Suffern (Village) NY GO
02011552   Dinuba Unified SD, CA GO Bonds Series 2002A
02011553   Delaware (City of) Ohio Swr Imp & Refund 2002
02011555   Brenham (City of), TX GOLT 2002
02011556   Richland County SD #2, SC GO Ref 2002B
02011557   Dudley (Town), MA GO 2002
02011558   Franklin County, WA GO ULT 2002
02011559   Kendall County, IL GO ARS 2002AB
02011560   Cocalico SD, PA GO Series B 2002
02011561   Wilson Area SD, PA GO 02
02011564   Huerfano SD RE-1 (Walsenburg), CO GO 2002
02011565   Petaluma Joint UHSD,CA GO Ref 2002
02011566   Bermudian Springs SD, PA GO 02
02011567   Fort Bend Co Levee Imp Dist #10, TX GO ULT 02A
02011568   Hinsdale CCSD #181, IL GO 2002
02011569   Rutherford Bd of Ed, NJ GO Sch 2002
02011571   Mount Laurel Twp BOE, NJ GO Tax Ref 2002
02011574   Kinnelon Boro BOE, NJ GO 2002
02011575   Sayville UFSD, NY GO 2002D
02011577   Pueblo SD No. 60, CO GO 02
02011579   Kern CCD, Fac Imp Dist, CA GO02
02011580   Ewing Township BOE, NJ GO Ref 2002
02011587   Matawan-Aberdeen Reg SD, NJ 2002
02011590   East Peoria (City), IL (Tazewell) GO Ref 2002B&C
02011591   Chester Twp., NJ GO 2002
02011592   Vallejo City USD, CA GO 2002
02011593   Cudahy (City), WI GO 2002
02011594   Wabaunsee Cnty USD No. 330, KS GO 02
02011595   Lake Zurich (Village of), IL GO 02
02011596   Lake Zurich (Village of), IL GO 02A
02011598   Barron County, Wisconsin GO 2002
02011599   North St. Paul (City). MN GO
02020003   CALIFORNIA STATE GO 91
02020010   New York City, NY GO 2002 B
02020011   New York City, NY GO Fiscal 2002 A9 & A11
02020012   New York City, NY GO Fiscal 2002 A9 & A11
02020017   New York City, NY GO 2002 B
02020018   California State GO 2001
02020024   New York City, NY GO 2002 B
02020038   California State GO 3-1-01
02020040   California State GO 3-1-01
02020042   California State GO 3-1-01
02020043   California State GO 2002
02020049   NEW YORK CITY, NY GO 97A
02020051   New York City, NY GO 01DEF
02020062   New York City, NY GO 2002C
02020116   Massachusetts Commonwealth GO 2001D
02020117   Massachusetts Commonwealth GO 2001D
02020118   Union County, NJ GO 2002
02020119   Union County, NJ GO 2002
02020121   Massachusetts Commonwealth GO 2001D
02020138   NEW YORK CITY, NY GO 97H
02020141   Connecticut State GO 2002B&C
02020155   New York City,NY GO Series F&G
02020156   Massachusetts Commonwealth GO C 02
 

 

-23-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

02020172     Massachusetts Commonwealth GO C 02
02020181   Massachusetts Commonwealth GO 2001D
02020182   Massachusetts Comnwelth GO 01A
02020183   Bowling Green, KY GO & Spec Rev 2002B & 2002C
02020189   New York City, NY GO 2003 A & B
02020190   New York City, NY GO 2003 A & B
02020191   New York City, NY GO 2003 A & B
02020192   New York City, NY GO 2003 A & B
02020193   New York City, NY GO 2003 A & B
02020194   New York City, NY GO 2003 A & B
02020195   New York City, NY GO 2003 A & B
02020196   New York City, NY GO 2003 A & B
02020197   New York City, NY GO 2003 A & B
02020198   New York City, NY GO 2003 A & B
02020199   New York City, NY GO 2003 A & B
02020200   New York City, NY GO 2003 A & B
02020202   New York City, NY GO 2003 A & B
02020203   New York City, NY GO 2003 A & B
02020204   New York City, NY GO 2003 A & B
02020205   New York City, NY GO 2003 A & B
02020207   New York City, NY GO 2003 A & B
02020209   New York City, NY GO 2003 A & B
02020213   New York City, NY GO 2003 A & B
02020214   Union County, NJ GO 2002
02020218   Massachusetts Commonwealth GO D 02
02020219   Massachusetts Commonwealth GO D 02
02020220   Massachusetts Commonwealth GO D 02
02020221   Massachusetts Commonwealth GO D 02
02020222   Washington St GO & Lease 98C
02020228   New York City,NY GO Series F&G
02020229   CALIFORNIA STATE GO 12-1-98
02020232   CALIFORNIA STATE GO 10-1-97
02020234   Medina (City of), OH Go Ltd Tax 01
02020236   California State GO dated 10/3/02
02020238   California State GO dated 10/1/02
02020239   Massachusetts Commonwealth GO C 02
02020240   Prince George’s Cnty, MD GO 2002
02020241   Massachusetts Commonwealth GO C 02
02020258   WEST VIRGINIA STATE GO 99B
02020262   NEW JERSEY STATE, GO SER D REF
03010004   Hampton Township, PA GO 2003 C
03010011   East Stroudsburg ASD, PA GO 2003
03010012   Columbia Borough School District, PA GO 2002
03010013   Sulphur Parks&Recreation (LA) GO Pub Imp.Bds 2003
03010014   Lancaster SD, PA GO 2003
03010015   Long Branch, NJ Sewerage Auth Series B
03010016   Dover ASD, PA GO Ser 2003
03010023   Shelton SD #309, WA GO ULT 2003
03010024   Sheboygan ASD, WI GO Ref dtd Jan. 15, 03
03010025   Arapahoe Cnty SD No. 6 (Littleton), CO GO 2002
03010026   South Lyon Com Schs, MI GO 03
03010028   Ascension Parish SD, LA GO Ref 2003
03010031   Montgomery County, NY GO 2002AB
03010035   Streator Twp HSD #40 (LaSalle Co), IL GO 03
03010036   Las Vegas Valley Water Dist, NV GO LTX 2003A

 

Policy Id

 

Policy

03010040     North Boone CUSD No. 200, IL CABs 2002
03010043   Malcomson Road Utility District, TX ULT GO 2003
03010045   Bartlesville, Oklahoma, GO Series 2003
03010046   Independence Loc Sch Dist, OH GO 2003
03010047   Reno (City of), NV GO LTX Cap Impr Ref 2003
03010049   Rowlett (City), Texas GOLT Ref 2003
03010051   Texarkana, Texas Ltd Tx GO Ref 2003
03010052   Canton Park District, IL GO 2003
03010053   Collierville (Town), TN GO 2003
03010054   Harris Cnty Water Contr. & Imp. #155, TX Rfd 2003
03010059   Sugar Land, TX GO LT Ref 2002
03010060   Cobleskill-Richmondville CSD, NY GO 2003
03010061   Lancaster County, PA GO 2003
03010062   Avella Area SD, PA GO Ref 2003AB
03010063   Sharonville (City of), OH GO LTX 2002
03010066   Westmoreland County, PA GO 2002
03010067   Decatur County, TN GO and Sch Ref 2003
03010068   West Irondequoit CSD, NY GO 2003
03010069   Palos Heights (City of), IL GO Library 2003
03010071   Henry County, TN GO Ref 2003
03010074   Phoenix ESD #1, Arizona GO Ref 2002
03010075   Grapevine (City of), Texas GO Ref & Imp 2003
03010076   Auburn City SD, NY GO 2003
03010081   Montgomery County MUD No. 9, TX GO ULT 2003
03010082   Salem (City), MA GOLT 03
03010085   Shenendehowa CSD, NY GO 2003
03010086   St. Joseph CCSD#169, IL GOULT 2002
03010092   Roslyn, Village of, NY GO 2003
03010093   Natchitoches Parish Cons SD No. 7, LA GO Ref 2003
03010095   Chester UFSD, NY GO 2003
03010096   Lower Dauphin School District, PA GO 2003
03010097   Lampeter-Strasburg SD, PA GO 2002
03010098   Pt. Wash.-Saukville SD, Wi GO 03
03010099   Sunnyvale, TX GOLT 2003
03010100   Rome (City of), NY GO 2003
03010102   Cattaraugus County, NY GO Pub Imp Ref 2003
03010104   Jackson County, WI GO 2003
03010105   Waubonsee CCD #516, IL GO 2003A
03010106   Waubonsee CCD #516, IL GO 2003B
03010107   Falmouth, MA GO LMTX 03
03010108   Malone Central SD, NY GO 2003 Series A and B
03010109   Brookhaven (Town of), NY GO 2003
03010110   Berlin Boro BOE, NJ GO 2003
03010111   Fleetwood Area School District, PA GO 2003
03010112   Woodcreek MUD, TX W&S Syst Comb Unl & Rev 2003
03010113   Sandoval Cnty, NM, GO Bds Series 2003
03010114   Columbus Bldg. Authority GA Series 2003 A
03010115   Columbus Bldg. Authority GA Series 2003 B
03010118   Sumner SD No. 320, WA GO 2003
03010121   Littleton (Town of) MA GO dtd 1/15/03
03010123   Ouachita Parish SD #1, LA GO LTX 2003
03010124   Oakmont (Boro. of), PA GO 03
03010125   Palmyra ASD, PA GO 2003
03010128   Butler Area School District, PA GO 2003ABC
03010129   Forks (Twp) , PA GO 2003
 

 

-24-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

03010130     Manheim Township School District, PA GO 2003
03010132   Jackson Township BOE, NJ GO 2003
03010133   Upper Adams SD PA GO 2003
03010139   Redding SD, CA GO 2003A
03010140   Liberty (City of), TX GO LT Ref 2003
03010141   Belleville (City of), IL GO 2003
03010142   Dover Municipal Utilities Auth, NJ Sewer 03
03010143   New Iberia (City of), LA GO 2003
03010147   Plum Borough School District, PA GO 2003
03010148   John Wood CCD #539, IL GO 2003AB
03010149   Salem Co Imp Auth, NJ Rev 2003
03010150   Strasburg Borough, PA GO 2003
03010151   Marquette Area PS, MI, GO Unltd Tax Ref Bds 2003
03010152   Orleans (Town of), MA GO Lmtx 03
03010154   Manhattan (Vlg), Will Cnty, IL GO 2003
03010155   Edison (Township) BOE, NJ GO Ref 2002
03010156   Canandaigua (City Of), NY GO Ref 2003
03010161   Huntley CCSD #158, IL GO 2003
03010162   Augusta (City of), ME GO Pension 2003
03010163   Wyomissing Area SD, PA GO 2002
03010164   Cottage Grove (Village), WI GO dtd 2/15/03
03010166   Lubbock (County), TX GOLT 2003
03010170   Monroe-Woodbury CSD, NY GO 2003
03010171   Folsom (City of), CA GO Ref 2003
03010172   Brick Township, NJ Pension GO 03
03010173   Roxbury Twn, NJ GO 03
03010174   Livingston (County of), MI GOLT 2003
03010175   Dickson County, TN GO Ref 2002A
03010177   Hornell (City of) City SD, NY GO (Serial) 2003
03010178   Oklahoma City, Oklahoma GO 2003
03010179   Cincinnatus CSD, Cortland Cnty, NY Ref Bds 2003
03010180   Gull Lake Comm Sch, MI GO NON-SBLF
03010181   Forest Park (Village of), IL GO Ref 2003
03010182   Galveston Cnty, Fresh Wtr Sply Dist No. 6 2003
03010186   Bayonne (City of), NJ GO Ref 2003
03010187   North Hempstead (Town of), NY GO 2003
03010188   Clark County SD, NV GO LTX 2003
03010190   Van Buren (Cnty), MI GO Lmtx 03
03010191   Northampton Area SD, PA Ser 2003
03010192   Clearview Reg HSD, NJ GO 2003
03010193   Deerfield CSD, Wi GO 03
03010195   Cumberland (Town of), RI GO Bds 2003
03010196   Collinsville CUSD #10, IL GO 2003
03010197   Calcasieu Parish SD #30, LA GO Ref 2003
03010198   Webb County, TX GOLT Ref 2003
03010200   Phoenixville Area School District, PA GO 2003
03010201   Sandwich (Town), MA GO 2003
03010204   Oceanside UFSD, NY Ref Serial Bonds 2003
03010205   Issaquah SD #411, WA GO 2003
03010206   Roseville (City of) SD, CA GO Elect of 2002, Ser A
03010207   Teaneck Twsp BOE, NJ GO dtd 2/1/03
03010208   Wichita, Kansas GO 03
03010209   West Harrris MUD #9, Tx 03
03010210   Delano Union Elem SD, CA GO 2003C
03010211   Keyport (Borough), NJ GO

 

Policy Id

 

Policy

03010212     Ellwood City (Borough of), PA GO A&B 2003
03010213   Blairsville-Saltsburg SD, PA GO Ref 2003AB
03010215   Leon County SD, FL GO Ref 2003
03010216   Harrison Twp BOE, NJ GO Ref 2003
03010217   Bayonne (City of), NJ GO School Bds 2003
03010221   Ohio State (Pub Fac Comm), OH GO 03
03010229   Monroe Twp BOE, NJ (Middlesex) 2002B
03010231   Hamburg ASD, PA GO 2003
03010232   Greater Latrobe School Auth, PA Rev 2003A
03010235   Bergenfield (Boro), NJ GO Ref (Taxable) 2003
03010236   Catskill CSD, NY GO 2003
03010239   Skokie SD#69, IL GO 2003
03010242   Elmwood CUSD No. 322, IL GO 2003A & GO Ref 2003B
03010245   Kearny MUA, NJ Rev Ref 2003B
03010246   Marion Center Area SD, PA 2003
03010247   Northfield ISD#659, Mn GO 03
03010248   Jefferson Cnty, IL GO ARB’s 2003-A & 2003-B
03010249   Oroville City ESD, CA GO Elect of 2002, Ser 2003
03010250   Millcreek Township SD, PA GO 2003
03010251   Glendora Unified SD, CA 2003B
03010255   Plain Local SD (Stark Cnty), OH GO 2003
03010256   Chesapeake (City of), VA GO 2003
03010257   Schaumburg Park Dist, IL GO 2003A
03010258   Berwick ASD, PA GO 2003ABCDE
03010259   Oshkosh (City of), WI GO 2003-A
03010260   Oshkosh (City of), WI GO 2003-B
03010261   Oshkosh (City of), WI GO 2003-C (taxable)
03010262   Allentown City SD, PA GO 2003
03010263   North Pocono SD, PA GO 2003
03010264   Pearl Public School District, MS GO 2003
03010265   Gloucester Township, NJ GO 2003
03010266   Lower MUA (Tnship of), NJ Rev Ref 03A & Rev 03B
03010267   Armstrong SD, PA GO Ref 2003
03010270   Kenosha County, WI GO 03
03010271   Lovington Muni SD No. 1, NM GO 2003
03010272   Midland Joint Buld Auth (City & Cty), MI GO Ul 03
03010273   Hanover Area SD, PA GO 2003
03010274   Fargo (City), ND GO 2003ABC
03010276   Memorial Park Dist, IL GO Alt Rev 2003A
03010277   Gatlinburg (City) TN Rev and Tax Ref 03
03010278   Jefferson County, NY GO 2003A&B
03010279   Grimes (City), Iowa GO 2003
03010282   Lodi (Boro of) BOE, NJ GO Pension Ref 2003
03010284   Groton-Dunstable Regional SD, MA GO 2003
03010285   Zion-Benton Township HSD No. 126, IL GO LTX 2003
03010286   Aurora West SD #129, IL GO Ltd Tax 2003
03010288   Williston PSD No 1, ND GO 03
03010292   Fallbrook Union ESD, CA GO
03010296   Tempe ESD #3, Arizona GO Refg 2003
03010298   Midland (City of), TX Ltd Tax GO Series 2003
03010299   Mahanoy Area Sch Dist, PA GO 02
03010300   Saratoga USD, CA GO Elect of 02, Series 2003
03010301   Jersey City, NJ GO 2003
03010303   Harris Cnty MUD #61 Wtr & Swr UnLmtd Tax 2003
03010305   Lawrence (Township) BOE, NJ GO 2003
 

 

-25-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

03010307     Matawan-Aberdeen Reg SD, NJ 2003
03010310   Hamilton SD, WI GO Refunding 2003
03010313   Centralia SD, CA GO
03010316   Nueces County Hosp Dist, TX GO LTX Rev Fwd Ref 03
03010317   Easton Area SD, PA GO 03
03010318   Mesa (City), Arizona GO 2003
03010319   Western Wayne SD,PA GO 2003
03010320   St. Tammany Par SD #12, LA GO 2003
03010321   Montpelier Exempted Village SD, OH GO ULT 2003
03010322   Langham Creek Util Dist, TX W/S GO ULT & Rev 03
03010323   Trophy Club MUD #1, TX 03
03010326   Ewing Township BOE, NJ GO Ref 2003
03010327   Camden County Imp. Auth, NJ GO 2003
03010328   Lee (Town of), MA GO ULT 2003
03010329   Pawling (Town), NY GO ULT 2003
03010330   Clearwater USD #264, KS (Sedgwick Co.) GO 2003
03010331   Pickens County SD, SC GO 03
03010332   Reynoldsburg City SD, OH GO 03
03010333   Milford (Town of) MA GOLT, 3-15-03
03010334   Berea City SD, Ohio GO ULT 2003
03010336   Franklin-McKinley School District, CA GO Ref 2003
03010337   Schertz, Texas LTGO Series 03
03010338   Wilkes-Barre ASD, PA GO 2003
03010339   Somerset Area School District, PA GO 2003
03010342   Ferndale (City), MI GO Ref 2003
03010343   Kern Cnty Com Col District, CA GO 2003A
03010344   Conewago Valley SD, PA GO 2003
03010346   Palos Verdes Peninsula USD, CA GO 00C & Ref 03
03010347   Trenton, NJ GO Sch Refg (NJ Sch Bd Act) 2003B
03010348   Mount Joy Boro Auth, PA Guar Sewer GO 2003
03010350   Mount Vernon (City of), OH GO LTX 2003
03010351   Winslow Township BOE, NJ GO Tax Ref 2003
03010356   Rankin SD No. 98, IL GO 2003
03010358   Franklin Township BOE, NJ GO Ref 2003
03010360   Pittsburg USD#250 (Crawford County),KS GO 2003
03010361   Wax Lake E Drain.Dist (St. Mary Par), LA GOULT 03
03010362   College Community School District, IA GO 03
03010363   Lebanon County, PA GO 03
03010364   Ellsworth Comm SD, WI Taxable GO Ref 2003
03010365   Moline Sch Dist #40, IL GO 2003A
03010366   Barker CSD, NY GO 2003
03010367   Wausau SD, WI GO Ref dtd 12/15/2002
03010369   Montgomery County MUD #18, TX GO 2003A
03010370   East Windsor Reg SD, NJ GO ULT 3/1/03
03010372   Lindenhurst UFSD, NY GO Ref 2003
03010374   Washoe County SD, NV GO 2003A
03010378   Belleville (City of), IL GO Series 2003A&B
03010379   Millburn Twn BOE, NJ GO 03
03010380   North Polk Cmmty SD, Ia GO Ref 03
03010382   East Hampton (Village of), NY GO 2003
03010383   Hamburg ASD, PA GO Series A of 2003
03010384   West New York (Town of), NJ GO 2003 Pension
03010385   Canton Charter Twp, MI GO 03
03010386   Monroe (Twp), Middlesex, NJ GO 03A
03010387   Hempfield ASD, PA GO Ref 2003AB

 

Policy Id

 

Policy

03010388     Roane County, TN GO 2003
03010389   Manitowoc (City), WI GO 2003A&B
03010390   Hermosa Beach City SD, CA GO ULT 2003
03010391   Aston (Township of), PA GO 2003
03010393   Victoria (City of), TX GO LTX Ref 2003
03010394   New York State Muni Bond Bank Agency (Troy CSD) 03
03010395   Lompoc USD, CA, Elect 2002, Ser 2003A
03010396   West Chester (Boro of), PA GO Guar Univ Parking 03
03010400   Lakewood Twp BOE, NJ GO Ref 2003
03010401   Mark West USD, CA GO 03
03010402   Verona BOE, NJ GO ULT 03
03010403   Grand Prairie, Texas LTGO 03
03010404   Red Bank BOE, NJ GO 03
03010405   West Muskingum Local SD OH GO 2003
03010406   New Haven (City of), CT GO Ref 2003
03010410   East Side Union HSD, CA GO 4/3/03 (02 Elec)
03010411   East Side Union HSD, CA GO (Elec 99) C
03010412   Beaumont (City of), TX GO LTX 2003
03010413   Calumet Park (Village), IL GO 2003
03010414   Redevelopment Authority of the City of Meadville,
03010415   Chilton SD, WI GO Ref dtd 4/15/03
03010421   Allentown (City of), PA GO 03
03010422   Lakeville, Minnesota GO 2003A
03010424   Sussex County MUA, NJ Sol Wste Rev Ref (GO) 2003
03010426   Woodbury, NJ GO 03
03010427   Salinas UHSD, CA GO 2003
03010428   Pearl (City of), MS GO 2003
03010430   Belfast CSD, NY GO Ref 2002
03010431   Carteret (Borough of) BOE, NJ
03010433   North Bergen (Township of), NJ Pension GO 2003
03010434   Brownsville ASD, PA GO 2003A&B
03010436   Springville-Griffith CSD, NY GO 03
03010437   North Babylon UFSD, NY GO 2003ABC
03010438   Savage (City), MN GO 03 A
03010439   Savage (City), MN GO 03 B
03010441   Dieringer SD #343, WA GO 2003
03010442   East Hartford (Town of), CT GO Ref dtd 4/1/03
03010443   Kiski Area School District, PA GO 2003
03010444   Warwick School District, PA GO 2003
03010447   St. Anthony City, MN GO 03B
03010449   Itawamba Cnty SD, MS GO 2003
03010450   Waterville CSD, NY GO 03
03010451   Fort Edward UFSD, NY GO 2003
03010452   Mequon, WI GO 03A
03010454   South Fayette Twp SD, PA GO 03
03010457   North Allegheny SD, PA GO Ref 2003A and GO 2003B
03010460   Bethlehem (City of), PA GO 2003AB
03010463   Ringgold School District, PA GO 2003
03010464   Pennridge SD, PA GO 2003A
03010465   Utica (City of), NY GO 2003
03010467   Andover CSD, NY GO Serial 2003
03010468   Franklin (Town of), MA GO LTX 2003
03010469   Carlisle Area SD, PA GO 2003
03010470   Venango (County of), PA GO 2003
03010471   West Perry SD, PA GO 2003 A&AA
 

 

-26-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

03010472     Oswego CUSD No. 308, IL GO LTX 2003AB
03010473   Oregon School Bd Assoc Limited Tax Pension Ser 03
03010474   Trinity Area Sch Dist PA GO 2003
03010475   Harris Cnty MUD #162, TX GOULT
03010476   Lorraine USD #328 (Ellsworth Co), KS GO 02
03010485   Manitowoc (City), WI GO 2003D
03010487   Wayne Building Authority, MI GO LTX 03
03010488   Everett ASD, PA GO Ref 2003
03010489   Guernsey Cnty, OH GOLT
03010490   Jefferson Co., TX Wtr Control & Imp Dist #10 GO 03
03010492   Gilroy USD GO ULT 03
03010493   Scotts Valley USD, CA GO ‘03
03010494   Cranberry Township, PA GO Ref 2003AB
03010495   Regional SD # 15, CT GO 2003
03010496   Fairbanks North Star Borough, AK GO 2003F
03010498   Green Bay (City), WI GO 03
03010499   Oregon State Intercept Program
03010501   Essex County Impr Auth, NJ (Corr Fac GO) 2003AB
03010502   Linden USD, CA GO Elec of 2002, Ser 2003
03010503   Toms River BOE, NJ GO 2003
03010505   Ridgway Area SD, PA GOULT 2003
03010508   Brandywine Heights ASD, PA GO 03
03010509   Racine (County), WI GO 2003B
03010510   Oklahoma (County of), OK GO LT, 2003A
03010511   West Contra Costa USD, CA GO(Elec ‘00, Ser C) 2003
03010512   Bledsoe County, TN GO Sch Ref 2003
03010513   Columbus City SD, Ohio GO ULT 2003
03010514   Fairfield County, OH GO LTX 03
03010515   Wyomissing Area SD, PA GO 2003A
03010516   Aransas Cnty, TX LTX GO 2003
03010517   North Beach SD #64 (Grays Harbor Cnty), WA GO 03
03010522   Acalanes Union HSD, CA GO 2003
03010523   Knox County, IL GO 03
03010524   Cimarron MUD, TX GO 03
03010525   South Texas CCD LT GO 2003
03010526   Niskayuna (Town of), NY Public Improv Ref 2003
03010528   Southern Columbia ASD, PA GO 2003
03010530   York (County of), SC GO Ref 2003
03010534   Fort Worth (City of), TX GO 2003
03010535   Palm Springs USD, CA GO 2000 Election Series D
03010536   Lawrence County, TN GO Sch Ref 2003
03010537   Chicago Park Dist, IL GO LTX 2003A
03010538   Chicago Park Dist, IL GO ULT 2003B
03010539   East Pennsboro ASD, PA GO 2003
03010541   Pottsville (City of), PA GO 03
03010542   Harris County WC&ID No. 1, TX GO ULT 2003
03010543   Cornwall-Lebanon SD, PA GO 2003A
03010544   St. Paul ISD No. 625, MN GO 2003 B
03010545   Canajoharie CSD, NY GO 2003
03010546   St. Paul ISD No. 625, MN GO 2003 C
03010547   San Bernardino City USD, CA ‘99 Elec GO 2003C
03010548   Madison (Town), WI 2003
03010549   Petaluma City ESD, CA GO Ref 2003
03010550   Auburn SD No. 408, WA GO ULT 2003
03010551   Ringgold School District, PA GO Ref 2003A

 

Policy Id

 

Policy

03010553     South Pasadena USD, CA GO Series 2003
03010556   Rye Brook (Village of), NY GO Public Improv 2003
03010557   Republic Cnty, KS GO 2003A
03010559   Phoenixville Borough, PA GO 2003
03010561   Scarborough (Town of), ME GO 2003
03010562   Seneca Valley SD, PA GO 2003AB
03010564   Bayonne MUA, NJ Swr Rev 2003A and 2003B (Txbl)
03010565   Ripley CSD, NY GO 2003A
03010566   Ripley CSD, NY GO 2003B
03010567   Lower Windsor Twnp, PA GO 2003
03010568   Warren Consolidated SD, MI GO ULT 2003
03010569   Kingston (Township), PA GO Refg 2003
03010576   Kutztown (Borough of), PA GO 2003
03010577   West Des Moines (City), IA GO 03A
03010578   Conneaut SD, PA GO (SPSBA) 03
03010579   Evans, CO GO 2003
03010580   Moore County, NC GO 2003
03010582   Watchung Hills Regional BOE, NJ GO dtd 5/1/03
03010586   Highlands SD, PA GO 2003
03010588   South Williamsport ASD, PA GO 2003
03010590   Ridley School District Auth, PA GO Rev 2003AB
03010592   North Bergen BOE, NJ GO Pension Ref dtd 3/1/03
03010593   Galeton Area School District, PA GO 2003
03010594   Klein PUD, TX Wtr&Swr ULTGO 2003
03010595   Wentzville R-IV SD, MO GO 2003A
03010596   St. Clair Cnty (Ira Township), MI GO LTX 2003A
03010597   Connecticut State GO 2003 C
03010598   Byron-Bergen CSD, NY GO 2003
03010601   Harrison (Town of), NJ GO 2003
03010602   Springfield SD #R-12, MO GO 03 (MDDP)
03010603   Sequatchie County, TN GO 2003
03010604   Pittsburgh (City of), PA GO 2003
03010605   St. Clair Cnty (Ira Township), MI GO LTX 2003B
03010607   Northern Highland RHSD BOE, NJ GO 03
03010608   Kronenwetter (Vlg of), WI GO Ref dtd 5/15/03
03010609   Green Brook Twp BOE, NJ GO 03
03010610   Lisbon CSD, NY GO 2003
03010611   Ontario (County of), NY GO Pub Improv 2003
03010612   Texarkana (City of), TX GO LTX Ref 2003
03010613   Crown Point CSD, NY GO 2003B
03010616   Queen Creek USD No. 95, AZ GO 2003
03010617   Sonoma County, CA Txbl Pension Oblig 2003A
03010618   Sonoma County, CA Txbl Pension Oblig 2003B
03010619   Luzerne (County of), PA GO 2003 C
03010620   Middletown ASD, PA GO 2003A
03010621   Mechanicsburg ASD, PA GO 2003
03010625   Kendall County Forest Preserve Distr, IL GO 2003
03010626   Central Dauphin SD, PA GO Notes 2003A
03010627   Grant Area District Library, MI ULT GO 2003
03010628   Washington State GO Various Purpose 2003 E
03010629   St. Clair County, MI GO LTX 2003
03010632   Louisiana (State) GO 03A
03010633   Brentwood Borough SD, PA GO 2003
03010634   Kern Cnty Taxable POBs, 2003A
03010636   Huntingdon ASD, PA GO 2003
 

 

-27-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

03010637     Wisconsin (State of), GO 03
03010639   Northwest Harris Cnty MUD No. 10, TX ULT GO 2003
03010640   Big Spring SD, PA GO 2003
03010641   Saucon Valley SD, PA GO 2003
03010642   Chambersburg Area SD, PA GO 2003
03010643   Edgewater Boro BOE, NJ GO 03
03010645   Columbia County, WI GO 2003
03010646   Kankakee (City of), IL 2001 GO 2003AB
03010647   Ontario-Montclair SD, CA GO Elec of 2002 Series A
03010649   Bay City (City of), TX GO LTX Ref 2003
03010650   Menifee USD, CA GO Elec of 2002 Series A
03010651   Marinette County, WI GO Ref 2003
03010653   Oklahoma (State of), OK GO 2003AB
03010656   Portage, MI GO LT 03
03010659   Bradford ASD, PA GO Ref 2003
03010662   Keystone Oaks SD, PA GO Ref 2003
03010663   Evergreen Fire Protection Dist, CO GO 2003
03010664   Hendrick Hudson CSD, NY GO 2003
03010665   West Reading (Boro of), PA GO 2003
03010666   Wilmington ASD, PA GO 2003
03010667   Waterville CSD, NY GO 2003
03010668   Guilderland CSD, NY GO 2003
03010669   Skaneateles CSD, NY GO 03
03010670   South Butler County SD, PA GO 2003
03010672   DuBois ASD, PA GO 2003
03010673   West Linn-Willsonville SD No. 3Jt, OR GO 2003AB
03010674   East Longmeadow (Town of), MA GO 03
03010675   Geneva City SD, NY GO 2003
03010678   Murrieta Valley Unified School District, CA GO
03010679   Cumberland Valley SD, PA GO 03
03010680   Cheltenham Twp. SD, PA GO 03
03010681   Allen (City of), TX GO LTX 2003
03010683   Apache Junction Unified Sch Dist #43, AZ GO 2003
03010684   Barrington Hills (Village of), IL GO 2003
03010687   Mount Vernon City SD, NY GO 2003AB
03010690   Norwell, MA GO LTX dtd. 6/15/03
03010691   Albuquerque (City), NM GO 2003C
03010692   Reynolds SD, PA GO 2003B
03010694   Lunenburg (Town of), MA GO dtd 6/1/03
03010695   Healdsburg USD, Sch Impr Distr #1, CA GO 03
03010699   Warren Cons SD, MI GO LTX 2003
03010700   Dayton CSD, OH GO-LT ‘03B
03010701   Dayton CSD, OH GO-ULT ‘03A
03010706   Northeastern York County SD, PA GO 2003AB
03010707   Olympia SD #111, WA GO Ref 2003
03010708   Carson City, NV GO LTX Ref 2003
03010709   Pasadena Area CCD, CA GO Elect of 2002, Ser 2003A
03010710   League City (City), TX GO LTX 2003 & 2003ABC
03010711   Covina-Valley USD, CA GO Elec of 2001 Series B
03010712   Camden County Imp. Auth, NJ GO Ref 03
03010713   Plum Borough SD, PA GO 2003ABC
03010714   Carrollton (City of), TX GO ULT 2003
03010716   Hurst, TX COO GO LTX Rev COOs 2003
03010717   Dansville CSD, NY GO 2003
03010718   East Pennsboro ASD, PA GO 03A and 03AA

 

Policy Id

 

Policy

03010721     Yavapai Cnty CCD, AZ GO 03
03010722   Smethport Area SD, PA GO 2003
03010723   Patchogue-Medford UFSD, NY GO 2003A
03010724   Brazoria County MUD No. 6, TX GO ULT 2003
03010726   Port Arthur (City), Texas GO LTX 2003
03010727   Fairfield ASD, PA GO 2003
03010728   Ashburnham-Westminster Reg SD, MA GO Ref 6/15/03
03010731   Wallenpaupack ASD, PA GO 2003
03010732   Montgomery County, TN GO 2003
03010733   Selinsgrove ASD, PA GO 2003B
03010734   Chesapeake (City of), VA GO 2003 ABC
03010735   Bridgewater-Raritan RSD BOE, NJ GO 2003
03010739   Dakota County, MN GO 03 ABC
03010740   Spokane (City of), WA GO LTX and Ref 2003
03010741   Bradley Beach (Borough of) BOE, NJ GO 2003
03010742   Perth Amboy (MCIA), NJ GO 2003
03010743   Snohomish Cnty Hosp Dis #2, WA GO ULT Ref 2003
03010744   Cupertino USD, California GO 03B
03010746   Washington Township BOE, NJ GO Ref 2003
03010747   Sandy Creek CSD, NY GO 2003AB
03010748   Bloomington (City of), IL GO 03
03010749   Randolph CSD, NY GO 2003
03010750   Frewsburg CSD, NY GO Ref 2003B
03010752   Erie County, NY GO 2003A&B
03010753   Sharpsville Area SD, PA GO Ref 2003
03010754   North Andover (Town of), MA GO LTX 2003AB
03010757   Lacey Twp MUA, NJ Wtr Rev Ref GO 2003A
03010758   Lacey Twp MUA, NJ Wtr Rev Ref GO 2003A
03010759   Elgin CCD No. 509, IL GO 2003A
03010760   Bedford County, TN GO 2003
03010761   Sumter County SD #2, SC GO Ref 2003
03010762   Ripon USD, CA GO Elec of 2002 Series B
03010765   Greenville CSD NY GO 03 ABCD
03010766   Lacey Twp MUA, NJ Wtr Rev Ref GO 2003B
03010767   Lacey Twp MUA, NJ Wtr Rev Ref GO 2003B
03010771   Ellwood City Area SD, PA GO 03
03010772   Phoenixville Area School District, PA GO 2003 A?
03010773   Clay County Reorg SD R-1 (Kearney), MO GO Ref 03
03010774   Harris County MUD No. 65, TX GO ULT 2003
03010775   Warwick (City), RI GO 2003
03010776   Tulpehocken Area School District, PA
03010777   Paradise Valley USD #69, AZ GO Ref 03 (2nd Series)
03010778   Worcester (City), MA GO 2003A
03010779   Monroe (Twnp) Gloucester, NJ GO 2003
03010780   Reading School District, PA GO 2003
03010781   Coos County, OR GO Ref 2003B
03010782   Allegheny County Comm College (SPSBA), PA GO 03
03010785   Flemington-Raritan RSD, NJ GO dtd 6/15/03
03010786   Federal Way SD No. 210, WA GO ULT 2003
03010788   Manheim Township School District, PA GO 2003A
03010789   Greater Nanticoke ASD, PA GO 2003
03010790   Pitman (Borough of), NJ GO 2003ABC
03010791   Anoka-Hennepin ISD #11, MN GO Ref 2003A
03010792   Roscoe CSD, NY GO 2003
03010793   Whitehall-Coplay SD, PA GO 03
 

 

-28-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

03010794     Moshannon Valley SD, PA GO 2003
03010795   North Collins CSD, NY GO 2003
03010796   Harris County MUD No. 222, TX GO ULT 2003
03010797   PLAINFIELD CCSD #202, IL GO 2003 A&B
03010798   Eastern Lebanon County SD, PA GO 2003AA
03010799   North Schuylkill SD, PA GO 2003
03010802   Spring-Ford Area SD, PA GO 2003
03010803   Blue Ridge SD, PA GO 2003
03010804   Newark CSD, NY GO 2003
03010805   Freetown (Town of), MA GO ULT dtd 7/15/03
03010806   Princeton (City of), IL GO (Water Rev Alt Rev) 03
03010807   Rosemont (Village of), IL GO ULT Ref 2003AB
03010808   Reading School District, PA GO 2003B
03010809   Macedonia (City of), OH GO Var Purp 2003
03010810   Bell County, TX GO LTX 2003 Ref
03010811   Kennett Consolidated SD, PA GO 2003AB
03010812   Edwards-Knox CSD, NY GO 2003AB
03010813   Seekonk (Town of), MA GO ULT dtd 7/15/03
03010816   Conestoga Valley SD, PA GO 2003
03010817   Laurel Highlands SD, PA GO Ref 2003
03010818   Woodmoor Wtr & San Dist, CO GO Refg 03
03010820   Tolleson (City of), AZ GO 2003
03010828   Sacramento Cnty, Ca Pension Oblig Restruct 03
03010832   Penbrook (Boro), PA GO 2003
03010833   Racine (City), WI GO Ref 2003
03010834   Chichester SD, PA GO 2003
03010836   Stratford (Town of), CT GO dtd 7/15/03
03010837   Indiana ASD, PA GO 2003
03010838   Orland Park SD 135 (Cook Cty), IL GO LTX 03AB
03010839   Orland Park SD 135 (Cook Cty), IL GO Ref 03C
03010840   Whitmore Lake PSD, MI GO 2003
03010842   Dayton CSD, OH GO ULT 03D
03010843   Everett ASD, PA GO 2003 Series A
03010844   New Brunswick Park Auth, NJ GO Guar Rev Ref 03
03010845   Warren County, NY GO 2003
03010846   Nauset Regional SD, MA GO Ref dtd 6/15/03
03010847   Montara San Dist, CA GO 2003
03010848   Van Buren (Charter Twp) LDFA, MI GO LTX 2003
03010850   Campbell Union HSD, CA GO Elec of 1999 Ser 2003
03010851   Santa Clarita Com CD, CA GO Elec of 2001, Ser 2003
03010852   Fry Road MUD, TX GO ULT Ref 2003
03010853   St. Clair ASD, PA GO 2003
03010854   Davison Comnty Schs, MI GO ULT 2003
03010855   Rocklin USD, CA GO 2003
03010856   Glendale CCD, CA GO Elect of 2002, Ser B and Ser C
03010857   Butler County, PA GO 03
03010858   Neshannock Twp, PA GO ULT 03
03010859   Huntington Beach City SD, CA GO 2003A
03010860   Peoria (City of), IL GO 2003A
03010862   Franklin Regional SD, PA GO 2003AA
03010864   District of Columbia GO 2003A
03010865   Mason City SD, OH GO Ref 2003
03010866   Brewster SD No 111/203J, WA GO ULT Ref 03
03010870   Olmsted Falls City SD, OH GO Ref 2003
03010871   Wilkes-Barre (Township of), PA GO 2003

 

Policy Id

 

Policy

03010873     Washington State GO Var Purpose 2004ABC
03010874   Hermon (Town of), ME GO Ref 2003
03010877   Union Area School Dist, PA GO Ref 2003
03010879   North Clackamas CSD No. 12, OR GO Ref 2003
03010881   Mississippi (State of), MS Taxable GO dtd 7/15/03
03010883   New Brunswick (City of), NJ GO Ref 2003
03010884   New Brunswick (City of), NJ GO 2003
03010887   Walnut Valley USD, CA GO (Elect of 2000), 03 Ser D
03010888   New Brunswick (City of), NJ GO
03010889   Wooster (City of), OH GO LTX Var Purpose 2003
03010890   West Irondequoit CSD, NY GO 2003 dtd 8/15/03
03010891   Lancaster SD, PA GO 2003 Ser A (Forward)
03010892   Boxford (Town of), MA GO dtd 8/15/03
03010895   Gateway School District, PA GO 2003
03010897   Myrtle Beach (City of), SC GO 03A
03010902   Millis (Town of), MA GO LTX 2003
03010903   Union Twp BOE, NJ GO dtd 8/15/03
03010904   West Deptford Twsp BOE, NJ GO Ref 2003
03010905   Monroe County, PA GO Notes 2003AB
03010906   Miller Place UFSD, NY GO 2003
03010907   Moline (City of), IL GO 2003A_C
03010908   Waukegan (City), IL GO 2003A
03010909   Moline (City of), IL GO Taxable 2003B
03010911   Del Mar Coll Distr, TX GO LTX 2003
03010913   Cooperstown (Village of), NY GO 2003
03010914   Cleveland (City of), TX GO LTX 2003
03010915   Mountain View-Whisman SD, CA GO 1998 Elect Ser 03E
03010916   Timberlake Improvement Dist, TX GO ULT 2003
03010917   Exeter Twp SD, PA GO 2003
03010918   West Allegheny SD, PA GO Ref 03AB
03010919   Thief River Falls (City), MN GO 2003
03010922   Nutley Twp BOE (Essex Co), NJ GO dtd 8/15/03
03010923   De Soto USD No. 232, KS GO 2003A
03010924   Beaver ASD, PA GO 2003C
03010925   New Albany (Vlg of), OH GO LTX 2003
03010926   Bay Village (City of), OH GO LTX 2003
03010927   Anchorage (Municipality of), AK GO 2003AB
03010929   Uniontown ASD, PA GO 2003
03010930   Rowlett (City), TX GO 03A
    Rowlett (City), TX GO LTX Rev COOs 03
03010933   Oakland Comm College, MI GO LTX Ref 2003
03010934   Medina Cnty Library Dist, OH GO ULT
03010935   West Harris Co MUD No. 10, TX GO 2003
03010936   Harris County MUD #82, TX GO 03
03010938   Fort Worth (City of), TX GO Ref and Impr 2003
03010939   Grand Prairie, TX GO LTX 2003-A & COOs 2003ABC
03010941   Sullivan County, NY GO 2003
03010944   Bryan (City of), TX GO LTX COOs, 2003
03010946   Weatherford (City), TX GO LTX COOs 2003
03010947   Crawford County, KS GO Ref 03A
03010948   Sartell (City of), MN GO 03
03010950   Alachua County SD, FL GO Ref 2003
03010951   Anchorage, Alaska GO 2003B
03010955   Eastside Union SD, CA GO 2003A
03010956   Union Springs CSD, NY GO 2003
 

 

-29-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

03010958     Weslaco (City of), TX GO LTX 2003
03010959   Winnebago County, IL GO (Alt Rev) 2003E
03010960   West Harris MUD No. 11, TX GO 2003
03010961   Pleasant Valley SD, PA GO 03AA
03010962   Foothill-De Anza CCD, CA (Elect 99) GO 2003 Ser B
03010963   Pittsburg USD, CA GO Ref 2003
03010966   Evergreen SD, CA GO Go Elect of 1997 03D
03010967   Evergreen SD, CA GO Ref 03B
03010970   Brazoria County MUD No. 3, TX Wtr/Swr Ref 2003
03010971   Lancaster County, PA GO 2003A
03010974   Bellaire (City of), TX GO LTX 2003
03010982   Midd-West SD, PA GO 2003A
03010983   Georgetown County, SC GO 2003A & Ref 2003B
03010985   Steel Valley SD, PA GO Ref 2003ABC
03010986   Rainier SD No. 307, WA GO ULT Ref 03
03010987   Waukesha, WI GO 03
03010988   Shelbyville (City of), TN W&S Rev and Tax Ref 03
03010989   West Fargo, ND GO Ref 2003D
03010992   Florence (City of), AL GO 2003-B
03010994   DePere USD, WI GO Ref 2003
03010997   Lucas (County of), OH GO LTX, 2003
03011000   Levittown UFSD, NY GO 2003
03011001   Austin, Texas GO Ltd Tax 03 ABCD
03011002   Niles Park District, IL GO (Alt Rev) 2003B
03011003   Port Chester (Village), NY GO 2003B
03011004   Brea-Olinda USD, CA GO Elect of 99 Ser 03
03011005   Moline (City of), IL GO 2003D
03011008   Clinton Twp BOE (Hunterdon), NJ GO Ref dtd 7/1/03
03011011   San Benito (City), TX GO 2003A
03011012   Mercer Cnty Imp Auth, NJ (Mercer Cnty GO) 2003
03011013   Pittsburgh SD, PA GO 2003
03011016   Kansas City SD Bldg Corp, MO Lse Rev 2003A
03011018   Melvindale (City of), MI GO LTX Ref dtd 9/1/03
03011019   Western Springs (Vlg of), IL GO (Alt Rev) 2003B
03011020   Pickens County, SC GO 2003
03011023   Cromwell (Town of), CT GO 2003
03011026   Little Falls (City of), MN GO 2003D
03011028   Marble Falls (City of), TX GO LTX 2003
03011029   Akron (City of), OH GO LTX 2003
03011030   Edwardsville (City of), IL GO Wtrwks Ref 2003
03011031   Lake of the Woods ISD #390, MN GO Ref 2003B
03011032   South-Western City SD, OH GO Ref 03
03011033   Pleasanton USD, CA GO Ref 2003B
03011034   Lower MUA (Tnship of), NJ Rev 03C & 03D
03011035   Calhoun County CUSD No.40, IL GO 2003AB
03011037   El Segundo USD, CA GO (Elec 2001) Ser 03
03011040   Pasadena (City), TX GO LTX 2003
03011041   Roselle Park (Borough of) Union Co, NJ GO 2003
03011042   Connecticut State GO 2003E
03011043   Muskegon Comm College, MI GO LTX 03
03011044   Hilton Central SD, NY GO Bonds 2003
03011045   East Lampeter Sewer Auth, PA Guar Sewer Rev 03
03011048   Sienna Plantation MUD #2, TX GO ULT 03
03011049   Harris County WC&ID No. 119, TX GO 2003
03011050   Scotch Plains Sr Citizen Hsing Corp, NJ Rev Ref 03

 

Policy Id

 

 

Policy

03011051     Greater Johnstown SD, PA GO 2003
03011052   Tomball (City of), TX GO LTX Tax/Rev COOs 2003
03011053   North Allegheny SD, PA GO 2003C
03011054   Mokena SD #159, IL GO Ref 2003
03011055   South Side ASD, PA GO 2003
03011056   Racine (City of), WI GO Ref dtd 11/1/03
03011057   South Park SD, PA GO 2003
03011058   Racine (City of), WI GO Ref Taxable
03011060   Naugatuck (Borough), CT GO 2003
03011061   Lima City SD, OH GO ULT 2003
03011063   Schaumburg Park Dist, IL GO Alt Rev 03C
03011064   Schaumburg Park Dist, IL GO Ltd. Tax 03D
03011065   Rio Rancho Pub SD No. 94, NM GO 2003
03011066   Block House MUD, TX GO ULT 2003A
03011067   Juneau (City/Boro), AK GO 2003A
03011068   Sto-Rox SD, PA GO 2003
03011069   Juneau (City/Boro), AK GO 2003B
03011070   Warren County, PA GO 2003
03011071   Penn Manor SD, PA GO 2003
03011074   Fort Bend County MUD No. 2, TX GO ULT 2003
03011075   West Chicago ESD #33, IL GO Ref 2003A_B
03011076   Moreland SD, CA GO (Elect of 2002) Ser B
03011077   Bristol Twp SD, PA GO Ref 2003
03011078   Cattaraugus County, NY GO Pub Imp 2003
03011080   Orangeburg County, SC GO 03A and GO Ref 03B
03011081   Huntington (Town), NY GO Public Impr 2003
03011082   El Paso County SD #20, CO GO 2003 (Academy)
03011085   Ballston Spa CSD, NY GO 2003
03011086   Dunmore SD, PA 2002
03011088   Cherry Hill (Township), NJ GO Ref 2003
03011089   Broadview Village, IL GO 2003
03011090   Richland SD, WI GO Ref dtd 11/3/03
03011092   Mansfield (City of), TX GO 2003
03011096   Camden County Imp Auth, NJ GO Guar Lease Ref 03B
03011097   Downers Grove (Village of), IL GO 2003A
03011098   Norristown Area SD, PA GO 2003A
03011099   Bangor ASD, PA GO 03
03011100   Wyomissing ASD, PA GO 2003B
03011101   Spokane (City of), WA GO LTX 2003B
03011102   Waterford (Charter Twp), MI GO LTX 2003
03011104   Cleveland (City), OH GO LTX Var Purpose 2003
03011108   Harris County MUD No. 230, TX GO ULT 2003
03011109   Dixon Unit SD No. 170, IL GO Ref 2003
03011110   Coalinga-Huron Joint USD, CA GO Ref 2003
03011111   Batavia Prk Dist, IL GO ARS 2003
03011112   Pleasant Prairie (Village of), WI GO Ref 2003
03011113   North Mission Glen MUD, TX GO 2003
03011114   Park City (City of), KS GO 2003B
03011116   Liberty Central SD, NY GO 2003
03011118   Fort Bend County MUD #26, TX GO ULT 2003
03011122   Newport-Mesa USD, CA GO 2003 (Elect of 2000)
03011123   Caledonia Charter Township, MI GO LTX 2003
03011124   Alvin (City of), TX GO LTX Ref 03 and COO 03
03011125   Campbell-Savona CSD, NY GO 2003
03011126   Strasburg Borough, PA GO 2003A
 

 

-30-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

03011127     Danvers (Town of), MA GO 2003
03011128   McKinney (City of), TX GO LTX Wtr/Swr 2003A
03011130   McKinney (City of), TX GO LTX 2003
03011131   Kankakee SD No. 111, IL GO Ref 03
03011133   Merriam (City of), KS GO 2003
03011134   Kent SD No. 415, WA GO ULT 2003
03011136   Big Walnut Local SD, OH GO 2003
03011137   Weehawken Twp BOE, NJ GO Ref 2003 (Pension 03)
03011140   Hinckley-Big Rock CUSD 429, IL GO LTX 03A & GO 03B
03011141   Greater Nanticoke ASD, PA GO 2003A
03011142   Olathe USD #233, KS GO 2003B
03011143   Macomb Township Bldg Auth, MI GO LTX 2003B
03011144   Robla Sch Dist, CA GO Ref 2003_2003D
03011148   West Harris MUD #9, TX 2003A
03011149   Tacoma SD #10, WA GO ULT 2003
03011150   Chesterfield (Charter Twp), MI GO LTX 2003
03011151   Portland Dist Library, MI Library Build GO ULT 03
03011152   Nevada GO Ltd Tax 2003I
03011153   West Allegheny SD, PA GO Ref 2003CD
03011154   Country Club Hills (City of), IL GO Ref 03AB
03011156   Savage (City of), MN GO 2003DE & GO Ref 2003FG
03011157   Pittsburgh SD, PA GO Ref 2003A
03011159   Pine-Richland SD, PA GO 2003
03011163   Manchester (City of ), NH GO 03AC & GO Ref 03B
03011165   Davenport (City of), IA GO 2003 B
03011166   Flagstaff (City of), AZ GO Ref 2003
03011169   Metro Govt Nashville-Davidson County, TN GO 03
03011170   Travis County MUD No. 3, TX GO ULT Ref 2003
03011171   North Allegheny SD, PA GO 2003D
03011172   Harris County MUD #8, TX GO ULT 2003
03011177   Clinton Twp BOE (Hunterdon), NJ GO dtd 12/1/03
03011178   Show Low USD No. 10, AZ GO Ref 2003B
03011179   Napavine SD No. 14, WA GO ULT Ref 2003
03011180   Fabius-Pompey CSD, NY GO 2003
03011185   Greece Central SD, NY GO 2003 AB
03011190   Weakley County, TN GO Sch. Rfd. 2003
03011192   Indiana Bond Bank Taxable Severance Funding, Ser 5
03011193   Stewart County, TN GO Ref 2003A
03011196   Aransas Pass (City of), TX GO LTX 2003
03011197   Mukwonago ASD, WI GO Ref dtd 12/22/03
03011198   Washoe County SD, NV GO LTX 2003C
03011200   Darien Park Dist, IL GO Ref 03C (Darien Sportsplex
03011201   Kohler SD, WI GO Ref dtd 12/15/03
03011203   Pflugerville (City of), TX GO LTX 2003A
03011208   Elgin SD #U-46, IL GO LTSer 03A&B
03011210   Yuma SD-1, CO GO 2003
03011211   Toledo City SD, OH GO ULT 2003B
03011212   Cicero SD No. 99, IL GO 2003
03011213   Kenai Peninsula Boro, AK GO 03 (Hosp Serv Area)
03011214   Round Lake Area Park District, IL GO Alt Rev 03
03011215   Kitsap County, WA GO LTX 2003B
03011217   Trenton (City) Park Auth, NJ Park Rev 03 (Guar)
03011221   Putnam County, NY GO 2003
03011222   Kalamazoo County Bldg Auth, MI GO LTX 2003
03011224   Pleasant Prairie (Village of), WI GO Prom Notes 03

 

Policy Id

 

Policy

03011225     Winchester (City of), VA GO 2003
03011226   East Hills (Inc. Vlg of), NY GO 2003
03011228   Westbrook (City of), ME GO 2003
03011229   River Dell Reg SD, NJ GO Ref 2003
03011230   Oxford (Town of), MA GO dtd 12/15/03
03011231   North Orange Cnty CCD, CA GO Elec of 2002, Ser 03
03011232   El Rancho USD, CA GO Election of 2003, Ser 2003A
03011233   Southfield (City of), MI GO LTX 2003
03011235   Lan-Oak Park Dist, IL GO (Alt Rev Source) 2003
03011238   Mercer Cnty Imp Auth (Reg Sludge) ,NJ GO Ref 03
03011239   Mercer Cnty Imp Auth (Reg Sludge) ,NJ GO Ref 03
03011240   Point Pleasant, NJ GO Gen Imp 03 & GO Wtr/Swr 03
03011244   Hanover Park Park Distr, IL GO Ref (Alt Rev) 2003
03020004   New Jersey (State of) GO Series J
03020008   New York City, NY GO Fiscal 2002 A9 & A11
03020009   New York City, NY GO 01 H Fix
03020010   New York City, NY GO Fiscal 2002 A9 & A11
03020012   New York City, NY GO 2003 G
03020016   New York City, NY GO 2003 G
03020019   New York City, NY GO 2000A
03020022   New York City, NY GO 2002 DEFG
03020025   New Jersey (State of) GO H & I
03020026   San Anselmo (Town), CA GO 03
03020027   San Anselmo (Town), CA GO 03
03020028   Houston, Tex GO Ltd Tax 99A/B
03020030   NEW JERSEY STATE, GO SER D REF
03020032   New York City GO 03 I
03020033   New York City,NY GO Series F&G
03020034   Massachusetts Commonwealth GO 03 ABC
03020035   New York City GO 03 I
03020036   New York City GO 03 I
03020037   New York City GO 03 I
03020038   New York City GO 03 I
03020039   Massachusetts Commonwealth GO 2001D
03020042   New Jersey (State of) GO H & I
03020044   New Jersey (State of) GO Series J
03020053   New Jersey (State of) GO H & I
03020054   California State GO dtd 5-1-03
03020055   California State GO dtd 5-1-03
03020057   Washington State GO Various Purpose 2003 E
03020059   Connecticut State GO 2003A
03020065   Illinois (State) GO June of 2003
03020066   Illinois (State) GO June of 2003
03020067   Illinois (State) GO June of 2003
03020073   Washington County, MN GO 03A & GO Jail Ref 03B
03020076   Metro Govt Nashville-Davidson County, TN GO 03
03020077   Oregon State, OR GO Dept Admin Services 2003
04010002   Commerce (City of), TX GO LTX Ref and Impr 03
04010003   Jeannette City SD, PA GO Ref 2003ABC
04010004   William Penn SD, PA GO 2004
04010006   Vista USD, CA GO Elec of 2002, Ser 2003B
04010007   Pennridge SD, PA GO 2004
04010008   Kankakee School District #111, IL GO 04
04010009   Scranton Parking Auth, PA Guar Park GO 03
04010010   Fort LeBoeuf SD, PA GO 2004
 

 

-31-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

04010011     Howard-Suamico SD, WI GO Ref dtd 1/1/04
04010012   Durant Community SD, IA GO Ref dtd 1/1/04
04010013   Madison (City of), MS GO Ref 2003
04010017   Delran (Township of) Sewerage Auth, NJ GO Ref 03
04010018   Council Rock SD, PA GO 2004
04010020   Laurel County (Courthouse Renov Proj), KY GO 2004
04010022   Ridley School Dist Auth, PA GO Rev 2004AB
04010026   Germantown SD, WI GO Ref dtd 1/1/04
04010028   Winslow Township BOE, NJ GO Ref 2002
04010030   Wild Rose SD, WI GO Ref 2004
04010032   Mesa (City), AZ GO Ref 2004
04010035   Riverside SD, PA GO 2004
04010036   Freeport (Village of), NY GO 2004 A&B
04010040   Titus County Hosp Dist, TX GO LTX Ref 2004
04010041   Berwick ASD, PA GO 2004
04010044   Barnegat Township BOE, NJ GO Ref 2004
04010049   Carlisle Area SD, PA GO 2003A
04010050   Susquehanna Community SD, PA GO 2004
04010051   Andover RSD, NJ GO Ref 2003
04010053   Monroe-Woodbury CSD, NY GO 2003 AB
04010054   Clear Brook City MUD, GO ULT 2004
04010055   Maywood (Borough of), NJ GO dtd 1/15/04
04010056   Clinton Comm SD, WI GO Ref dtd 2/1/04
04010057   Oxford (City of), AL GO School Warrants 2004
04010059   Port of Seattle, WA GO LTX 2004 A
04010060   Clintondale Comm Schools, MI GO ULT Ref 04
04010061   Washington County, UT GO Ref 2003
04010062   North Star SD, PA GO Ref 04
04010063   Utica City SD, NY GO 2004
04010065   San Jacinto Coll Dist, TX GO LTX & Ref 04
04010066   Bay City (City of), TX GO LTX COOs 04 (Matagorda)
04010067   Louetta North PUD, TX GO ULT 2004
04010070   Kane Cnty Forest Preserve Dist, IL GO Ref 2004
04010071   Beaumont USD, CA GO Elect of 1998, Ser 2004
04010072   Warminster (Twp of), PA GO 2004
04010075   Chassell Township Schools, MI GO ULT Ref 04
04010078   Spring Hill USD No. 230, KS GO 2004
04010079   Shade-Central City SD, PA GO Ref 04
04010081   Golf (Village of), IL GO ULT 2004
04010082   Brownsville, TX GOLT 2004-A & 2004-B (AMT)
04010083   Brownsville, TX C/O’s 2004-A & 2004-B (AMT)
04010084   Gaston County, NC GO & GO Ref 2004
04010085   Edinburg (City of), TX GO COOs 2004
04010088   Fort LeBoeuf SD, PA GO 2004C
04010089   Poplar Grove (Vlg of), IL GO Alt Rev 2004
04010093   Dauphin County, PA GO Notes 04A (TaxEx) &04B (Txbl
04010094   San Mateo UHSD, CA GO Elec 2000 (Series C 2004)
04010095   Ellsworth Comm SD, WI GO Ref dtd 3/15/04
04010096   West Allegheny SD, PA GO Ref 2004
04010097   Somerset ASD, PA GO 2004
04010102   York City SD, PA GO 2004
04010103   Merced City SD, CA GO (Elect of 2002) Ser 2004
04010104   North Attleborough, MA GO LTX Ref dtd 3/1/04
04010105   Danbury (City of), CT GO Ref 04
04010112   Freeport (Village of), NY GO Ref 04

 

Policy Id

 

Policy

04010113     Galion City SD, OH GO ULT 04
04010116   Kent City SD, OH GO ULT Library Improv 2004
04010118   Pentwater Pub Schools. MI GO ULT 04 Bldg and Site
04010120   Euless (City of), TX GO Ref 2004
04010121   Neodesha USD #461, KS GO Ref 04
04010123   Kenosha (City of), WI GO Promissory Notes 2004
04010125   Grand Meadow ISD No. 495, MN GO Ref 2004
04010126   Scottsdale USD #48, AZ GO Ref 04
04010128   Montgomery County, TN GO Ref 2004
04010129   Jefferson Local SD, OH GO ULT vtd 11/4/03
04010130   Cleveland (City of), TN W&S Rev & Tax Ref 04
04010131   Alhambra ESD #68, AZ GO Ref 2004
04010133   Newhall SD, CA GO Ref 2004
04010135   Oak Lawn-Hometown SD No. 123, IL CABs 2004
04010139   Rochester (City of), NY GO 2004A
04010141   Rochester (City of), NY GO 2004B
04010143   Springfield SD No. 186, IL GO LTX CABs 04
04010147   Hamilton SD, WI GO Ref dtd 3-15-04
04010149   North Hempstead (Town of), NY GO 04 Ref
04010154   Bernards Township BOE, NJ GO Ref 2004
04010155   Westlake City SD OH GO ULT Ref 2003
04010158   Nye County SD, NV GO LTX Ref 2004
04010163   Punxsutawney Area SD, PA GO Ref 04
04010164   Summit County, OH GO LTX Ref 04AB
04010165   Fond Du Lac (City of), WI GO Prom Notes 04
04010166   Fond Du Lac (City of), WI GO Ref dtd 3/15/04
04010168   Gary Comm School Corp, IN GO 2004
04010169   Holton (City of), KS GO Ref 04A
04010170   Fort Bend County MUD #23, TX GO ULT 04
04010172   Fort Bend Co. LID #11, TX GO ULT Impr Ref 04
04010173   Butler County, PA GO 04
04010175   Ansonia (City of), CT GO Ref 04
04010176   Fresno (County of), CA GO Ref 2004AB
04010177   Alhambra City ESD, CA (Election of 1999) GO Ser B
04010178   Middletown City SD BOE, OH GO School Impr dtd 3/1/
04010179   Mansfield (City of), TX GO Ref 2004
04010181   Kane County (Motor Fuel Tax), IL GO Ref 04
04010184   Garvey SD, CA GO Election of 2000 Ser B
04010185   Bloomsburg ASD, PA GO 2004
04010186   Medford Township, NJ GO Ref 04
04010191   Kankakee (City of), IL GO 2004
04010192   Kenosha (City of), WI GO 2004B
04010194   Kent (City of), WA GO LTX Ref 04
04010195   Indian Springs SD #109, IL GO LTX 2004
04010201   Dover (Township of), NJ GO 2004
04010202   Center Line (City of), MI GO ULT Ref 04
04010203   Jersey Shore ASD, PA GO 2004
04010205   Hempfield (Twp), PA GO Ref 2004
04010206   Franklin Local SD, OH GO 04A
04010207   St. Charles Parish SD #1, LA GO Ref 2004
04010208   South Georgia Gvmt Svc Auth, GA ULT 04
04010213   West York ASD, PA GO 2004
04010214   Connecticut State GO Ref 2004B
04010217   East St. Louis SD #189, IL GO Ref 04AB
04010224   Delhi CSD, NY GO 2004
 

 

-32-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

04010225     Elmont UFSD, NY GO 2004
04010227   Calcasieu Parish SD No. 30, LA GO Ref 2004A
04010228   Bensalem Township, PA GO 2004
04010229   New Brunswick (City of), NJ GO Impr 04 & Ref 04
04010230   Saranac Lake CSD, NY GO Ref 04
04010231   Cook Cnty SD No. 162 (Matteson), IL GO LTX 04
04010239   Twinsburg City SD, OH GO ULT Ref 04
04010240   Westwood Reg SD BOE, NJ GO Ref 04 (Bergen Co)
04010241   Hamilton SD, WI GO Ref dtd 4/15/04
04010243   Jurupa USD, CA GO (Elect of 2001) 2004
04010245   Sidney CSD, NY GO 2004
04010246   Oxford Academy and Central SD, NY GO 2004
04010249   Unadilla Valley Central SD, NY GO 2004
04010250   Webster Parish SD No. 6, LA GO School 2004
04010252   Tempe ESD #3, AZ GO Ref 2004
04010253   Cicero (Town of), IL GO Ref 04ABC
04010254   Warren City SD, OH GO ULT School Impr 2004
04010256   Lancaster SD, PA GO 2004
04010257   Broome County, NY GO Ref 04
04010262   Dundee (Village), MI Local Dev Fin Auth GO LTX 04
04010267   Anoka-Hennepin ISD #11, MN GO Ref 2004B
04010268   Murphy (City of), TX GO LTX 04
04010280   Timber Lane Utility District, TX GO ULT 04
04010281   Greene Cnty (Blount Cnty PBA), TN GOULT
04010282   Gibraltar SD, MI GO 2004 (Q-SBLF)
04010285   Warwick SD, PA GO 04
04010286   Utica City SD, NY GO 2004B
04010287   Waterford-Halfmoon Union FSD, NY GO 2004
04010288   Fort Bend County, TX GO ULT & Sub Lien Toll Rd 04
04010289   Tecumseh Local SD, OH GO 04
04010290   Connecticut State GO Ref 2004C
04010291   Avon Grove SD, PA GO 2004AB
04010294   Duarte USD, CA GO (Elect of 1998) GO Series D
04010295   Roseville City SD, CA GO (Elect of 2002) Ser B
04010297   Kent (City of), WA GO ULT Ref 04
04010298   Hempfield ASD, PA GO 04A & Ref 04B
04010299   Millburn CCSD #24, IL (Lake County) GO 04
04010300   Denver SD #1, CO GO 2004 Ref
04010301   Licking Heights LSD, OH GO
04010302   Kaneland CUSD #302, IL (Kane/DeKalb) GO 04
04010304   Jackson Local SD, OH GO ULT dtd 3/2/04
04010305   Cambria Heights SD, PA GO 2004AB
04010306   Oceanside USD, CA GO (Elect of 2002), Ser D
04010307   Centr Montgomery Co Area Vo-Tech, PA (SPSBA) GO 04
04010308   Monessen City SD, PA GO 04AB
04010309   Frankfort CCSD #157-C, IL GO 2004 ABC
04010315   Elk River ISD #728, MN GO 2004A
04010316   West Kern CCD, CA GO (Election 2004) Ser 04A
04010318   Rosemead SD, CA GO (Elect 2000) Ser B
04010319   Denton (City of), TX GO LTX Ref 04 & COOs 04
04010328   Anaheim City SD, CA GO (Elect of 2002) Ser 2004
04010330   Olentangy Local SD, OH GO Var Purp 04AB
04010334   Placentia-Yorba Linda USD, CA GO 2002 Series B
04010335   Henry County SD, GA GO 2004
04010347   Huntley CCSD #158, IL GO CABs 04

 

Policy Id

 

Policy

04010348     Wisconsin (State of), GO 2004 Ref, Ser 3
04010349   Buffalo (City of), NY GO 2004BC
04010350   Redmond SD No. 2J, OR GO 04AB
04010351   Harris Co MUD #370, TX GO 2004
04010352   Allen (City of), TX GO LTX 2004
04010353   Glens Falls (City of) City SD, NY GO 04
04010358   Baldwin Park USD, CA GO (Elect of 2002) Ser 04
04010361   Mount Morris CSD, NY GO 2004
04010362   Solvay UFSD, NY GO 2004AB
04010363   Solvay UFSD, NY GO 2004AB
04010365   Fabius-Pompey CSD, NY GO 2004B
04010367   Wentzville R-IV SD, MO GO 2004
04010368   West Valley SD #363, WA GO ULT 2004
04010372   West Bradford Township, PA GO 04
04010373   San Bernardino County, CA GO LTX Pens Obl 04ABC
04010374   Ellenville CSD, NY GO 2004
04010375   Sterling Heights (City), MI GO LTX Judgmnt Fund 04
04010382   Wissahickon SD, PA GO 2004
04010383   Kern HSD, CA GO (Elect of 1990) Ser E
04010389   Oklahoma County ISD #89, OK GO 2004
04010391   Douglas County SD RE1, CO GO 04
04010393   Crete-Monee SD 201-U, IL GO CABs 04
04010401   Bayonne (HCIA), NJ GO Lse (DPW Garage Proj) 04
04010403   Lucia Mar USD, CA GO (Elect of 2004) Ser A
04010404   Rolling Meadows Park Dist, IL GO 04 (ARS)
04010406   Calumet City (City of), IL GO Ref 2004
04010408   Laurel Highlands SD, PA GO 2004
04010410   Central Unified SD, CA GO (Elect of 2004) Ser A
04010416   San Diego County, CA POBs 04A&C
04010417   Siuslaw SD No. 97-J, OR GO Ref 04
04010419   Ford Heights SD No. 169, IL GO LTX 04AB
04010421   Philadelphia SD, PA GO 2004D
04010422   Montebello USD, CA GO (Elect of1998) Ser 04
04010423   Colton Joint USD, CA GO (Elect of 2001) Ser B
04010424   Clark County SD, NV GO LTX 04C
04010425   Mt. Diablo USD, CA GO (Elect of 2002) Ser 2004
04010426   Hood Canal SD #404, WA GO ULT 2004
04010427   Oroville UHSD, CA GO (Elect of 2002), Ser B
04010428   Chillicothe City SD, OH GO ULT 2004
04010437   Jefferson Co-DuBois Area Voc-Tech Sch, PA Rev 04
04010438   Byron ISD No. 531, MN GO 04A
04010440   El Segundo USD, CA GO Ref 04
04010442   Kingsburg Elem SD, CA GO (Elect of 2004) Ser A
04010443   Barnegat Township BOE, NJ GO dtd 7/1/04
04010445   Oxnard SD, CA GO (Elect 1997) Ser G
04010448   Millstone Twp BOE, NJ GO 04
04010449   Addison SD No. 4, IL GO 2004
04010451   Mount Vernon City SD, NY GO 2004
04010456   St. Tammany Parishwide SD #12, LA GO 2004
04010457   San Rafael City HSD, CA GO (Elect of 2002) Ser B
04010458   San Rafael ESD, CA GO (Elect of 2002) Ser B
04010459   Pennfield Schools, MI GO 04 (Q-MSBLF)
04010460   Baldwin-Whitehall SD, PA GO 2004
04010462   Rochester CSD, MI GO 2004
04010463   Arlington School Dist No. 16, WA GO Ref 04
 

 

-33-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

04010465     Sparta Area Schools, MI GO 04
04010470   Owego Apalachin CSD, NY GO 04B
04010475   Owego Apalachin CSD, NY GO 04A
04010481   Chelsea SD, MI GO 04
04010482   Washington USD, CA GO 04A
04010489   North Colonie CSD, NY GO 04
04010491   Fowlerville Comm Schools, MI GO 2004
04010492   Auburn SD No. 408, WA GO dtd 8/1/04
04010493   Atwater ESD, CA 04A
04010496   Carlisle Area SD, PA GO 04A
04010497   Natomas USD, CA GO (Elect of 2002) Ser 04B
04010498   Fort Mill SD #4, SC GO 2004
04010499   Cicero (Town of), IL GO Ref 04
04010504   Northville Public Schools, MI GO 04
04010516   Tahoe Truckee USD (SFID #1), CA GO Elec 1999 Ser B
04010517   Tahoe Truckee USD (SFID #2), CA GO Elec 1999 Ser B
04010518   Schaumburg (Village of), IL GO 04B
04010520   Hermiston SD #8R, OR GO Ref 04
04010521   DeSoto County SD, MS GO 04A
04010522   DeSoto County SD, MS GO 04B
04010523   West Contra Costa USD, CA GO (Elect 2002) Ser C
04010524   Fennville Public Schools, MI GO 04
04010526   Kingsway Regional SD, NJ GO 04
04010527   Francis Howell SD, MO GO Ref 04A (MDDP)
04010528   Black Horse Pike Reg SD, NJ GO Ref 04
04010529   Atchison County USD No. 409, KS GO 04
04010530   Blount County, TN GO Ref 2004A
04010531   Lake Washington SD #414, WA GO Ref 04B
04010535   Novi Building Authority, MI GO LTX Ref 04
04010540   Tulsa County ISD No. 1, OK GO 04B
04010549   Las Vegas (City of), NV GO LTX 2004
04010550   Springfield SD, PA GO 04A
04010559   Armstrong SD, PA GO 2004
04010561   Saline Area Schools, MI GO Ref 04
04010563   Burlington Twp BOE, NJ GO 2004
04010564   Golf (Village of), IL GO 04A
04010565   Fairfield County, OH GO LTX 04
04010570   McGuffey School District, PA GO 04
04010571   South Park SD, PA GO 04
04010572   Jamesburg BOE, NJ GO dtd 8/1/04
04010573   Gibson County, TN GO 2004
04010575   Allegheny County Comm College (SPSBA), PA GO 2004
04010579   West Allegheny SD, PA GO 04B
04010580   Daytona Beach (City of), FL GO 04
04010581   Manhasset UFSD, NY GO 04
04010582   Wichita Falls (City of), TX GO LTX Tax/Rev Ref 04
04010585   Highline SD #401, WA GO Impv & Ref 04
04010586   Plumsted Twp BOE, NJ GO Ref 04
04010587   Huntington Beach (City of), CA GO LTX Judgmnt 04
04010592   Everett (City of), MA GO Ref dtd 9/15/04
04010593   Cal-Mort SCDA (Keiro Snr Lvg), CA Rev 04
04010594   Chesterfield County SD, SC GO 04
04010595   Waunakee Comm SD, WI GO 04AB
04010597   Susquehanna Twp SD, PA GO 04
04010598   Granite Shoals, TX GO LTX Comb Tax & Rev COOs 04

 

Policy Id

 

Policy

04010603     Dearborn (City of), MI GO ULT Sewer 04B
04010604   Paradise Valley USD #69, AZ GO Ref 04
04010605   Union ESD, CA GO (Elect of 99) Ser C
04010606   Union ESD, CA 2004 GO Ref
04010609   Pearl River UFSD, NY GO Ref 04AB
04010610   Lenape Reg HSD BOE, NJ GO Ref 04
04010611   Blount County, TN GO Ref 2004B
04010613   Jackson Local SD, OH GO ULT 04
04010614   Seneca Valley SD, PA GO 04
04010626   Pasadena USD, CA Elec GO Ref 04AB
04010627   Canby SD No. 86, OR GO Ref 04
04010628   Fillmore USD, CA GO Ref 04
04010633   West Linn-Willsonville SD No. 3Jt, OR GO Ref 04
04010636   Wyoming Area SD, PA GO 2004A
04010637   West Shore SD, PA GO 04A & 04AA
04010643   Denver SD #1, CO GO Ref 04C
04010644   Southwestern CCD, CA GO (Elect of 2000) 04A
04010646   York City SD, PA GO 2004B
04010649   Shippensburg Area School District, PA GO 04
04010653   Cornwall CSD, NY GO 04
04010654   Indiana Bond Bank Taxable Severance , Ser 7A 2004
04010655   Indiana Bond Bank Taxable Severance , Ser 7B 2004
04010656   Cherry Hill (Township), NJ GO 04A
04010658   Moreland SD, CA GO Ref 04
04010663   Montgomery County MUD #46, TX GO ULT W&S 04
04010669   Apple Valley SD, CA (Elect of 2004) GO Ser A
04010670   Dysart USD No. 89, AZ GO Ref 04
04010671   Fort Mill SD #4, SC GO Adv Ref 04B
04010672   Wisconsin (State of), GO 2004 , Ser E
04010675   Rockland County, NY GO Various Purp 04
04010676   Harris County MUD #26, TX
04010677   Montville Township BOE, NJ Ref 04
04010678   Manalapan-Englishtown Reg BOE, NJ GO Ref 04
04010682   TPFA (Park Development), TX GO Ref 04
04010689   Ferndale Public Schools, MI GO ULT School & Ref 04
04010693   Harper Woods (City of) SD, MI GO School & Ref 04
04010694   Mississippi (State of), MS GO Cap Impr (Tax-Ex) 04
04010695   Warren Twp HSD #121, IL GO Ref 04D
04010696   Mendon Community Schools, MI GO ULT 04 Q-SBLF
04010701   Howell Fire District No. 2, NJ GO 04
04010704   Gateway USD, CA GO (Elect of 2002) Ser B
04010705   Plymouth-Canton CS, MI GO ULT 04 (Q-SBLF)
04010709   Moreland SD, CA GO Elec of 2002 Series CD
04010712   Lancaster CSD, NY GO 2004
04010714   Cal-Mortgage (CHFFA) Solheim, CA Rev 04A
04010715   North Schuylkill SD, PA GO 2004
04010716   Penn-Delco SD, PA GO 04A & Ref 04B
04010720   Upper Saddle River (Boro of) BOE, NJ GO Ref 04
04010724   Conejo Valley USD, CA GO (Electof 1998) Ser D
04010727   Penn Manor SD, PA GO 2004
04010728   Fair Lawn Borough BOE, NJ GO 04
04010729   Mayville Comm Schools, MI GO ULT 04 (Q-SBLF)
04010731   Commack UFSD, NY GO 04
04010733   Bethlehem (City of), PA GO 2004 (Fed Txble)
04010734   Painesville City LSD, OH GO ULT 04
 

 

-34-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

04010735     Henderson (City of), NV GO LTX Sewer 04
04010736   Bath Comm Schools, MI GO ULT 04
04010737   Collinsville Area Rec Dist., Il GO Alt Rev 04
04010743   East Grand Forks (City of), MN GO Impr 04B
04010744   Hamilton Twp BOE, NJ GO Ref 04
04010746   Antioch CCSD #34, IL GO LTX Ref 04
04010749   South Redford SD, MI GO Ref 05
04010750   Tumwater SD #33, WA GO ULT & Ref 04
04010751   Northwest Park MUD, TX GO 2004
04010752   Indiana Bond Bank Taxable Severance, Ser 8AB 2004
04010753   Wolcott (Town), CT GO Ref 04
04010754   Harris County MUD #153, TX GO ULT 04A
04010759   Clovis USD, CA GO (Elect of 2004), Ser A
04010767   Plainfield (Village), IL GO Ref 04AB
04010773   El Paso County SD #20, CO GO 04B (Academy)
04010775   Geneva CUSD #304 (Kane Co), IL GO 04A
04010778   El Monte City SD, CA GO 04C & Ref 04
04010779   Katonah-Lewisboro UFSD, NY GO 04ABC
04010782   Lewiston-Porter CSD, NY 2004
04010784   DePere USD, WI GO dtd 11/1/04
04010785   El Rancho USD, CA GO (Elect of 2003) Ser 04
04010787   Niles Twp CHSD #219, IL GO Ref 04
04010790   Indiana Bond Bank Taxable Severance, Ser 9 2004
04010792   Konocti USD, CA GO (Elect of 2004), Ser 04A
04010793   Fort Bragg USD, CA GO (Elect 2003) Ser 04
04010794   Summit Cnty SD RE-1, CO GO 04B
04010795   Manhattan SD 114, Will County, IL GO Cap Appr 04C
04010797   Woodland CCSD #50, IL GO Ref 04
04010798   Brighton SD #27J, CO GO 2004
04010799   Lake Central School Corp, IN GO Pension 04 (Txble)
04010800   Northampton Township, PA GO 05
04010801   Springfield (City of), IL GO 04AB (Txble/Tax-Ex)
04010804   Minooka SD 201, Il GO Ref 04
04010806   Collinsville CUSD #10, IL GO Ref 04
04010812   Sturgis (City), MI GO LTX Build Auth 04(Hosp Proj)
04010813   Lancaster SD, PA GO 2005
04020001   Oregon State, OR GO Dept Admin Services 2003
04020002   Oregon State, OR GO Dept Admin Services 2003
04020003   New Jersey (State of) GO H & I
04020011   Massachusetts Commonwealth, MA GO 04B & GO Ref 04B
04020014   New Jersey (State of) GO H & I
04020026   California State GO 4-1-02
04020035   California State, CA GO dtd 7/1/03
04020038   Harris Cnty, TX GO ULT Road 2001
04020043   California State, CA GO dtd 2/1/04
04020044   California State, CA GO dtd 2/1/04
04020057   CALIFORNIA STATE GO 10-1-97
04020058   CALIFORNIA ST GO AUG 90
04020059   CALIFORNIA STATE GO 10-1-98
04020060   California State, CA GO dtd 6/1/04
04020064   New Jersey (State of) GO Series K 2003
04020065   New Jersey (State of) GO Series K 2003
04020090   Massachusetts Commonwealth GO D 02
04020091   Harris County,TX GO Road Ref 04B

 

Policy Id

 

Policy

04020111     California State, CA GO dtd 12/1/04
04020112   California State GO dtd 5-1-03
04020117   California State, CA GO dtd 12/1/04
05010007   Fort Bend County MUD #26, TX GO ULT 2005
05010008   Bethlehem CSD, NY GO Ref 05
05010009   State PSBA (Career Inst of Tech), PA GO 05
05010012   Terre Haute San Dist, IN GO 05
05010013   Acalanes Union HSD, CA GO Ref 05
05010016   Rio Grande City Consol ISD, TX GO ULT 04
05010017   Tucson (City of), AZ GO Ref 04
05010018   Allegheny County. PA GO C-57 (2005)
05010019   Kutztown (Borough of), PA GO 05
05010020   Calcasieu Parish SD No. 34, LA GO Pub Impr 05
05010023   New Caney ISD, TX GO Ref 05
05010027   Hazelwood SD, MO GO 2005 (MDDP)
05010029   Tulare Joint Union HSD, CA GO Elec of 2004 Ser B
05010030   Klein ISD, TX GO Schoolhouse 05
05010031   Austin ISD, TX GO Ref 05
05010033   Utica Comm Schools, MI GO Bldg & Ref 05
05010035   Eagle Mountain-Saginaw ISD, TX GO Bldg & Ref 05-A
05010036   Mukilteo SD No. 6, WA GO ULT Ref 05
05010037   Humble ISD, TX GO Unltd 04
05010038   Nampa (City of), ID GO 05
05010039   Penn Manor SD, PA GO 2005
05010040   Blount County, TN GO Ref 2005
05010041   Dublin City SD, OH GO ULT 2005
05010043   Frankenmuth SD, MI GO Ref 05 (Q-SBLF)
05010048   Montoursville Area SD, PA GO 05
05010049   Arcadia USD, CA GO Ref (Elect of 1993) Ser 05A
05010051   San Ysidro SD, CA GO Elect of 97 Series D
05010056   Pittsburgh SD, PA GO Ref 05
05010057   Hawthorne SD, CA GO (Elect of 04) 05A
05010061   South Eastern SD, PA GO 05
05010062   Westtown Township, PA GO Guar Swr Rev 05
05010063   Grand Ledge PS, MI GO ULT Ref 05 (Q-SBLF)
05010066   Cocalico SD, PA GO 05
05010067   Wyomissing ASD, PA GO 05
05010068   Magnolia ISD, TX GO ULT & Ref 05
05010071   Charter Oak USD, CA GO (Elect of 2000) Ser 05C
05010073   New Jersey State, NJ GO Ref 05
05010075   Palisades SD, PA GO 05
05010076   West York ASD, PA GO 2005
05010077   West Rusk County Cons ISD, TX GO ULT School 05
05010079   Three Rivers/Josephine Co Unit Jt SD, OR GO Ref 05
05010080   Spring ISD, GO ULT 05
05010081   Fremont Union HSD, CA GO
05010082   Royse City ISD, TX GO ULT 05
05010083   Ottawa USD No. 290, KS GO Ref 2005
05010087   Imperial CCD, CA GO (Elect of 04) Ser 05
05010088   Hazelwood SD, MO GO 2005B Ref
05010089   Lewisville ISD, TX GO ULT & Ref 05
05010090   Harris County WCID #155, TX Ref 05
05010091   Napoleon Comm Schools, MI GO Ref 05 (Q-SBLF)
05010092   Jenkintown SD, PA GO 05A & Ref 05B
05010096   Pine Hill (Boro) BOE, NJ GO Adv Ref 04
 

 

-35-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

05010100     Minooka SD 201, Il GO Sch & Ref 05
05010101   Florida (State) BOE, FL PECO GO Ref 05A
05010102   Zeeland Public Schools, MI GO Ref ULT 05
05010113   New Smyrna Beach (City of), FL GO 05
05010114   Chaffey Jt. UHSD, CA GO Ref 05
05010115   William Community Schools, MI 05 GO ULT
05010117   Carlisle Area SD, PA GO 05
05010118   Sturgis Pub School Dist, MI GO Ref 05 (Q-SBLF)
05010119   Randolph Twp SD BOE, NJ GO dtd 2/1/05
05010121   Pequea Valley SD, PA GO Ref 2005
05010123   Benjamin Logan LSD, OH GO Sch Impr Ref 05
05010124   Aurora East SD No. 131, IL GO & LTX 2005AB
05010125   Newark City SD, OH GO ULT 05
05010126   North Monterey County USD, CA (Elect 2002) Ser B
05010127   Ferndale (City of), MI GO Ref 2005
05010128   Santa Maria Jt UHSD, CA GO (Elect of 2004) Ser 05
05010130   Lucia Mar USD, CA GO Ref 05
05010134   Lincoln USD, CA GO (Elect of 2004) Ser 05
05010136   Somerville BOE, NJ GO 05
05010137   Sumner SD No. 320, WA GO ULT Ref 05
05010140   Madison Cnty SD, MS GO Ref 05A
05010143   North Mission Glen MUD, TX GO 2005
05010144   Frazier SD, PA GO 05
05010145   Kenowa Hills Pub Sch, MI GO Ref 05 (Q-SBLF)
05010146   Big Beaver Falls ASD, PA GO Ref 05
05010155   Antietam SD, PA GO 05
05010156   York City SD, PA GO 05
05010157   Warwick SD, PA GO Ref 05
05010160   Warwick Valley CSD, NY GO Ref 2005AB
05010163   Denton ISD, TX GO ULT 05B
05010164   State PSBA (Colonial IU No. 20), PA GO Lse Rev 05
05010165   East China SD, MI GO ULT Ref 05 (Q_SBLF)
05010167   Perris UHSD, CA GO 2004 Elec, Series A & 05 Ref
05010169   Philadelphia RDA, PA GO 04ABC (Neighborhood Trans)
05010170   Green Bay Area PS Dist, WI GO Ref 05A&B
05010171   Green Bay Area PS Dist, WI GO Ref 05B
05010174   West Earl Sewer Auth, PA GO Gtd Sewer Rev 05
05010175   North Chicago (City of), IL GO 05AB
05010176   Vancouver SD No. 37, WA GO ULT Ref 05
05010177   Ephrata ASD, PA GO 05 & Ref 05A
05010181   Johnson Co (Gardner-Edgerton) USD #231, KS GO 05A
05010182   Clark County SD, NV GO LTX Ref 05A
05010183   Clark County SD, NV GO LTX Ref 05B (ARS)
05010184   Hempfield ASD, PA GO Ref 05A & Ref 05B
05010185   Greater Latrobe School Auth, PA GO Rev Ref 05AB
05010186   Kutztown ASD, PA GO 2005 (Adv Ref)
05010187   Fort Bend Co. MUD #25, TX GO ULT 2005
05010188   Randolph Twp SD BOE, NJ GO Ref dtd 3/1/05
05010190   Edmonds SD No. 15, WA GO ULT Ref 2005
05010191   Scottsdale USD #48, AZ GO Sch Impr 05A
05010192   Plum Borough SD, PA GO 05AB
05010193   La Mesa-Spring Valley SD, CA GO Ser B & Ref 05
05010194   Fullerton Jt Un HSD, CA, GO Elec 02, Series B
05010196   Bridgeport (Borough), PA GO 05
05010202   Olentangy Local SD, OH GO Ref 05

 

Policy Id

 

Policy

05010204     Harris County MUD #354, TX GO ULT Ref 05
05010205   Peoria (City of), IL GO 05A
05010213   Tecumseh Pub Schools, MI GO Ref 05 Q-SBLF
05010214   Conroe ISD, GO ULT 05B
05010216   West University Place (City of), TX GO Ref 05
05010217   Newberg SD No. 29J, OR GO Ref 05
05010218   Dundee Community SD, MI GO Ref 05
05010220   Nevada (State of), NV GO LTX 05E
05010221   Nevada (State of), NV GO LTX 05C
05010222   Nevada (State of), NV GO LTX 05D
05010224   Metuchen BOE, NJ GO Proj Sch dtd 3/15/05
05010225   Metuchen BOE, NJ GO Ref Sch dtd 3/15/05
05010227   Alhambra City UFSD, CA (Elect of 04) GO Ser A
05010228   Navasota ISD, TX GO Sch Build 05 & Ref 05
05010230   Port Arthur ISD, TX GO Sch Bldg 05
05010232   Cal-Mortgage (CHFFA) Small Facilities, CA Rev 05A
05010234   Dixon USD, CA GO (Elect 02) 05 CABS
05010238   Bellefontaine City SD, OH GO ULT 05
05010244   Lincoln (City), OR GO Sewer Ref 05
05010245   Fremont (City of), CA GO (Elec of 2002) Ser B
05010246   El Paso (City of), TX GO LTX Ref 05
05010249   Franklin-McKinley SD, CA (Elect of 2004) GO Ser A
05010252   Fenton Area Pub Schools, MI GO ULT Ref 05 (Q-SBLF)
05010257   North Brunswick TWP BOE, NJ GO dated 4/1/05
05010258   North Kingstown (Town of), RI GO Ref 05
05010260   Hoisington USD #431 (Barton Co.), KS GO Ref 05
05010261   Francis Howell SD R-III, MO GO Ref 05 (MDDP)
05010264   Sierra Jt CCD #2, CA GO (Elect 04) Ser A (W Nev)
05010266   Sierra Jt CCD #1, CA GO (Elect 04) Ser A (Tahoe)
05010267   Lebanon CSD No. 9, OR GO Ref 05
05010268   Carl Sandburg CCD #518, IL GO Ref 05
05010275   Hampton (City of), VA GO Pub Imp 05A
05010279   King County, WA GO LTX W&S Rev 05
05010280   Brownwood ISD, TX GO ULT School Bldg & Ref 05
05010282   Roseville Joint UHSD, CA GO (Elec of 2004) Ser A
05010283   Madison County SD, MS GO 05
05010286   Las Vegas Valley Water Dist, NV GO LTX Ref 05A
05010288   Leander ISD, TX GO ULT Bldg & Ref 05
05010289   Linn-Mar Comm SD, IA GO Ref 05AB
05010291   San Jose Unified SD, CA GO (Elect of 2002) Ser B
05010292   Yosemite CCD, CA GO (Elect of 2004) Ser 05
05010293   South Padre Island (Town of), TX GO 05
05010294   Upland Unified SD, CA GO (Elect of 2000) Ser 05C
05010295   Norwalk-La Mirada USD, CA GO 05B & Ref 05
05010297   Peoria (City of), IL GO Ref 05B
05010298   Mifflin County, PA GO ULT 05AB
05010299   Placer UHSD, CA GO Ref 05
05010301   Southgate CSD, MI GO ULT Ref 05
05010305   Door County, WI GO ULT Ref 05A
05010307   Shawano-Gresham SD, WI GO Ref 05
05010308   Timberlake Improve Dist, TX GO ULT 05
05010309   McKinney (City of), TX GO Tax/Ltd Pled W&S COOs 05
05010310   Haverford (Twp), PA GO 05A (Tax-Ex) & 05B (Txble)
05010314   Palmer Plantation MUD No. 1, TX GO W&S Ref 05
05010315   Altmar-Parish-Williamstown CSD, NY GO Ref 05
 

 

-36-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

05010316     Brookhaven (Town of), NY GO Pub Impr 05
05010318   Madera USD, CA GO (Elect of 2002) Ser 05
05010319   Napa Valley USD, CA GO (Elect of 2002) Ser 05
05010323   Johnston County, NC GO Ref 05
05010325   Dickson County, TN GO Ref 05
05010333   South Eastern SD, PA GO 05
05010335   Marion (City of), IL GO Ref 05
05010336   Pittsburgh SD, PA GO Taxable 05
05010339   Lansing USD#469 (Leavenworth), KS GO Ref & Imp 05
05010340   Rincon Valley Union ESD GO, CA (Elect 2004) Ser 05
05010341   Fowler USD, California GO (Elect of 04) 05
05010342   New Brunswick (City of), NJ GO Ref 05
05010343   New Brunswick (City of), NJ Sch Bonds Ref 05
05010344   Kingsway Reg HSD BOE, NJ GO Ref dtd 3/15/05
05010345   Madison Dist Pub Sch, MI GO Ref 05
05010346   Riverton CUSD#14, IL GO 05
05010347   Akron-Summit Co. Pub Lib, OH Ref 05
05010348   Lafourche Parish Cons SD #1, LA GO School 05
05010350   Humble ISD, TX GO ULT 05B
05010351   Magnolia SD, CA GO Ref 05
05010352   Paola USD #368, KS (Miami Co) GO Ref & Impr 05
05010354   Evesham Twp BOE, NJ GO Ref 05
05010358   Victor ESD, GO (Election of 02) Ser B
05010360   Lake Stevens SD No. 4, WA GO 05
05010361   Novi Building Authority, MI GO LTX Ref 05
05010364   Monticello CSD, NY GO Ref 05AB
05010365   Hillsboro SD #1J, OR GO Ref 05
05010367   Clear Brook City MUD, TX GO 05
05010369   Shawnee Mission USD No. 512, KS GO Ref 05C
05010372   Atlanta (City of), GA GO Ref 05A
05010374   Victor ESD, GO Ref 05B
05010381   Upper Darby SD, PA GO 05
05010382   West Virginia State, WV GO State Road Ref 05
05010383   Islip UFSD, NY GO Ref 2005
05010384   Oswego CUSD No. 308, IL GO LTX 05
05010385   Mainland Regional HSD, NJ Sch Ref 05
05010386   Highlands SD, PA GO Ref 2005 (Adv Ref)
05010387   Souderton ASD, PA GO 05
05010389   Summit Hill SD #161, IL GO 2005
05010390   DeSoto County SD, MS GO 05
05010397   Hollywood (City of), FL GO 05
05010398   Menifee USD, CA GO (Elec of 2002) Series B
05010402   Grossmont-Cuyamaca CCD, GO (Elect of 2002) 05B
05010410   Johnson City CSD, NY GO 05
05010412   Rowland USD, CA GO Ref 05
05010414   Hacienda LaPuente USD CA, GO Ref 05
05010415   Moriah Central SD, NY GO Ref 05
05010417   Snohomish County, WA GO LTX Ref 05B
05010418   Snohomish County, WA GO LTX 05A
05010419   Arkansas Dev Fin Auth, AR GO Ref 05
05010420   Claysburg-Kimmel SD, PA GO Ref 05
05010421   Garvey SD, CA GO (Election of 04) Ser 05
05010422   Mount Pleasant ASD, PA GO Ref 05
05010423   Siren SD, WI GO Ref dtd 7/1/05
05010424   Waterloo CSD, NY GO 05 dtd 6/15/05

 

Policy Id

 

Policy

05010425     Oak Valley Hosp Dist, CA GO (Elect of 04) 05
05010426   Worcester (City of), MA GO LTX Ref 05A
05010427   Worcester (City of), MA GO LTX Ref 05B
05010429   North Pocono SD, PA GO 2005
05010430   Goose Creek Consol ISD, TX GO ULT Schoolhouse 05
05010431   Wayne CSD, NY GO Sch Dist 05
05010434   Campton Township, IL GO 05B
05010435   Lamar SD, MS GO 05
05010436   Timber Lane Util Dist, TX GO ULT 05A
05010438   Goodyear (City of), AZ GO 2005
05010441   Tucson (City of), AZ GO 05-E
05010443   Beverly Hills USD, CA GO Refunding 05
05010444   Cook County SD No. 162 (Matteson), IL GO Ref 05
05010445   Homer Twp, IL GO Open Space Ref 05
05010446   Brazoria MUD No. 26, TX GO 05
05010447   Erie County Convention Center Auth, PA GO 05
05010448   Erie County Convention Center Auth, PA GO 05
05010452   Rome (City of) City SD, NY GO Ref 05
05010456   Anaheim City SD, CA GO Ref 05
05010461   Everett ASD, PA GO 2005AB
05010462   Bristol Twp SD, PA GO 2005
05010472   Denver SD #1, CO GO Ref 05A
05010479   Brazoria County MUD No. 3, TX Wtr/Swr Rev 05
05010480   Linn-Mar Comm SD, IA GO Ref 05A
05010481   Douglass USD #396, KS GO Ref 05
05010482   Herkimer Cntrl SD, NY GO Ref 05
05010483   Highlands Ranch Metro Dist No. 1, CO GO Ref 05
05010484   Highlands Ranch Metro Dist No. 4, CO GO Ref 05
05010485   Highlands Ranch Metro Dist No. 2, CO GO Ref 05
05010486   Highlands Ranch Metro Dist No. 3, CO GO Ref 05
05010489   Cal Mortgage (AIDS Healthcare), CA Rev 05A
05010490   Galesburg-Augusta Comm Sch, MI GO Ref 2005
05010491   Miami-Dade County, FL GO Bldg Better Comm Prog 05
05010492   Midland CCD, TX GO LTX 05
05010493   Pawtucket (City of), RI GO dtd 7/1/05
05010494   Cotati-Rohnert Park USD, CA GO Crossover Ref 05AB
05010500   Brookville ASD, PA GO 05
05010501   Johnston County, NC GO Pub Impr 05
05010506   Hempfield ASD, PA GO 05C
05010510   Three Village Central SD, NY GO Ref 05
05010512   Spokane (City of), WA GO LTX 05AB
05010513   Spokane (City of), WA GO Ref 05
05010516   Southwestern CCD, CA GO Ref 05B
05010517   Sun Prairie (City of), WI GO 05C
05010521   Temple City Unified School District, CA GO Ref 05
05010526   Spring Hill USD No. 230, KS GO 2005
05010527   Berkeley USD, CA GO (Elect of 00) 05
05010528   Livermore Valley Jt USD, CA GO (Elect of 99) 05
05010530   Jefferson Local SD, OH GO Sch Fac Const & Impr 05
05010531   Biloxi Public School District, Ms GO 2005
05010538   Oceanside (City), CA GO LTX POB 05
05010539   Seneca Valley SD, PA GO 05
05010540   Oxford Area SD, PA GO 2005AB
05010542   West De Pere SD, WI GO Ref 05A
05010551   Hoffman Estates (Village of), IL GO 05 A (Taxable)
 

 

-37-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

05010553     Fort Bend MUD No. 118, TX GO 05
05010554   Hartland Township, MI GO LTX 05A (Livingston Co)
05010555   Hartland Township, MI GO LTX 05B (Livingston Co)
05010559   East Meadow UFSD, NY GO 05
05010560   Lake Placid CSD, NY GO Ref 05
05010561   Pine (County of), MN GO Jail 05A
05010562   Gilroy USD, CA GO (Elect of 02) 05
05010563   Fort Bend County MUD #23, TX GO ULT 05
05010569   Newport MUD, TX GO Wwks & Swr Sys Rev 05
05010572   Calumet City (City of), IL GO Ref 2005
05010574   Hunter’s Glen MUD, TX GO ULT 05
05010575   New Lenox SD #122, IL GO Ref 2005AB
05010577   Oshkosh (City of), WI GO Ref 05-D
05010578   Milford Charter Twp, MI GO Library & Police Ref 05
05010583   Hamilton Township, NJ (Mercer) GO 2005
05010584   Hamilton Township, NJ (Mercer) Swr GO 2005
05010585   Jefferson ESD, CA GO (Elect of 2001) Ser 2005
05010586   Wilson SD, PA GO 05
05010587   Hopewell Area Sch Dist, PA GO 2005B
05010588   Hopewell Area Sch Dist, PA GO 2005A
05010589   Coachella Valley USD, CA GO (Elect of 05) Ser A
05010595   Schenectady City SD, NY GO 05
05010598   Central Bucks SD, PA GO ULT 05A
05010601   Haddon Twp. BOE, NJ GO ULT Ref 2005
05010604   El Paso (City of), TX GO LTX 05
05010605   Punxsutawney Area SD, PA GO 05
05010609   Huntington Beach City SD, CA GO ULT Ref 2005
05010611   Wantagh UFSD, NY GO ULT 2005
05010615   Union County Impr Auth, NJ GO ULT 2005
05010618   Anchorage (Municipality of), AK GO 05F
05010619   Licking Valley LSD, OH GO ULT Ref dtd 9/22/05
05010622   Alamo Comm Coll Dist, TX GO LTX 05
05010623   Pierce County, WA LTX GO 2005
05010624   Maury County, TN GO ULT dtd 9/1/05
05010626   Aurora West SD #129, IL GO Ref 2005A
05010627   Aurora West SD #129, IL GO LTX Ref 05B
05010628   Mattoon CUSD #2, IL GO Ref 2005
05010629   South Lyon Comm Schools, MI GO Ref 05 Ser II
05010630   Foothill-De Anza CCD, CA GO (Elect 99) 05C & Ref
05010631   Guadalupe County, TX GO LTX Ref 2005
05010632   Fort Bend County LID #14, TX GO ULT Ref 05
05010633   Newtown (Twp of), PA GO 2005
05010635   Union Springs CSD, NY GO 2005
05010639   Birmingham SD, MI GO ULT Ref 2005
05010640   Washington Court House CSD, OH GO 2005
05010641   Mt. Lebanon SD, PA GO 2005
05010653   Waubonsee CCD #516, IL GO 05DE
05010654   Marana USD #6, AZ GO Ref 2005
05010656   Sweetwater (City of), TX GO LTX Ref 05
05010660   St. Charles CUSD #303, IL GO LTX 05C
05010669   North Mission Glen MUD, TX GO 2005A
05010670   London City SD, OH GO Adv Ref 2005
05010674   Perkiomen Valley SD, PA GO Adv Ref 05AA
05010675   Washington TWP MUA, NJ GO Ref 2005
05010676   Washington TWP MUA, NJ GO Ref 2005

 

Policy Id

 

Policy

05010680     San Angelo, TX GO LTX Comb Tax & Rev COOs 05
05010683   Standish-Sterling CS, MI GO Ref 2005 (Q-SBLF)
05010687   West Contra Costa USD, CA GO (Elect 2002) Ser D
05010690   Galveston County WC&ID #12, TX GO 2005
05010700   Malden (City of), MA GO dtd 10/15/05
05010708   State PSBA (Career Inst of Tech), PA GO 05A
05010712   Peoria USD No. 11, AZ GO 2nd Ser 2005
05010713   Wyoming (City of), MI GO LTX 05
05010715   Rio Hondo CCD, CA GO Ref (Elect 2004) Ser 05A
05010717   West Kern CCD, CA GO Ref 2005
05010718   Livingston Co, MI GO LTX Ref 05 (Brighton Twp Swr)
05010719   Poplar Grove (Vlg of), IL GO Alt Rev 05AB
05010721   Lakota Local School Dist, OH GO ULT Ref 05A
05010723   Winchester (City of), VA GO 2005
05010727   Mason City SD, OH GO ULT Ref 2005
05010731   Pottstown SD, PA GO 2005
05010733   Kauai County, HI GO 2005A
05010735   Manteca USD, CA GO Ref 2005
05010736   Palm Springs USD, CA GO Ref 2005
05010737   Bucks County Tech Sch Auth, PA GO 2005
05010738   Indianapolis Lcl Pub Imp Bond Bank, IN GO Ref 05D
05010739   Blind Brook-Rye UFSD, NY GO 05
05010740   Attleboro (City of), MA GO dtd 11/15/05
05010741   Erie County, PA GO Ref 2005ABC
05010742   Ulster County, NY GO 2005A
05010744   Honolulu (City and County), HI GO 05EF
05010746   Connecticut (State of), CT GO 05D
05010747   Wyandotte USD#204 (Bonner Springs), KS GO Ref 05A
05010750   Long Beach CCD, CA GO (Elect 02) 2005B & Ref 2005C
05010751   Los Gatos Union SD, CA GO (Elect 2001) Ser C
05010757   Grapevine-Colleyville ISD, TX GO Ref 2005-A
05010766   Ovid-Elsie Area Schools, MI GO Ref 2005 (Q-SBLF)
05010768   Barrow County, GA GO 05
05010775   Cecil County, MD GO Ref 2005
05010784   Alum Rock Union ESD, CA GO Ref 2005
05010785   Warren Twp HSD #121, IL GO Ref 05
05010786   Newark City SD, OH GO ULT Series 05A
05010795   Tacoma Metro Park District, WA GO Ref 2005
05010796   Calexico USD, CA GO (Elect of 2004) Ser B
05010797   Gilbert USD No. 41, AZ GO 2005A
05010800   Webutuck CSD, NY GO 2005
05010802   Tacoma SD #10, WA GO 05B
05010805   El Monte City SD, CA GO (Elect 04) A Ref 05
05010806   Simi Valley USD, CA GO (Elect of 2004) Ser 05B
05010808   Carson City, NV GO LTX 2005A
05010822   Cleveland County Sanitary Dist, NC GO Ref 2005
05010823   West Windsor-Plainsboro RSD, NJ GO Ref dtd 12/1/05
05010825   Ramapo Indian Hills Reg HSD (BOE), NJ GO Ref 05
05010845   Peralta CCD (OPEB) Bonds, CA
05010847   Davenport (City of), IA GO 05A
05010848   Peralta CCD (OPEB) Bonds, CA
05020008   California State, CA GO dtd 2/1/04
05020016   California State, CA GO dtd 11-1-03
05020017   California State, CA GO dtd 3-1-05
05020018   New York (City of), NY GO 2005 Series J, K and L
 

 

-38-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

05020021     Illinois State, IL GO Oct 03A & Var Rate Oct 03B
05020022   New York (City of), NY GO 2005 Series J, K and L
05020023   New York (City of), NY GO 2003J
05020024   New York City,NY GO Series F&G
05020025   New York City, NY GO 2002 DEFG
05020026   New York City, NY GO 2003 CDE
05020027   New York (City of), NY GO 05DE
05020028   New York (City of), NY GO 2005 Series M
05020029   New York (City of), NY GO 2005 Series G, H and I
05020030   New York (City of), NY GO 2005 Series M and N
05020031   New York (City of), NY GO 2005 Series M and N
05020032   New York (City of), NY GO 2005 Series M and N
05020033   New York (City of), NY GO 2005 Series M and N
05020034   New York (City of), NY GO 2005 Series M and N
05020035   New York (City of), NY GO 2005 Series J, K and L
05020036   New York (City of), NY GO 2005 Series M and N
05020037   New York (City of), NY GO 2005 Series J, K and L
05020038   New York (City of), NY GO 2005 Series M and N
05020039   New York (City of), NY GO 2005 Series G, H and I
05020040   New York (City of), NY GO 2005 Series J, K and L
05020041   New York (City of), NY GO 2005 Series M and N
05020042   New York (City of), NY GO 2005 Series M and N
05020043   New York (City of), NY GO 2004 AB
05020044   New York (City of), NY GO 05DE
05020045   New York (City of), NY GO 2005 Series G, H and I
05020046   Dept of Veterans Affairs, CA GO Portion 05
05020047   New York (City of), NY GO 04 Series I
05020048   New York (City of), NY GO 2005 Ser O, P & Q
05020049   New York (City of), NY GO 2005 Ser O, P & Q
05020050   New York (City of), NY GO 04D
05020051   New York (City of), NY GO 2005 Ser O, P & Q
05020053   Concord Township, PA GO 05
05020056   Massachusetts Commonwealth, MA GO 04A & GO Ref 04A
05020058   New York (City of), NY GO 06ABCD
05020059   New York (City of), NY GO 06ABCD
05020060   New York (City of), NY GO 06ABCD
05020061   New York (City of), NY GO 06ABCD
05020062   New York (City of), NY GO 04 Series I
05020065   New York (City of), NY GO Fiscal 06 Ser E Sub E-1
05020066   Carpentersville CUSD No. 300, IL GO ULT
05020067   New York (City of), NY GO 2005 Series G, H and I
05020068   New York (City of), NY GO 04G
05020069   New York (City of), NY GO 04 Series I
05020070   New York (City of), NY GO Fiscal 06 Ser F-1 & F-2
05020071   New York (City of), NY GO Fiscal 06 Ser F-1 & F-2
05020072   Massachusetts Commnwlth, MA GO LTX Consol Loan 05B
05020074   New York (City of), NY GO 2005 Ser M & N
05020075   New York (City of), NY GO 2005 Ser O, P & Q
05020076   Connecticut State GO Ref 2004C
06010001   San Antonio (City of),TX GO LTX Forward Ref 06
06010004   Pottstown SD, PA GO Adv Ref 2006
06010005   Monterey Peninsula CCD, CA GO Ref 05
06010006   Central Bucks SD, PA GO ULT Ref 2006
06010007   Barbers Hill ISD, TX GO ULT 06

 

Policy Id

 

Policy

06010009     Colton Joint USD, CA GO (Elect of 2001) Ser C
06010010   Tolleson Union HSD No. 214, AZ GO (Proj 03) 2006B
06010011   Montour SD, PA GO 05
06010012   San Jose USD, CA GO Ref 2005
06010013   London City SD, OH GO Ref 2006
06010014   Chicago Park Dist, IL GO LTX Ref 2006AB
06010017   Newark City SD, OH GO ULT Ref 05
06010019   Chicago Park Dist, IL GO ULT Ref 2006CD
06010023   Harris County WCID #155, TX Ref 06
06010024   Spring Creek Util Dist, TX GO ULT 2006
06010035   Yuma UHSD #70, AZ GO Proj 05, Ser A (2006)
06010037   North Pocono SD, PA GO 06
06010038   Johnston CSD, IA GO dtd 2/1/06
06010041   Brazoria MUD No. 26, TX GO 06
06010042   Wilmington (City of), DE GO 2006 A-1 & A-2
06010044   Bendle Public Schools, MI GO 2006
06010045   Charter Oak USD, CA GO Ref (Elect 00) Ser 06DE
06010046   Harris Cnty MUD No. 132, TX GO ULT 06
06010057   Kenosha USD No. 1, WI GO dtd 2/1/06
06010060   Ephrata ASD, PA GO 06
06010061   Council Rock SD, PA GO 2006
06010062   Clark County, NV GO LTX Ref 06
06010064   West Windsor-Plainsboro RSD, NJ GO Ref 2006
06010065   Adirondack CSD (Oneida Co), NY Ref 05AB
06010067   Bethel SD #403, WA GO Ref 06
06010068   Stockton USD, CA GO (Elect 05) Ser 06
06010069   Grove City Area Hosp Auth, PA GO Guar 2006
06010076   Nordonia Hills CSD, OH GO Ref 2006
06010082   Penn Manor SD, PA GO 2006A
06010087   Richland County SD No. 2, SC GO 05A
06010093   Richland SD Project, PA (SPSBA) Lease Rev 05
06010095   Lacey Township BOE, NJ GO Ref 06
06010096   Kyrene ESD #28, AZ GO (Proj 05) Ser A (2006)
06010099   Greater Cleveland RTA, OH GO LTX Ref 2006
06010101   Asotin County, WA GO ULT Ref 2006
06010102   Bonsall USD, CA GO 06
06010103   Upper Makefield (Twp of), PA GO 2006
06010104   Mesa USD No. 4, AZ GO (Proj 05) Ser A (2006)
06010107   Prescott USD No. 1, AZ GO (Proj 04) Ser 06B
06010108   Kutztown (Borough of), PA GO 2006
06010109   DePere USD, WI GO dtd 3/15/06
06010110   Las Vegas (City of), NV GO LTX Ref 2006A
06010121   Wellington Unified SD #353, KS GO Ref 2006
06010123   St. Vrain Valley SD No. RE-1J, CO GO Ref 2006
06010127   Lucia Mar USD, CA GO Ref 2006
06010128   Franklin-McKinley SD, CA GO Ref 2006
06010134   Wisconsin (State of), WI GO 2006A
06010138   Ipswich (Town of), MA GO LTX Ref dtd 3/15/06
06010141   New York State, NY GO 2006A (Tax-Exempt)
06010143   Adams County SD #12, CO GO 2006B
06010144   Fredonia Central SD, NY GO Ref 2006
06010146   Tucson USD No. 1, AZ GO Ref 2006
06010151   Schuylkill Valley SD, PA GO 2006AB
06010164   Carteret County, NC GO 2006
06010165   Rayford Road MUD, TX GO 2006A
 

 

-39-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

06010166     Castro Valley USD, CA GO (Elect of 05) Ser 06
06010167   Northtown MUD, TX GO ULT 2006
06010171   Miami Trace LSD, OH GO ULT 2006
06010172   Apache Jnctn USD #43, AZ GO (Proj 04) Ser B (2006)
06010176   New Haven USD, CA GO (Elect 03) Ser B CABs
06010183   La Verne (City of), CA GO LTX POBs Ref 2006
06010189   Lubbock (City of), TX Tax/WWks Sys Surplus COOs 06
06010191   Harris Co. MUD No. 120, TX GO ULT Ref 2006
06010192   Georgetown (City of), TX GO LTX & COOs 2006
06010207   Edmonds SD No. 15, WA GO 2006
06010208   Napa Valley USD, CA GO (Elect 02) Ser 06
06010213   Woodstock CUSD #200, IL GO 2006AB
06010214   Lubbock (City of), TX GO LTX Ref 2006
06010218   Penn Manor SD, PA GO 06
06010220   Pearland (City of), TX GO LTX Ref 2006
06010225   Firebaugh-Las Deltas USD, CA GO Ref 2006
06010227   Cinco MUD No. 1, TX GO Contract Rev 2006A
06010232   Eatonville SD No. 404, WA GO 2006
06010237   El Monte UHSD, CA GO Ref 2006
06010240   Minooka CHSD No. 111, IL GO 2006
06010241   Lubbock (City of), TX GO LTX 2006
06010246   Wentzville R-IV SD, MO GO 2006
06010248   San Jose USD, CA GO (Elect 02, Ser C) 2006
06010256   Spencerport CSD, NY GO Ref 2006
06010262   West Seneca CSD, NY GO 2006
06010267   Mesa (City of), AZ GO Ref 2006
06010273   Newark Valley CSD, NY GO 2006A
06010277   Everett SD No. 2, WA GO ULT 2006
06010278   Harris County MUD #53, TX GO ULT 2006
06010289   Roseville Joint UHSD (Elect 04), CA GO ULT 06B
06010291   Trussville (City of), AL GO Warrants 2006AB
06010294   McCall-Donnelly Jt SD No.421, ID GO ULT 06
06010295   San Gorgonio Memorial HC District, CA ULT GO 06A
06010296   Monticello CSD, NY GO 2006
06010297   West De Pere SD, WI GO 06A
06010299   Bassett USD, CA GO (Elect 04) Ser 06BC
06010303   Frisco (City of), TX GO LTX 06
06010304   Frisco (City of), TX COOs 06
06010306   Farrell ASD, PA GO Ref 06
06010311   Piedmont City USD, CA GO Elect of 2006 Ser B
06010319   Natomas USD, CA GO (Elect of 2006) Ser 2006
06010325   Saugus USD, CA GO Ref 2006
06010328   Anchorage (Municipality of), AK GO Ref 06AB
06010329   Anchorage (Municipality of), AK GO Ref 06AB
06010330   Anchorage (Municipality of), AK GO Ref 06AB
06010332   Renn Road MUD, TX GO 2006
06010336   Kirtland LSD, OH GO 2006
06010346   Renton SD No. 403, WA GO ULT 2006
06010353   Sierra Sands USD, CA GO (Elect 06) Ser 06A
06010354   Brandywine Heights ASD, PA GO Ref 2006
06010360   Eanes ISD, TX GO 2006
06010362   Solano County CCD, CA GO (Elect 02) Ser 06B
06010363   Mount Vernon SD #320, WA GO Ref 06
06010365   Bellwood (Village of), IL GO Ref 2006A
06010366   Prosper (Town of), TX GO LTX & COO 06

 

Policy Id

 

Policy

06010367     Byron USD, CA GO (Elect 06) Ser 2006A
06010368   Camden Cnty Imp Auth, NJ GO Guar Swr Rev Ref 06AB
06010372   Eastport-South Manor CHSD, NY GO Ref 06
06010374   Butler County, OH GO LTX 2006
06010377   El Camino CCD, CA GO (Elect 02) Ser 2006B
06010379   Michigan State, GO 2006AB
06010381   Juneau (City and Borough), AK GO ULT 06B
06010382   Juneau (City and Borough), AK GO ULT 06C
06010392   Cincinnati City SD, OH GO Ref 2006
06010393   Newburgh City SD, NY GO 2006A
06010395   Woodhaven-Brownstown SD, MI GO Ref 06B (Q-SBLF)
06010400   Camden Cnty Imp Auth, NJ GO Guar Swr Rev Ref 06A
06010406   Marion (City of), IL GO Ref 2006
06010408   Garfield Heights CSD, OH GO Ref 2006
06010412   Texas Trans Comm, TX GO Mobility Fund 06-A
06010414   South Lyon Comm Schools, MI GO Ref 06
06010416   Norristown Area SD, PA GO Ref 06
06010421   Westlake MUD No. 1, TX 2006
06010425   West Virginia State, WV GO Ref 06
06010428   Sachem CSD, NY GO Ref 2006
06010429   San Francisco (City & County of), CA GO Ref 06-R1
06010431   Kettering City SD, OH GO Ref 2006
06010434   Suffolk County, NY GO 2006B
06010441   Norfolk (City of), VA GO Cap Impr & Ref 06
06010443   Sachem CSD, NY GO Ref 2006B
06010445   Haverhill (City of), MA GO LTX dtd 11/1/06
06010450   Eaton Community City SD, OH GO Ref 2006
06010451   Kingsbridge MUD, TX GO Ref 2006
06010452   Chino Valley USD, CA GO (Elect 02) Ser 2006D
06010466   Franconia Sewer Auth, PA Gtd Rev 2006
06010477   Bass Lake JUESD, CA GO (Elect 06) Ser 06
06010497   Mansfield Township BOE, NJ GO Ref 2006
06010499   Bonita USD, CA GO (Elect 04) Ser B
06010503   Canton (City of), OH GO LTX 2006
06010507   Chillicothe City SD, OH GO Ref 2006
06010510   Brecksville-Broadview Heights CSD, OH GO Ref 06
07010004   Muhlenberg SD, PA GO LTX Ref 2007 A&AA
07010006   Dearborn SD, MI GO Ref 2007 (Q-SBLF)
07010012   Clackamas CCD, OR GO Ref 2007
07010018   Lewisville ISD, TX GO ULT Ref 2007
07010019   Central Bucks SD, PA GO Ref 2007
07010022   Bensalem Twp SD, PA GO LTX 2007
07010023   Lincoln-Way CHSD #210, IL GO 2007
07010024   West Harris Co MUD No. 10, TX GO Ref 2007
07010028   Pima County, AZ GO 2007
07010029   Denton Co Fresh Water Supply Dist #6, TX GO Ref 07
07010031   Abington SD, PA GO LTX Ref 2007
07010033   Lincoln Park SD, MI GO Ref 2007 (Q-SBLF)
07010035   Walton County, GA GO & Sales Tax 2007
07010041   Kentwood Pub Schools, MI GO ULT Ref 07
07010042   Mingus UHSD #4, AZ GO Sch Impr 07
07010043   North Syracuse CSD, NY GO Ref 2007
07010044   Washington State, WA GO Var Purp 07C
07010045   Santa Monica CCD, CA GO Ref 2007ABC
07010048   Niagara Wheatfield CSD, NY GO 07
 

 

-40-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

07010049     Bonneville & Bingham Jt SD#93, ID GO 07
07010050   Kalamazoo Public Schools, MI GO Ref 07
07010053   Clark County SD, NV GO LTX Ref 07A
07010054   Plainfield CCSD No. 202, IL GO Sch Build 07
07010058   Albany (City of), OR GO Ref 07
07010061   El Paso (City of), TX GO Ref 07
07010062   Lansing USD#469 (Leavenworth), KS GO Ref 07
07010065   Big Spring (City of), TX GO 07
07010069   Big Spring (City of), TX GO 07
07010079   Boulder Valley SD #RE-2, CO GO 07
07010080   Mesa USD No. 4, AZ GO (Proj 05) Ser B (2007)
07010081   Plainfield CCSD No. 202, IL GO Ref 07A
07010083   William Floyd UFSD, NY GO Ref 07
07010084   Banning USD, CA GO (Elec 06) Ser A
07010085   Grosse Pointe Pub Sch Sys, MI GO Ref 07
07010086   Harborfields CSD, NY GO Ref 07
07010092   West Branch LSD, OH GO ULT Ref 07
07010093   Washington Union SD, CA GO Ref 2007
07010094   Mendon Comm Schools, MI GO ULT Ref 07
07010096   New York State, NY GO 07A
07010097   Boston (City of), MA GO 07A
07010098   Brentwood Union SD, CA GO ULT Ref 07
07010099   Brentwood Union SD, CA GO (Elec 03) Ser C
07010100   Alamo CCD, TX GO LTX 07
07010101   Bryan (City of), TX GO LTX COOs 07
07010104   Spring Hill USD No. 230, KS GO Ref 07
07010106   Dublin City SD, OH GO ULT Ref 07
07010112   North Brunswick (Twp of), NJ GO Ref 07
07010113   Cherokee Co School System, GA GO 07A & Ref 07B
07010114   Phoenix ESD #1, AZ GO (Proj 06) Ser A (07)
07010116   Harris County MUD No. 154, TX GO ULT 07
07010118   Shaker Heights City SD, OH GO School Impr & Ref 07
07010126   Long Hill (Twp of), NJ GO Ref 07
07010135   Litchfield Elem SD No. 79, AZ GO (Proj 06) Ser 07A
07010143   Andover USD No. 385, KS GO Ref & Impr 07
07010144   Mendocino USD, CA GO (Elec 06) Ser 07
07010145   Cleveland (City of), OH GO LTX 07AB
07010146   Ypsilanti Comm Util Auth, MI GO LTX Ref 2007
07010147   Casa Grande Union HSD #82, AZ GO (Proj 06) Ser 07A
07010148   Cleveland (City of), OH GO LTX 07C
07010149   Sumner Co, TN GO School 07
07010157   Willistown (Twnsp of), PA GO 2007
07010159   Warrensville Heights CSD, OH GO Ref 2007
07010160   Wyoming Pub Schools, MI GO ULT 07
07010161   Campbell Union HSD, CA GO (Elect 06) Ser 07A
07010163   Tonganoxie USD No. 464, KS GO Ref 07A
07010164   Emporia USD No. 253 (Lyon Co), KS GO Ref 07
07010173   Illinois (State of), IL GO 2007
07010174   Dysart USD No. 89, AZ GO (Proj 06) Ser 07A
07010175   Sonoma Valley USD, CA GO Ref 07
07010176   South Brunswick (Twns of) BOE, NJ GO 2007
07010177   South Brunswick (Twp of) BOE, NJ GO 2007AA
07010180   Anchorage (Municipality of), AK GO Ref 07 A&B
07010183   Philadelphia SD, PA GO 2007A
07010187   Jefferson Union HSD, CA GO (Election 2006) A

 

Policy Id

 

Policy

07010190     Escondido Union SD, CA GO Ref 2007B
07010192   Paulding Co, GA GO Conservation & Courthouse 07
07010193   Grand Prairie ISD, TX GO Ref 2007
07010194   Escondido Union SD, CA GO Ref 2007A
07010197   Memphis (City of), TN GO Impr 07A
07010202   Chicago (City of), IL GO Ref 07A & Taxable 07B
07010205   St. Lawrence (Co of), NY GO PIB 07
07010207   San Lorenzo USD, CA GO (Elec 04) Ser B
07010212   Massachusetts Commnwlth, MA GO 2007A
07010219   Napa Valley USD, CA GO (Elect 06) Ser 07
07010221   Mesa (City of), AZ GO 07
07010232   Mount Clemens Comm SD, MI GO Ref 07
07010238   Neshaminy SD, PA GO 07AB
07010239   Wallingford-Swarthmore SD, PA GO 07A
07010240   Oklahoma Co ISD No. 89 (Oklahoma CSD), OK GO 07
07010245   Oxford Area SD, PA GO 2007
07010246   Berea City SD, OH GO LTX Energy Conserv Impr 07
07010247   Syracuse (City of), NY GO School Bonds Ser 2007A
07010248   District of Columbia, DC GO 07A
07010250   Union-Endicott CSD, NY GO 07
07010253   Bend-La Pine Admin SD No. 1, OR GO 07
07010254   Marcellus CSD, NY GO 2007
07010256   Pulaski CSD, NY GO 2007A
07010264   Ashland SD No. 5 (Jackson Co), OR GO 07
07010274   Mt. Pleasant Pub Sch, MI GO Build 07
07010276   Kane Co Forest Preserve Dist, IL GO 07
07010278   Huntington Beach UHSD, CA GO (Elec 04) Ser 07
07010281   Montgomery Co MUD No. 46, TX GO W&S 07
07010282   Berkeley USD, CA GO (Elect of 00) 2007
07010283   Galt Joint Union HSD, CA GO (Elect 05) Ser B
07010284   San Juan USD, CA GO (Elec 02) Ser 07
07010291   California State, CA GO Var Purp dtd 6/28/07
07010296   Fort Bend (County of) MUD No.26, TX GO 2007
07010306   Chambersburg ASD, PA GO 07
07010307   San Marcos CISD, TX GO 2007
07010308   Orange Co, NY GO Var Purp 07
07010309   Caddo Parish, LA GO 2007
07010310   Kendall County Forest Preserve Distr, IL GO 2007
07010311   Indian Prairie CUSD No. 204, IL GO 07A
07010312   Kern HSD, CA GO (Elect 04) Ser C
07010313   Nevada (State of), NV GO LTX 07B
07010314   Schenectady City SD, NY GO 2007
07010317   Northeastern York SD, PA GO ULT 2007A
07010318   Northeastern York SD, PA GO LTX 2007B
07010319   Everett SD No. 2, WA GO ULT Ref 07
07010327   Northlake (City of), IL GO 07
07010328   Longview (City of), TX GO LTX 07
07010331   Oakland USD, CA GO Ref 07
07010332   Johnston (Co of), NC GO PIB 07
07010334   Bethlehem CSD, NY GO 07B
07010343   Waco (City of), TX GO LTX 2007
07010344   Oswego CUSD No. 308, IL GO Ref 2007A
07010345   Lakewood City SD, OH GO Construction 07
07010346   Berwyn (City of), IL GO 2007AB
07010350   Buckeye UHSD No. 201, AZ GO (Proj 02 & 06) Ser 07
 

 

-41-


Schedule 1

List of Covered Policies

 

 

Policy Id

 

Policy

07010351     Henderson (City of), NV GO LTX Water/Sewer Ref 07
07010352   Contra Costa CCD, CA GO (Elect 06) 2007
07010353   Varner Creek Util Dist, TX GO ULT 07
07010354   Ridgeland (City of), MS GO PIB 07A
07010355   Ridgeland (City of), MS GO PIB 07B
07010356   Marion County, IL GO Alt Rev Ref 07 Priv Plcmnt
07010361   Menomonee Falls SD, WI GO dtd 09/01/07
07010362   Wiseburn SD, CA GO (Elec 07) Ser 07A
07010368   Ellis (County of), TX GO LTX 2007
07010369   Washington Central SD No. 51, IL GO Ref 2007
07010377   Sun Prairie ASD, WI GO Ref dtd 8/7/07
07010378   Tucson USD No. 1, AZ GO (Proj 04) Ser C (2007)
07010379   Florence USD No. 1, AZ GO (Proj 06) Ser 2007A
07010383   Natomas USD, CA GO (Elect of 2006) CIB 2007
07010384   Natomas USD, CA GO (Elect of 2006) CAB 2007
07010389   Fort LeBoeuf SD, PA GO Ref 07
07010390   Lafourche Parish Cons SD #1, LA GO School 07
07010391   Fond Du Lac (City of), WI GO Ref dtd:10/1/07
07010392   Jackson PSD, MS GO 2007
07010393   Higley USD No. 60, AZ GO (Proj of 06) Ser 07B
07010400   Huron City SD, OH GO 07
07010401   Oyster Bay-East Norwich CSD NY GO 2007
07010405   River Valley LSD, OH GO 07
07010406   Richland County SD No. 1, SC GO 2007A
07010407   Livingston Twp. BOE, NJ GO 2007
07010408   Oak Lawn HSD No. 229, IL GO Taxable 07AB
07010411   Council Rock SD, PA GO 2007
07010412   Santa Monica-Malibu USD, CA GO Elec 06 Ser A
07010413   Licking Heights LSD, OH GO Ref 2007
07010422   Los Angeles CCD (Elec 01), CA GO 2007A
07010427   Harris County MUD No. 104, TX GO 2007
07010435   Exeter (Twp of), PA GO 2007A
07010436   Seneca Valley SD, PA GO LTX 2007A
07010438   Sidney City SD, OH GO Ref 2007
07010439   California State, CA GO Var Purp dtd 11/01/07
07010440   Red Lion SD, PA GO LTX 2007
07010444   East Stroudsburg ASD, PA GO LTX Series 2007A
07010445   Imperial CCD, CA GO (Elect of 04) Ser 2007C CIBs
07010446   Imperial CCD, CA GO (Elect of 04) Ser 2007C CABs
07010451   Long Beach CCD, CA GO (Elect 02) 2007D
07010463   Deer Lakes SD, PA GO Ref LTX 2007
07010464   Tracy Joint USD, CA GO (Elect 06) 2007
07010466   Rutherford County, TN GO 2007
07010474   Federal Way SD No. 210, WA GO 2007
07010475   Genesee Co. (Brownfield RDA), MI GO LTX 2007
07010476   Jersey City MUA, NJ Sewer Rev Ref 07
07010478   California State, CA GO Var Purp dtd 11/01/07
07010492   Morton Road MUD, TX GO 2007
84020017   Sears Tax Exempt Investment Tr
84020108   Sears Tax-Exempt Investment Tr
85010162   Town of Huntington, Suffolk Co
85010258   Town of Babylon, New York
85010262   Village of Assining, Westchest
85020009   The Municipal Bond Trust- Insu
85020011   Municipal Investment Trust Fun

 

Policy Id

 

Policy

85020065     E.F. Hutton Tax Exempt Trust,
85020069   Municipal Trust Fund Seventeen
85020092   Municipal Investment Trust Fun
86010036   Town of Huntington, Suffolk Co
86010052   Town of North Hempstead, Nassa
86020001   Sears Tax-Exempt
86020004   E.F. Hutton Tax Exempt Trust,
86020019   Sears Tax-Exempt Investment Tr
86020037   Sears Tax-Exempt Investment Tr
86020043   Sears Tax-Exempt Investment Tr
87010011   Board of Education of The Stro
87010120   Town of Huntington, Suffolk Co
87010123   McKinney Independent School Di
87010188   City of Shreveport, State of L
87020003   Sears Tax-Exempt Investment Tr
87040057   The City of New York
87990003   CHICAGO SCHOOL FINANCE AUTHORI
88040022   P.M.-Mulit.Rev.Strms in policy
88040121   The City of New York ( New Yor
89010022   Essex County NJ GO 89A TAXABLE
89010067   GENERAL BROWN CENTRAL SD,NY GO
89010167   VOORHEESVILLE CSD, NY GO 89
89010202   WALLKILL, NY GO SER 89 B
89010239   HUNTINGTON, NEW YORK GO 89B
89010264   ARLINGTON HEIGHTS SD #25,IL GO
89010276   PALATINE VILLAGE, IL GO SER 89
89020329   OLD BRIDGE MUA, NJ 89
90010034   Camden Co, NJ MUA Rfdg 90
90010100   WASHINGTONVILLE CSD, NY GO 90
90010117   WOLCOTT, CONNECTICUT GO 1990
90010140   WAPPINGERS CENTRAL SD,NY GO 90
90010148   EAST LAMPETER SWR AUTH,PA GO90
90010149   BROOKHAVEN, NEW YORK, GO 1990
90010183   POUGHKEEPSIE CITY, NY GO 90A,B
90010186   MOUNT VERNON, NEW YORK GO 1990
90010188   CARROLL ISD, TEXAS GO 90 & 90A
90010234   PHOENIXVILLE BOROUGH, PA GO 90
90010272   Camden County Municipal Util90
90010273   Camden County Municipal Util90
91010054   THORNTON, COLORADO GO SER 91
91010105   BRANFORD, CONNECTICUT GO 1991
91010120   CHANDLER ARIZONA GO, SER 1991
91010126   SOUTH ORANGETOWN CSD, NY GO 91
91010129   SCHENECTADY, NEW YORK GO 1991
91010138   ONTEORA CENTRAL SD, NY GO 1991
91010140   CHEEKTOWAGA-MARYVALE SD, NY GO
91010143   BENSALEM TWP SD, PA GO SER 91F
91010160   BALTIMORE MARYLAND, GO SER 91C
91010171   STAFFORD, CONNECTICUT GO 1991
91010183   Warwick Valley Cntl SD NY GO91
91010193   ONTARIO COUNTY, NEW YORK GO 91
91010195   WASHINGTONVILLE CSD, NY GO 91
91010226   JACKSON TWP BD OF ED, NJ GO 91
91010277   CROWLEY ISD, TEXAS GO 91
91010291   HUDSON COUNTY, NEW JERSEY GO
 

 

-42-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
91010297     ROCKLIN USD, CALIFORNIA GO 91
91010305   IDAHO FALLS,IDAHO GO & ELEC 91
91010315   CATTARAUGUS CNTY, NY GO 1991 B
91010316   GRISWOLD, CONNECTICUT GO 1991
91010330   HAMPDEN TWNSP,PA SEW AUTH GO91
91010331   Pawling Central S.D., NY GO 91
91010348   ATLANTIC CNTY IMP AUTH, NJ GO
91010356   Guilderland, Town of G.O. 91
91010366   Pottstown Sewer Auth, PA Ser91
91010394   KEARNY MUNIC UTIL AUTH,NJ GO91
91010397   SALISBURY TWP SD, PA GO 91A,AA
91010403   ST. LAWRENCE COUNTY, NY GO 91
91010407   MAPLE SHADE TWP,NJ GO TAXEXMPT
91010412   WATERTOWN, NEW YORK GO SER 91
91010413   WASHINGTON COUNTY, NY GO 1991
91010414   CHICHESTER SCH DIS,PA GO 91A&B
91010466   BUFFALO (CITY OF),NY GO 91 REF
91010470   Carlisle (Borough of),PA GO 91
91010486   WYOMING COUNTY, NY GO 91
91010503   CLARK CNTY SD, NV GO 91 B REF
91010538   CAMDEN CNTY, NJ MUA 91 A
91010539   CAMDEN CNTY, NJ MUA 91 B
92010006   GULL LAKE COMM SCHS, MI GO 91
92010007   Lancaster Parking Auth., PA 91
92010012   AMHERST, NEW YORK GO 91
92010018   ERIE COUNTY, NEW YORK GO 92
92010029   COLD SPRING ISD #750, MN GO 92
92010064   LIVE OAK, TX GO 92 LTD TAX
92010078   North Richland Hills, TX GO 92
92010088   WARWICK VALLEY CSD, NY GO 92
92010128   Lower Moreland, PA Twshp 92
92010164   Washington Cnty Auth, PA GO 92
92010170   UPPER DUBLIN TOWNSHIP,PA GO 92
92010177   Exeter Twp Sch Dist, PA GO 92
92010221   NORTHEASTERN YORK CNTY SD,PA92
92010280   PITTSBURGH (CITY), PA GO 92 A
92010308   SOUTH PARK SCH DIST, PA GO 92
92010309   Reeths-Puffer Schs MI GO 92REF
92010365   ARLINGTON HGHTS SD #25,IL GO92
92010381   Romulus Comm SD, MI GO 92 CABs
92010422   TUCSON USD NO.1, ARIZONA GO 92
92010453   CHEMUNG COUNTY, NY GO 92 A&B
92010456   SIERRA VISTA USD#68,AZ GO92REF
92010458   BERKS COUNTY, PA GO REF SER 92
92010502   St Clair Cty Pub Buld Com GO92
92010506   NORTHEASTRN YORK CNTY SD,PA 92
92010507   MEDINA CITY SCH DIST, OH GO 92
92010509   Tucson (City of), AZ GO Ref92
92010539   WEST OTTAWA PUB SCHL, MI GO 92
92010545   Kyrene Elem SD #28 AZ GO Ser92
92010555   ROCKVILLE CENTRE (VLG),NY GO92
92010563   GUILDERLAND (TOWN OF), NY GO92
92010565   Lowell Area Schools, MI GO 92
92010574   COOK COUNTY, IL GO 92C
92010581   WATERTOWN (CITY), NY GO 92 ABC

 

Policy Id

  Policy
92010582     EASTON (CITY OF), PA GO 92
92010583   NEW WINDSOR (TOWN OF), NY GO92
92010645   NORTH HEMPSTEAD,NY GO 92AB REF
92010653   CAMDEN COUNTY MUA, NJ GO 92A
92010657   CAMDEN COUNTY MUA, NJ GO 92B
92010673   LIVONIA PUB SCHLS, MI GO 92-II
92010682   NAUGATUCK (BOROUGH), CT GO 92
92010692   HARLEM SCH DIST #122, IL GO 92
92010701   CALIFORNIA (STATE OF) GO NOV92
92010707   ESSEX COUNTY, NJ GO 92 REF
92010711   Miami (City of), FL GO Ref S92
92010712   GIRARD SCHOOL DISTRICT,PA GO92
92010714   Chandler (City of),AZ GO 92Ref
92010756   Freeport Sch Dist #145 IL GO92
92020128   NEW YORK CITY GO 92 (VARIABLE)
92020129   NEW YORK CITY GO 92 (VARIABLE)
92020266   CALIFORNIA STATE GO 91
93010044   HURON VALLEY SD, MI GO 93 REF
93010074   ST LOUIS PUB SCH DST, MO GO 93
93010112   LaGRANGE PARK SD #102,IL GO 93
93010122   WASHINGTON SD, PA GO 93A & B
93010172   NORTH BERGEN MUA, NJ SWR GO 93
93010223   CLARKSTON COMM SCHLS, MI GO 93
93010247   ONTARIO COUNTY, NY GO 93 REF
93010257   Rochester Comm SD, MI GO 93REF
93010261   OYSTER BAY (TOWN OF),NY GO 93
93010284   ROMULUS COMM SCHLS,MI GO 93REF
93010287   MUKILTEO SCH DIST #6, WA GO 93
93010288   HUDSON LOCAL SD, OH GO 93 REF
93010302   LAUREL HIGHLANDS SD, PA GO 93
93010305   YONKERS (CITY OF),NY GO 93 REF
93010307   BLOOMINGDALE PSD #16, MI GO 93
93010312   COLUMBUS CITY SD, OH GO 93 REF
93010320   NORTHSHORE SD #417,WA GO 93REF
93010334   HAWAII COUNTY, HI GO 93 REF
93010346   PENINSULA SD #401, WA GO 93REF
93010347   CHICAGO (CITY OF), IL GO 93
93010353   SOUTH HAVEN PUB SCHLS,MI GO 93
93010365   GAINESVILLE, GA GO 93 REF
93010380   ALBANY COUNTY, NY GO 93 REF
93010418   MOHAVE UNION HSD#30, AZ GO 93
93010447   ERIE COUNTY HOSP AUTH,PA GO 93
93010459   HOMEWOOD-FLOSSMOOR SD233,IL 93
93010460   FEDERAL WAY SD #210, WA GO 93
93010471   TEMPE ELEM SD #3, AZ GO 93
93010484   CHASKA ISD #112, MN GO 93B
93010485   NEW BRUNSWICK PKG AUTH,NJ GO93
93010509   TUCSON USD #1, ARIZONA GO 1993
93010511   NORTH POCONO SCH DIST,PA GO 93
93010514   CASTAIC UNION SD, CA GO 93A
93010541   JACKSONVILLE (CITY OF),TX GO93
93010563   BALTIMORE, MARYLAND GO SER 93C
93010575   ROSEMONT (VLG OF), IL GO 93AB
93010604   EUREKA UN SCH DIST, CA GO 93A
93010618   GENEVA COMM USD #304, IL GO 93
 

 

-43-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
93010628     HAWORTH BOROUGH, NJ GO REF 93
93010646   NASSAU COUNTY,NY GO 9/1/93 REF
93010647   LONG BEACH (CITY OF), NY GO 93
93010659   MASSACHUSETTS CWLTH GO REF 93C
93010698   TUCSON, ARIZONA GO REF SER 93
93010700   LEBANON SCHOOL DIST.,PA. GO 93
93010716   BABYLON (TOWN OF), NY GO 93A
93010724   WESTMORELAND CNTY, PA GO 93F/G
93010750   East Side Union HSD, CA GO 93
93010758   POMPANO BEACH, FL GO 93 REF
93010772   ADELANTO SCHOOL DIST, CA GO 93
93010776   SARATOGA SPRINGS CSD, NY GO 93
93010778   BERKS COUNTY, PA GO 93B REF
93010780   Chandler (City of), AZ GO 93
93010781   ALGONAC COMM SCH,MI GO UNLTD93
93010802   MILWAUKEE COUNTY, WI GO 93A
93010823   Webster Cent SD, NY GO 93
93010830   HOPEWELL TOWNSHIP, NJ GO 93REF
93010857   KYRENE ELEM SD #28, AZ GO 93C
93010871   WARREN CONS SCHS, MI GO REF 93
93010884   Monroe Twnshp(Bd of Ed)NJ GO93
93010923   FRANCIS HOWELL SD, MO GO 93REF
93010924   WILMINGTON, DELAWARE GO REF93B
93010938   CHICAGO HEIGHTS, IL GO 93 A&B
93020180   MA BAY TRANS AUTH, GO 93A REF
93020224   ROSEVILLE CITY SD, CA GO 92A
94010023   MAUI COUNTY, HI GO REF 93 F&G
94010049   ROCHESTER (CITY OF), MI GO 94
94010051   CATALINA FTHLLS USD#16,AZ GO94
94010063   NASSAU COUNTY, NY 94 GO REF
94010064   WESTBROOK (TOWN OF), CT GO 94
94010096   COTTONWOOD-OAK CRK ESD6,AZ 93A
94010097   DELAWARE CITY SD, OH GO 94A&B
94010117   SOUTH AMBOY, NJ GO SER 94
94010123   PICKERINGTON LOCAL SD,OH GO 94
94010125   PARADISE VALLEY USD #69,AZ 94E
94010161   PLEASANT PLAINS CUSD#8,IL GO94
94010219   CHANDLER USD #80, AZ GO 94 REF
94010230   WAYNE CNTY BLDG AUTH,MI 94 REF
94010234   Southampton (Twp) SD, NJ GO 94
94010250   Rockland (County of), NY 94
94010266   Littleton ESD#65,AZ Rfdg GO 94
94010279   TUCSON (CITY),AZ GO 84-G(1994)
94010291   EAST LAMPETER SWR AUTH,PA GO94
94010301   Northwestern Local SD,OH GO 94
94010336   Adelanto Sch Dist, CA GO 94B
94010365   Homer Twp Fire Dist, IL GO 94
94010367   Penn Yan Central SD, NY GO 94
94010368   Totowa (Borough), NJ GO 94
94010374   Maplewood-Richmond SD, MO GO94
94010382   Dundee Comm USD #300, IL GO 94
94010416   Exeter Twp SD, PA GO 94 Ref
94010418   Tucson USD No. 1, AZ GO Ser 94
94010421   Twin Valley Sch Dist, OH GO 94
94010440   Mars Area Sch Dist,PA GO 94ABC

 

Policy Id

  Policy
94010441     BLACK RIVER LOCAL SD 1994
94010462   California (State Of) GO
94010466   Rockville Centre(Vlg),NY GO 94
94010493   Santa Cruz Vlly USD#35,AZ GO94
94010506   Closter (Boro) Bd of Ed, NJ 94
94010511   Fort Bend Co. LID #2, TX GO 94
94010521   Goldsboro (City),NC 94 2nd Ser
94010539   LAURENS COUNTY, SC GO 94
94010543   Kent County, DE GO 94
94010555   PLEASANTVILLE (City of), NJ 94
94010571   Wayland Union SD, MI GO ULT 94
94010574   SELINSGROVE AREA SD, PA GO 94
94010594   Napoleon Comm Schools, MI GO94
94010615   Chandler (City of), AZ GO 94
94010618   California (State Of) GO 94
94010623   VALLEY VIEW SD, PA GO 94
94020002   HARRIS COUNTY, TEXAS GO ULT 93
94020007   HARRIS CNTY FLOD CNTL DISTGO93
94020083   CALIFORNIA (STATE OF) GO 1993
94020096   California (State) Var Purp GO
94020097   CALIFORNIA ST VAR PURP GO 92
94020098   California (State) Var Purp GO
94020099   California (State) Var Purp GO
94020127   CALIFORNIA ST VAR PURP GO 92
94020131   CALIFORNIA ST VAR PURP GO 91
94020135   CALIFORNIA STATE GO 91
94020137   CALIFORNIA (STATE OF) GO NOV92
94020143   CALIFORNIA ST VAR PURP GO 91
94020158   CALIFORNIA ST GO AUG 90
94020211   CALIFORNIA (STATE OF) GO 1993
94020228   CALIFORNIA (STATE OF) GO 1993
94020271   California (State) Var Purp GO
94020276   California (State) Var Purp GO
94020278   California (State) Var Purp GO
94020306   HARRIS CNTY FLOD CNTL DISTGO93
94020339   HARRIS CNTY, TX-ROAD & REF 93
94020340   HARRIS CNTY FLOD CNTL DISTGO93
94020376   MASSACHUSETTS CMNWLTH GO 93A/B
95010012   Burlington-Edison SD#100,WA 95
95010023   Riverbank ESD, CA GO 93 Ser B
95010045   Camp Verde USD No.28, AZ GO 94
95010068   HAZLETON AREA SCH DIST,PA GO95
95010069   St Francois CSD R-III,MO GO 95
95010087   CASTAIC UNION SCH DIST, CA 93B
95010097   Eastern Local SD BOE, OH GO 95
95010104   KINGS LOCAL SCH DIST, OH GO 95
95010124   Baltimore, MD GO REF 1995 A&B
95010141   Lebanon (Township) BOE, SD 95
95010154   Orchard SD, California GO 95 A
95010158   CHEEKTOWAGA TOWN OF, NY GO 95
95010176   Mona Shores Public Schools, MI
95010183   Rensselaer County, NY GO 1995
95010185   BOWLING GREEN CITY SD,OH GO 95
95010194   BERKLEY SCHOOL DIST, MI GO 95
95010209   JAMUL-DULZURA USD, CA GO 95 A
 

 

-44-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
95010215     MONROE COUNTY, NY GO SER 1995
95010222   Sayville UFSD, NY GO 1995
95010231   ROSEVILLE JOINT UHSD, CA GO95B
95010250   Glen Cove (City of), NY GO 95A
95010259   Peekskill City SD, NY Go 1995
95010264   HASTINGS-ON-HDSN UFSD,NY GO95B
95010283   LINCOLN CNTY SCH DIST, OR GO95
95010284   QUEENSBURY (TOWN OF), NY GO95A
95010321   CAMERON COUNTY, TX ULT GO 95
95010326   Pleasanton USD, CA GO 95 Ser K
95010352   HEMPSTEAD (TOWN), NY GO 95 A/B
95010376   Old Adobe Union SD, CA GO 1995
95010377   EUREKA UN SCH DIST, CA GO 95B
95010386   LA CANADA UNIF SD, CA GO 95
95010390   DELAWARE CITY SD, OH GO 1995
95010397   TRAVIS CNTY,TX WC&ID #10 GO 95
95010399   LOCKPORT TWP HSD #205, IL GO95
95010400   WARREN COUNTY, NC GO SER 95
95010404   SPARKS, NEVADA GO 1995 Ref
95010423   MASON CITY SCH DIST, OH GO 95
95010458   Northshore SD #417, WA GO 1995
95010467   FREMONT PUB SCH, MI GO 1995
95010496   WOODBURN SD #103, OREGON GO 95
95010499   FERNDALE PUBLIC SCHLS, MI GO95
95010507   CATTARAUGUS CNTY, NY GO 95A,B
95010508   Marshall (City of), TX GO 1995
95010510   Camden County, MUA NJ GO 1995
95010512   PULLMAN SCH DIST #267, WA GO95
95010518   Anchorage (Municip),AK GO95REF
95010529   PAW PAW PUBLIC SCHOOLS,MI GO95
95010560   Illinois State GO Ser Dec 1995
95010601   Enumclaw School District #216
95010611   YORK (CITY), PA GO 95 A&B TXBL
95010612   Lemont-Bromberek SD#113A,IL 95
95010614   South River Borough BOE, NJ GO
95010615   CORONA, CALIFORNIA GO SER 95
95010618   Mundelein SD #75, IL GO Ser 95
95010619   Niles (Village of), IL GO
95020041   HONOLULU (CITY & CNTY),HI-93 B
95020060   NEW JERSEY STATE, GO SER D REF
95020083   HONOLULU (CITY & CNTY), HI-93A
95020090   HONOLULU (CITY & CNTY),HI-93 B
95020091   HONOLULU (CITY & CNTY),HI-93 B
95020093   HONOLULU (CITY & CNTY), HI-94A
95020094   HONOLULU (CITY & CNTY), HI-94A
95020095   HONOLULU (CITY & CNTY), HI-94A
95020128   California (State) Var Purp GO
95020129   CALIFORNIA (STATE OF) GO 1993
95020133   California (State Of) GO 95
95020134   California (State Of) GO 95
95020135   California (State Of) GO 95
95020136   California (State Of) GO 95
95020138   CALIFORNIA ST, GO VAR PURP 92
95020142   California (State) Var Purp GO
95020143   CALIFORNIA (STATE OF) GO 1993

 

Policy Id

  Policy
95020145     FAIRFIELD CITY SD, OHIO GO 94
95020147   FAIRFIELD CITY SD, OHIO GO 94
95020187   HONOLULU (CITY & CNTY), HI-93A
95020202   Massachusetts Commonwealth GO
95020203   Massachusetts Commonwealth GO
95020204   Massachusetts Commonwealth GO
95020213   HONOLULU (CITY & CNTY), HI-94A
95020219   HONOLULU (CITY & CNTY),HI-93 B
95020245   Connecticut State GO & Lease
95020253   Hawaii State GO-1992 BY & BZ
95020254   Hawaii State GO-1992 BY & BZ
95020255   Hawaii State GO-1992 BY & BZ
95020257   HAWAII STATE, GO 93 CA & CB
95020259   Hawaii State GO-1993 CH & CI
95020271   Hawaii State GO CC & CD
95020277   Connecticut State GO & Lease
95020368   Massachusetts Bay Trans 91 A
95020370   MASS BAY TRANS AUTH GO 94A&B
95020373   SURRY COUNTY, NC GO PUB IMP 95
95020378   California (State Of) GO
95020380   CALIFORNIA (STATE OF) GO 1993
95020381   California (State Of) GO
95020390   CALIFORNIA (STATE OF) GO 1993
95020392   CALIFORNIA (STATE OF) GO 1993
96010004   Fillmore USD, CA GO Ref Ser 96
96010007   Issaquah, Washington, GO
96010009   Chicago Park Dist, IL GO Ref96
96010011   East Ridge, Tennessee 1995 B
96010016   PECAN GROVE MUD, TX GO 1995
96010017   Burnet County, TX GO LTD TX 95
96010037   SALIDA UNION SD, CA GO 1996
96010038   PUYALLUP SD #3, WA GO 1996
96010039   TUMWATER SCH DIST #33, WA GOAB
96010060   HILLIARD CITY SD, OH GO 96 A
96010061   ROCHESTER (CITY OF), NY GO96B
96010083   Manhattan Beach USD, CA GO 96
96010084   INDIAN LAKE LOC SD, OH GO 96
96010087   WOODSTOCK SD #200, IL GO 1996
96010092   NORTH KITSAP SD #400, WA GO 96
96010105   AUBURN (CITY OF), NY GO 96
96010113   MOLALLA RIVER SD #35, OR GO 96
96010145   DADE CO,FL GO (METRO F&R DIST)
96010168   West Valley SD #363, WA GO 96
96010182   Nooksack Vly SD #506, WA GO 96
96010186   PORT OF ASTORIA, OREGON GO 96
96010193   BEAVERCREEK LOC SD, OH GO 96
96010218   East Valley SD#361, WA GO 96
96010226   GARRETT COUNTY, MD GO 1996
96010230   ST CHARLES CITY S.D.,MO GO 96
96010237   Bennett Valley USD, CA GO 96
96010244   APACHE JUNCTION USD#43,AZ GO96
96010250   Calistoga Joint USD, CA GO 95A
96010268   Baltimore (City Of), MD GO 96B
96010274   WEST VIRGINIA STATE GO 1996
96010285   WASHINGTON COUNTY, MD GO 96A/B
 

 

-45-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
96010295     Glen Cove (City of), NY GO 96
96010337   LEMONT PUBLIC LIB DIST,IL GO96
96010350   Monroe SD #103, WA GO Ser 96
96010356   COLLINGSWOOD, NJ GO 96
96010357   ROCKVILLE CENTRE(Vil)NYGO96A&B
96010363   WOONSOCKET (CITY OF), RI GO 96
96010366   LaSalle County SD#122 IL GO 96
96010393   COOK COUNTY, ILLINOIS GO 96
96010395   Islip (Town of) NY GO 96 A&B
96010406   WEST MIFFLIN SWR AUTH GTD,PA96
96010411   Windsor Unified SD, CA GO 96
96010419   Suffolk County, New York GO96B
96010424   Lake Worth, Florida GO Ser 96
96010432   KEYES UNION SD,CALIFORNIA GO96
96010436   Patterson Joint USD, CA GO 96A
96010437   Waubonsee CCD No.516, IL.
96010440   Genesee Co. NY GO 96
96010444   Meriden (City of), CT GO 96
96010456   JACKSON TOWNSHIP, NJ GO 96 A&B
96010467   Baldwin Park USD, CA GO Ser 96
96010476   Mint Hill (Town of), NC GO 96
96010479   IRVING FLOOD CNTRL DST,TX GO96
96010484   DESOTO (CITY OF), TX GO LTD 96
96010496   Lincoln Park (Borough)NJ GO 96
96010497   Azle (City of), TX Ltd 1996
96010502   Campbell Union SD, CA GO 96
96010510   Stark County OH GO LTDTX 96
96010515   Highland Local SD OH GO 96
96010534   Humble (City of), TX Ltd 1996
96010556   GRAPEVINE (City), TEXAS Ltd 96
96010565   KINGS MOUNTAIN, NC GO 1996
96010577   SOUTHINGTON (TOWN OF) CT GO 96
96010583   Nashua (City of), NH GO 96
96010584   Sugar Land Texas, GO 1996A
96010596   SOUTH RIVER (BOROUGH),NJ GO 96
96010606   TERRE HAUTE SAN DIST, IN GO96
96010610   CADILLAC ASD, MI GO 96
96010619   Nassau County, New York GO96W
96010620   Camden County,NJ MUA GO 2nd 96
96010627   LUCAS COUNTY, OHIO LTDTX GO 96
96010628   Arcadia USD, CA GO 1993 Ser C
96010631   Chandler, AZ GO 1996B
96010645   WEST OTTOWA PS MI (GO) 96
96010649   CAMERON COUNTY, TX GO 96C,D
96010653   AUBURN (CITY OF), NY GO 96C
96010659   Pflugerville (City),TX Ltd 96A
96010665   PEMBERTON (TWP OF), NJ GO 96
96010666   JACKSON TOWNSHIP, NJ GO 1996
96010673   MANCHESTER TOWNSHIP, NJ GO 96
96010676   Laurel, Maryland GO Ref 96 A
96010681   Shoreline SD #412, WA GO 1996C
96010683   Willoughby(City of)OHLTDTXGO96
96010693   Shoreline SD#412,WA GO 11/1/96
96010695   Harris Cnty MUD #102, TX GO 96
96010698   Kearny Muni Util Auth GO 1996

 

Policy Id

  Policy
96010702     Hawaii State GO 1996 Series CM
96010706   Waxahachie, Texas GO Ltd Tx 96
96010707   Benton County, TN GO Sch Bonds
96010708   Burke County, NC GO Series 96A
96010709   Burke County, NC GO Ser 96
96010713   NORTH CHICAGO, ILLINOIS GO 96
96010716   WEST VIRGINIA STATE GO 1996D
96010722   HUDSON CNTY IMPR AUTH,NJ GO 96
96020003   ST CHARLES CITY SD, MO GO95REF
96020004   ST CHARLES CITY SD, MO GO95REF
96020008   Mill Valley Sch Dist,CA GO 94C
96020009   Mill Valley Sch Dist,CA GO 94C
96020010   Mill Valley Sch Dist,CA GO 94C
96020011   Hawaii State GO-1993 CH & CI
96020012   California (State Of) GO
96020021   HONOLULU (CITY & CNTY),HI-93 B
96020027   Hawaii State GO 1996 Series CL
96020034   California (State Of) GO Ref
96020036   California (State Of) GO Ref
96020039   California (State Of) GO
96020052   CONNECTICUT STATE GO SER 1990A
96020056   MASS BAY TRANS AUTH GO 94A&B
96020057   MASS BAY TRANS AUTH GO 94A&B
96020059   CONNECTICUT STATE GO SER 1990A
96020074   California (State Of) GO Ref
96020076   California (State Of) GO Ref
96020091   California (State Of) GO Ref
96020098   California (State Of) GO
96020099   California (State Of) GO
96020108   South Pasadena USD, CA GO 96A
96020111   NEW YORK CITY, NY GO 97E
96020112   NEW YORK CITY, NY GO 97E
96020116   NEW YORK CITY, NY GO 96 H,I&J
96020117   NEW YORK CITY, NY GO 97E
96020143   HAWAII STATE, GO 93 CA & CB
96020144   California (State Of) GO
97010004   Harbor Creek SD, PA GO 96A&B
97010008   SOLEDAD USD, CALIFORNIA GO 97
97010009   Thompson SD #R2-J, CO GO 1996
97010010   COLLEGE STATION, TX GO 1996
97010015   ST. LUCIE CNTY P&A AUTH, FL GO
97010020   LAS VEGAS (CITY OF), NV GO 97
97010022   BOWIE COUNTY, TEXAS GO 1996
97010025   Lake County SD 79 (Fremont) 96
97010026   Anamosa CSD, IA Ser 1997A
97010029   Mokena Comm.Park Dist.IL GO 97
97010031   Healdsburg Unified SD, CA GO96
97010043   Luzerne County, PA GO 97
97010052   North Hills Sch Dist, PA GO 97
97010053   Sequim SD #323, WA GO Ser 97
97010060   West Boylston (Town) MA GO 97
97010062   KENOSHA COUNTY, WI GO 1997 A
97010067   GARRETT COUNTY, MARYLAND GO 97
97010069   Belleville (City of), IL GO 97
97010073   Brazos River Authority, Ser 97
 

 

-46-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
97010077     Humboldt USD #22,Arizona GO97C
97010078   ROCKFORD (CITY OF), IL GO 97AB
97010080   Cotati-Rohnert Park USD, CA GO
97010092   Flagstaff, Arizona GO 1997
97010093   Illinois (State of) GO 97
97010098   NORTH HEMPSTEAD(TOWN) NY GO 97
97010101   Elko, Nevada GO Ltd Tax Ref 97
97010109   Nassau County, New York GO97 X
97010113   Dennis (Town of) MA GOULT 97
97010124   San Jacinto USD, CA GO 1997 A
97010130   Klamath County, OR GO 97 A&B
97010136   Roseland (Borough of) NJ GO 97
97010140   Detroit/Wayne Cnty Stad, Mi 97
97010151   Hawaii State GO 1997 Ser CN,CO
97010153   California State GO, 3-1-97
97010154   Finneytown Local SD OH GO 97
97010162   Sun Prairie, WI GO Series 1997
97010173   Claymont City SD OH GO 97
97010178   Cary CCSD #26 IL GO 97
97010179   Elizabeth Forward SD, PA 97AB
97010194   McKeesport Area SD PA GO 97AB
97010196   Madeira CSD, Oh GO ULT 97
97010198   Angelina Cnty, TX GO Ltd Tx 97
97010201   Apex, North Carolina GO 1997
97010206   PENN HILLS, PENNSYLVANIA GO 97
97010210   Anderson, South Carolina GO 97
97010213   FOLSOM (CITY OF),CA GO97 Ser D
97010214   ROWLETT TEXAS, GO 97
97010218   Lakeway, TX Ltd 97
97010222   McMINNVILLE SD #40, OR GO 1997
97010232   NORFOLK, VIRGINIA GO 97 (AMT)
97010245   Essexville-Hampton PS MI GO 97
97010246   Pflugerville, TX GO Ltd Tx 97
97010247   Westmoreland County, PA GO 97
97010260   St Clair Co Pub Bldg IL GO 97
97010264   Carson City, Nevada GO 1997C
97010266   Hampton Township, PA GO 1997
97010268   Cicero Sch Dist #99, IL GO 97
97010270   YOUGH SCH DIST, PA GO 1997B
97010271   Gurnee Sch Dist #56 IL GO 97
97010276   Flower Mound, TX GO Ltd Tax 97
97010283   HEMPSTEAD (VILLAGE), NY GO97A
97010286   Crowley (City of), LA GO Ser97
97010287   FONTANA USD, CALIFORNIA GO 97
97010290   SYCAMORE SD #427, IL GO 1997
97010296   Peoria School Dist 150 ILGO 97
97010316   Monroe SD #103, WA GO 1997
97010322   Ukiah USD, CA GO 1997
97010323   Smithfield (Town of) RI GO 97
97010324   Johnson City, TN GO 1997
97010335   Frisco,TX GO Ltd COO 97Taxable
97010343   Fillmore USD, CA GO
97010345   Mount Shasta USD, CA GO 97 A
97010346   Glen Ellyn SD#41, IL GO 97
97010349   Prairie Grove SD46, Il GO97

 

Policy Id

  Policy
97010353     Baltimore (City), MD GO 1997B
97010359   South Bay Union SD, CA 1997A
97010360   PINER-OLIVET UNION ESD,CA GO97
97010367   KEARNY (CITY OF), NJ GO Ref 97
97010376   Decatur Pub Bldg Comm, IL 1997
97010379   Tahoma SD #409, WA GO 1997
97010384   PINEY CREEK METRO DIST,CO GO97
97010389   Safford USD NO. 1 AZ Series97A
97010392   Petersburg, Virginia GO 1997
97010399   Show Low Unified SD No. 10 AZ
97010400   Lucia Mar USD, CA GO 97
97010408   Redwood City ESD, CA GO 1997
97010409   QUAKER VALLEY SD, PA GO 97AB
97010411   Rockford PS MI GO 97
97010417   Du Quoin CUSD #300 IL GO 97
97010425   Steilacoom HSD #1, WA GO 97
97010426   Nassau County, New York GO97WY
97010435   Illinois State GO 97
97010440   Georgetown Co., SC GO 97
97010441   Fair Lawn (Borough of),NJ GO97
97010446   Massachusetts (Cmnwelth)GO97AB
97010452   OSSINING VILLAGE, NY GO 97
97010454   Hampton Bays UFSD NY GO 97
97010459   Wiseburn SD, CA GO 97A
97010468   Nassau County, New York GO97A
97010476   Cuyahoga Falls, OH LTD 97
97010480   Santa Clara USD, CA GO Ser 97
97010482   Benicia Unified SD, CA GO 97AB
97010484   Burbank Unified SD, CA GO 97A
97010485   Mansfield (Town of) MA LTDGO97
97010501   Glendale USD, CA GO 97
97010502   Reynoldsburg City SD, OH GO 97
97010505   Reno (City of), NV GO 97B
97010506   Watertown (Town), MA 97
97010507   CLOVIS USD, CA GO Ser. E&F
97010514   Northeastern Clntn CSD,NY GO97
97010523   Missouri City, Texas GO 1997
97010527   CHINO VALLEY USD #51, AZ GO 97
97010534   S. Huntington UFSD NY 1997
97010542   Azle (City of), TX Ltd 1997
97010547   Medway, MA GO ULTD 97
97010550   Little Falls City SD, NY GO
97010558   Alpine Union SD, CA GO 1997A
97010561   ARKANSAS STATE GO 1997B
97010562   WANTAGH UFSD, NY GO 97
97010563   Clark Township, NJ GO 97
97010577   Sulphur Springs, Texas GO 97
97010578   PECAN GROVE MUD, TEXAS GO 97
97010588   ROMEO COMM SD, MI GO 97
97010590   Wilmington, NC GO Series 1997A
97010591   Wilmington, NC GO Series 1997B
97010596   GLOUCESTER COUNTY, NJ GO 97
97010598   West Mifflin Boro, PA GO 97ABC
97010599   ARLINGTON HTS PK,IL GOLT 97B
97010600   ARLINGTON HTS PK,IL GO 97CDE
 

 

-47-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
97010602     Yonkers, New York GO 97 C
97010608   Wayland Union SD, MI GO 97 REF
97010609   Woodway (City of), TX GO 97
97010612   Carlsbad USD, CA GO 97
97010614   Moon Area Sch Dist, PA 1997
97010619   Hawaii State GO 97 Ser CP & CQ
97010625   Boulder Vally SD #RE-2,CO GO97
97010630   WALLKILL (TOWN OF), NY GO 97
97010631   Rochester (City of), NY GO 97
97010633   Ansonia (City Of), CT GO 97
97010644   Bernalillo Mun SD#1, NM GO 97
97010645   BOLINGBROOK, ILLINOIS GO 97
97010647   Erie County, New York GO 97 A
97010649   Enumclaw S.D. #216, WA GO 97
97010654   Belle Vernon Area SD, PA GO97A
97010668   Honolulu, Hawaii GO 1997 A,B,
97010672   South Lake Schools MI GO 97
97010673   Springfield SD #19, Oregon
97010674   Snoqualmie Vly SD #410, WA GO
97010675   BEDFORD COUNTY, VIRGINIA GO 97
97010677   HAZLETON AREA SD, PA GO 97ABC
97010678   YORK COUNTY, PA (REDEV AUTH)
97010681   Spokane Co Fire Dist 9,WA GO97
97010682   Liberty Local Sch Dist, OH 97
97010683   Lake Jackson, Texas GO 97
97010684   Alisal Union SD, CA GO 97
97010685   Carson City, Nevada GO 11-1-97
97010693   NEW YORK CITY, NY GO 98D
97010696   CORINTH, TEXAS GO 1997
97010698                LLAGE, IL GO 97
97010699   WEST LINN-WILSONVILLE SD,OR GO
97010700   Bainbridge Isl SD#303,WA GO97B
97010702   LITCHFIELD ELEM SD#79,AZ GO97B
97010703   HILLIARD CITY SD, OH GO 97
97010704   Saratoga USD, CA GO 97 Ser. A
97010707   TOWN OF WOODSTOCK, NY GO 97
97010711   Shaler Area SD, PA GO, 97 A&B
97010719   Isle of Wight Cnty, VA GO 97B
97010721   Piqua City SD OH GO 97
97010726   Tucson USD NO. 1, AZ GO 1997
97010732   TOLEDO (CITY OF),OH GOLT 97AB
97010733   Suffolk County, New York GO97B
97010735   Green, Oh LMTX GO 97
97010736   LAS VEGAS, NEVADA GO 1997A
97010738   Taunton, Ma LMTX GO 97
97010742   Camden Cnty Impr Auth, NJ 97A
97010745   Chicago Park Dist, IL GO 97
97010746   King Cnty Fire Dist #26, WA GO
97010748   South Allegheny SD PA GO 97AB
97010749   GLADEWATER, TEXAS GO 1997
97010756   Clearview Regl HSD, NJ GO 97
97010760   Anderson CO, SC GO Series 1997
97010768   SWEETWATER, TEXAS GO 1997
97010771   Niles (Village of), IL GO 97
97010775   UNIVERSAL CITY, TEXAS GO 1997

 

Policy Id

  Policy
97010785     Portsmouth (City of),VA GO 97A
97010787   TRENTON (CITY OF), NJ GO 1997
97010789   Albany (City of), NY GO 97
97010792   HAMMONTON, NEW JERSEY GO 97
97010800   ST Clair Co Pub Bldg IL GO 97C
97010801   Henry County, Il GO 97
97010809   Scotland County, NC GO 97
97010817   NEW HAVEN, CT GO dtd. 12/15/97
97010818   NEW HAVEN, CT GO dtd 12/30/97
97020005   Willoughby (City)OH LTDTXGO 90
97020007   California (State Of) GO
97020012   WEST VIRGINIA STATE GO 1996D,E
97020014   WEST VIRGINIA STATE GO 1996D,E
97020015   WEST VIRGINIA STATE GO 1996D,E
97020033   Hawaii State GO-1992 BY & BZ
97020082   WISCONSIN (STATE OF) GO, 97 A
97020090   Massachusetts St Cllge Blg 94A
97020128   HAWAII STATE, GO 93 CA & CB
97020159   HONOLULU (CITY & CNTY),HI-93 B
97020161   HONOLULU (CITY & CNTY), HI-93A
97020168   CALIFORNIA STATE GO 10-1-97
97020169   CALIFORNIA STATE GO 10-1-97
97020172   CALIFORNIA STATE GO 10-1-97
97020173   NEW YORK CITY, NY GO 98D
97020188   NEW YORK CITY, NY GO 98EF
98010011   ESSEX COUNTY, NJ GO 97A
98010017   Maple Park CUSD #302 IL GO 98
98010021   MILLCREEK TWP SD, PA GO 98A/B
98010028   ST. CLOUD (CITY OF),MN GO 98A
98010033   Alum Rock Union ESD, CA GO 98
98010037   Burlington-Edison SD#100,WA 98
98010040   Schertz (City of), TX GO 98
98010041   SWEETWATER, TEXAS GO 1998
98010044   EVERETT SCHOOL DIST #2,WA GO98
98010053   Orange, MA 1/15/98 Series B
98010054   Marion ISD, IA Series 1998
98010055   S Local Sch Dis, OH ULTD GO 98
98010056   COLONY (CITY OF THE), TX GO 98
98010057   Douglas County SD Re1,CO GO98A
98010058   DeKalb CUSD #428, IL Ser 1998
98010060   Otsego PS, Mi Q-SBLF GO 98
98010067   Washington ESD #6,AZ GO01-1-98
98010069   San Jacinto USD, CA GO 1998B
98010071   Hopewell Twp BOE, NJ GO 98 Rfd
98010072   Hartford (City of), CT GO 98
98010073   Camden County Imp Auth,NJ 98AB
98010075   Brighton SD #27J, CO GO 98
98010079   Ripley-Union-Lewis-Hunt SD OH
98010084   RICHLAND HILLS, TEXAS GO 1998
98010088   Mineola (City of), TX COO 98
98010089   FERN RIDGE SD #28J,OREGON GO98
98010092   Barron Area SD, WI GO 98
98010093   Suffolk County, New York GO98A
98010099   Hampton Bays UFSD NY GO 98
98010103   Gardner USD #231, KS GO 98-A
 

 

-48-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
98010107     Tucson, AZ GO & Lease Ref 98
98010109   Port of Beaumont Nav Dist, TX
98010110   Port of Beaumont Nav Dist, TX
98010112   Worthington City SD, OH ULT 98
98010113   BUFFALO, NEW YORK GO 98ABCF
98010119   PIPER USD #203, KANSAS GO 98A
98010130   SOMERSET COUNTY, PA GO 98
98010131   Tahoma SD #409, WA GO 1998
98010132   Pittsburgh (City of)PA GOTax98
98010136   Nauset Regional SD, MA GO 98
98010139   ALTON, ILLINOIS GO 98
98010140   Douglas Co Fire Dist#2,WA GO98
98010143   Highland Village, TX GO Ltd 98
98010150   Butler Area Sch Dist, PA 98ABC
98010152   GREATER CLEVELAND RTA,OH LTX98
98010157   DEARBORN SCH DIST, MI GO 98
98010158   TOMBALL TEXAS GO 1998
98010160   South Pasadena USD,CA GO Ser B
98010161   MARANA USD #6, AZ GO SER 1998
98010162   WEST ALLIS (CITY OF), WI GO98C
98010169   Dublin City SD, OH GO 98
98010171   Post Falls, Idaho GO 98
98010177   Campbell USD, CA GO Ref Ser 98
98010182   Lewiston, Maine GO 98A
98010183   Lewiston, Maine GO 98B
98010184   Wanaque Val Reg Swr Auth, 98
98010191   California State GO 1998
98010192   TOLEDO (CITY OF), OH GOLT 98AB
98010193   Sugar Land, TX Ltd Tax GO 98
98010205   Nyack UFSD, NY GO 98 A & B
98010206   WEST VIRGINIA STATE GO 98A
98010208   WEST VIRGINIA STATE GO 98B
98010210   Glen Ellyn SD#41, IL 1998
98010211   Jefferson Cnty SD R-1, CO GO98
98010212   Manhattan Beach USD, CA GO 97
98010216   PARKLAND SCH DIST, PA GO 98
98010217   Kent City SD, OH GOULT 98
98010220   Cy-Champ PUD, TX GO (MUD) 98
98010221   Nassau County, New York GO98Y
98010224   North Canton City SD, OH 98
98010225   Harmony Union SD, CA GO Ser 98
98010226   Leslie PS, Mi GO 98
98010231   Barberton City Schs, OH GO 98
98010233   ST LOUIS PUB SD, MO GO REF 98
98010243   Tewksbury (Town of), MA GO 98
98010244   Greenwood Lake UFSD, NY 1998
98010247   Bradford Area SD, PA GO 1998
98010260   Cumberland Cnty, NC GO Ref 98
98010261   Cumberland County, NC GO 98
98010262   Porter Cnty Lib Dist, IN GO 98
98010263   Medina City SD, OH GO 98
98010264   GILBERT (TOWN), AZ GO 1998
98010268   Eastside Union SD, CA GO 98A
98010276   King City Jt. UHSD, CA GO 1998
98010280   Northwest Loc SD,OH (Ham Co)98

 

Policy Id

  Policy
98010281     BRICK TOWNSHIP, NJ GO & MUA
98010282   Lafayette, Colorado GO 98
98010292   Riverdale Joint USD, CA GO 98
98010293   NEW YORK CITY, NY GO 98H
98010294   Mercer Cty Imp Auth, NJ 98ABC
98010300   ONEIDA COUNTY, NEW YORK GO 98
98010322   Clarkstown Town of, NY G.O. 98
98010325   DUNCANVILLE, TEXAS GO 1998
98010334   SELAH SCH DIST #119, WA GO 98
98010335   Mesa, AZ GO 1998
98010350   OLD BRIDGE TWP, NJ GO 98
98010353   Canal Winchester LSD OH GO 98
98010354   New Haven USD, CA GO 1998B
98010363   CLARK CNTY, NV GO 98A LVCVA
98010368   Pendleton SD #16R, Oregon GO
98010376   Denton (City of), TX Ltd GO 98
98010377   Sturbridge (Town), MA LTX GO98
98010380   Albany, Oregon GO 98
98010384   LAKE HAVASU USD #1, AZ GO 1998
98010390   Kinnelon BOE, NJ dtd 4/1/98
98010393   Logan Township, PA GO 98
98010395   Glen Cove (City of), NY GO 98
98010396   Randolph County, NC GO 98 Ref
98010397   EAST HAMPTON (TOWN), NY GO 98
98010401   Ojai USD, California GO Ser A
98010402   Olathe USD #233, KS GO 98 A
98010404   WEATHERLY AREA SD, PA GO 98
98010412   STROUDSBURG AREA SD, PA GO 98
98010417   PENN CAMBRIA SD, PA GO 1997AB
98010419   Maui County, HI GO 98 A,B&C
98010423   BEND-LA PINE ASD #1, OR GO 98
98010425   TAHOE TRUCKEE USD, CA GO 98
98010427   Benicia Unified SD, CA GO 1998
98010428   Rio Elementary SD, CA GO 97 A
98010430   Huntington UFSD, NY GO 98
98010431   Onalaska, WI GO 98A
98010432   Columbia Gorge CCD, OR GO 98
98010436   Leon Valley, TX GOLT Series 98
98010439   Wadsworth City SD OH 98
98010442   HORSEPEN BAYOU MUD, TEXAS GO98
98010444   Brazoria Cnty, TX GO Ltd Tx 98
98010446   Clinton (City of), TN 98
98010447   Livonia (City of) MI GO LTX 98
98010450   Central Islip UFSD NY GO 98
98010453   Mead SD #354, Washington GO 98
98010454   Hendersonville, NC GO 1998
98010464   WARRENTON, OREGON GO 1998
98010465   Ocean Township NJ Sewer GO 98C
98010467   Surry Cnty, NC GO Ref Ser 98
98010468   Edmonds SD #15, WA GO Ser 98
98010481   FALLBROOK UN HIGH SD, CA GO 98
98010490   ATTLEBORO (CITY OF), MA GO 98
98010492   Harris Cnty MUD #102, TX GO 98
98010493   Dexter Community Schools,MI GO
98010495   ISAAC ESD #5, AZ GO 1998B
 

 

-49-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
98010499     Lakota Local Sch Dist, OH 98
98010501   South Suburban Pk&Rec,CO GO 98
98010503   LAREDO, TEXAS LTD TAX GO 98
98010505   Baltimore (City Of), MD GO 98
98010518   SOUTHLAKE (City of), TX GO 98
98010520   Paw Paw Pub Schools MI GO 98
98010524   St. Johns Pub Schools MI GO 98
98010526   San Angelo, Texas GO Ltd TX 98
98010528   MANALAPAN-ENGLISHTOWN RSD,NJ98
98010529   Parma, (City) Ohio
98010538   Benicia, CA (97 Wstwtr) GO 98B
98010545   GARDNER, KANSAS GO 1998A
98010546   GARDNER, KANSAS GO 1998B
98010549   Newberg Sch Dist #29Jt,OR GO98
98010555   ARKANSAS STATE GO 1998A
98010561   Tully CSD NY GO 98
98010565   VICTOR CENTRAL SD, NY GO 98
98010570   Northshore SD #417,WA GO 98A&B
98010571   East Meadow UFSD, NY GO 98
98010572   Glen Cove (City of), NY GO 98
98010573   Greenville CSD NY GO 98
98010577   Chemung County, NY GO ULTD 98
98010583   North East SD, PA GO 98
98010584   LAKEWAY MUD, TEXAS GO 98
98010586   El Paso County, TX GO REF 98
98010596   CLIFTON, NEW JERSEY GO 98
98010599   Avondale ESD #44, AZ GO 98 A
98010605   Mercer Co Imp Auth 1998C
98010607   Peoria, Arizona GO Ser A 1998
98010608   Peoria, Arizona GO Ser B 1998
98010610   San Juan Capistrano, CA GO 98
98010611   AGUA FRIA UHSD#216, AZ GO 98A
98010612   ABINGTON (Town of), MA GO
98010615   Easthampton, MA dtd 7/1/98
98010618   Norfolk, Virginia GO 98
98010620   BLOOMFIELD SD #6, NM GO 1998
98010621   Deming SD #1, NM GO Ser 7/1/98
98010622   Johnson City, TN GO 1998
98010625   Ripley-Union-Lewis-HuntSD OH98
98010627   McFarland Sch Dist, WI GO 98
98010631   Nederland Fire PD, CO GO 98
98010632   Stroudsburg (Borough) PA GO 98
98010636   Montville Township, NJ 1998
98010639   Newark, Oh GO Lmtx 98
98010641   Seneca County, OH GO LTX 98
98010642   Rescue Union SD, CA GO 98
98010645   East Stroudsburg ASD PAGO 98AA
98010646   Riverside Beaver Co.SD PA GO98
98010647   La Conner SD No. 311, WA GO 98
98010651   Greenfield Union ESD, CA GO 98
98010652   Coleman, TX GO Limited Tx 1998
98010654   NEVADA STATE GO, 1998A,B,C,D
98010655   WEST VIRGINIA STATE GO Rd Bd98
98010661   San Ramon Vly USD, CA GO 98 A
98010662   Tukwila SD #406, WA GO Ref 98

 

Policy Id

  Policy
98010667     Pleasant Plains CUSD #8, IL 98
98010669   Odessa, Texas Ltd GO Ser 98
98010672   MACON COUNTY, TENNESSEE GO 98
98010674   Wood County, OH LTGO 1998
98010676   Valley Park SD MO 98
98010677   Chatham (Town of) MA LTD GO 98
98010680   Upper Allen Twp, PA GO 1998
98010683   TOLEDO (CITY OF), OH GOLT 98
98010689   Laguna Salada USD,CA GO Ser98B
98010690   MARSING JOINT SD #363, ID GO98
98010695   TOLEDO (CITY OF), OH GOLT 98
98010696   Fort Loramie Local SD, OH 1998
98010702   Shrewsbury Bd of Ed, NJ GO
98010703   Suffolk County, NY GO 98 AEF
98010704   Rhode Island (State Of) GO 98A
98010709   Maui County, Hawaii GO 98 C
98010712   ROCK ISLAND CO PUB BLDG COM 98
98010713   Firebaugh Las Dlts USD,CA GO98
98010715   Angleton, Texas GO Ltd Tax 98
98010720   Harris Co WC&ID #119, GO 1998
98010727   Shawano County, WI GO 98
98010729   Lawrence BOE NJ GO 98
98010730   Grapevine, Texas GO Ltd Tax 98
98010732   Nassau County, N Y GO 98Z
98010735   Temple City USD, CA GO 98
98010736   Nassau County, New York GO 98B
98010737   Montebello USD, CA GO 1998
98010740   HUDSON COUNTY, NJ GO 98
98010743   Chico USD, California GO 98 A
98010747   Thomaston(Village of),NY CO 98
98010749   STRATFORD (TOWN OF), CT PEN 98
98010754   Burbank Unified SD, CA GO 97 B
98010756   Kingsburg Joint UHSD, CA GO 98
98010758   Chino Vly USD #51, AZ GO 98 A
98010763   Moscow, Idaho GO Ser 98
98010764   East Haddam (Town of), CT GO98
98010765   MURRIETA VALLEY USD, CA GO 98
98010767   Francis Howell SD, MO GO 98
98010768   Gadsden ISD #16, NM GO Ser 98
98010774   Soledad USD, California GO 98B
98010776   Lakeside Joint SD, CA GO 98 A
98010779   Hanford Elem Sch Dist, CA GO98
98010782   SUNNYSIDE USD #12, AZ GO 1998
98010784   Bellmore UFSD, NY GO 98
98010785   SOMERSET COUNTY, PA GO 1998C
98010786   Genesee Co. NY GO 98
98010787   TUALATIN HILLS PK/REC,OR GO 98
98010789   TAYLOR, TEXAS GO 1998
98010796   Berkeley USD, CA GO 98 Rfd
98010799   Rocklin USD, California GO 98
98010801   Los Angeles, California GO 98
98010803   Mercer Co Imp Auth 98 (Golf)NJ
98010811   Jamul-Dulzura UESD, CA GO 98A
98010814   South Whittier ESD, CA GO 98 A
98010815   Southbridge Town, MA GO LTX 98
 

 

-50-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
98010817     Agawam, MA dtd. 9/1/98
98010820   Northview Pub Schools MI GO 98
98010821   Fremont Unif Sch Dist,CA GO 98
98010824   WOODBURN SD #103, OREGON GO 98
98010826   Town of Pittsford, NY, Ser.‘98
98010829   ROCKVILLE CENTRE,NY GO 98
98010831   Council Rock SD, PA GO 98
98010833   Middletown (Twnshp) PA GO 98
98010838   NEEDLES USD, CALIFORNIA GO 98
98010839   COOK COUNTY, ILLINOIS GO 98A
98010840   EPHRATA AREA SD, PA GO 98
98010842   Sturgeon Bay, WI GO 98
98010843   Palo Verde Unified SD,CA GO98A
98010844   Humboldt USD #22, Arizona GO98
98010847   Hawthorne SD, CA GO 97 Ser B
98010850   Columbus Sch Dist, WI GO 98
98010860   Methuen (Town of) MA GO LMTX98
98010861   East Tawas (City of), MI GO
98010865   Marana USD #6, AZ GO Ref 98
98010868   Bemus Point CSD, NY GO
98010869   Bay Shore UFSD NY GO
98010871   Summit County, OH 98A
98010872   CLARK COUNTY, NEVADA GO 1998
98010873   South Huntington UFSD,NY GO 98
98010875   SELMA USD, CALIFORNIA GO 98
98010881   RIVER PLACE MUD, TEXAS GO 1998
98010883   Washington TWP MUA, NJ GO 98AB
98010884   Washington TWP MUA, NJ GO 98AB
98010885   Washington TWP MUA, NJ GO 98AB
98010887   Elmwood Park Vill, IL GO UT 98
98010889   Richland County OH Ltd GO 98
98010891   Norton (Town of) MA GO Ltd 98
98010892   GLENDALE UN HSD #205, AZ GO 98
98010894   Lindenwold, NJ GO 98
98010896   Watertown USD, WI GO 98
98010900   COLLINGSWOOD, NJ GO 98A
98010903   Peoria USD #11, Arizona GO 98C
98010910   Mississippi State GO 98 U&C
98010913   PEORIA (CITY OF), IL GO 98C
98010914   Miller Place UFSD, NY Ser. ‘98
98010915   Madison ESD #38, Arizona GO 98
98010917   ALPENA PUB. SCHS., MI GO 98
98010922   Mercedes, Texas Ltd Tax GO 98
98010926   Cornwall CSD (NY), Series 1998
98010927   WAPPINGERS CSD, NY GO 98
98010930   Amherst, Oh Lmtx GO 98
98010931   Georgetown (Town) MA LTDGO 98C
98010935   Spotswood (Borough), NJ GO 98
98010936   Athens Cnty, Oh LTD
98010939   Osborn Elem SD #8, AZ GO 1998
98010942   Chicago CSR BOE, Il GO ULT98AB
98010943   Spring Lake Pub School MI GO98
98010944   North Davis Cty SwrDist,UTGO98
98010946   Floral Park-Bellerose UFSD, 98
98010947   Ansonia (City Of), CT GO 98

 

Policy Id

  Policy
98010948     Millbury, MA dtd 10/15/98
98010949   CARSON CITY, NEVADA GO 1998A
98010952   Berwick (Town), ME GO 98
98010953   Pompton Lakes, NJ MUA 1998 D
98010954   Lennox SD, CA GO 98
98010955   ENNIS (CITY OF) TEXAS GO LTX98
98010958   Waterloo CUSD 5, IL GO 98
98010960   Sevierville, Tennessee GO 98
98010969   Lancaster, PA GO 98
98010971   Edwardsburg Public Schools ‘98
98010973   Waupun SD, WI 98
98010978   South Chicago Heights, Ill
98010979   Fraser, MI GO 98
98010980   Clinton (Township), MI GO 98
98010985   Caldwell, Texas Ltd Tax GO 98
98010991   Southern Montgy Co MUD,TX GO98
98010993   Erie County, New York GO 98
98010995   Central Valley S.D.#356, WA 98
98010997   Webster Central SD, NY GO 98
98011001   Geneva (City of), IL GO 98
98011003   CAROL STREAM PARK DIST,IL GO98
98011005   Wyoming City SD, Oh GO 98B
98011009   South Whidbey SD #206,WA GO 98
98011014   Mississippi State GO
98011024   Goodyear, Arizona GO Series 98
98011026   Kittitas Co Pub HD No. 1, WA98
98011027   Hamilton Comm Schs, MI GO 1998
98011032   North Brunswick (Twp) NJ GO 98
98011037   Conroe, Texas CO 98
98011038   Matanuska-Susitna Boro,AKGO98A
98011039   E. Cent Jr Coll Dist MO GO 98
98011040   Westmoreland County, PA GO 98
98011043   BEAVER COUNTY, PA GO 98
98011044   Kent SD #415, Washington GO 98
98011048   Hartford (City of), CT GO
98011050   ATLANTA, GEORGIA GO 1998
98011051   Bordentown (Twp), NJ GO 98
98011053   GREATER CLEVE. RTA,OH LTDGO98R
98011058   Black Horse Pike RSD NJ GO 98
98011059   LAS VEGAS, NV GO Limited 98AB
98011060   Essexville-Hampton PS, Mi 98
98011061   Wasco County, OR GO Rfdg 98
98011065   BENSALEM (TOWNSHIP), PA GO 98
98011066   BENSALEM TWP S D, PA GO 98
98011067   Grant County, IN GO 1998
98011071   Indian Prairie CUSD#204, IL98B
98011073   BRICK TOWNSHIP, NJ MUA 1998
98011075   Miami-Dade Cnty, Florida GO 98
98011076   Ypsilanti Sch. Dist. MI GO 98
98011077   New Haven Unif SD, CA GO 98C
98011078   Wisconsin HeightsSD,WI 12/1/98
98011079   Maple Shade Township, NJ GO 98
98011081   Mass Bay Trans Auth MA GO 98BC
98011082   El Rancho USD, CA GO 98A
98011083   College Place, WA GO 98
 

 

-51-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
98011084     Yakima Sch Dist #7, WA GO 1998
98011087   Harris Cnty MUD #55, TX GO 98
98011090   N. CLACKAMAS SD #12, OR GO 98
98011092   LAREDO, TEXAS LTD TAX GO 98REF
98011093   MARION CNTY, FL LTD AD VALOR98
98011097   Wicomico County, MD GO 1998
98011098   Bensenville, IL GO (AltRev)98A
98011101   Cave Creek USD #93, AZ GO 98
98011103   CLARK COUNTY, NEVADA GO 98A&B
98011104   Ashland (Town of) MA GO 98
98011105   Ware (Town of), MA GO 98
98011107   Stanwood SD No. 401, WA GO 98
98011110   Allegany-Limestone CSD,NY GO98
98011111   Metamora #122 (Taze/Wood), IL
98011112   Washoe County Sch Dist,NV GO98
98011115   Suffolk County, New York 98C
98011116   WEST WINDSOR-PLAINSB.SD,NJ 98
98011117   Southwick, MA dtd 12/15/98
98011118   Chili (Town of) NY GO 98
98011119   Chicago Park Dist IL GO 98ARfg
98011120   Lake County SD No. 103, IL 98
98011123   Hastings Area Sch Sys, MI GO98
98011124   PRESCOTT, ARIZONA GO 1998
98011126   Johnsburg CUSD 12 IL GO 98
98011129   Dakota Comm Unit SD 201, IL 98
98011136   Merriam, Kansas GO 98A & 98C
98011137   South Redford SD MI GO 98
98011142   Sussex, Wisconsin GO 1998
98011145   SOUTH ORANGETOWN CSD, NYGO 98A
98011147   Cuyahoga Falls, OH LTD 98
98011152   MCHENRY COMM CONS SD #15,IL GO
98011153   Suttons Bay PS, Mi GO 98Q-SBLF
98011155   Community Unit SD #5,IL GO 98B
98011156   West Bloomfield SD GO 98 Rfd
98011157   Erie County, Ohio LTD TX 98
98011158   CALIFORNIA STATE GO 12-1-98
98011159   Murphysboro CUSD #186, IL 98
98011162   Highland City, Utah GO 1998
98011164   Uxbridge (Twn), MA GOULT 98
98011165   HAMILTON TWP(ATLANTIC),NJ GO98
98011166   Tolleson UHSD #214, AZ GO 98
98011167   PHILADELPHIA, PA GO 98 RFD
98011168   Huntley CCSD 158 IL GO 98
98011170   Overton County, TN GO 98
98011171   Ossining UFSD, NY GO 98
98011172   East Quogue UFSD NY GO 98
98011173   Dayton (City) Ohio 98
98011177   CASA GRANDE ESD #4, AZ GO 1998
98011179   Wood County, OH Sewer (GO) 98
98011182   Mayfield City School District,
98011183   Polo Comm Unit SD #222, IL 98
98011185   Leesburg, Virginia GO Ser 1998
98011186   Ann Arbor, Mi GO LMTX B.A. 98
98011187   DYERSBURG (CITY OF), TN GO 98
98011188   Woonsocket (City of), RI GO 98

 

Policy Id

  Policy
98011190     Scotland County, NC GO 98
98011191   North Kingstown, RI GO 98A
98020007   NEW YORK CITY, NY GO 98EF
98020013   NEW YORK CITY, NY GO 98EF
98020021   NEW YORK CITY, NY GO 98EF
98020022   New York City, NY GO 98C
98020031   New York City, NY GO 98C
98020033   CALIFORNIA STATE GO 10-1-97
98020034   California State GO 1998
98020035   California State GO 1998
98020036   California State GO 1998
98020037   California State GO 1998
98020038   Hillsboro SD #1J, OR GO Ref 98
98020041   Hawaii State GO 1996 Series CL
98020042   CALIFORNIA STATE GO 10-1-97
98020047   Hawaii State GO 1996 Series CL
98020048   Hawaii State GO-1993 CH & CI
98020051   NEW YORK CITY, NY GO 96FG
98020054   NEW YORK CITY, NY GO 98H
98020055   NEW YORK CITY, NY GO 98H
98020056   NEW YORK CITY, NY GO 98H
98020061   NEW YORK CITY, NY GO 98H
98020062   NEW YORK CITY, NY GO 98H
98020063   NEW YORK CITY, NY GO 98H
98020064   NEW YORK CITY, NY GO 98H
98020067   Hawaii State GO 93 CC & CD
98020081   Hawaii State GO-1992 BY & BZ
98020089   Hawaii State GO-1993 CH & CI
98020096   NEW YORK CITY, NY GO 98EF
98020100   New York City, NY GO 98JK
98020101   New York City, NY GO 98JK
98020102   New York City, NY GO 98JK
98020103   New York City, NY GO 98JK
98020104   New York City, NY GO 98JK
98020106   New York City, NY GO 98JK
98020108   New York City, NY GO 98JK
98020109   New York City, NY GO 98JK
98020110   SANTA MONICA-MALIBU USD,CAGO98
98020111   SANTA MONICA-MALIBU USD,CAGO98
98020113   NEW YORK CITY, NY GO 98H
98020115   New York City, NY GO 98JK
98020116   NEW YORK CITY, NY GO 98EF
98020117   New York City, NY GO 98JK
98020118   New York City, NY GO 99A
98020119   New York City, NY GO 99A
98020120   New York City, NY GO 99A
98020121   New York City, NY GO 99A
98020127   New York City, NY GO 99A
98020129   New York City, NY GO 99A
98020131   New York City, NY GO 99A
98020134   New York City, NY GO 99A
98020135   New York City, NY GO 99A
98020136   New York City, NY GO 99A
98020139   New York City, NY GO 99A
98020144   California State GO 1998
 

 

-52-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
98020147     New York City, NY GO 99C
98020148   New York City, NY GO 99C
98020150   New York City, NY GO 99C
98020151   New York City, NY GO 99D
98020152   NEW YORK CITY, NY GO 98EF
98020153   New York City, NY GO 99C
98020154   NEW YORK CITY, NY GO 98D
98020160   New York City, NY GO 98JK
98020164   New York City, NY GO 99D
98020166   New York City, NY GO 99D
98020167   New York City, NY GO 99C
98020168   New York City, NY GO 99C
98020169   New York City, NY GO 99C
98020170   New York City, NY GO 99A
98020172   New York City, NY GO 99C
98020175   New York City, NY GO 99D
98020179   NEW YORK CITY, NY GO 98G
98020181   NEW YORK CITY, NY GO 97E
98020222   Florida State Bd of Ed GO 98 D
99010003   Stanwood SD No. 401, WA GO 99
99010005   Kandiyohi County, MN GO 99
99010007   Franklin Reg SD, PA GO 99A
99010014   BENSALEM TWP S D, PA GO 99
99010027   New Brunswick Park Auth,NJ GO
99010038   North Marion SD No 15,OR GO 99
99010041   Keller (City of),TX GO Ltd 98B
99010042   Portland, Town of, CT GO 99
99010045   Orting SD #344, WA GO Ser. 99
99010046   DENVER SD #1, CO GO 99
99010047   East Side UHSD, CA GO 99
99010051   Scotland County, NC GO 99
99010052   Sagemeadow Util Dist, TX GO 99
99010053   Dublin City SD, OH GO ULT 99
99010056   Skokie-Fairview SD #72,IL GO99
99010058   Brick TWSP BOE, NJ GO 99
99010060   Allegany-Limestone CSD,NY GO99
99010062   Bunker Hill Vl,TX Ltd Tax GO98
99010063   Philomath SD #17J, OR GO 1999
99010067   Arcola Township, Ill 99
99010068   Tinley Park CCSD #146, IL GO99
99010070   East Hartford (Town) CT GO 99
99010071   MOORESTOWN TWP BOE, NJ GO 99
99010072   Sparta ASD, WI GO 99A
99010074   WAUPACA SD, WI GO 99
99010075   MADISON LOCAL SCH,OH GO 1999
99010076   ALPENA PUBLIC SCHLS, MI GO 99
99010077   Ball-CHATHAM CUSD #5, IL GO 99
99010078   El Paso, TX GO Ref Ltd Tax 99
99010080   Bunker Hill Vlg,TX Ltd Tax 99
99010082   RICHMOND COMM SCHOOLS, MI 1999
99010083   Northampton MUD, TX GO 99
99010084   Cowley Cnty USD #470, KS GO 99
99010086   St. Helens SD#502, OR GO Ser99
99010087   Pflugerville, Texas GO 1999
99010088   Lakeview Comm. Sch. MI GO 99

 

Policy Id

  Policy
99010089     Rockwall (City of), TX GO 99
99010090   Batavia Pub Lib Dist IL GO 99
99010091   Florida State GO 99A
99010092   Weslaco, Texas Ltd Tax GO 98
99010093   Espanola Public SD 45,NM GO 99
99010096   Westville SD2 (Vermilion)IL 99
99010097   Orangeburg Cty Fire, SC GO 99
99010098   PENNSAUKEN TWP BOE,NJ GO 1999
99010099   Troutdale, OR GO 99
99010100   Harker Heights, TX LTGO 99
99010101   Jefferson School District, WI
99010105   Moline Sch Dist #40, IL GO 9
99010107   Stafford Township, NJ GO 99
99010109   Powell, OH GO ULT 1999
99010113   Bridgeport, Texas Ltd Tax GO99
99010115   Sussex County, NJ GO 99
99010118   Stafford Township, NJ GO 99Rfg
99010119   BISMARCK PUB SD #1, ND GO 1999
99010121   NEW HAVEN, CONNECTICUT GO 99AB
99010122   Morton Grove (Village),IL GO99
99010123   Council Rock SD, PA GO 99
99010127   Flemington-Raritan RSD NJ GO98
99010132   Huntington UFSD, NY GO 99
99010135   Wallenpaupack ASD, PA GO 99
99010139   BERKLEY SCHOOL DIST, MI GO 98
99010140   Burrell SD, PA GO 98 Rfdg
99010141   Tewksbury (Town of), MA GO 99
99010144   Hastings Area Sch Sys, MI GO99
99010146   KALAMAZOO CITY SD, MI GO 99
99010147   LINCOLN COUNTY, NC GO Ser. 99
99010148   Ridgefield Park (Village)
99010155   Hopkins Pub Sch, MI GO 99
99010156   Shreveport, LA GO Ref Ser 99
99010157   Willamina Fire Dist., OR GO 99
99010158   Plattsburgh City SD, NY GO 99
99010159   Sulphur Springs, TX GO Ltd 99
99010160   Anchorage, Alaska GO 1999
99010162   ROCKFORD (CITY OF), IL GO 99
99010164   Bradley Cnty, Tennessee GO 99
99010165   SMITHFIELD CITY, UTAH GO 1999
99010168   Kinnelon BOE, NJ dtd 2/1/99
99010169   Chicago CSR BOE, Il GO ULT 99A
99010170   Rose Tree Media SD, PA GO 99
99010173   Willamalane Prk & Rec Dist, OR
99010177   Oshkosh (City of),WI GO 99ABC
99010178   Pleasant Valley SD, PA GO 99
99010179   Evesham Twp BOE, NJ GO 99
99010180   MEIGS COUNTY, TENNESSEE GO 99
99010185   South Colonie CSD, NY GO 99
99010186   Anchor Bay SD, MI GO 99
99010188   Wild Rose SD, WI GO
99010193   Blue Ridge CUSD#18, IL
99010196   Reynoldsburg, OH GO 99
99010197   Chicago Park Dist IL LTDGO 99A
99010198   Chicago Park Dist, IL ALTGO99B
 

 

-53-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
99010199     HOLLY AREA SCH DIST, MI GO 99
99010200   SPRING HILL USD #230, KS GO 98
99010201   Cornerstones MUD, TX GO 99
99010202   Westside Union SD, CA GO 99
99010203   Rochester SD #3A, Il GO 99
99010204   MONTOUR SD, PA GO99
99010205   Ocean Twp. BOE, NJ GO 98
99010207   Chicago PBC, Il BOE GO 99B
99010209   Lincoln-Way CHSD#210,IL IDA GO
99010210   Ojai USD, California GO Ser97B
99010213   Newport, OR GO Ser. 99
99010216   Tillamook County, OR GO 1999
99010217   Klamath County, Oregon GO 99
99010218   CALIFORNIA STATE GO 2-1-99
99010219   Kinnikinnick CCSD131, Il GO 99
99010220   Caledonia Comm School MI GO 98
99010221   CLEAR LAKE C.WTR AUTH,TX GO 99
99010224   Sussex County, NJ GO 99 Rfdg
99010226   Mt. Zion CUSD #3 IL GO 99
99010227   Allegany-Limestone CSD,NY GO99
99010228   Lake Jackson, TX GO Ltd Tax 99
99010230   GRAPEVINE, TEXAS GO 1999
99010234   St. George, Utah GO 1999
99010236   Crawford Central SD, PA GO 99
99010238   Spring Lake Pub School,MI GO99
99010239   Fort Bend Co. LID #2, TX GO 99
99010240   Massapequa UFSD, NY GO 99A
99010242   Matanuska-Susitna Boro,AKGO99A
99010243   Lemon Grove SD, CA GO 99 Ser A
99010245   Terrell, Texas GO LTX 99
99010246   Ellington (Town of), CT GO 99
99010247   Omro SD, WI GO 99
99010248   CLARK COUNTY, NEVADA GO99A,B,C
99010250   CHICAGO (CITY OF), IL GO 1999
99010251   West Hills CCD, CA GO Ser 99A
99010252   Wyoming Public Schls, MI GO 99
99010253   Washington State GO R-99A
99010254   Brooklyn, Oh Lmtx GO 99
99010259   Evergreen SD #114, WA GO 1999
99010260   North Attleborough, MA LTDGO99
99010261   Lyons SD103, Il GO Lmtx
99010262   Southwest Licking LSD, OH GO99
99010263   Harris County MUD #360,TX GO99
99010264   Albany, Oregon GO Series 1999
99010265   Stearns County, MN GO 1999
99010267   Shawano (City of), WI GO 99
99010268   Hart Public Schools, Mi GO99
99010269   SULLIVAN COUNTY, NY GO 99
99010271   Spring Cove SD, PA GO 99A&B
99010272   Shreveport, LA GO Series 1999
99010275   Dobbs Ferry (Village),NY GO 99
99010276   WASHOE COUNTY, NV GO 1999 B
99010277   Pilot Point, TX GO/COO 99
99010279   East Detroit Pub Sch, MI GO 99
99010282   Wappingers CSD, NY GO 99

 

Policy Id

  Policy
99010283     Butler Cnty USD #205, KS GO 99
99010284   Fremont, OH GO LMTX 1999
99010286   East Ouachita SD, LA GO 1999
99010287   Illinois State GO 99
99010293   Plaquemines Parish, LA, GO 99
99010294   Penn (Twn), Pa GO 99
99010298   Bethel Park, PA GO 1999AB
99010299   Santa Cruz, California GO 99B
99010301   Platteville (City of),WI GO 99
99010302   Sweetwater, Texas Ltd GO 1999A
99010304   Montgomery, IL Alt. Rev. 99A&B
99010305   Anchorage, Alaska GO Series99A
99010307   Eagle Cnty SD Re.50J, CO GO 99
99010308   Washington Cnty TN GO 1999A
99010311   Honolulu, Hawaii GO 99A,B,C
99010312   Honolulu, Hawaii GO 99D
99010313   CHICAGO (CITY OF),IL GO99 911
99010320   Kenosha (City of) WI GO 99A
99010321   LACKAWANNA COUNTY, PA GO 1999
99010322   Ridley School District PA GO99
99010325   Ossining UFSD, NY GO 99
99010326   Edmonds SD #15, WA GO 1999
99010327   Biddeford, ME GO 99
99010328   St. Peters (City of), MO GO 99
99010329   Dorchester County, SC GO 1999
99010330   San Angelo, TX GO Ltd Tx Ref99
99010332   Triton Reg SD MA GO 99
99010335   North Brunswick(Twp) GO 4/1/99
99010337   Ohio Township, PA GO 1999
99010338   Francis Howell SD, MO GO 99
99010339   Bastrop, TX GO 99
99010341   COOK COUNTY,IL GO99AB
99010343   Elyria, OH GO Limited Tax 99
99010346   Onondaga Central SD, NY GO 99
99010348   Moreland SD, CA GO 1999 F
99010351   TOMS RIVER (BOE Reg’l), NJ 99
99010352   Douglas County SD Re1, CO GO99
99010353   Heyworth CUSD #4, IL GO 99
99010354   NORTH HEMPSTEAD(TOWN), NY GO99
99010357   Newburyport, MA GO 99
99010360   Hueneme SD, California GO 97 B
99010361   Dracut (Town of) MA Ltd GO 99
99010363   Penn Cambria SD, PA GO 99
99010364   GIRARD SCH DIST, PA GO 99A/B
99010365   Wadsworth City SD, OH GO 99
99010367   SOUTHWEST LOCAL SD, OH GO 99
99010368   Lodi, NJ GO 99
99010373   Charles Stewart MottCC,MI GO99
99010376   Pittsgrove Twp BoE, NJ 99
99010377   Jenison Public Schools,MI GO99
99010380   Taconic Hills CSD, NY GO 99
99010382   Perry Comm.SD, IA GO Ref 99A
99010385   Keller, TX GO Refg LT 1999
99010386   Maui County, HI GO 1999 Ser A
99010388   Worth (Village) IL ALT GO 99A
 

 

-54-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
99010389     Worth (Village), IL Ltd GO 99B
99010390   Dudley-Charlton RSD MA GO 99A
99010392   Dudley-Charlton RSD MA GO 99B
99010395   Pine River Area Sch,MI QSBLF99
99010397   Kyrene ElementarySD#28,AZ GO99
99010398   SOUTHWEST LOCAL SD, OH GO 99B
99010399   Penn Hills, PA GO 99
99010400   Columbia County, OR GO 1999
99010403   Lake County CCSD #24,IL GO 99B
99010408   Fredericksburg, TX GO Ltd Tx99
99010410   Fairfield County, OH GO 99
99010411   San Diego Unified SD, CA GO 99
99010416   Somerdale Bd Of Ed, NJ GO 99
99010417   Pine Hill (Boro) BOE, NJ GO 99
99010418   Palmyra (Vlg), NY GO 99
99010419   Kenosha (City of) WI GO 99C
99010420   Will Co Forest Prsv Dist, 99AB
99010421   Colleyville, TX COO Ltd Tax 99
99010422   Wheeling (Village),IL GO 99A&B
99010423   Oak Park SD #97, IL GO 99
99010425   Otsego County, NY GO Ref 99
99010426   WEST VIRGINIA STATE GO 99A
99010427   Champaign County, IL GO 99
99010430   Aurora West SD #129, IL GO 99
99010432   HARRIS COUNTY MUD #6, TX Ser99
99010434   Ross Valley SD, CA GO ULT 1999
99010435   BEAUMONT, TX GO Ltd Tax 1999
99010436   Regional SD #14, CT GO 99
99010437   Southgate CSD, MI GO 99 QSBLF
99010439   Memphis CS, Mi GO Q-SBLF 99
99010440   Ravenna Pub Sch, MI GO 99
99010442   Lancaster Sch. Dist., CA GO 99
99010443   Yonkers, New York GO 99B & 99C
99010446   Neoga CUSD #3(Cumberland),IL99
99010448   Fond du Lac SD, Wi GO 99
99010450   Santa Monica-Malibu USD,CAGO99
99010451   Cypress-Klein UD, Texas Ser 99
99010453   Somonauk CUSD #432, IL GO 99
99010463   Monroe (Township), NJ GO 1999
99010467   Rockford (City), IL GO 99 ABC
99010468   Northvale (Boro) NJ GO 1999
99010471   Dallas (City of), OR GO 99
99010473   Tri Valley CUSD #3, Ill GO 99
99010474   St Clair County, IL GO 1999
99010475   Hopatcong (Boro of), NJ GO 99
99010477   Alwood CUSD #225, IL GO
99010481   Highland (Charter Twp),MI GO99
99010482   Williamsburg County, SC GO 99
99010483   CHEEKTOWAGA (TOWN OF),NY GO 99
99010486   Fort Dodge, IA GO 99
99010487   SUMMIT HILL S.D. #161,IL GO 99
99010490   BILMA PUB UTIL DIST, TEXAS GO
99010491   Cleveland, Tennessee GO Ser 99
99010492   DULUTH (CITY OF), MN GO 99CD
99010494   Homer Twp, Il GO 99

 

Policy Id

  Policy
99010495     Washington County, MD GO 1999
99010498   Olentangy LSD, OH GO 1999
99010500   Rio Elementary SD, CA GO 97 B
99010502   Cecil County, Maryland GO 99
99010503   Rio Elementary SD, CA GO 97 C
99010505   Earlville CUSD#9, Il GO ULT 99
99010506   LANCASTER SCH DIST, PA GO 99
99010508   Chippewa Hills SD,MI GO 99
99010509   Albion CSD, NY GO 99
99010510   Ela Area Pub Lib Dist, IL GO99
99010514   Haverhill (City of), MA GO 99
99010520   Marlborough (City), MA GO 99
99010521   East Providence, RI GO 99
99010523   Illinois State GO 1999
99010524   Rancocas Valley RHSD, NJ GO 99
99010526   North Hanover (Twp), NJ GO 99
99010527   Lansing (Village of)ILGO99Rfdg
99010528   Baden (Borough) PA GO 99 Rfdg
99010529   Horry County, SC GO Series 99
99010531   Urbana SD #116, IL GO 1999C
99010532   Chrisman CSD#6, Il GO 99
99010535   Connecticut St GO & Lease 99A
99010538   Hutchinson, Kansas GO 99
99010539   Genoa Area LSD OH GO 99
99010541   Highland CUSD #5, IL GO 99
99010542   Windham, Conn. GO 99
99010543   East Windsor (Twp), NJ GO 99
99010544   WASHINGTON UNION HSD, CA GO 99
99010545   HADLEY, MASSACHUSETTS GO 99
99010548   Woodbridge (Twp), NJ GO 99
99010549   Coachella Val Wtr Dist54 Ser99
99010550   Coachella Val Wtr Dist55 Ser99
99010551   Coachella Val Wtr Dist58 Ser99
99010552   Sag Harbor (Vill of), NY GO 99
99010553   WILLITS USD, CA GO 1999
99010554   Windham School Dist, NH GO 99
99010558   Dumont (Boro), NJ GO 99
99010559   Rock Island Cnty, Ill GO 99
99010560   WEBB COUNTY, TEXAS GO 1999
99010561   Danvers, MA LTD GO 99
99010563   Prairie State CD 515, Il GO
99010566   LOGAN TWP SCH DIST, NJ GO 99
99010570   Maricopa USD #20, AZ GO Ser99B
99010571   Keller (City of), TX COO LT 99
99010574   Bridgewater (T),MA LTX 7/15/99
99010575   Peotone CUSD #207-U IL GO 99
99010576   Lindenhurst UFSD, NY GO 99
99010577   Alta Loma Sch Dist, CA GO 99A
99010580   Hudson, MA GO LT dtd 7/15/99
99010581   LAREDO, TEXAS GO SER 1999
99010582   Clark County SD, NV GO 1999B
99010584   Madison Dist Pub Sch,MIGORef99
99010586   Toledo (City of), OH GOLT 99
99010587   Woburn (City), MA GO 99
99010589   Norfolk, Virginia GO 1999
 

 

-55-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
99010591     North Las Vegas, NV GO 1999
99010597   Pontiac City SD, MI GO 99
99010598   North Colonie CSD, NY GO 99
99010606   Medina City SD, OH GO 99
99010607   Zeeland Public Schools, MI 99
99010608   GARDNER, KANSAS GO 1999A
99010609   Clark County SD, NV GO 1999A
99010611   Visalia Unified SD, CA GO 99 A
99010614   Southern Platte FirePD,MO GO99
99010618   Tehachapi Unified SD, CA GO99A
99010619   Sugar Land, TX Ltd Tax GO 99
99010620   Winslow Twp BOE, NJ GO 99
99010621   Levittown UFSD, NY GO 99
99010622   South Pasadena USD, CA GO 99C
99010623   Montabella Comm Schs, MI GO 99
99010624   Calhoun CSD#40, IL GO ULT 99
99010625   Fairview Park, OH GO LTD 99
99010627   Gloucester (City of) MA GO 99
99010628   OAK GROVE SD, CA GO 1999 CABS
99010629   Merced Union High SD CA GO 99A
99010634   Sherrard CUSD #200, IL GO 99
99010635   Walla Walla SD#140, WA GO 1999
99010637   Gloucester Twp BOE, NJ GO 99
99010638   Rocklin USD, CA GO 99 CIBs
99010640   Springboro (City)OH GO 99A&B
99010644   Brownsville, TX Ltd Tax GO99AB
99010645   Blount County, TN GO Ser 1999
99010647   Bergenfield (Boro) NJ GO 99
99010648   Bellmead, Texas GO 1999
99010650   Genesee Co., NY GO 99
99010651   Tempe UHSD #213, AZ GO Ser 99B
99010652   Cleveland (City), OH GO LTD 99
99010653   San Bernardino City USD, CA GO
99010655   Clarkstown (Town), NY GO 99
99010659   Mendota Twp. HSD #280, IL 99
99010660   LAREDO, TEXAS GO 1999A & B
99010661   Mauston SD, WI GO
99010662   Butterfield Park Dist, IL GO
99010673   Wiseburn SD, CA GO 99
99010675   Northville (Township of) MI
99010678   Raritan (Twp of), NJ GO 1999
99010681   Laurens County SD #55, SC GO
99010684   Carson City, NV Ltd Tax GO 99A
99010685   Carson City, NV Ltd Tax GO 99B
99010687   Evergreen Local SD, OH GO 99
99010689   Camden County Imp Auth,NJ 99
99010696   Bedford (City) OH 99
99010697   Union County, NC GO Ser 99 A&B
99010698   Kiel Area SD WI GO 99
99010699   Brownsville, TX Ltd Tax GO 99B
99010700   Lake Tahoe USD, CA GO 99A
99010703   Baldwin UFSD, NY GO 99
99010704   Gadsden ISD #16, NM GO 1999
99010705   Union County, NC GO Ser 99 B
99010706   Agawam, MA dtd 9/1/99

 

Policy Id

  Policy
99010708     Carl Sandburg CCD #518, Il 99A
99010710   Apache Junction USD #43, AZ GO
99010711   Flower Mound, TX GOLT/COO 1999
99010712   Kimberly Area SD, WI GO 99
99010713   Suffolk County, N Y GO 99B
99010715   Gaylord (City), MI GO 99
99010716   McLennan Jr. College, TX 99
99010719   Copperas Cove (City), TX LTD99
99010720   Park City, Utah GO 1999
99010721   Brunswick City SD, OH 1999
99010722   Avon Lake City SD, OH GO 99
99010724   Long Creek Twp,IL Bond Bank 99
99010726   Richmond, TX GO Series II 1999
99010728   TORRINGTON (CITY OF), CT GO 99
99010731   Springfield (City) OH 1999
99010733   Rhode Island (State Of) GO 99A
99010734   East Meadow UFSD, NY GO 99
99010735   Huron City SD, OH GO 99
99010739   Lexington Cnty SD #4, SC GO 99
99010740   Port Jervis, NY GO 99
99010741   Myrtle Beach, SC GO 99
99010744   Nevada St GO Col Rvr Comm 99A
99010745   Inglewood Unified SD, CA GO99A
99010748   Calumet (City of), IL GO 99B
99010756   Plainfield (City), NJ GO 99
99010761   Sun Prairie Area SD, WI GO 99
99010762   Erie County, Ohio LTD TX 99
99010763   Manhattan Beach USD, CA GO 99C
99010764   Lake In The Hills (Vlg of), IL
99010771   Erie County, New York GO 99
99010773   Defiance (Co.) OH LTD 99
99010777   Streetsboro, OH Series 1999
99010780   Richwood, TX Ltd Tax 99
99010782   Centerville, OH GO Ltd Tax 99
99010784   Brea Olinda USD, CA GO Ser 99A
99010787   Richland County, OH Ltd GO 99
99010791   Monona Grove SD, WI GO 99
99010792   Lamont SD, CA GO 1999 Series A
99010793   The County of Marion, IL GO 99
99010795   Chicago Park Dist, IL Aq+Mu 99
99010798   Pima County, Arizona GO Ser 99
99010801   Middletown (City of)OH GOLTD99
99010802   Incline Vg Gen ImpDist,NV GO99
99010803   Arnold (City), PA
99010804   Tuckahoe UFSD, NY GO 99
99010805   Wylie, TX LT GO 1999
99010806   Tahoe Truckee USDSFID1,CA GO99
99010807   Tahoe Truckee USDSFID2,CA GO99
99010809   Hillsboro, IL GO (Alt Rev) 99
99010814   Las Vegas, Nevada GO Ltd Tax
99010818   Northampton (City), MA GOLT 99
99010821   Illinois State GO Series 10/99
99010822   Clinton (County), IL GO 99
99010824   Troy City SD, NY GO 99
99010825   Lima (City), OH LTD GO 99
 

 

-56-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
99010827     Leander (City) TX 99
99010828   Summit County, OH 99
99010830   Elko, Nevada GO Ltd Tax 99 A&B
99010839   MONTGOMERY CNTY MUD#47,TXGO99
99010840   Chichester SD, PA GO 99
99010841   Anchor Bay SD, MI GO 99I
99010844   Marion County, Tennessee GO 99
99010847   California State GO 10-1-99
99010849   Washington Cnty, TN GO 99B
99010852   Charleroi Area SD, PA GO 99
99010854   Berlin (Town of), MA GO 99
99010855   Rockland (County of), NY GO 99
99010856   Hamilton Co. CUSD #10, IL 99
99010857   Florida State Bd of Ed GO 99C
99010858   Dalton-Nunda CSD, NY GO 99
99010859   Norway-Vulcan Area School MI
99010860   Romulus Comm Schs, MI GO 99
99010864   Bayville (Vlg) NY GO 99
99010865   Voorhees (Twp), NJ GO 99
99010869   Cranston, RI GO 99
99010870   Holyoke (City of), MA GOLT 99
99010873   Berrien Sprgs Pub Sch, MI GO99
99010875   Canton Bldg Auth (Twp), MI GO
99010876   Kaleva Norman Dickson SD,MI GO
99010877   Manistee Area Pub Schs, MI GO
99010878   Delanco (Township) NJ GO 99
99010879   Chicago (City of), IL GO 99
99010880   Miami-Dade County,Florida GO99
99010881   Centreville Pub Schls, MI GO99
99010882   Boyne City Pub.Schools,MI GO99
99010883   Canon-McMillan SD, PA GO 99
99010884   Ketchikan Gateway Bor,AK GO 99
99010889   Shreveport, LA GO Series 99A
99010891   HILTON HEAD ISLAND, SC GO 99A
99010893   Brimley Area Schools, MI GO 99
99010894   Jonesville Comm. Sch, MI GO 99
99010895   Ipswich (Town) MA GO LTD
99010896   St. Michael (City), MN GO 99
99010898   Mesa, AZ GO 1999
99010901   Comstock Park PS, MI GO 99
99010906   Kingston (Town), MA GOLT 99
99010910   Johnson & Union Cos CUSD 1, IL
99010916   Geneva (City of), IL GO 99
99010919   Eastern York SD, GO 99
99010923   Derry Coop SD, NH dtd 11/15/99
99010927   Mount Olive TWP, NJ GO 99
99010928   Allentown City SD, PA GO 99AB
99010929   Vernon (Twp) BOE, NJ GO 99
99010931   SUNNYSIDE USD #12, AZ GO 99
99010934   OXFORD, CONNECTICUT GO 99
99010937   Clementon, NJ GO 1999
99010939   Uniondale Union Free SD, NY 99
99010940   Northwestern MI Coll GO 99
99010942   Holliston (Town), MA GO 99
99010947   Oak Lawn (Village), IL GO 99

 

Policy Id

  Policy
99010950     Quincy, Illinois GO 99
99010951   Tempe ESD #3, AZ GO Ser E (99)
99010955   Mercer Co Imp Auth Pkg,NJ 99AB
99010956   Clear Brook City MUD, TX GO 99
99010957   Burrillville (Town), RI GO 99
99010960   Colony, Texas Ltd Tax GO Ser99
99010962   Waxahachie, TX GO Ltd Tax 99
99010966   Upper Saddle River BOE, NJ GO
99010967   South Brunswick Twp BOE, NJ 99
99010968   Middleborough (Town) MA GO A
99010971   Barnegat (Twp), NJ GO 99
99010972   Littleton (Town of) MA 99 LMTX
99010973   Salem County, NJ GO 99
99010975   Wicomico County Maryland GO 99
99010976   Lumberton, NJ GO 99
99010980   Willow Springs,IL Alt Rev GO99
99010984   Northport Pub. Sch., MI GO 99
99010985   Union Elementary SD, CA GO 99A
99010988   St Clair County, MI LTD
99010991   Amphitheater USD #10, AZ GO 99
99010993   Lancaster County, SC GO 99
99010994   Merrimac (Town), MA GO 99
99010996   Mercer Co Imp Auth ArenaNJ 99A
99010998   Billerica (Town), MA GOLT 99
99011000   Suffolk County, NY GO 99C
99011001   Mount Kisco (Vlg), NY GO 99
99020002   Florida State Bd of Ed GO 98 D
99020007   New York City, NY GO 98JK
99020008   New York City, NY GO 99E
99020009   New York City, NY GO 99E
99020010   New York City, NY GO 99E
99020011   New York City, NY GO 99E
99020012   New York City, NY GO 99E
99020013   New York City, NY GO 99E
99020014   New York City, NY GO 99E
99020016   NEW YORK CITY, NY GO 98EF
99020020   New York City, NY GO 99 F/G
99020021   New York City, NY GO 99 F/G
99020022   New York City, NY GO 99 F/G
99020023   New York City, NY GO 99 F/G
99020024   New York City, NY GO 99 F/G
99020025   New York City, NY GO 99E
99020026   New York City, NY GO 99E
99020027   New York City, NY GO 99E
99020029   New York City, NY GO 99 F/G
99020030   New York City, NY GO 99E
99020031   New York City, NY GO 99 F/G
99020032   New York City, NY GO 99E
99020033   New York City, NY GO 98JK
99020035   New York City, NY GO 99E
99020037   New York City, NY GO 99 F/G
99020038   New York City, NY GO 99 F/G
99020039   New York City, NY GO 98C
99020040   New York City, NY GO 99E
99020044   New York City, NY GO 99 F/G
 

 

-57-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
99020045     New York City, NY GO 99 F/G
99020047   NEW YORK CITY, NY GO 98EF
99020048   New York City, NY GO 99 F/G
99020049   New York City, NY GO 99 F/G
99020050   NEW YORK CITY, NY GO 97B,C,&D
99020052   New York City, NY GO 99 F/G
99020054   New York City, NY GO 99E
99020062   CALIFORNIA STATE GO 12-1-98
99020073   CALIFORNIA STATE GO 10-1-97
99020086   CALIFORNIA STATE GO 4-1-99
99020089   New York City, NY GO 99H
99020091   New York City, NY GO 99I
99020092   New York City, NY GO 99I
99020105   NEW YORK CITY, NY GO 98EF
99020133   New York City, NY GO 99J
99020135   New York City, NY GO 99J
99020136   New York City, NY GO 99I
99020140   New York City, NY GO 99KL
99020141   NEW YORK CITY, NY GO 98EF
99020142   New York City, NY GO 99H
99020148   New York City, NY GO 99KL
99020155   NEW YORK CITY, NY GO 98EF
99020160   New York City, NY GO 99J
99020163   New York City, NY GO 99H
99020164   New York City, NY GO 99 F/G
99020166   Los Gatos-Srtga JUHSD,CA GO98A
99020168   New York City, NY GO 99 F/G
99020171   North Charleston, SC GO Ser 99
99020172   North Charleston, SC GO Ser 99
99020179   NEW YORK CITY, NY GO 98EF
99020216   New York City, NY GO 99 F/G
99020217   New York City, NY GO 99 F/G
99020227   New York City, NY GO 99KL
99020230   NEW YORK CITY, NY GO 98D
99020231   New York City, NY GO 99H
99020244   Connecticut St GO & Lease 99B
99020245   New York City, NY GO 99A
99020253   New York City, NY GO 99E
99020255   New York City, NY GO 99H
99020263   NEW YORK CITY, NY GO 98D
99020266   NEW YORK CITY, NY GO 98EF
99020267   New York City, NY GO 98JK
99020271   NEW YORK CITY, NY GO 98AB
99020272   NEW YORK CITY, NY GO 98D
99020278   Los Angeles, California GO 98
93010199   Grand Rapids, MI Wtr System 92
94010451   ORANGE & ROCKLAND UTIL, FWD 94
00010001   Beaufort-Jasp Co W&S Rev 2000
00010002   Beaufort-Jasp Co W&S Rev 2000
00010024   Beaufort-Jasp Co W&S SRF93 Sur
00010025   Beaufort-Jasp Co W&S Sur SFR96
00010026   Beaufort-Jasp Co WS SRF98A Sur
00010027   Beaufort-Jasp Co WS SRF98B Sur
00010063   Florida State BOE Lottery 99A
00010064   Florida State BOE Lottery 99A

 

Policy Id

  Policy
00010067     Miami-Dade Co Exp Auth FL 2000
00010069   Beaufort-Jasp W&S, SC Sur 00B
00010075   Chandler, AZ Water & Sewer 00
00010080   Univ of Ill South Campus 2000B
00010087   Jacksonville Prt Au,FL Apt00AB
00010091   Boulder Co.,CO Sls&Use Tax00AB
00010092   Boulder Co.,CO Sls&Use Tax00AB
00010093   Kansas City, MO Wtr Rev 2000A
00010111   Florida Dept. of Tran. 2000A
00010113   Albany, NY Muni Wtr Auth 1999A
00010116   Galveston, TX Wtr & Swr Rev 00
00010130   Colorado Wtr Res Dev Auth 00A
00010135   Paris, TX Wtr/Swr Rev 2000
00010137   New York LGAC Sales Tax Surety
00010151   Dallas/Ft Worth Int’l Arpt 00A
00010159   Tucson, AZ St&Hwy Jr Lien 2000
00010161   ESCONDIDO, CA WTR REV COPS 00
00010175   Florida St BOE Lottery 2000A
00010176   Florida St BOE Lottery 2000A
00010179   UNIV. OF CONNECTICUT G0 2000
00010196   DADE CNTY, FL AVIATN REV 00A&B
00010197   Maine Turnpike Authority Rev00
00010200   Maine Turnpike Authority Rev00
00010221   Port of Oakland, CA Rev 2000K
00010222   Atlanta, GA. Airport Rev 00ABC
00010223   Atlanta, GA. Airport Rev 00ABC
00010225   Atlanta, GA. Arpt Sr. Surety
00010226   Atlanta, GA Air. Rev 2000C For
00010235   Columbia Cnty, GA Wtr&SwrSer00
00010237   FLORIDA PRSRV 2000,DOC STAMP00
00010263   College Station, TX Util 2000
00010277   Surprise AZ MuniPropCo Sltx 00
00010278   Surprise AZ MuniPropCo Sltx 00
00010279   Beaufort-Jasp W&S, SC Sur 00C
00010287   Westview ElementarySBC IN 2000
00010288   Upper Trinity Reg WtrRev TX00B
00010298   Clinton Ctl Sch Blg Corp,IN 00
00010300   Pompano Beach, FL Wtr & Swr 00
00010303   Minneapolis-St.Paul ArptRev 00
00010314   Upper Trinity RegWtrRev,TX 00A
00010317   Fresno, CA Sewer 2000A Sub.
00010318   Shreveport, LA W&S Rev 2000A
00010326   Rhode Island EDC (Arpt) 00AB
00010349   Hawaii - Airport Sys Rev 1999A
00010360   Phoenix Cv Imp Corp Wstewtr 00
00010388   Knox Middle SBC, In Lease 2000
00010392   Des Moines, IA Parking 00AB
00010394   Florida St BOE Lottery 2000B
00010395   Florida St BOE Lottery 2000B
00010396   Daytona Beach, FL W/S SSGFC 00
00010398   Arizona Brd of Regents (ASU)00
00010399   Sacramento Reg. CSD, CA 2000AB
00010404   Trinity Rvr 10Mile Creek TX 00
00010409   Univ of WV-Sys Rev Marshall00B
00010412   Fl Brd of Reg (U of FL) Hsg 00
 

 

-58-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
00010413     Fl Brd of Reg (U of FL) Hsg 00
00010416   Martin County, FL Wtr/Swr Sys
00010424   Hollywood, FL Non-Ad V SSGFC00
00010429   Glendale, Arizona W&S Rev 2000
00010430   Glendale, Arizona W&S Rev 2000
00010432   Tulsa Airports Improv Trust00A
00010433   Tulsa Airports Improv Trust00A
00010462   Peoria, AZ W&S Rev Series 2000
00010463   Peoria, AZ W&S Rev Series 2000
00010465   Milwaukee Co WI Arprt Rev 00A
00010468   Brownsburg Comm Sch Corp,IN 00
00010472   Henry Co Wtr Swr Auth, GA 2000
00010487   Wichita, KS Wtr/Sew KDFA Loan
00010489   Wichita, KS Wtr/Sew KDFA Loan
00010493   Fountain Hills,AZ MPC Excise00
00010494   Fountain Hills,AZ MPC Excise00
00010503   Peoria (City of), AZ WIFA00-02
00010512   North Harris Mntg CCD,TX Rev00
00010513   North Harris Mntg CCD,TX Rev00
00010521   New York ST Thruwy Auth 2000B
00010525   Tucson, Arizona Wtr Sys Rev 00
00010527   William Paterson Univ 2000A
00010536   Gladstone, MO Wtr & Swr 2000
00010541   Florida St BOE Lottery 2000C
00010542   Florida St BOE Lottery 2000C
00010551   Houston, TX Water & Sewer 00 B
00010560   Palm Beach Co, FL Non-Ad Vl 00
00010577   Beaumont, TX Wtr & Swr Rev 00
00010578   Beaumont, TX Wtr & Swr Rev 00
00010580   Regional Trans Auth, LA Sur 91
00010591   Phoenix, AZ Excise Tax Sub. 00
00010617   Connecticut SpeclTax 2nd Ln 00
00010628   Riverton, UT Wtr Rev Ref 2000B
00010632   Melbourne (City of), FL WS 00A
00010643   Portland, OR SWR SYS Rev 2000A
00010651   Concord Cmty Sch BldCrp,INLS00
00010668   Citrus Heights Wtr Dist, CA 00
00010669   Hendersonville UD,TN Wtr & Swr
00010670   Hendersonville UD,TN Wtr & Swr
00010680   Pinellas Cnty, FL Sales Tax 00
00010681   Pinellas Cnty, FL Sales Tax 00
00010698   Stafford EDC, TX Sales Tax 00
00010699   Stafford EDC, TX Sales Tax 00
00010709   Winter Springs,FL Wtr & Swr 00
00010715   Rowan Univ, NJ (NJEFA) GO 00B
00010719   Mandeville, LA Sales Tax 2000
00010724   West Ouachita PSD, LA SlsTax00
00010734   GRAND VALLEY UNIVERSITY, MI 00
00010735   Orlando-Orange Co Exp,FLjrsrty
00010744   Mesa, Arizona Utlt. Sys. Rev00
00010745   Mesa, Arizona Utlt. Sys. Rev00
00010747   Lafayette, LA Sales Tax 2000A
00010748   Lafayette, LA Sales Tax 2000B
00010751   McKinney, TX Wtr&Swr Rev Ser00
00010762   Richmond, VA Metro Auth 00

 

Policy Id

  Policy
00010765     Long Beach (Port of), CA 2000A
00010766   Miami Beach, FL Stormwtr Rev00
00010767   Miami Beach, FL Stormwtr Rev00
00010768   Portage, Indiana Lease 2000
00010777   Grand Rapids, MI Wtr Sys Rev00
00010789   Eastern Michigan Univ Ser B 00
00010790   Grand Rapids, MI Wtr Sys Rev00
00010799   Boise, ID Airport Rev COP 2000
00010801   Houston Arpt Sys,TX Rev 2000Sy
00010802   Boise, ID Airport Rev COP 2000
00010812   Beaufort-Jasp Co WS SC Sur 00D
00010815   Houston Arpt, TX Rev CP 2000Sy
00010820   Shelby Court BC, IN Lease 00
00010826   Lawrence Fire St. Corp, IN 00
00010831   Port St. Lucie, FL Gas Tax 00
00010832   Port St. Lucie, FL Gas Tax 00
00010834   Tyler (City of), TX Wtr&Swr 00
00010841   Tyler (City of), TX Wtr&Swr 00
00010851   Los Angeles CMTA PropC SlsTx00
00010856   Gallup, NM Sales Tax 2000
00010857   Gallup, NM Sales Tax 2000
00010862   Terrebonne Parish, LA ST-2000
00010869   Lakeland, FL (SSGFC) Non-Ad 00
00010873   Albany, GA Water Rev 2000
00010875   Bowling Green St.U,OH Gnrct 00
00010877   Florida Dept of Transpor 2000B
00010889   DASNY CUNY 2nd Res 2000B
00010890   DASNY CUNY 4th Res 2000A
00010899   Albany, GA Water Rev 2000
00010901   Iowa City, IA Water Revenue
00010908   San Francisco, CA Arpt 26A&26
00010910   Regional Trans Dist,CO SlsTx00
00010911   Regional Trans Dist,CO SlsTx00
00010924   Marshall, TX Wtr & Swr 2000
00010947   Albany County Arport Auth, NY
00010952   North Montgomery HSBC, IN 00
00010954   Westmoreland Co MA, PA W&S 00A
00010955   Santa Rosa Co, FL Exc Tax 2000
00020001   STATE UNIV/DASNY, NY LEASE 93A
00020018   San Francisco BART,Sales Tax98
00020034   MASS WATER RESOURCES 1993 C
00020038   Wisconsin (State)Motor Veh 98A
00020041   New York, NY Muni Wtr Auth 98D
00020042   San Francisco BART,Sales Tax98
00020043   DASNY CUNY Cons 3rd Res 98-1
00020044   DASNY CUNY Cons 3rd Res 98-1
00020061   STATE UNIV/DASNY, NY LEASE 93A
00020068   Sacramento Reg. CSD, CA 2000AB
00020076   Mass Port Authority 98ABC Sr
00020081   Illinois (State), SalesTax 97Y
00020127   New York City TFA 98C
00020139   Long Beach (Port of), CA 2000A
01010012   Avon 2000 Sch Bldg Corp, IN 01
01010015   North Montgomery HSBC, IN 01
01010017   Westmoreland Cnty MA,PA 01A
 

 

-59-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
01010021     University Central FL, Hsg 00
01010022   University Central FL, Hsg 00
01010026   Jacksonville Elec FL W&S 2001A
01010043   Colorado Wtr Res Dev Auth 01A
01010053   Hollywood, FL Non-Ad Vlm
01010068   Pleasant Grove, UT Gas Tx 01
01010081   Fayette County, Indiana 2001
01010086   Suffolk Cnty Water Auth, NY 01
01010101   Franklin Twp S B C, IN 2001
01010108   Chandler, AZ Wtr & Swr 2001
01010109   Reg Trans Auth,IL SLS TX 01B
01010110   Reg Trans Auth,IL SLS TX 01B
01010116   Chandler, AZ Street&Hwy Rev 01
01010123   Cucamonga County, CA Water 00
01010124   Cucamonga County, CA Water 00
01010126   Raleigh-Durham NC Arpt Rev 01A
01010127   Raleigh-Durham NC Arpt Rev 01A
01010168   New York ST Thruwy Auth 2001A
01010171   Allegheny Cnty Port Spl Rev 01
01010186   Houston Arpt Rental Car Fac 01
01010187   Houston Arpt Rental Car Fac 01
01010194   Colleyville, TX Drain Revs 01
01010195   Colleyville, TX Drain Revs 01
01010229   Connecticut-Bradley Int’l Arpt
01010232   Tucson, Arizona Water Sys 01A
01010237   Eastern Municipal Water Dist01
01010243   Port of Portland, Or 01 15CD
01010246   Passaic County, NJ GO
01010251   Grapevine, Tx Wtr&Swr Rev 01
01010255   Pima County, AZ Sewer 2001
01010263   West Ouachita PSD,LA SlsTax 01
01010270   Port of Portland, OR 2001 15AB
01010278   Rowan Univ.(NJEFA), NJ 01B
01010279   Rowan University, NJ 01C
01010305   Pima County, AZ Sewer 2001
01010314   Oro Valley Municipal Property Corp, AZ 2001
01010317   Jacksonville, FL Sales Tx 2001
01010318   Regional Transportation Auth, IL Sales Tax 2001A
01010319   Norfolk, VA GARB 2001A&B
01010320   Regional Transportation Auth, IL Sales Tax 2001A
01010321   Metro Nashville Arpt,TN 2001A
01010323   Metro Nashville Arpt,TN 2001A
01010324   Elwood Middle School Building Corporation, IN 2001
01010328   San Antonio, TX Water Rev 2001
01010329   San Antonio, TX Water Rev 2001
01010343   Fairfield-Suisun SD,CA Swr 01
01010356   Dallas Co WC&ID 6,TX W&S Rev01
01010359   Lauderhill, Florida Sales Tax 2001
01010362   Farmington, Mn RDA Lse 01A
01010364   Harrisburg, PA Water Auth 01A
01010376   Wa-Nee Middle SBC, In Lease 2001
01010379   Cincinnati (Univ. of), OH GO 01
01010393   Greene County, AR Sales Tax 2001
01010399   Tallahassee, FL Consolidated Utility Systems 2001
01010401   Upper Trinity Regional Water District, Texas 2001

 

Policy Id

  Policy
01010423     Gresham, Oregon Stormwater Rev 2001
01010426   Penn Turnpike Com Series S
01010434   Osceola County Sch Dist, FL Sales Tax 2001
01010438   Ocala, FL W&S Rev 2001
01010465   Bergen Co Util Auth, NJ
01010469   Hawaii - Airport Sys Rev
01010478   Palm Beach Cnty, FL Non-Ad Vlm Series 2001
01010480   Palm Beach Cnty, FL Non-Ad Vlm Series 2001
01010484   Porter Township HSBC, Indiana
01010498   Valparaiso MS Bldg Corp, IN 01
01010502   Detroit (City of), MI Water
01010504   Minneapolis-St.Paul ArptRev,MN
01010505   Minneapolis-St.Paul ArptRev,MN
01010506   Detroit (City of), MI Water
01010508   Detroit (City of), MI Water Second Lien 01
01010525   Laredo, Texas Sales Tax 2001-Sports Venue
01010538   Round Rock Transp Sys Dev Corp, TX Sales Tax 2001
01010539   Round Rock Transp Sys Dev Corp, TX Sales Tax 2001
01010542   Lafayette Redev Auth, IN Lse 01B
01010556   North Richland Hills, TX Sales Tax 2001
01010558   University of Massachusetts GO
01010559   University of Massachusetts GO
01010575   Miami-Dade Co. Exp Auth, FL 01
01010584   Marshall Univ, WV Hsg & Parking 2001A
01010596   Cucamonga County, CA Water 2001
01010597   Cucamonga County, CA Water 2001
01010624   Phoenix Civic Improvement Corp, AZ Wastewater 2001
01010625   Town Center Imp Dist, TX Sales/Hotel Tax 2001
01010631   KANSAS CITY METRO Com College, MO LEASE
01010633   Washington Terrace (City), Utah W&S 2001
01010642   Ferris St Univ Brd of Trustees, MI Gen Rev 2001
01010644   Marion County, FL Utility System Rev 2001
01010645   Marion County, FL Utility System Rev 2001
01010652   Burleson, TX Waterwrks & Sewer 2001
01010653   Burleson 4A Economic Devel Corp., TX Sls Tx 01
01010654   Burleson Community Serv Dev Corp., TX Sls Tx 01
01010666   Valparaiso MS Bldg Corp, IN 01B
01010668   Univ of Illinois 2001B+C
01010672   San Francisco, CA Int’l Arpt Issue 27B
01010673   Seattle, WA Drainage &Wstewtr 2001
01010674   Seattle, WA Drainage &Wstewtr 2001
01010675   Denver, CO - Arpt Sys Rev 2001AB
01010676   Georgetown, SC W&S Rev SRF Loan (Surety) 2001
01010682   Jasper Economic Dev Corp, TX Sls Tx 01
01010696   Logansport High School Building Corporation, Ind
01010697   Escambia County Utilities Authority, FL W&S 2001
01010698   Escambia County Utilities Authority, FL W&S 2001
01010699   Tucson, Arizona Water Sys Rev 2000-A (2001)
01010705   Brevard County, FL Tourist Development Tax Ser 01
01010713   Philadelphia, PA - Arpt Rev 01A
01010714   Philadelphia, PA - Arpt Rev 01B
01010722   West University Place, TX Wtr & Swr Rev, Ser 2001A
01010724   Palm Bay, Florida W&S 2001
01010726   Palm Bay, Florida W&S 2001 Surety
01010738   New York City TFA 2002A
 

 

-60-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
01010747     West University Place, Texas Wtr & Swr Rev, 2001B
01010767   Venice (City) Fl Sales Tax 2001
01010776   Univ. of California Rev Bonds Series M
01010781   Florida State BOE Lottery Ser 2001B
01010782   Florida State BOE Lottery Ser 2001B
01010786   Charlotte County, FL Water & Sewer 2001
01010787   Charlotte County, FL Water & Sewer 2001
01010797   Cadillac (City of), MI Wtr/Swr 2001
01010809   Tri-County School Corporation, Indiana 2001
01010810   Imperial (City), CA Wastewater 2001
01010811   Imperial (City), California Water 2001
01010816   Delaware County Reg Wtr Auth, PA Swr Rev 01
01010820   Richland-Bean Blossom 2000 SBC, Indiana
01010828   San Jose, CA - Airport Rev 2001A
01010841   Tampa Bay Wtr Auth, FL Rev 01
01010846   Northeast Sullivan Multi-Sch Bldg Corp, IN
01010852   Shelby East SBC IN 2001
01010860   Riverside, Ca. Water Rev. 2001
01010867   Tippecanoe Cnty Middle Sch Bldg Corp,IN Lease 2001
01010876   Neptune Beach (City), Florida W&S 2001
01010877   Phoenix Civic Imprv Corp, AZ Water System Rev 01
01010881   Clean Water Services, Oregon 2001
01010882   Clean Water Services, Oregon 2001
01010892   Henry Cnty Gov Cntr BC, In Lse RFG 2001
01010902   NORTHERN ILLINOIS UNIV AUX REV 2001
01010912   Appleton (City), WI W&S Rev 01
01010914   INDIAN RIVER CNTY, FL SLS TAX 2001
01010915   INDIAN RIVER CNTY, FL SLS TAX 2001
01010924   Ocala, FL Water & Sewer Rev Refg 2001A
01010925   Ocala, FL Water & Sewer Rev Refg 2001A
01010926   Cleveland Heights (City of), OH Non-advlrn Rev 01A
01010935   Petoskey (City), MI Wtr. & Swr. 2001
01010941   BATON ROUGE, LOUISIANA SLS TAX Series 2001A
01010944   Miller County, Missouri Lease 2001
01010950   Parker Water and Sanitation District, CO W&S 2001
01010960   Kearns Imprvmnt Dist, UT Sewer 2001
01010966   East Baton Rouge Parish, LA Sales Tax Series 2001
01010972   Jeffersonville-Clark Co Bldg Auth, IN Lease GO 01
01010977   Penn Turnpike Com Series T
01010984   Cass County, MO Lease
01010987   East Maine School District #63, IL GOLT 2001
01010988   East Maine School District #63, IL GOLT
01012003   Panama City, Florida Public Service Tax 2001
01012005   San Antonio, TX - Airport Rev Series 2001
01012007   Passaic County, New Jersey GO 2001
01012015   Grand Prairie (City), Texas Sales Tax 2001
01012016   Grand Prairie (City), Texas Sales Tax 2001
01012023   Panama City, FL Public Service Tax 2001 - Surety
01012033   Idaho University 2001
01012034   Idaho University 2001 - Surety
01012060   Perry Twp MSD (PTMBC of 1996), IN Lease 2001
01012064   Oak Park (Village), Illinois W&S 2001
01012069   Martin County, FL Wtr/Swr Sys 01
01012070   Martin County, FL Wtr/Swr Sys 01
01012082   Wichita, Kansas Watr & Sewer

 

Policy Id

  Policy
01012083     Wichita, Kansas Watr & Sewer
01012111   League City, Texas W&S GCWA 2001
01012126   New Jersey Educ Facil Auth (Montclair), NJ 2001F
01012127   New Jersey Educ Facil Auth (Montclair), NJ 2001F
01012131   Tippecanoe County GBC, IN Lease 2001
01012134   Merrillville Multi-School BC, IN GO Lease 2001
01012135   Northern Wells CSBC, IN LSE 2001
01012148   Hillsborough County, FL CIT, Rev 2001 A&B
01012150   Hillsborough County, FL CIT, Rev 2001 A - Surety
01012156   Hillsborough County, FL CIT, Rev 2001 B - Surety
01012158   Port of Seattle, WA Rev. 2001ABCD
01012159   Port of Seattle, WA Rev. 2001ABCD
01012160   Port of Seattle, WA Rev. 2001ABCD
01012170   Tacoma (City), WA Sewer 2001A
01012178   Detroit, MI Sewer Disposal 2001A
01012179   Detroit, MI Sewer Disposal 2001B
01012180   Detroit, MI Sewer Disposal 2001C-2
01012190   Tampa Bay Regional Water Authority, FL 2001B
01012199   Detroit, MI Sewer Disposal Second Lien 2001E
01012210   Lakeland, FL (SSGFC) Non-Ad Valorem 2001
01012214   Seminole County, FL SLS TX 2001
01012215   Seminole County, FL SLS TX 2001
01012222   Tallahassee,FL SlsTax&Gtd Entitl,2001
01012223   Tallahassee,FL SlsTax&Gtd Entitl,2001
01012225   Univ. of California Rev Bonds Series N
01012226   Northern Kentucky Wtr Dist Rev 2001A
01012233   Elwood (City), Indiana
01012234   Norfolk, Va Water Revenue 2001
01012236   Norfolk, Va Water Revenue 2001
01012239   Columbia, SC Water/Sewer Sys Surety 01
01012258   Brevard County, FL Sales Tax 2001
01012259   Brevard County, FL Sales Tax 2001
01012270   Sunman Dearborn ISBC, IN 2001
01012279   Pearland, Texas Water & Sewer Revs
01012283   Seattle, WA Water System Revs 2001
01012284   Seattle, WA Water System Revs 2001
01012291   Webster Groves, (City) MO LSE 2001
01012301   Fort Pierce (City of), FL 2001
01012302   Fort Pierce (City of), FL 2001
01012303   Passaic Valley Wtr Comm, NJ W&S 2001 A&B Surety
01012323   South Gate Utility Auth, CA 2001 REV
01012324   Houston (City), Texas Airport System 2001A
01012327   King County, WA Sewer Rev 2001
01012330   Tacoma, WA Water System 2001
01012331   Philadelphia, PA
01012333   Apopka, FL Water & Sewer Rev 2001 & Refunding
01012338   Iowa City, Iowa Sewer 2001
01012340   Apopka, FL Water & Sewer Rev 2001 & Refunding
01012342   Washington School District, MO Lease 2001
01012349   Metropolitan Transportation Authority,NY DTF 2001A
01012353   Kankakee (City of), IL 2001A Sr Lien
01012367   Chesapeake Bay Bridge/Tunnel, VA Rev 2001
01012369   Seacoast Util. Auth, FL 2001
01012382   Delaware Transportation Authority 2001
01012383   Westmoreland County MA, PA W&S 2001 Surety
 

 

-61-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
01012384     Wichita, Kansas Water & Sewer 2001
01012385   Wichita, Kansas Water & Sewer 2001
01012386   Tri-Creek South Nichols SBC, IN LSE
01012392   Chesapeake Bay Brdg/Tunnel, VA 2001 JR
01012396   Alabama University Gen Fee Rev 2001
01012405   Nassau County, FL Gas Tax 2001
01012410   Virgin Valley Water District, NV Rev 2001
01012411   Virgin Valley Water District, NV Rev 2001
01012419   Midlothian Comm Dev Corp, Texas Sales Tax Ser 2001
01012422   Knoxville (City), TN Wastewater 2001A
01012425   Escambia County Utilities Authority, FL W&S 2001B
01012426   Escambia County Utilities Authority, FL W&S 2001B
01012430   Lafayette, Louisiana Sales Tax 2001A
01012431   Lafayette, Louisiana Sales Tax 2001B
01012433   South Central Conn Regl Wtr Auth. Surety
01012439   Battle Creek (City of), MI WstWtr Rev 2001
01012441   SUNY Lease Rev (DASNY) 2001
01012445   Lehigh County Authority, PA Water 2001
01012446   Fountain Hills, AZ MPC Rev 2001
01012447   Fountain Hills, AZ MPC Rev 2001
01012450   Pearland, Texas Water & Sewer Revs 2001
01012457   Nevada Univ & Comm. Clg System REV 01A
01012478   Lawrence County, In Lease
01012483   Dallas/Ft Worth Intl Arpt 01A
01012484   Dallas/Ft Worth Intl Arpt 01A
01012485   Boone-Florence Wtr Commis, KY WTR REV 01
01012486   Conway (City of), AR Water 2001
01012490   Alabama Univ@Birmingham,GenRev2001
01012491   Excelsior Springs, MO GO&Lease
01012499   Morgan State University, MD 2001
01012508   Warrensburg (City), MO Lease 2001
01012518   Tulsa Arpts Improv Trust, OK 01AB
01012519   Tulsa Arpts Improv Trust, OK 01AB
01020003   New York City TFA 98B
01020004   New York City TFA 98C
01020006   New York City TFA 2000B
01020012   New York City TFA 98B
01020037   New York City TFA 99B
01020046   New York City TFA 98C
01020048   San Francisco BART,Sales Tax98
01020061   New York City TFA 98B
01020062   New York City TFA 98B
01020063   Los Angeles Dept Wtr&Pwr 01WTR
01020068   Los Angeles Dept Wtr&Pwr 01WTR
01020083   New York City TFA 98B
01020085   Los Angeles Dept Wtr&Pwr 01WTR
01020088   New York City TFA 98C
01020089   New York City TFA FY98 A
01020090   MASS WATER RESOURCES 1993 C
01020091   Los Angeles Dept Wtr&Pwr 01WTR
01020092   New York City TFA 98B
01020093   Los Angeles Dept Wtr&Pwr 01WTR
01020095   New York City TFA 98B
01020101   Mass Port Auth,Rev Bonds 98D/E
01020102   Los Angeles Dept Wtr&Pwr 01WTR

 

Policy Id

  Policy
01020103     Mass Port Auth,Rev Bonds 98D/E
01020107   Los Angeles Dept Wtr&Pwr 01WTR
01020108   Los Angeles Dept Wtr&Pwr 01WTR
01020111   New York City TFA 98C
01020114   New York City TFA 98C
01020116   Los Angeles Dept Wtr&Pwr 01WTR
01020148   Los Angeles Dept Wtr&Pwr 01WTR
01020151   New York City TFA 99B
01020153   Los Angeles Dept Wtr&Pwr 01WTR
01020155   New York, NY Muni Wtr
01020159   Los Angeles Dept Wtr&Pwr 01WTR
01020164   Bay Area TA CA Toll Rev 01B
01020168   Charlotte, NC Wtr & Swr Rev
01020174   New York, NY Muni Wtr 2001C,D&E
01020179   New York City TFA 98B
01020182   New York, NY Muni Wtr 2001C,D&E
01020184   New York, NY Muni Wtr 2002A
01020185   New York, NY Muni Wtr 2002A
01020186   New York, NY Muni Wtr 2001C,D&E
01020188   New York, NY Muni Wtr 2001C,D&E
01020189   New York City TFA 98B
01020190   New York City TFA 2002A
01020191   New York City TFA 2002A
01020192   New York City TFA 2002A
01020193   New York, NY Muni Wtr 2002A
01020195   New York, NY Muni Wtr 2002A
01020197   New York, NY Muni Wtr 2002A
01020199   New York City TFA 98C
01020200   New York City TFA 98B
01020201   New York, NY Muni Wtr 2002A
01020202   Mass Port Auth,Rev Bonds 98D/E
01020206   New York, NY Muni Wtr 02BC
01020209   New York, NY Muni Wtr 02BC
01020210   New York, NY Muni Wtr 02BC
01020211   New York City Muni Wtr 2001B
01020213   New York, NY Muni Wtr 02BC
01020214   New York, NY Muni Wtr 02BC
01020215   Port Authority of NY and NJ 124 Ser (2001)
01020216   New York, NY Muni Wtr 02BC
01020217   Port Authority of NY and NJ 124 Ser (2001)
01020218   New York, NY Muni Wtr 02BC
01020219   New York, NY Muni Wtr 2002A
01020220   New York, NY Muni Wtr 02BC
01020221   Port Authority of NY and NJ 124 Ser (2001)
01020222   New York, NY Muni Wtr 02 D,E,F
01020223   Port Authority of NY and NJ 124 Ser (2001)
01020224   Port Authority of NY and NJ 124 Ser (2001)
01020225   Port Authority of NY and NJ 124 Ser (2001)
01020226   Los Angeles Dept Wtr&Pwr 01WTR
01020227   Port Authority of NY and NJ 124 Ser (2001)
01020228   New York St ThruwayAuth-Toll E
01020232   Port Authority of NY and NJ 124 Ser (2001)
01020236   New York, NY Muni Wtr 02 D,E,F
01020238   New York, NY Muni Wtr 2002A
01020239   New York, NY Muni Wtr 02 D,E,F
 

 

-62-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
01020241     New York, NY Muni Wtr 2002A
01020242   New York, NY Muni Wtr 02 D,E,F
01020250   Univ. of California Rev Bonds Series N
01020262   New York City TFA
01020264   Triborough Bridge Special
01020265   New York City TFA 99B
01020269   New York, NY Muni Wtr 02 D,E,F
01020270   New York, NY Muni Wtr 02 D,E,F
01020271   Sacramento Co, CA SD 1 Sewer00
01020273   New York, NY Muni Wtr 02 D,E,F
01020281   New York City TFA 98C
01020285   Port Authority of NY and NJ
01020287   New York, NY Muni Wtr 02 D,E,F
01020288   New York, NY Muni Wtr 2001C,D&E
01020291   New York, NY Muni Wtr 2001C,D&E
01020292   New York, NY Muni Wtr 2001C,D&E
01020294   New York, NY Muni Wtr
01020295   Port Authority of NY/NJ 122
01020296   Port Authority of NY/NJ 122
01020301   Port Authority of NY/NJ 122
01020304   New York City TFA 99B
02010002   Boynton Beach, FL Wtr & Swr 2002 FWD
02010006   Tucson (City), AZ Water System Revenue 2002
02010007   North Penn Water Authority
02010012   Cleburne 4B Economic Dev Corp, Texas Series 2002
02010013   Cleburne 4B Economic Dev Corp, Texas Series 2001
02010015   West Clark Sch Bldg Corp, IN 02
02010020   Gautier Utility Dist, MS Comb Util Rev 02
02010021   Gautier Utility Dist, MS Comb Util Rev 02
02010025   Richmond, VA Metro Auth 02
02010033   Ball State University, IN Rev Student Fee 2001 K
02010045   Public Util Dist. #1 of Snohomish CO, WA Rev 02
02010047   Collier County, Florida Sales Tax Series 2001
02010048   Collier County, Florida Sales Tax Series 2001
02010049   Zionsville Comm. Sch. Corp., IN GO lease 2002
02010062   Mesa, Arizona Utility System 2002
02010063   Mesa, Arizona Utility System 2002
02010075   Pima County, AZ St&Hwy 2002
02010093   Mesa, AZ Street & Highway Rev 2002
02010099   Regional Trans Dist, CO Sls Tax 2001
02010101   West Virginia Pkwy 2002
02010105   Florida St BOR, Univ Sys Mand Fee 2001
02010106   Florida St BOR, Univ Sys Mand Fee 2001
02010107   Mobile Alabama Water & Sewer 2002
02010111   North Texas Muni Wtr Dist, TX REV 02 -Trinity East
02010113   Boise State Univ, ID 2002
02010114   Boise State Univ, ID 2002
02010116   Mesa (City of), AZ Ref Utility System 02
02010117   Mesa (City of), AZ Ref Utility System 02
02010132   Palo Alto, CA Utility Rev 2002A (Water & Gas)
02010140   East Cocalico Township Auth, PA Wtr Rev 2002
02010149   Northern KY Wtr Dist (fna Kenton Co. KY WD) 02A
02010176   Stockton-East Water District, CA W&S 2002
02010177   Stockton-East Water District, CA W&S 2002
02010186   Univ of Conn Spec Obli Stu Fee Rev Ref 2002A

 

Policy Id

  Policy
02010203     El Paso (City), TX W&S 2002
02010206   Tampa, Florida Non-Ad Vlm Series 2002A
02010211   Monroe City Sch Dist, LA Sales Tax 2002
02010225   Winter Haven, FL Sales Tax Rev 2002
02010226   Winter Haven, FL Sales Tax Rev 2002
02010232   West Sacramento Financing Authority, CA Water 2002
02010243   North Hudson Sewerage Auth Rev 2002A
02010256   Sugar Land 4B Corporation, TX Sales Tax 2002
02010259   Colorado University Auxiliary Rev
02010261   West Sacramento Financing Authority, CA Water 2002
02010262   Pennsylvania (Commonwealth) GO 2002
02010281   Tampa-Hillsborough (State of Florida) Exprswy 2002
02010282   Tampa-Hillsborough (State of Florida) Exprswy 2002
02010286   New York State DASNY-SUNY GO/Lease 2002A
02010287   Eastern Michigan Univ Brd of Rgnts, MI Gen Rev 02
02010295   Sammamish Plateau WtrSwr Dist 2002
02010309   San Antonio, TX - Airport PFC & Jr Lien GARB 2002
02010310   San Antonio, TX - Airport Rev GARB 2002
02010317   Tacoma (City), WA Sewer Rev 2002
02010320   Eastern Michigan Univ Brd of Rgnts 2002B
02010331   University & Community College Sys, NV Rev 2002A
02010345   Bates County, Missouri COP 2002
02010364   Kalamazoo (City of), MI Water System
02010377   Phoenix, AZ Water System Rev
02010385   Nacogdoches, TX Wtr & Swr 2002
02010388   Arlington (City of), TX Wtr & Swr 2002
02010415   Little Elm (Town of), TX 2002 REV
02010416   Valparaiso Multi Sch Bldg Corp, IN 2002
02010417   Jacksonville (City), FL Excise Tax 2001B
02010419   Boone Cons Pub Wtr Sup Dist #1, MO Rev
02010429   Brazos River Auth, TX (Lake Granbury) REV 2002
02010430   Brazos River Auth, TX (Lake Granbury) REV 2002
02010435   Orange Park FL W&S 2002 Rfdg
02010437   Illinois (State), Sales Tax Build Illinois 2002
02010438   Illinois (State), Sales Tax 2002
02010441   Monroe (City), LA Sales Tax 2002
02010442   Monroe (City), LA Sales Tax 2002
02010446   Orange Park FL W&S 2002 Rfdg
02010447   Jacksonville (City), FL Excise Tax 2001B
02010450   Denver (City and County), CO WstWtr 2002
02010451   Denver (City and County), CO WstWtr 2002
02010456   PASCO COUNTY, FL GAS TAX 02
02010462   Stockton-East Water Dist, CA W&S 2002B
02010463   Stockton-East Water Dist, CA W&S 2002B
02010464   Westmoreland County Community College, PA
02010468   Jacksonville Elec Auth, FL W&S
02010473   Florida State BOE Lottery 2002
02010474   Florida State BOE Lottery 2002
02010478   Anderson (City of), SC Wtr & Swr 2002
02010479   Anderson (City of), SC Wtr & Swr 2002
02010481   St. Cloud, Florida Sales Tax, Series 2002
02010482   St. Cloud, Florida Sales Tax, Series 2002
02010491   New York City TFA 2002C
02010496   Goshen Community Schools, IN Lease 2002
02010498   Gulfport, MS (MS Dev. Bank) Wtr & Swr 02
 

 

-63-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
02010505     Reno, NV Hotel & Sales Tax 2002
02010506   Reno, NV Hotel & Sales Tax 2002
02010518   Phoenix, Az Airport 2002 Senior Lien
02010519   Phoenix, Az Airport 2002 Senior Lien
02010526   Oklahoma St Bd of Reg (Colvin) 2002
02010527   Oklahoma St Bd of Reg (Colvin) 2002
02010529   Houston Area Water Corp, TX 2002
02010530   Northern Wells CSBC, IN LSE 02
02010537   Baltimore (City), MD Wastewater Sub Lien 2002C
02010540   Los Angeles, CA Wastewater Sys Revs 2002A
02010543   Carmel (City), IN Waterworks 2002
02010546   Charleston (College of), SC 2002A
02010547   Charleston (College of), SC 2002A
02010552   Baltimore (City), MD Wastewater Sr Lien 2002 A&B
02010554   Kansas City, MO Wtr Sys 2002C
02010555   Kansas City (City of), MO Wtr Sys 2002C
02010592   California Department Wtr-Central Valley 2002 X
02010595   Baltimore (City), MD Water Senior Lien 2002 A&B
02010596   Baltimore (City), MD Water Subordinate Lien 2002C
02010603   Dickson County Water Authority, TN W&S 2002
02010604   Dickson County Water Authority, TN W&S 2002
02010605   Daytona Beach, FL Wtr/Swr Refg 2002B
02010621   Miami-Dade County, Florida GARB 2002
02010625   Massachusetts Special Oblig. Gas Tax 2002A
02010626   Massachusetts Special Oblig. Gas Tax 2002A
02010631   Butler County Community College, PA 2002
02010648   Montgomery Co, MD Bethesda 2002
02010649   Montgomery Co, MD (Silver) 2002
02010653   Phoenix (City), AZ Street & Hwy Jr Lien 2002
02010654   Lawrenceburg SBC, IN 2002
02010655   Board of Reg. of Tx Wms Univ 02
02010663   Tamarac, FL Sales Tax 2002
02010664   Tamarac, FL Sales Tax 2002
02010677   Washoe County Airport Authority, NV 2002
02010692   Pennsylvania Sub Water Company 2002
02010706   Osceola Cnty, FL Hotel/Motel 2002
02010707   Osceola Cnty, FL Hotel/Motel 2002
02010711   Metro Washington DC Arpt 2002AB
02010729   MTA Transportation Rev 2002
02010732   Arizona Board of Regents (ASU)
02010737   St. Charles (City), MO Lse 02
02010739   St. Charles (City), MO Lse 02
02010741   University of Massachusetts GO 2002C
02010749   San Bruno Wastewater, CA ‘02
02010750   San Bruno Wastewater, CA ‘02
02010751   MTA Transportation Rev 2002 50 bp
02010752   MTA Transportation Rev 2002 58BP
02010758   Port Authority of NY & NJ 126th Ser 2002
02010767   Indiana State Office Bldg Commission Lease 2002
02010775   West Lafayette Bldg Corp, IN 2002
02010776   New Jersey Ed Fac Auth(College of New Jersey), NJ
02010777   New Jersey Ed Fac Auth(College of New Jersey), NJ
02010797   Colorado Water Res & Pwr Dev Auth, CO 2002A
02010798   Montgomery Co, MD (Bethesda) 2002A
02010799   Montgomery Co, MD (Bethesda) 2002A

 

Policy Id

  Policy
02010804     Cache County, UT Sales Tax 2002
02010805   Cache County, UT Sales Tax 2002
02010806   Vigo County Mtg Rev Bonds, Ind 2002
02010812   HAWAII (UNIVERSITY OF) SYS REV 02
02010813   Portage Twp Multi-Sch BldgCorp,IN2002
02010817   MTA Service Contract 2002A
02010818   Merto Pier & Expo Auth, IL Sls Tx
02010826   Baltimore, MD Parking Sys Fac 2002
02010828   Jacksonville, FL Gtd Entitlement 2002
02010838   Clarksville HS Bldg Corp, IN
02010858   Polk County, Florida Sales Tax Series 2002
02010859   Polk County, Florida Sales Tax Series 2002
02010883   Tucson (City), Arizona Wtr Sys 2000-B (2002)
02010888   Metropolitan Transportantion Auth, 2002B
02010899   Avondale, AZ Excise Tax 2002
02010900   Avondale, AZ Excise Tax 2002
02010907   Univ. of California, Rev Bonds Series 2002 O
02010909   Univ. of California Rev Bonds, Series P 2002
02010917   Charleston (College of), SC 2002B
02010918   Charleston (College of), SC 2002B
02010923   Pike Twnship Multi-School Build Corp. Ind
02010925   Regional Transportation Authority, IL Sls Tx 2002B
02010926   Regional Transportation Authority, IL Sls Tx 2002B
02010930   Temple(City) TX W&S Rev 2002
02010941   Clearwater, FL W&S Rev 2002
02010943   Greencastle Multi-Sch Bldg Corp, IN 2002
02010945   Clarksburg, WV Water Rfdg 2002
02010946   Trinity River/Fort Worth W&S 02
02010947   Florida State BOE Lottery 2002
02010948   Florida State BOE Lottery 2002
02010976   Melbourne (City of), FL WtrSwr 2002A
02010984   New Jersey Turnpike Auth Rev 02
02010985   Detroit, MI Wayne Co. Airport 2002CD
02010990   Alaska, University of 2002 Series K
02010993   Port of Oakland, CA Rev 2000LM
02010998   Contra Costa Tran Auth, CA Sales Tax 02A
02011005   Bradford City, PA Wtr Auth Rfd 02
02011010   New Mexico State Univ, NM Rev Bonds, 2002
02011012   Contra Costa Tran Auth, CA Sales Tax 02A
02011016   Charleston (College of), SC 2002C
02011017   Charleston (College of), SC 2002C
02011023   North Texas Univ Bd of Reg, TX 2002
02011025   Port of Seattle, WA Rev.
02011031   Arizona BD of Regents NAU 2002
02011044   Melbourne (City of), FL WtrSwr 2002B
02011045   Allegheny Cnty Airport Rev 02
02011046   Allegheny Cnty Airport Rev 02
02011053   Lanesville Comm SBC, IN Lease Ref 2002
02011055   Hammond Multi-School Bldg Corp, IN Lease
02011065   Escondido, CA Wtr Rev COPS 02
02011081   Mount Pleasant, SC Wtr & Swr 2002
02011082   Mount Pleasant, SC Wtr & Swr 2002
02011083   Mount Pleasant, SC W&S ‘02 Surety Only
02011084   Mount Pleasant, SC W&S ‘02 Surety Only
02011085   Mount Pleasant, SC W&S ‘02 Surety Only
 

 

-64-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
02011093     Port of New Orleans, LA Rev 2002
02011099   Oxford W&S, AL ‘02
02011105   Florissant (City of), MO Lease (COP) 2002
02011117   Melbourne (City of), FL WtrSwr ‘02C
02011118   Miami-Dade Co. Exp Auth, FL 2002
02011130   Fairmont State College, WV, Lease Revenue
02011131   Fairmont State College 2002B (Student fee)
02011146   Dallas Area Rapid Transit, TX Sr Lien Sales Tax 02
02011157   Cowlitz County, WA Special Sew Rev Ref, 2002
02011158   Cowlitz County, WA Special Sew Rev Ref, 2002
02011159   Monroe (City), LA Sales Tax Jr Lien 2002A
02011172   Galveston, TX Hotel/Motel 2002A
02011173   Galveston, TX Hotel/Motel 2002B
02011174   University & Community College Sys, NV Rev 2002B&C
02011178   Columbia (City of), MO Sew Sys Rev Rev, 2002
02011180   Brevard Cnty, FL Util Rev 2002
02011187   Jackson, MS Water & Sewer 2002
02011188   Jackson, MS Water & Sewer 2002
02011194   Hammond Multi-School Building Corp, IN Lease
02011196   Oxford W&S, AL Ref 2002
02011200   New York State DASNY-SUNY GO/Lease 2002
02011211   Monroe (City), LA Sales Tax Jr Lien 2002A
02011213   Mesa (City of), AZ Utility System Rev Ref 2002A
02011214   Mesa (City of), AZ Utility System Rev Ref 2002A
02011221   Mount Vernon, WA swr ser 2002
02011226   Port Canaveral,FL Port Revenue 2002 A&B
02011229   Clay School Bldg Corp, IN
02011243   Hallsdale-Powell UD, TN Wtrwks & Swr Rev Ref 02AB
02011244   Hallsdale-Powell UD, TN Wtrwks & Swr Rev Ref 02AB
02011246   Greene County Building Corporation, IN 2002
02011279   Calif Depart Wtr-Central Valley Series Z 02
02011282   Denver, CO - Arpt Sys Rev Refunding Bonds 2002E
02011285   Tippecanoe Valley Middle Sch Corp, IN Lease Ref 02
02011295   Fordham University, NY (DASNY) 2002
02011310   Ramapo College (NJEFA) Lease Rev Bds 2002H, I & J
02011312   Wisconsin (State) Motor Veh Reg 2002A
02011317   South Blount County Util Dist, TN Wtrwrks Rev 2002
02011318   South Blount County Util Dist, TN Wtrwrks Rev 2002
02011321   Pennsylvania (Commonwealth) GO 2002 Ref
02011335   North Montgomery HSBC, IN 02 (CABs)
02011337   Jacksonville Elec Auth, FL W&S 2002C
02011341   Sarasota (County), FL Utility Sys Ref Rev 2002C
02011342   Sarasota (County), FL Utility Sys Ref Rev 2002C
02011353   McKinney, TX Wtr&Swr Rev Ser 02
02011356   Orange County, FL Sales Tax Rev & Refg 2002A&B
02011359   Sebring, FL wtr & swr 2002
02011360   Sebring, FL wtr & swr 2002
02011361   Altamonte Springs, FL Wtr&Swr Rev.Rfd.2002
02011362   Petoskey (City), MI W&S Rev Ref 2002
02011369   Florida Forever Doc Stamp 2002B
02011376   New York City TFA 2003C
02011378   Miami, FL Non-Ad Vlm Tax Refg Bds Ser C
02011379   Miami, FL Non-Ad Vlm Tax Refg Bds Ser C
02011385   Board of Regents Uni. of (OK),Student Housing 2002
02011394   Board of Regents Uni. of (OK),Student Housing 2002

 

Policy Id

  Policy
02011396     Texas Public Finance Auth (TPFA), TX Rev Ref 2002
02011397   Greensburg School Build Corp, IN 1st Mtg 2002
02011401   Passaic Valley Wtr Com, NJ W&S 02 A&B Surety
02011407   Cleveland (City), Ohio Waterworks 2002 K
02011411   Bend (City of), OR Sewer Rev 02
02011413   Bend (City of), OR Sewer Rev 02
02011417   North Texas Univ Bd of Reg, TX Rev 2002A
02011426   Rutgers State Univ GO, NJ 2002
02011443   Port of Seattle, WA, subordinate. rev., 2002
02011444   Port of Seattle, WA, subordinate. rev., 2002
02011458   Cleveland (City), Ohio Waterworks 2002 L
02011464   Rowan Univ. (NJEFA), NJ Rev 2002K
02011471   Arkansas University (Fayetteville) Rev 2002
02011477   Elsinore Valley MWD, CA W&S 2002A
02011478   Elsinore Valley MWD, CA W&S 2002A
02011479   Kansas City Metro Jr College Dist, MO COPs 02
02011490   Alabama University Gen Rev 2002
02011508   Jacksonville (City), FL Sales Tax Ref & Imp Rev 02
02011509   Jacksonville (City), FL Sales Tax Ref & Imp Rev 02
02011516   NYS Personal Income Tax (NYS Urban Dev Corp.) 02
02011521   Michigan City Area-Wide School Bldg Corp 2002, IN
02011525   Bossier City (City of), LA Sales Tax 2002
02011527   Seattle (City), WA Drainage &Wstewtr Rev & Ref 02
02011529   Seattle (City), WA Drainage &Wstewtr Rev (Srty) 02
02011545   NYS Environmental Fac Corp State PIT Rev 2002A
02011562   NYS Environmental Fac Corp State PIT Rev 2002B
02011570   Contra Costa Water Auth, CA Rev Rfd 2002A
02011572   Los Angeles Dept of Arpts 02A
02011578   Lousiana PFCA (Med Cntr) State Lse 02
02011581   Nevada Irrigation Dist, CA Rev Cert. Ref 02
02011582   Nevada Irrigation Dist, CA Rev Cert. Ref 02
02011588   Bethesda Water Supply Corporation, TX Wtr & Swr 02
02011589   Bethesda Water Supply Corporation, TX Wtr & Swr 02
02020001   SUNY Lease Rev (DASNY) 2001
02020002   Port Authority of NY and NJ 124 Ser (2001)
02020005   New York City TFA 2002B
02020006   New York City TFA 98B
02020008   New York City TFA 98C
02020009   New York City TFA 2002B
02020013   New York City TFA 99B
02020016   New York City TFA 98C
02020021   Triborough Bridge Special
02020022   Triborough Bridge Special
02020023   Triborough Bridge General Purpose Rev 2001A
02020025   Triborough Bridge General Purpose Rev 2001A
02020026   Triborough Bridge General Purpose Rev 2001A
02020027   Triborough Bridge General Purpose Rev 2001A
02020028   Triborough Bridge General Purpose Rev 2001A
02020030   Triborough Bridge General Purpose Rev 2001A
02020031   Triborough Bridge General Purpose Rev 2001A
02020032   Triborough Bridge General Purpose Rev 2001A
02020033   Triborough Bridge General Purpose Rev 2001A
02020034   Triborough Bridge General Purpose Rev 2001A
02020035   Triborough Bridge General Purpose Rev 2001A
02020036   Triborough Bridge General Purpose Rev 2001A
 

 

-65-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
02020037     Triborough Bridge General Purpose Rev 2001A
02020041   Triborough Bridge General Purpose Rev 2001A
02020045   Triborough Bridge General Purpose Rev 2001A
02020052   Metropolitan Water District CA
02020053   Triborough Bridge General Purpose Rev 2001A
02020056   Triborough Bridge General Purpose
02020057   Triborough Bridge General Purpose
02020058   Triborough Bridge General Purpose
02020059   Triborough Bridge General Purpose Rev 2001A
02020060   Triborough Bridge General Purpose Rev 2001A
02020061   New York City TFA 2002B
02020063   New York, NY Muni Wtr 2001C,D&E
02020064   New York City TFA 2002B
02020065   New York City TFA 2002B
02020068   Triborough Bridge General Purpose Rev 2001A
02020069   Los Angeles Dept Wtr&Pwr 01WTR
02020070   New York City TFA 98C
02020071   Triborough Bridge General Purpose
02020072   Los Angeles Dept Wtr&Pwr 01WTR
02020073   Triborough Bridge General Purpose Rev 2001A
02020074   Triborough Bridge General Purpose
02020075   Triborough Bridge General Purpose
02020076   New York, NY Muni Wtr 02BC
02020077   Triborough Bridge General Purpose
02020078   Triborough Bridge General Purpose
02020081   Triborough Bridge General Purpose
02020083   Triborough Bridge General Purpose Rev 2001A
02020088   Triborough Bridge General Purpose Rev 2001A
02020090   Triborough Bridge General Purpose
02020091   Triborough Bridge General Purpose
02020093   Triborough Bridge General Purpose Rev 2001A
02020094   Port Authority of NY/NJ 122
02020095   Triborough Bridge General Purpose Rev 2001A
02020096   New York City TFA 99B
02020097   Triborough Bridge General Purpose Rev 2001A
02020098   Triborough Bridge General Purpose Rev 2001A
02020099   New York City TFA 99B
02020101   New York City TFA 99B
02020103   New York City TFA 99B
02020104   Triborough Bridge General Purpose Rev 2001A
02020106   Triborough Bridge General Purpose Rev 2001A
02020107   New York City TFA 2001B
02020108   MTA Transportation Rev 2002
02020110   MTA Transportation Rev 2002
02020112   MTA Transportation Rev 2002
02020114   New York City TFA 99B
02020115   Colorado University Enterprise Rev 2002B&C
02020122   Triborough Bridge General Purpose
02020123   STATE UNIV/DASNY, NY LEASE 93B
02020124   DASNY STATE APPROP (SUNY), 90A
02020125   MTA Service Contract 2002A
02020126   MTA Service Contract 2002A
02020127   STATE UNIV/DASNY, NY LEASE 93A
02020129   MTA Service Contract 2002A
02020130   Triborough Bridge General Purpose Rev 2001A

 

Policy Id

  Policy
02020132     MTA Service Contract 2002A
02020133   MTA Service Contract 2002A
02020134   MTA Service Contract 2002A
02020135   MTA Service Contract 2002A
02020136   Triborough Bridge General Purpose Rev 2001A
02020137   MTA Service Contract 2002A
02020140   Triborough Bridge General Purpose Rev 2001A
02020142   New York City TFA 2003A
02020143   Triborough Bridge General Purpose Rev 2001A
02020144   New York City TFA 99B
02020145   New York, NY Muni Wtr 2003A
02020146   New York, NY Muni Wtr 2003A
02020147   New York, NY Muni Wtr 2003A
02020150   MTA Service Contract 2002A
02020151   New York, NY Muni Wtr 2003A
02020152   New York City TFA 98B
02020153   Metropolitan Transportantion Auth, 2002B
02020154   New York, NY Muni Wtr 2003A
02020157   New York, NY Muni Wtr 2003A
02020158   New York, NY Muni Wtr 02 D,E,F
02020159   New York City TFA 99
02020160   New York City TFA 99
02020161   New York City TFA 99
02020162   New York City TFA 1999A&B
02020163   New York City TFA 1999A&B
02020164   New York City TFA 99
02020165   New York City TFA 1999A&B
02020166   New York City TFA 1999A&B
02020167   New York City TFA 99
02020168   New York City TFA 99
02020169   New York City TFA 1999A&B
02020171   New York City TFA 1999A&B
02020173   New York City TFA 99
02020175   New York City TFA 99
02020176   New York City TFA 99
02020177   New York, NY Muni Wtr 2003A
02020178   New York City TFA 99
02020179   New York City TFA 99
02020180   New York City TFA 99
02020184   New York City TFA 1999A&B
02020185   STATE UNIV/DASNY, NY LEASE 93B
02020186   New York City TFA 98C
02020187   New York City TFA 1999A&B
02020188   MTA Service Contract 2002A
02020210   San Francisco BART,Sales Tax98
02020224   New York City TFA 2003B
02020225   New York City TFA 2003A
02020226   New York State DASNY-SUNY GO/Lease 2002
02020227   New York, NY Muni Wtr 2003A
02020230   New York State DASNY-SUNY GO/Lease 2002
02020231   New York State DASNY-SUNY GO/Lease 2002
02020233   STATE UNIV/DASNY, NY LEASE 93B
02020237   New York City TFA 99B
02020242   STATE UNIV/DASNY, NY LEASE 93A
02020243   New Jersey Turnpike Auth 91 C
 

 

-66-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
02020244     Triborough Bridge General Purpose Rev 2001A
02020245   Bay Area TA CA Toll Rev 01B
02020247   New York Thruway Auth. State Lease 2002
02020248   New Jersey Turnpike Auth 91 C
02020249   Alabama Pub Sch & Coll Auth99D
02020251   New Jersey Turnpike Auth 91 C
02020252   New York City TFA 99
02020253   New York City TFA 2003A
02020254   New York City TFA 2003A
02020266   DASNY New York St Personal Income Tax
02020267   DASNY New York St Personal Income Tax
02020268   DASNY New York St Personal Income Tax
02020269   DASNY New York St Personal Income Tax
02020270   DASNY New York St Personal Income Tax
02020272   DASNY New York St Personal Income Tax
02020273   DASNY New York St Personal Income Tax
02020274   DASNY New York St Personal Income Tax
02020275   DASNY New York St Personal Income Tax
03010006   Calif Depart Wtr-Central Valley Series AA fwrd
03010008   Westmoreland County MA, PA W&S
03010017   Osceola County, FL Gas Tax Rev Ref 2003
03010019   Michigan City Area-Wide School Bldg Corp 2003, IN
03010020   Lafayette, LA Sales Tax 2003A
03010021   Lafayette, LA Sales Tax 2003B
03010034   Fox Chapel Auth, PA Water Rev Ref 2003
03010037   Garrett (City of), IN Sewage Rev 2002A
03010038   Los Angeles Dept of Wtr&Pwr Wtr Rev 2003A
03010039   DASNY New York St Personal Income Tax 2003B
03010044   Metro Pier & Expo Auth, IL 2002
03010055   Northwest Wtr Comm, IL Wtr Rev Ref 03 (Frd Dlvry)
03010056   Prescott Valley Twn MPC, AZ Exc Tax 2003
03010057   Oakland Rdv Agy, CA (Cntrl Dist Prj) Sub TABs 2002
03010058   Oakland Rdv Agy, CA (Cntrl Dist Prj) Sub TABs 2002
03010064   Ojai Valley Sanitary Dist, CA Wastewater Rev 02
03010065   Ojai Valley Sanitary Dist, CA Wastewater Rev 02
03010070   Geary County, KS (Geary County PBC)
03010072   Morgan State University, MD 2003 AB
03010073   Central Michigan University, MI Rev 2002
03010078   University Maine Sys Rev 2003
03010079   California State Univ Systemwide Rev 03
03010087   Riverton, UT Wtr Rev Ref 2003
03010088   Riverton, UT Wtr Rev Ref 2003
03010089   Riverton, UT Wtr Rev Rfdg-2000B standalone surety
03010090   Thomasville City, NC Rev 2003
03010091   Thomasville City, NC Rev 2003
03010119   San Francisco, CA Int’l Arpt Series 29A&B
03010120   San Francisco, CA Int’l Arpt Series 29A&B
03010126   Southern Illinois University, Rev 2003A
03010127   Grandview (City of), MO COPs 2003
03010131   Simi Valley CDA, CA TAB 2003
03010134   Burlingame Fin Auth, CA Wtr Rev 03
03010135   Burlingame Fin Auth, CA Wtr Rev 03
03010136   Burlingame Fin Auth, CA Swr Rev 03
03010153   Passaic Valley Swr Comm, NJ Sewer Rev 03F
03010157   Kansas City, MO Airport Rev 2003AB

 

Policy Id

  Policy
03010158     Kansas City, MO Airport Rev 2003AB
03010159   Kansas City, MO Airport Rev 2003B surety
03010168   Beaufort-Jasp Co W&S Auth, Rev 2003 Surety
03010169   Beaufort-Jasp Co W&S Auth, Rev 2003 Surety Request
03010176   Hobart & William Smith Colleges, Series 2003
03010183   South Gate Utility Authority,CA
03010184   Wichita, Kansas Wtr & Sewer 2003
03010185   Wichita, Kansas Wtr & Sewer 2003
03010189   Upper Trinity Regional Water District, TX 2003
03010199   Brownsburg 1999 Sch Bldg Corp, IN Series 2003
03010202   Fairmont State College, WV Student Act Rev 2003B
03010203   Fairmont State College, WV 2003A Coll Fac Rev
03010222   San Francisco Redev. Proj TABS Series A,B & C
03010223   San Francisco Redev. Proj TABS Series A,B & C
03010224   SAN FRANCISCO REDEV PROJ, TABs 2003B (Surety)
03010225   SAN FRANCISCO REDEV PROJ, TABs 2003C (Surety)
03010233   SAN FRANCISCO REDEV PROJ, TABs 2003B (Surety)
03010237   Lake Central Multi-Dist SBC, IN Lease Ref 2003
03010243   Indiana University, IN Student Fee, Series O
03010244   Illinois Univ Board of Trustees, COP 2003
03010268   Polk County, FL Wtr./Swr. Sys 2003
03010269   Polk County, FL Wtr./Swr. Sys 2003
03010280   Cache County, UT Sales Tax Series 2003
03010281   Cache County, UT Sales Tax Series 2003
03010283   Triborough Bridge Subord Rev 2003
03010290   Kansas City, MO Airport Rev 2003B surety
03010291   Haubstadt/Owensville SBC, In Lse Ref 03
03010293   North Dakota Bld Auth, ND Rev Ref 2003A
03010294   Calif Depart Wtr-Central Valley Series Y 03
03010295   Eastern Michigan Univ Brd of Rgnts, MI Gen Rev 03A
03010297   SAN FRANCISCO REDEV PROJ, TABs 2003C (Surety)
03010302   Kansas City Metro Jr College Dist, MO COPs 03A
03010304   Mesa, AZ Street & Highway Rev Ref 2003
03010306   Lafayette County, MO Lsehold Rev 03 (Justice Cntr)
03010308   Mesa (City of), AZ Utility Sys Rev 03
03010309   Santa Clara Val Wtr, COP Sr 03A
03010324   Monroe (City), LA Sales Tax Bonds Series 2003
03010325   Monroe (City), LA Sales Tax Bonds Series 2003
03010340   Arkansas Dev Fin. Auth, AK (Corr. Fac. Rev.) 2003A
03010341   Arkansas Dev Fin. Auth, AK (Corr. Fac. Rev.) 2003A
03010349   Mesa (City of), AZ Utility Sys Rev Surety 2003
03010352   Cucamonga County Water Dist, Ca COPS 2003
03010353   Cucamonga County, CA Water 2003
03010354   Deer Creek Drainage, PA Swr Rev 2003
03010355   Deer Creek Drainage, PA Swr Rev 2003
03010357   Fairfield, CA Water Rev Refg 2003
03010359   Shreveport, LA W&S Rev Ref 2003A
03010368   Univ of Redlands (CEFA), CA Rev 2003
03010373   New Palestine Sch Bldg Corp, IN Lease 03
03010375   Cincinnati (Univ. of), OH GO 2003C
03010376   Florida DEP Save Our Coast Sales Tax 2003A
03010377   Pepperdine University, CA
03010381   New York State DASNY-SUNY GO/Lease Surety
03010392   Oxnard Finance Auth, CA Sewer Rev Ref 2003
03010397   Fort Myers (City), FL W&S Utility 2003A
 

 

-67-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
03010398     Fort Myers (City), FL W&S Utility 2003A
03010407   State BOE (John C. Calhoun), AL Tuition Rev 2003A
03010408   Fernandina Beach, Fl Utili Rev Ser 2003
03010409   Fernandina Beach, Fl Utili Rev Ser 2003
03010417   Franklin Cnty Pub- Wtr Dist, Mo Rev Bnds 03A
03010418   Franklin Cnty Pub- Wtr Dist, Mo COPs 03B
03010419   Franklin Cnty Pub- Wtr Dist, Mo Rfg CoPs 03C
03010432   Greencastle Middle School Bldg Corp, 2003
03010435   DASNY- CUNY 3rd, 4th, 5th Res 2002
03010445   Fresno, CA Water System 2003A
03010446   Fresno, CA Water System 2003A
03010455   King County, WA Sewer Rev Ref 2003
03010456   King County, WA Sewer Rev Ref 2003
03010461   Oklahoma Dept Corrections (ODFA), OK Lease Rev 03
03010462   Oklahoma Dept Corrections (ODFA), OK Lease Rev 03
03010466   New York City TFA 2003E
03010477   DASNY- CUNY 3rd, 4th, 5th Res 2002
03010478   DASNY- CUNY 3rd, 4th, 5th Res 2002
03010479   DASNY- CUNY 3rd, 4th, 5th Res 2002
03010480   DASNY- CUNY 3rd, 4th, 5th Res 2002
03010483   DASNY- CUNY 3rd, 4th, 5th Res 2002
03010484   DASNY- CUNY 3rd, 4th, 5th Res 2002
03010486   Prince William Cty,VA WtrSwr 2003
03010491   Ohio State Bldg Auth Wrk Comp Fac Lease 2003A Ref
03010497   Hernando Co, Florida W&S Ref 2003
03010504   Winchester (City of), KY Rev 03
03010519   Clearfield City, UT Sales Tax Rev 2003
03010520   Clearfield City, UT Sales Tax Rev 2003
03010521   Simmons College (Mass HEFA) Priv Hghr Ed Rev 2003F
03010529   Decatur Twp IN Mid Sch Bldg Corp 1st Mtg Ref 2003
03010531   Regional Transportation Authority, IL Sls Tx 03AC
03010532   Regional Transportation Authority, IL Sls Tx 03AC
03010533   Regional Transportation Auth, IL Sls Tx 03C Surety
03010540   Cass County, MI GO Trans Fund 03
03010552   Cleveland State Univ, OH Gen Receipt 03A
03010554   Blue River Valley Sch Build Corp, IN 1st mrtg 2003
03010558   Appalachian St Univ, BOG Univ of NC, NC Rev 2003
03010563   New Jersey City Univ, NJ Rev
03010570   San Marcos Pub Fac Auth CA Proj Area 1 TAB
03010571   San Marcos Pub Fac Auth CA Proj Area 1 TAB
03010572   San Marcos Pub Fac Auth, CA 03 TAB Proj Area No. 2
03010573   San Marcos Pub Fac Auth, CA 03 TAB Proj Area No. 2
03010574   Azle (City of),TX Wtr & Swr Rev Ref 2003
03010581   University of Arizona, Series 2003
03010584   Florida Preservation 2000 Surety
03010587   Leon County, FL Cap Impr Rev 2003A & 2003B (Txbl)
03010589   Leon County, FL Cap Impr Rev 2003A & 2003B (Txbl)
03010591   Port Authority of NY & NJ 130th Ser 2002
03010599   MTA Transportation Rev 2003 Series A
03010600   Noblesville SE Pub Lib Bldg Corp, IN 1st Mrtg 2003
03010606   Washington Terrace (City), Utah W&S 2001 Surety
03010614   Florida Forever Doc Stamp 2003A
03010615   Florida Forever Doc Stamp 2003A
03010622   Santa Ana Comm Redev Agency So Main, CA TABs 03AB
03010623   Santa Ana Comm Redev Agency So Main, CA TABs 03AB

 

Policy Id

  Policy
03010624     Drew Univ, NJ NJEFA Rev 2003C
03010630   Miami-Dade County, FL GARB 2003 A-F
03010631   Miami-Dade County, FL GARB 2003 A-F
03010644   Avondale (City of) Muni Dev Corp, AZ Exc Tax 2003
03010652   Connecticut Hlth & Educ Fac Auth, CT Rev Series E
03010657   Pennsylvania (Commonwealth) GO 2nd Series 2003
03010658   Univ of Redlands (CEFA), CA Rev 2003B
03010660   Baltimore (City), MD Wastewater Sr Lien 2003 A
03010661   Baltimore (City), MD Water Senior Lien 2003
03010671   Avondale (City of) Muni Dev Corp, AZ Exc Tax 2003
03010676   Shreveport, LA W&S Rev Ref 2003B
03010677   Hammond Multi-School Bldg Corp, IN Lease 03A
03010685   Passaic (County of), NJ GO dtd 6/1/03
03010688   Volusia County, FL Wtr/Sew 03 Ref
03010689   Volusia County, FL Wtr/Sew 03 Ref
03010693   Miami-Dade Cnty SD, FL COP 2003D
03010696   Sanibel (City of), FL Sewer Ulty Rev Ref 03
03010697   Sanibel (City of), FL Sewer Ulty Rev Ref 03
03010703   Duquesne Univ, PA Rev 2003
03010704   St. Peters (City of), MO Wtr/Swr Rev 2003
03010705   St. Peters (City of), MO Wtr/Swr Rev 2003
03010720   Univ/CC Sys, NV Rev (UNLV Dorm/UNR Park) 03B
03010737   Cherokee Co W&S Auth, GA 2003
03010738   Cherokee Co W&S Auth, GA 2003
03010745   Jacksonville Airport Auth, FL Rev Ref 2003
03010751   Hillsborough Cnty, FL Sales Tax 2003 Fwd Swap
03010755   Escambia County Utilities Authority, FL W&S 2003
03010756   Escambia County Utilities Authority, FL W&S 2003
03010763   Univ of Arkansas (Fort Smith), AR Rev 2003
03010764   Univ of Arkansas (Fort Smith), AR Rev 2003
03010768   Hillsborough County, Florida Utility Series 2003
03010769   Hillsborough County, Florida Utility Series 2003
03010770   Chandler, AZ W&S Senior Lien Rev 2003
03010783   Northern Kentucky Wtr Dist Rev 03
03010784   Milwaukee (City of), WI Sewer Sys Rev 2003 S4
03010787   New Jersey Turnpike Auth Rev 2003A
03010800   Villanova Univ (Delaware Cnty Auth), PA Rev Ref 03
03010801   Broward County, FL Airport Rev Ref 2003K
03010814   Key West (City of), FL Swr Sys Rev Ref 2003
03010815   Key West (City of), FL Swr Sys Rev Ref 2003
03010821   Bloomington (City of), IN Waterworks Rev Ref 2003
03010822   Bloomington (City of), IN Waterworks Rev Ref 2003
03010823   Bloomington (City of), IN Waterworks Rev SRF 2003A
03010825   Deer Creek Drainage, PA Swr Rev Ref 2003A
03010826   Deer Creek Drainage, PA Swr Rev Ref 2003A
03010829   Bloomington (City of), IN Waterworks Rev SRF 2003B
03010830   Clifton Park Wtr Auth, NY Rev Ref 2003A
03010831   Clifton Park Wtr Auth, NY Rev Ref 2003A
03010835   Rutgers State Univ GO, NJ GO Ref 2003C
03010849   Arvada (City of), CO Sales/Use Tax Ref Rev 03
03010867   MTA Transportation Rev 2003 Series B
03010868   Stuart, Fl - Pub Util Rev Rfdg 2003
03010869   Stuart, Fl - Pub Util Rev Rfdg 2003
03010872   Jacksonville Airport Auth, FL Rev Fwd Swap 03
03010875   Washington, DC Wtr/Swr Auth 2003
 

 

-68-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
03010876     Washington, DC Wtr/Swr Auth 2003
03010880   Univ of Ill South Campus 2003A
03010882   New Jersey (Lease) Econ Devel Auth 2003F
03010885   Manchester (City of), NH Water Rev 2003
03010893   Lancaster County W&S District, SC 1999 Surety
03010894   Lancaster County W&S District, SC 2003
03010898   Rogers (City of), AR Sales and Use Rev 2003
03010899   Rogers (City of), AR Sales and Use Rev 2003
03010900   Pasadena (City of), CA Water Rev Ref 2003
03010901   Turlock (City), CA (Pub Fin Auth) Swr Rev 2003A
03010910   Orange County, CA Wtr Dist Rev COP’s 2003B
03010920   Florida St Ed Sys (FL Atlantic Univ), Hsg Rev 03
03010921   Florida St Ed Sys (FL Atlantic Univ), Hsg Rev 03
03010928   Arizona School Facilities Board COPs 2003B
03010931   Yorba Linda Wtr Dist, CA Wtr Rev COP 2003
03010932   Yorba Linda Wtr Dist, CA Wtr Rev COP 2003
03010940   New York City TFA Future Tax Secured 2004A
03010942   Alamo Comm Coll Dist, TX Comb Fee Rev Ref 2003
03010943   Alamo Comm Coll Dist, TX Comb Fee Rev Ref 2003
03010945   Valparaiso Middle Sch Bldg Corp, IN Ref Bds 2003
03010952   Metropolitan Water Dist, CA Rev 03, Ser B-1 & B-2
03010953   Metropolitan Water Dist, CA Rev 03, Ser B-1 & B-2
03010954   St. Petersburg (City of) ,FL Excise Tx Ref Rev 02
03010968   Metro Washington DC Arpt 2003 B
03010969   Metro Washington DC Arpt 2003 B
03010978   Plainfield (Town of), IN Wtrwrks Rev 2003
03010979   Plainfield (Town of), IN Wtrwrks Rev 2003
03010980   Plainfield (Town), IN Swgwks Rev 2003A & Ref 2003B
03010981   Plainfield (Town), IN Swgwks Rev 2003A & Ref 2003B
03010984   Oregon (State of) Dept. of Admin COPs 2003C
03010990   Project 7 Water Authority, Co 03 Ref
03010991   Project 7 Water Authority, Co 03 Ref
03010995   Metro Washington, D.C. Arpts 2003C
03010996   Metro Washington DC Arpt 2003 A
03010998   Gilbert (Town), AZ Street/Hghwy Rev (Proj 2003) 03
03011006   North Harris Cnty. Reg. Wtr. Auth., TX Rev. 2003
03011007   Kean University, NJ Revenue Bds 2003D
03011009   North Harris Cnty. Reg. Wtr. Auth., TX Rev. 2003
03011010   Eureka (City of) Redevl Agency, CA Ref TABs 03
03011015   Kansas City SD, MO Bldg Corp Lease Rev 2003B Appr.
03011017   Columbus, OH, Reg Airport 2003
03011024   Norristown Muni Wst Auth, PA Swr Rev 2003
03011025   Acton MUD, TX Util Rev & Ref 2003
03011038   Rhode Island EDC (Arpt) 03A
03011039   Rhode Island EDC (Arpt) 03A
03011046   Hillsboro (City of), OR Wtr Rev 2003
03011047   Hillsboro (City of), OR Wtr Rev 2003
03011059   Colorado Water Res/Pwr Dev Auth, CO (Clifton) 03
03011062   Vermont State Colleges, VT Rev 2003
03011072   Albany (City of), OR Water Rev and Ref 2003
03011073   Albany (City of), OR Water Rev and Ref 2003
03011083   Rowan Univ. (NJEFA), NJ Rev 2003I & 2003J
03011087   Indiana SOBC Lease 03 B (Evansville St Hospital)
03011091   Cape Girardeau County, MO Lease COPs 2003
03011093   Upper Mohawk Reg Water Fin Auth Rev 03

 

Policy Id

  Policy
03011094     Mansfield Park Fac Dev Corp, TX Sales Tax Rev 03
03011095   Mansfield Park Fac Dev Corp, TX Sales Tax Rev 03
03011105   Carson City, NV Hghwy Rev (Motor Veh Fuel Tax) 03
03011106   Colorado Water Res & Pwr Dev Auth, CO 2003A
03011107   Colorado Water Res/Pwr Dev Auth, CO (Eaton) Rev 03
03011115   Hammond Multi-School Bldg Corp, IN Lease 03B
03011117   Los Banos (City), CA Rev Ref COPs 03 (93 Swr Proj)
03011119   Metro Nashville Arpt Auth,TN Rev 03B
03011120   Metro Nashville Arpt Auth,TN Rev 03B
03011121   Wisconsin (State) Motor Veh Reg 2003A
03011129   McKinney (City of), TX Wtrwks/Swr Sys Rev 2003
03011135   Northern Arizona Univ, AZ Rev 2003
03011138   El Dorado Irrigation Dist (EID), CA Rev COPs 2003A
03011139   El Dorado Irrigation Dist (EID), CA Rev COPs 2003A
03011145   Castle Rock (Town of), CO W&S Enterprise Rev 03
03011146   Castle Rock (Town of), CO W&S Enterprise Rev 03
03011155   Connecticut (State of), CT Special Tax Transp 03B
03011158   Univ of North Alabama, AL Gen Fee (sub) Rev 2003
03011160   Kansas State DOT Highway Rev Ref 2003AB
03011161   Alaska (Univ of), AK Gen Rev 2003L
03011162   Alaska (Univ of), AK Gen Rev 2003L
03011168   Shreveport (City of), LA W&S Rev Ref 2003C
03011181   Chino Hills (City of), CA Water Sys Ref COPs 2003
03011182   Chino Hills (City of), CA Water Sys Ref COPs 2003
03011183   Norman Utilities Auth, OK Util Rev Ref 03
03011184   Norman Utilities Auth, OK Util Rev Ref 03
03011186   SUNY (DASNY), NY Lease Rev 03BC
03011187   SUNY (DASNY), NY Lease Rev 03A
03011188   Butte-Silver Bow, MT Water 2003
03011189   Butte-Silver Bow, MT Water 2003
03011191   Columbus State Comm College, OH Rev 03
03011204   Atlanta (City of), GA Airport Rev Ref 2003RF-D
03011205   Atlanta (City of), GA Airport Rev Ref 2003RF-D
03011206   Arcata (City), CA Jt PFA Rev Ref TAB 2003
03011209   Monroe County Comm School Corp, IN Rev 1st Mort 03
03011216   Lansing, MI Sewer Rev Rfd 2003
03011218   Lancaster Redev Agy, CA Comb Redev Proj Hsg 04
03011219   Lancaster Fin Agy, CA TABS Projs Res & Amar 2004
03011220   Sacramento Cnty PFA, CA TAB’s Series 2003AB
03011223   Yakima (City of), WA W&S Rev 2003AB
03011227   San Jose (City of) RDA, CA Merged Area TABs 2003
03011234   Fairfield SBC, IN Lease Rev 2003
03011241   Alabama PS & College Auth, AL Cap Impr Rev 03
03011242   Sacramento Cnty PFA, CA TABs Series 2003B
03020011   New York City TFA 98B
03020013   New York City TFA 98B
03020014   Triborough Bridge General Purpose 2002B
03020015   MTA Transportation Rev 2002 46BP
03020023   MTA Transportation Rev 2002 46BP
03020031   NYS Personal Income Tax (NYS UDC) 03A-1/A-2
03020040   MTA Transportation Rev 2002 46BP
03020047   MTA Transportation Rev 2002E
03020056   MTA Transportation Rev 2002 46BP
03020062   DASNY New York St Personal Income Tax
03020064   Los Angeles Dept Wtr&Pwr 01WTR
 

 

-69-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
03020068     New York City TFA 98B
03020069   New York City TFA 98B
03020070   New York City TFA 98B
03020074   New York City TFA 98B
03020075   New York City TFA 98B
03020078   Alabama PS & College Auth, AL Cap Impr Rev 03
04010005   Brandeis University, MA Rev Series K
04010014   Castle Rock (Town of) CO W&S Enterprise Rev 04
04010015   Castle Rock (Town of) CO W&S Enterprise Rev 04
04010016   Akron (City of), OH Income Tax Rev 2004A
04010021   Wayne State Univ, MI Gen Rev 2003B
04010023   Akron (City of), OH Income Tax Rev 2004B
04010024   Santa Clara Valley Wtr Dist, CA Ref COPs 04A
04010025   Santa Clara Valley Wtr Dist, CA Ref COPs 04A
04010027   Miss State Univ EBC, MS Rev 04 (Power Generation)
04010029   San Dieguito Water Dist, CA Wtr Rev Ref 2003
04010033   Mesa (City of), AZ Utility Sys Rev Ref 2004
04010034   Mesa (City of), AZ Street & Highway Rev Ref 2004
04010037   Honolulu (City&Cnty of), HI Wtr Sys Rev 04A
04010038   Honolulu (City&Cnty of), HI Wtr Sys Rev 04A
04010039   William Paterson Univ (NJEFA), NJ Rev 2004 A
04010042   Muscle Shoals (City) Utl Bd, AL Wtr&Swr Rev Ref 04
04010043   Muscle Shoals (City) Utl Bd, AL Wtr&Swr Rev Ref 04
04010045   York College, PA Rev 2003
04010047   Ramapo College (NJEFA), NJ Rev 2003H
04010048   Port Authority of NY & NJ 133rd & 134th Cons. Bds
04010052   Kansas City, KS (Wyandotte)Swr Loans (Jr Lien) 03
04010064   Louisville & Jefferson Metro Swr Dist, KY Rev 04A
04010068   Vancouver (City of), WA W&S Rev Ref 2003
04010073   Tampa Bay Regional Water Authority, FL 2004 Ref
04010074   Boise State Univ, ID General Rev 2004
04010076   DASNY Dept of Health, NY Rev Ref 2004
04010080   San Francisco Redev Proj, TABs 1993B Surety
04010087   Univ of Akron, OH Gen Receipts 2004
04010090   Cincinnati/Hamilton Co Conven Auth, OH Hotel Tx 04
04010091   Cincinnati/Hamilton Co Conven Auth, OH Hotel Tx 04
04010092   Cincinnati/Hamilton Co Conv Auth, OH Hotel Jr Lien
04010098   Virgin Valley Water District, NV Wtr Rev Ref 2004
04010099   Virgin Valley Water District, NV Wtr Rev Ref 2004
04010100   Palm Beach Cnty, FL Non-Ad Vlm Rev Ref 2004
04010101   Palm Beach Cnty, FL Non-Ad Vlm Rev Ref 2004
04010106   Dearborn (City of), MI Sewage Disp Rev Ref 04
04010107   Arkansas St Univ (Jonesboro), AR Housing Rev 2004
04010108   Arkansas St Univ (Jonesboro), AR Housing Rev 2004
04010109   Arkansas St Univ (Jonesboro), AR Stud Fee Rev 2004
04010110   Arkansas St Univ (Jonesboro), AR Stud Fee Rev 2004
04010111   Long Beach (Port of), CA 04 AB
04010115   Provo (City of), UT Sales Tax Rev 04 (Taxable)
04010117   Harris County, TX Toll RD Sr Lien Rev & Ref 04A
04010122   Indiana SOBC, IN Lease Rev 2004 ABC
04010124   Manitowoc Public Utilities, WI Electric Rev 2004A
04010127   California (State Of) GARVEEs, CA 04A
04010132   Metropolitan Transpotation Authority, NY DTF2004A
04010134   Wildlife Conservation Society, 2004
04010136   Mountains RCA Assesm Dist No. 1, CA Rev 04

 

Policy Id

  Policy
04010137     Mountains RCA Assessment Dist No. 2, CA Rev 04
04010138   Indiana SOBC, IN Lease Rev 2004B
04010140   Indiana SOBC, IN Lease Rev 2004C
04010142   Bergen County Utilities Authority, NJ Wtr Rev2004A
04010144   Northeastern State University (OK BOR), OK Rev 04
04010145   Northeastern State University (OK BOR), OK Rev 04
04010146   Boston University (Mass Development Finance Auth)
04010148   Gary Comm School Corp, IN 1st Mrtg 2004
04010150   Penta Career Center, OH Lease Rev COPs dtd 3/1/04
04010151   Tulsa Intl Air, OK Gen Rev 04 (Improvement Trust)
04010152   Tulsa Intl Air, OK Gen Rev 04 (Improvement Trust)
04010157   KDFA (Kansas Projects), KS Rev 04A
04010159   Duquesne University, PA Rev Student Hous 2004
04010160   Duquesne Univ, PA Rev Student Hous 2004
04010167   Fond du Lac (City of), WI Waterworks Sys Rev 04
04010171   Fond du Lac (City of), WI Sewer Sys Rev 04
04010174   Arizona School Facilities Board COPs 2003C forward
04010180   Mansfield (City of), TX W&S Rev Ref 04
04010182   Sevier County MBA, UT Rev 04
04010183   Nogales MDA, AZ Muni Fac Rev 04A & 04B (Taxable)
04010187   Nogales MDA, AZ Muni Fac Rev 04A & 04B (Taxable)
04010188   Jacksonville Elec Auth, FL W&S Sr Lien Rev Ref04AB
04010189   Jacksonville Elec Auth, FL W&S Sub Lien Rev 04A
04010190   Jacksonville Elec Auth, FL W&S Sub Lien Rev 04A
04010193   Nevada Real Property Corporation COPs Rev 04
04010196   Fletcher Allen Health Care04
04010198   Stockton RDA (Events Center), CA Rev 04
04010204   Richland-Bean Blossom 2000 SBC, IN 1st Mrtg 04
04010209   Florida State Univ, FL Hsg Rev 2004A
04010210   Florida State Univ, FL Hsg Rev 2004A
04010215   Scottsdale Preserve Auth, Excise Rev Ref 04
04010216   Univ of North Dakota, ND Aux Fac Rev 04
04010218   Riverton (City of), UT Wtr Rev Ref 2004
04010219   Riverton (City of), UT Wtr Rev Ref 2004
04010220   Santa Rosa (City of), CA Wastewater Rev 04B
04010222   CenterPt Engy Houston Elect (Gulf Coast ), TX 04
04010223   CenterPt Energy Houston Elect (Brazos), TX Ref 04A
04010226   Port St. Lucie (City), FL Gas Tax Ref & Imp Rev 04
04010232   San Francisco Redev Proj, TABs 2004 A
04010233   San Francisco Redev Proj, TABs 2004 A
04010236   Univ of South Alabama, AL Rev 04
04010237   Miami-Dade Co, FL Airport Rev 04ABC
04010238   Miami-Dade Co, FL Airport Rev 04ABC
04010242   Colorado DOT TRANS, CO Rev 2004AB
04010244   Southmont SBC, IN 1st Mrtg 2004
04010247   Harris County, TX Toll RD Sr Lien Rev & Ref 04B-1
04010248   Harris County, TX Toll RD Sr Lien Rev & Ref 04B-2
04010255   Palm Beach County SD, FL COPs 2004A
04010259   Centennial Water & Sani Dist, CO Rev and Ref 04
04010260   Centennial Water & Sani Dist, CO Rev and Ref 04
04010263   Alabama Power, AL Sr. Unsecured 04 (Taxable)
04010264   Birmingham (City of), AL W&S Rev 04AB
04010265   Miami-Dade Co, FL Cap Asset Acquis MUNI-CPI 04A
04010266   Miami-Dade Co, FL Cap Asset Acquis MUNI-CPI 04A
04010269   Chelan Hydro Cons System (PUD #1), WA Rev 04
 

 

-70-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
04010270     Chelan Hydro Cons System (PUD #1), WA Rev 04
04010271   Chelan Hydro Cons System (PUD #1), WA Rev 04B
04010272   Chelan Hydro Cons System (PUD #1), WA Rev 04B
04010273   Chelan Hydro Cons System (PUD #1), WA Rev 04C
04010274   Chelan Hydro Cons System (PUD #1), WA Rev 04C
04010275   Chelan Hydro Cons System (PUD #1), WA Rev 04E
04010276   Chelan Hydro Cons System (PUD #1), WA Rev 04E
04010278   South Ogden City, UT Sales Tax Rev & Ref 04
04010279   South Ogden City, UT Sales Tax Rev & Ref 04
04010283   Southwest Parke Comm SBC, IN Lease Rev 2004
04010284   Skidmore College (DASNY), NY Insured Rev 2004
04010303   California (State of) Econ. Recovery Bonds, 2004
04010310   Sacramento (SMUD), CA Elec Rev 04T
04010311   Phoenix (City of), AZ Cons Car Rental Fac Rev
04010312   Phoenix (City of), AZ Cons Car Rental Fac Rev
04010313   Bradley Intl Arpt, CT Rev Ref 04
04010317   Moberly (City of), MO W&S Rev 04
04010320   Anaheim Pub Fin Auth, CA Mello Roos 04A
04010321   Anaheim Pub Fin Auth, CA Mello Roos 04A
04010322   Indiana Transport Fin Auth, IN Hwy Rev 04A
04010323   Myrtle Beach (City of), SC Accomod Fee Rev 2004AB
04010324   Myrtle Beach (City of), SC Accomod Fee Rev 2004
04010325   Fashion Inst of Tech (SUNY), NY Rev 2004
04010326   Tacoma (City of), WA Elec Rev 04A
04010327   Houston (City of), TX Comb Util Rev Ref 04ABC
04010331   Energy Northwest, WA Elec Rev Ref 04
04010332   Univ of New Orleans (LSU BOS), LA Std Fee Rev 04A
04010333   Univ of New Orleans (LSU BOS), LA Std Fee Rev 04A
04010341   Oklahoma City (City of), OK W&S Sys Rev 04
04010342   Oklahoma City (City of), OK W&S Sys Rev 04
04010343   Kentucky Turnpike Auth, KY Lease Rev 04A
04010344   Texas Mun Pwr Agy (TMPA) Sub Lien, TX Elec Ref 04
04010345   Texas Mun Pwr Agy (TMPA) Sub Lien, TX Elec Ref 04
04010346   Port Orange (City of), FL Excise Rev 04
04010354   Central Washington Univ (SUB/REC), WA Rev 04
04010355   Lincoln University, PA
04010356   Oxnard Finance Auth, CA Sewer Rev 2004A
04010357   Oxnard Finance Auth, CA Sewer Rev 2004A
04010359   Massachusetts Commonwealth, MA Hotel Tax Rev 04
04010360   Massachusetts Commonwealth, MA Hotel Tax Rev 04
04010364   Anaheim Pub Fin Auth, CA Mello Roos 04A SY
04010371   South Jersey Transp Auth, NJ Rev Rev 2004 A
04010376   San Antonio (City), TX Sr. Lien Wtr Rev Ref 04
04010377   San Antonio (City), TX Sr. Lien Wtr Rev Ref 04
04010378   San Antonio (City), TX Jr. Lien Wtr Rev Ref 04
04010379   San Antonio (City), TX Jr. Lien Wtr Rev Ref 04
04010380   San Antonio (City), TX Jr. Lien Wtr Rev Ref 04A
04010381   San Antonio (City), TX Jr. Lien Wtr Rev Ref 04A
04010384   Clay County Bldg Corp, IN Lease Rev 04
04010385   Kansas City, MO GARB Rev Ref 04E
04010386   Kansas City, MO GARB Rev Ref 04E
04010387   Port of Seattle, WA Rev Rfdg 2004
04010388   Port of Seattle, WA Rev Rfdg 2004
04010390   Stockton PFA (Parking & Cap Projects), CA Rev 04
04010392   Children’s Hosp Med Ctr, OH, Rev Ref 04

 

Policy Id

  Policy
04010398     Watsonville (City of) RDA, CA TABS
04010399   Watsonville (City of) RDA, CA TABS Ref 04A
04010400   Jackson State University (EBC), MS Rev 04
04010402   South Orange Cnty PFA (Foothill), CA Rev Ref 04A
04010407   Indiana Transport Fin Auth, IN Hwy Rev 04B
04010409   Leesburg (City of), FL Electric Util Sys Rev 04
04010411   Leesburg (City of), FL Electric Util Sys Rev 04
04010412   Leesburg (City of), FL Wtr/Gas Util Sys Rev 04
04010413   Leesburg (City of), FL Wtr/Gas Util Sys Rev 04
04010414   Oregon Fac Auth (Willamette Univ), OR Rev 04A
04010415   Allen County Pub Lib Bldg Corp, IN Lease Rev 04
04010429   Massachusetts Commonwealth, MA Hotel Tax Rev 04
04010430   Massachusetts Commonwealth, MA Hotel Tax Rev 04
04010431   Massachusetts Commonwealth, MA Hotel Tax Rev 04
04010436   Kearns Improv Dist, UT Sewer Rev Surety
04010439   Saginaw Valley St Univ, MI Rev Ref 04
04010446   Central Ark Univ BOT, AR Rev 04A/Tax 04B & Aux 04C
04010450   Indiana Transport Fin Auth, IN Hwy Rev 04C
04010454   Miami-Dade County SD, FL Lease Rev COPs 04A
04010461   Rutgers St Univ, NJ Rev 04E
04010464   Corona RDA, CA TAB Ref 04
04010466   Corona RDA, CA TAB Ref 04
04010468   Alamo Comm Coll Dist, TX Comb Fee Rev 04
04010471   Denver Reg Trans Dist (RTD), CO Rev COPS 04A
04010472   Nevada (State of), NV Hwy Impr Motor Fuel Tax 04
04010473   Miami-Dade County Expwy Auth, FL Toll Rev 04AB
04010474   Miami-Dade County Expwy Auth, FL Toll Rev 04AB
04010476   Leesburg (City of)), FL Cap Imp Rev 04
04010477   Leesburg (City of)), FL Cap Imp Rev 04
04010480   Cleveland State Univ, OH Rev 04
04010484   Lucia Mar USD, CA COPS 04AB
04010485   Lucia Mar USD, CA COPS 04AB
04010486   Otay Water District, CA Rev Ref 04
04010487   Otay Water District, CA Rev Ref 04
04010490   West Palm Beach, FL W&S Util 2004
04010494   Clark County (McCarran Arpt), NV SubLien Rev 04ABC
04010495   North Dakota St Univ, ND Auxil Fac Rev 04
04010503   Houston (City of), TX Wtr&Swr Jr Lien 2004-AB
04010506   Miami-Dade Co., FL W&S Surety 97
04010508   Miami-Dade Co., FL W&S Surety 99A
04010509   Florida Muni Power Agy, FL Rev 04
04010510   Monroe Co Comm Sch Corp, IN Lease Rev Ref 04
04010511   Piedmont Muni Pwr Ag, SC Elec Rev 04AB
04010512   Florida Muni Power Agy, FL Rev 04
04010513   Florida Muni Power Agy, FL Rev 04
04010519   Franklin Comm SBC, IN Lse Rev 04
04010525   Univ of Washington (Biomed Prop I), WA Lse Rev 04A
04010532   Concord Hospital, NH Rev 04
04010533   Grand Rapids, MI Sani Swr Sys Rev 04
04010534   Grand Rapids, MI Sani Swr Sys Rev 04
04010536   Puerto Rico Electr Power Auth, PR Rev Ref OO
04010538   El Dorado Irrig Dist, CA Fixed Rev Ref COPS 04A
04010541   Murrieta Valley USD (CFD’s), CA Mello Roos 04
04010542   Murrieta Valley USD (CFD’s), CA Mello Roos 04
04010543   Michigan State Trunk Line, MI Gas Tax 04
 

 

-71-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
04010545     New Jersey EDA (Sch Fac Constr), NJ Lease Rev 04I
04010546   West Virginia Higher Ed Policy Comm, WV Rev 04B
04010548   New Jersey Trans Trust Fund Auth, NJ Rev 2004A
04010551   Alabama St. Univ., AL GO
04010552   Alabama St. Univ., AL GO
04010553   Alabama St. Univ., AL GO
04010555   New York University, NY Rev 04AB
04010566   Fulton County, GA W&S Rev 04 (Tax-Ex)
04010567   Southwest Gas Corp (Ind Dev Auth), NV Rev 04
04010568   Manatee County, FL Rev Impv 04
04010569   Manatee County, FL Rev Impv 04
04010576   Sarasota Co Sch Bd, FL Lease Rev 04
04010577   Palmdale Water District, CA Rev COPs 04
04010578   Palmdale Water District, CA Rev COPs 04
04010583   Northwestern SBC, IN Lease Rev 04
04010588   Beaumont (City of), TX Wtr & Swr Rev 04
04010589   Beaumont (City of), TX Wtr & Swr Rev 04
04010591   Schenectady Metroplex Dev Auth, NY Gen Res 04A
04010596   Univ of Central Florida, FL (UCFAA) COPs 04
04010599   Riviera Beach (City of), FL W&S Rev 04
04010600   Riviera Beach (City of), FL W&S Rev 04
04010601   Public Utility Dist #1 (Cowlitz Cnty), WA Rev 04
04010602   Public Utility Dist #1 (Cowlitz Cnty), WA Rev 04
04010607   Manteca USD, CA CFD 1989-2 2004D
04010608   Manteca USD, CA CFD 1989-2 2004D
04010612   Iowa BOR (State Univ of), IA Acad Bldg S.U.I. 2004
04010624   Louisiana State Univ (New Orleans), LA Rev Ref 04
04010625   Louisiana State Univ (New Orleans), LA Rev Ref 04
04010634   Sierra Joint CCD, CA COPS 04
04010635   Sierra Joint CCD, CA COPS 04
04010640   Lee Co IDA (Bonita Springs Util), FL W&S 04A
04010641   Lee Co IDA (Bonita Springs Util), FL W&S 04A
04010642   New Jersey Trans Trust Fund Auth, NJ Rev 2004B
04010645   Coastal Water Auth, TX Rev 04 (Houston City Proj)
04010647   Coastal Water Auth, TX Rev 04 (Houston City Proj)
04010650   Hallsdale-Powell UD, TN WWks & Swr Rev 04
04010651   Hallsdale-Powell UD, TN WWks & Swr Rev 04
04010659   Lebanon Pub Library, IN Lease Rev 04
04010664   Lee County, FL 5 Cent Gas Tax Ref Rev 04
04010665   Lee County, FL 5 Cent Gas Tax Ref Rev 04
04010666   Delaware Transportation Auth, DE Rev Sr Lien 04
04010668   Saginaw Valley St Univ, MI Gen Rev 04B
04010673   Ramapo College (NJEFA), NJ Rev 04E
04010674   Ramapo College (NJEFA), NJ Rev 04E
04010679   Univ of Akron, OH Gen Receipts 2004B
04010680   Emerald Coast Util Auth, FL Ref Rev 2004
04010681   Emerald Coast Util Auth, FL Ref Rev 2004
04010686   High Point (City of), NC Comb Enterprise Rev 04
04010687   High Point (City of), NC Comb Enterprise Rev 04
04010688   New York STAR Corp, NY Rev 05AB
04010690   Indiana MPA, IN Electr Rev 04A
04010691   Indiana Bond Bank, IN Spec Prgm 04D
04010692   Indiana Bond Bank, IN Spec Prgm 04D
04010702   Osceola Co Sch Brd, FL Lease Rev 04A
04010703   Osceola Co Sch Brd, FL Lease Rev 04B

 

Policy Id

  Policy
04010706     Mississippi St Univ EBC (Res Hall), MS Rev Ref 04A
04010718   Melbourne (City of), FL W&S Rev 04
04010719   Melbourne (City of), FL W&S Rev 04
04010721   Lancaster RDA (Proj Areas), CA Mark-Roos 04
04010722   Lancaster RDA (Housing Program), CA TAB 04
04010723   Washington (Columbia Basin CC), WA COPS Rev 04F
04010725   Erie City, PA Water Authority 2004
04010726   Brevard County SD, FL Lease Rev 04AB
04010730   Pulaski Tech College (Board of Trust), AR Rev 04
04010732   Riverside (City) Redev Ag, CA TAB 04A
04010738   Polk County, FL Util Sys Rev 04A & Ref 04B
04010739   Polk County, FL Util Sys Rev 04A & Ref 04B
04010740   Dunklin County, MO COPS 04
04010741   Mooresville (Town of), NC Enterprise Sys Rev 04
04010742   Mooresville (Town of), NC Enterprise Sys Rev 04
04010745   West Virginia (Univ of), WV Rev 04BC
04010755   Aqua Pennsylvania, PA Rev 04
04010756   Camden (City of), SC Combined Util Rev Ref 04
04010757   Camden (City of), SC Combined Util Rev Ref 04
04010758   Univ of Colorado BOR, CO Enterprise Sys Rev 04
04010760   Lower Colorado River Auth (LCRA), TX Rev Ref 04D
04010761   Lower Co Riv Auth (LCRA-Trans Svc), TX Elec Rev 04
04010765   West Virginia (Univ of), Auction Rate Rev 04A
04010766   Ceres USD, CA COPS 04
04010768   Portland (Interstate Corridor), OR TIF Rev 04A
04010769   Portland (Interstate Corridor), OR TIF Rev 04A
04010770   New Albany-Floyd Co SBC, IN Lease Rev Ref 04
04010771   DASNY (Catskill Reg Med Ctr), NY Rev 04
04010772   Big Creek Util Dist (Grundy Co), TN Wtr Rev Ref 04
04010774   Montefiore Med Center (DASNY), NY Hosp Rev 04
04010776   NYS PIT (NYS Urban Dev Corp) 04A-1
04010781   New Jersey Bldg Auth, NJ Lease Rev 04A
04010783   New Jersey Bldg Auth, NJ Lease Rev 04B
04010786   Northern Arizona Univ, AZ Sys Rev Ref 04
04010789   Aurora Sch Bldg Corp, IN Lease Rev 04
04010791   Brevard County SD, FL Lease Rev 04B
04010796   NYS Environmental Fac Corp State PIT Rev 04A&B
04010802   St Louis Muni Fin Corp (Forest Park), MO Lse 04
04010803   St Louis Muni Fin Corp (Forest Park), MO Lse 04
04010807   Port Authority of NY & NJ 138th Cons. Bds
04010808   San Francisco, CA Intl Airport Issue 32 Rev Ref
04010810   San Francisco, CA Intl Airport Issue 32 Rev Ref
04020012   California DWR Power Supply Rev. Bonds 2002A
04020018   California DWR Power Supply Rev. Bonds 2002A
04020019   New York St Tobacco Settl Fin Corp, NY Rev 2003B
04020020   California (State of) Econ. Recovery Bonds, 2004
04020021   California (State of) Econ. Recovery Bonds, 2004
04020023   New York St Tobacco Settl Fin Corp, NY Rev 2003B
04020030   New York City TFA 2004B
04020032   New York City TFA 2004B
04020033   New York City TFA 1999A&B
04020034   New York LGAC Sales Tax 93D/E
04020037   New York City TFA 2004B
04020039   Port Authority of NY Consol 85
04020040   New York St Tobacco Settl Fin Corp, NY Rev 2003B
 

 

-72-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
04020041     New York City TFA 98B
04020042   New York City TFA 2003D
04020045   New York City TFA 1999A&B
04020046   New York City TFA 2004C
04020047   New York City TFA 2004C
04020048   New York St Tobacco Settl Fin Corp, NY Rev 2003A
04020051   New York City TFA 2004C
04020052   New York City TFA 2004C
04020053   Virgin Islands Pub Fac Auth 2003A
04020062   New York City TFA 2004C
04020067   California (State of) Econ. Recovery Bonds, 2004
04020069   New York City TFA 2004C
04020070   New York City TFA 2003B
04020072   New York St Tobacco Settl Fin Corp, NY Rev 2003A
04020079   California (State of) Econ. Recovery Bonds, 2004
04020083   Upstate Comm Colleges (DASNY), NY Rev 04
04020084   Upstate Comm Colleges (DASNY), NY Rev Ref 04B
04020085   Upstate Comm Colleges (DASNY), NY Rev Ref 04B
04020086   Upstate Comm Colleges (DASNY), NY Rev Ref 04B
04020087   Upstate Comm Colleges (DASNY), NY Rev 04
04020088   Upstate Comm Colleges (DASNY), NY Rev Ref 04B
04020089   Upstate Comm Colleges (DASNY), NY Rev 04
04020092   New York City TFA 2003D
04020094   California (State of) Econ. Recovery Bonds, 2004
04020095   California (State of) Econ. Recovery Bonds, 2004
04020096   New York City TFA 2004C
04020097   California (State of) Econ. Recovery Bonds, 2004
04020099   California (State of) Econ. Recovery Bonds, 2004
04020100   California (State of) Econ. Recovery Bonds, 2004
04020101   New Jersey Trans Trust Fund Auth, NJ Rev 99 A
04020102   New Jersey (Lease) Econ Devel Auth 2003F
04020103   California SPWB (Univ CA ), CA Lse 04F
04020104   California SPWB (Univ CA ), CA Lse 04F
04020105   California SPWB (Univ CA ), CA Lse 04F
04020107   California (State of) Econ. Recovery Bonds, 2004
04020108   California (State of) Econ. Recovery Bonds, 2004
04020109   New York St Tobacco Settl Fin Corp, NY Rev 2003A
04020110   New York City TFA 2004C
04020113   California (State of) Econ. Recovery Bonds, 2004
04020114   California (State of) Econ. Recovery Bonds, 2004
05010001   Chelan Hydro Cons System (PUD #1), WA Rev 05A
05010002   Chelan Hydro Cons System (PUD #1), WA Rev 05A
05010003   Chelan Hydro Cons System (PUD #1), WA Rev 05B
05010004   Chelan Hydro Cons System (PUD #1), WA Rev 05B
05010005   South Carolina Pub Svc Auth, SC Electric Rev 05A
05010006   Osceola Co Sch Brd, FL Lease Rev 04C fwd
05010010   Mississippi Dev Bank (MDOT), MS Rev 05
05010011   Mississippi Dev Bank (MDOT), MS Rev 05
05010014   Lodi USD (Aspire Project), CA COPS 05AB
05010015   Lodi USD (Aspire Project), CA COPS 05AB
05010021   Oklahoma City Comm College (BOR), OK Rev 04
05010022   San Francisco, CA Intl Airport Issue 32 Rev Ref
05010024   Georgia Muni Elec Auth (MEAG), GA Rev 05
05010025   Ocala (City of), FL Util Sys Rev Ref 04
05010026   Ocala (City of), FL Util Sys Rev Ref 04

 

Policy Id

  Policy
05010028     New Jersey Trans Trust Fund Auth, NJ Rev 05B
05010032   San Ysidro SD, CA COPS 05
05010034   San Ysidro SD, CA COPS 05
05010042   Western MI Univ BOT, Gen Rev 05
05010044   New Jersey EDA (Sch Fac Constr), NJ Lease Rev 05K
05010045   Grant Cnty PUD 2 (Wanapum Hydro), Rev Ref 05
05010046   Grant Cnty PUD 2 (Wanapum Hydro), Rev Ref 05
05010050   Santee Comm Dev Commission, CA TAB 05A
05010054   Santee Public Financing Auth, CA Lse Rev 05
05010055   Santee Public Financing Auth, CA Lse Rev 05
05010058   Pomona USD (Golden West Sch Fin Auth), CA Rev 05
05010069   Chesterfield (City of), MO Rev COPS 05
05010070   Chesterfield (City of), MO Rev COPS 05
05010072   Northern Arizona Healthcare Sys, AZ Hosp Rev 05
05010074   St. Francois County, MO COPS 04
05010078   Fort Zumwalt SD Improvement Corp, MO Lse Ref 05
05010084   Nebraska Pub Power Dist, NE Rev Rfdg 05B
05010093   Pittsburgh Pub Parking Auth, PA Rev 05
05010094   Univ of Pennsylvania Health Sys, PA Hosp Rev 05B
05010095   Pittsburgh Pub Parking Auth, PA Rev 05
05010097   Warren Twnp MSD Vision 2005, IN Lease Rev Ref 05
05010098   Elsinore Valley MWD, CA W&S COPs 05
05010099   Elsinore Valley MWD, CA W&S COPs 05
05010103   North Bergen Twp BOE, NJ Lease Rev dtd 12/15/04
05010104   North Bergen Twp BOE, NJ Lease Rev dtd 12/15/04
05010105   Creighton Univ (Douglas Co), NE Rev 03-04
05010107   New Jersey HMFA, NJ Housing Rev 05ABCDE
05010108   Mental Health Svcs Fac Improv (DASNY), NY Rev 05
05010111   Centennial Water & Sani Dist, CO Ref 05
05010112   Centennial Water & Sani Dist, CO Ref 05
05010116   Nebraska Pub Power Dist, NE Rev Rfdg 05B
05010122   South Carolina Pub Svc Auth, SC Rev Ref 05C
05010129   CUNY (DASNY), NY Rev 05
05010131   Illinois (State of), IL Sales Tax Rev 05
05010132   Arkansas University (Fayetteville), AR Rev 05AB
05010133   Pennsylvania Power & Light Co, PA Rev 05
05010135   Central TX Regl Mobility Auth Toll Rev 05
05010138   SUNY (DASNY), NY Rev 05
05010139   Tampa Bay Regional Water Authority, FL Ref Rev 05
05010141   San Diego County, CA Wtr Auth Ref 05
05010142   San Diego County, CA Wtr Auth Ref 05
05010147   Arizona School Facilities Board, AZ COPs 05A-1
05010148   Arizona School Facilities Board, AZ COP 2005A-2
05010149   Arizona School Facilities Board, AZ COP 2005A-3
05010150   Upstate Comm Colleges (DASNY), NY Rev 05
05010153   Mental Health Svcs Fac Improv (DASNY), NY Rev
05010154   Indian River County, FL W&S Ref 05
05010158   NYS PIT Housing Fin Agency (Eco Devel/Hous) 05A
05010161   Woman’s Hospital, LA Hosp Rev Ref 05
05010162   Contra Costa Wtr Dist, CA Wtr Rev Ref Series N 05
05010166   Center Grove Comm Sch Bldg Corp, IN Lease Rev 05
05010168   SUNY (DASNY), NY Rev 05
05010172   Mental Hlth Svcs Fac Improv (DASNY) NY Rev 05 40.7
05010173   Mental Hlth Svcs Fac Improv (DASNY) NY Rev 05 40.7
05010178   Clinton Prairie Comm Sch Bldg Corp, IN, Rev 2005
 

 

-73-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
05010179     Detroit (City), MI Wtr Supply Ref 2005A&C (Sr Ln)
05010180   Detroit (City), MI Wtr Supply Ref 2005A&C (Sr Ln)
05010195   Noblesville Multi Sch Bldg Corp, IN, Lease Rev 05
05010197   Chandler (City of), AZ W&S 05 (Sr. Lien)
05010198   Chandler (City of), AZ W&S 05 (Sr. Lien)
05010199   Southmost Union Jr College Dist, TX Rev Ref 05
05010200   Southmost Union Jr College Dist, TX Rev Ref 05
05010201   Alaska Municipal Bond Bank, AK GO 2005A
05010209   NYS PIT Edu 05AB & Eco Develop/Housing) 05AB
05010210   Duval County Sch Brd, FL, Lease Rev COPs 05A
05010215   North West Hendricks Middle SBC, IN Lse Ref 2005
05010219   Massachusetts State Colleg Build Auth, MA, Rev 05A
05010223   Greenfield Multi-Sch Bldg Corp, IN Lse Rev Ref 05
05010231   New Jersey Trans Trust Fund Auth, NJ Rev 05C
05010235   Univ of Pennsylvania Health Sys, PA Hosp Rev 05D
05010237   Puerto Rico Electr Power Auth, PR Rev Ref 05RR
05010239   Madison Cons (Lydia Middleton)SBC, IN Lease Rev 05
05010240   Salem (City of), OR W&S Ref 05
05010241   Salem (City of), OR W&S Ref 05
05010243   Univ of Massachusetts (Mass HEFA), MA Rev Ref 05
05010247   Oklahoma City Pub Prop Auth (OCPPA), OK, Rev 05
05010248   Oklahoma City Pub Prop Auth (OCPPA), OK, Rev 05
05010250   Washington St Univ Hsg & Dining, WA Rev Ref 05
05010251   Washington St Univ Hsg & Dining, WA Rev Ref 05
05010253   Southeast Georgia Hlth Sys Ref Series 2005
05010256   Sarasota (County), FL W&S Util Sys Ref Adv Rev 05
05010262   Univ of North Carolina (Wilmington), NC Lse Rev 05
05010263   Univ of North Carolina (Wilmington), NC Lse Rev 05
05010265   North White SBC, IN, Lease Rev 2005
05010269   Cherokee (County), KS, COPs Rev 2005
05010270   Riverside County, CA Lease 05B
05010271   Riverside County, CA Lease 05A
05010272   Unive of Colorado (BOR), CO Rev Ref 05A
05010273   Sacramento Suburban Water Dist, CA COP Taxable 05B
05010276   Sacramento Suburban Water Dist, CA COP Taxable 05B
05010277   Dillsburg Area Authority, PA Swr Rev 05
05010278   Center Grove 2000 Sch Bldg Corp, IN Lease Rev 05
05010281   Kentucky Turnpike Auth, Lease Rev 05
05010284   Capistrano UFSD (Ladera) CFD 98-2, CA MelloRoos 05
05010285   Capistrano UFSD (Ladera) CFD 98-2, CA MelloRoos 05
05010290   Louisiana State Gas & Fuels Tax Rev 05A
05010296   KDFA BOR (Scientific Res & Dev Fac), KS Rev 05D
05010300   Lancaster Area Sewer Authority, PA Rev 05
05010306   Port Authority of NY & NJ 139th Cons. Bds
05010311   Wichita (City of), KS W&S Util Ref Rev 05A
05010312   Wichita (City of), KS W&S Util Ref Rev 05A
05010313   New York City Housing Dev Corp, NY Rev 05A
05010320   Canaveral Port Auth, FL, Port Rev Ref, Series 2005
05010321   Del Mar Coll Distr, TX, Comb Fee Rev Ref, 2005
05010322   Del Mar Coll Distr, TX, Comb Fee Rev Ref, 2005
05010324   Oklahoma Cap Imp Auth (Native Am), OK Rev Ref 05C
05010326   Laguna Stonelake CFD No. 1, CA Mello Roos Rev 05
05010327   Laguna Stonelake CFD No. 1, CA Mello Roos Rev 05
05010334   New York City Housing Dev Corp, NY Rev 05A
05010337   Taylor County, FL Sales Tax Rev Ref 05

 

Policy Id

  Policy
05010338     Taylor County, FL Sales Tax Rev Ref 05
05010353   Pittsburgh Pub Parking Auth, PA Rev 05A
05010355   New Jersey Econ Dev Auth, NJ Lse Ref 05
05010359   Penn Pwr&Light Co.PA Lehigh Cty Ind Dev 05B
05010363   Austin (Town Lake Pk Comm Ctr), TX Car Tax 05
05010368   Aqua Pennsylvania Proj (Del Co IDA), PA Rev 05AB
05010370   Hillsborough County, FL Non Ad Valorem Ser 2005
05010371   Hillsborough County, FL Non Ad Valorem Ser 2005
05010373   Boone County Hosp Assoc, IN Lease Rev 2005
05010375   San Jose RDA, CA TABS Ref 05 B
05010376   San Jose RDA, CA TABS Ref 05 B
05010377   San Jose RDA, CA TABS Ref 05A
05010378   San Jose RDA, CA TABS Ref 05A
05010379   Austin (Town Lake Pk Comm Ctr), TX Car Tax 05
05010380   Blue Ridge HealthCare Sys, NC Hosp Rev 05A
05010391   Colorado State University Sys, CO Ent Rev 05B
05010393   Merrillville Multi-School BC, IN GO Lease Rev 2005
05010394   Wayne Twp Marion Cty SBC, IN, Lease Rev 2005
05010396   Minneapolis-St.Paul Metro Arpt,MN Subord Rev 05C
05010399   Roseville (City of), CA Elec Rev 05A
05010403   Chandler (City of), AZ W&S Ref 05 (Sr. Lien)
05010413   England Dist Sub-Dist No 1, LA, Rev 2005
05010428   Univ of Central Florida, FL (UCFAA) COPs 2005A
05010432   Turlock USD, CA COPs Rev 05
05010433   Turlock USD, CA COPs Rev 05
05010437   TPFA (Stephen F. Austin Univ), TX Rev 05
05010442   Passaic Valley Wtr Comm, NJ Water Supp Rev Ref 05
05010449   Rio Rancho (City), NM Gross Rcpts (City Hall)05
05010453   Los Angeles (City of) Sanit Equip Charge, CA 05A
05010454   Univ of Denver (CO ECFA), CO Rev Ref 05A
05010455   Univ of Denver (CO ECFA), CO Rev Ref 05A
05010457   Sacramento City Fin Auth (Solid Waste), CA Rev 05
05010458   Sacramento City Fin Auth (Solid Waste), CA Rev 05
05010459   Sacramento City Fin Auth (Solid Waste), CA Rev 05
05010468   Lahey Clinic Medical Center, MA Rev Series 2005
05010469   Stockton (City of) CFD 90-2, CA Mello-Roos Rev 05
05010476   Massachusetts Commonwlth, MA Spec Obs Rev Ref 05
05010477   Massachusetts Commonwlth, MA Spec Obs Rev Ref 05
05010478   2004 Plainfield Comm. HSBC, IN Lease Series 2005A
05010488   Antioch PFFA (CFD No. 89-1), CA MelloRoos Ref 05
05010495   Corona Norco USD PFA, CA MelloRoos Rev Ref 05
05010497   Arvada (City of) Finance Corp, CO Lse Rev 05
05010498   Arvada (City of) Finance Corp, CO Lse Rev 05
05010499   Val Verde USD, CA COPs 05B
05010507   Douglas Co. PUD No 1 (Wells), WA Elec Ref 05ABC
05010508   Douglas Co. PUD No 1 (Wells), WA Elec Ref 05ABC
05010509   Los Angeles Co MTA Grant Notes, Series 2005
05010514   Honolulu (City/Cnty), HI WWater Rev 05AB (Sr Lien)
05010515   Honolulu (City/Cnty), HI WWater Rev 05AB (Sr Lien)
05010529   Lower Co Riv Auth (LCRA-Trans Svc), TX Elec Rev 05
05010532   MARTA, GA Sales Tax Rev Ref 05A (Third Indenture)
05010534   MARTA, GA Sales Tax Rev Ref 05A (Third Indenture)
05010537   California St Univ Sacramento Fndn, CA Aux Rev 05
05010543   Sacramento Cnty San Dist, CA Rev Ref 05
05010544   Sacramento Cnty San Dist, CA Rev Ref 05
 

 

-74-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
05010546     Mississippi Dev Bank, MS Moral Ob Rev Ref 05AB
05010547   Wichita (City of), KS W&S Util Ref Rev 05B
05010548   Wichita (City of), KS W&S Util Ref Rev 05B
05010549   Chino Valley USD, CA COPS Ref 05A
05010550   Chino Valley USD, CA COPS Ref 05A
05010552   Oregon Fac Auth (Willamette Univ), OR Rev 05
05010557   Parkersburg (City of), WV W&S Impr Rev 05
05010573   NYS Thruway Auth, NY Highway/Bridge 05B
05010582   Port of Tacoma, WA Rev 05
05010599   New Jersey Transit Corp, NJ, Sub lien GARVEE 2005A
05010602   Idaho St Bldg Auth (Eastrn Idaho Tech), ID Rev 04A
05010603   Idaho St Bldg Auth (Eastrn Idaho Tech), ID Rev 04A
05010606   Phoenix (City), AZ CIC Exc Tax Rev 05A (Civ Plaza)
05010610   Montefiore Med Center (DASNY), NY Hosp Rev 05
05010616   Alamo Comm Coll Dist, TX Comb Fee Rev 05
05010617   Alamo Comm Coll Dist, TX Comb Fee Rev 05
05010620   Anchorage, AK Airport Car Rental Fac Rev 2005
05010621   Anchorage, AK Airport Car Rental Fac Rev 2005
05010625   Nacogdoches County Hosp Dist, TX Sales Tx Ref 05
05010636   Phoenix CIC State Distribution Rev 2005
05010637   Santa Monica (City of), CA WWater Rev 2005A
05010638   Santa Monica (City of), CA WWater Rev 2005A
05010642   Tacoma (City of), WA Water System Rev & Ref 2005
05010643   Norman Utilities Auth, OK Util Rev Ref 05
05010644   Norman Utilities Auth, OK Util Rev Ref 05
05010645   UCF Convocation Center, FL CBA
05010646   Tacoma (City of), WA Elec Rev Ref 05A
05010647   Tacoma (City of), WA Elec Rev Ref 05B
05010657   Omaha Public Power Dist, NE Elec Rev 05
05010659   Tacoma (City of), WA Water System Rev & Ref 2005
05010661   Port Authority of NY & NJ 141st Cons. Bds
05010662   Palm Bay (City of), FL Util Rev Ref 05A
05010663   Palm Bay (City of), FL Util Rev Ref 05A
05010664   Palm Bay (City of), FL Util Rev Ref 05B
05010665   Palm Bay (City of), FL Util Rev Ref 05B
05010666   San Rafael ESD, CA COPS 05
05010667   San Rafael ESD, CA COPS 05
05010668   Port of Los Angeles, CA Harbor Rev 05C
05010671   Port of Los Angeles, CA Harbor Rev 05C
05010672   Alaska (Virology Lab), AK COPS 05B
05010677   Los Angeles Co Sani Dist #14, CA Rev 05B
05010678   Los Angeles Co Sani Dist #14, CA Rev 05B
05010679   Oregon (State of) Dept. of Admin COPs 2005
05010681   Reno (City of) Cap Improvement, NV Rev Ref 05
05010682   Reno (City of) Cap Improvement, NV Rev Ref 05
05010689   Calif St Pub Wks Brd (SPWB), CA Lse 05E
05010691   Mississippi Dev Bank (MDOT), MS Spcl Ob 05 Laurel
05010693   Mississippi Dev Bank (MDOT), MS Spcl Ob Rev 05
05010694   Mississippi Dev Bank (MDOT), MS Spcl Ob Rev 05
05010699   University of North Texas Sys, TX Rev Ref 05
05010701   Nebraska Pub Power Dist, NE Gen Rev 05C
05010702   New Jersey Natural Gas Co (NJ Rsrces), NJ 05A
05010703   New Jersey Natural Gas Co (NJ Rsrces), NJ 05B
05010704   New Jersey Natural Gas Co (NJ Rsrces), NJ 05C
05010705   West Virginia Wtr Dev, WV Rev Ref A-II, B-II, C-II

 

Policy Id

  Policy
05010706     Calif St Pub Wks Brd (SPWB), CA Lse 05F
05010707   Calif St Pub Wks Brd (SPWB), CA Lse 05G
05010714   Univ of Maine System, ME Rev 2005
05010722   Omaha Public Power Dist, NE Elec Rev 05
05010726   Nevada (State of), NV Motor Vehicle Fuel Tax 05
05010729   University of Kentucky (A/L Comm), Gen Rec 05
05010732   Fl Brd of Reg (U of FL), FL Hsg Rev Rfdg 2005A
05010734   Dover (City of),OH Mun Elec Rev Ref 2005
05010745   Univ of California (Regents), CA Rev Ref 05GHIJK
05010752   Redding, CA Electric Rev 05
05010753   Redding, CA Electric Rev 05
05010758   2004 Plainfield Comm. HSBC, IN Lease Series 2005B
05010759   Virginia Hospital Center Ref Series 2005
05010760   Brevard County, FL Gas Tax Rev 2005
05010761   Brevard County, FL Gas Tax Rev 2005
05010763   Sacramento Fin Auth (Downtown & Oak), CA TAB 05AB
05010764   Sacramento Fin Auth (Downtown & Oak), CA TAB 05AB
05010765   Missouri Dev Fin Board (State Offices),MO COPs 05A
05010767   North West Hendricks Middle SBC, IN Lse Ref 2005B
05010769   Delaware Trans Auth, DE Rev Sr Lien 05
05010770   Sacramento Fin Auth (Downtown & Oak), CA TAB 05AB
05010771   Conn Dev Auth, CT Water Fac Rev (Crystal Water)05A
05010772   Connecticut Dev Auth/Water Svc, CT Rev 2005A
05010773   Univ of Denver (CO Educ & Cul Fac Auth), CO Rev 05
05010774   Univ of Denver (CO Educ & Cul Fac Auth), CO Rev 05
05010780   Ca Infr & Ec Dev Bnk Sch Apportion LS (Vallejo USD
05010781   Ca Infr & Ec Dev Bnk Sch Apportion LS (Vallejo USD
05010782   Ca Infr & Ec Dev Bnk Sch Apportion LS (WCCUSD)
05010783   Ca Infr & Ec Dev Bnk Sch Apportion LS (WCCUSD)
05010787   Grand Rapids (City of), MI Wtr Sys Rev 2005
05010788   Oakland SBA (Elihu M. Harris), CA Lse Rev 05A
05010789   San Francisco SBA (Civic Center), CA Lse Rev 05A
05010790   Mental Hlth Svcs Fac Improv (DASNY) NY Rev 05EF
05010792   Phoenix Hotel Rev Sub Lien (Sports Fac. Tax) 05BC
05010793   Grant Cnty No 2 (Priest Rapids), WA Elec Rev 05ABZ
05010794   Grant Cnty No 2 (Priest Rapids), WA Elec Rev 05ABZ
05010801   Grand Rapids (City of), MI Wtr Sys Rev 2005
05010803   North Texas Tollway Auth, TX RevRfdg05
05010804   North Texas Tollway Auth, TX RevRfdg05
05010807   Columbus Children’s Series 2005C
05010810   South Dakota Bd of Regents, SD Aux Rev 05
05010811   Banning (City of) Util Auth, CA Wtr Rev Ref 05
05010812   Banning (City of) Util Auth, CA Wtr Rev Ref 05
05010813   Franklin Comm SBC, IN Lse Rev 05
05010815   North Texas Tollway Auth, TX RevRfdg05
05010817   Dare County, NC Lease Rev
05010818   Chicago-O’Hare Airport, IL 3rd Lien Rev 05A
05010819   Chicago-O’Hare Airport, IL 3rd Lien Rev 05B
05010820   Chicago-O’Hare Airport, IL 3rd Lien Rev 05A
05010821   Chicago-O’Hare Airport, IL 3rd Lien Rev 05AB
05010846   Aqua Pennsylvania Proj (Del Co IDA), PA Rev 05C
05010849   Tampa-Hillsborough (State of Florida) Exprswy 2002
05020002   California (State of) Econ. Recovery Bonds, 2004
05020003   California (State of) Econ. Recovery Bonds, 2004
05020004   California (State of) Econ. Recovery Bonds, 2004
 

 

-75-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
05020005     California (State of) Econ. Recovery Bonds, 2004
05020006   California (State of) Econ. Recovery Bonds, 2004
05020007   California (State of) Econ. Recovery Bonds, 2004
05020009   Port Authority of NY & NJ 138th Cons. Bds
05020010   New York LGAC Sales Tax 93D/E
05020012   New York LGAC Sales Tax 93D/E
05020013   California SPWB (Univ CA ), CA Lse 04F
05020014   North Carolina Muni Power #1 Elec Rev03AB
05020015   North Carolina Muni Power #1 Elec Rev03AB
05020019   New York St Tobacco Settl Fin Corp, NY Rev 2003A
05020020   New York City TFA 2004 D Sen/Sub
05020052   Upstate Comm Colleges (DASNY), NY Rev Ref 04B
05020054   California (State of) Econ. Recovery Bonds, 2004
05020055   California (State of) Econ. Recovery Bonds, 2004
05020057   California (State of) Econ. Recovery Bonds, 2004
05020063   Upstate Comm Colleges (DASNY), NY Rev Ref 04B
05020064   California (State of) Econ. Recovery Bonds, 2004
05020073   Tacoma (City of), WA Elec Rev Ref 05A
06010002   Port of Los Angeles, CA Harbor Rev 06 A
06010003   Port of Los Angeles, CA Harbor Rev 06 B&C
06010008   Gilbert (Town of) Pub Fac MPC, AZ Sales Tax Rv 06
06010018   Cape Girardeau (City of), MO Wtr Rev Ref 05A
06010021   Eureka (City of) Redev Agency, CA Surety 05
06010022   Oklahoma City Comm College (BOR), OK Rev 06
06010027   South Jersey Transp Auth,NJ Rev (Atl City Proj) 05
06010028   Orange County, FL Sales Tax Rev Ref 2006
06010033   Oklahoma St Univ, OK Util System Rev Ref 06
06010034   Oklahoma St Univ, OK Util System Rev Ref 06
06010039   Placentia-Yorba Linda USD, CA COPS Rev 06
06010056   Wayne Twp Marion County SBC, IN 1st Mort Ref 06
06010058   West Virginia Wtr Dev, WV Rev Ref 2006A-II
06010059   Galveston (City of), TX WWks & Swr Rev Ref 06
06010066   Rhode Island EDC GARVEES 2006A
06010070   Nacogdoches County Hosp Dist, TX Sales Tx Ref 06
06010071   Glendale (City of), AZ Sub Lien W&S Rev 2006
06010072   Glendale (City of), AZ Sub Lien W&S Rev 2006
06010073   Aurora (City of), CO COPS Ref 05 A-1 & A-2
06010075   Fashion Inst of Tech (SUNY), NY Rev 2004 Surety
06010077   Golden (City of), CO COPs 2006
06010080   Omaha Public Power Dist, NE Elec Rev 05
06010084   Aurora (City of), CO COPS Ref 05 A-1 & A-2
06010086   West Ouachita Parish SD, LA Sls Tax Ref 2006
06010088   Boulder County, CO Sales & Use Tax 06
06010089   Boulder County, CO Sales & Use Tax 06
06010090   Sacramento City Fin Auth (Oak Park), CA TAB 06A
06010091   Sacramento City Fin Auth (Oak Park), CA TAB 06A
06010092   Sacramento City Fin Auth (Del Paso), CA TAB 06B
06010097   Canaveral Port Auth, FL, Port Ref 06A/Port Imp 06B
06010098   Orange Cnty Sch Brd, FL Lease Rev COPs 06AB
06010100   Univ of Connecticut, CT GO 2006A & GO Ref 2006A
06010113   Parkersburg (City of), WV WWks &Sewer Rev Ref 06C
06010114   Univ of Arkansas (UAMS), AR Rev 06
06010115   Univ of Arkansas (UAMS), AR Rev 06
06010116   Noblesville Multi Sch Bldg Corp, IN Lse Rev 2006
06010117   Indianapolis Local Pub Imp Bank, IN Mor Obl 06D

 

Policy Id

  Policy
06010118     Indianapolis Local Pub Imp Bank, IN Mor Obl 06D
06010119   Long Island Power Auth, NY Electr Rev 06AB
06010120   Omaha Public Power Dist, NE Elec Rev 05
06010126   KDFA (Transportation Program), KS Rev 06A
06010135   Tarrant Reg Water District, TX Wtr Rev 06
06010149   Chula Vista Elementary SD, CA COP 06
06010152   University of Pittsburgh Med Cntr Series 2006
06010153   Sacramento City Fin Auth (Del Paso), CA TAB 06B
06010155   Chula Vista Elementary SD, CA COP 06
06010158   Santa Rosa Sch. Brd., FL COPs 2006-2
06010160   Kansas City Muni Asst Co (Bartle Hall), MO Lse 06A
06010161   Kansas City Muni Asst Corp (Kemper), MO Lse 06B
06010162   Kansas City Muni Asst Co (Bartle Hall), MO Lse 06A
06010163   Kansas City Muni Asst Corp (Kemper), MO Lse 06B
06010168   Hobart Bldg Corp, IN Lease Rev 2006
06010169   Santa Monica (City of), CA TAB Ref 06AB
06010170   Santa Monica (City of), CA TAB Ref 06AB
06010173   Hillsborough County, FL Spec Assessment 2006
06010174   Travis USD, CA COPs 06
06010175   Dillsburg Area Authority, PA Swr Rev 2006
06010180   South San Francisco RDA, CA TAB Rev 06A
06010181   Florida State Ed Sys, Univ Sys Imp Rev Ref, 2006A
06010182   Dist. of Columbia, DC (St Elizabeth Hosp) COPs 06
06010184   East Baton Rouge Parish, LA Sales Tax 06A
06010186   East Baton Rouge Parish, LA Sales Tax 06B
06010193   Georgetown (City of), TX Utility Sys Rev 06
06010199   Florida State Ed Sys, Univ Sys Imp Rev Ref, 2006A
06010200   District of Col Baseball 2006 A-1, A-2, B-1, B-2
06010201   District of Col Baseball 2006 A-1, A-2, B-1, B-2
06010202   District of Col Baseball 2006 A-1, A-2, B-1, B-2
06010204   District of Col Baseball 2006 A-1, A-2, B-1, B-2
06010205   District of Col Baseball 2006 A-1, A-2, B-1, B-2
06010206   District of Col Baseball 2006 A-1, A-2, B-1, B-2
06010210   Univ of North Carolina (Wilmington), NC Lse Rev 06
06010211   Univ of North Carolina (Wilmington), NC Lse Rev 06
06010219   Aerospace Corp Series 2006
06010224   Fashion Inst of Tech (SUNY), NY Rev 2004 Surety II
06010226   Oregon (State of) Dept. of Admin COPs Fwd 06
06010234   New Jersey TTFA, NJ 2006
06010235   Coronado CDA, CA TABs Ref 06
06010236   Coronado CDA, CA TABs Ref 06
06010238   St. Lucie Co. SD, FL Lcl Sales Tax 2006
06010239   St. Lucie Co. SD, FL Lcl Sales Tax 2006
06010242   DASNY Muni Health Fac (PCDC), NY Lease Rev Ref 06A
06010243   Illinois Muni Pwr Elec Agy, IL Pwr Sup Sys Rev 06
06010245   Phoenix (City of), AZ CIC Sub Ex Tax Rev 06C
06010247   Providence Health Rev 06
06010251   Mesa (City of), AZ Utility Sys Rev 06
06010257   New Jersey Trans Trust Fund Auth, NJ GARVEE 06A
06010263   Fresno JPFA (Convention Cntr), CA Lse Rev 06
06010264   Fresno JPFA (Convention Cntr), CA Lse Rev 06
06010265   Mesa (City of), AZ Utility Sys Rev Ref 06
06010269   College Park (Atlanta Intl Air/Car Rental) GA 06AB
06010270   Riverside County (Cap Impr Proj), CA COP 06A
06010271   Tacoma (City), WA Sewer Rev Ref 2006AB
 

 

-76-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
06010272     Tacoma (City), WA Sewer Rev Ref 2006AB
06010276   Washington (State of), WA COPs 06F
06010279   New Hampshire Muni Bond Bank, NH Rev 2006A
06010280   New Hampshire Muni Bond Bank, NH Rev 2006A
06010283   Emerald Coast Util Auth, FL Rev 2006
06010284   Emerald Coast Util Auth, FL Rev 2006
06010286   Michigan State Trunk Line, MI Gas Tax 2006
06010290   Sacramento Regional Cnty Sanitation Dstr,CA Rev 06
06010292   Omaha Public Power Dist, NE Elec Rev 05
06010293   Cleveland (City of), OH Pub Pwr Sys Rev Ref 2006A-
06010305   Denver (City & Co) CO Airport Sys Rev 06AB
06010307   Detroit (City), MI Sewer Disp Rev 2006AB (2nd Ln)
06010308   Detroit (City), MI Sewer Disp Rev 2006AB (2nd Ln)
06010310   New Jersey HMFA, NJ Multi-Family Rev 06DF
06010317   Louisiana State Univ (A&M), LA Aux Rev 06
06010320   California Science Center Foundation, CA Rev 06
06010323   Klickitat Co. PUD No.1, WA Elec Rev Ref 06AB
06010324   Cleveland (City of), OH Pub Pwr Sys Rev Ref 2006AB
06010326   Detroit Sewer Disposal Rev, MI 06
06010327   San Jose USD, CA COPs Ref 06
06010331   San Jose USD, CA COPs Ref 06
06010337   Alaska Railroad Corp, AK FTA (5307 & 5309) 2006
06010338   Alaska Railroad Corp, AK FTA (5307 & 5309) 2006
06010339   Marysville Joint USD, CA COPs 06
06010340   Marysville Joint USD, CA COPs 06
06010341   Denver (City & Co) CO Airport Sys Rev 06A
06010345   Cleveland (City of), OH Pub Pwr Sys Rev Ref 2006A-
06010349   Signal Hill RDA, CA Proj No.1 TABs 06A
06010350   Signal Hill RDA, CA Proj No.1 TABs 06A
06010351   Fort Smith (City of), AR Sales Tax Ref 2006
06010352   Fort Smith (City of), AR Sales Tax Ref 2006
06010361   Michigan State Building Auth., MI Lease Rev 2006
06010364   Hammond Multi-School Bldg Corp, IN Lse Rev Ref 06
06010370   Hallsdale-Powell UD, TN WWks & Swr Rev 2006
06010371   Hallsdale-Powell UD, TN WWks & Swr Rev 2006
06010375   Tampa Bay Regional Water Authority, FL Rev 06
06010376   Riverside(Galleria @ Tyler Pub Imp), CA Lse Rev 06
06010378   Long Island Power Auth, NY Electric Rev 06E
06010383   West Valley City MBA, UT Lease Rev Ref 06AB
06010384   West Valley City MBA, UT Lease Rev Ref 06AB
06010385   West Valley City MBA, UT Lease Rev Ref 06AB
06010386   Virgin Islands Pub Fac Auth 2006A
06010387   Nebraska Pub Power Dist, NE Gen Rev 06A
06010388   Springfield (City of), MO Utility Rev 06
06010389   Ohio Bldg Auth, OH St Fac Ref, Rev 06AB
06010390   Mississippi Dev Bank (MDOT), MS Spcl Obl Rev 06
06010391   Mississippi Dev Bank (MDOT), MS Spcl Obl Rev 06
06010398   Eastern Washington Univ, WA Srvs & Acts Rev Ref 06
06010399   Eastern Washington Univ, WA Srvs & Acts Rev Ref 06
06010401   Idaho St Bldg Auth (Idaho St Cap Prj), ID Rev 06
06010402   Idaho St Bldg Auth (Idaho St Cap Prj), ID Rev 06
06010404   Yuba City USD, CA COP 06
06010405   Yuba City USD, CA COP 06
06010407   Virginia Port Authority, VA Port Fac Rev 2006
06010409   Virginia Port Authority, VA Port Fac Rev 2006

 

Policy Id

  Policy
06010411     Oglethorpe Power Corp 144A
06010413   Univ of Oklahoma (BOR), OK Rev Ref 06A
06010415   Portage Twp Multi-Sch Bldg Corp, IN Lse Rev Ref 06
06010419   Lafayette (City of), IN Sewage Wrks Rev Ref 2006
06010420   Lafayette (City of), IN Sewage Wrks Rev Ref 2006
06010426   North Texas MWD, TX Wtr Sys Rev 06A
06010427   Louisiana State Gas & Fuels Tax Rev 06A
06010437   California SPWB (CA State Univ), CA Lease 06A
06010438   Calif St Pub Wrks Brd (SPWB), CA Lse 06F
06010439   Metropolitan Wastewtr Mgmt Comm, OR Wstwtr Rev 06
06010440   Metropolitan Wastewtr Mgmt Comm, OR Wstwtr Rev 06
06010442   San Francisco Intl Arpt, CA 2nd Ser Ref 32F&G
06010444   Kansas City Metro CC, MO Lease Rev 06
06010453   Chicago (City of), IL 2nd Lien Swr Rev Ref 06AB
06010454   Chicago (City of), IL 2nd Lien Swr Rev Ref 06AB
06010455   NYC TFA, Building Aid Rev 2007S-1
06010456   Parker Water & Sanit Dist, CO W&S Rev Ref 06A
06010459   Bartow (City of), FL W&S Rev Ref 2006
06010460   South Ogden City, UT Sales Tax Rev Ref 06
06010461   South Ogden City, UT Sales Tax Rev Ref 06
06010462   Metro Washington Airport Auth, DC Arpt Rev 06B
06010463   Metro Washington Airport Auth, DC Arpt Rev 02B
06010464   Metro Washington Airport Auth, DC Arpt Rev 06C
06010467   Children’s Hospital Medical Center Rev 2006
06010468   SPWB (Cal St Univ), CA Lease Rev 06G
06010469   SPWB (Dprt Corrct & Rehab), CA Lease Rev 06H
06010470   SPWB (Dpt Mental Hlth), CA Lease Rev 06I
06010473   Grays Harbor County PUD#1, WA Elec Rev Ref 06
06010474   Grays Harbor County PUD#1, WA Elec Rev Ref 06
06010475   Ramapo College (NJEFA)Lse Rev Bds 02H,I,J (Surety)
06010476   Ramapo College (NJEFA), NJ Rev 2003H (surety)
06010478   Ramapo College (NJEFA)Lse Rev Bds 02H,I,J (Surety)
06010479   Ramapo College (NJEFA)Lse Rev Bds 02H,I,J (Surety)
06010480   Emerald Coast Util Auth, FL Rev Ref 2006B
06010481   Emerald Coast Util Auth, FL Rev Ref 2006B
06010482   West Palm Beach (City of) CRA, FL Tax Incr Rev 06A
06010483   West Palm Beach (City of) CRA, FL Tax Incr Rev 06A
06010484   LACnty Pub Wrks Fin Auth, CA Lease Ref 06AB
06010485   Castle Rock (Town of), CO W&S Rev 2006
06010489   Los Angeles (City) MICLA, CA Lease 06-A
06010490   Los Angeles (City) MICLA, CA Lease 06-A
06010491   Jackson State University (EBC), MS Rev 06A
06010492   Castle Rock (Town of), CO W&S Rev 2006
06010493   Philadelphia, PAID Lease Rev Series 2006AB
06010494   New Hampshire Muni Bond Bank, NH Rev 06B
06010496   New Hampshire Muni Bond Bank, NH Rev 06B
06010498   Bay Area Infrastr Fin Auth,CA St Pymnt Accl Nts 06
06010500   Mesa (City of), AZ Utility Sys Rev Ref 2nd 06
06010501   Norman Utilities Auth, OK W&S Util Rev 2006
06010502   Norman Utilities Auth, OK W&S Util Rev 2006
06010504   Northern Arizona Univ, AZ Sys Rev Ref 06
06010505   Arizona BOR (NAU), AZ Surety 97
06010515   Minneapolis-St. Paul, MN Airport Rev
06020002   New York St Tobacco Settl Fin Corp, NY Rev 2003B
07010002   Florida State DOE, FL CC Cap Improv Rev 2006A
 

 

-77-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
07010003     Florida State DOE, FL CC Cap Improv Rev 2006A
07010005   Melbourne (City of), FL W&S Rev Ref 2007
07010007   U. Mass (Mass HEFA - Lowell), MA Rev Ref 07D
07010008   U. Mass (Mass HEFA - Worcester), MA Rev Ref 07E
07010009   U. Mass (Mass HEFA - Mattapan), MA Rev Ref 07F
07010010   Univ of Denver (CO Educ Cul Fac Auth), CO Rev 07
07010011   Univ of Denver (CO Educ Cul Fac Auth), CO Rev 07
07010013   Aqua Pennsylvania (Chester Cnty IDA) 07
07010026   New York City Educ Constr Fund, NY Rev 07A
07010030   Univ of Oklahoma (BOR), OK Rev 07AB
07010037   San Antonio (City), TX Sr. Lien Wtr Rev Ref 2007
07010038   San Antonio (City), TX Sr. Lien Wtr Rev Ref 2007
07010039   Escondido JPFA, CA Lease Rev Ref 07AB
07010040   Escondido JPFA, CA Lease Rev Ref 07AB
07010047   Wichita Falls, TX W&S Rev Ref 07
07010051   Palm Beach County SD, FL COPs 2007AB
07010052   West Virginia SBA, WV Rev Ref 2007 Fwd.
07010056   Kentucky SPBC, KY Rev Ref Project No. 87
07010059   Wisconsin State, WI Transp Rev Ref 07 Ser 1
07010060   Wisconsin State, WI Transp Rev 07A
07010063   Sacramento Reg Cnty San District,CA Rev Ref 07AB
07010064   Sacramento Reg Cnty San District,CA Rev Ref 07AB
07010068   Guadalupe Valley Electric Coop, Inc., TX Rev 2007
07010070   Guadalupe Valley Electric Coop, Inc., TX Rev 2007
07010071   Omaha Public Power Dist, NE Elec Rev 07
07010072   Clark County PUD No. 1, WA Elec Rev Ref 07
07010073   Clark County PUD No. 1, WA Elec Rev Ref 07
07010074   Clark County PUD No. 1, WA Generating Sys Rev 07
07010075   Clark County PUD No. 1, WA Generating Sys Rev 07
07010076   Oregon (State of) Dept. of Admin COPs Fwd 07
07010077   SPWB (Emerg. Srvs), CA Lease Rev 07A
07010078   SPWB (Cal Comm Colleges), CA Lease Rev 07B
07010087   NYC TFA, NY Building Aid Rev 2007S-2
07010088   Antelope Valley-East Kern Wtr Agncy,CA COPs 07A1
07010089   MARTA, GA Sales Tax Rev Ref 07A (Third Indenture)
07010090   Antelope Valley-East Kern Wtr Agncy,CA COPs 07A1&2
07010091   MARTA, GA Sales Tax Rev Ref 07A (Third Indenture)
07010095   Oklahoma Muni Pwr Auth (OMPA), OK Elec Sys Rev 07A
07010102   Bryan (City of), TX W&S Rev Ref & Impr 07
07010103   Bryan (City of), TX W&S Rev Ref & Impr 07
07010107   Rowan Univ (NJEFA), NJ Rev Ref 2007B
07010108   Broward County Sch Bd, FL Lease Rev COPs 07A
07010110   Indiana Fin Auth, IN Hwy Rev Ref 2007A
07010125   Kankakee River Metro Ag, IL Sr Lien Ref Rev 07
07010127   Tampa, FL Occ Lic & Non-Ad Valorem Tax, Ref 2007
07010128   Kankakee River Metro Ag, IL Sr Lien Ref Rev 07
07010132   New Jersey City Univ (NJEFA), NJ Rev Ref 2007F
07010133   Fontana RDA (Sierra Corridor), CA TAB Rev 07
07010134   Fontana RDA (Sierra Corridor), CA TAB Rev 07
07010136   Omaha Public Power Dist, NE Elec Sub Rev 07AA
07010137   Los Alamitos USD, CA COPs Ref 07
07010138   Los Alamitos USD, CA COPs Ref 07
07010139   Rohnert Park Comnty Dev Comm, CA TAB Hsg 07H
07010140   Rohnert Park Comnty Dev Comm, CA TAB Hsg 07H
07010141   Rohnert Park Comnty Dev Comm, CA TABs 07R

 

Policy Id

  Policy
07010142     Rohnert Park Comnty Dev Comm, CA TABs 07R
07010150   California SPWB (Univ CA), CA Lease Ref 07A
07010151   California SPWB (Univ Cal), CA Lease Rev Ref 07C
07010152   California SPWB (Univ Cal), CA Lease Rev Ref 07B
07010154   Buckeye Union SD, CA COPs 07
07010155   Buckeye Union SD, CA COPs 07
07010156   Kean University (NJ EFA), NJ Rev Ref 2007DE
07010165   Lynwood USD, CA COPs Rev 07A
07010166   Lynwood USD, CA COPs Rev 07A
07010167   Cleveland State Univ, OH Rev Ref 2007
07010168   Lynwood USD, CA COPs Ref 07B
07010169   Lynwood USD, CA COPs Ref 07B
07010178   New Jersey Sports & Exp Auth, NJ Rev 2007A
07010182   Port Authority of NY & NJ 147th Cons. Bds
07010184   Miami-Dade County SD, FL Rev COPs 2007ABC
07010185   Manteca USD, CA CFD 1989-2 2007E
07010186   Manteca USD, CA CFD 1989-2 2007E
07010189   El Centro RDA, CA TABs 07AB
07010195   Buffalo Fiscal Stability Auth, NY Sales Tax 2007A
07010196   Buffalo Fiscal Stability Auth, NY Sales Tax 2007A
07010198   Sacramento County Water Finance Auth, CA Rev 07
07010201   Michigan Muni Bond Auth, MI Rev Ref 2007
07010203   Lincoln (City of), NE Electric Rev Sys 07A
07010204   Lincoln (City of), NE Electric Rev Sys 07B
07010208   San Francisco (City and County), CA COPs 07A
07010211   Sacramento County Water Finance Auth, CA Rev 07
07010213   Miami-Dade County SD, FL Rev COPs 2007B
07010214   East Bay MUD, CA Sub Water Rev Ref 07 AB
07010217   East Bay MUD, CA Sub Water Rev Ref 07 AB
07010218   Pacificorp
07010220   East Bay MUD, CA Sub Water Rev Ref 07 AB
07010222   Raleigh-Durham, NC Airport Rev 2007
07010224   Anaheim Pub Fin Auth, CA Sr Lse Rev Ref 07A-1&A-2
07010225   Anaheim Pub Fin Auth, CA Sr Lse Rev Ref 07A-1&A-2
07010226   Anaheim PFA, CA Sr Lse Rev Ref 07B (Taxable)
07010228   Anaheim PFA, CA Sr Lse Rev Ref 07B (Taxable)
07010229   Orange County, FL Tourist Dev Tax Rev Ref 2007
07010230   Kentucky Asset/Liab Comm, KY Rev Ref 07AB
07010235   Puerto Rico Elec Pwr Auth Rev Ref VV
07010236   Fashion Inst of Tech (SUNY), NY Rev 2007
07010237   Fashion Inst of Tech (SUNY), NY Rev 2007
07010241   Dist of Columbia, DC W&S Auth Sub Lien Rev 07A
07010243   Whittier RDA, CA TABs 07B (Housing) (Taxable)
07010244   Antioch USD, CA COPs 07
07010249   South Dakota Building Authority, SD Rev 07
07010251   Mesa State College, CO College Enterprise Rev 07
07010252   Mesa State College, CO College Enterprise Rev 07
07010255   Wayne Co. Airport Auth., Jr Lien New Money 2007
07010262   SPWB (Dept Correct & Rehab), CA Rev 07D
07010263   Barnard College (DASNY), NY Rev 2007AB
07010265   Brevard County, FL Local Option Gas Tax Rev 2007
07010266   Brevard County, FL Local Option Gas Tax Rev 2007
07010267   Louisiana PFA (19th Judicial Distr), LA Lease 07
07010268   Louisiana PFA (19th Judicial Distr), LA Lease 07
07010269   Sacramento Area Flood Control Agcy, CA Cons Cap 07
 

 

-78-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
07010270     Sacramento Area Flood Control Agcy, CA Cons Cap 07
07010271   Ramona USD, CA COPs Ref 2007
07010272   Pasco County School Board, FL Rev COPs 2007
07010275   Ramona USD, CA COPs Ref 2007
07010285   Central Arkansas Univ (BOT), AR GO 07ABC
07010286   Orange Cnty Sch Brd, FL Lease Rev COPs 07A
07010288   Miami-Dade Co, FL Gtd Entitle Ref Rev 07
07010289   Univ of North Florida (Union), FL Ltd Rev 07
07010290   Univ of North Florida (Union), FL Ltd Rev 07
07010292   Univ of North Florida (Housing), FL Aux Rev 07
07010293   Univ of North Florida (Housing), FL Aux Rev 07
07010294   Florida Dept of Transp, FL Turnpike Rev 2007A
07010295   Harpeth Valley Util Dist, TN W&S Rev Ref & Impr 07
07010298   Mass Port Auth (BOSFUEL Proj), MA Rev 2007
07010299   Mass Port Auth (BOSFUEL Proj), MA Rev 2007
07010300   Allegheny Co Sanitary Auth, PA Swr Rev 07
07010301   Allegheny Co Sanitary Auth, PA Swr Rev 07
07010302   Harpeth Valley Util Dist, TN W&S Rev Ref & Impr 07
07010303   MTA, NY Transportation Rev 2007A
07010305   Houston (City of),TX Cmb Util 1st Lien Rev Ref 07B
07010321   Olivenhain MWD No. 96-1, CA Lmtd Obl Impr Ref 07
07010322   South Madison Middle SBC, IN Rev 2007
07010326   Puerto Rico Sales Tax Rev 2007
07010329   Hercules RDA (Merged Proj Area), CA TAB 07
07010335   Houston (City of), TX Airport Rev Ref 07B
07010336   Houston (City of), TX Airport Rev Ref 07B
07010339   MICLA (Figueroa), CA Lse 07B-1/B-2 (Txble)
07010340   MICLA (Figueroa), CA Lse 07B-1/B-2 (Txble)
07010341   Los Angeles (City) MICLA (Cap Equip), CA Lease 07A
07010342   Los Angeles (City) MICLA (Cap Equip), CA Lease 07A
07010347   Victor Valley Transit Authority, CA COPs 07
07010348   Hayward (City of), CA Sew Sys.Rev COPs Ref 2007
07010349   Hayward (City of), CA Sew Sys.Rev COPs Ref 2007
07010357   Calleguas-Las Virgenes PFA,CA Rev Ref 07AB
07010358   Calleguas-Las Virgenes PFA,CA Rev Ref 07AB
07010359   Indian River Cnty Sch Brd, FL COPs 07
07010360   Idaho State University, ID Rev 07
07010376   Calleguas-Las Virgenes PFA,CA Rev Ref 07AB
07010381   Alaska Railroad Corp, AK FTA (5307 & 5309) 2007
07010382   Alaska Railroad Corp, AK FTA (5307 & 5309) 2007
07010386   Colorado State University Sys, CO Ent Rev 07ABC
07010387   Illinois Muni Pwr Elec Agy, IL Pwr Rev 07ABC
07010394   Melbourne (City of), FL W&S Rev Ref 2007B
07010395   Melbourne (City of), FL W&S Rev Ref 2007B
07010396   Florida Keys Aqueduct Auth, FL Wtr Rev 2007
07010397   Florida Keys Aqueduct Auth, FL Wtr Rev 2007
07010398   South Bend Comm Sch Corp, IN Rev 2007
07010399   South Bend Comm Sch Corp, IN Rev 2007
07010404   Illinois Muni Pwr Elec Agy, IL Pwr Rev 07C
07010410   Franklin Comm MSBC, IN Lse Rev Ref 2007
07010414   New York St Thruway Auth, Gen Rev Series H
07010416   New York City Muni Wtr Fin Auth, NY W&S Rev 08AA
07010417   San Mateo (City of), CA Lease Rev Ref 07B
07010418   San Mateo (City of), CA Lease Rev Ref 07B
07010419   Central Arkansas Univ (BOT), AR GO 07C

 

Policy Id

  Policy
07010420     Univ of California, CA Sub Lien Rev 07D
07010424   St. Peters (City of), MO Water & Sewer Rev 2007
07010426   St. Peters (City of), MO Water & Sewer Rev 2007
07010428   Miramar (City of), FL Util Sys Rev 2007
07010429   Miramar (City of), FL Util Sys Rev 2007
07010430   Philadelphia, PAID Lease Rev Series 2007AB
07010433   Maine Health & HEFA, ME Rev 2007B
07010434   Cowlitz Co. PUD No.1, WA Elec Rev 07
07010442   Calaveras County, CA COPs 07
07010443   Calaveras County, CA COPs 07
07010447   Fort Smith (City of), AR Wtr & Swr Rev 2007
07010448   Fort Smith (City of), AR Wtr & Swr Rev 2007
07010454   Washington (State of), WA COPs 07F
07010455   Wayne Co. Airport Auth., Sr. Lien Rfd. 2007
07010456   Philadelphia, PAID Lease Rev Series 2007AB
07010457   Philadelphia, PAID Lease Rev Series 2007AB
07010458   Sonoma (County of), CA (Measure F) Sales Tax 07AB
07010459   Sonoma (County of), CA (Measure F) Sales Tax 07AB
07010460   Sonoma (County of), CA (Measure F) Sales Tax 07AB
07010461   Sonoma (County of), CA (Measure F) Sales Tax 07AB
07010482   Kentucky SPBC, KY Rev Project No. 88
07010485   Escondido UHSD, CA COPs 07
07010486   Escondido UHSD, CA COPs 07
07010487   Fort Lewis College BOT, CO Aux Rev 07A,B1,B2,C,D
07010488   Fort Lewis College BOT, CO Aux Rev 07A,B1,B2,C,D
07020001   New Jersey TTFA, NJ 2006
07020002   Providence Health
84020044   E.F. Hutton Tax Exempt Trust,
84020050   Municipal Investment Trust Fun
84020054   The Municipal Bond Trust Insur
84020078   Sears Tax-Exempt Investment Tr
85020013   Sears Tax-ExemptInvestment Tru
85020021   Sears Tax-Exempt Investment Tr
85020054   Sears Tax-Exempt Investment, T
85020096   Smith Barney Insured Series 7
86010159   City of Indianapolis, Indiana
86020014   Insured Tax-Free Income Trust,
86020019   Sears Tax-Exempt Investment Tr
86990007   Arizona HELP SEries 1985
87010114   Intermountain Power Agency (A
87020002   E.F.Hutton Tax-Exempt Trust, C
88010480   CABELL, PUTNAM, WAYNE CMO 88
88010542   CABELL PUTNAM WAYNE CMO CABS
88010655   HERNANDO CNTY FL VRRB 1986 A&B
88010722   Albuquerque, NM CMO Ser 1988A
89010026   SEACOAST UTILITY AUTH 89
89010028   SEACOAST UTILITY AUTH 89
89010079   ROSS COUNTY OH 89
89010109   Sussex Co, DE Muni Ref CMO
89010123   HARRISBURG SEWER RFDG 89 2ND S
89010124   HARRISBURG SEWER RFDG 89 3RD S
89010141   Orange Co., Fl SW Rev 89
89010162   FEDERAL WAY, WA W&S 89
89010243   Pompton Lakes, NJ MUA
89010255   ESCAMBIA CNTY, FL SALES TAX 89
 

 

-79-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
90010030     WEST ORANGE BD OF ED, NJ LEASE
90010051   AUSTIN, TX COMB UTIL 90 A & B
90010150   PALM BEACH CNTY, FL EXCISE 90
90010184   Castle Rock, Co Sewer 90 A
90010285   SAN FRANCISCO REDEV PROJ, TAB
90010289   SAN FRANCISCO REDEV PROJ, TAB
90010316   Orlando-Orange Co Exp Auth 90
90010321   Chicago Wastewater 1990
90020091   Nashville/Davidson TN W/S 86
90020374   CITY UNIVERSITY, DASNY, LEASE
90020379   CITY UNIVERSITY, DASNY, LEASE
90020380   CITY UNIVERSITY, DASNY, LEASE
90020381   CITY UNIVERSITY, DASNY, LEASE
91010042   Allegheny Co., PA Sewer 1991
91010047   Piedmont MPA, SC Elec Refdg 91
91010109   Eastern Muni Wtr Dist COP 1991
91010122   Chandler, AZ Wtr/Swr Ref, 91
91010125   New Hampshire Tpke Rev 1991
91010158   DETROIT EDISON COMPANY 1991 AA
91010165   DETROIT EDISON CO SERIES E 91
91010201   GREEN COVE SPRINGS,FL UTIL 91
91010232   UNIV MARYLAND MED SYS 91 A & B
91010269   Buffalo Sewer Auth NY Ser F 91
91010312   PIMA CNTY, AZ SEWER REV SER 91
91010345   NJ Turnpike Authority 1991A
91010378   DENVER METRO BASEBALL DIST,SLS
91010399   SAN FRANCISCO REDEV PROJ,TAB91
91010427   ALLEGHENY CO, PA SWR 91 A,B,C
91010438   GRAND RAPIDS, MI WTR SYS 1991
91010444   Clark Cnty, WA PUD No 1 1991
91010455   REGIONAL TRAN AUTH,IL SL TX91A
91010456   Piedmont MPA Elec Rev Ref 91 A
91010463   SANTA ROSA CNTY,FL EXCISETAX91
91010465   JOLIET, IL WATER & SEW REV 89
91010467   REGIONAL TRAN AUTH,IL SL TX91A
91010481   LOS ANGELES CNTY TRANS,SLS TAX
91010505   ROCK HILL, SC UTIL SYS REV 91
91010513   New Jersey Turnpike Auth 91 D
91010514   New Jersey Tpke Auth 91 Surety
91010529   REGIONAL TRAN AUTH,LA SLSTAX91
91010533   Bucks Co, PA Sew Sys 1991 A&B
91010534   Bucks Co, PA SW Wtr Sys 91 A&B
91010535   Bucks Co, PA Swr Sys 1991
91020152   Tucson Wtr, AZ Proj 84D (1991)
91020339   DASNY STATE APPROP (SUNY), 90A
92010095   Harrisburg, PA Swr 2nd Ser 92
92010096   Harrisburg, PA Swr 1st Ser 92
92010104   SAN BERNARDINO CNTY TRANS,CA92
92010108   NYS MED CARE(MNTL HLTH)LEASE92
92010134   DETROIT EDISON 92AA
92010150   St Lucie Cnty, FL Sales Tax 92
92010210   Montgomery Co, MD Bethesda 92A
92010211   Montgomery Co. MD (Silver) 92
92010216   Helena, MT Wtr Sys 92 B&C
92010223   ST. LUCIE, FL W&S 1990 Surety

 

Policy Id

  Policy
92010226     PIERCE CNTY TRANS,WA SLS TX 92
92010229   Niagara Falls Brdg Comm 1992
92010245   Tampa, FL Water & Sewer 92A
92010247   Winston-Salem, NC Wtr/Swr 92
92010263   OKLAHOMA BAPTIST UNIV 92 REF
92010289   Richmond, VA Metro Auth ABC 92
92010332   LOS ANGELES CTC, SALES TAX 92A
92010348   Hesperia, CA Wtr Dist 92A&B
92010354   Hesperia, CA Wtr Dist 92A
92010355   Passaic Valley Water, NJ 92
92010357   Gilbert, Az Water&Sewer 92
92010360   Hesperia, CA Wtr Dist 92A
92010384   Boynton Beach, FL Wtr & Swr 92
92010401   Ridges Metro, CO GTD Sls Tax92
92010425   Lower Paxton, Pa Sewer 92 A&B
92010446   PASCO COUNTY,FL GAS TAX 92 REF
92010447   PASCO CNTY,FL GTD ENTLMT 92REF
92010468   Farmington, NM Util Rev 92
92010479   FLAGSTAFF,AZ JrLIEN HWY USR 92
92010490   Pasco Co. Fl Wtr&Swr Ref 92
92010491   Maryland Trans. Auth. 1992
92010498   South Co. Regional Wstewtr 92B
92010508   City of Fort Collins, Colorado
92010542   ARVADA (CITY OF), CO SLS TX 92
92010543   ARVADA (CITY OF), CO SLS TX 92
92010552   KENNER (CITY),LA SLSTAX 92 REF
92010570   Colorado Small Water Prog 92B
92010572   Elsinore Valley, CA MUD Ref 92
92010573   KENTUCKY TRNPK AUTH, EXC 92REF
92010607   Escambia Util Auth Ref 92B
92010608   Escambia Util Auth Ref 92B
92010623   Fulton County, GA Wtr & Swr 92
92010664   Panama City, FL Excise Tax S92
92010669   PALM BEACH CNTY, FL TAX REV 92
92010676   Santa Rosa Wastewater 92 B
92010690   Altamonte Springs, Fl Wtr&Swr
92010715   Chandler, AZ Wtr&Sw Ref 92
92010723   City of Chicago, Illinois, Was
92010746   Gainesville, GA Wtr&Swr Surety
92010747   Gainesville, GA Wtr/Swr 90 A&B
92010753   Coral Springs, FL W&S Rev 92
92010759   Margate, Fl. Wtr&Swr Rev Ref92
92010765   Bergen Co Util Auth, NJ 92 B
92020025   NYC Muni Water & Sewer 1992 A
92020027   Port Auth of NY&NJ 74th Series
92020033   Port Auth of NY&NJ 74th Series
92020073   Port Auth of NY&NJ 74th Series
92020083   PHOENIX, AZ ST/HWY JR LIEN 92
92020278   Nashville/Davidson TN W/S 86
93010003   Gainesville, GA Wtr&Swr 92 A&C
93010007   McCORMICK PLACE, IL SLS TX 92
93010013   PHOENIX, AZ ST/HWY JR LIEN 92A
93010015   Apopka, Fl Water and Swr 92
93010029   BroMenn HealthCare, IL 92 Ref
93010052   Sarasota Co., Fl Util Ref 93
 

 

-80-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
93010053     Sarasota Co., Fl Util Ref 93
93010077   San Diego Co., Calif. Wtr 92 A
93010078   San Diego Co., Calif. Wtr 92 A
93010114   Albany, NY Muni Wtr Auth 93 A
93010115   JACKSONVILLE, FL EXC TAX 93
93010116   JACKSONVILLE, FL EXC TAX 93
93010134   Riverside City, CA Sewer 93
93010135   Riverside City, CA Sewer 93
93010147   Montgomery Co. OH Sewer 92
93010152   Detroit, MI Swr Rev. Ref 93 A
93010176   Santa Maria, CA Water Proj. 93
93010184   INDIANA UNIV STUDNT FEES 93 J
93010185   INDIANA UNIV STUDNT FEES 93 J
93010204   Boston Water & Sewer Comm Rev
93010207   Chicago, IL Wstewtr Ref 93
93010208   Chicago, IL Wstewtr Ref 92
93010210   Phoenix, AZ Wtr System Rev 93
93010248   Gainesville, GA Wtr&Swr 93 A&B
93010254   Allegheny Co. Sani Auth. 93 A
93010258   Landis, NJ Sewer Authority 93
93010269   Chandler, AZ Water&Sewer 93
93010278   Indian River County, FL W&S93
93010296   PALM BEACH CNTY,FL ADMIN REV93
93010297   PALM BEACH CNTY,FL ADMIN REV93
93010301   Hamilton County, Ohio Sewer 93
93010332   Charlotte Co., FL Utilty 93
93010341   MODESTO (CITY OF), CA LEASE 93
93010350   MIAMI UNIVERSITY,OH GEN REV 93
93010359   Santa Rosa, CA Sewer Rev 93
93010360   Eastern Municipal Wtr 93-B
93010378   PALM BEACH CNTY, FL TAX REV 93
93010379   PALM BEACH CNTY, FL TAX REV 93
93010408   MONROE COUNTY,FL EXC TAX 93REF
93010430   Big Bear Lake, CA Wtr&Pwr 93
93010448   VIRGINIA BEACH, VA COP REF 93
93010456   CONTRA COSTA TRAN AUTH, CA 93A
93010496   New Jersey American Water 93
93010499   New Smyrna Beach Utility 93
93010502   Mary Hitchcock MemHosp,NH93Ref
93010504   ROCKEFELLER UNIVERSITY, NY 91A
93010529   CHILDRENS HSP MC OBGRP,OH93REF
93010536   Niagara Falls Brdg Commiss 93
93010545   Vallejo, CA Sanitation Dist.
93010546   Magee-Womens Hosp,Pitts, PA93
93010547   Niceville Fl, Wtr & Swr Ref 93
93010553   SAN FRANCISCO RDV PROJ,TAB 93B
93010556   Bucks Co W&S Nashaminy 93
93010566   Houston, TX Airport Sys.
93010568   Nashville/Davidson Co. W/S 93
93010569   Greater Baltimore Med Ctr,MD93
93010596   Oxnard, CA Financing Authority
93010609   Ft. Myers, FL Utility Sys 93
93010610   Ft. Myers, FL Utility Sys 93
93010614   Philadelphia, PA Water & Sewer
93010643   Palm Beach Co.,FL Wtr & Swr 93

 

Policy Id

  Policy
93010649     Pittsburgh W&S 91A Surety
93010669   Baystate Medical Center, MA93
93010671   PASSAIC COUNTY, NJ GO 93 REF
93010693   Jurupa, CA Wastewater 93
93010694   SARASOTA (CITY OF), FL W&S 93
93010731   Dunedin, Fl Wtr/Swr Ref. 93
93010732   Dunedin, Fl Wtr/Swr Ref. 93
93010733   MED CTR CENTRAL GEORGIA S93A
93010738   Fort Myers, FL Util Sys 93B
93010756   Pompano Beach, Fl Wtr & Swr 93
93010764   Chicago, Il Water Rev Ref 93
93010765   Chicago, Il Water Rev Ref 93
93010773   COLORADO SMALL WTR RES AUTH 93
93010775   Westmoreland Cnty MA, PA 93ABC
93010789   Houston, TX - Airport System
93010799   Detroit (City of), MI Water 93
93010803   Shreveport, LA - Wtr & Swr93 B
93010809   MACON-BIBB CNTY HOSP AUTH 93C
93010811   Pittsburgh, PA Wtr & Swr 93 AB
93010812   Pittsburgh, PA Wtr & Swr 93 AB
93010833   Metropolitan Nashville Arpt 93
93010835   ROGERS (CITY OF), AR SLS TX 93
93010862   Kenosha (City of), WI Sewer 93
93010865   Washington, D.C., Transit Auth
93010866   Washington, D.C., Transit Auth
93020026   North Carolina East 93A&B Sec
93020028   North Carolina East 92A&B Sec
93020061   North Carolina East 93A&B Sec
93020062   North Carolina East 92A&B Sec
93020071   North Carolina East 93A&B Sec
93020078   North Carolina East 93A&B Sec
93020094   DASNY, STATE UNIV SER 89B
93020095   DASNY LEASE 2ND RES(CUNY)90B&C
93020134   CITY UNIV/DASNY CONS REV 93A
93020195   STATE UNIV/DASNY, NY LEASE 93B
93020197   STATE UNIV/DASNY, NY LEASE 93B
93020198   STATE UNIV/DASNY, NY LEASE 93B
93020209   Salt River Proj Elec Sys Rev
93020227   DASNY, STATE UNIV SER 89B
93020282   GEORGIA MUNI ELEC AUTH, SER V
93020290   STATE UNIV/DASNY, NY LEASE 93A
94010011   Oklahoma Muni Power Auth 94
94010025   OSCEOLA CNTY,FL SLS TAX 93REF
94010026   OSCEOLA CNTY,FL SLS TAX 93REF
94010056   ST. LUCIE CNTY,FL SLS TX REF93
94010059   BAY COUNTY, FL GAS TAX 94
94010067   Oklahoma Muni Power Auth 94
94010075   Mishawaka (City), IN Swr 94A/B
94010078   Mishawaka (City), IN Swr 94A/B
94010084   FT LAUDERDALE,FL EX TX SURETY
94010088   Lancaster Cnty Wtr&Swr Dist,SC
94010095   Washington Pub Pwr SS Pr#2 94A
94010110   McMinnville City of,OR Sewer94
94010131   Baltimore, Md Water Proj. 94-A
94010132   Baltimore, MD Wastewater 94-A
 

 

-81-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
94010142     Union (City of), SC Util Sys94
94010157   Stafford Muni Util Auth, NJ 94
94010196   NEW JERSEY TRANS/METROPARK, 94
94010199   Sumter Co,FL Gas & Gtd Ent 94
94010224   James Island PSD, SC Sewer 94
94010232   COLORADO SMALL WTR AUTH 94A
94010261   Opa-Locka City, Fl GTDENT,SUTX
94010262   Opa-Locka City, Fl GTDENT,SUTX
94010285   PALM BEACH CNTY,FL CRM JSTC RV
94010304   Miami, FL (SSGFC) Tax 94
94010322   Winston-Salem NC W&S 94 Surety
94010331   Tacoma Wa Electric Sys Ref S94
94010333   METRO PIER & EXPO AUTH,IL 94AB
94010380   RICHLAND COUNTY, SC COP SER 94
94010387   Santa Clara Vly Wtr Ds, Ca Cop
94010394   ROCKEFELLER UNIVERSITY, NY 91A
94010412   PALM BEACH CNTY,FL PB IMP RV94
94010427   South Orange Cnty PFA, CA 94C
94010431   Miami Beach, FL (SSGFC) Tax 94
94010448   Med Ctr Hospital of Vermont94
94010471   ROCK HILL, SC UTIL SYS 94
94010480   Austin TX Comb UTS Sr. Lien 94
94010488   Miami, FL Non Ad Vlm Tax 94
94010518   Tacoma, Washington Sewer 94
94010540   Forsyth Cnty, GA - Wtr&Swr 94
94010551   Srs of Providence Oblg Grp, 94
94010560   Tacoma, Washington Sewer 94
94010567   Altoona, PA Water Authority
94010591   Regional Trans Auth,IL STX94CD
94010600   Regional Trans Auth,IL STX94CD
94010607   CHARLOTTE CNTY WTR/SWR, FL 94
94010616   CHANDLER, AZ WATER & SEWER 94
94010617   CHANDLER, AZ WATER & SEWER 94
94010639   Sarasota Co., Fl Util Rev - 94
94020029   STATE UNIV/DASNY, NY LEASE 93A
94020038   Gwinnett, GA Wtr & Swr Auth 94
94020047   METRO PIER/McCORMICK PLC,IL92A
94020051   METRO PIER/McCORMICK PLC,IL92A
94020052   METRO PIER/McCORMICK PLC,IL92A
94020053   METRO PIER/McCORMICK PLC,IL92A
94020068   METRO PIER/McCORMICK PLC,IL92A
94020073   Georgia MuniElec Auth Ser Z&A
94020074   Georgia Muni Elec Auth 93C
94020075   Georgia MuniElec Auth Ser Z&A
94020076   Georgia Muni Elec Auth BB
94020077   Georgia Muni Elec Auth 93B
94020078   Georgia Muni Elec Auth 92 B
94020080   Georgia MuniElec Auth Ser Z&A
94020081   Georgia Muni Elec Auth 93C
94020082   GEORGIA MUNI ELEC AUTH, SER V
94020084   Georgia MuniElec Auth Ser Z&A
94020089   Georgia Muni Elec Auth 92 B
94020091   Georgia Muni Elec Auth 92 B
94020093   Georgia Muni Elec Auth 92 B
94020094   Georgia MuniElec Auth Ser Z&A

 

Policy Id

  Policy
94020095     Georgia Muni Electric 92 B Sec
94020112   LOS ANGELES DEPT OF WTR, CA 93
94020121   CITY UNIV/DASNY, 2ND RES 93A
94020134   METRO PIER/McCORMICK PLC,IL92A
94020194   METRO PIER/McCORMICK PLC,IL92A
94020195   METRO PIER/McCORMICK PLC,IL92A
94020207   PHOENIX, AZ ST/HWY JR LIEN 92
94020246   METRO PIER/McCORMICK PLC,IL92A
94020255   DASNY, STATE UNIV SER 89B
94020257   STATE UNIV/DASNY, NY LEASE 93A
94020258   STATE UNIV/DASNY, NY LEASE 93A
94020265   Georgia MuniElec Auth Ser Z&A
94020300   Georgia MuniElec Auth Ser Z&A
94020303   Georgia Muni Elec Auth BB
94020304   INDIANA UNIV STUDENT FEE SER I
94020312   METRO PIER/McCORMICK PLC,IL92A
94020318   NEW YORK STATE (MCFFA) 94E
94020319   NEW YORK STATE (MCFFA) 94E
94020332   NEW YORK STATE (MCFFA) 92F
94020334   LA DWAP 1994
94020342   City of Austin - Comb Util 93A
94020346   Georgia MuniElec Auth Ser Z&A
94020347   City of Austin - Comb Util 93
94020361   Georgia Muni Elec Auth BB
94020367   METRO PIER/McCORMICK PLC,IL92A
94020369   Metro Water Dist So. CA - 93 A
94020387   Gwinnett, GA Wtr & Swr Auth 94
94020389   METRO PIER/McCORMICK PLC,IL92A
94020392   NEW YORK ST POWER AUTH-SER 91Z
94020402   LA DWAP 1994
94020416   METRO PIER/McCORMICK PLC,IL92A
94020422   METRO PIER/McCORMICK PLC,IL92A
94020427   METRO PIER/McCORMICK PLC,IL92A
94020437   MICHIGAN ST TRUNKLINE,EXCISE89
94020441   Georgia MuniElec Auth Ser Z&A
94020446   Georgia MuniElec Auth Ser Z&A
94020448   Georgia Muni Elec Auth 92 B
94020451   Georgia Muni Elec Auth 92 B
94020452   METRO PIER/McCORMICK PLC,IL92A
94020456   Gwinnett, GA Wtr & Swr Auth 94
95010016   Stockton Rev Certificates 1995
95010061   New York St Thruway Auth- 95 C
95010086   Bradenton, Florida Utility Sys
95010110   Beaufort-Jasp Co W&S Auth 92A
95010111   Beaufort-Jasp Co W&S Auth 92 B
95010134   Clifton Park Wtr Auth,NY Wtr93
95010188   Harrison Cnty, MS Wastewtr 95
95010197   Ft. Collins, Co Swr Rev Ref 95
95010201   Harrison Co Wastewtr, MS 91A
95010219   Tacoma, Washington Swr 1995A&B
95010236   Port of Portland Series Ten
95010245   Peoria, AZ Wtr & Swr Rev 1995A
95010270   ROCKEFELLER UNIVERSITY, NY 91A
95010273   JACKSONVILLE, FL SLS TX 95
95010339   Houston Airport, TX Surety 95
 

 

-82-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
95010363     Stafford Muni Util Auth, NJ 94
95010379   Miami, Fl Non-Ad Vlm Tax 1995
95010380   Miami, Fl Non-Ad Vlm Tax 1995
95010410   ORANGE CITY, FL UTIL SYS 1995
95010436   Winston-Salem, NC W&S 95AB sur
95010442   Mesa, Arizona Utility Sys 1995
95010448   Dade County, FL Wtr & Swr 95
95010449   Mobile Co. Wtr & Fire Ser 1995
95010477   Robinson Twp MUA,PA W&S SerA95
95010484   Clark Cnty PUD No 1, Gener. 95
95010491   Miami, FL (SSGFC) Non-Ad Tx 95
95010531   Clark Cnty PUD No 1, WA Elec95
95010536   Mason Cnty, WA-PUD No. 3, 1995
95010556   Bradenton, Fl Sub Lien Ser 95
95010572   Hammond,IN Pub Imp Bd Bk 1995A
95010579   San Diego, CA Sewer 95
95010596   Illinois (State of), SaleTax W
95010600   Chicago (City),IL Wtr Rev 1995
95010603   Chicago Wstewtr Trans Jr,IL 95
95010604   Chicago (City),IL Wtr Rev 1995
95020012   Georgia Muni Elec Auth 92 B
95020016   METRO PIER/McCORMICK PLC,IL92A
95020043   LA DWAP 1994
95020046   LA DWAP 1994
95020047   METRO PIER/McCORMICK PLC,IL92A
95020051   LOS ANGELES DEPT OF WTR, CA 93
95020053   METRO PIER/McCORMICK PLC,IL92A
95020054   City of Austin - Comb Util 93A
95020063   METRO PIER/McCORMICK PLC,IL92A
95020066   LA DWAP 1994
95020117   LA DWAP 1994
95020144   City of Austin - Comb Util 93
95020156   METRO PIER/McCORMICK PLC,IL92A
95020167   NEW YORK STATE (MCFFA) 92F
95020211   SALT RIVER AG I&P DIST, AZ 93C
95020217   City of Austin - Comb Util 93A
95020240   City of Austin - Comb Util 93
95020285   WPPSS - No. 1 Refdg S89B WA
95020294   NEW YORK ST POWER AUTH 93 CC
95020295   NEW YORK ST POWER AUTH 93 CC
95020329   METRO PIER/McCORMICK PLC,IL92A
95020338   METRO PIER/McCORMICK PLC,IL92A
95020340   City of Austin - Comb Util 93A
96010001   SARASOTA (CITY OF), FL W&S 96
96010006   JACKSONVILLE, FL EXCISE TAX95A
96010018   JACKSONVILLE, FL EXCISE TAX95A
96010045   Riverside Cnty TC, CA Sls Tx95
96010046   Riverside Cnty TC, CA Sls Tx95
96010055   Bossier City, LA Utility 1996
96010059   Louisville & Jeff Co Sewer 96A
96010072   East Bay MUD, CA Water Sys 96
96010090   JACKSONVILLE,FL EXCISE TAX 96A
96010091   JACKSONVILLE,FL EXCISE TAX 96A
96010093   COLUMBIA CNTY,FL GAS TX SURETY
96010097   UNIV. OF CONNECTICUT G0

 

Policy Id

  Policy
96010100     Lake Mary, Fl. Pub Imp Rev 96
96010114   Sarasota Co., Fl W & S Ser 96A
96010115   Sarasota Co., Fl W & S Ser 96A
96010127   Houston W&S Rev Rf,TX JR 96A&C
96010129   Lakewood Pub Fin Auth Wtr 1996
96010136   Stafford County, VA Wtr/Swr 96
96010149   SAN ANTONIO,TX CONV CTR-HOTEL
96010165   South Gate Pub Fin Wtr, CA 96A
96010203   Port StLucie FL Utl Rev CAB96A
96010211   Baltimore, MD Parking Sys 96A
96010212   Baltimore, MD Parking Sys 96A
96010213   Mary Hitchcock Mem Hosp 85A
96010234   Lake Wales, FL W & S Rev 1996
96010251   Franklin Cnty Pub Fac Corp, NC
96010259   Indian River County, FL W&S 96
96010260   NEW JERSEY-AMERICAN WTR CO 96
96010281   VANDENBERG VILL COMM SVS DT 96
96010309   Hillsborough Cnty Avtn 1996 AB
96010323   Orange City FL Utl Sys Rev 96
96010347   LAKE WALES, FLORIDA EXCISE 96
96010364   West Palm Beach, FL (SSGFC) 96
96010378   CHARLOTTE CO WTR/SWR, FL 1996
96010379   CHARLOTTE CO WTR/SWR, FL 1996
96010404   Port Canaveral,FL Auth 1996A&B
96010473   Unified Swrage Agcy,OR Sr 1996
96010474   Unified Swrage Agcy,OR Sr 1996
96010485   Dixon, City - Swr Imp Proj 96
96010505   Emerald People’s Util Dist-96
96010506   Emerald People’s Util Dist-96
96010513   Illinois St. Toll Hghwy 1996A
96010519   Fort Lauderdale, FL (SSGFC) 96
96010528   Port of Portland, OR Series 11
96010530   Tulsa Airports Improv Trust 96
96010545   NORTHERN ILL. UNIV AUX REV 96
96010548   Hawaii (State), Exc1996 Surety
96010552   Morristown, TN Water Sys 1996
96010569   BRIGHTON, COLORADO Sls 96RefB
96010570   BRIGHTON, COLORADO Sls 96RefB
96010579   JACKSONVILLE, FL EXCISE 96B&C
96010598   PASSAIC COUNTY, NJ GO 96A&B
96010601   Martin Cnty, Fl Wtr/Swr 1996
96010605   West Morgan East Law Wtr 1996
96010652   Margate, FL Wtr&Swr 96 Surety
96010663   Kansas City, KS Swr SRF Loans
96010668   Lynnwood, WA W&S Rev Ref 1996
96010680   Richmond Co, GA W&S 96A,B
96010691   Dade County Expressway Auth 96
96010701   HOUSTON WTR & SWR JR,TX 1996D
96010712   Kansas City, Mo Wtr Sys 1996B
96010717   Kansas City, Kansas Sewer
96020049   Boston Water & Sewer Sr. 92 A
96020152   MASS WATER RESOURCES 1993 C
97010002   Richmond County, GA W&S 1997
97010005   JACKSONVILLE, FL SLS TX 96
97010006   JACKSONVILLE, FL SLS TX 96
 

 

-83-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
97010023     Wheeling, WV Comb. Wtr&Swr 97
97010028   HOUSTON W&S, TX REV REF 97ABC
97010037   Texarkana, TX W & S Rev 96B
97010038   ST. PETERSBURG,FL EXCISE DSRF
97010039   Dade County, FL Wtr/Swr 1997
97010044   Fayette Co, Ga Water Rev 96
97010050   Connecticut State GF CDA 97A
97010064   Kansas City, KS Swr Loans 1997
97010085   Maine Turnpike Authority Rev97
97010086   Bergen Co Util Auth, NJ 1997
97010104   San Diego, CA Sewer 1997 A&B
97010108   Fort Lauderdale, FL (SSGFC) 97
97010131   Everett, WA Water&Sewer 1997
97010132   Everett, WA Water&Sewer 1997
97010158   Seattle, WA Water System 97 SY
97010170   Mesa, AZ Utility System 1997
97010171   Daytona Beach, FL (SSGFC) 97
97010175   Sarasota Co., FL W & S Ser 97
97010202   Cocoa, Florida Wtr&Swr Sys 97
97010265   Corsicana, TX Wtr&Swr 1997C
97010284   NEW JERSEY-AMERICAN WTR CO 97B
97010291   Beaverton, OR Water Rev Ser 97
97010292   Beaverton, OR Water Rev Ser 97
97010298   Gilbert, Az Water&Sewer 1997
97010312   Colorado Wtr Res Dev Auth 97 A
97010330   Arizona BD of Regents (NAU) 9
97010331   Arizona BD of Regents (NAU) 9
97010337   Bossier City, LA Sales Tax 97
97010339   TUCSON, AZ ST&HWY GAS TAX 97C
97010342   Houston Arprt Syst., TX 1997
97010364   Arkansas Dev Fin Auth Ser 97
97010369   Atlanta, GA W&S Sr. Lien Ser97
97010371   Atlanta, GA W&S 2nd Lien
97010381   Burlington VT Wtr Sys Ser 97
97010382   Burlington VT Wtr Sys Ser 97
97010385   Phila, PA - Arpt Rev Ser 97AB
97010403   Fort Wayne (City), IN Water 97
97010438   Stafford Muni Util Auth, NJ 97
97010445   Regional Trans Dist, CO SLS 97
97010462   Stafford Muni Util Auth, NJ 97
97010465   Galveston, TX Wtr Sys (O&M) 97
97010471   Palm Beach Cnty, FL Non-Ad Vlm
97010491   Jacksonville Elec, FL W&S 97AB
97010518   Unified Swrage Agency,OR Sr 97
97010519   Unified Sewerage Agency Sub.97
97010520   Chandler, AZ Water&Sewer 1997
97010529   Polk County, FL Util Sys 97A&B
97010530   Lambert-St Louis Intl Airprt97
97010536   Chicago (City), IL Wtr Rev 97
97010537   Chicago (City), IL Wtr Rev 97
97010554   Water Facilities Auth, CA 97A
97010557   White House Util W&S, TN 97A&B
97010573   Regional Trans Auth,IL STAX 97
97010574   Regional Trans Auth,IL STAX 97
97010580   Texas Tpke Auth DNT Sys. 1997A

 

Policy Id

  Policy
97010597     TX TA Dallas No Tollway Ser 97
97010605   White House Util W&S, TN 97A&B
97010611   Prescott Valley Twn, AZ Exc Tx
97010624   MESA, ARIZONA ST & HWY REV 97
97010626   Hamilton County, Ohio Swr 97A
97010632   West Palm Beach, FL (SSGFC) 97
97010641   Prescott Valley Twn, AZ Exc Tx
97010646   DASNY CUNY Cons 97AB 3rd 97-1
97010660   BATON ROUGE, LA SLS TAX 97
97010662   Marshall, TX Wtr & Swr Ser 97
97010669   RUTHERFORD CO. CUD, TN WTR 97A
97010679   Butler Area Swr Auth Rev 97AB
97010701   Modesto, CA Water Rev 97 COPS
97010705   Modesto, CA Water Rev 97 COPS
97010727   Greater Orlando, FL 1997 A,B&C
97010796   Cherokee Co, GA Wtr&Swr Auth97
97010806   Prince William,VA Wtr/Swr 97
97010808   Warren (City of) Wtr Rev 1997
97020047   STATE UNIV/DASNY, NY LEASE 93A
97020048   STATE UNIV/DASNY, NY LEASE 93A
97020052   CITY UNIV/DASNY 93BCDE REF
97020053   STATE UNIV/DASNY, NY LEASE 93A
97020054   CITY UNIV/DASNY CONS REV 93A
97020056   CITY UNIV/DASNY CONS REV 93A
97020058   STATE UNIV/DASNY, NY LEASE 93A
97020060   CITY UNIV/DASNY CONS REV 93A
97020066   CITY UNIV/DASNY CONS REV 93A
97020068   City Univ/DASNY, 2nd Res 95A
97020071   STATE UNIV/DASNY, NY LEASE 93B
97020079   MASS WATER RESOURCES 1993 C
97020102   STATE UNIV/DASNY, NY LEASE 93A
97020105   MASS WATER RESOURCES 1993 C
97020156   MASS WATER RESOURCES 1993 C
97020158   Tucson, Arizona Wtr Sys Ref 93
97020162   MASS WATER RESOURCES 1993 C
98010001   Long Beach Harbor Revnue 1998A
98010012   Colorado Wtr Res Dev Auth 97 B
98010023   Metro Nashville Arpt,TN 97
98010026   Metro Nashville Arpt,TN 97
98010027   Metro Nashville Arpt,TN 97
98010046   Hillsborough CO, FL Fuel TX 98
98010050   Hillsborough CO, FL Fuel TX 98
98010064   San Jose, CA - Airport Rev 98A
98010070   OSCEOLA CNTY, FL GAS TAX 98
98010076   Eastern KY Univ Mand Fee S&T
98010104   Longview, TX WtrSwr Rev 98B
98010106   Nashville/Davidson TN WS 98A
98010108   Escambia Co. FL Ut Auth 1998D
98010111   Escambia Co. FL Ut Auth 1998D
98010118   GRAND VALLEY UNIVERSITY, MI 98
98010124   Escambia Co., FL Utl 1998 ABC
98010125   Fairfield, OH Water Rev 1998
98010126   Escambia Co., FL Utl 1998 ABC
98010137   Longview, TX WtrSwr 98-A TWDB
98010149   Fayette Co, Ga Water Series 98
 

 

-84-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
98010153     Akron, Ohio Waterworks Rev. 98
98010163   Daytona Beach, FL (SSGFC) 98
98010165   Nashville/Davidson TN W/S 98B
98010170   Pittsburgh, PA Wtr & Swr 98AB
98010194   Charlotte Co., FL Wtr&Swr 1998
98010197   Buffalo, NY Muni Wtr Auth 98AB
98010198   Edgefield Co. W&S Auth., SC 98
98010199   Edgefield Co. W&S Auth., SC 98
98010201   Fort Wayne (City), IN Swr 98A
98010213   Westmoreland Muni Auth W&S 98
98010215   Phila, PA - Arpt Rev Ser 98A
98010218   FORT PIERCE, FLORIDA NON-AD 98
98010219   FORT PIERCE, FLORIDA NON-AD 98
98010232   Butte-Silver Bow, MT Water 98
98010241   Baltimore, MD Prkng Sys 1998A
98010242   Baltimore, MD Prkng Sys 1998A
98010269   Parker Wtr&San Dist, CO Ref 98
98010270   Florida DOT Turnpike Rev 1998A
98010273   S. Indiana (Univ of) Std Fee F
98010277   Los Angeles, CA Wstewtr 98A&B
98010290   Chicago (City of), Il STax98
98010296   Houston Airport Sys, TX 1998A
98010304   Chandler, AZ Water & Sewer 98
98010311   Boston Water & Sewer Rev 98A
98010316   Louisville & Jeff Co Sewer 98A
98010317   Louisville & Jeff Co Sewer 98A
98010318   Houston Airport Sys, TX 1998A
98010323   Boston Water & Sewer Rev 98C
98010324   Richmond, VA Metro Auth 1998
98010326   Metro Nashville Arpt,TN 98
98010327   Metro Nashville Arpt,TN 98
98010330   Mesa County, CO Sales Tax 98
98010344   Palmdale, CA Water District 98
98010345   Palmdale, CA Water District 98
98010358   DASNY CUNY Cons 3rd Res 98-1
98010359   DASNY CUNY Cons 2nd Res 1998A
98010360   Mobile Co., AL Wtr,Swr&Fire 9
98010370   Hernando CO Sales Tax, FL 1998
98010371   Hernando Co, Florida W&S 98
98010372   Coral Springs, FL Wtr&Swr 1998
98010374   Akron (City), OH Swr Sys 98
98010378   Connecticut (St) Specl Tax 98A
98010379   New Jersey Wastewater 1998G
98010411   Winslow, AZ Water Revenue 1998
98010413   Winder, Georgia Wtr & Swr 1998
98010414   Winder, Georgia Wtr & Swr 1998
98010438   Kansas City, Mo Wtr Sys 98A&B
98010458   Harris County, TX Toll RD 97SY
98010459   Kansas City, Mo Wtr Sys 98B
98010460   Orlando-Orange CO Exp, FL JR98
98010466   Port of Seattle, WA Rev.1998A
98010474   Stafford Muni Util Auth, NJ 98
98010475   Stafford Muni Util Auth, NJ 98
98010476   Lantana, FL Utility Sys 1998
98010482   Kenosha, WI Water Rev 1998

 

Policy Id

  Policy
98010483     Kenosha, WI Water Rev 1998
98010507   Martin Cnty, Fl Wtr/Swr 98
98010508   Martin Cnty, Fl Wtr/Swr 98
98010509   ST. JOHNS CO., FL SALES TAX 98
98010510   ST. JOHNS CO., FL SALES TAX 98
98010511   ST. JOHNS CO, FL W&S 1998
98010512   ST. JOHNS CO, FL W&S 1998
98010515   Oklahoma Tkpe Authority, 98A&B
98010516   Oklahoma Tkpe Authority, 98A&B
98010517   BATON ROUGE, LA SLS TAX 98A
98010519   Phoenix, AZ Wtr Jr Rev 1998
98010532   PIMA COUNTY, AZ SEWER 98
98010533   PIMA COUNTY, AZ SEWER 98
98010535   Terrebonne, LA Wtr Dist #1 98
98010540   Florida State BOE Lottery 98A
98010542   Florida State BOE Lottery 98A
98010544   Kansas City, KS Swr Jr Lien 98
98010548   Kansas City,KS Swr Jr Lien 98A
98010552   Lewisville, TX Wtr & Swr 98
98010559   Lancaster Cnty Wtr&Swr Dist,SC
98010574   Fulton County, GA Wtr & Swr 98
98010575   North Port Utility System 92
98010576   North Port Utility System 92
98010582   Arvada, Colorado Sls Tx Ser 98
98010602   San Bernardino, CA Sew. Rev 98
98010609   Scottsdale Prsrve Auth, AZ 98
98010613   Seattle, WA Wtr Sys Rev 98
98010624   Winston-Salem, NC W&S 98 Sur
98010628   Volusia County, FL Wtr/Sew 98
98010633   Grand Rapids Sewer Rev 1998A
98010634   Grand Rapids Sewer Rev 1998A
98010643   Fresno, CA Water System 1998 A
98010657   West Wilson Util, TN Wtr 1998
98010658   HAWAII STATE-HIGHWAY REV 98
98010660   HAWAII STATE-HIGHWAY REV 98
98010668   Texas City, TX W&S (GCWA) 98-C
98010673   Lakehaven Util Dist, WA W&S 98
98010684   Pinellas Co, Fl. Sewer Rev 98
98010685   Pinellas Co, Fl. Sewer Rev 98
98010686   Dade Co., Fl Aviation 1998A&B
98010687   Oklahoma Tkpe Authority, 1998B
98010688   Oklahoma Tkpe Authority, 1998B
98010691   Philadelphia, PA -Arpt Rev 98B
98010693   Philadelphia, PA -Arpt Rev 98B
98010700   Warren Co, OH Wtrwks Rev 1998
98010701   Warren Co, OH Wtrwks Rev 1998
98010708   NEW JERSEY-AMERICAN WATER 98A
98010711   Napa Sanitation Dist., CA 98A
98010716   San Francisco Arpt 18A-18B-19
98010718   Putnam Cnty JBC, In Lease 98
98010721   Dallas Co Wtr Dist 6,TX W&SRev
98010739   Salinas, CA Wastewater Rev 98
98010745   Oklahoma St Univ Util Revs 98
98010748   San Diego, CA Water Revenue 98
98010769   Illinois, Sales Tax McCorm98AB
 

 

-85-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
98010795     Greater Buffalo,NY Int Arpt 98
98010802   Weslaco, TX Wtr & Sew (TWDB)9
98010807   POLK COUNTY,FL FUEL TAX DSRF96
98010809   Greater Orlando, FL Airport 98
98010819   Peoria, AZ Wtr & Sew 98 A&B
98010822   Peoria, AZ Wtr & Sew 98 A&B
98010823   Peoria, AZ Wtr & Sew 98 A&B
98010825   Ohio Turnpike Commission 98AB
98010827   Central Michigan Univ, MI 1998
98010832   Wichita, Kansas Wtr & Swr 98
98010834   Wichita, Kansas Wtr & Swr 98
98010835   Florida State BOE Lottery 98B
98010836   Florida State BOE Lottery 98B
98010851   Lancaster Cty AVTSA, PA 98
98010856   Miramar, FL Water Imp Assmt 98
98010864   Tampa Bay Reg Wtr Auth FL 98AB
98010886   Ohio Turnpike Commission 98B
98010893   TOLEDO (UNIV OF),OH GEN RECT98
98010907   TX Tpke Auth Dallas N Toll 98
98010911   Colorado Wtr Res Dev Auth 1998
98010916   Willingboro MUA,NJ Wtr/Swr 98G
98010919   MIAMI UNIV,OH GEN RECEIPTS 98
98010924   New York LGAC Sales Tax 1998A
98010925   Port Authority of NY & NJ 116
98010928   Lauderhill, FL TAX REV 98
98010937   Douglsvll-Dgls Co W&S Ath GA98
98010938   ORANGE CO., FL Guar. Ent. 98
98010950   Wisconsin (State)MotorVeh 98B
98010956   New York, NY Muni Wtr 99A
98010970   Charleston, SC Wtrwrks&Swr 98
98010975   San Diego Co., CA. Wtr Rev 98A
98010977   Houston Airport, TX Rev 98B&C
98010982   Longview City TX WtrSwrRev 98C
98010992   Clearwater, FL W&S Rev 98
98010994   Regional Trans Auth,LA SlsTx97
98011000   Houston Airport, TX Rev 98B&C
98011006   Folsom Water Rev, CA Series 98
98011007   Folsom Water Rev, CA Series 98
98011011   Port Angeles, WA Wtr&Sew Rev98
98011013   Rutgers State Univ GO, NJ 98A
98011015   Spartanburg, S.C. Wtr Rev 98
98011016   Port Angeles, WA Wtr&Sew Rev98
98011030   San Mateo, CA Sewer Rev. 98A&B
98011036   Brea Pub Fin Auth, CA Wtr 98
98011042   Port of Portland, Oregon 12ABC
98011049   Port Auth of NY/NJ Cons 117
98011056   Port of Portland, Oregon 12ABC
98011063   New York City TFA 99A
98011068   Regional Trans Auth,LA SlsTx97
98011094   PRESCOTT,AZ MPC EXCISE TAX 98F
98011100   Alderwood Water District, WA98
98011102   Cherokee Co W&S Auth Rev 1998
98011122   Fort Lauderdale, FL Excise 98C
98011131   Mitchell Elem SBC,IN 1998
98011133   Honolulu, HI Swr Rev/Jr.Lien98

 

Policy Id

  Policy
98011134     Honolulu, HI Swr Rev/Sr.Lien98
98011135   Lambert-St Louis Intl Airprt98
98011138   SARASOTA Co, FL GTD ENTITLE 98
98011143   Corona Pub Fin Auth,CAWtrRev98
98011144   Corona Pub Fin Auth,CAWtrRev98
98011149   Rutgers/New Bruns Housing 1998
98011150   SARASOTA (CITY OF), FL W&S 98
98011161   Fort Wayne (City), IN Swr 98B
98011176   Mass WtrPolAbmnt NewBedford 98
98020004   Houston Univ Of, TX Cons Rev98
98020015   New York City TFA 98B
98020017   New York, NY Muni Wtr Auth 98D
98020018   New York, NY Muni Wtr Auth 98D
98020019   New York City TFA 98B
98020020   New York, NY Muni Wtr Auth 98D
98020025   New York, NY Muni Wtr Auth 98D
98020029   New York, NY Muni Wtr Auth 98D
98020030   New York, NY Muni Wtr Auth 98D
98020043   New York, NY Muni Wtr Auth 98D
98020046   New York City TFA 98B
98020057   New York, NY Muni Wtr Auth 98D
98020072   New York City TFA 98C
98020073   New York City TFA 98C
98020076   New York City TFA 98B
98020079   New York City TFA 98B
98020085   New York City TFA 98B
98020086   New York City TFA 98B
98020091   New York City TFA 98B
98020092   New York City TFA 98B
98020093   New York City TFA 98B
98020095   MASS WATER RESOURCES 1993 C
98020126   DASNY CUNY Cons 3rd Res 1998-2
98020143   DASNY CUNY Cons 3rd Res 1998-2
98020145   DASNY CUNY Cons 3rd Res 1998-2
98020146   MASS WATER RESOURCES 1993 C
98020176   New York City TFA 98B
98020186   STATE UNIV/DASNY, NY LEASE 93A
98020187   STATE UNIV/DASNY, NY LEASE 93A
98020191   New York City TFA 98C
98020192   New York City TFA 98B
98020193   New York LGAC Sales Tax 93C
98020194   City Univ/DASNY, 2nd Res 95A
98020196   Charleston, SC Wtrwrks&Swr 98
98020197   Charleston, SC Wtrwrks&Swr 98
98020198   New York, NY Muni Wtr 99A
98020199   New York, NY Muni Wtr 99A
98020200   New York, NY Muni Wtr 99A
98020201   New York, NY Muni Wtr 99A
98020202   New York, NY Muni Wtr 99A
98020207   New York, NY Muni Wtr 99A
98020208   New York, NY Muni Wtr 99A
98020211   New York, NY Muni Wtr Auth 98D
98020214   New York, NY Muni Wtr 99A
98020216   New York State GO & Lease 97
98020221   New York City TFA 98B
 

 

-86-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
99010016     Cent. Puget Sd RTA, WA SLTX 99
99010017   Cent. Puget Sd RTA, WA SLTX 99
99010032   Boston W & S Comm Rev 98D
99010043   Orange County, FL Sales Tax 99
99010049   Kitsap Co., WA Sewer Rev 99
99010050   Kitsap Co., WA Sewer Rev 99
99010059   Collier Co, FL W&S Rev, 1999
99010061   Collier Co, FL W&S Rev 1999
99010064   Ball State Univ,IN StudFeeI 98
99010065   Allen, TX W&S Rev. Series 1999
99010069   Chicago (City of),Il SaleTax99
99010073   Chandler, AZ W&S 99 (Surety)
99010085   Fair Oaks Wtr Dist Rev COPS 98
99010102   Cocoa, FL Wtr&Swr Sys 1998
99010114   Hurst, TX Wtrwrks & Swr, Ser99
99010120   Butler Cnty, MO Lease 98 Rfdg
99010129   Los Angeles, CA Wastewater 99A
99010138   New Hampshire Turnpike Rev99AB
99010142   Florida State BOE Lottery 98C
99010143   Florida State BOE Lottery 98C
99010149   Richmond, VA Met Auth Toll 99
99010150   Southeastern PA Tran Auth,99AB
99010152   Southeastern PA Tran Auth,99AB
99010166   Alderwood Water District, WA99
99010174   Metro Domestic Wtr Dist, AZ 98
99010175   Metro Domestic Wtr Dist, AZ 98
99010182   PIERCE CNTY TRANS,WA SLS TAX99
99010194   JACKSONVILLE, FL EXCISE TAX 99
99010195   JACKSONVILLE, FL EXCISE TAX 99
99010237   San Diego, CA Sewer 99 A & B
99010241   New York ST ThruwyAuthGasTx99A
99010256   Butler County, OH Sewer Rev 99
99010270   Central Pug Sd RTA, WA SLTX 99
99010274   North Texas Muni Water Dist.99
99010281   Port of Portland, Oregon 14&15
99010291   Arvada, Colorado Sls Tx Ser 99
99010292   Arvada, Colorado Sls Tx Ser 99
99010296   South Island Pub Svc Di, SC 99
99010297   South Island Pub Svc Di, SC 99
99010303   Mission EDC, TX Sb Ln Sls Tx99
99010314   Loudoun Co., VA Sanit Auth 99
99010315   Kankakee, IL Sewerage 99AB
99010317   Atlanta, GA Water & Sewer 1999
99010318   UNIV. OF CONNECTICUT G0 99A
99010319   PICA/Philadelphia Wage Tax 99
99010323   PICA/Philadelphia Wage Tax 99
99010331   Clackamas SD 1 OR Sew Surety94
99010336   CASA GRANDE, AZ EXCISE TAX 99
99010342   Toledo, OH Water Rev 1999
99010350   West Melbourne, FL W/S, Ser 99
99010356   Miami-Dade Cnty, FL Wtr/Swr99A
99010358   Metro Washington DC Arpt 99Rfg
99010359   Metro Washington DC Arpt 99Rfg
99010378   NORTHERN KENTUCKY U, CONS ED99
99010381   ST. JOHNS CO. FL W&S Ser.99AB

 

Policy Id

  Policy
99010383     ST. JOHNS CO. FL W&S Ser.99AB
99010384   ST. JOHNS CO. FL W&S Ser.99AB
99010393   San Francisco Park. Auth 99-1
99010394   San Francisco Park. Auth 99-1
99010401   San Francisco, CA Arpt 23A
99010402   San Francisco, CA Arpt 23B
99010404   AVONDALE, ARIZONA EXCISE TAX99
99010405   AVONDALE, ARIZONA EXCISE TAX99
99010406   Jefferson Co CO Sls Tx Open 99
99010407   Jefferson Co CO Sls Tx Open 99
99010409   Pennsylvania-American Wtr 1999
99010431   Bartow, FL Water & Sewer Ser99
99010438   Celina, OH Wastewater Rev
99010447   New York ST Thruwy Auth TF 99B
99010452   PHM Sch Renov BC, In Lse 99
99010454   Clifton Park Wtr Auth,NY 1999A
99010457   FLORIDA PRSV 2000,DOC STAMP99A
99010461   Colorado Springs, CO Sls Tx 99
99010469   Greater Orlando, FL Arpt 99A&B
99010488   Wichita, KS Wtr & Sew Rev 99
99010489   Wichita, KS Wtr & Sew Rev 99
99010493   Oro Valley Mun Prop Corp,AZ 99
99010497   Seattle, WA Water System Rev99
99010504   Tucson, AZ Water Rev 1994-C 99
99010507   Hillsborough Co Avt Ath,FL99AB
99010515   Tarrant Cnty WC&ID, TX Rev 99
99010519   WAYNE STATE UNIV, MI GEN REV99
99010534   ST. Louis, MO GO 99
99010567   Jackson, MS Water & Sewer 99
99010568   Jackson, MS Water & Sewer 99
99010583   Metro Nashville Apt,TN 95,98AB
99010588   Minneapolis-St.Paul ArptRev 99
99010590   Napa County, CA Sales Tax 1999
99010595   Central Lake Co. Jt Wtr, IL 99
99010600   West Palm Beach, FL Wtr&Swr 99
99010602   St. Peters, MO Wtr&Swr 1999
99010603   St. Peters, MO Wtr&Swr 1999
99010610   Napa County, CA Sales Tax 1999
99010612   Tamarac, FL Sales Tax 1999
99010613   Tamarac, FL Sales Tax 1999
99010615   MANDEVILLE,LOUISIANA SLS TAX99
99010632   Contra Costa Wtr Dst, CA Rev99
99010633   Contra Costa Wtr Dst, CA Rev99
99010636   Jacksonville, FL Excise Tax99B
99010641   Martinez, CA Water COPs Ser 99
99010642   Martinez, CA Water COPs Ser 99
99010664   Ft. Wayne,IN Waterworks Surety
99010668   St. John, MO COP Series 1999
99010671   Escambia Co., FL Util Auth 99
99010672   Escambia Co., FL Util Auth 99
99010676   Akron (Univ of),OH Gen Recpt99
99010680   EAST BATON RGE PSH,LA SLSTX99A
99010683   Prince William Cty,VA WtrSwr99
99010690   Illinois Sale Tax McCorm99ABCD
99010693   St.Petersburg,FL SSGFC NonAd99
 

 

-87-


Schedule 1

List of Covered Policies

 

 

Policy Id

  Policy
99010694     Turlock (City), CA Swr Rev 99
99010701   St.Petersburg,FL SSGFC NonAd99
99010702   Charlotte, NC Wtr & Swr Rev 99
99010729   Jacksonville, FL Excise Tax99B
99010736   Lafayette, LA Sales Tax 99B
99010737   Florida Ports Financing Comm99
99010742   Durango, Colorado Sls Tax 99
99010743   Durango, Colorado Sls Tax 99
99010751   Fort Myers (City), FL Util 99A
99010752   Fort Myers (City), FL Util 99A
99010757   Tampa Bay Wtr Auth FL Rev 99
99010758   San Francisco BART, Sls Tax 99
99010768   Phila. Sub. Water Corp. 1999
99010770   Tucson, Arizona Water Sys 99A
99010785   Alabama Pub Sch & Coll Auth 99
99010788   Port Authority of NY/NJ 118
99010800   Seattle, WA Water System 99B
99010815   Beaufort-Jasp Co W&S Rev 99
99010816   Beaufort-Jasp Co W&S Rev 99
99010833   Gainesville, GA Wtr & Swr 99
99010838   Gainesville, GA Wtr & Swr 99
99010845   King County, WA Sewer Rev 99
99010850   Vancouver, WA Water & Sewer 99
99010861   Austin Car Rental Tax, TX 99
99010862   Austin Car Rental Tax, TX 99
99010886   Alabama Pub Sch & Coll Auth99D
99010887   Tulsa Airports Improv Trust99
99010888   Tulsa Airports Improv Trust99
99010890   San Antonio, TX Wtr Rev Sr 99
99010907   Corsicana, TX Wtr & Swr Rev 99
99010911   Longview, TX Wtr & Swr Rev 99
99010915   Connecticut (St) Specl Tax 99A
99010921   Detroit,MI Water Rev 1999A
99010922   Detroit,MI Water Rev 1999A
99010924   Culver City, CA Wastewater 99
99010926   INDIANA U Stud Fee SerM Surety
99010935   Ross Co Water Company OH Rev99
99010938   Ross Co Water Company OH Rev99
99010945   El Paso, TX Water & Sewer 99C
99010953   Margate, FL Wtr & Swr Rev 1999
99010961   Ennis Eco Dev Corp,TX SlsTax99
99010965   DASNY-SUNY Series EDL FACS 99
99010970   Pittsburgh,PA Airport Rev 99
99010978   Detroit, MI Sewer Disposal 99A
99010979   Detroit, MI Sewer Disposal 99A
99010982   Louisville&Jeff Co Swr Rev 99A
99010983   Louisville&Jeff Co Swr Rev 99A
99010992   Central Missouri St Univ,MO 99
99020001   New York LGAC Sales Tax 93C
99020004   Pennsylvania GO 98 3rd Series
99020018   New York City TFA 98B
99020034   New York City TFA 98C
99020053   New York City TFA 98B
99020056   New York City TFA 98C
99020063   DASNY LEASE 2ND RES(CUNY)90B&C

 

Policy Id

  Policy
99020067     New York City TFA 99B
99020070   Fulton County, GA Wtr & Swr 98
99020071   New York, NY Muni Wtr Auth 98D
99020072   New York City TFA 99B
99020078   New York City TFA 98C
99020079   New York City TFA 98B
99020084   City Univ/DASNY, 2nd Res 95A
99020087   DASNY CUNY Cons 3rd Res 98-1
99020090   New York City TFA 98C
99020093   New York City TFA 98C
99020095   New York City TFA 99C
99020100   New York City TFA 98C
99020103   New York City TFA 98B
99020108   New York City TFA 99A
99020109   New York City TFA 99A
99020112   Colorado Springs, CO Sls Tx 99
99020113   Colorado Springs, CO Sls Tx 99
99020114   Mass Port Auth,Rev Bonds 98D/E
99020119   New York City TFA FY98 A
99020131   New York, NY Muni Wtr Auth 98D
99020146   New York City TFA 98B
99020157   New York City TFA 98B
99020167   New York, NY Muni Wtr Auth 97A
99020176   New York, NY Muni Wtr 99A
99020206   New York, NY Muni Wtr Auth 98D
99020208   New York City TFA 99B
99020211   New York City TFA 99B
99020223   San Diego Co., CA Wtr Rev 97A
99020240   DASNY CUNY Cons 3rd Res 98-1
99020247   Mass Port Auth Rev, MA 1999C-D
99020252   New York, NY Muni Wtr Auth 97A
99020273   DASNY LEASE 2ND RES(CUNY)90B&C
99020275   New York City TFA 98C
99020280   New York State GO & Lease 97
 

 

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EXHIBIT A

FORM OF NOVATION ENDORSEMENT

[Letterhead of National]

National Public Finance Guarantee Corporation

113 King Street

Armonk, NY 10504

[Toll Free # to be inserted]

NOVATION ENDORSEMENT

On             , 20[ ], the Supreme Court of the State of New York (the “ Rehabilitation Court ”), Case No. Index No. 401265/2012, approved a Plan of Rehabilitation, Novation Agreement and this Novation Endorsement for Financial Guaranty Insurance Company (“ FGIC ”). As a result of the Rehabilitation Court’s approval of these documents, National Public Finance Guarantee Corporation (“ National ”) has assumed and accepted all liabilities of FGIC under the express contractual terms of your financial guaranty insurance policy issued by FGIC.

This Novation Endorsement attaches to and forms part of your financial guaranty insurance policy issued by FGIC. Except as described in the amendments below, your financial guaranty insurance policy remains unchanged. The amendments to your financial guaranty insurance policy are as follows:

All references to the name “Financial Guaranty Insurance Company” are hereby changed to “National Public Finance Guarantee Corporation.”

Any references to the address of FGIC for the provision of notice or otherwise, are hereby changed to National Public Finance Guarantee Corporation, 113 King Street, Armonk, NY 10504.

[ Additional relevant changes to be included ].

You, as the holder of the policy, obligors of the obligations insured by the policy and all other interested persons are directed to pay all future premiums and recoveries, if any, and to submit all claims, if any, under or with respect to such policy solely and directly to National and to treat National for all purposes as if it had originally issued or written such policy instead of FGIC.

All other terms, provisions and conditions of your financial guaranty insurance policy remain unchanged except as described in this Novation Endorsement.

Please use the administrative address for National noted above to send premium payments, obtain claims forms and/or file claims.


IN WITNESS WHEREOF, National Public Finance Guarantee Corporation has, by its [ Authorized Officer ], executed this Novation Endorsement as of the      day of              20    .

 

 

 

   

 

  Name:       Name:
  Title:       Title:


EXHIBIT B

INDEMNIFICATION BY NATIONAL

National hereby agrees to indenmify, defend and hold harmless FGIC and its Affiliates and their respective directors, officers, employees, agents, advisors, legal counsel, auditors, other representatives, equityholders and successors and assigns (collectively, the “ Indemnitees ” and, each, an “ Indemnitee ”) from and against any and all Liabilities incurred by any such Indemnitee to the extent relating to or arising from (i) National’s exercise, or its refusal or other failure to exercise, any Covered Policy Rights, unless the exercise or refusal or other failure to exercise such Covered Policy Rights was undertaken by National at the written direction of FGIC, (ii) any National Extra Contractual Obligations and (iii) any actions taken by any Indemnitee pursuant to Section 4.7 of this Agreement at the request of and in accordance with the directions of National. Notwithstanding anything contrary in this Agreement, the indemnification provided for in this Exhibit B will be the sole and exclusive remedy against National and its Affiliates and their respective directors, officers, employees, agents, advisors, legal counsel, auditors, other representatives, equityholders and successors and assigns for any indemnifiable losses suffered or incurred by the Indemnitees by reason of the matters set forth in clauses (i), (ii) and (iii) above.

Each Indemnitee shall give written notice as promptly as reasonably practicable to National of any claims or action commenced against it in respect of which indemnity may be sought hereunder (each, a “ Claim ”), but failure to so notify National shall not relieve National from any liability hereunder unless and to the extent such failure has materially prejudiced the rights of National. Any failure of an Indemnitee to so notify National shall not result in any liability of an Indemnitee to National.

Subject to the next sentence, National shall have the right, at its option and expense, to assume any defense of any Claim; provided , that within 20 days of receiving the notice with respect to such Claim pursuant to the above notice provision (or such shorter period of time as an answer to such Claim or other responsive action may be required), National, by written notice delivered to the Indemnitee, elects to assume such defense and National acknowledges in writing its obligation hereunder to indemnify the Indemnitee with respect to such Claim and periodically thereafter provides the Indemnitee with reasonably sufficient evidence of the ability of National to satisfy such Claim. Notwithstanding the foregoing, National shall not have the right to assume the defense of any Claim if (x) representation of both the Indemnitee and National by the same counsel would be prohibited by rules or regulations governing the professional conduct of such counsel due to actual or potential differing interests between them, (y) the Indemnitee determines in good faith that there is a significant possibility that such Claim may materially and adversely affect it or its Affiliates other than as a result of monetary damages and so notifies National of such determination, or (z) National has not assumed such defense pursuant to the first sentence of this paragraph within 20 days (or such shorter period described in such sentence) of receiving written notice of such Claim.

If National has assumed the defense of a Claim in accordance with this Exhibit B, then the following shall apply:

 

  (i) except as provided in clause (v) below, the Indemnitee shall have the right to participate and assist in, but not control, the defense of such Claim and to employ its own counsel in connection therewith;


  (ii)

except as provided in clause (v) below, National shall not be liable to the Indemnitee for the fees, costs, or expenses of the Indemnitee’s counsel or other fees, costs, or expenses incurred by the Indemnitee in connection with participating in the defense of such Claim, except that National shall be liable for any such fees, costs, and expenses incurred prior to the time that National assumed such defense;

 

  (iii)

counsel used by National in connection with the defense of such Claim shall be reasonably satisfactory to the Indemnitee;

 

  (iv)

except as provided in clause (v) below, National shall have no liability with respect to any compromise or settlement of such Claim effected without its consent, such consent not to be unreasonably withheld, conditioned, or delayed;

 

  (v)

if National shall fail to defend diligently such Claim, then (A) the Indemnitee shall have the right, upon written notice to National, to assume control of the defense of such Claim, (B) National shall be liable to the Indemnitee for the fees, costs and expenses of the Indemnitee’s counsel from after the date of any notice delivered pursuant to the preceding clause and other fees, costs and expenses incurred by the Indemnitee in connection with the defense of such Claim and (C) National shall be liable for any compromise or settlement in good faith of such Claim effected by the Indemnitee; and

 

  (vi)

National may effect any compromise or settlement of such Claim only with the consent of the Indemnitee, which consent shall not be unreasonably withheld, conditioned, or delayed, and only if (1) such compromise or settlement includes a full release of the Indemnitee, (2) neither the Indemnitee’s business nor its name nor the business or name of any of its Affiliates will be damaged by such compromise or settlement, (3) such compromise or settlement is limited strictly to monetary damages, and (4) the Indemnitee has not previously assumed control of the defense of such Claim in accordance with clause (v) above.


If National does not assume the defense of a Claim (whether because it elects not to or has no right to), without limiting the provisions of clause (v) of the preceding paragraph, the following shall apply:

 

  (i)

National shall have the right, at its sole cost and expense, to participate in, but not control, the defense of such Claim and to employ its own counsel in connection therewith; and

 

  (ii)

National shall have no liability with respect to any compromise or settlement of such Claim effected without its consent, which will not be unreasonably withheld, conditioned, or delayed.

The Parties agree to cooperate to the fullest extent possible in connection with any Claim in respect of which indemnification is sought under this Exhibit B.