Financial Guarantors
Credit Analysis
Ratings
Insurer Financial Strength
CIFG Guaranty ..................................................... AAA
CIFG Assurance North America, Inc..................... AAA
CIFG Europe ........................................................ AAA
Rating Outlook................................................... Stable
Related Ratings
Natixis (Foreign Currency)
Long-Term IDR........................................................AA
Short-Term ............................................................ F1+
Rating Outlook................................................... Stable
Analysts
Joo-Yung Lee
+1 212 908-0560
joo-yung.lee@fitchratings.com
Thomas J. Abruzzo
+1 212 908-0793
thomas.abruzzo@fitchratings.com
Ralph R. Aurora
+1 212 908-0528
ralph.aurora@fitchratings.com
Recent Developments
• Ownership transfer of CIFG Holding
to Natixis from Caisse Nationale des
Caisse d’Epargne completed in
November 2006.
• Benefit of implicit parental support
from Natixis.
• Matrix core capital adequacy ratio of
1.15x at Sept. 30, 2006, with excess
capital of $154.8 million.
• Concentration in structured finance
continues to increase, particularly its
collateralized debt obligation (CDO)
exposure.
• California insurance license obtained
in September 2006, with a total of 48
U.S.-jurisdiction insurance licenses
obtained to date.
CIFG Guaranty
„ Summary
The insurer financial strength (IFS) ratings for CIFG Guaranty (CIFG)
and its two insurance subsidiaries reflect the implicit parental support
from its new owner, Natixis, and the combined company’s adequate
capital position in support of its high-quality, low-risk insured portfolio.
Under Fitch’s Matrix simulation, CIFG had a core capital adequacy ratio
(CCAR) of 1.15 times (x), with excess capital of $154.8 million as of
Sept. 30, 2006. While this reflects a healthy excess as of Sept. 30, 2006,
the company’s fast growth and rapid capital consumption have begun to
exceed its internal capital generation rate. Given that Fitch still considers
CIFG to be in its developmental stage, a larger excess capital position is
expected to remain in place to offset many of the challenges facing an
emerging financial guarantor. Such challenges include a high growth
rate, trading disparity relative to its competitors and heavier
concentration in its insured portfolio.
As of November 2006 CIFG became a direct subsidiary of Natixis, a
large French banking company that provides asset management,
corporate and investment banking, private equity and private banking,
and several specialized services. Natixis is owned 34.4% by Caisse
Nationale des Caisses d’Epargne et Prevoyance (CNCE, CIFG’s former
parent company, rated ‘AA’/‘F1+’ by Fitch Ratings), 34.4% by Banque
Federale des Banques Populaires (BFBP, rated ‘A+’/‘F1’ by Fitch), and
the balance is publicly traded. Fitch acknowledges that Natixis provides
strong support to CIFG and recognizes that this support remains crucial
to CIFG maintaining its ‘AAA’ IFS rating.
CIFG has taken positive steps towards expanding its market position as
a provider of financial guaranty insurance. The company’s profitability
has increased and the company has expanded its name recognition in
the U.S. municipal finance market. Fitch notes, however, that
structured finance concentration continues to increase, particularly in
pooled collateralized debt obligations (CDO). Furthermore, highly
rated non-senior pooled CDO exposure continues to represent a
notable portion of CIFG’s insured portfolio. These CDO exposures are
underwritten at a very high attachment point (typically well above
minimum ‘AAA’ levels) but junior to one or more tranches in the
overall transaction’s capital structure. Additionally, the large
concentration to pooled CDO compared to the other ‘AAA’ financial
guarantors leaves CIFG more susceptible to potential weakness that
may occur in that sector. Therefore, despite their high credit quality
and, thus, low probability of default, such exposures pose the potential
for higher loss given default relative to the senior-most tranche. CIFG
also remains at a competitive disadvantage to the larger, more
established financial guarantors due to its trading disadvantage and
capacity constraints. These challenges have been further exacerbated
by the current competitive market.
May 3, 2007
www.fitchratings.com
Financial Guarantors
„
•
•
•
•
Strengths
The financial strength and implied support of
CIFG’s parent company.
Increased profitability and new business
production.
Sufficient capital relative to the current insured
portfolio.
A relatively low-risk insured portfolio, which
has resulted in no incurred losses since inception.
CIFG Guaranty — Ownership Structure
Groupe Nationale des
Caisses d'Epargne
(‘AA’/‘F1+’)
Banque Federale des
Banques Populaires
(‘A+’/‘F1’)
34.4%
34.4%
Natixis
(‘AA’/‘F1+’)
100%
„
•
•
•
•
„
Concerns
Ability to compete with the larger, established
‘AAA’ primary financial guaranty companies.
Portfolio growth outstripping internal capital
formation.
Lack of portfolio diversification and increased
concentration in the pooled CDO sector.
Continued expansion in structured finance, with
some large, lower-rated investment-grade single
risks.
CIFG Holding
100%
CIFG Guaranty
(‘AAA’ IFS)
100%
CIFG Europe
(‘AAA’ IFS)
Parent Company
100%
CIFG Services, Inc.
100% Beneficial
Interest
Natixis
Natixis combines the businesses previously
undertaken by Natexis Banques Populaires (NBP,
previously owned 75.6% by BFBP) and select CNCE
subsidiaries, including IXIS Corporate & Investment
Bank (IXIS CIB) and ISIS Asset Management
Group. Natixis provides corporate and investment
banking, asset management, private equity and
private banking, and specialized services, including
financial guaranty via CIFG, which is a direct
subsidiary of Natixis. Natixis is jointly owned by
CNCE and BFBP at 34.4% each, and the rest is
publicly floated. Natixis benefits from the crossguarantee mechanisms in place at Groupe Caisses
d’Epargne (GCE) and Groupe Banque Populaire
(GBP) with its double affiliation now formalized.
While CIFG does not benefit from any explicit
guarantee from Natixis, Fitch expects that the parent
would fully support CIFG.
Voting Trust
100% Voting Interest
CIFG Assurance North
America, Inc.
(‘AAA’ IFS)
IFS – Insurer financial strength.
banking. CNCE was a 65.0% owned subsidiary, with
Caisse des Depots et Consignations (CDC) owning
the remaining 35%, but as of late January 2007 CDC
divested its stake. CNCE owns 34.4% of Natixis,
CIFG’s current parent holding company. For more
information, see Fitch’s full report on Groupe Caisse
d’Epargne, dated Aug. 8, 2006, available on Fitch’s
Web site at www.fitchratings.com.
Groupe Caisse d’Epargne/Caisse Nationale
des Caisses d’Epargne et Prevoyance
Groupe Banque Populaire/Banque Federale
des Banques Populaires
GCE is a leading French cooperative banking group
that is not a legal entity but operates and is regulated
as one group. The group benefits from a crossguarantee mechanism that ensures the liquidity of all
affiliated entities. CNCE is the group’s central body
and is the holding company for the group’s two major
business lines, retail banking and investment
GBP is also a leading French cooperative banking group
that is not a legal entity but operates and is regulated as
one group. Like GCE, BFBP is the group’s central
body, and a cross-guarantee mechanism ensures the
liquidity of all of the affiliated entities of the group. The
group is France’s fifth-largest retail banking group.
CIFG Guaranty
2
Financial Guarantors
Dec. 31, 2005, CIFG Europe had EUR35.1 million of
equity based on French GAAP. In addition, and as of
the same reporting date, CIFG Europe had gross and
net par outstanding exposure of EUR8.5 billion
and EUR4.8 million, respectively.
BFBP owns 34.4% of Natixis. For more information,
see Fitch’s full report on Groupe Banque Populaire,
dated May 16, 2005, available on Fitch’s Web site at
www.fitchratings.com.
„
Company Overview
CIFG Assurance North America, Inc.
CIFG Holding
CIFG NA was initially funded with a $100.0 million
capital contribution from CIFG. Pursuant to a
facultative reinsurance agreement, CIFG NA may
cede up to 90% of its par written on each transaction
to CIFG. CIFG NA also benefits from the support of
a net worth maintenance agreement that provides that
CIFG will maintain CIFG NA’s statutory capital and
surplus at no less than $80.0 million. As of Dec. 31,
2006, CIFG NA had qualified statutory capital of
$114.4 million. In addition, and as of the same
reporting date, CIFG NA had gross and net par
insured exposure of $54.6 billion and $6.9 billion,
respectively.
CIFG Holding is the holding company for CIFG,
CIFG Assurance North America, Inc. (CIFG NA) and
CIFG Europe. CIFG Holding was initially capitalized
by a capital contribution from CDC IXIS (now part
of Natixis), and subsequently benefited from a
subordinated loan agreement from CDC IXIS as well.
Having fully drawn upon the CDC IXIS subordinated
loan facility, CIFG Holding entered into a
$200.0 million senior loan agreement with CNCE in
2004, of which $90.0 million was immediately drawn
upon and contributed as equity capital to CIFG
Guaranty. An additional $8.5 million was drawn in late
2005 and retained at the holding company and used for
general corporate purposes. The remaining
$101.5 balance of the irrevocable loan facility is
available to be drawn by CIFG Holding at any time.
As of Dec. 31, 2006, CIFG Holding had consolidated
shareholders’ equity of $617.1 million based on U.S.
generally accepted accounting principles (GAAP).
CIFG NA continues to make progress securing the
remaining U.S. state licenses necessary to write U.S.
municipal financial guaranties on a primary basis.
Currently, CIFG NA is licensed in 48 U.S.
jurisdictions, including some of the largest municipal
issuers, such as California, Florida, Illinois,
Massachusetts, New Jersey, New York, Pennsylvania
and Texas. As of September 2006, CIFG NA
obtained its California license, which is significant
given California’s status as the largest issuer of
municipal debt. Securing a California license should
improve CIFG NA’s growth and profitability,
especially because it does not have capacity
constraints for California that some other financial
guarantors may face.
CIFG Guaranty
CIFG was initially capitalized by a $280.0 million
contribution from CIFG Holding in 2001. CIFG has
since received additional capital contributions downstreamed from CIFG Holding in order to support
ongoing and expected insured business growth. CIFG
established CIFG Europe in 2001 to underwrite
financial
guaranty
business
in
the
European Union, and CIFG NA in 2002 to
underwrite U.S. municipal and structured finance
business. As of Dec. 31, 2006, CIFG had
consolidated shareholders’ equity of $713.9 million
based on U.S. GAAP.
A voting trust was established in New York state to
hold CIFG NA shares as a result of legislation in
certain states prohibiting the licensing of insurance
companies owned or controlled by a foreign state or
agency of a foreign state. CIFG’s prior ownership
included CDC, which is a French public purpose
entity and was the reason for the creation of the
voting trust. The voting trust has five members, none
of which may be French civil servants or employees
of CDC, and this structure was approved by the New
York State Insurance Department, which determined
that CDC does not own or control CIFG NA within
the meaning of the government control legislation.
Given CDC’s divestiture, the need for this voting
trust is being analyzed, though CIFG will most likely
unwind the structure.
CIFG Europe
CIFG Europe was initially funded with a
EUR32.0 million capital contribution from CIFG.
CIFG Europe also benefits from an annually
renewable, multiyear excess-of-loss arrangement
whereby CIFG will cover 100% of CIFG Europe’s
cumulative losses in excess of EUR20.0 million.
Furthermore, a net worth maintenance agreement
requires that CIFG maintain CIFG Europe’s capital
and surplus at no less than EUR20.0 million. As of
CIFG Guaranty
3
Financial Guarantors
CIFG Guaranty — Insured Portfolio
credit spread environment and intense industry
competition. Fitch believes that full investor
acceptance of new market entrants takes time and for
CIFG to fully eliminate pricing and trading
disparities, the company will have to continue to
build its reputation in the financial guaranty market
to fully realize a successful franchise.
($ Mil., As of Sept. 30, 2006)
Net Par
Net Par
(%)
WA
Rating*
8,369.8
2,344.7
2,334.5
1,722.5
1,421.5
1,014.1
567.8
85.8
17,860.7
13.0
3.6
3.6
2.7
2.2
1.6
0.9
0.1
27.7
‘A–’
‘A–’
‘A–’
‘A–’
‘A’
‘BBB+’
‘A+’
‘BBB+’
‘A–’
15,775.9
3,346.7
3,141.4
1,583.1
23,847.2
24.5
5.2
4.9
2.5
37.0
‘AA+’
‘AA–’
‘AA’
‘AA+’
‘AA+’
Collateralized Debt Obligations
Mortgage-Backed Securities
Sovereign/Sub-Sovereign
Asset-Backed Securities
Transportation
Investor-Owned Utilities
Project Finance
Utilities
Higher Education
Other
Total
13,892.8
2,066.2
1,931.7
1,717.6
1,391.7
872.6
691.7
48.2
12.4
128.6
22,753.5
21.6
3.2
3.0
2.7
2.2
1.4
1.1
0.1
0.0
0.2
35.3
‘AAA’
‘AAA’
‘A’
‘AA–’
‘A’
‘A’
‘AA’
‘AAA’
‘BBB’
‘BBB–’
‘AA’
Net Par Insured Exposure
64,461.3
100.0
U.S. Municipal Finance
General Obligations
Tax-Backed
Transportation
Utilities
Health Care
Higher Education
Military Housing
Other
Total
„ Insured Portfolio
CIFG’s insured portfolio has continued to perform
well as a result of sound underwriting, a primary
focus on high-credit-quality insured exposures and an
overall benign credit environment. Furthermore,
CIFG has not incurred a loss since inception. As of
Sept. 30, 2006, CIFG’s $64.5 billion net par insured
portfolio consisted of 37.0% U.S. structured finance
exposure, 27.6% international structured finance
exposure, 27.7% U.S. municipal finance exposure
and 7.7% international municipal finance exposure.
U.S. Structured Finance
Collateralized Debt Obligations
Mortgage-Backed Securities
Asset-Backed Securities
Other Structured Finance
Total
International Finance
CIFG’s insured portfolio maintained a weightedaverage rating of ‘AA–’ as of Sept. 30, 2006, with
two exposures rated below investment grade (BIG).
However, one of these transactions was called in the
third quarter of 2006 and the other was called in the
fourth quarter of 2006. As of Sept. 30, 2006,
CIFG’s net par exposure to the two transactions
totaled $63.2 million, or less than 0.1% of total net
par outstanding.
‘AA–’
*Based on CIFG Guaranty’s lowest ratings. WA – Weighted
average.
„ Competition
CIFG’s competition stems from its industry
competitors and alternative structures to financial
guaranty. Industry competition has intensified in
recent years amongst the financial guarantors, with
the tight interest rate spread environment and recent
market entrants such as XL Capital Assurance and
Assured Guaranty Corp. adding to the competitive
pressures that have put downward pressure on
premium rates and new business opportunities across
sectors. In addition, reduced overall demand for
financial guaranty insurance and investor acceptance
of senior/subordinated structures in the mortgagebacked and asset-backed sectors have increased
competitive pressures.
Overall, CIFG’s insured portfolio lacks diversity in
relation to its larger competitors, reflective of its
development stage. It is largely concentrated in
structured finance, with over 64% of its insured
exposure in U.S. and international structured finance
transactions. While this lack of diversity is somewhat
characteristic of a developing company and is
mitigated in part by the company’s available capital
support and the high quality of its insured portfolio,
Fitch believes that an ‘AAA’ financial guarantor
should have a more balanced portfolio and expects
CIFG to reduce its heavy concentration in structured
finance over time. Specific portfolio concerns relate
to the CIFG’s significant U.S. and international
pooled CDO exposure (46% of total exposure) and
certain mezzanine and/or layered loss exposures,
though the company no longer underwrites new
layered loss transactions.
CIFG has been able to increase its market share,
albeit still small relative to its peers, with increasing
market acceptance of its name. While a pricing or
trading disparity appears to still exist, there has been
some evidence this margin has improved. However,
there is concern that the fast-paced growth has come
at the expense of price, particularly given the tight
Structured Finance
CIFG’s overall structured finance insured portfolio
had a weighted-average rating of ‘AA+’ as of
Sept. 30, 2006, primarily driven by significant
CIFG Guaranty
4
Financial Guarantors
increased slightly as a percent of the total portfolio at
46% of CIFG’s total insured portfolio. In Fitch’s
opinion, a highly concentrated portfolio, in part
composed of mezzanine exposures, is not consistent
with the long-term business strategy of an ‘AAA’rated financial guarantor. As such, Fitch would view
reduction of CIFG’s CDO exposure, as a percentage
of total net par insured, favorably.
insured CDO exposure. As of the same date, CIFG’s
U.S. and international structured finance exposure
was $41.7 billion, of which $29.7 billion, or 71.2%,
represented CDO exposure. CIFG has insured both
cash-funded CDOs and synthetic CDOs, with various
types of collateral, including investment-grade
corporate debt, leveraged loans and asset-backed and
mortgage-backed securities (ABS/MBS). The
weighted-average credit quality of CIFG’s CDO
exposure, based on CIFG’s internal ratings, was
‘AA+’ as of Sept. 30, 2006, with the majority of the
exposures rated ‘AAA’ and no exposures rated lower
than ‘AA–’. In addition, the credit quality of CIFG’s
CDO exposure is further strengthened by the
underlying maturity profile, as a significant portion
of the exposure has short weighted-average
remaining lives.
As of Sept. 30, 2006, CIFG also had $827.7 million
of airline enhanced equipment trust certificate
(EETC) exposure. However, CIFG’s entire EETC
exposure was executed on a secondary, wrap-of-wrap
basis, whereby CIFG would only be obligated to pay
claims upon the default of both the EETC and a thirdparty ‘AAA’-rated primary financial guarantor,
mitigating much of the credit risk typically associated
with exposures of this nature.
As of Sept. 30, 2006, CIFG had $7.7 billion of nonsenior layered pooled CDO, with almost all of the
exposure supported by credits that were well above
minimum ‘AAA’ or higher levels of credit
enhancement, with the exception of just a couple of
exposures in the ‘AA’ rating category. In addition,
CIFG had one additional ABS mezzanine exposure of
$28.5 million, but at the ‘AAA’ credit enhancement
level. Mezzanine exposures account for 12.1% of
CIFG’s total insured portfolio. These insured
exposures, despite very low default probability, are
subject to higher loss severities (i.e., lower
recoveries) in the event of default because of the
mezzanine nature of the exposures relative to seniormost tranches. In determining CIFG’s capital
adequacy, Fitch includes the par exposure above
CIFG’s layer in order to assess potential loss severity.
As of Sept. 30, 2006, the par amount of exposure
above CIFG’s mezzanine exposures was roughly
$56.7 billion. While CIFG is not obligated to assume
losses for par exposure above its insured tranche, in
the highly remote instance that losses exceed CIFG’s
attachment point, this would negatively affect the
likelihood of recoveries for CIFG.
International Finance
CIFG’s total international finance business stood at
$22.8 billion of net par outstanding at Sept. 30, 2006,
or 35% of its total insured portfolio. As mentioned,
the majority of CIFG’s international business relates
to CDOs, although CIFG has expanded its
international business across other sectors. CIFG has
also insured consumer and commercial ABS and
MBS, sovereign, utility, and project financings in the
transportation revenue and health care sectors. It also
had several private finance initiative, layered loss
exposures that totaled $61.8 million. Its international
project financings totaled approximately $1.8 billion
of net par outstanding at Sept. 30, 2006, which are
primarily in the transportation sector. The weightedaverage rating of these transactions is ‘A+’. CIFG’s
international presence has been due in part to the
reputation, presence and existing relationships of its
current owner, Natixis, as well as its former owner,
CNCE, within the European markets.
Municipal Finance
CIFG experienced significant growth in its municipal
finance portfolio. As of Sept. 30, 2006, CIFG’s
$17.9 billion of U.S. municipal insured exposure
consisted of general obligations ($8.4 billion, or 13%
of total net par insured), tax-backed bonds
($2.3 billion, or 3.6%) and transportation revenue
bonds ($2.3 billion, or 3.6%), among others. The
weighted-average credit quality of CIFG’s U.S.
municipal finance exposure was ‘A–’ as of Sept. 30,
2006, with no below-investment-grade exposure.
CIFG currently maintains sufficient capital support to
offset the higher level of risk within these exposures;
however, Fitch will continue to monitor CIFG’s
future participation in the non-senior CDO sector to
determine if sufficient capital and pricing remain
available to support the associated risks. These risks
are accounted for in Fitch’s Matrix model. In
addition, as noted previously, CIFG continues to
exhibit significant concentration on the pooled CDO
sector across both senior-most and mezzanine
exposures. As of Sept. 30, 2006, total CDO exposure
CIFG Guaranty
5
Financial Guarantors
CIFG Holding — Unaudited GAAP Operating Efficiency
(Years Ended Dec. 31)
Operating Expenses
Net Premiums Written
Expense Ratio (%)
Loss and Loss-Adjustment Expenses (LAE)
Net Premiums Earned
Loss and LAE Ratio (%)
9/30/06
36,456
109,704
33.2
2005
33,210
108,512
30.6
2004
20,932
75,183
27.8
2003
18,892
83,355
22.7
2002
16,125
16,826
95.8
1,981
51,352
3.9
1,858
44,789
4.1
3,598
35,982
10.0
1,365
17,203
7.9
134
1,347
9.9
GAAP – Generally accepted accounting principles.
„ Investment Portfolio
As of Sept. 30, 2006, the U.S.-dollar-equivalent book
and market values of CIFG Holding’s consolidated
investment portfolio were $886.7 million and
$867.1 million, respectively. The investment
portfolio consisted of mostly high-rated short-term
money-market mutual funds ($139.4 million book
value, or 15.7% of the total portfolio, though about
$10.4 million is not rated) and long-term taxable
securities ($747.3 million, or 84.3%). CIFG does not
provide financial guaranty insurance on any of the
assets held within the investment portfolio.
CIFG obtained its license to write direct financial
guaranty insurance in California in late September
2006, which should have a positive impact on the
company’s future ability to underwrite business in
that state. The results through Sept. 30, 2006, do not
include any direct financial guaranty insurance in
California; however, the company has been able to
insure a significant amount of California exposure by
means of secondary market transactions and
reinsurance agreements with other primary financial
guarantors. As of Sept. 30, 2006, CIFG’s
$897.8 million of insured exposure to California was
CIFG’s sixth-largest state exposure.
CIFG Holding’s year-to-date (YTD), as of Sept. 30,
2006, consolidated GAAP net investment income
was $22.2 million. The company’s net realized
capital gains from its unrated short-term investment
portfolio were $0.2 million. In the past this number
was significant because CIFG Holding held a much
greater proportion of its investment portfolio in shortterm investments that under French regulation the
company is required to reinvest at the end of each
holding period. Combining the net investment
income and net realized capital gains translates into
an annualized investment yield of about 3.6% as of
Sept. 30, 2006, which reflects a significant
improvement over time. CIFG’s investment yield is
notably below the industry average, but is attributable
to the short tenor and high quality of the majority of
CIFG Holding’s consolidated investment portfolio.
Fitch expects CIFG Holding to lengthen the duration
of its investment portfolio, consistent with the rest of
the industry.
CIFG does not yet exhibit the overall diversification
by state that the larger, more established ‘AAA’-rated
financial guaranty insurance companies do, as CIFG’s
top 10 state exposures represented 73.3% of U.S.
municipal finance par exposure as of Sept. 30, 2006.
This lack of diversification by state has improved and
is expected to continue to improve as the final state
insurance licenses are obtained, and the U.S. municipal
finance business platform is further expanded. The
pricing disadvantage versus the larger, more
established ‘AAA’-rated financial guaranty insurance
companies has been diminishing and while it may
restrain CIFG’s expansion in the municipal finance
sector, with continued improvement in CIFG’s name
recognition and franchise value, Fitch expects this
differential should become less of a factor.
Surveillance
CIFG’s insured portfolio is monitored by its
surveillance group, with specialists across various
sectors. The group also has surveillance analysts in
Europe that specifically monitor European
transactions. The group is governed by a surveillance
committee that meets regularly and reviews credits that
require additional attention. Each credit is assigned an
internal surveillance rating from one through six, with
one indicating a credit is performing better than
expected and a six indicating that a reserve has been
established and a loss incurred.
„ Financial Performance
CIFG’s profitability has greatly improved, with YTD
Sept. 30, 2006, net income of $22.0 million
compared with $7.4 million for the same period in
2005. Return on equity (ROE) has also improved, to
4.9% at Sept. 30, 2006, though this remains well
below the industry average. While improving, ROEs
are likely to remain challenged by relatively lower
CIFG Guaranty
6
Financial Guarantors
CIFG Matrix Performance Statistics
Summary
premium rates CIFG generates on its insured
portfolio, a reflection of its limited history in the
financial guaranty sector. Additionally, CIFG
maintains a significantly higher tax rate relative to its
peers, with approximately 40% of pretax income on a
U.S. GAAP basis going towards taxes. While CIFG
NA continues to report a statutory loss of $700,000
YTD as of Sept. 30, 2006, CIFG Europe continues to
operate profitability. Fitch assesses CIFG’s financial
performance on a consolidated basis and therefore
does not view CIFG NA’s statutory loss as being of
significant concern.
(000, As of Sept. 30, 2006)
9/30/06
Adjusted Claims-Paying Resources (ACPR)
‘AAA’ Threshold
‘AA’ Threshold
‘A’ Threshold
1,183,412
1,191,589
1,196,851
Required Claims-Paying Resources (RCPR)
‘AAA’ Threshold
‘AA’ Threshold
‘A’ Threshold
1,028,573
764,241
634,146
Core Capital Adequacy Ratio (ACPR/RCPR) (x)
‘AAA’ Threshold
‘AA’ Threshold
‘A’ Threshold
Rating Threshold*
Given that CIFG is a financial guaranty company still
in its developmental stages, its limited profitability
and significant expenses are to be expected.
However, Fitch anticipates that as the insured
portfolio grows, its profitability should also increase
and expenses should stabilize. However, given the
intense competition in the financial guaranty industry
and the pressure for CIFG to grow its insured
portfolio, particularly in public finance, the potential
for compromise on pricing is a concern. Fitch will
continue to monitor pricing and the underlying credit
quality of new insured business.
1.15
1.56
1.89
‘AAA’
*The Rating Threshold at which a financial guarantor's Core Capital
Adequacy Ratio is expected to exceed 1.00x.
those employed with respect to traditional financial
guaranty insurance policies. Finally, Fitch is
comfortable that CIFG is not exposed to material
collateral posting requirements or ratings-based
downgrade triggers that could potentially impact the
company’s liquidity position further.
„
Currently, Fitch does not anticipate any claims in the
near future, nor are any expected that would directly
impact the company’s IFS ratings. Furthermore,
unlike the larger, more established financial
guarantors, CIFG lacks the large municipal finance
portfolio that provides steady earned premium
recognition over long periods of time. CIFG’s
concentration in structured finance, while providing
installment premiums, is short in duration and
requires more frequent new business to replace runoff
in the portfolio
Capitalization
External Capital Support
Since inception, CIFG has benefited from significant
excess capital support in order to offset the limited
profitability and lack of business diversification that
are characteristic of a start-up financial guaranty
insurance company. However, as CIFG’s business
has grown, this excess is diminishing. Historically,
CIFG received capital support, first from CDC IXIS
and then from CNCE. Specifically, CIFG drew down
the remaining $115.0 million of the CDC IXIS
subordinated loan agreement in September 2004, and
also entered into a $200.0 million senior loan
agreement with CNCE in December 2004, of which
$90.0 million was immediately drawn upon by CIFG
Holding and contributed to CIFG. Another
$8.5 million was drawn by CIFG Holding in 2005 for
general corporate purposes. The remaining
$101.5 under this irrevocable facility is available for
CIFG to draw at any time. Under the terms and
conditions of the senior loan agreement between
CIFG Holding and CNCE, the loan agreement
expires on Dec. 31, 2030, and the last date on which
a draw may be made is Dec. 31, 2010. CIFG Holding
may call the debt at any time after five years. As of
Sept. 30, 2006, CIFG Holding’s debt-to-capital ratio
„ Liquidity
Fitch remains comfortable with CIFG’s overall
liquidity management and the available resources to
meet potential liquidity needs. These resources
include ongoing earnings streams from insurance
premiums and investment income, and a high-quality
investment portfolio that could be liquidated or
monetized through repurchase agreements if
necessary.
In addition, Fitch also remains comfortable that the
potential for increased liquidity risk stemming from
the assumption of credit risk by means of credit
default swap agreements has been properly mitigated
through the use of structuring techniques similar to
CIFG Guaranty
7
Financial Guarantors
stood at 14.1%, which is within Fitch’s guideline for
the holding company of an ‘AAA’-rated financial
guarantor.
from its prior published CCAR of 1.28x at year-end
2005. The driver behind this change is the company’s
rapid portfolio growth, which is significantly
outstripping internal capital generation, as well as
increased concentration in CDOs. Its excess capital
was $154.8 million with adjusted claims-paying
resources (ACPR) of $1.18 billion and required
claims-paying resources (RCPR) of $1.03 billion.
Included in CIFG’s ACPR is the benefit of the
committed loan facility from its former parent,
CNCE, of which $101.5 million remains available.
It is important to note that the CNCE loan agreement
remains with CNCE, which is no longer a direct
parent of CIFG. Fitch has included the loan
agreement as part of CIFG’s claims-paying resources
and, without its inclusion, CIFG’s excess capital
would be marginal. Fitch believes that this loan is
still readily available to CIFG; in fact, CIFG plans to
draw about $20 million, which is a clear
demonstration that the facility remains available.
However, if for some reason the facility is no longer
available to CIFG, the company’s capital adequacy
could be compromised and could lead to adverse
rating action. In addition, the continued implied
support from its current parent, Natixis, remains
crucial for CIFG to maintain its ‘AAA’ IFS rating.
Given the company’s rapid growth and capital
consumption rate, which is exceeding its internal
capital generation, its excess capital is being eroded
quickly, even with access to the loan facility. Unless
growth and/or capital usage slows over time (such as
through decreased activity in capital-intensive
transactions and greater diversification), Fitch would
expect that the company will have to access
additional capital or become more active in capital
relief transactions, such as reinsurance in the short to
intermediate term.
CIFG’s leverage ratios of 99.7x qualified statutory
capital (QSC) and 52.1x claims-paying resources
(CPR) has increased considerably in the past two
years. Furthermore, CIFG also has a significant
amount of par exposure above its mezzanine
exposure, about $48.1 billion, which increases its
leverage even further, to 174.1x QSC and 91.0x CPR.
As mentioned previously, CIFG is not obligated to
assume losses for par exposure above its insured
tranche; however, CIFG’s level of recoveries could
be directly affected in the remote instance that losses
are incurred.
CIFG’s simulated losses continue to be driven almost
entirely by its structured finance exposures (91% of
net simulated losses). This is consistent with the
composition of the company’s insured portfolio, with
over 64% of its insured exposure in structured
finance. Despite underwriting at very high attachment
points well above minimum ‘AAA’ requirements,
pooled CDO, much of which is non-senior and
mezzanine-layered, continued to be the largest
contributor to simulated losses (59% of losses), given
the company’s high concentration (46% of total net
exposure) to this subsector.
Matrix Capital Model Results
As of Sept. 30, 2006, CIFG met the minimum capital
requirements under Matrix for its ‘AAA’ IFS rating,
with a CCAR of 1.15x. This is down significantly
CIFG Holding — Pro Forma Claims-Paying Resources
($000, Years Ended Dec. 31)
Capital and Surplus
Contingency Reserve
Qualified Statutory Capital (QSC)
Present Value Installment Premiums
Unearned Premium Reserves
Loss and Loss-Adjustment Expense Reserves
Third-Party Capital Support
Total Claims-Paying Resources (CPR)
Net Par in Force
Net Par/QSC (:1)
Net Par/CPR (:1)
9/30/06
559,438
87,059
646,497
231,252
257,270
—
101,500
1,236,519
2005
550,212
49,618
599,830
185,978
190,664
—
101,500
1,077,972
2004
626,261
27,135
653,396
140,110
122,412
0
110,000
1,025,918
2003
515,256
9,562
524,818
74,632
80,017
0
0
679,467
2002
270,000
555
270,555
16,223
15,994
0
220,000
522,772
64,461,344
42,655,222
24,697,794
12,345,296
2,279,710
99.7
52.1
71.1
39.6
37.8
24.1
23.5
18.2
8.4
4.4
CIFG Guaranty
8
Financial Guarantors
of $1.5 billion to Assured Guaranty Re Ltd. (IFS
rated ‘AA’ by Fitch, $432.9 million of ceded par),
Bluepoint Re Limited ($235.0 million of ceded par),
Ram Reinsurance Company Ltd. ($395.1 million of
ceded par), Financial Security Assurance, Inc. (IFS
rated ‘AAA’ by Fitch, $352.8 million of ceded par),
XL Financial Assurance Ltd. (IFS rated ‘AAA’ by
Fitch, $109.6 million of ceded par) and Radian Asset
Assurance Inc. (‘AA’ by Fitch, $15.0 million of
ceded par).
CIFG Sector Loss Distribution
Other
Sectors
12%
MBS and
Pooled Debt
Home
Obligations
Equity
59%
11%
CIFG also acts as a provider of reinsurance support to
other third-party financial guaranty insurance
companies. However, as CIFG has grown, it has
markedly curtailed its reinsurance activity. Still, it
continues to reinsure transactions, particularly related
to transactions that CIFG may not have otherwise
been able to participate in as a result of transaction
size. It also gives CIFG the opportunity to add
additional premium income and diversify its insured
portfolio.
Commercial
Receiv ables ABS
and Conduit
18%
M B S – M o rtgage-backed securities. A B S – A sset-backed
securities.
Other significant contributors to simulated losses
include the commercial ABS sector (18% of losses)
and the residential mortgage-backed securities
(RMBS)/second-lien sector (11% of losses).
Simulated losses in commercial ABS were mostly
from future flow transactions in the ‘BBB’ rating
category, large single risks in the auto rental fleet
securitization subsector in the ‘BBB’ rating category,
as well as highly rated but large single-risk
commercial MBS. MBS/second-lien simulated losses
primarily came from large single risks in the ‘BBB’
rating category. In the first publication of Matrix
results based on exposure as of year-end 2005, CIFG
had a couple of below-investment-grade exposures
that were signficant contributors to net simulated
losses in the RMBS subsector; however, these
exposures have since come off CIFG’s books.
Positively, as of Sept. 30, 2006, CIFG had assumed
$4.1 billion of exposure from third parties,
representing 6.4% of CIFG’s total net par insured,
which is down significantly from prior periods.
Assumed business included commercial ABS,
RMBS/second-lien securitizations, transportation,
investor-owned utilities and utilities. Currently, CIFG
is not actively pursuing inbound reinsurance and only
does selective facultative transactions on an
opportunistic basis.
While Fitch takes comfort from the fact that all CIFG
reinsurance has been done on a facultative basis,
whereby each transaction is individually underwritten
by CIFG prior to assumption, CIFG’s more recent
activity in reinsurance has been in lower-rated
structured finance transactions. Selective reinsurance
provides some portfolio diversification and revenue
enhancement opportunities; however, it also has the
potential for adverse selection and weaker pricing
fundamentals than primary business.
Reinsurance
CIFG utilizes reinsurance on a selective basis to
manage concentration risk and capacity constraints.
As of Sept. 30, 2006, CIFG had ceded total exposure
CIFG Guaranty
9
Financial Guarantors
Matrix Capital Adequacy Results
(Continued)
Matrix Capital Adequacy Results
($000, As of Sept. 30, 2006)
Policyholder Surplus
Losses and Loss Adjustment Expense Reserves
Unearned Premiums
Contingency Reserves
Equity-Like Soft Capital (1)
Discounted PV Installment Premiums
Total Claims-Paying Resources
Required Capital for Factor-Based Charges (2)
ACPR
CIFG*
559,438
—
257,270
87,059
101,500
215,644
1,220,911
37,500
1,183,412
Simulated Portfolio Losses
Runoff Expenses
Reinsurance and Soft Capital Credit
RCPR
950,595
93,061
15,083
1,028,573
Core Capital Adequacy Ratio (CCAR) (3)
NPO
Operating Leverage
($000, As of Sept. 30, 2006)
Reinsurance and Soft Capital Usage
Reinsurance Ceded and Soft Capital Facilities (5)
Qualified Claims on Reinsurance and Soft Capital
Adjusted Qualified Claims on Reinsurance and
Soft Capital (6)
Qualified Claims/
Reinsurance and Soft Capital (%) (7)
Adjusted Qualified Claims/
Qualified Claims (%) (8)
Gross Simulated Losses
Adjusted Qualified Claims/
Gross Simulated Losses (%) (9)
1.15
Insured Portfolio Summary
66,001,771
35
65
0
Total NPO
Municipal NPO as % of Total
Structured NPO as % of Total
BIG as a % of NPO
64,461,343
35
65
0
Gross Simulated Losses ($)
Municipal Losses (%)
Structured Losses (%)
Reinsurance and Soft Capital Credit
Municipal (%)
Structured (%)
Net Simulated Losses
Municipal Losses (%)
Structured Losses (%)
950,595
9
91
15,083
2
98
935,512
9
91
Net Simulated BIG Exposure Losses (4)
Net Simulated BIG Exposure Losses(%)
Municipal Losses (%)
Structured Losses (%)
—
N.A.
N.A.
N.A.
Gross Simulated Losses/GPO (%)
Net Simulated Losses/NPO (%)
1.44
1.45
15,083
1.0
93.4
950,595
1.6
*Rating Threshold ‘AAA’. PV – Present value. ACPR – Adjusted
claims-paying resources. RCPR – Required claims-paying
resources. NPO – Net par outstanding. GPO – Gross par
outstanding. BIG – Below investment grade. N.A. – Not available.
Note: Fitch rating or lower of other ratings agencies’ rating. See
Notes for Matrix Capital Adequacy Results, page 11.
64,461,343
99.71
Total GPO
Municipal GPO as % of Total
Structured GPO as % of Total
BIG as a % of GPO
CIFG*
1,540,428
16,155
CIFG Guaranty
10
Financial Guarantors
Notes for Matrix Capital Adequacy Results, Page 10
(1) Equity-Like Soft Capital — Equity-Like Soft Capital consists of soft capital facilities, such as
contingent preferred stock put facilities that are given equity credit. Reinsurance-like soft capital, such
as bank lines, is treated separately under Matrix.
(2) Required Capital for Factor-Based Charges — The Required Capital for Factor-Based Charges is
the total required capital for factor-based charges (reduction to available capital) based on the
individual company’s investment portfolio, investment agreement and medium-term note (MTN)
portfolio, other invested assets, and the present value of installment premiums based on its given rating
threshold. The composition of each financial guarantor’s investment portfolio by asset class and rating
is used to determine a portfolio level mean “credit spread return” and standard deviation of this return
that is used to calculate a factor charge based on its rating threshold, which then reduces the guarantor’s
available capital by that amount. If the company has an investment agreement and MTN portfolio
(commonly including guaranteed investment contracts, or GICs), then it is determined whether the
portfolio is duration matched, mismatched short (0.5–1.5 years) or mismatched long (greater than 1.5
years), with each classification carrying its own mean return and standard deviation used to determine a
factor charge based on the company’s rating threshold. A fixed factor charge is applied to other
invested assets regardless of rating threshold. The present value of installment premiums are further
discounted by (1 – the percentage of structured finance defaults), which varies depending on which
rating threshold is appropriate and thus reduces the guarantor’s claims-paying resources accordingly.
(3) Core Capital Adequacy Ratio (CCAR) — The CCAR is the ACPR divided by the RCPR. It is the
key ratio that measures a company’s capital adequacy under a given rating threshold and provides an
indication of whether a company has excess capital. If a company’s CCAR exceeds 1.0x, it can meet
simulated losses and business expenses based on its available capital resources.
(4) Net Simulated BIG Losses — Net Simulated BIG Losses provides the overall percentage of simulated
losses that are the result of below-investment-grade exposures net of reinsurance in a given insured
portfolio.
(5) Reinsurance Ceded and Soft Capital Facilities — Reinsurance Ceded and Soft Capital Facilities is
the amount of total ceded (reinsured) par plus non-equity-like soft capital facilities, such as bank soft
capital facilities with reinsurance-like features.
(6) Adjusted Qualified Claims on Reinsurance and Soft Capital — Adjusted Qualified Claims on
Reinsurance and Soft Capital reflects the amount of qualified claims (losses) assigned to third-party
capital that is adjusted for simulated third-party capital provider defaults and claim disputes.
(7) Qualified Claims/Reinsurance and Soft Capital — Qualified Claims/Reinsurance and Soft Capital
provides a measure of the overall utilization of third-party capital against total qualified claims.
(8) Adjusted Qualified Claims/Qualified Claims — Adjusted Qualified Claims/Qualified Claims
provides an indication of the quality of third-party reinsurance and capital support. It demonstrates how
much of the company’s reinsurance would be available after factoring in third-party capital provider
defaults and disputes.
(9) Adjusted Qualified Claims/Gross Simulated Losses — The Adjusted Qualified Claims/Gross
Simulated Losses is the percentage of gross losses absorbed by a financial guarantor’s reinsurance and soft
capital providers. It measures the efficiency of a company’s use of third-party reinsurance and capital. It
reflects how much “reinsurance credit” a company receives under the Matrix model simulation.
CIFG Guaranty
11
Financial Guarantors
Key Financial Indicators — CIFG Holding and Subsidiaries
($ Mil., Years Ended Dec. 31)
9/30/06
2005
2004
2003
2002
(%)
C,G
25,121
6,418
11,604
7,098
74.5
21,282
5,494
7,755
8,033
74.2
12,742
3,074
4,085
5,582
75.9
10,086
2,332
4,899
2,855
76.9
2,352
694
986
672
70.5
122.1
164.0
117.5
100.1
(5.2)
C
C
C
C
C
Adjusted Gross Premiums Written (1)
Total Underwriting Expenses (2)
159.3
47.0
163.4
44.4
120.6
44.4
132.2
40.2
33.3
24.8
106.4
52.0
C
C
Gross Par Expense Ratio (%) (3)
Policyholders' Surplus
Contingency Reserve
Qualified Statutory Capital (4)
Unearned Premium Reserve
Loss and LAE Reserves
0.2
559.4
87.1
646.5
257.3
0.0
0.2
550.2
49.6
599.8
190.7
0.0
0.3
626.3
27.1
653.4
122.4
0.0
0.4
515.3
9.6
524.8
80.0
0.0
1.1
270.0
0.6
270.6
16.0
0.0
—
21.4
285.0
26.1
109.8
0.0
—
G
G
G
G
G
66,002
64,461
97,484
95,190
43,106
42,655
63,420
62,672
24,986
24,698
35,204
34,763
12,450
12,345
17,141
17,013
2,375
2,280
2,983
2,872
142.7
143.8
153.4
154.4
G
G
G
G
99.7
147.2
71.1
104.5
37.8
53.2
23.5
32.4
8.4
10.6
93.3
101.6
G
G
87.1
11.7
1.1
0.1
0.0
35.5
7.4
0.6
0.0
56.5
26.0
0.0
0.6
0.0
73.5
N.A.
N.A.
N.A.
N.A.
N.A.
—
—
—
—
—
—
—
—
—
—
Financial Data (Pro Forma SAP)
Gross Par Insured
Domestic Municipal
Domestic Nomunicipal
International
% Nonmunicipal and International
Insured Portfolio
Gross Par Outstanding (5)
Net Par Outstanding
Gross P&I Outstanding (5)
Net P&I Outstanding
Leverage Ratios
Net Par/Qualified Statutory Capital (:1)
Net P&I/Qualified Statutory Capital (:1)
Investment Portfolio Credit Quality (%)
‘AAA’
‘AA’
‘A’
‘BBB’
Not Investment Grade/Not Rated
86.3
12.4
1.2
0.1
0.0
See Notes and Definitions, page 14.
CIFG Guaranty
12
Financial Guarantors
Key Financial Indicators — CIFG Holding and Subsidiaries
($ Mil., Years Ended Dec. 31)
9/30/06
2005
2004
2003
2002
(%)
C,G
52.3
0.0
22.2
4.0
78.5
44.5
0.0
20.5
(2.0)
63.0
36.0
0.0
12.5
0.9
49.3
17.1
0.0
3.9
8.4
29.4
1.3
0.0
9.3
0.0
10.6
62.6
0.0
754.5
(66.3)
68.6
C
C
C
C
C
Operating Expense
2.0
36.5
1.9
33.2
3.6
27.8
1.7
18.9
0.1
16.5
(38.3)
76.2
C
C
Total Insurance Expense
Interest Expense
Other Expense
Nonrecurring Items
Total Expense
38.4
3.6
0.0
0.0
42.1
35.1
4.0
0.0
0.0
39.1
31.4
0.1
0.0
0.0
31.5
23.6
0.6
0.0
0.0
24.2
16.6
0.6
0.0
0.0
17.2
47.0
NM
0.0
0.0
60.8
C
C
C
C
C
Income Before Taxes
Net Income
Adjusted Net Income (6)
36.5
22.0
21.4
23.9
11.0
11.1
17.8
11.6
11.6
5.2
1.8
1.8
(6.6)
(8.0)
(8.0)
78.6
89.5
84.9
C
C
C
Total Investments and Cash
Reinsurance Assets or Recoverables
Derivative Assets
Deferred Acquisition Costs
Accrued Investment Income
Other Assets
Total Assets
882.5
4.1
0.6
60.3
13.7
32.0
993.2
786.4
3.0
0.0
48.8
13.4
25.8
877.4
777.3
2.0
0.0
45.9
1.9
22.6
849.7
617.0
0.3
0.0
29.9
0.7
15.9
663.9
296.9
0.4
0.0
8.4
0.4
8.1
314.2
33.7
89.7
NM
69.2
151.6
44.2
35.9
G
G
G
G
G
G
G
Unearned Premiums
Loss and Loss Adjustment Expense Reserves
Guaranteed Investment Contract Obligations
Long-Term Debt
Derivative Liabilities
Accrued Interest Payable
Other Liabilities
Total Liabilities
240.1
6.4
0.0
98.5
0.0
0.0
50.1
395.0
180.6
3.9
0.0
98.5
0.3
0.0
38.1
321.4
113.8
5.7
0.0
90.0
0.1
0.0
27.7
237.3
76.9
1.9
0.0
0.0
0.1
0.0
19.9
98.8
15.9
0.1
0.0
0.0
0.0
0.0
16.7
32.8
106.2
178.4
0.0
N.M.
(100.0)
0.0
34.0
94.2
G
G
G
G
G
G
G
G
0.0
598.1
993.2
0.0
556.0
877.4
0.0
612.4
849.7
0.0
565.0
663.9
0.0
281.4
314.2
0.0
22.3
35.9
G
G
G
N.A.
N.A.
N.A.
N.A.
63.5
(88.2)
26.7
2.0
24.2
(110.4)
93.9
7.7
32.7
(255.4)
223.5
0.7
(4.8)
6.6
0.0
1.8
(100.0)
N.M.
(100.0)
N.M.
C
C
C
C
65.4
28.3
0.2
1.2
0.0
4.8
71.1
32.5
4.7
(0.4)
0.0
(3.3)
72.9
25.3
17.1
0.0
0.0
1.8
58.5
13.3
28.1
(0.3)
0.0
0.4
12.7
87.3
69.2
(0.0)
0.0
0.0
—
—
—
—
—
—
—
—
—
—
—
—
3.9
71.0
74.9
5.1
14.1
4.1
74.1
78.3
1.9
15.0
10.0
77.4
87.4
2.0
12.8
10.0
127.2
137.2
0.4
0.0
9.9
1,221.8
1,231.8
N.A.
0.0
—
—
—
—
—
—
—
—
—
—
0.6
0.8
0.5
0.6
0.8
1.1
0.5
0.8
0.9
1.0
0.5
1.2
1.3
1.8
0.8
1.7
1.4
1.7
1.5
0.9
—
—
—
—
—
—
—
—
Summary Income Statement (GAAP)
Insurance Revenues
Financial Services Revenue
Net Investment Income
Other Revenues
Total Revenues
Loss and LAE
Summary Balance Sheet (GAAP)
Shareholders’ Equity
Preferred Stock
Total Shareholders' Equity
Total Liabilities and Shareholders' Equity
Cash Flow Information (GAAP)*
Cash Flow from Operations
Cash Flow from Investing
Cash Flow from Financing
Net Change in Cash
% of Total Revenue
Net Premiums Earned
Net Investment Income
Net Realized Gains (Losses) on Investments
Net Realized and Unrealized Gains (Losses) on Derivatives
Financial Services
Other Revenues
Ratios (GAAP) (%)
GAAP Loss and LAE Ratio (7)
GAAP Expense Ratio (8)
GAAP Combined Ratio (9)
Return on Equity (10)
Financial Leverage (11)
Adjusted Gross Premiums (AGP)/Gross Par Insured (GPI)
Domestic Municipal AGP/Domestic Municipal GPI
Domestic Nonmunicipal AGP/Domestic Nonmunicipal GPI
International AGP/International GPI
*For CIFG Holding and Subsidiaries. See Notes and Definitions, page 14.
CIFG Guaranty
13
Financial Guarantors
Notes and Definitions for Key Financial Indicators, Pages 12–13
(1) Upfront premiums plus the estimated present value of future installment premiums for policies issued during
the period. (2) Before ceding commission income. (3) Total underwriting expenses divided by gross par insured.
(4) Policyholders’ surplus plus contingency reserve. (5) Before reinsurance. (6) GAAP net income excluding
change in fair value of derivatives, assuming a 35% tax rate. (7) GAAP loss and LAE divided by GAAP net
premiums earned. (8) GAAP operating and underwriting expenses divided by GAAP net premiums earned.
(9) GAAP Loss and LAE ratio plus GAAP expense ratio. (10) GAAP net income divided by average
stockholders’ equity. (11) Debt outstanding divided by total capitalization.
C – Percentage change between period shown. G – Compound annual growth rate over the period shown. SAP –
Statutory accounting practices. LAE – Loss-adjustment expenses. P&I – Principal and interest. GAAP –
Generally accepted accounting principles. N.R. – Not reported. N.M. – Not meaningful. N.A. – Not available.
Note: Net par outstanding and net principal and interest are net of intercompany cessions. Numbers may not add
due to rounding.
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