CONSOLIDATED FINANCIAL STATEMENTS (unaudited):

Consolidated Balance Sheets (unaudited)

1

Consolidated Statements of Operations and Comprehensive Income (unaudited).

2

Consolidated Statements of Cash Flows (unaudited)

3

Notes to Consolidated Financial Statements (unaudited)

4

June 30,
2007

December 31,
2006

ASSETS

General investment portfolio:

Bonds at fair value (amortized cost of $4,541,179 and $4,505,898)

$

4,624,856

$

4,681,144

Equity securities at fair value (cost of $39,316 and $54,291)

39,380

54,325

Short-term investments (cost of $116,617 and $85,980)

117,957

86,503

Financial products segment investment portfolio:

Bonds at fair value (amortized cost of $1,125,699 and $1,127,698)

1,125,843

1,128,255

Guaranteed investments contracts from GIC Affiliates at fair value (amortized cost of $878,422 and $962,815)

871,970

962,815

Short-term investments

9,955

19,478

Assets acquired in refinancing transactions:

Bonds at fair value (amortized cost of $26,483 and $40,133)

28,012

41,051

Securitized loans

201,577

241,785

Other

50,346

55,036

Total investment portfolio

7,069,896

7,270,392

Cash

45,652

29,660

Deferred acquisition costs

346,618

340,673

Prepaid reinsurance premiums

1,027,984

1,004,987

Reinsurance recoverable on unpaid losses

39,834

37,342

Other assets

1,288,422

1,496,170

TOTAL ASSETS

$

9,818,406

$

10,179,224

LIABILITIES, MINORITY INTEREST AND SHAREHOLDER’S EQUITY

Deferred premium revenue

$

2,688,340

$

2,658,594

Loss and loss adjustment expense reserve

238,975

228,122

Financial products segment debt

2,840,762

3,067,745

Deferred federal income taxes

261,849

292,905

Notes payable to affiliate

262,199

321,370

Surplus notes

108,850

108,850

Other liabilities and minority interest

344,603

439,030

TOTAL LIABILITIES AND MINORITY INTEREST

6,745,578

7,116,616

COMMITMENTS AND CONTINGENCIES

Preferred stock (5,000.1 and 0 shares authorized; 0 shared issued and outstanding; par value of $1,000 per share)

Common stock (363 and 380 shares authorized; issued and outstanding; par value of $41,322 and $39,474 per share)

15,000

15,000

Additional paid-in capital—common

658,074

743,504

Accumulated other comprehensive income (net of deferred income taxes of $31,527 and $63,063)

58,521

117,087

Accumulated earnings

2,341,233

2,187,017

TOTAL SHAREHOLDER’S EQUITY

3,072,828

3,062,608

TOTAL LIABILITIES, MINORITY INTEREST AND SHAREHOLDER’S EQUITY

$

9,818,406

$

10,179,224

Six Months Ended
June 30,

2007

2006

REVENUES

Net premiums written

$

232,893

$

256,076

Net premiums earned

$

226,145

$

209,435

Net investment income

114,776

104,904

Net realized gains (losses)

(2,038

)

(4,458

)

Interest income from financial products segment

68,862

68,871

Net realized and unrealized gains (losses) on derivative instruments

(89,889

)

41,577

Income from assets acquired in refinancing transactions

11,316

13,107

Net realized gains (losses) from assets acquired in refinancing transactions

313

541

Other income

8,439

6,203

TOTAL REVENUES

337,924

440,180

EXPENSES

Losses and loss adjustment expenses

9,068

11,184

Interest expense

11,022

13,267

Interest expense from financial products segment

61,422

72,654

Amortization of deferred policy acquisition costs

34,006

30,631

Foreign exchange (gains) losses from financial products segment

31,116

95,655

Other operating expenses

49,996

41,351

TOTAL EXPENSES

196,630

264,742

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST

141,294

175,438

Provision for income taxes

Current

43,151

34,864

Deferred

480

30,664

Total provision

43,631

65,528

NET INCOME BEFORE MINORITY INTEREST

97,663

109,910

Less: Minority interest

(56,554

)

(85,847

)

NET INCOME

154,217

195,757

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

Unrealized gains (losses) arising during period, net of deferred income tax provision (benefit) of $(30,072) and $(29,346)

(55,847

)

(54,529

)

Less: Reclassification adjustment for gains (losses) included in net income, net of deferred income tax provision (benefit) of $1,464 and $(1,480)

2,719

(2,749

)

Other comprehensive income (loss)

(58,566

)

(51,780

)

COMPREHENSIVE INCOME