CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

Condensed Consolidated Balance Sheets (unaudited)

1

Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited).

2

Condensed Consolidated Statements of Cash Flows (unaudited)

3

Notes to Condensed Consolidated Financial Statements (unaudited)

4

June 30,
2006

December 31,
2005

ASSETS

Bonds at fair value (amortized cost of $4,368,873 and $4,208,011)

$

4,450,531

$

4,370,469

Equity securities at fair value (cost of $54,462 and $54,370)

54,462

54,370

Short-term investments

47,045

133,283

Variable interest entities’ bonds at fair value (amortized cost of $1,149,432 and $1,155,832)

1,149,830

1,155,992

Variable interest entities’ guaranteed investments contracts at fair value (amortized cost approximates fair value)

944,214

1,021,791

Variable interest entities’ short-term investment portfolio

4,184

2,674

Total investment portfolio

6,650,266

6,738,579

Assets acquired in refinancing transactions:

Bonds at fair value (amortized cost of $48,445 and $65,865)

49,997

68,421

Securitized loans

273,877

296,965

Other

59,692

102,487

Total assets acquired in refinancing transactions

383,566

467,873

Total investments

7,033,832

7,206,452

Cash

47,421

10,376

Deferred acquisition costs

340,894

335,129

Prepaid reinsurance premiums

918,812

865,192

Reinsurance recoverable on unpaid losses

35,241

36,339

Other assets

1,271,584

1,162,562

TOTAL ASSETS

$

9,647,784

$

9,616,050

LIABILITIES AND MINORITY INTEREST AND SHAREHOLDER’S EQUITY

Deferred premium revenue

$

2,480,862

$

2,380,600

Losses and loss adjustment expenses

214,094

205,718

Variable interest entities’ debt

2,843,845

2,708,773

Deferred federal income taxes

241,123

238,342

Notes payable to affiliate

375,388

463,575

Surplus notes

108,850

108,850

Minority interest

42,157

254,123

Accrued expenses and other liabilities

374,919

353,643

TOTAL LIABILITIES AND MINORITY INTEREST

6,681,238

6,713,624

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 (400 shares authorized; issued and outstanding; par value of $37,500 per share)

15,000

15,000

Additional paid-in capital—common

841,971

841,828

Accumulated other comprehensive income (net of deferred income taxes of $30,332 and $58,198)

56,302

108,082

Accumulated earnings

2,053,273

1,937,516

TOTAL SHAREHOLDER’S EQUITY

2,966,546

2,902,426

TOTAL LIABILITIES AND MINORITY INTEREST AND SHAREHOLDER’S EQUITY

$

9,647,784

$

9,616,050

Six Months Ended
June 30,

2006

2005

REVENUES

Net premiums written

$

256,076

$

265,192

Net premiums earned

$

209,435

$

203,054

Net investment income

104,904

99,263

Net realized gains (losses)

(4,458

)

(851

)

Variable interest entities’ interest income

68,871

37,293

Net realized and unrealized gains (losses) on derivative instruments

41,577

(66,396

)

Income from assets acquired in refinancing transactions

14,381

19,488

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

(1,305

)

5,282

Other income

6,775

12,253

TOTAL REVENUES

440,180

309,386

EXPENSES

Losses and loss adjustment expenses

11,184

10,222

Interest expense

13,267

17,811

Policy acquisition costs

30,631

31,606

Variable interest entities’ foreign exchange (gain) loss

95,655

(136,490

)

Variable interest entities’ interest expense

72,654

51,621

Other operating expenses

41,351

37,617

TOTAL EXPENSES

264,742

12,387

INCOME BEFORE INCOME TAXES AND MINORITY INTEREST

175,438

296,999

Provision for income taxes

65,528