<PAGE>
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
June 4, 1996
ContiMortgage Home Equity Loan Trust 1996-2
(filed on its behalf by ContiSecurities Asset Funding Corp.)
-----------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 33-99340 Application Pending
----------------------------- ---------- -------------------
(State or Other Jurisdiction) (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
c/o Manufacturers and Traders Trust Company
One M & T Plaza
Buffalo, New York 14240
-------------------------- -------------------
(Address of Principal (Zip Code)
Executive Offices)
Registrant's telephone number, including area code (716) 842-4217
--------------
No Change
-----------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable
(b) Not applicable
(c) Exhibits:
20.1 Audited Financial Statements of MBIA Insurance
Corporation dated December 31, 1995 and December 31,
1994.
23.1 Consent of Coopers & Lybrand L.L.P., independent
auditors of MBIA Insurance Corporation.
99.1 Computational Materials provided by CS First Boston
in connection with sales efforts related to the
Registrant's securities.
99.2 Computational Materials provided by Merrill Lynch in
connection with sales efforts related to the
Registrant's securities.
<PAGE>
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 hereunto duly authorized.
CONTISECURITIES ASSET FUNDING CORP.,
as Depositor
By: /s/ James E. Moore
---------------------------------
Name: James E. Moore
Title: President
By: /s/ Jerome M. Perelson
---------------------------------
Name: Jerome M. Perelson
Title: Vice President
Dated: June 6, 1996
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
20.1 Audited Financial Statements of MBIA Insurance
Corporation dated December 31, 1995 and
December 31, 1994.
23.1 Consent of Coopers & Lybrand L.L.P., independent
auditors of MBIA Insurance Corporation.
99.1 Computational Materials provided by CS First Boston
in connection with sales efforts related to the
Registrant's securities.
99.2 Computational Materials provided by Merrill Lynch
in connection with sales efforts related to the
Registrant's securities.
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 1995 and 1994
and for the years ended
December 31, 1995, 1994 and 1993
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
MBIA INSURANCE CORPORATION:
We have audited the accompanying consolidated balance sheets of MBIA Insurance
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, changes in shareholder's equity and cash
flows for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of MBIA Insurance
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note 7 to the consolidated financial statements, effective
January 1, 1993 the Company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes." As discussed in Note 2 to the
consolidated financial statements, effective January 1, 1994 the Company adopted
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
\s\ COOPERS & LYBRAND
New York, New York
January 22, 1996
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
------------------- ----------------
ASSETS
Investments:
<S> <C> <C>
Fixed maturity securities held as available-for-sale
at fair value (amortized cost $3,428,986 and
$3,123,838 $3,652,621 3,051,906
Short-term investments, at amortized cost
(which approximates fair value) 198,035 121,384
Other investments 14,064 11,970
------------ ------------
Total investments 3,864,720 3,185,260
Cash and cash equivalents 2,135 1,332
Accrued investment income 60,247 55,347
Deferred acquisition costs 140,348 133,048
Prepaid reinsurance premiums 200,887 186,492
Goodwill (less accumulated amortization of
$37,366 and $32,437) 105,614 110,543
Property and equipment, at cost (less accumulated
depreciation of $12,137 and $9,501) 41,169 39,648
Receivable for investments sold 5,729 945
Other assets 42,145 46,552
------------ ------------
TOTAL ASSETS $4,462,994 $3,759,167
============ ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Deferred premium revenue $ 1,616,315 $ 1,512,211
Loss and loss adjustment expense reserves 42,505 40,148
Deferred income taxes 212,925 97,828
Payable for investments purchased 10,695 6,552
Other liabilities 54,682 46,925
------------ ------------
TOTAL LIABILITIES 1,937,122 1,703,664
------------ ------------
Shareholder's Equity:
Common stock, par value $150 per share; authorized,
issued and outstanding - 100,000 shares 15,000 15,000
Additional paid-in capital 1,021,584 953,655
Retained earnings 1,341,855 1,134,061
Cumulative translation adjustment 2,704 427
Unrealized appreciation (depreciation) of investments,
net of deferred income tax provision (benefit)
of $78,372 and $(25,334) 144,729 (47,640)
------------ ------------
TOTAL SHAREHOLDER'S EQUITY 2,525,872 2,055,503
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $4,462,994 $3,759,167
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
2
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Years ended December 31
----------------------------------------
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Gross premiums written $349,812 $361,523 $479,390
Ceded premiums (45,050) (49,281) (47,552)
---------- ---------- ----------
Net premiums written 304,762 312,242 431,838
Increase in deferred premium revenue (88,365) (93,226) (200,519)
---------- ---------- ----------
Premiums earned (net of ceded
premiums of $30,655
$33,340 and $41,409) 216,397 219,016 231,319
Net investment income 219,834 193,966 175,329
Net realized gains 7,777 10,335 8,941
Other income 2,168 1,539 3,996
---------- ---------- ----------
Total revenues 446,176 424,856 419,585
---------- ---------- ----------
Expenses:
Losses and loss adjustment expenses 10,639 8,093 7,821
Policy acquisition costs, net 21,283 21,845 25,480
Underwriting and operating expenses 41,812 41,044 38,006
---------- ---------- ----------
Total expenses 73,734 70,982 71,307
---------- ---------- ----------
Income before income taxes and cumulative
effect of accounting changes 372,442 353,874 348,278
Provision for income taxes 81,748 77,125 86,684
---------- ---------- ----------
Income before cumulative effect of
accounting changes 290,694 276,749 261,594
Cumulative effect of accounting changes --- --- 12,923
---------- ---------- ----------
Net income $290,694 $276,749 $274,517
========== ========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
3
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
For the years ended December 31, 1995, 1994 and 1993
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Unrealized
Additional Cumulative Appreciation
Common Stock Paid-in Retained Translation (Depreciation)
Shares Amount Capital Earnings Adjustment of Investments
------- -------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1993 100,000 $ 15,000 $ 931,943 $ 670,795 $ (474) $ 2,379
Net income --- --- --- 274,517 --- ---
Change in foreign currency translation --- --- --- --- (729) ---
Change in unrealized appreciation
of investments net of change in
deferred income taxes of $(1,381) --- --- --- --- --- 2,461
Dividends declared (per
common share $500.00) --- --- --- (50,000) --- ---
Tax reduction related to tax sharing
agreement with MBIA Inc. --- --- 11,851 --- --- ---
------- -------- ---------- ---------- ---------- ------------
Balance, December 31, 1993 100,000 15,000 943,794 895,312 (1,203) 4,840
------- -------- ---------- ---------- ---------- ------------
Net income --- --- --- 276,749 --- ---
Change in foreign currency translation --- --- --- --- 1,630 ---
Change in unrealized depreciation
of investments net of change in
deferred income taxes of $27,940 --- --- --- --- --- (52,480)
Dividends declared (per
common share $380.00) --- --- --- (38,000) --- ---
Tax reduction related to tax sharing
agreement with MBIA Inc. --- --- 9,861 --- --- ---
------- -------- ---------- ---------- ---------- ------------
Balance, December 31, 1994 100,000 15,000 953,655 1,134,061 427 (47,640)
------- -------- ---------- ---------- ---------- ------------
Exercise of stock options --- --- 5,403 --- --- ---
Net income --- --- --- 290,694 --- ---
Change in foreign currency translation --- --- --- --- 2,277 ---
Change in unrealized appreciation
of investments net of change in
deferred income taxes of $(103,707) --- --- --- --- --- 192,369
Dividends declared (per
common share $829.00) --- --- --- (82,900) --- ---
Capital contribution from MBIA Inc. --- --- 52,800 --- --- ---
Tax reduction related to tax sharing
agreement with MBIA Inc. --- --- 9,726 --- --- ---
======= ======== ========== ========== ========== ============
Balance, December 31, 1995 100,000 $ 15,000 $1,021,584 $1,341,855 $ 2,704 $144,729
======= ======== ========== ========== ========== ============
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
4
<PAGE>
MBIA INSURANCE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------------
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $290,694 $276,749 $274,517
Adjustments to reconcile net income to net
cash provided by operating activities:
Increase in accrued investment income (4,900) (3,833) (5,009)
Increase in deferred acquisition costs (7,300) (12,564) (10,033)
Increase in prepaid reinsurance premiums (14,395) (15,941) (6,143)
Increase in deferred premium revenue 104,104 109,167 206,662
Increase in loss and loss adjustment expense reserves 2,357 6,413 8,225
Depreciation 2,676 1,607 1,259
Amortization of goodwill 4,929 4,961 5,001
Amortization of bond (discount) premium, net (2,426) 621 (743)
Net realized gains on sale of investments (7,778) (10,335) (8,941)
Deferred income taxes 11,391 19,082 7,503
Other, net 29,080 (8,469) 15,234
----------- ------------ ------------
Total adjustments to net income 117,738 90,709 213,015
----------- ------------ ------------
Net cash provided by operating activities 408,432 367,458 487,532
----------- ------------ ------------
Cash flows from investing activities:
Purchase of fixed maturity securities, net
of payable for investments purchased (897,128) (1,060,033) (786,510)
Sale of fixed maturity securities, net of
receivable for investments sold 473,352 515,548 205,342
Redemption of fixed maturity securities,
net of receivable for investments redeemed 83,448 128,274 225,608
(Purchase) sale of short-term investments, net (32,281) 3,547 (40,461)
(Purchase) sale of other investments, net (692) 87,456 (37,777)
Capital expenditures, net of disposals (4,228) (3,665) (3,601)
----------- ------------ ------------
Net cash used in investing activities (377,529) (328,873) (437,399)
----------- ------------ ------------
Cash flows from financing activities:
Capital contribution from MBIA Inc. 52,800 --- ---
Dividends paid (82,900) (38,000) (50,000)
----------- ------------ ------------
Net cash used by financing activities (30,100) (38,000) (50,000)
----------- ------------ ------------
Net increase in cash and cash equivalents 803 585 133
Cash and cash equivalents - beginning of year 1,332 747 614
----------- ------------ ------------
Cash and cash equivalents - end of year $2,135 $1,332 $747
=========== ============ ============
Supplemental cash flow disclosures:
Income taxes paid $ 50,790 $ 53,569 $ 52,967
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
5
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
MBIA Insurance Corporation ("MBIA Corp."), formerly known as Municipal Bond
Investors Assurance Corporation, is a wholly owned subsidiary of MBIA Inc. MBIA
Inc. was incorporated in Connecticut on November 12, 1986 as a licensed insurer
and, through the following series of transactions during December 1986, became
the successor to the business of the Municipal Bond Insurance Association (the
"Association"), a voluntary unincorporated association of insurers writing
municipal bond and note insurance as agent for the member insurance companies:
o MBIA Inc. acquired for $17 million all of the outstanding common stock of
New York domiciled insurance company and changed the name of the insurance
company to Municipal Bond Investors Assurance Corporation. In April 1995, the
name was again changed to MBIA Insurance Corp. Prior to the acquisition, all of
the obligations of this company were reinsured and/or indemnified by the former
owner.
o Four of the five member companies of the Association, together with their
affiliates, purchased all of the outstanding common stock of MBIA Inc. and
entered into reinsurance agreements whereby they ceded to MBIA Inc.
substantially all of the net unearned premiums on existing and future
Association business and the interest in, or obligation for, contingent
commissions resulting from their participation in the Association. MBIA Inc.'s
reinsurance obligations were then assumed by MBIA Corp. The participation of
these four members aggregated approximately 89% of the net insurance in force of
the Association. The net assets transferred from the predecessor included the
cash transferred in connection with the reinsurance agreements, the related
deferred acquisition costs and contingent commissions receivable, net of the
related unearned premiums and contingent commissions payable. The deferred
income taxes inherent in these assets and liabilities were recorded by MBIA
Corp. Contingent commissions receivable (payable) with respect to premiums
earned prior to the effective date of the reinsurance agreements by the
Association in accordance with statutory accounting practices, remained as
assets (liabilities) of the member companies.
Effective December 31, 1989, MBIA Inc. acquired for $288 million all of
the outstanding stock of Bond Investors Group, Inc. ("BIG"), the parent company
of Bond Investors Guaranty Insurance Company ("BIG Ins."), which was
subsequently renamed MBIA Insurance Corp. of Illinois ("MBIA Illinois").
-6-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In January 1990, MBIA Illinois ceded its portfolio of net insured
obligations to MBIA Corp. in exchange for cash and investments equal to its
unearned premium reserve of $153 million. Subsequent to this cession, MBIA Inc.
contributed the common stock of BIG to MBIA Corp. resulting in additional
paid-in capital of $200 million. The insured portfolio acquired from BIG Ins.
consists of municipal obligations with risk characteristics similar to those
insured by MBIA Corp. On December 31, 1990, BIG was merged into MBIA Illinois.
Also in 1990, MBIA Inc. formed MBIA Assurance S.A. ("MBIA Assurance"),
a wholly owned French subsidiary, to write financial guarantee insurance in the
international community. MBIA Assurance provides insurance for public
infrastructure financings, structured finance transactions and certain
obligations of financial institutions. The stock of MBIA Assurance was
contributed to MBIA Corp. in 1991 resulting in additional paid-in capital of $6
million. Pursuant to a reinsurance agreement with MBIA Corp., a substantial
amount of the risks insured by MBIA Assurance is reinsured by MBIA Corp.
In 1993, MBIA Inc. formed a wholly owned subsidiary, MBIA Investment
Management Corp. ("IMC"). IMC, which commenced operations in August 1993,
principally provides guaranteed investment agreements to states, municipalities
and municipal authorities which are guaranteed as to principal and interest.
MBIA Corp. insures IMC's outstanding investment agreement liabilities.
In 1993, MBIA Corp. assumed the remaining business from the fifth member of
the Association.
In 1994, MBIA Inc. formed a wholly owned subsidiary, MBIA Securities
Corp. ("SECO"), to provide fixed-income investment management services for MBIA
Inc.'s municipal cash management service businesses. In 1995, portfolio
management for a portion of MBIA Corp.'s insurance related investment portfolio
was transferred to SECO; the management of the balance of this portfolio was
transferred in January 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared on the basis of
generally accepted accounting principles ("GAAP"). The preparation of financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
-7-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
disclosure 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. Significant
accounting policies are as follows:
CONSOLIDATION
The consolidated financial statements include the accounts of MBIA Corp., MBIA
Illinois, MBIA Assurance and BIG Services, Inc. All significant intercompany
balances have been eliminated. Certain amounts have been reclassified in prior
years' financial statements to conform to the current presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and demand deposits with banks.
INVESTMENTS
Effective January 1, 1994, MBIA Corp. adopted Statement of Financial Accounting
Standards ("SFAS") 115 "Accounting for Certain Investments in Debt and Equity
Securities." In accordance with SFAS 115, MBIA Corp. reclassified its entire
investment portfolio ("Fixed-maturity securities") as "available-for-sale."
Pursuant to SFAS 115, securities classified as available-for-sale are required
to be reported in the financial statements at fair value, with unrealized gains
and losses reflected as a separate component of shareholder's equity. The
cumulative effect of MBIA Corp.'s adoption of SFAS 115 was a decrease in
shareholder's equity at December 31, 1994 of $46.8 million, net of taxes. The
adoption of SFAS 115 had no effect on MBIA Corp.'s earnings.
Bond discounts and premiums are amortized on the effective-yield method
over the remaining term of the securities. For pre-refunded bonds the remaining
term is determined based on the contractual refunding date. Short-term
investments are carried at amortized cost, which approximates fair value and
include all fixed-maturity securities with a remaining term to maturity of less
than one year. Investment income is recorded as earned. Realized gains or losses
on the sale of investments are determined by specific identification and are
included as a separate component of revenues.
Other investments consist of MBIA Corp.'s interest in limited
partnerships and a mutual fund which invests principally in marketable equity
securities. MBIA Corp. records dividends from its investment in marketable
equity securities and its share of limited partnerships and mutual funds as a
-8-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
component of investment income. In addition, MBIA Corp. records its share of the
unrealized gains and losses on these investments, net of applicable deferred
income taxes, as a separate component of shareholder's equity.
PREMIUM REVENUE RECOGNITION
Premiums are earned pro rata over the period of risk. Premiums are allocated to
each bond maturity based on par amount and are earned on a straight-line basis
over the term of each maturity. When an insured issue is retired early, is
called by the issuer, or is in substance paid in advance through a refunding or
defeasance accomplished by placing U.S. Government securities in escrow, the
remaining deferred premium revenue, net of the portion which is credited to a
new policy in those cases where MBIA Corp. insures the refunding issue, is
earned at that time, since there is no longer risk to MBIA Corp. Accordingly,
deferred premium revenue represents the portion of premiums written that is
applicable to the unexpired risk of insured bonds and notes.
POLICY ACQUISITION COSTS
Policy acquisition costs include only those expenses that relate primarily to,
and vary with, premium production. For business produced directly by MBIA Corp.,
such costs include compensation of employees involved in marketing, underwriting
and policy issuance functions, certain rating agency fees, state premium taxes
and certain other underwriting expenses, reduced by ceding commission income on
premiums ceded to reinsurers. For business assumed from the Association, such
costs were comprised of management fees, certain rating agency fees and
marketing and legal costs, reduced by ceding commissions received by the
Association on premiums ceded to reinsurers. Policy acquisition costs are
deferred and amortized over the period in which the related premiums are earned.
LOSSES AND LOSS ADJUSTMENT EXPENSES
Reserves for losses and loss adjustment expenses ("LAE") are established in an
amount equal to MBIA Corp.'s estimate of the identified and unidentified losses,
including costs of settlement on the obligations it has insured.
To the extent that specific insured issues are identified as currently
or likely to be in default, the present value of expected payments, including
loss and LAE associated with these issues, net of expected recoveries, is
allocated within the total loss reserve as case basis reserves. Management of
MBIA Corp. periodically evaluates its estimates for losses and LAE and any
resulting adjustments are reflected in current earnings. Management believes
-9-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
that the reserves are adequate to cover the ultimate net cost of claims, but the
reserves are necessarily based on estimates, and there can be no assurance that
the ultimate liability will not exceed such estimates.
CONTINGENT COMMISSIONS
Contingent commissions may be receivable from MBIA Corp.'s and the Association's
reinsurers under various reinsurance treaties and are accrued as the related
premiums are earned.
INCOME TAXES
MBIA Corp. is included in the consolidated tax return of MBIA
Inc. The tax provision for MBIA Corp. for financial reporting purposes is
determined on a stand alone basis. Any benefit derived by MBIA Corp. as a result
of the tax sharing agreement with MBIA Inc. and its subsidiaries is reflected
directly in shareholder's equity for financial reporting purposes.
Deferred income taxes are provided in respect of temporary 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 Internal Revenue Code permits financial guarantee insurance
companies to deduct from taxable income additions to the statutory contingency
reserve, subject to certain limitations. The tax benefits obtained from such
deductions must be invested in non-interest bearing U. S. Government tax and
loss bonds. MBIA Corp. records purchases of tax and loss bonds as payments of
Federal income taxes. The amounts deducted must be restored to taxable income
when the contingency reserve is released, at which time MBIA Corp. may present
the tax and loss bonds for redemption to satisfy the additional tax liability.
PROPERTY AND EQUIPMENT
Property and equipment consists of MBIA Corp.'s headquarters and equipment and
MBIA Assurance's furniture, fixtures and equipment, which are recorded at cost
and, exclusive of land, are depreciated on the straight-line method over their
estimated service lives ranging from 4 to 31 years. Maintenance and repairs are
charged to expenses as incurred.
GOODWILL
Goodwill represents the excess of the cost of the acquired and contributed
subsidiaries over the tangible net assets at the time of acquisition or
contribution. Goodwill attributed to the acquisition of the licensed insurance
-10-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
company includes recognition of the value of the state licenses held by that
company, and is amortized by the straight-line method over 25 years. Goodwill
related to the wholly owned subsidiary of MBIA Inc. contributed in 1988 is
amortized by the straight-line method over 25 years. Goodwill attributed to the
acquisition of MBIA Illinois is amortized according to the recognition of future
profits from its deferred premium revenue and installment premiums, except for a
minor portion attributed to state licenses, which is amortized by the
straight-line method over 25 years.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities denominated in foreign currencies are translated at
year-end exchange rates. Operating results are translated at average rates of
exchange prevailing during the year. Unrealized gains or losses resulting from
translation are included as a separate component of shareholder's equity.
3. STATUTORY ACCOUNTING PRACTICES
The financial statements have been prepared on the basis of GAAP, which differs
in certain respects from the statutory accounting practices prescribed or
permitted by the insurance regulatory authorities. Statutory accounting
practices differ from GAAP in the following respects:
o premiums are earned only when the related risk has expired
rather than over the period of the risk;
o acquisition costs are charged to operations as incurred rather
than as the related premiums are earned;
o a contingency reserve is computed on the basis of statutory requirements and
reserves for losses and LAE are established, at present value, for specific
insured issues which are identified as currently or likely to be in default.
Under GAAP reserves are established based on MBIA Corp.'s reasonable estimate
of the identified and unidentified losses and LAE on the insured obligations
it has written;
o Federal income taxes are only provided on taxable income for which income
taxes are currently payable, while under GAAP, deferred income taxes are
provided with respect to temporary differences;
o fixed-maturity securities are reported at amortized cost rather than fair
value;
-11-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
o tax and loss bonds purchased are reflected as admitted assets as well as
payments of income taxes; and
o certain assets designated as "non-admitted assets" are charged directly
against surplus but are reflected as assets under GAAP.
The following is a reconciliation of consolidated shareholder's equity
presented on a GAAP basis to statutory capital and surplus for MBIA Corp. and
its subsidiaries, MBIA Illinois and MBIA Assurance:
As of December 31
-----------------
(In thousands) 1995 1994 1993
-------------- ---- ---- ----
GAAP shareholder's equity ... $ 2,525,872 $ 2,055,503 $ 1,857,743
Premium revenue recognition . (328,450) (296,524) (242,577)
Deferral of acquisition costs (140,348) (133,048) (120,484)
Unrealized (gains) losses ... (223,635) 71,932 --
Contingent commissions ...... (1,645) (1,706) (1,880)
Contingency reserve ......... (743,510) (620,988) (539,103)
Loss and loss adjustment
expense reserves ........... 28,024 18,181 26,262
Deferred income taxes ....... 205,425 90,328 99,186
Tax and loss bonds .......... 70,771 50,471 25,771
Goodwill .................... (105,614) (110,543 (115,503)
Other ....................... (12,752) (13,568 (11,679)
------------ ----------- -----------
Statutory capital
and surplus ......... $ 1,274,138 1,110,038 $ 977,736
=========== ========= ===========
Consolidated net income of MBIA Corp. determined in accordance with
statutory accounting practices for the years ended December 31, 1995, 1994 and
1993 was $278.3 million, $224.9 million and $258.4 million, respectively.
4. PREMIUMS EARNED FROM REFUNDED AND CALLED BONDS
Premiums earned include $34.0 million, $53.0 million and $85.6 million for 1995,
1994 and 1993, respectively, related to refunded and called bonds.
5. INVESTMENTS
MBIA Corp.'s investment objective is to optimize long-term, after-tax returns
while emphasizing the preservation of capital and claims-paying capability
through maintenance of high-quality investments with adequate liquidity. MBIA
Corp.'s investment policies limit the amount of credit exposure to any one
-12-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
issuer. The fixed-maturity portfolio is comprised of high-quality (average
rating Double-A) taxable and tax-exempt investments of diversified maturities.
The following tables set forth the amortized cost and fair value of the
fixed-maturities and short-term investments included in the consolidated
investment portfolio of MBIA Corp. as of December 31, 1995 and 1994.
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---- ----- ------ ----------
(In thousands
December 31, 1995
Taxable bonds
United States Treasury
and Government Agency .. $ 6,742 $ 354 -- $ 7,096
Corporate and other
obligations ............ 592,604 30,536 (212) 622,928
Mortgage-backed .......... 389,943 21,403 (932) 410,414
Tax-exempt bonds municipal
Obligations .............. 2,637,732 175,081 (2,595) 2,810,218
--------- ------- ------ ---------
Total fixed-
maturities $3,627,021 $ 227,374 (3,739) $3,850,656
========== ========== ====== ==========
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---- ----- ------ ----------
(In thousands)
Taxable bonds
United States Treasury
and Government Agency $ 15,133 -- (149) $ 14,984
Corporate and other ...
obligations ......... 461,601 2,353 (23,385) 440,569
Mortgage-backed ......... 317,560 3,046 (12,430) 308,176
Tax-exempt bonds
State and municipal
obligations ........... 2,450,928 36,631 (77,998) 2,409,561
--------- ------ ------- ---------
Total fixed-
maturities ......... $3,245,222 $ 42,030 $ (113,962) $3,173,290
========== ========== ========== ==========
Fixed-maturity investments carried at fair value of $8.1 million and
$7.4 million as of December 31, 1995 and 1994, respectively, were on deposit
with various regulatory authorities to comply with insurance laws.
-13-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The table below sets forth the distribution by expected maturity of the
fixed-maturities and short-term investments at amortized cost and fair value at
December 31, 1995. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations.
Amortized Fair
(In thosands Cost Value
Maturity
Within 1 year ....................... $ 178,328 $ 178,256
Beyond 1 year but within 5 years .... 448,817 477,039
Beyond 5 years but within 10 years .. 1,133,527 1,211,645
Beyond 10 years but within 15 years . 742,790 804,421
Beyond 15 years but within 20 years . 686,871 730,030
Beyond 20 years ..................... 46.745 38,851
-------- --------
3,237,078 3,440,242
Mortgage-backed ..................... 389,943 410,414
------- -------
Total fixed-maturities and short-term
investments ....................... $3,627,021 $3,850,656
========== ==========
6. Investment Income and Gains and Losses
Investment income consists of:
Years ended December 31
-----------------------
(In thousands) ................ 1995 1994 1993
- ------------------------------- ---- ---- ----
Fixed-maturities .............. $ 216,653 $ 193,729 $ 173,070
Short-term investments ...... 6,008 3,003 2,844
Other investments ............. 17 12 2,078
-- -- -----
Gross investment income ..... 222,678 196,744 177,992
Investment expenses ........... 2,844 2,778 2,663
----- ----- -----
Net investment income ....... 219,834 193,966 175,329
Net realized gains (losses):
Fixed-maturities:
Gains..................... 9,941 9,635 9,070
Losses................ .. (2,537) (8,851) (744)
------ ------ ----
Net..................... 7,404 784 8,326
Other investments:
Gains................... 382 9,551 615
Losses................... (9) -- --
---- ------ ----
Net....................... 373 9,551 615
--- ----- ---
Net realized gains .......... 7,777 10,335 8,941
----- ------ -----
Total investment income ....... $ 227,611 $ 204,301 $ 184,270
=========== =========== ===========
-14-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unrealized gains (losses) consist of:
As of December 31
-----------------
(In thousands) .................. 1995 1994
- --------------------------------- ---- ----
Fixed-maturities:
Gains ......................... $ 227,374 $ 42,030
Losses ........................ (3,739) (113,962)
Net .......................... 223,635 (71,932)
Other investments:
Gains ......................... 287 --
Losses ........................ (821) (1,042)
------- ------
Net ........................... (534) (1,042)
------ ------
Total ........................... 223,101 (72,974)
Deferred income tax (benefit) ... 78,372 (25,334)
------ -------
Unrealized gains (losses) - net $ 144,729 $ (47,640)
========= =========
The deferred taxes in 1995 and 1994 relate primarily to unrealized
gains and losses on MBIA Corp.'s fixed-maturity investments, which are reflected
in shareholders' equity in 1995 and 1994 in accordance with MBIA Corp.'s
adoption of SFAS 115.
The change in net unrealized gains (losses) consists of:
Years ended December 31
-----------------------
In thousands 1995 1994 1993
- ------------ ---- ---- ----
Fixed-maturities ............... $ 295,567 $(289,327) $ 101,418
Other investments .............. 508 (8,488) 3,842
--- ------ -----
Total ........................ 296,075 (297,815) 105,260
Deferred income taxes (benefit) 103,706 (27,940) 1,381
------- ------- -----
Unrealized gains (losses), net $ 192,369 $(269,875) $ 103,879
========= ========= =========
7. INCOME TAXES
Effective January 1, 1993, MBIA Corp. changed its method of accounting for
income taxes from the income statement-based deferred method to the balance
sheet-based liability method required by SFAS 109 "Accounting for Income Taxes."
MBIA Corp. adopted the new pronouncement on the cumulative catch-up basis and
recorded a cumulative adjustment, which increased net income and reduced the
deferred tax liability by $13.0 million. The cumulative effect represents the
impact of adjusting the deferred tax liability to reflect the January 1, 1993
tax rate of 34% as opposed to the higher tax rates in effect when certain of the
deferred taxes originated.
-15-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SFAS 109 requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in
the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference 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 on tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities at December 31, 1995 and 1994 are as presented below:
(In thousands) ................................ 1995 1994
- ----------------------------------------------- ---- ----
Deferred tax assets
Tax and loss bonds .......................... $ 71,183 $ 50,332
Unrealized losses ........................... -- 25,334
Alternative minimum tax credit carry forwards 39,072 22,391
Loss and loss adjustment expense reserves ... 9,809 6,363
Other ....................................... 954 3,981
--- -----
Total gross deferred tax assets ............. 121,018 108,401
======= =======
Deferred tax liabilities
Contingency reserve ......................... 131,174 91,439
Deferred premium revenue .................... 64,709 54,523
Deferred acquisition costs .................. 49,122 48,900
Unrealized gains ............................ 78,372 --
Contingent commissions ...................... 7,158 4,746
Other ....................................... 3,408 6,621
----- -----
Total gross deferred tax liabilities ........ 333,943 206,229
------- -------
Net deferred tax liability .................. $212,925 $ 97,828
======== ========
Under SFAS 109, a change in the Federal tax rate requires a restatement
of deferred tax assets and liabilities. Accordingly, the restatement for the
change in the 1993 Federal tax rate resulted in a $5.4 million increase in the
tax provision, of which $3.2 million resulted from the recalculation of deferred
taxes at the new Federal rate.
The provision for income taxes is composed of:
Years ended December 31
-----------------------
(In thousands) .................. 1995 1994 1993
- --------------------------------- ---- ---- ----
Current ......................... $70,357 $58,043 $66,086
Deferred ........................ 11,391 19,082 20,598
------ ------ ------
Total ......................... $81,748 $77,125 $86,684
======= ======= =======
-16-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The provision for income taxes gives effect to permanent differences
between financial and taxable income. Accordingly, MBIA Corp.'s effective income
tax rate differs from the statutory rate on ordinary income. The reasons for
MBIA Corp.'s lower effective tax rates are as follows:
Years ended December 31
-----------------------
1995 1994 1993
---- ---- ----
Income taxes computed on pre-tax
financial income at statutory rates .......... 35.0% 35.0% 35.0%
Increase (reduction) in taxes resulting from:
Tax-exempt interest ........................ (12.5) (12.0) (10.6)
Amortization of goodwill ................... 0.5 0.5 0.5
Other ...................................... (1.1) (1.7) --
---- ---- ----
Provision for income taxes ......... 21.9% 21.8% 24.9%
==== ==== ====
8. DIVIDENDS AND CAPITAL REQUIREMENTS
Under New York state insurance law, MBIA Corp. may pay a dividend only from
earned surplus subject to the maintenance of a minimum capital requirement. The
dividends in any 12-month period may not exceed the lesser of 10% of its
policyholders' surplus as shown on its last filed statutory-basis financial
statements, or of adjusted net investment income, as defined, for such 12-month
period, without prior approval of the superintendent of the New York State
Insurance Department.
In accordance with such restrictions on the amount of dividends which
can be paid in any 12-month period, MBIA Corp. had approximately $44 million
available for the payment of dividends as of December 31, 1995. In 1995, 1994
and 1993, MBIA Corp. declared and paid dividends of $83 million, $38 million and
$50 million, respectively, to MBIA Inc.
Under Illinois Insurance Law, MBIA Illinois may pay a dividend from
unassigned surplus, and the dividends in any 12-month period may not exceed the
greater of 10% of policyholders' surplus (total capital and surplus) at the end
of the preceding calendar year, or the net income of the preceding calendar year
without prior approval of the Illinois State Insurance Department.
In accordance with such restrictions on the amount of dividends which
can be paid in any 12-month period, MBIA Illinois may pay a dividend only with
prior approval as of December 31, 1995.
-17-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The insurance departments of New York state and certain other statutory
insurance regulatory authorities and the agencies which rate the bonds insured
by MBIA Corp. have various requirements relating to the maintenance of certain
minimum ratios of statutory capital and reserves to net insurance in force. MBIA
Corp. and MBIA Assurance were in compliance with these requirements as of
December 31, 1995.
9. LINES OF CREDIT
MBIA Corp. has a standby line of credit commitment in the amount of $650 million
with a group of major banks to provide loans to MBIA Corp. after it has incurred
cumulative losses (net of any recoveries) from September 30, 1995 in excess of
the greater of $500 million and 6.25% of average annual debt service. The
obligation to repay loans made under this agreement is a limited recourse
obligation payable solely from, and collateralized by, a pledge of recoveries
realized on defaulted insured obligations including certain installment premiums
and other collateral. This commitment has a seven-year term and expires on
September 30, 2002 and contains an annual renewal provision subject to the
approval by the bank group.
MBIA Corp. and MBIA Inc. maintain bank liquidity facilities aggregating
$275 million. At December 31, 1995, MBIA Inc. had $18 million outstanding under
these facilities.
10. NET INSURANCE IN FORCE
MBIA Corp. guarantees the timely payment of principal and interest on municipal,
asset-/mortgage-backed and other non-municipal securities. MBIA Corp.'s ultimate
exposure to credit loss in the event of nonperformance by the insured is
represented by the insurance in force as set forth below.
The insurance policies issued by MBIA Corp. are unconditional
commitments to guarantee timely payment on the bonds and notes to bondholders.
The creditworthiness of each insured issue is evaluated prior to the issuance of
insurance and each insured issue must comply with MBIA Corp.'s underwriting
guidelines. Further, the payments to be made by the issuer on the bonds or notes
may be backed by a pledge of revenues, reserve funds, letters of credit,
investment contracts or collateral in the form of mortgages or other assets. The
right to such money or collateral would typically become MBIA Corp.'s upon the
payment of a claim by MBIA Corp.
-18-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 1995, insurance in force, net of cessions to reinsurers,
has a range of maturity of 1-43 years. The distribution of net insurance in
force by geographic location and type of bond, including $2.7 billion and $1.5
billion relating to IMC's municipal investment agreements guaranteed by MBIA
Corp. in 1995 and 1994, respectively, is set forth in the following tables:
<TABLE>
<CAPTION>
As of December 31
-----------------
($ in billions) 1995 1994
- --------------- ---- ----
Net Number % of Net Net Number % of Net
Georgraphic Insurance of Issues Insurance Insurance of Issues Insurance
Location In Force Outstanding In Force In Force Outstanding In Force
- -------- -------- ----------- -------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
California .. $ 51.2 3,122 14.8 $ 43.9 2,832 14.3%
New York .... 30.1 4,846 8.7 25.0 4,447 8.2
Florida ..... 26.9 1,684 7.7 25.4 1,805 8.3
Texas ....... 20.4 2,031 5.9 18.6 2,102 6.1
Pennsylvania 19.7 2,143 5.7 19.5 2,108 6.4
New Jersey .. 16.4 1,730 4.7 15.0 1,590 4.9
Illinois .... 15.0 1,090 4.3 14.7 1,139 4.8
Massachusetts 9.3 1,070 2.7 8.6 1,064 2.8
Ohio ........ 9.1 1,017 2.6 8.3 996 2.7
Michigan .... 7.9 1,012 2.3 5.7 972 1.9
--- ----- --- --- --- ---
Subtotal .... 206.0 19,745 59.4 184.7 19,055 60.4
Other ....... 135.6 11,147 39.1 118.8 10,711 38.8
----- ------ ---- ----- ------ ----
Total U.S. 341.6 30,892 98.5 303.5 29,766 99.2
International 5.1 53 1.5 2.5 18 0.8
--- -- --- --- -- ---
$ 346.7 30,945 100.0% $ 306.0 29,784 100.0%
======== ====== ===== ======== ====== =====
</TABLE>
-19-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
<TABLE>
<CAPTION>
As of December 31
-----------------
1995 1994
---- ----
($ in billions) Net Number % of Net Net Number % of Net
Insurance of Issues nsurance Insurance of Issues Insurance
Type of Bond In Force Outstanding In Force In Force Outstanding In Force
- ------------ -------- ----------- -------- -------- ----------- --------
MUNICIPAL
<S> <C> <C> <C> <C> <C> <C>
General Obligation $ 91.6 11,445 26.4% $ 84.2 11,029 27.5%
Utilities ........ 60.3 4,931 17.4 56.0 5,087 18.3
Health Care ...... 51.9 2,458 15.0 50.6 2,670 16.5
Transportation ... 25.5 1,562 7.4 21.3 1,486 7.0
Special Revenue .. 24.4 1,445 7.0 22.7 1,291 7.4
Industrial
development and
pollution control
revenue 17.2 924 5.0 15.1 1,016 4.9
Housing .......... 15.8 2,671 4.5 13.6 2,663 4.5
Higher education . 15.2 1,261 4.4 14.0 1,208 4.6
======= ======= ====== ======= ======= =====
Other ............ 7.3 134 2.1 3.8 124 1.2
309.2 26,831 89.2 281.3 26,574 91.9
======= ======= ======= ======= ======= =====
Non-municipal
Asset/mortgage-
backed 20.2 256 5.8 12.8 151 4.2
Investor-owned
utilities 6.4 3,559 1.8 5.7 2,918 1.9
International .... 5.1 53 1.5 2.5 18 0.8
Other ............ 5.8 246 1.7 3.7 123 1.2
--- --- --- --- --- ---
37.5 4,114 10.8 24.7 3,210 8.1
---- ----- ---- ---- ----- ---
$346.7 30,945 100.0% $306.0 29,784 100.0%
======= ======= ======= ====== ======= =====
</TABLE>
11. REINSURANCE
MBIA Corp. reinsures portions of its risks with other insurance companies
through various quota and surplus share reinsurance treaties and facultative
agreements. In the event that any or all of the reinsurers were unable to meet
their obligations, MBIA Corp. would be liable for such defaulted amounts.
Amounts deducted from gross insurance in force for reinsurance ceded by
MBIA Corp., MBIA Assurance and MBIA Illinois were $50.1 billion and $42.6
-20-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
billion, at December 31, 1995 and 1994, respectively. The distribution of ceded
insurance in force by geographic location and type of bond is set forth in the
tables below:
As of December 31
-----------------
(In billions) 1995 1994
- ------------- ---- ----
% of % of
Ceded Ceded Ceded Ceded
Insurance Insurance Insurance Insurance
Geographic Location In Force In Force In Force In Force
- ------------------- -------- -------- -------- --------
California ......... $ 8.8 17.5% $ 7.5 17.6%
New York ........... 5.7 11.4 4.9 11.5
New Jersey ......... 3.1 6.1 2.0 4.7
Texas .............. 2.8 5.6 2.5 5.9
Pennsylvania ....... 2.7 5.4 2.6 6.1
Florida ............ 2.3 4.6 2.1 4.9
Illinois ........... 2.2 4.5 2.3 5.4
District of Columbia 1.5 3.0 1.6 3.8
Washington ......... 1.4 2.7 1.2 2.8
Puerto Rico ........ 1.3 2.6 1.1 2.6
Massachusetts ...... 1.1 2.1 0.9 2.1
Ohio ............... 1.0 2.1 0.9 2.1
--- --- --- ---
Subtotal ........... 33.9 67.6 29.6 69.5
Other .............. 14.4 28.8 12.3 28.9
---- ---- ---- ----
Total U. S ..... 48.3 96.4 41.9 98.4
International ...... 1.8 3.6 0.7 1.6
--- --- --- ---
$ 50.1 100.0% $42.6 100.0%
======= ===== ===== =====
-21-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31
-----------------
(In billions) 1995 1994
- ------------- ---- ----
% of % of
Ceded Ceded Ceded Ceded
Insurance Insurance Insurance Insurance
Type of Bond In Force In Force In Force In Force
- ------------ -------- -------- -------- --------
Municipal
General obligation ... $ 11.7 23.3% $ 9.7 22.8%
Utilities ............ 9.0 18.0 8.5 20.0
Health care .......... 6.6 13.1 6.5 15.3
Transportation ....... 5.5 11.0 4.5 10.6
Special revenue ...... 3.2 6.4 2.7 6.3
Industrial development
and pollution
control revenue 3.0 6.0 2.9 6.8
Housing .............. 1.4 2.8 1.0 2.3
Higher education ..... 1.2 2.4 1.2 2.8
Other ................ 2.4 4.8 1.5 3.5
--- --- --- ---
44.0 87.8 38.5 90.4
==== ==== ==== ====
Non-municipal
Asset-/mortgage-backed 3.6 7.2 2.7 6.3
International ........ 1.8 3.6 0.7 1.6
Other ................ 0.7 1.4 0.7 1.7
--- --- --- ---
6.1 12.2 4.1 9.6
--- ---- --- ---
$ 50.1 100.0% $ 42.6 100.0%
======== ===== ======== =====
Included in gross premiums written are assumed premiums from other
insurance companies of $11.7 million, $6.3 million and $20.4 million for the
years ended December 31, 1995, 1994 and 1993, respectively. The percentages of
the amounts assumed to net premiums written were 3.8%, 2.0% and 4.7% in 1995,
1994 and 1993, respectively.
Gross premiums written include $0.2 million in 1994 and $5.4 million in
1993 related to the reassumption by MBIA Corp. of reinsurance previously ceded
by the Association. Also included in gross premiums in 1993 is $10.8 million of
premiums assumed from a member of the Association. Ceded premiums written are
net of $0.2 million in 1995, $1.6 million in 1994 and $2.5 million in 1993
related to the reassumption of reinsurance previously ceded by MBIA Corp. or
MBIA Illinois.
-22-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. EMPLOYEE BENEFITS
MBIA Corp. participates in MBIA Inc.'s pension plan covering all eligible
employees. The pension plan is a defined contribution plan and MBIA Corp.
contributes 10% of each eligible employee's annual total compensation. Pension
expense for the years ended December 31, 1995, 1994 and 1993 was $3.2 million,
$3.0 million and $3.1 million, respectively. MBIA Corp. also has a profit
sharing/401(k) plan which allows eligible employees to contribute up to 10% of
eligible compensation. MBIA Corp. matches employee contributions up to the first
5% of total compensation. MBIA Corp. contributions to the profit sharing plan
aggregated $1.4 million, $1.4 million and $1.3 million for the years ended
December 31, 1995, 1994 and 1993, respectively. The 401(k) plan amounts are
invested in common stock of MBIA Inc. Amounts relating to the above plans that
exceed limitations established by Federal regulations are contributed to a
non-qualified deferred compensation plan. Of the above amounts for the pension
and profit sharing plans, $2.7 million, $2.6 million and $2.6 million for the
years ended December 31, 1995, 1994 and 1993, respectively, are included in
policy acquisition costs.
MBIA Corp. also participates in MBIA Inc.'s common stock incentive plan
which enables employees of MBIA Corp. to acquire shares of MBIA Inc. or to
benefit from appreciation in the price of the common stock of MBIA Inc.
MBIA Corp. also participates in MBIA Inc.'s restricted stock program,
adopted in December 1995, whereby key executive officers of MBIA Corp. are
granted restricted shares of MBIA Inc. common stock.
Effective January 1, 1993, MBIA Corp. adopted SFAS 106 "Employers'
Accounting for Postretirement Benefits Other than Pensions." Under SFAS 106,
companies are required to accrue the cost of employee post-retirement benefits
other than pensions during the years that employees render service. Prior to
January 1, 1993, MBIA Corp. had accounted for these post-retirement benefits on
a cash basis. In 1993, MBIA Corp. adopted the new pronouncement on the
cumulative catch-up basis and recorded a cumulative effect adjustment which
decreased net income and increased other liabilities by $0.1 million. As of
January 1, 1994, MBIA Corp. eliminated these post-retirement benefits.
-23-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. RELATED PARTY TRANSACTIONS
The business assumed from the Association, relating to insurance on unit
investment trusts sponsored by two members of the Association, includes deferred
premium revenue of $1.6 million and $1.9 million at December 31, 1995 and 1994,
respectively.
In 1993, MBIA Corp. assumed the balance of $10.8 million of deferred
premium revenue from a member of the Association which had not previously ceded
its insurance portfolio to MBIA Corp. Also in 1993, MBIA Corp. assumed $0.4
million of deferred premium revenue relating to one of the trusts which was
previously ceded to an affiliate of an Association member.
Since 1989, MBIA Corp. has executed five surety bonds to guarantee the
payment obligations of the members of the Association, one of which is a
principal shareholder of MBIA Inc., which had their Standard & Poor's
claims-paying rating downgraded from Triple-A on their previously issued
Association policies. In the event that they do not meet their Association
policy payment obligations, MBIA Corp. will pay the required amounts directly to
the paying agent instead of to the former Association member as was previously
required. The aggregate amount payable by MBIA Corp. on these surety bonds is
limited to $340 million. These surety bonds remain outstanding as of December
31, 1995.
MBIA Corp. has investment management and advisory agreements with an
affiliate of a principal shareholder of MBIA Inc., which provides for payment of
fees on assets under management. Total related expenses for the years ended
December 31, 1995, 1994 and 1993 amounted to $2.5 million, $2.6 million and $2.4
million, respectively. These agreements were terminated on January 1, 1996 at
which time SECO commenced management of MBIA Corp.'s consolidated investment
portfolios. In addition, investment management expenses of $0.1 million were
paid to SECO for the portion of the investment portfolio transferred in 1995.
MBIA Corp. has various insurance coverages provided by a principal
shareholder of MBIA Inc., the cost of which was $1.9 million, $1.9 million and
$2.0 million for the years ended December 31, 1995, 1994 and 1993, respectively.
-24-
<PAGE>
MBIA INSURANCE CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Included in other assets at December 31, 1995 and 1994 is $1.1 million
and $14.5 million of net receivables from MBIA Inc. and other subsidiaries.
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value amounts of financial instruments shown in the following
table have been determined by MBIA Corp. using available market information and
appropriate valuation methodologies. However, in certain cases considerable
judgment is necessarily required to interpret market data to develop estimates
of fair value. Accordingly, the estimates presented herein are not necessarily
indicative of the amount MBIA Corp. could realize in a current market exchange.
The use of different market assumptions and/or estimation methodologies may have
a material effect on the estimated fair value amounts.
FIXED-MATURITY SECURITIES - The fair value of fixed-maturity securities equals
quoted market price, if available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar securities.
SHORT-TERM INVESTMENTS - Short-term investments are carried at amortized cost
which, because of their short duration, is a reasonable estimate of fair value.
OTHER INVESTMENTS - Other investments consist of MBIA Corp.'s interest in
limited partnerships and a mutual fund which invests principally in marketable
equity securities. The fair value of other investments is based on quoted market
prices.
CASH AND CASH EQUIVALENTS, RECEIVABLE FOR INVESTMENTS SOLD AND PAYABLE FOR
INVESTMENTS PURCHASED - The carrying amounts of these items are a reasonable
estimate of their fair value.
PREPAID REINSURANCE PREMIUMS - The fair value of MBIA Corp.'s prepaid
reinsurance premiums is based on the estimated cost of entering into an
assumption of the entire portfolio with third party reinsurers under current
market conditions.
25
<PAGE>
DEFERRED PREMIUM REVENUE - The fair value of MBIA Corp.'s deferred premium
revenue is based on the estimated cost of entering into a cession of the entire
portfolio with third party reinsurers under current market conditions.
LOSS AND LOSS ADJUSTMENT EXPENSE RESERVES - The carrying amount is composed of
the present value of the expected cash flows for specifically identified claims
combined with an estimate for unidentified claims. Therefore, the carrying
amount is a reasonable estimate of the fair value of the reserve.
INSTALLMENT PREMIUMS - The fair value is derived by calculating the present
value of the estimated future cash flow stream at 9% and 13.25% at December 31,
1995 and December 31, 1994, respectively.
As of December 31,
------------------
1995 1994
---- ----
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
ASSETS:
Fixed-maturity securuities $3,652,621 $3,652,621 $3,051,906 $3,051,906
Short-term investments.. 198,035 198,035 121,384 121,384
Other investments ...... 14,064 14,064 11,970 11,970
Cash and cash equivalents 23,258 23,258 1,332 1,332
Prepaid reinsurance
premiums .............. 200,887 174,444 186,492 159,736
Receivable for
investments sold ...... 5,729 5,729 945 945
LIABILITIES:
Deferred premium
revenue ............. 1,616,315 1,395,159 1,512,211 1,295,305
Loss and loss adjustment
expense reserves ..... 42,505 42,505 40,148 40,148
Payable for investments
purchased ........... 10,695 10,695 6,552 6,552
OFF-BALANCE-SHEET
INSTRUMENTS:
Installment premiums ---- 235,371 --- 176,944
26
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Prospectus Supplement to the
Prospectus dated April 17, 1996 to Registration Statement No. 33-99340
of our report dated January 22, 1996 on our audits of the consolidated
financial statements of MBIA Insurance Corporation and Subsidiaries. We
also consent to the reference to our firm under the caption "Experts."
/s/Coopers & Lybrand L.L.P.
--------------------------
Coopers & Lybrand L.L.P.
May 23, 1996
New York, New York
<PAGE>
ContiMortgage 1996-2 CS First Boston Computational Materials
FIXED RATE COLLATERAL SUMMARY
Total Number of Loans 5,244 Level Pay/Balloon 44.92%/55.08%
Total Outstanding Loan Balance $334,201,562 1st Lien/2nd Lien 93.10%/6.90%
RANGE % TOTAL # LOANS
Avg Loan Balance $ 63,730.28 <= 24,999.99 3.49 613
Highest Balance $375,000.00 25,000 - 49,999.99 20.29 1,800
50,000 - 74,999.99 24.93 1,362
75,000 - 99,999.99 17.10 663
100,000 - 199,999.99 28.25 725
200,000 - 299,999.99 4.74 69
300,000 - 399,999.99 1.20 12
RANGE % TOTAL # LOANS
Wtd Avg Coupon 11.18% 7.00% - 8.99% 5.59 240
Highest Coupon 18.55% 9.00% - 10.99% 47.57 2,200
Lowest Coupon 7.50% 11.00% - 12.99% 35.30 1,923
13.00% - 14.99% 9.58 709
15.00% - 16.99% 1.71 149
17.00% - 18.99% 0.25 23
RANGE LEVEL PAY BALLOON
Wtd Avg Remaining Term 204.24 1 - 83 0.20% 0.00%
Highest Remaining Term 360 84 - 119 1.19% 0.00%
Lowest Remaining Term 58 120 - 180 14.60% 55.08%
181 - 240 21.14% 0.00%
241 - 360 7.79% 0.00%
Wtd Avg Seasoning 1.02
Highest Seasoning 22
Lowest Seasoning 0
RANGE % TOTAL # LOANS
Wtd Avg Orig CLTV 74.11% 0.01% - 65.00% 20.78 1,458
Highest CLTV 95% 65.01% - 75.00% 25.20 1,334
75.01% - 80.00% 29.11 1,421
80.01% - 85.00% 16.03 713
85.01% - 90.00% 8.88 318
Property Type Occupancy Status
Single Family 90.37% Primary Residence 96.07%
Two to Four Family 7.70% Other 3.93%
Other 1.93%
Geographics NJ 9%, NY 9%, MI 9%, OH 8%, PA 7%, IL 7%
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
ContiMortgage 1996-2 CS First Boston Computational Materials
FLOATING RATE COLLATERAL SUMMARY
Total Number of Loans 638 Level Pay/Balloon 99.55%/0.45%
Total Outstanding Loan Balance $52,461,557 1st Lien 100%
RANGE % TOTAL # LOANS
Avg Loan Balance $ 82,228.15 <= 24,999.99 0.66 18
Highest Balance $337,500.00 25,000 - 49,999.99 12.57 170
50,000 - 74,999.99 18.71 158
75,000 - 99,999.99 20.96 128
100,000 - 149,999.99 21.88 98
150,000 - 199,999.99 14.44 44
200,000 - 274,999.99 7.19 16
275,000 - 350,999.99 3.59 6
RANGE % TOTAL # LOANS
Wtd Avg Coupon 9.85% 7.00% - 8.99% 28.14 134
Highest Coupon 14.19% 9.00% - 9.99% 32.08 202
Lowest Coupon 7.45% 10.00% - 10.99% 22.43 165
11.00% - 11.99% 12.72 95
12.00% - 13.99% 3.96 37
14.00% - 14.99% 0.67 5
6 Month LIBOR 100.00%
Periodic Cap 1.0%/1.5% 94.08%/5.92%
Wtd Avg Months to Next Rate Roll 4.63
RANGE % TOTAL # LOANS
Wtd Avg Margin 6.67% 2.00% - 4.99% 8.56 40
Highest Margin 10.75% 5.00% - 5.99% 19.40 103
Lowest Margin 2.50% 6.00% - 6.99% 30.42 184
7.00% - 7.99% 31.55 244
8.00% - 8.99% 8.40 52
9.00% - 10.99% 1.67 15
RANGE % TOTAL # LOANS
Wtd Avg Life Cap 16.09% 13.00% - 14.99% 18.00 89
Highest Life Cap 20.19% 15.00% - 15.99% 34.24 205
Lowest Life Cap 13.45% 16.00% - 16.99% 29.83 202
17.00% - 18.99% 15.29 115
19.00% - 20.99% 2.64 27
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
ContiMortgage 1996-2 CS First Boston Computational Materials
FLOATING RATE COLLATERAL SUMMARY CONTINUED
RANGE % TOTAL # LOANS
Wtd Avg Remaining Term 355.21 1 - 84 0.00% 0
Highest Remaining Term 360 85 - 120 0.10% 2
Lowest Remaining Term 119 121 - 180 1.29% 14
181 - 240 1.12% 10
241 - 360 97.49% 612
Wtd Avg Seasoning .82
Highest Seasoning 11
Lowest Seasoning 0
RANGE % TOTAL # LOANS
Wtd Avg Orig CLTV 74.77% 0.01% - 65.00% 14.12 113
Highest CLTV 100% 65.01% - 70.00% 11.15 81
70.01% - 75.00% 19.24 126
75.01% - 80.00% 39.00 235
80.01% - 85.00% 15.68 79
85.01% - 100.00% 0.81 4
Property Type Occupancy Status
Single Family 94.47% Primary Residence 99.00%
Two to Four Family 3.27% Other 1.00%
Other 2.26%
Geographics MI 43%, IL 8%, OH 7%, CA 6%, UT 4%, AZ 4%
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
ContiMortgage 1996-2 CS First Boston Computational Materials
BOND PROFILE SUMMARY
Avg. CBE 1st Last Mod. Legal
Class Original Coupon Life Yield Pay Pay Dur. Final
Name Par (%) (yrs) (%) Price (mm/yy)(mm/yy) (yrs) (mm/yy)
- -----------------------------------------------------------------------------
To Maturity:
A1 29,000,000 5.62 0.52 5.686 100-00 7/96 6/97 0.50 7/97
A2 118,000,000 6.55 1.00 6.369 100-00 7/96 2/98 0.94 6/10
A3 54,000,000 6.75 2.01 6.702 100-00 2/98 11/98 1.82 4/11
A4 82,500,000 6.95 3.03 6.949 100-00 11/98 4/00 2.64 4/11
A5 21,500,000 7.15 4.04 7.176 100-00 4/00 10/00 3.40 4/11
A6 62,500,000 7.40 5.21 7.446 100-00 10/00 10/02 4.17 6/11
A7 43,000,000 7.70 7.42 7.770 100-00 10/02 4/05 5.45 2/15
A8 39,500,000 8.10 11.42 8.194 100-00 4/05 6/11 7.13 7/27
A9 55,000,000 FLOAT 4.63 5.987 100-00 7/96 1/20 7/27
- ----------------------------------------
To Call:
A8 39,500,000 8.10 8.83 8.186 100-00 4/05 4/05 6.08 7/27
A9 55,000,000 FLOAT 3.98 5.954 100-00 7/96 4/05 7/27
(1) Fixed Rate Certificates (Class A1-A8) Prepayment Curve (PPC)= 115% of PPC. A
100% Prepayment Assumption assumes prepayments start at 4% in month 1, rise
by 1.455 per month to 20% CPR in month 12 at 20% CPR thereafter on a
seasoning adjusted basis.
(2) Adjustable Rate Certificates (Class A9) Prepayment Curve (PPC) = 18% CPR
throughout the life of the collateral.
(3) Coupon and price are assumed for computational materials.
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
ContiMortgage 1996-2 CS First Boston Computational Materials
BOND PROFILE SUMMARY
% of PPC: 0% 50% 100% 115% 125% 150% 200%
Implied Seasoned CPR: 0% 10% 20% 23% 25% 30% 40%
- -----------------------------------------------------------------------------
CLASS A1 $29,000,000; Legal Final 7/97
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon 5.62%; Assumed Price: 100-00)
Bond Yield: 5.69 5.69 5.69 5.69 5.69 5.69 5.69
Average Life: 1.36 0.52 0.52 0.52 0.52 0.52 0.52
Mod. Duration: 1.25 0.50 0.50 0.50 0.50 0.50 0.50
First Prin Pay: 7/96 7/96 7/96 7/96 7/96 7/96 7/96
Last Prin Pay: 11/99 6/97 6/97 6/97 6/97 6/97 6/97
- -----------------------------------------------------------------------------
CLASS A2 $118,000,000; Legal Final 6/10
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon 6.55%; Assumed Price: 100-00)
Bond Yield: 6.60 6.50 6.40 6.37 6.35 6.31 6.23
Average Life: 9.19 1.95 1.12 1.00 0.94 0.82 0.65
Mod. Duration: 6.56 1.76 1.04 0.94 0.88 0.77 0.62
First Prin Pay: 11/99 8/96 7/96 7/96 7/96 7/96 7/96
Last Prin Pay: 11/09 11/99 5/98 2/98 1/98 10/97 7/97
- -----------------------------------------------------------------------------
CLASS A3 $54,000,000; Legal Final 4/11
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon 6.75%; Assumed Price: 100-00)
Bond Yield: 6.82 6.77 6.72 6.70 6.69 6.67 6.62
Average Life: 14.48 4.14 2.27 2.01 1.87 1.59 1.24
Mod. Duration: 8.97 3.50 2.04 1.82 1.70 1.46 1.16
First Prin Pay: 11/09 11/99 5/98 2/98 1/98 10/97 7/97
Last Prin Pay: 4/11 5/01 2/99 11/98 8/98 4/98 11/97
- -----------------------------------------------------------------------------
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
ContiMortgage 1996-2 CS First Boston Computational Materials
BOND PROFILE SUMMARY
% of PPC: 0% 50% 100% 115% 125% 150% 200%
Implied Seasoned CPR: 0% 10% 20% 23% 25% 30% 40%
- -----------------------------------------------------------------------------
CLASS A4 $82,000,000; Legal Final 4/11
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon 6.95%; Assumed Price: 100-00)
Bond Yield: 7.02 7.00 6.96 6.95 6.94 6.92 6.88
Average Life: 14.83 6.36 3.45 3.03 2.80 2.35 1.77
Mod. Duration: 8.98 4.97 2.97 2.64 2.46 2.10 1.62
First Prin Pay: 4/11 5/01 2/99 11/98 8/98 4/98 11/97
Last Prin Pay: 4/11 6/04 10/00 4/00 12/99 5/99 8/98
- -----------------------------------------------------------------------------
CLASS A5 $21,500,000; Legal Final 4/11
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon 7.15%; Assumed Price: 100-00)
Bond Yield: 7.23 7.21 7.18 7.18 7.17 7.15 7.12
Average Life: 14.83 8.50 4.62 4.04 3.73 3.11 2.28
Mod. Duration: 8.86 6.17 3.81 3.40 3.17 2.70 2.04
First Prin Pay: 4/11 6/04 10/00 4/00 12/99 5/99 8/98
Last Prin Pay: 4/11 6/05 5/01 10/00 6/00 10/99 11/98
CLASS A6 $62,500,000; Legal Final 6/11
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon 7.40%; Assumed Price: 100-00)
Bond Yield: 7.48 7.48 7.45 7.45 7.44 7.43 7.40
Average Life: 14.93 10.81 5.96 5.21 4.79 3.98 2.93
Mod. Duration: 8.75 7.18 4.65 4.17 3.90 3.33 2.54
First Prin Pay: 4/11 6/05 5/01 10/00 6/00 10/99 11/98
Last Prin Pay: 6/11 5/09 9/03 10/02 4/02 4/01 12/99
- -----------------------------------------------------------------------------
CLASS A7 $43,000,000; Legal Final 2/15
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon 7.70%; Assumed Price: 100-00)
Bond Yield: 7.79 7.79 7.77 7.77 7.77 7.76 7.74
Average Life: 16.31 14.28 8.49 7.42 6.83 5.66 4.13
Mod. Duration: 8.97 8.38 6.01 5.45 5.12 4.43 3.42
First Prin Pay: 6/11 5/09 9/03 10/02 4/02 4/01 12/99
Last Prin Pay: 11/14 4/11 7/06 4/05 8/04 3/03 5/01
- -----------------------------------------------------------------------------
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
ContiMortgage 1996-2 CS First Boston Computational Materials
BOND PROFILE SUMMARY
% of PPC: 0% 50% 100% 115% 125% 150% 200%
Implied Seasoned CPR: 0% 10% 20% 23% 25% 30% 40%
- -----------------------------------------------------------------------------
CLASS A8 $39,500,000; Legal Final 7/27
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon 8.10%; Assumed Price: 100-00)
Bond Yield: 8.21 8.20 8.20 8.19 8.19 8.19 8.17
Average Life: 22.57 15.77 12.66 11.42 10.62 8.88 6.46
Mod. Duration: 9.94 8.58 7.61 7.13 6.82 6.05 4.81
First Prin Pay: 11/14 4/11 7/06 4/05 8/04 3/03 5/01
Last Prin Pay: 8/25 3/18 2/12 6/11 4/11 7/10 10/06
- ----------------------
CALL (Assumed Coupon 8.10%; Assumed Price: 100-00)
Bond Yield: 8.21 8.20 8.19 8.19 8.18 8.18 8.16
Average Life: 21.11 14.82 10.08 8.83 8.08 6.74 4.91
Mod. Duration: 9.75 8.34 6.65 6.08 5.72 5.01 3.91
First Prin Pay: 11/14 4/11 7/06 4/05 7/04 3/03 5/01
Last Prin Pay: 6/19 4/11 7/06 4/05 7/04 3/03 5/01
- -----------------------------------------------------------------------------
(3) Class A-8 is subject to an available funds cap equal to the Net WAC on the
collateral.
CPR: 0% 8% 16% 18% 20% 24% 32%
- -----------------------------------------------------------------------------
CLASS A9 $55,000,000; Legal Final 7/27
- -----------------------------------------------------------------------------
TO MATURITY (Assumed Coupon FLOAT; Assumed Price: 100-00)
Average Life: 21.61 9.38 5.21 4.63 4.15 3.41 2.46
First Prin Pay: 7/96 7/96 7/96 7/96 7/96 7/96 7/96
Last Prin Pay: 2/26 9/25 11/21 1/20 3/18 10/14 12/09
- ----------------------
TO CALL (Assumed Coupon FLOAT; Assumed Price: 100-00)
Average Life: 19.55 7.92 4.51 3.98 3.58 2.96 2.14
First Prin Pay: 7/96 7/96 7/96 7/96 7/96 7/96 7/96
Last Prin Pay: 6/19 4/11 7/06 4/05 7/04 3/03 5/01
- -----------------------------------------------------------------------------
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
ContiMortgage 1996-2 CS First Boston Computational Materials
Schedule of Monthly Available Funds Caps for Class A-9 Adjustable Rate
Certificates
<TABLE>
<CAPTION>
Assumes 6 month LIBOR remains constant at 5.625%
- --------------------------- -------------------------- ---------------------------- --------------------------
MONTHS COUPON CAP MONTHS COUPON CAP MONTHS COUPON CAP MONTHS COUPON CAP
- --------------------------- -------------------------- ---------------------------- --------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
7/15/96 9.26 4/15/00 11.20 1/15/04 11.20 10/15/07 11.20
8/15/96 9.26 5/15/00 11.20 2/15/04 11.20 11/15/07 11.20
9/15/96 9.27 6/15/00 11.20 3/15/04 11.20 12/15/07 11.20
10/15/96 9.31 7/15/00 11.20 4/15/04 11.20 1/15/08 11.20
11/15/96 9.69 8/15/00 11.20 5/15/04 11.20 2/15/08 11.20
12/15/96 10.19 9/15/00 11.20 6/15/04 11.20 3/15/08 11.20
1/15/97 10.29 10/15/00 11.20 7/15/04 11.20 4/15/08 11.20
2/15/97 10.29 11/15/00 11.20 8/15/04 11.20 5/15/08 11.20
3/15/97 10.30 12/15/00 11.20 9/15/04 11.20 6/15/08 11.20
4/15/97 10.34 1/15/01 11.20 10/15/04 11.20 7/15/08 11.20
5/15/97 10.70 2/15/01 11.20 11/15/04 11.20 8/15/08 11.20
6/15/97 11.20 3/15/01 11.20 12/15/04 11.20 9/15/08 11.20
7/15/97 11.29 4/15/01 11.20 1/15/05 11.20 10/15/08 11.20
8/15/97 10.80 5/15/01 11.20 2/15/05 11.20 11/15/08 11.20
9/15/97 10.80 6/15/01 11.20 3/15/05 11.20 12/15/08 11.20
10/15/97 10.80 7/15/01 11.20 4/15/05 11.20 1/15/09 11.20
11/15/97 10.94 8/15/01 11.20 5/15/05 11.20 2/15/09 11.20
12/15/97 11.13 9/15/01 11.20 6/15/05 11.20 3/15/09 11.21
1/15/98 11.20 10/15/01 11.20 7/15/05 11.20 4/15/09 11.21
2/15/98 11.20 11/15/01 11.20 8/15/05 11.20 5/15/09 11.21
3/15/98 11.20 12/15/01 11.20 9/15/05 11.20 6/15/09 11.21
4/15/98 11.20 1/15/02 11.20 10/15/05 11.20 7/15/09 11.21
5/15/98 11.20 2/15/02 11.20 11/20/05 11.20 8/15/09 11.21
6/15/98 11.20 3/15/02 11.20 12/15/05 11.20 9/15/09 11.21
7/15/98 11.20 4/15/02 11.20 1/15/06 11.20 10/15/09 11.21
8/15/98 11.20 5/15/02 11.20 2/15/06 11.20 11/15/09 11.21
9/15/98 11.20 6/15/02 11.20 3/15/06 11.20 12/15/09 11.21
10/15/98 11.20 7/15/02 11.20 4/15/06 11.20 1/15/10 11.21
11/15/98 11.20 8/15/02 11.20 5/15/06 11.20 2/15/10 11.21
12/15/98 11.20 9/15/02 11.20 6/15/06 11.20 3/15/10 11.21
1/15/99 11.20 10/15/02 11.20 7/15/06 11.20 4/15/10 11.21
2/15/99 11.20 11/15/02 11.20 8/15/06 11.20 5/15/10 11.21
3/15/99 11.20 12/15/02 11.20 9/15/06 11.20 6/15/10 11.21
4/15/99 11.20 1/15/03 11.20 10/15/06 11.20 7/15/10 11.21
5/15/99 11.20 2/15/03 11.20 11/15/06 11.20 8/15/10 11.21
6/15/99 11.20 3/15/03 11.20 12/15/06 11.20 9/15/10 11.21
7/15/99 11.20 4/15/03 11.20 1/15/07 11.20 10/15/10 11.21
8/15/99 11.20 5/15/03 11.20 2/15/07 11.20 11/15/10 11.21
9/15/99 11.20 6/15/03 11.20 3/15/07 11.20 12/15/10 11.21
10/15/99 11.20 7/15/03 11.20 4/15/07 11.20 1/15/11 11.21
11/15/99 11.20 8/15/03 11.20 5/15/07 11.20 2/15/11 11.21
12/15/99 11.20 9/15/03 11.20 6/15/07 11.20 3/15/11 11.21
1/15/00 11.20 10/15/03 11.20 7/15/07 11.20
2/15/00 11.20 11/15/03 11.20 8/15/07 11.20
3/15/00 11.20 12/15/03 11.20 9/15/07 11.20
<FN>
(1) Available Funds Cap equals gross WAC on collateral minus 0.59% in months 1
to 12 and minus 1.09% thereafter.
</FN>
</TABLE>
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
<TABLE>
<CAPTION>
ContiMortgage 1996-2 CS First Boston Computational Materials
Schedule of Monthly Available Funds Caps for Class A-9 Adjustable Rate Certificates
Assumes 6 month LIBOR remains constant at 5.625%
- --------------------------- -------------------------- -------------------------- --------------------------
MONTHS COUPON CAP MONTHS COUPON CAP MONTHS COUPON CAP MONTHS COUPON CAP
- --------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
4/15/11 11.21 1/15/15 11.20 10/15/18 11.20 7/15/22 11.21
5/15/11 11.21 2/15/15 11.20 11/15/18 11.20 8/15/22 11.21
6/15/11 11.20 3/15/15 11.20 12/15/18 11.20 9/15/22 11.21
7/15/11 11.20 4/15/15 11.20 1/15/19 11.20 10/15/22 11.21
8/15/11 11.20 5/15/15 11.20 2/15/19 11.20 11/15/22 11.21
9/15/11 11.20 6/15/15 11.20 3/15/19 11.20 12/15/22 11.21
10/15/11 11.20 7/15/15 11.20 4/15/19 11.20 1/15/23 11.21
11/15/11 11.20 8/15/15 11.20 5/15/19 11.20 2/15/23 11.21
12/15/11 11.20 9/15/15 11.20 6/15/19 11.20 3/15/23 11.21
1/15/12 11.20 10/15/15 11.20 7/15/19 11.20 4/15/23 11.21
2/15/12 11.20 11/15/15 11.20 8/15/19 11.20 5/15/23 11.21
3/15/12 11.20 12/15/15 11.20 9/15/19 11.20 6/15/23 11.21
4/15/12 11.20 1/15/16 11.20 10/15/19 11.20 7/15/23 11.21
5/15/12 11.20 2/15/16 11.20 11/15/19 11.20 8/15/23 11.21
6/15/12 11.20 3/15/16 11.20 12/15/19 11.20 9/15/23 11.21
7/15/12 11.20 4/15/16 11.20 1/15/20 11.20 10/15/23 11.21
8/15/12 11.20 5/15/16 11.20 2/15/20 11.20 11/15/23 11.21
9/15/12 11.20 6/15/16 11.20 3/15/20 11.20 12/15/23 11.21
10/15/12 11.20 7/15/16 11.20 4/15/20 11.20 1/15/24 11.21
11/15/12 11.20 8/15/16 11.20 5/15/20 11.20 2/15/24 11.21
12/15/12 11.20 9/15/16 11.20 6/15/20 11.20 3/15/24 11.21
1/15/13 11.20 10/15/16 11.20 7/15/20 11.20 4/15/24 11.21
2/15/13 11.20 11/15/16 11.20 8/15/20 11.20 5/15/24 11.21
3/15/13 11.20 12/15/16 11.20 9/15/20 11.20 6/15/24 11.21
4/15/13 11.20 1/15/17 11.20 10/15/20 11.20 7/15/24 11.21
5/15/13 11.20 2/15/17 11.20 11/15/20 11.20 8/15/24 11.21
6/15/13 11.20 3/15/17 11.20 12/15/20 11.20 9/15/24 11.21
7/15/13 11.20 4/15/17 11.20 1/15/21 11.20 10/15/24 11.21
8/15/13 11.20 5/15/17 11.20 2/15/21 11.20 11/15/24 11.21
9/15/13 11.20 6/15/17 11.20 3/15/21 11.20 12/15/24 11.21
10/15/13 11.20 7/15/17 11.20 4/15/21 11.20 1/15/25 11.21
11/15/13 11.20 8/15/17 11.20 5/15/21 11.20 2/15/25 11.22
12/15/13 11.20 9/15/17 11.20 6/15/21 11.20 3/15/25 11.22
1/15/14 11.20 10/15/17 11.20 7/15/21 11.20 4/15/25 11.22
2/15/14 11.20 11/15/17 11.20 8/15/21 11.20 5/15/25 11.22
3/15/14 11.20 12/15/18 11.20 9/15/21 11.21 6/15/25 11.22
4/15/14 11.20 1/15/18 11.20 10/15/21 11.21 7/15/25 11.22
5/15/14 11.20 2/15/18 11.20 11/15/21 11.21 8/15/25 11.22
6/15/14 11.20 3/15/18 11.20 12/15/21 11.21 9/15/25 11.22
7/15/14 11.20 4/15/18 11.20 1/15/22 11.21 10/15/25 11.22
8/15/14 11.20 5/15/18 11.20 2/15/22 11.21 11/15/25 11.21
9/15/14 11.20 6/15/18 11.20 3/15/22 11.21 12/15/25 11.21
10/15/14 11.20 7/15/18 11.20 4/15/22 11.21 1/15/26 11.20
11/15/14 11.20 8/15/18 11.20 5/15/22 11.21 2/15/26 11.17
12/15/14 11.20 9/15/18 11.20 6/15/22 11.21
<FN>
(1) Available Funds Cap equals gross WAC on collateral minus 0.59% in months 1
to 12 and minus 1.09% thereafter.
</FN>
</TABLE>
The above analysis is not intended to be a prospectus and any investment
decision with respect to the security should be made by you based solely upon
all of the information contained in the final prospectus. Under no circumstances
shall the information presented constitute an offer to sell or the solicitation
of an offer to buy nor shall there be any sale of the securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
The securities may not be sold nor may an offer to buy be accepted prior to the
delivery of a final prospectus relating to the securities. The above preliminary
description of the underlying assets has been provided by the issuer and has not
been independently verified by CS First Boston. All information described above
is preliminary, limited in nature and subject to completion or amendment. CS
First Boston makes no representations that the above referenced security will
actually perform as described in any scenario presented.
<PAGE>
<TABLE>
<CAPTION>
Computational Materials of Merrill Lynch
Deal: ContiMortgage Home Equity Loan Trust 1996-2
Size: $505,000,000 (Approx.)
Cut-Off Date: June 1, 1996
Exp. Pricing: Wk of May 13, 1996
Exp. Settlement: Wk of June 18, 1996
Ratings Exp Final Legal Final
Amount (Moody's/S&P) WAL Maturity Maturity
To Maturity:
<S> <C> <C> <C> <C> <C>
A-1 $29,000,000 Aaa/AAA 0.52 6/97 7/97
A-2 $118,000,000 Aaa/AAA 1.00 2/98 6/10
A-3 $54,000,000 Aaa/AAA 2.01 11/98 4/11
A-4 $82,500,000 Aaa/AAA 3.03 4/00 4/11
A-5 $21,500,000 Aaa/AAA 4.04 10/00 4/11
A-6 $62,500,000 Aaa/AAA 5.21 10/02 6/11
A-7 $43,000,000 Aaa/AAA 7.42 4/05 2/15
A-8 $39,500,000 Aaa/AAA 11.42 6/11 7/27
A-9 $55,000,000 Aaa/AAA 4.63 1/20 7/27
To Call
A-7 $43,000,000 Aaa/AAA 7.42 4/05 2/15
A-8 $39,500,000 Aaa/AAA 8.83 4/05 7/27
A-9 $55,000,000 Aaa/AAA 3.98 4/05 7/27
</TABLE>
SELLER/
SERVICER: ContiMortgage Corporation ("Seller and Servicer"). TRUSTEE:
Manufacturers and Traders Trust Company, a New York banking
corporation.
UNDERWRITERS: CS First Boston (Lead), Lehman Brothers (Co.), Merrill Lynch
(Co.).
ERISA: The Class A Certificates may be purchased by employee
benefit plans that are subject to the Employee Retirement
Income Security Act of 1974, as amended.
SMMEA: The Fixed Rate Class A Certificates will not be SMMEA
eligible. The Adjustable Rate Class A-9 Certificates will be
SMMEA eligible.
TAX STATUS: The Trust will elect to be treated as a REMIC for federal
income tax purposes.
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
<PAGE>
INTEREST/
PRINCIPAL: The 15th day of each month (or if such 15th day is not a
business day, the next succeeding business day), commencing
on July 15, 1996.
CREDIT
ENHANCEMENT: Overcollateralization plus a 100% guarantee of timely
interest and ultimate principal from MBIA.
OPTIONAL
REDEMPTION: Less than 10% of the original pool balance outstanding.
Group 1 (Fixed Rate as of May 9, 1996):
- ----------------------------------------
Initial Home Equity Loan Principal Balance: $334,201,562.56
Properties secured by 1st/2nd Liens: 93.10%/6.90%
Weighted Average Coupon: 11.18%
Weighted Average CLTV: 74.11%
Weighted Average Rem. Term: 204 mos
Weighted Average Original Term: 205 mos
Geographic Distribution: 42 States and D.C.
States w/ >5% Concentrations: NJ-9.43%, NY-9.32%,
MI-9.16%, OH 8.46%,
PA 7.16%,IL-7.04%,
MD-5.50%
Balloons (30's due in 15): 55.08%
Occupancy-
Owner Occupied: 96.07%
Investor Owned: 3.93%
Property Type-
Condominium: 0.42%
Mixed use: 0.44%
Planned Unit Development 0.38%
Single Family Attached 2.96%
Single Family Detached 87.40%
Group 2 (Adjustable Rate as of May 9, 1996):
- --------------------------------------------
Initial Home Equity Loan Principal Balance: $52,461,557.01
Weighted Average Coupon: 9.85%
Weighted Average Lifetime Cap: 16.09%
Weighted Average Lifetime Floor: 9.85%
Weighted Average Gross Margin: 6.67%
Negative Amortization: None
Weighted Average Rem. Term: 355 mos.
Weighted Average Original Term: 356 mos
Properties secured by 1st Liens: 100.00%
Weighted Average CLTV: 74.77%
Geographic Distribution: 32 States and D.C.
States w/ >5% Concentrations: MI-42.94%, IL-7.82%,
OH-6.61%, CA-6.15%
Balloons: 0.45%
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
2
<PAGE>
Occupancy-
Owner Occupied: 99.00%
Investor: 1.00%
Property Type-
Two-to-Four Family: 3.27%
Condominium: 0.62%
Planned Unit Development 0.82%
Single Family Attached 0.69%
Single Family Detached 93.79%
<TABLE>
<CAPTION>
Distribution of Combined Loan-to-Value Ratios - Fixed Rate Group
Aggr. Princ. % of Contr Pool
# of Contr. Bal. Outst. by Outst. Princ.
as of as of Bal. as of
Loan-to-Value Ratio(1) May 9 May 9 May 9
<C> <C> <C> <C> <C>
10.01 - 15.00 12 283,894.17 0.09%
15.01 - 20.00 32 747,643.88 0.22%
20.01 - 25.00 38 808,985.97 0.24%
25.01 - 30.00 63 1,837,870.28 0.55%
30.01 - 35.00 82 2,414,465.42 0.72%
35.01 - 40.00 66 2,388,383.58 0.72%
40.01 - 45.00 106 4,739,377.98 1.42%
45.01 - 50.00 240 9,125,870.19 2.73%
50.01 - 55.00 155 8,415,331.53 2.52%
55.01 - 60.00 270 14,810,666.91 4.43%
60.01 - 65.00 394 23,861,446.52 7.14%
65.01 - 70.00 573 34,103,000.83 10.20%
70.01 - 75.00 761 50,115,658.41 15.00%
75.01 - 80.00 1,421 97,282,821.01 29.11%
80.01 - 85.00 713 53,561,667.44 16.03%
85.01 - 90.00 317 29,699,578.44 8.89%
90.01 - 95.00 1 4,900.00 0.00%
- -------- ----
Total 5,244 $334,201,562.56 100.00%
===== ============== ======
Cut-Off Date Coupon Rates - Fixed Rate Group
Aggr. Princ. % of Contr Pool
# of Contr. Bal. Outst. by Outst. Princ.
as of as of Bal. as of
Range of Rates May 9 May 9 May 9
7.00% - 7.99% 21 2,300,515.73 0.69%
8.00% - 8.99% 219 16,385,603.74 4.90%
9.00% - 9.99% 889 64,515,942.35 19.30%
10.00% - 10.99% 1,311 94,456,882.36 28.26%
11.00% - 11.99% 1,137 74,200,779.83 22.20%
12.00% - 12.99% 786 43,768,171.01 13.10%
13.00% - 13.99% 432 21,073,871.65 6.31%
14.00% - 14.99% 277 10,948,038.98 3.28%
15.00% - 15.99% 115 4,762,290.86 1.42%
16.00% - 16.99% 34 961,009.24 0.29%
17.00%+ 23 828,456.81 0.25%
-- ---------- ----
Total 5,244 $334,201,562.56 100.00%
===== ============== ======
</TABLE>
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
3
<PAGE>
<TABLE>
<CAPTION>
Distribution of Remaining Terms to Maturity - Fixed Rate Group
Aggr. Princ. % of Contr Pool
# of Contr. Bal. Outst. by Outst. Princ.
Months Remaining to as of as of Bal. as of
Maturity May 9 May 9 May 9
<C> <C> <C> <C>
0 - 120 214 6,177,581.48 1.85%
121 - 180 3,540 231,292,045.86 69.20%
181 - 240 1,158 70,706,655.07 21.16%
241 - 300 12 771,032.67 0.23%
301 - 360 320 25,254,247.48 7.56%
</TABLE>
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
4
<PAGE>
STRUCTURE:
The Home Equity Loans will be divided into two Loan Groups and the property of
the Trust will include, among other items, the two Loan Groups. Loan Group 1
will consist of fixed rate loans and Loan Group 2 will consist of adjustable
rate loans indexed to 6 Month LIBOR. The trust will issue the following classes
of certificates:
The Fixed Rate Group 1 Certificates backed by cash flows from Loan Group 1:
The Class A-1 Certificates will receive payments of principal from the Fixed
Rate Group 1 Collateral according to a fixed amortization schedule. Payments of
principal from the Fixed Rate Group 1 Collateral in excess of the Class A-1
schedule will be allocated to the Class A-2 Certificates. Once the Class A-1
Certificates have been paid down in full, the Class A-2 Certificates will
receive all payments of principal until retired. Once the Class A-2 Certificates
have been paid down in full, the Class A-3 Certificates will receive all
payments of principal until retired. Once the Class A-3 Certificates have been
paid down in full, the Class A-4 Certificates will receive all payments of
principal until retired. Once the Class A-4 Certificates have been paid down in
full, the Class A-5 Certificates will receive all payments of principal until
retired. Once the Class A-5 Certificates have been paid down in full, the Class
A-6 Certificates will receive all payments of principal until retired. Once the
Class A-6 Certificates have been paid down in full, the Class A-7 Certificates
will receive all payments of principal until retired. Once the Class A-7
Certificates have been paid down in full, the Class A-8 Certificates will
receive all payments of principal until retired.
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
5
<PAGE>
The Adjustable Rate Group 2 Certificates backed by cash flows from Loan Group 2:
The Adjustable Rate Certificates will receive payments of principal from Loan
Group 2 concurrently with the Fixed Rate Certificates' receipt of payments of
principal from Loan Group 1.
FIXED RATE CERTIFICATE PRICING PREPAYMENT ASSUMPTION:
With respect to the Fixed Rate Certificates, a 100% Prepayment Assumption
assumes conditional prepayment rates (CPR) of 4.6% per annum of the then
outstanding principal balance of the Home Equity Loans in Group I in the first
month of the life of the mortgage loans and an additional 1.67325% per annum
each month thereafter until the twelfth month. Beginning in the thirteenth month
and in each month thereafter during the life of the mortgage loans 100%
Prepayment Assumption assumes a conditional prepayment rate of 23% per annum
each month.
This is analogus to 115% PPC which represents 115% of ContiMortgage's historical
prepayment curve (100% PPC = 4% CPR in month 1 increasing 1.455% CPR to 20% CPR
in month 12).
<TABLE>
<CAPTION>
FIXED RATE CERTIFICATE PREPAYMENT SENSITIVITY ANALYSIS:
(assuming 0 bps losses):
(NO CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
<S> <C> <C> <C> <C> <C> <C>
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-1 WAL (yrs.) 1.37 0.52 0.52 0.52 0.52 0.52
Class A-1 Exp. Beg. Am. 1 1 1 1 1 1
Class A-1 Exp. End. Am. 41 12 12 12 12 12
(NO CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-2 WAL (yrs.) 9.19 1.75 1.26 1.00 0.84 0.73
Class A-2 Exp. Beg. Am. 41 1 1 1 1 1
Class A-2 Exp. End. Am. 161 36 26 20 17 15
(NO CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-3 WAL (yrs.) 14.48 3.68 2.59 2.01 1.65 1.41
Class A-3 Exp. Beg. Am. 161 36 26 20 17 15
Class A-3 Exp. End. Am. 178 53 37 29 23 20
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
6
<PAGE>
(NO CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-4 WAL (yrs.) 14.83 5.67 3.96 3.03 2.45 2.05
Class A-4 Exp. Beg. Am. 178 53 37 29 23 20
Class A-4 Exp. End. Am. 178 86 60 46 37 30
(NO CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-5 WAL (yrs.) 14.83 7.59 5.31 4.04 3.24 2.69
Class A-5 Exp. Beg. Am. 178 86 60 46 37 30
Class A-5 Exp. End. Am. 178 97 68 52 41 34
(NO CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-6 WAL (yrs.) 14.93 9.71 6.85 5.21 4.16 3.44
Class A-6 Exp. Beg. Am. 178 97 68 52 41 34
Class A-6 Exp. End. Am. 180 140 99 76 60 50
(NO CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-7 WAL (yrs.) 16.31 13.41 9.72 7.42 5.92 4.87
Class A-7 Exp. Beg. Am. 180 140 99 76 60 50
Class A-7 Exp. End. Am. 221 178 138 106 85 70
(NO CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-8 WAL (yrs.) 22.57 15.46 13.82 11.42 9.28 7.64
Class A-8 Exp. Beg. Am. 221 178 138 106 85 70
Class A-8 Exp. End. Am. 350 239 206 180 176 146
(10% CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-7 WAL (yrs.) 16.31 13.41 9.72 7.42 5.92 4.87
Class A-7 Exp. Beg. Am. 180 140 99 76 60 50
Class A-7 Exp. End. Am. 221 178 138 106 84 68
(10% CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
% Prepay Assumpt. 0% 50% 75% 100% 125% 150%
Class A-8 WAL (yrs.) 21.11 14.83 11.74 8.83 6.99 5.66
Class A-8 Exp. Beg. Am. 221 178 138 106 84 68
Class A-8 Exp. End. Am. 276 178 141 106 84 68
</TABLE>
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
7
<PAGE>
ADJUSTABLE RATE CERTIFICATE PRICING PREPAYMENT ASSUMPTION:
Prepayment Scenarios:
- ---------------------
Scenario 1: 0% Constant prepayment rate.
Scenario 2: 6% Constant prepayment rate.
Scenario 3: 12% Constant prepayment rate.
Scenario 4 (Pricing): 18% Constant prepayment rate.
Scenario 5: 24% Constant prepayment rate.
Scenario 6: 30% Constant prepayment rate.
ADJUSTABLE RATE CERTIFICATE PREPAYMENT SENSITIVITY ANALYSIS:
(assuming 0 bps losses):
<TABLE>
<CAPTION>
(NO CLEAN-UP CALL)
SCENARIO (1) 1 2 3 4 5 6
- - - - - -
<S> <C> <C> <C> <C> <C> <C>
CPR 0% 6% 12% 18% 24% 30%
Class A-8 WAL (yrs.) 21.61 11.25 6.82 4.63 3.41 2.65
Class A-8 Exp. Beg. Am. 1 1 1 1 1 1
Class A-8 Exp. End. Am. 356 353 337 283 220 174
2/26 11/25 7/24 1/20 10/14 12/10
(10% CLEAN-UP CALL)
SCENARIO 1 2 3 4 5 6
- - - - - -
CPR 0% 6% 12% 18% 24% 30%
Class A-8 WAL (yrs.) 19.55 9.00 5.74 3.98 2.99 2.35
Class A-8 Exp. Beg. Am. 1 1 1 1 1 1
Class A-8 Exp. End. Am. 276 178 141 106 84 68
6/19 4/11 3/08 4/05 6/03 2/02
</TABLE>
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
8
<PAGE>
The attached tables and other statistical analyses (the "Computational
Material") are privileged and confidential and are intended for use by the
addressee only. These Computational Materials are furnished to you solely by
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch") and not by
the issuer of the securities or any of its affiliates. The issuer of these
securities has not prepared or taken part in the preparation of these materials.
Neither Merrill Lynch, the issuer of the securities nor any of its affiliates
makes any representation as to the accuracy or completeness of the information
herein. The information herein is preliminary, and will be subsequently filed
with the Securities and Exchange Commission. They may not be provided to any
third party other than the addressee's legal, tax, financial and/or accounting
advisors for the purposes of evaluating said material.
Numerous assumptions were used in preparing the Computational Material
which may or may not be stated therein. As such, no assurance can be given as to
the accuracy, appropriateness or completeness of the Computational Materials in
any particular context; or as to whether the Computational Materials and/or the
assumptions upon which they are based reflect present market conditions or
future market performance. These Computational Materials should not be construed
as either projections or predictions or as legal, tax, financial or accounting
advice.
Any yields or weighted average lives shown in the Computational
Materials are based on prepayment assumptions and actual prepayment experience
may dramatically affect such yields or weighted average lives. In addition, it
is possible that prepayments on the underlying assets will occur at rates slower
or faster than the rates assumed in the attached Computational Materials.
Furthermore, unless otherwise provided, the Computational Materials assume no
losses on the underlying assets and no interest shortfall. The specific
characteristics of the securities may differ from those shown in the
Computational Materials due to differences between the actual underlying assets
and the hypothetical assets used in preparing the Computational Materials. The
principal amount and designation of any security described in the Computational
Materials are subject to change prior to issuance.
- --------------------------------------------------------------------------------
Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
9
<PAGE>
Although a registration statement (including the prospectus) relating
to the securities discussed in this communication has been filed with the
Securities and Exchange Commission and is effective, the final prospectus
supplement relating to the securities discussed in this communication has not
been filed with the Securities and Exchange Commission. This communication shall
not constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of the securities discussed in this communication in any state
in which such offer, solicitations or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
Prospective purchasers are referred to the final prospectus and prospectus
supplement relating to the securities discussed in this communication for
definitive Computational Materials on any matter discussed in this
communication. A final prospectus and prospectus supplement may be obtained by
contacting the Merrill Lynch Trading Desk at (212) 449-3659.
Please be advised that asset-backed securities may not be appropriate
for all investors. Potential investors must be willing to assume, among other
things, market price volatility, prepayments, yield curve and interest rate
risk. Investors should fully consider the risk of an investment in these
securities.
If you have received this communication in error, please notify the
sending party immediately by telephone and return the original to such party by
mail.
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Recipients must read the information contained in the attached statement. Do not
use or rely on this information if you have not received and reviewed the
statement. If you have not received the statement, call your Merrill Lynch
account executive for another copy.
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