April 2014 Investment Report

Transcription

1 April 2014 Investment Report

2 EXECUTIVE SUMMARY (April 30, 2014) 30, 2013) Citizens total portfolio market value for April 2014 was $14.62 billion with an average duration of 1.8 years and average credit ratings of AA-/Aa3/AA-. 66% of the total portfolio is taxable, with a market value of $9.63 billion. Citizens total portfolio market value is $14.62 billion. Citizens taxable portfolio market value is $9.63 billion. Citizens tax-exempt portfolio market value is $4.99 billion. 34% of the total portfolio is tax-exempt, with a market value of $4.99 billion. 90% of the total portfolio is managed by external investment managers, or $13.24 billion, with an average duration of 2.0 years and 9% is internally managed, or $1.39 billion. Citizens gross total return for April 2014 was 0.22% for one month and 0.71% for one year. Citizens taxable gross total return was 0.23% for one month and 0.62% for one year. Citizens tax-exempt gross total return was 0.20% for one month and 0.90% for one year. For April 2014, the average 1-year Treasury yield was 0.09%, 3-year Treasury yield was 0.86%, and 5-year Treasury yield was 1.68%. 1

3 MARKET RATES Market rates are slightly lower this month, and as a result, the total return of the managed portfolios also declined slightly. Taxable Rates Current (5/22) 1-Mo. Prior 1-Year Prior 1-Mo. Change 1-M LIBOR 0.15% 0.15% 0.19% 0.00% 3-M LIBOR 0.23% 0.23% 0.27% 0.00% 3-M TSY 0.03% 0.03% 0.04% 0.00% 1-Yr TSY 0.08% 0.09% 0.11% -0.01% 2-Yr TSY 0.34% 0.40% 0.25% -0.06% 3-Yr TSY 0.77% 0.91% 0.42% -0.14% 5-Yr TSY 1.53% 1.74% 0.90% -0.21% Tax- Exempt Rates Current (5/22) 1-Mo. Prior 1-Year Prior 1-Mo. Change SIFMA 0.08% 0.07% 0.15% 0.01% 1-Yr MMD 0.15% 0.15% 0.20% 0.00% 2-Yr MMD 0.31% 0.37% 0.29% -0.06% 3-Yr MMD 0.60% 0.64% 0.42% -0.04% 4-Yr MMD 0.88% 0.92% 0.56% -0.04% 5-Yr MMD 1.17% 1.17% 0.74% 0.00% Historical Taxable Rates 1.00% 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 1-Year TSY 2-Year TSY 3-Year TSY Historical Tax-Exempt Rates 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% Source: Bloomberg and Thomson Reuters 0.00% Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 SIFMA 2-Yr MMD 5-Yr MMD 2

4 Yield (%) TREASURY MARKET UPDATE The 30-year bond is 3.33%, the lowest level since last June, while shorter-dated maturities are at their lowest levels since November The 30-year bond has returned over 15% this year, while the 10- and 5-year maturities are up roughly 6% and 2% respectively According to Bloomberg, economic forecasters are starting to pare back their estimates as a result of recent events; the median forecast on the 10-year note is down 10bp for Q at 2.85%, with similar changes through Q2 of 2015, where the estimate is 3.54% AAA MMD Yields remain steady and are above the historic lows seen since Treasury 10/15/2008: Spike in yields during height of credit crisis 05/19/2013: Yields 1-Yr Previous 7/24/2012: Record Low Treasury Yields 5/18/2014: Current Yields /15/2008: Spike in yields during height of credit crisis 05/19/2013: Yields 1-Yr Previous 11/30/2012: Record Low MMD yields 5/16/2014: Current yields Source: Bloomberg /15/ /9/ /24/ /18/

5 Spread to Treasury (bps) CORPORATE BOND UPDATE Corporate bond spreads continue to narrow, and are near their all time low. Corporate bond demand is strong. In 2013, there was record issuance of over $1.4 trillion in the corporate bond market so far in 2014, issuance of corporate bonds is relatively flat from 2013 to Effective Duration (yrs) B of A / ML B of A / ML Index Name C0A3 C0A2 Ratings "A" "AA" Effective Duration (yrs) Current Effective Yield (%) 2.76% 2.39% Spread to Treasuries (bps) Current (04/30/2014) Year Average High Low Average Average Average Average Corporate Bond Indices vs. Relevant Treasury Bonds B of A / ML C0A3 "A" Index Source: Bank of America / Merrill Lynch for C0A3 and C0A2 Indices B of A / ML C0A2 "AA" Index 4

6 ($in billions) Yield (%) Yield (%) MUNICIPAL MARKET UPDATE Municipal yields are increasing at a moderate pace and are higher than historic lows Long-term municipal new issue volume was down 39% in April. Through April 30 th, $87 billion in municipal bonds have been issued in 2014, which is 28% lower than the $122 billion issued for the same period in AAA Municipal Market Data AAA MMD /15/2008: Spike in yields during height of credit crisis /19/2013: Yields 1-Yr Previous 11/30/2012: Record Low MMD yields 5/16/2014: Current yields Municipal Long-Term Issuance $ in billions YoY % January $ $ $ % February % March % April % May June July August September October November December Total $ $ $ Source: The Bond Buyer Source: Thomson Reuters, issuance through April 30, AAA Municipal Market Data Treasury /15/ /19/ /15/2008: Spike in yields during height of credit crisis /19/2013: 0.28 Yields 1-Yr Previous /24/2012: Record Low Treasury Yields 11/30/ /18/2014: 0.30 Current Yields /16/ Municipal Long Term Issuance Monthly Long-Term Municipal Issuance 5

7 Economists forecast higher rates over the next five quarters, but have slightly pared how high we will see rates climb. Looking forward, the Fed is expected to start increasing rates by the middle of 2015 and the Bloomberg Consensus projects higher interest rates over the next 18 months, 2-year and 10- year Treasuries are projected to be in a range of % higher. BLOOMBERG ECONOMIC SURVEY Bloomberg Consensus US Treasury Current Rate To 2015 Q2 Q2 Q3 Q4 Q1 Q2 2 Bloomberg Year Consensus 0.40% 0.49% 0.62% 0.77% 0.94% 1.13% 0.73% Economists US Treasury Surveyed Current Rate To 2015 Q2 10 Year 2.53% 2.83% Q2 3.06% Q3 3.25% Q4 3.37% Q1 3.50% Q2 0.97% Economists 2 Year Surveyed 0.40% 0.49% % % % % % 30 Economists Year Surveyed 0.00% 3.72% % % % % % Economists 10 Year Surveyed 2.53% 2.83% % % % % % *Source: Economists Bloomberg Surveyed as of June 2, Year 0.00% 3.72% 3.90% 4.07% 4.17% 4.26% 4.26% Bloomberg Consensus Economists Surveyed *Source: Economic Bloomberg Indicators as of June Current 2, Rate To 2015 Q2 Q2 Q3 Q4 Q1 Q2 Real Bloomberg GDP Consensus -1.00% 3.50% 3.00% 3.10% 3.00% 3.05% 4.05% Consumer Economic Price Indicators Index Current 1.40% Rate 1.80% 1.80% % 2.00% % To 0.60% 2015 Q2 Unemployment 6.67% 6.40% Q2 6.30% Q3 6.15% Q4 6.10% Q1 6.00% Q2-0.67% Fed Real Funds GDP Target -1.00% 0.25% 0.25% 3.50% 0.25% 3.00% 0.25% 3.10% 0.25% 3.00% 0.38% 3.05% 0.13% 4.05% 3-month Consumer LIBOR Price Index 0.23% 1.40% 0.24% 1.80% 0.27% 1.80% 0.33% 2.00% 0.41% 2.00% 0.54% 2.00% 0.31% 0.60% *Source: Unemployment Bloomberg as of June 6.67% 2, % 6.30% 6.15% 6.10% 6.00% -0.67% Fed Funds Target 0.25% 0.25% 0.25% 0.25% 0.25% 0.38% 0.13% 3-month LIBOR 0.23% 0.24% 0.27% 0.33% 0.41% 0.54% 0.31% *Source: Bloomberg as of June 2,

8 $ billion, or 90%, of the portfolio is managed by 12 external investment managers. The remaining 10% of the portfolio is internally managed and currently invested in taxable AAA MMF, AAA Tax-Exempt MMF, and Legacy securities. In addition, internally managed funds include $520 million of debt service reserve funds and debt service funds. PORTFOLIO SUMMARY AS OF April 30, 2014 ($ IN MILLIONS) Security Description Amortized Cost Market Value Taxable % of Portfolio Government & Agency Securities $ 3,904 $ 3, % Corporate Bonds, CP, and CDs $ 4,416 $ 4, % Municipal Bonds (Taxable) $ 311 $ % Money Market Funds (Taxable) $ 774 $ % Legacy Securities $ 129 $ % Total Taxable Portfolio $ 9,533 $ 9, % Tax-Exempt Money Market Funds (Tax-Exempt) $ 467 $ % Municipal Bonds (Tax-Exempt) $ 4,441 $ 4, % Variable Rate Demand Notes (VRDN's) $ 43 $ % Total Tax-Exempt Portfolio $ 4,951 $ 4, % Total Citizens Portfolio $ 14,485 $ 14, % MV $8.70 billion of the $9.63 billion taxable portfolio (90%) is externally managed by 11 managers. $4.54 billion of the $4.99 billion tax-exempt portfolio (91%) is externally managed by 9 managers. Taxable Internally Managed Portfolio $929 6% Tax-Exempt Internally Managed Portfolio $461 3% Tax-Exempt Managed Portfolio $4,535 31% Taxable Managed Portfolio $8,700 60% Grand Total % of Portfolio Externally Managed $13, % Internally Managed $1, % Total Citizens Portfolio $14, % Dollars in millions 7

9 EXTERNAL INVESTMENT MANAGERS PORTFOLIO SUMMARY Total Externally Managed Portfolio Composition ($13.24B) US Bancorp $671 5% Wellington $1,001 8% Wells Capital $1,167 9% Blackrock $757 6% Cutwater $1,828 14% 90% of the taxable portfolio, or $8.70 billion, is managed by 11 external investment managers. 91% of the tax-exempt portfolio, or $4.54 billion, is managed by 8 external investment managers. UBS $527 6% US Bancorp $671 8% UBS $1,057 8% Standish $1,102 8% Wellington $1,001 12% Wells Capital $652 7% RBC $1,446 11% Taxable Externally Managed Portfolio Composition ($8.70B) Cutwater $964 11% Blackrock $292 3% PFM $832 6% Northern Trust $1,033 8% UBS $529 12% Federated $863 6% GR-NEAM $1,479 11% Tax-Exempt Externally Managed Portfolio Composition ($4.53B) Wells Capital $514 11% Blackrock $465 10% Cutwater $864 19% RBC $1,332 15% Federated $297 3% Dollars in millions PFM $832 10% Northern Trust $1,033 12% GR-NEAM $1,099 13% Standish $1,102 24% RBC $114 3% GR-NEAM $380 8% Federated $566 13% 8

10 PORTFOLIO DETAILS TAXABLE PORTFOLIO 46% of the portfolio is in Corporate Bonds. BBB Corporates 4% Taxable Credit Quality Distribution A-1/P-1 Short Term CP & CD's 1% Legacy Securities 2% AAA Prime Money Markets 8% 41% of the portfolio is in Government and Agency securities. 8% of the portfolio is in AAA rated Money Market Funds. 3% of the portfolio is in Taxable Municipal Bonds. A Corporates 22% Government & Agency 41% Money Market Funds (Taxable) 8% Municipal Bonds (Taxable) 3% Taxable Portfolio Composition Legacy Securities 2% 2% of the portfolio remains in Legacy securities. 54% of the portfolio has AAA or equivalent ratings. AA Corporates 17% AAA Corporates 2% Municipals 3% Government & Agency Securities 41% Corporate Bonds, CP, and CDs 46% 9

11 PORTFOLIO DETAILS TAX-EXEMPT PORTFOLIO Tax-Exempt Credit Quality Distribution Municipals SP-1+/MIG1 1% 55% of the portfolio is in AA rated Municipals. 26% of the portfolio is in A rated Municipals. 9% of the portfolio is in AAA rated Tax-Exempt Money Market Funds. 9% of the portfolio is in AAA rated Municipals. 1% of the portfolio is in SP-1/MIG1 rated Municipal Bonds. Municipals A 26% AAA Tax- Exempt Money Market 9% Municipals AAA 9% Municipals AA 55% 10

12 CITIZENS PORTFOLIO RETURNS CITIZENS SUMMARY PORTFOLIO RETURNS SUMMARY 4/30/2014 Gross Total Returns Gross Income Returns Credit 1 Month 3 Month 6 Month 1 Year 2 Year 1 Month 3 Month 6 Month 1 Year 2 Year Citizens Returns Duration Rating 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 Taxable Aggregate 1.8 AA-/Aa3/AA- 0.23% 0.25% 0.59% 0.62% 1.30% 0.09% 0.24% 0.46% 0.91% 0.92% Taxable Aggregate Excl. Legacy Securities 1.8 AA-/Aa3/AA- 0.22% 0.25% 0.54% 0.51% 0.93% 0.08% 0.23% 0.45% 0.88% 0.89% Taxable Internally Managed 0.0 AAA/Aaa/AAA 0.12% -0.03% 0.47% 1.08% 3.49% 0.19% 0.21% 0.23% 0.46% 0.44% Taxable Internally Managed Excl. Legacy Securities 0.0 AAA/Aaa/AAA 0.00% 0.01% 0.01% 0.02% 0.07% 0.00% 0.01% 0.01% 0.02% 0.07% Taxable Externally Managed Aggregate 2.0 A+/A1/A+ 0.25% 0.28% 0.61% 0.56% 1.04% 0.08% 0.25% 0.49% 0.98% 0.98% Tax-Exempt Aggregate 2.0 AA-/Aa3/AA- 0.20% 0.15% 0.50% 0.90% 1.14% 0.09% 0.26% 0.51% 0.98% 0.99% Tax-Exempt Internally Managed 0.0 AAA/Aaa/AAA 0.00% 0.00% 0.01% 0.01% 0.02% 0.00% 0.00% 0.01% 0.01% 0.02% Tax-Exempt Externally Managed Aggregate 2.1 AA-/Aa3/AA- 0.22% 0.16% 0.53% 0.93% 1.21% 0.09% 0.28% 0.53% 1.03% 1.04% Citizens Total Portfolio Average 1.8 AA-/Aa3/AA- 0.22% 0.21% 0.56% 0.71% 1.22% 0.09% 0.25% 0.47% 0.93% 0.93% As of Date*** 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 Reference Rates-Annual Yield SIFMA 0.09% 0.06% 0.06% 0.07% 0.11% A 1-year MMD Tax-Exempt 0.34% 0.34% 0.35% 0.38% 0.43% Bloomberg "A" Corporate 1-Year 0.45% 0.44% 0.44% 0.44% 0.50% Bloomberg "A" Corporate 3-Year 1.31% 1.28% 1.26% 1.24% 1.17% Bloomberg "A" Corporate 4-Year 1.83% 1.81% 1.81% 1.78% 1.61% Bloomberg "A" Corporate 5-Year 2.26% 2.28% 2.31% 2.25% 2.00% 1-Year Treasury Yield 0.09% 0.11% 0.13% 0.14% 0.16% 3-Year Treasury Yield 0.86% 0.80% 0.75% 0.68% 0.53% 5-Year Treasury Yield 1.68% 1.63% 1.59% 1.45% 1.10% The total portfolio duration is 1.8 years. The 1-year gross total return is 0.71%. The 1-year gross income return is 0.93%. Notes: The 2 Year returns are annualized, and the remaining returns are actual for the period. Large differences in returns between taxable aggregates are caused by the Legacy securities. Due to the nature of these securities, principal repayments and market value fluctuations can cause large changes in the overall portfolio returns. ***Reference rates are the average of the indicated rate during the as of date time range. 11

13 TAXABLE LIQUIDITY EXTERNAL CITIZENS MANAGER PORTFOLIO RETURNS RETURNS SUMMARY SUMMARY 4/30/2014 Market Duration Value ($MM) 1 Month 3 Month 6 Month 1 Year 2 Year Taxable Liquid 4/30/2014 4/30/2014 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 BlaBlackrock % 0.164% 0.324% 0.623% 0.731% Cutwater % 0.110% 0.241% 0.393% 0.536% FedFederated % 0.221% 0.348% 0.513% 0.663% PFMPFM % 0.210% 0.394% 0.606% * RBRBC % 0.220% 0.488% 0.635% 0.705% USUS Bancorp % 0.162% 0.325% 0.529% * WeWellington % 0.171% 0.337% 0.563% 0.708% Taxable Liquidity Fund Average Gross Total Returns 0.8 2, % 0.188% 0.361% 0.564% 0.657% The Taxable Liquidity portfolio duration is 0.8 years The Taxable Liquidity portfolio 1-year gross total return is 0.56% The Taxable Liquidity portfolio gross 1-year income return is 0.53% The average manager 1-year net return is 0.52% 4/30/2014 Market Gross Income Returns Duration Value ($MM) 1 Month 3 Month 6 Month 1 Year 2 Year Taxable Liquid 4/30/2014 4/30/2014 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 BlaBlackrock % 0.136% 0.273% 0.556% 0.588% Cutwater % 0.108% 0.221% 0.457% 0.493% FedFederated % 0.141% 0.272% 0.571% 0.603% PFMPFM % 0.116% 0.231% 0.480% * RBRBC % 0.135% 0.283% 0.571% 0.596% USUS Bancorp % 0.137% 0.272% 0.556% * WeWellington % 0.146% 0.292% 0.631% 0.626% Taxable Liquidity Fund Average 0.8 2, % 0.130% 0.260% 0.534% 0.578% As of Date*** 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 Reference Rates-Annual Yield Bloomberg "A" Corporate 1-Year 0.45% 0.44% 0.44% 0.44% 0.50% Bloomberg "A" Corporate 3-Year 1.31% 1.28% 1.26% 1.24% 1.17% Bloomberg "A" Corporate 4-Year 1.83% 1.81% 1.81% 1.78% 1.61% Bloomberg "A" Corporate 5-Year 2.26% 2.28% 2.31% 2.25% 2.00% 1-Year Treasury Yield 0.09% 0.11% 0.13% 0.14% 0.16% 3-Year Treasury Yield 0.86% 0.80% 0.75% 0.68% 0.53% 5-Year Treasury Yield 1.68% 1.63% 1.59% 1.45% 1.10% Notes: The Taxable Liquidity portfolio is managed to a 1 year maximum duration. This policy governs the investment of funds and surplus that will be the first moneys used to pay claims after an event, and that can be used to pay operating expenses on an ongoing basis. The 2 Year returns are annualized, and the remaining returns are actual for the period. Returns shaded green fall within 10% of the average return or higher. Returns shaded red fall below 10% of the average return. *PFM and US Bancorp were allocated funds in May of 2012, and they do not have 2 year investment return history. ***Reference rates are the average of the indicated rate during the as of date time range. 12

14 TAXABLE CLAIMS EXTERNAL CITIZENS MANAGER PORTFOLIO RETURNS RETURNS SUMMARY SUMMARY 4/30/2014 Market Gross Total Returns Duration Value ($MM) 1 Month 3 Month 6 Month 1 Year 2 Year Taxable Claims 4/30/2014 4/30/2014 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 CuCutwater % 0.285% 0.654% 0.614% 1.092% GRGR-NEAM 2.5 1, % 0.265% 0.661% 0.448% 1.268% NoNorthern Trust 2.3 1, % 0.347% 0.772% 0.830% 1.353% PFM % 0.329% 0.744% 0.462% * RBRBC 2.6 1, % 0.404% 0.951% 0.695% 1.464% UBUBS % 0.277% 0.664% 0.507% 1.155% US Bancorp % 0.285% 0.630% 0.604% * WeWellington % 0.284% 0.586% 0.549% 1.117% WeWells Capital % 0.293% 0.488% 0.332% 0.910% *Taxable Claims Paying Fund Average 2.3 6, % 0.313% 0.702% 0.620% 1.216% The Taxable Claims portfolio duration is 2.3 years The Taxable Claims portfolio 1-year gross total return is 0.62% The Taxable Claims portfolio gross 1-year income return is 1.14% The average manager 1-year net return is 0.57% 4/30/2014 Market Gross Income Returns Duration Value ($MM) 1 Month 3 Month 6 Month 1 Year 2 Year Taxable Claims 4/30/2014 4/30/2014 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 CuCutwater % 0.262% 0.527% 1.023% 1.050% GRGR-NEAM 2.5 1, % 0.343% 0.682% 1.365% 1.387% NoNorthern Trust 2.3 1, % 0.302% 0.603% 1.144% 1.116% PFM % 0.218% 0.438% 0.856% * RBRBC 2.6 1, % 0.299% 0.614% 1.221% 1.246% UBUBS % 0.262% 0.515% 1.000% 0.994% US Bancorp % 0.251% 0.485% 0.923% * WeWellington % 0.288% 0.582% 1.164% 1.146% WeWells Capital % 0.239% 0.476% 0.974% 0.985% *Taxable Claims Paying Fund Average 2.3 6, % 0.289% 0.577% 1.137% 1.137% As of Date*** 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 Reference Rates-Annual Yield Bloomberg "A" Corporate 1-Year 0.45% 0.44% 0.44% 0.44% 0.50% Bloomberg "A" Corporate 3-Year 1.31% 1.28% 1.26% 1.24% 1.17% Bloomberg "A" Corporate 4-Year 1.83% 1.81% 1.81% 1.78% 1.61% Bloomberg "A" Corporate 5-Year 2.26% 2.28% 2.31% 2.25% 2.00% 1-Year Treasury Yield 0.09% 0.11% 0.13% 0.14% 0.16% 3-Year Treasury Yield 0.86% 0.80% 0.75% 0.68% 0.53% 5-Year Treasury Yield 1.68% 1.63% 1.59% 1.45% 1.10% Notes: The Taxable Claims portfolio is managed to a 3 year maximum duration. This policy governs the investment of funds that will be used to pay claims post-event once Citizens has expended all moneys in the Liquidity Fund. The 2 Year returns are annualized, and the remaining returns are actual for the period. Returns shaded green fall within 10% of the average return or higher. Returns shaded red fall below 10% of the average return. *PFM and US Bancorp were allocated funds in May of 2012, and they do not have 2 year investment return history. ***Reference rates are the average of the indicated rate during the as of date time range. 13

15 TAX-EXEMPT CLAIMS EXTERNAL CITIZENS MANAGER PORTFOLIO RETURNS RETURNS SUMMARY SUMMARY 4/30/2014 Market Gross Total Returns Duration Value ($MM) 1 Month 3 Month 6 Month 1 Year 2 Year Tax-Exempt Claims 4/30/2014 4/30/2014 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 BlaBlackrock % 0.164% 0.499% 0.728% 1.114% CuCutwater % 0.141% 0.493% 0.828% 1.181% FedFederated % 0.211% 0.618% 0.974% 1.232% GR-NEAM % 0.159% 0.498% 0.828% 1.139% RBRBC % 0.215% 0.650% 0.855% 1.250% StaStandish 2.5 1, % 0.166% 0.533% 0.997% 1.199% UBUBS % 0.114% 0.549% 0.817% 1.206% WeWells Capital % 0.160% 0.512% 0.931% 1.105% Tax-Exempt Claims Paying Fund Average 2.1 4, % 0.162% 0.533% 0.950% 1.211% 4/30/2014 Market Gross Income Returns Duration Value ($MM) 1 Month 3 Month 6 Month 1 Year 2 Year Tax-Exempt Claims 4/30/2014 4/30/2014 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 BlaBlackrock % 0.226% 0.451% 0.911% 0.947% CuCutwater % 0.323% 0.632% 1.261% 1.274% FedFederated % 0.277% 0.532% 1.042% 1.060% GR-NEAM % 0.228% 0.430% 0.850% 0.820% RBRBC % 0.330% 0.647% 1.282% 1.251% StaStandish 2.5 1, % 0.290% 0.554% 1.050% 1.065% UBUBS % 0.283% 0.538% 1.010% 0.969% WeWells Capital % 0.270% 0.512% 0.985% 0.976% Tax-Exempt Claims Paying Fund Average 2.1 4, % 0.279% 0.538% 1.046% 1.053% The Tax-Exempt Claims portfolio duration is 2.1 years The Tax-Exempt Claims portfolio 1-year gross total return is 0.95% The Tax-Exempt Claims gross 1-year income return is 1.05% The average manager 1-year net return is 0.90% As of Date*** 4/14 2/14-4/14 11/13-4/14 5/13-4/14 5/12-4/14 Reference Rates-Annual Yield SIFMA 0.09% 0.06% 0.06% 0.07% 0.11% A 1-year MMD Tax-Exempt 0.34% 0.34% 0.35% 0.38% 0.43% Notes: The Tax-Exempt Claims portfolio is managed to a 3 year maximum duration. This policy governs the investment of funds that will be used to pay claims post-event once Citizens has expended all moneys in the Taxable Liquidity portfolio and Taxable Claims portfolio. The 2 Year returns are annualized, and the remaining returns are actual for the period. Returns shaded green fall within 10% of the average return or higher. Returns shaded red fall below 10% of the average return. ***Reference rates are the average of the indicated rate during the as of date time range 14

16 Periodic Maturity Amount in Billions Cumulative Maturity Amount in Billions PORTFOLIO MATURITY DISTRIBUTION $4.0 $ % of the portfolio matures in less than 90 days. $ % 25.2% 24.0% $14 Maturity Amount % of Portfolio $3.0 $ Days $3, % $2.5 $ Days $ % Days $ % 14.7% 270 Days-1 Yr $ % $2.0 $8 1-2 Years $3, % 2-3 Years $3, % 3-4 Years $2, % $1.5 $6 4-5 Years $ % > 5 Years $ % $1.0 $4 Total $14, % 5.2% 4.0% $ % 2.1% 1.3% $2 $ Days Days Days 270 Days to 1 Year 1-2 Years 2-3 Years 3-4 Years 4-5 Years > 5 Years $- Dollars in billions All Citizens investments over 5 years are Legacy assets *1.4% or $43.3 million of the 0-90 day maturity bar consists of VRDN s with longer stated maturities. We include them in the 0-90 day bar, because the inherent put feature allows us almost instant liquidity at par within 7 days. 15

17 PORTFOLIO DOWNGRADED CITIZENS SECURITIES PORTFOLIO RETURNS SUMMARY Securities Not in Compliance with Citizens Guidelines from a Ratings Perspective 2 : Date Moody's Date Fitch's Date S&P 4/30/2014 4/30/2014 4/30/2014 Security 3 Maturity Moody's Downgrade Fitch Downgrade S&P Downgrade Amortized Cost Market Value Unrealized G/L ABB FINANCE 5/8/2017 A2 5/7/2012 BBB+ 6/11/2012 A 5/7/2012 1,505,263 1,518, , BANK OF AMERICA CORP 7/12/2016 Baa1 9/21/2011 A+ 7/11/2011 A- 11/29/ ,209,509 14,639, ,135 GOLDMAN SACHS GROUP INC 2/7/2016 Baa1 11/15/2013 A+ 10/13/2011 A- 11/29/ ,754,787 19,287, ,157 MORGAN STANLEY 4/29/2016 Baa2 11/14/2013 A+ 2/8/2012 A- 11/29/ ,654,804 15,134, ,623 THERMO FISHER SCIENTIFIC 8/15/2016 Baa3 2/4/2014 BBB 12/4/2013 BBB 12/9/2013 3,821,356 3,878,888 57,531 Total: $52,945,718 $54,459,456 $1,513,737 Legacy Assets 1, 4 : Date Moody's Date Fitch's Date S&P 4/30/2014 4/30/2014 4/30/2014 Security 3 Maturity Moody's Downgrade Fitch Downgrade S&P Downgrade Amortized Cost 1 Market Value Unrealized G/L LEHMAN BROTHERS HLDGS N/A NP 9/16/2008 NR 9/16/2008 D 9/16/ ,803,125 4,803,125 ISSUER ENTITY (OTTIMO FUNDING LTD) N/A NP 11/9/2007 NR 11/9/2007 D 11/9/2007 8,844,309 17,980,422 9,136,112 PACIFIC WEST (FORMER KKR) N/A NP 4/1/2008 NR 4/1/2008 D 4/1/ ,673,870 34,391,874 10,718,004 LGIP FUND B N/A NP 11/1/2007 NR 11/1/2007 D 11/1/2007 8,214,252 15,651,078 7,436,826 ATLANTIC EAST (FORMER KKR) N/A NP 4/1/2008 NR 4/1/2008 D 4/1/ ,859,372 56,117,194 15,257,822 AXON FINANCIAL FNDG LLC N/A NP 11/27/2007 NR 11/27/2007 D 11/27/ ,599,335 65,358,149 17,758,815 Total: $129,191,139 $194,301,842 $65,110,703 1 The total write-down amount is $290.6 million - the write-downs were taken on 12/31/07, 9/30/08, and 12/31/08 in the amount of $88.5 million, $117.8 million, and $84.3 million, respectively. 2 Citizens has the option of immediately reducing these positions to attain compliance. After consulting with the outside managers, the decision was made to hold until maturity, as the bonds are not expected to pose a default risk before maturity and the purchased yields are greater than current reinvestment options. 3 Securities highlighted in light blue were purchased by the former investment manager(s). 4 As of April 30, 2014 $153.0 million total principal was recovered from Legacy assets, as these bonds continue to pay principal and interest. The total principal recovered directly offsets the writedown of $290.6 million in 2007 and 2008, resulting in a net current writedown of $137.6 million. Note: All securities that matured before this report was finalized were removed from the out of compliance list. 16