* * PROPERTY AND CASUALTY COMPANIES - ASSOCIATION EDITION

Transcription

1 * * PROPERTY AND CASUALTY COMPANIES - ASSOCIATION EDITION ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER, 06 OF THE CONDITION AND AFFAIRS OF THE United Guaranty Residential Insurance Company NAIC Group Code NAIC Company Code 587 Employer's ID Number (Current) (Prior) Organized under the Laws of North Carolina, State of Domicile or Port of Entry NC Country of Domicile United States of America Incorporated/Organized /7/96 Commenced Business /8/96 Statutory Home Office 0 North Elm Street, Greensboro, NC, US 740 (Street and Number) (City or Town, State, Country and Zip Code) Main Administrative Office 0 North Elm Street (Street and Number) Greensboro, NC, US 740, (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Mail Address Post Office Box 0597, Greensboro, NC, US 740 (Street and Number or P.O. Box) (City or Town, State, Country and Zip Code) Primary Location of Books and Records 0 North Elm Street (Street and Number) Greensboro, NC, US 740, (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Internet Website Address Statutory Statement Contact Jeffrey Wayne Shaw, (Name) (Area Code) (Telephone Number) StatutoryAccountingTeam@archmi.com, ( Address) (FAX Number) President & Chief Executive Officer David Evan Gansberg # Executive Vice President, General Counsel & Secretary Sara Fitzgerald Millard # OFFICERS Executive Vice President & Chief Financial Officer Thomas Harrison Jeter # Senior Vice President & Controller Brian Joseph Smith Cheryl Ann Feltgen # Executive Vice President & Chief Risk Officer Chris Martin Clement # Executive Vice President & Chief Sales Officer OTHER John Edward Gaines # Executive Vice President & Chief Credit & Pricing Officer James Heath Taylor Vice President & Treasurer Christopher Andrew Hovey # Executive Vice President & Chief Operating Officer David William McLaughry Senior Vice President & Chief Actuary DIRECTORS OR TRUSTEES Andrew Thomas Rippert # Thomas Harrison Jeter # Dennis Robert Brand # Cheryl Ann Feltgen # David Evan Gansberg # Mark Donald Lyons # John Edward Gaines # DonnaLee Ann DeMaio State of County of North Carolina Guilford SS: The officers of this reporting entity being duly sworn, each depose and say that they are the described officers of said reporting entity, and that on the reporting period stated above, all of the herein described assets were the absolute property of the said reporting entity, free and clear from any liens or claims thereon, except as herein stated, and that this statement, together with related exhibits, schedules and explanations therein contained, annexed or referred to, is a full and true statement of all the assets and liabilities and of the condition and affairs of the said reporting entity as of the reporting period stated above, and of its income and deductions therefrom for the period ended, and have been completed in accordance with the NAIC Annual Statement Instructions and Accounting Practices and Procedures manual except to the extent that: () state law may differ; or, () that state rules or regulations require differences in reporting not related to accounting practices and procedures, according to the best of their information, knowledge and belief, respectively. Furthermore, the scope of this attestation by the described officers also includes the related corresponding electronic filing with the NAIC, when required, that is an exact copy (except for formatting differences due to electronic filing) of the enclosed statement. The electronic filing may be requested by various regulators in lieu of or in addition to the enclosed statement. David Evan Gansberg Sara Fitzgerald Millard Thomas Harrison Jeter President & Chief Executive Officer Executive Vice President, General Counsel & Executive Vice President & Chief Financial Officer Secretary a. Is this an original filing? Yes [ X ] No [ ] Subscribed and sworn to before me this b. If no, 5th day of February, 07. State the amendment number. Date filed. Number of pages attached Donna O. Robbins Notary Public November 6, 0

2 ASSETS Assets Current Year Nonadmitted Assets Net Admitted Assets (Cols. - ) Prior Year 4 Net Admitted Assets. Bonds (Schedule D),578,790,590 0,578,790,590,98,9,787. Stocks (Schedule D):. Preferred stocks ,000. Common stocks 8,8, ,8,406 57,886,46. Mortgage loans on real estate (Schedule B):. First liens Other than first liens Real estate (Schedule A): 4. Properties occupied by the company (less $ 0 encumbrances) Properties held for the production of income (less $ 0 encumbrances) Properties held for sale (less $ 0 encumbrances),74, 0,74,,689,74 5. Cash ($ 9,46,45, Schedule E - Part ), cash equivalents ($ 0, Schedule E - Part ) and short-term investments ($ 57,,64, Schedule DA) 86,759, ,759,069 4,58,8 6. Contract loans (including $ 0 premium notes) Derivatives (Schedule DB) Other invested assets (Schedule BA) 05,000, ,000,000 05,000, Receivable for securities , 0. Securities lending reinvested collateral assets (Schedule DL) Aggregate write-ins for invested assets Subtotals, cash and invested assets (Lines to ),05,60,76 0,05,60,76,7,5,60. Title plants less $ 0 charged off (for Title insurers only) Investment income due and accrued 5,6,8 0 5,6,8 9,7, Premiums and considerations: 5. Uncollected premiums and agents' balances in the course of collection 4,765, ,765,095 5,,0 5. Deferred premiums and agents' balances and installments booked but deferred and not yet due (including $ 0 earned but unbilled premiums) Accrued retrospective premiums ($ 0 ) and 6. Reinsurance: contracts subject to redetermination ($ 0 ) Amounts recoverable from reinsurers 4,8,98 0 4,8,98 7,5,75 6. Funds held by or deposited with reinsured companies Other amounts receivable under reinsurance contracts ,54,44 7. Amounts receivable relating to uninsured plans Current federal and foreign income tax recoverable and interest thereon 5,9,508 5,9, Net deferred tax asset 467,949,0 5,074,00 5,875,08 67,05,56 9. Guaranty funds receivable or on deposit Electronic data processing equipment and software 5,887,57 5,887, Furniture and equipment, including health care delivery assets ($ 0 ) 507, , Net adjustment in assets and liabilities due to foreign exchange rates Receivables from parent, subsidiaries and affiliates 7,96, ,96, , Health care ($ 0 ) and other amounts receivable Aggregate write-ins for other than invested assets 0,0,66 64,887 9,476,774 6,70 6. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5),69,6,0 8,,749,07,99,5,550,46,70 7. From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7),69,6,0 8,,749,07,99,5,550,46, DETAILS OF WRITE-INS 98. Summary of remaining write-ins for Line from overflow page Totals (Lines 0 thru 0 plus 98)(Line above) State premium taxes recoverable,696,94 0,696,94 6, Prepaid assets 49,8 49, Prepaid reinsurance premium 7,779, ,779, Summary of remaining write-ins for Line 5 from overflow page 594, , Totals (Lines 50 thru 50 plus 598)(Line 5 above) 0,0,66 64,887 9,476,774 6,70

3 LIABILITIES, SURPLUS AND OTHER FUNDS Current Year Prior Year. Losses (Part A, Line 5, Column 8) 59,46, ,09,96. Reinsurance payable on paid losses and loss adjustment expenses (Schedule F, Part, Column 6),740,6,804,55. Loss adjustment expenses (Part A, Line 5, Column 9) 6,7,59 7,78,0 4. Commissions payable, contingent commissions and other similar charges 65,66 774, Other expenses (excluding taxes, licenses and fees) 5,796,5 7,78, Taxes, licenses and fees (excluding federal and foreign income taxes),54,5 5,54, Current federal and foreign income taxes (including $ 0 on realized capital gains (losses)) 4,,688,948,49 7. Net deferred tax liability Borrowed money $ 0 and interest thereon $ Unearned premiums (Part A, Line 8, Column 5) (after deducting unearned premiums for ceded reinsurance of $ 94,85,097 and including warranty reserves of $ 0 and accrued accident and health experience rating refunds including $ 0 for medical loss ratio rebate per the Public Health Service Act) 450,568,90 56,805,0 0. Advance premium 0 0. Dividends declared and unpaid:. Stockholders 0 0. Policyholders 0 0. Ceded reinsurance premiums payable (net of ceding commissions) 48,40,64 5,60,70. Funds held by company under reinsurance treaties (Schedule F, Part, Column 9) 0 8,84, Amounts withheld or retained by company for account of others Remittances and items not allocated 9,494,97,695,07 6. Provision for reinsurance (including $ 0 certified) (Schedule F, Part 8) Net adjustments in assets and liabilities due to foreign exchange rates Drafts outstanding Payable to parent, subsidiaries and affiliates 5,46,9 5,95,89 0. Derivatives 0 0. Payable for securities 0 6,4. Payable for securities lending 0 0. Liability for amounts held under uninsured plans Capital notes $ 0 and interest thereon $ Aggregate write-ins for liabilities,86,999, ,47,57 6. Total liabilities excluding protected cell liabilities (Lines through 5),,40,46,99,46, Protected cell liabilities Total liabilities (Lines 6 and 7),,40,46,99,46, Aggregate write-ins for special surplus funds Common capital stock 5,997,00 5,997,00. Preferred capital stock 0 0. Aggregate write-ins for other than special surplus funds 0 0. Surplus notes 00,000,000 00,000, Gross paid in and contributed surplus 579,78,88 579,78,88 5. Unassigned funds (surplus) 500,70,49 665,49, Less treasury stock, at cost: 6. 0 shares common (value included in Line 0 $ 0 ) shares preferred (value included in Line $ 0 ) Surplus as regards policyholders (Lines 9 to 5, less 6) (Page 4, Line 9),86,509,07,5,70,65 8. TOTALS (Page, Line 8, Col. ),07,99,5,550,46,70 DETAILS OF WRITE-INS 50. Statutory contingency reserve,4,74,090 85,,6 50. Deferred ceded commision expense 44,58,784 4,46, Amounts payable to reinsurers 0, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 thru 50 plus 598)(Line 5 above),86,999, ,47, Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 90 thru 90 plus 998)(Line 9 above) Summary of remaining write-ins for Line from overflow page Totals (Lines 0 thru 0 plus 98)(Line above) 0 0

4 STATEMENT OF INCOME UNDERWRITING INCOME Current Year Prior Year. Premiums earned (Part, Line 5, Column 4) 65,06, ,,87 DEDUCTIONS:. Losses incurred (Part, Line 5, Column 7) 00,685,00 0,77,0. Loss adjustment expenses incurred (Part, Line 5, Column ) 8,76,99 5,875,49 4. Other underwriting expenses incurred (Part, Line 5, Column ) 68,86,607 56,08, Aggregate write-ins for underwriting deductions Total underwriting deductions (Lines through 5) 77,74,556 9,6,7 7. Net income of protected cells Net underwriting gain or (loss) (Line minus Line 6 plus Line 7) 7,0,400 66,760,070 INVESTMENT INCOME 9. Net investment income earned (Exhibit of Net Investment Income, Line 7) 96,98,00 0,97,74 0. Net realized capital gains or (losses) less capital gains tax of $ (9,500,845) (Exhibit of Capital Gains (Losses) ),8,564 4,966,077. Net investment gain (loss) (Lines 9 + 0) 8,85,664 06,88,80 OTHER INCOME. Net gain (loss) from agents or premium balances charged off (amount recovered $ 0 amount charged off $ 0 ) 0 0. Finance and service charges not included in premiums Aggregate write-ins for miscellaneous income 588, Total other income (Lines through 4) 588, Net income before dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Lines ) 456,706,896 47,64, Dividends to policyholders Net income, after dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Line 6 minus Line 7) 456,706,896 47,64, Federal and foreign income taxes incurred,57,008 59,045, Net income (Line 8 minus Line 9)(to Line ) 5,69,888 4,597,995 CAPITAL AND SURPLUS ACCOUNT. Surplus as regards policyholders, December prior year (Page 4, Line 9, Column ),5,70,65,8,8,086. Net income (from Line 0) 5,69,888 4,597,995. Net transfers (to) from Protected Cell accounts Change in net unrealized capital gains or (losses) less capital gains tax of $,96,446 0,80,845 (7,748,458) 5. Change in net unrealized foreign exchange capital gain (loss) Change in net deferred income tax 66,06,76 4,47, Change in nonadmitted assets (Exhibit of Nonadmitted Assets, Line 8, Col. ) 0,99,54 (4,,86) 8. Change in provision for reinsurance (Page, Line 6, Column minus Column ) Change in surplus notes Surplus (contributed to) withdrawn from protected cells 0 0. Cumulative effect of changes in accounting principles 0 0. Capital changes:. Paid in 0 0. Transferred from surplus (Stock Dividend) 0 0. Transferred to surplus 0 0. Surplus adjustments:. Paid in 0 0. Transferred to capital (Stock Dividend) 0 0. Transferred from capital Net remittances from or (to) Home Office Dividends to stockholders (09,6,98) 0 6. Change in treasury stock (Page, Lines 6. and 6., Column minus Column ) Aggregate write-ins for gains and losses in surplus (07,58,478) (9,560,59) 8. Change in surplus as regards policyholders for the year (Lines through 7) (64,76,546) (,560,4) 9. Surplus as regards policyholders, December current year (Line plus Line 8) (Page, Line 7),86,509,07,5,70, DETAILS OF WRITE-INS Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 050 thru 050 plus 0598)(Line 5 above) Gain on sale of fixed assets 588, Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 thru 40 plus 498)(Line 4 above) 588, Increase in statutory contigency reserve (07,58,478) (9,560,59) Summary of remaining write-ins for Line 7 from overflow page Totals (Lines 70 thru 70 plus 798)(Line 7 above) (07,58,478) (9,560,59) 4

5 CASH FLOW Current Year Prior Year Cash from Operations. Premiums collected net of reinsurance 598,68,40 740,8,4. Net investment income 0,460,7 4,64,85. Miscellaneous income 588, Total (Lines through ) 709,7,59 855,448,76 5. Benefit and loss related payments,456,77 88,704,79 6. Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts Commissions, expenses paid and aggregate write-ins for deductions 78,77,47 74,66, Dividends paid to policyholders Federal and foreign income taxes paid (recovered) net of $ 0 tax on capital gains (losses) 56,78,95 45,670,64 0. Total (Lines 5 through 9) 548,47,94 609,00,75. Net cash from operations (Line 4 minus Line 0) 6,4,965 46,446,4 Cash from Investments. Proceeds from investments sold, matured or repaid:. Bonds,,8,805 74,87,504. Stocks 08,060 8,00,000. Mortgage loans Real estate 6,8,76 4,46,94.5 Other invested assets 67,5 65,0,5.6 Net gains or (losses) on cash, cash equivalents and short-term investments Miscellaneous proceeds 77, 49,74.8 Total investment proceeds (Lines. to.7),0,474,984 8,457,05. Cost of investments acquired (long-term only):. Bonds,6,76,984,086,,697. Stocks 0,,70. Mortgage loans Real estate 6,8,944 4,850,74.5 Other invested assets 0 5,858,785.6 Miscellaneous applications 6,4 90,8.7 Total investments acquired (Lines. to.6),4,7,5,099,557, Net increase (decrease) in contract loans and premium notes Net cash from investments (Line.8 minus Line.7 minus Line 4) 86,74,7 (78,00,0) Cash from Financing and Miscellaneous Sources 6. Cash provided (applied): 6. Surplus notes, capital notes Capital and paid in surplus, less treasury stock Borrowed funds Net deposits on deposit-type contracts and other insurance liabilities Dividends to stockholders 09,6, Other cash provided (applied),75,07,40,60 7. Net cash from financing and miscellaneous sources (Lines 6. to 6.4 minus Line 6.5 plus Line 6.6) (85,879,8),40,60 RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 8. Net change in cash, cash equivalents and short-term investments (Line, plus Lines 5 and 7) 6,77,886 (8,4,998) 9. Cash, cash equivalents and short-term investments: 9. Beginning of year 4,58,8,84,80 9. End of period (Line 8 plus Line 9.) 86,759,068 4,58,8 Note: Supplemental disclosures of cash flow information for non-cash transactions: Non-Cash Dividend,08,6 0 5

6 UNDERWRITING AND INVESTMENT EXHIBIT Line of Business PART - PREMIUMS EARNED Net Premiums Written per Column 6, Part B Unearned Premiums Dec. Prior Year - per Col., Last Year s Part Unearned Premiums Dec. Current Year - per Col. 5 Part A 4 Premiums Earned During Year (Cols. + - ). Fire Allied lines Farmowners multiple peril Homeowners multiple peril Commercial multiple peril Mortgage guaranty 548,800,56 56,805,0 450,568,90 65,06, Ocean marine Inland marine Financial guaranty Medical professional liability - occurrence Medical professional liability - claims-made Earthquake Group accident and health Credit accident and health (group and individual) Other accident and health Workers' compensation Other liability - occurrence Other liability - claims-made Excess workers' compensation Products liability - occurrence Products liability - claims-made , 9. Private passenger auto liability , 9.4 Commercial auto liability Auto physical damage Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit International Warranty Reinsurance - nonproportional assumed property Reinsurance - nonproportional assumed liability Reinsurance - nonproportional assumed financial lines Aggregate write-ins for other lines of business TOTALS 548,800,56 56,805,0 450,568,90 65,06, DETAILS OF WRITE-INS 498. Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 thru 40 plus 498)(Line 4 above)

7 UNDERWRITING AND INVESTMENT EXHIBIT Line of Business PART A - RECAPITULATION OF ALL PREMIUMS Amount Unearned (Running One Year or Less from Date of Policy) (a) Amount Unearned (Running More Than One Year from Date of Policy) (a) Earned But Unbilled Premium 4 Reserve for Rate Credits and Retrospective Adjustments Based on Experience 5 Total Reserve for Unearned Premiums Cols Fire Allied lines Farmowners multiple peril Homeowners multiple peril Commercial multiple peril Mortgage guaranty,44, ,44, ,568,90 8. Ocean marine Inland marine Financial guaranty Medical professional liability - occurrence Medical professional liability - claims-made Earthquake Group accident and health Credit accident and health (group and individual) Other accident and health Workers' compensation Other liability - occurrence Other liability - claims-made Excess workers' compensation Products liability - occurrence Products liability - claims-made , 9. Private passenger auto liability , 9.4 Commercial auto liability Auto physical damage Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit International Warranty Reinsurance - nonproportional assumed property Reinsurance - nonproportional assumed liability Reinsurance - nonproportional assumed financial lines Aggregate write-ins for other lines of business TOTALS,44, ,44, ,568,90 6. Accrued retrospective premiums based on experience 0 7. Earned but unbilled premiums 0 8. Balance (Sum of Line 5 through 7) 450,568, DETAILS OF WRITE-INS 498. Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 thru 40 plus 498)(Line 4 above) (a) State here basis of computation used in each case Statutory 7

8 UNDERWRITING AND INVESTMENT EXHIBIT PART B - PREMIUMS WRITTEN Line of Business Reinsurance Assumed Reinsurance Ceded Net Premiums Written Direct Business (a) From Affiliates From Non-Affiliates To Affiliates To Non-Affiliates Cols Fire Allied lines Farmowners multiple peril Homeowners multiple peril Commercial multiple peril Mortgage guaranty 89,8,9 56,54,56 84,97 6,965,5 0,08, ,800,56 8. Ocean marine Inland marine Financial guaranty Medical professional liability - occurrence Medical professional liability - claims-made Earthquake Group accident and health Credit accident and health (group and individual) Other accident and health Workers' compensation Other liability - occurrence Other liability - claims-made Excess workers' compensation Products liability - occurrence Products liability - claims-made , 9. Private passenger auto liability , 9.4 Commercial auto liability Auto physical damage Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit International Warranty Reinsurance - nonproportional assumed property XXX Reinsurance - nonproportional assumed liability XXX Reinsurance - nonproportional assumed financial lines XXX Aggregate write-ins for other lines of business TOTALS 89,8,9 56,54,56 84,97 6,965,5 0,08, ,800, DETAILS OF WRITE-INS 498. Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 thru 40 plus 498)(Line 4 above) (a) Does the company's direct premiums written include premiums recorded on an installment basis? Yes [ ] No [ X ] If yes:. The amount of such installment premiums $ 0. Amount at which such installment premiums would have been reported had they been reported on an annualized basis $ 0 8

9 9 ANNUAL STATEMENT FOR THE YEAR 06 OF THE United Guaranty Residential Insurance Company UNDERWRITING AND INVESTMENT EXHIBIT PART - LOSSES PAID AND INCURRED Losses Paid Less Salvage Net Losses Unpaid Current Year (Part A, Col. 8) Losses Incurred Current Year (Cols ) Percentage of Losses Incurred (Col. 7, Part ) to Premiums Earned (Col. 4, Part ) Reinsurance Reinsurance Net Payments Net Losses Unpaid Line of Business Direct Business Assumed Recovered (Cols. + - ) Prior Year. Fire Allied lines Farmowners multiple peril Homeowners multiple peril Commercial multiple peril Mortgage guaranty 44,80,57 8,94,66 57,4,74 5,6,467 59,46, ,09,96 00,685, Ocean marine Inland marine Financial guaranty Medical professional liability - occurrence Medical professional liability - claims-made Earthquake Group accident and health Credit accident and health (group and individual) Other accident and health Workers' compensation Other liability - occurrence Other liability - claims-made Excess workers' compensation Products liability - occurrence Products liability - claims-made , 9. Private passenger auto liability , 9.4 Commercial auto liability Auto physical damage Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit International Warranty Reinsurance - nonproportional assumed property XXX Reinsurance - nonproportional assumed liability XXX Reinsurance - nonproportional assumed financial lines XXX Aggregate write-ins for other lines of business TOTALS 44,80,57 8,94,66 57,4,74 5,6,467 59,46, ,09,96 00,685, DETAILS OF WRITE-INS Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 thru 40 plus 498)(Line 4 above)

10 0 ANNUAL STATEMENT FOR THE YEAR 06 OF THE United Guaranty Residential Insurance Company UNDERWRITING AND INVESTMENT EXHIBIT PART A - UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES Reported Losses Incurred But Not Reported Deduct Reinsurance Recoverable Net Losses Excl. Incurred But Not Reported (Cols. + - ) Net Unpaid Loss Adjustment Expenses Reinsurance Reinsurance Reinsurance Net Losses Unpaid Line of Business Direct Assumed Direct Assumed Ceded (Cols ). Fire Allied lines Farmowners multiple peril Homeowners multiple peril Commercial multiple peril Mortgage guaranty 4,895,74 64,87,74 6,877,858 5,05,609 0,55,7,54,90,97,0 59,46,489 6,7,59 8. Ocean marine Inland marine Financial guaranty Medical professional liability - occurrence Medical professional liability - claims-made Earthquake Group accident and health (a) Credit accident and health (group and individual) Other accident and health (a) Workers' compensation Other liability - occurrence Other liability - claims-made Excess workers' compensation Products liability - occurrence Products liability - claims-made , 9. Private passenger auto liability , 9.4 Commercial auto liability Auto physical damage Aircraft (all perils) Fidelity Surety Burglary and theft Boiler and machinery Credit International Warranty Reinsurance - nonproportional assumed property XXX XXX Reinsurance - nonproportional assumed liability XXX XXX Reinsurance - nonproportional assumed financial lines XXX XXX Aggregate write-ins for other lines of business TOTALS 4,895,74 64,87,74 6,877,858 5,05,609 0,55,7,54,90,97,0 59,46,489 6,7,59 DETAILS OF WRITE-INS Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 thru 40 plus 498)(Line 4 above) (a) Including $ 0 for present value of life indemnity claims.

11 UNDERWRITING AND INVESTMENT EXHIBIT. Claim adjustment services: PART - EXPENSES Loss Adjustment Expenses Other Underwriting Expenses Investment Expenses. Direct 806, ,47. Reinsurance assumed (676,6) 0 0 (676,6). Reinsurance ceded (87,60) 0 0 (87,60).4 Net claim adjustment service ( ) 57, ,887. Commission and brokerage:. Direct excluding contingent Reinsurance assumed, excluding contingent 0 8,54, ,54,607. Reinsurance ceded, excluding contingent 0 86,08,5 0 86,08,5.4 Contingent - direct Contingent - reinsurance assumed Contingent - reinsurance ceded Policy and membership fees Net commission and brokerage ( ) 0 (77,67,68) 0 (77,67,68). Allowances to managers and agents Advertising 0,408,676 0,408, Boards, bureaus and associations,44 8, , Surveys and underwriting reports 0 0,0,89 0 0,0,89 7. Audit of assureds records Salary and related items: 8. Salaries 4,089,046,75,906 6,90 5,8,4 8. Payroll taxes 6,807 7,758,688 4,046 8,04,54 9. Employee relations and welfare 60,646 8,098, 9,47 8,78,4 0. Insurance 8, , ,0. Directors fees 9,74 7,69 4 8,786. Travel and travel items 4,840,70,464,99,89,. Rent and rent items 9,068,65,945 6,074,05, Equipment 54,546 0,50,088 5,479 0,870, 5. Cost or depreciation of EDP equipment and software 66,7 9,68, ,0,78 6. Printing and stationery 0,70 4, , Postage, telephone and telegraph, exchange and express 04,5,090,4,60,96,0 8. Legal and auditing,06,8 7,507,5,94 8,58,46 9. Totals (Lines to 8) 7,667,585 6,8,995 96,450,88,00 0. Taxes, licenses and fees: 0. State and local insurance taxes deducting guaranty association credits of $ 0 0 8,60,5 0 8,60,5 0. Insurance department licenses and fees 0 96,4 0 96,4 0. Gross guaranty association assessments All other (excluding federal and foreign income and real estate) 0,6,477 0,6, Total taxes, licenses and fees ( ) 0,66,6 0,66,6. Real estate expenses 47, ,75. Real estate taxes Reimbursements by uninsured plans Aggregate write-ins for miscellaneous expenses 9,705 7,78,067,50, 9,909, Total expenses incurred 8,76,99 68,86,607,598,56 (a) 79,648, Less unpaid expenses - current year 6,7,59 6,560,675 8,809,96,0 7. Add unpaid expenses - prior year 7,78,0,0, ,704,044, Amounts receivable relating to uninsured plans, prior year Amounts receivable relating to uninsured plans, current year TOTAL EXPENSES PAID (Lines ) 9,769,49 64,97,79,04,458 77,7,74 DETAILS OF WRITE-INS 40. Depreciation 8,55 844, , Investment advisory fee 0 0,498,56,498, Sundry 0,70 6,,65,09 6,57, Summary of remaining write-ins for Line 4 from overflow page Totals (Lines 40 thru 40 plus 498)(Line 4 above) 9,705 7,78,067,50, 9,909,885 (a) Includes management fees of $ 8,974,94 to affiliates and $ 7,5 to non-affiliates. 4 Total

12 EXHIBIT OF NET INVESTMENT INCOME Collected During Year Earned During Year. U.S. Government bonds (a) 4,00 4,79. Bonds exempt from U.S. tax (a) 0,77,509,870,996. Other bonds (unaffiliated) (a) 8,56,9 75,776,084. Bonds of affiliates (a) 0 0. Preferred stocks (unaffiliated) (b),66,66. Preferred stocks of affiliates (b) 0 0. Common stocks (unaffiliated) 0 0. Common stocks of affiliates 0 0. Mortgage loans (c) Real estate (d) Contract loans Cash, cash equivalents and short-term investments (e) 7,506 67,689 7 Derivative instruments (f) Other invested assets (,4) (,4) 9. Aggregate write-ins for investment income 6,674 6, Total gross investment income 0,,049 99,580,66. Investment expenses (g),598,56. Investment taxes, licenses and fees, excluding federal income taxes (g) 0. Interest expense (h) 0 4. Depreciation on real estate and other invested assets (i) 0 5. Aggregate write-ins for deductions from investment income 0 6. Total deductions (Lines through 5),598,56 7. Net investment income (Line 0 minus Line 6) 96,98,099 DETAILS OF WRITE-INS 090. Bellemeade Re Ltd-Interest Income From Trust Fund 6,674 6, Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 090 thru 090 plus 0998) (Line 9, above) 6,674 6, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 thru 50 plus 598) (Line 5, above) 0 (a) Includes $,80,459 accrual of discount less $,564,74 amortization of premium and less $ 6,4,649 paid for accrued interest on purchases. (b) Includes $ 6,000 accrual of discount less $ 0 amortization of premium and less $ 0 paid for accrued dividends on purchases. (c) Includes $ 0 accrual of discount less $ 0 amortization of premium and less $ 0 paid for accrued interest on purchases. (d) Includes $ 0 for company s occupancy of its own buildings; and excludes $ 0 interest on encumbrances. (e) Includes $ 0 accrual of discount less $ 0 amortization of premium and less $ 0 paid for accrued interest on purchases. (f) Includes $ 0 accrual of discount less $ 0 amortization of premium. (g) Includes $ 0 investment expenses and $ 0 investment taxes, licenses and fees, excluding federal income taxes, attributable to segregated and Separate Accounts. (h) Includes $ 0 interest on surplus notes and $ 0 interest on capital notes. (i) Includes $ 0 depreciation on real estate and $ 0 depreciation on other invested assets. EXHIBIT OF CAPITAL GAINS (LOSSES) 4 5 Total Realized Capital Gain (Loss) (Columns + ) Change in Unrealized Capital Gain (Loss) Change in Unrealized Foreign Exchange Capital Gain (Loss) Realized Gain (Loss) On Sales or Maturity Other Realized Adjustments. U.S. Government bonds 7,07 0 7, Bonds exempt from U.S. tax,64,04 0,64, Other bonds (unaffiliated),77,895 (,78,68) 9,449,,4,7 0. Bonds of affiliates Preferred stocks (unaffiliated) (97,940) 0 (97,940) 0 0. Preferred stocks of affiliates Common stocks (unaffiliated) Common stocks of affiliates 0 0 0,44,60 0. Mortgage loans Real estate Contract loans Cash, cash equivalents and short-term investments Derivative instruments Other invested assets 67,5 0 67, Aggregate write-ins for capital gains (losses) Total capital gains (losses) 4,6,40 (,78,68),,79 4,766,87 0 DETAILS OF WRITE-INS Summary of remaining write-ins for Line 9 from overflow page Totals (Lines 090 thru 090 plus 0998) (Line 9, above)

13 EXHIBIT OF NON-ADMITTED ASSETS Current Year Total Nonadmitted Assets Prior Year Total Nonadmitted Assets Change in Total Nonadmitted Assets (Col. - Col. ). Bonds (Schedule D) Stocks (Schedule D):. Preferred stocks Common stocks Mortgage loans on real estate (Schedule B):. First liens Other than first liens Real estate (Schedule A): 4. Properties occupied by the company Properties held for the production of income Properties held for sale Cash (Schedule E - Part ), cash equivalents (Schedule E - Part ) and short-term investments (Schedule DA) Contract loans Derivatives (Schedule DB) Other invested assets (Schedule BA) Receivables for securities Securities lending reinvested collateral assets (Schedule DL) Aggregate write-ins for invested assets Subtotals, cash and invested assets (Lines to ) Title plants (for Title insurers only) Investment income due and accrued Premiums and considerations: 5. Uncollected premiums and agents' balances in the course of collection 0 6,500,000 6,500, Deferred premiums, agents' balances and installments booked but deferred and not yet due Accrued retrospective premiums and contracts subject to redetermination Reinsurance: 6. Amounts recoverable from reinsurers Funds held by or deposited with reinsured companies Other amounts receivable under reinsurance contracts Amounts receivable relating to uninsured plans Current federal and foreign income tax recoverable and interest thereon 5,9,508 08,8 (5,0,80) 8. Net deferred tax asset 5,074,00 8,860,4,786,49 9. Guaranty funds receivable or on deposit Electronic data processing equipment and software 5,887,57 50,95,440 (,69,). Furniture and equipment, including health care delivery assets 507, (506,785). Net adjustment in assets and liabilities due to foreign exchange rates Receivables from parent, subsidiaries and affiliates Health care and other amounts receivable Aggregate write-ins for other than invested assets 64,887 7,967,0 7,,4 6. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5) 8,,749 40,6,04 0,99,55 7. From Separate Accounts, Segregated Accounts and Protected Cell Accounts Total (Lines 6 and 7) 8,,749 40,6,04 0,99, DETAILS OF WRITE-INS 98. Summary of remaining write-ins for Line from overflow page Totals (Lines 0 thru 0 plus 98)(Line above) Prepaid assets 49,8 0 (49,8) 50. Settlement receivable 594,505 7,967,0 7,7, Summary of remaining write-ins for Line 5 from overflow page Totals (Lines 50 thru 50 plus 598)(Line 5 above) 64,887 7,967,0 7,,4

14 . Summary of Significant Accounting Policies and Going Concern A. Accounting Practices, Impact of NAIC/State Differences NOTES TO THE FINANCIAL STATEMENT The financial statements of United Guaranty Residential Insurance Company (the Company) are presented on the basis of accounting practices prescribed or permitted by the North Carolina Insurance Department. The North Carolina Insurance Department recognizes only statutory accounting practices prescribed or permitted by the state of North Carolina for determining and reporting the financial condition and results of operations of an insurance company, for determining its solvency under the North Carolina Insurance Law. The National Association of Insurance Commissioners' (NAIC) Accounting Practices and Procedures manual, (NAIC SAP) has been adopted as a component of prescribed or permitted practices by the state of North Carolina. Changes in surplus in the accompanying financial statements due to differences between the prescribed accounting practices of the state of North Carolina and those of the NAIC are as follows: Description SSAP # F/S Page F/S Line # () Net Income, state basis $5,69,888 $4,597,995 () Effect of state prescribed practices () Effect of state permitted practices (4) Net Income, NAIC SAP basis $5,69,888 $4,597,995 Description SSAP # F/S Page F/S Line # (5) Policyholders surplus, state basis $,86,509,07 $,5,70,65 (6) Effect of state prescribed practices Nonadmitted mortgage loan Nonadmitted surplus note Nonadmitted premiums receivable (7) Effect of state permitted practices (8) Policyholders surplus, NAIC SAP basis $,86,509,07 $,5,70,65 B. Use of Estimates in the Preparation of the Financial Statements The preparation of a financial statement in conformity with Statutory Accounting Principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities. It also requires disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. C. Accounting Policy Premiums are earned over the terms of the related insurance policies and reinsurance contracts. Unearned premium reserves are established to cover the unexpired portion of premiums written. Such reserves are computed based on North Carolina statutory requirements for direct business and are based on reports received from ceding companies for reinsurance. Expenses incurred in connection with acquiring new insurance business, including such acquisition costs as sales commissions, are charged to operations as incurred. Expenses incurred are reduced for ceding allowances received or receivable. In addition, the company uses the following accounting policies: () The Company considers all highly liquid debt securities with maturities of greater than three months but less than twelve months from the date of purchase to be short-term investments. Short-term investments are carried at amortized cost which approximates NAIC market value (as designated by the NAIC Securities Valuation Office). () Bonds, loan backed and structured securities ( LBaSS ) with an NAIC designation (as obtained from the NAIC Investment analysis Office ( IAO )) of or (considered to be investment grade) are carried at amortized cost. Bonds and LBaSS with an NAIC designation of, 4, 5, 5*, 6 or 6* (considered to be non-investment grade) are carried at the lower of amortized cost or fair value. LBaSS fair values are determined using independent pricing services and broker quotes. Bonds and LBaSS that have not been filed and have not received a designation in over a year, from the NAIC IAO, are assigned a 6* designation and carried at zero, with unrealized losses charged to surplus. Bond and LBaSS securities that have been filed and received a 6* designation can carry a value greater than zero. Bond and LBaSS securities are assigned a 5* designation when the following conditions are met: a) the documentation required for a full credit analysis did not exist, b) the issuer/obligor has made all contracted interest and principal payments, and c) an expectation of repayment of interest and principal exists. Amortization of premium or discount on bonds and LBaSS is calculated using the effective yield method. Additionally, mortgage-backed securities and asset backed securities prepayment assumptions were obtained from an outside vendor or internal estimates. The retrospective adjustment method is used to account for the effect of unscheduled payments affecting high credit quality securities, while securities with less than high credit quality and securities for which the collection of all contractual cash flows is not probable are both accounted for using the prospective adjustment method. () Common stocks of non-affiliates - Not applicable (4) Preferred stocks Not Applicable (5) Mortgage loans Not Applicable 4

15 (6) Loan-backed securities - Refer to Note.C () above. The fair value of the Company s loan-backed securities was $0,99,066 and $94,40,96 at //6 and //5, respectively. (7) Investments in affiliates are stated at statutory book value. (8) Investments in joint ventures, partnerships and limited liability companies Not Applicable (9) Accounting policy for derivatives Not Applicable (0) No premium deficiencies exist regardless of whether or not anticipated investment income is used as a factor in the calculation. () Reserves are provided for reported and unreported claims. Estimates of claims incurred but not reported and of expenses required to settle unpaid claims are included on the basis of historical loss experience and management's evaluation of current trends. All such reserves are periodically evaluated and reviewed during the year and changes therein are reflected in operating results when known. Loss and loss adjustment expense reserves are stated after deduction for reinsurance ceded to other insurers. () The Company has not modified its capitalization policy from the prior period. () Pharmaceutical Rebate Receivables - Not Applicable D. Going Concern Not Applicable. Accounting Changes and Corrections of Errors - Not Applicable. Business Combination and Goodwill - Not Applicable 4. Discontinued Operations - Not Applicable 5. Investments A. Mortgage Loans Not Applicable B. Debt Restructuring - Not Applicable C. Reverse Mortgages - Not Applicable D. Loan-Backed and Structured Securities. Prepayment assumptions for single class, multi-class mortgage-backed and asset-backed securities were obtained from independent third party services or internal estimates. These assumptions are consistent with the current interest rate and economic environment.. Securities with a recognized other-than-temporary impairment Not Applicable. Securities with a recognized other-than-temporary impairment to disclose Not Applicable 4. The Company s loan-backed and structured securities in unrealized loss positions as of year-end are as follows: a. Aggregate amount of unrealized losses. Less than twelve months $,668,709. Twelve months or longer 0. Total $,668,709 b. Aggregate fair value of securities with unrealized losses. Less than twelve months $69,649,588. Twelve months or longer 0. Total $69,649, In its OTTI assessment, the Company considers all information relevant to the collectability of the security, including past history, current conditions and reasonable forecasts when developing an estimate of future cash flows. Relevant analyst reports and forecasts for the asset class also receive appropriate consideration. The Company also considers how credit enhancements affect the expected performance of the security. In addition, the Company also considers its cash and working capital requirements and generally considers expected cash flows in relation to its business plans and how such forecasts affect the intent and ability to hold such securities to recovery of their amortized cost. E. Repurchase Agreements Not Applicable F. Real Estate Real estate is sometimes acquired in the settlement of claims as part of the Company s effort to mitigate losses. The real estate is carried at the lower of cost or market value as prescribed by SSAP 40. Gains or losses from the holding or disposition of real estate acquired in claim settlement are recorded in net losses and loss adjustment expenses. G. Investments in Low-Income Housing Tax Credits Not Applicable 4.

16 H. Restricted Assets () Restricted Assets (including pledged) summarized by restricted asset category Gross (Admitted & Nonadm itted) Restricted Current Year Current Year Percentage 4 5 Gross 0 Account (Admitted & G/A Total Assets Total Nonadm itted) Supporting Account Supporting Increase/ Total Non Admitted Restricted to Account Restricted G/A Activity Total Total From (Decrease) adm itted Restricted Total Assets Activity (a) Assets (b) ( plus ) Prior Year (5 minus 6) Restricted (5 minus 8) (c) Total General Account (G/A) Admitted Restricted to Total Admitted Assets (d) Restricted Asset Category a. Subject to contractual obligation for w hich liability is not show n $ - $ - $ - $ - $ - $ - $ - $ - $ % 0.00% b. Collateral held under security lending agreements % 0.00% c. Subject to repurchase agreements % 0.00% d. Subject to reverse repurchase agreements % 0.00% e. Subject to dollar repurchase agreements % 0.00% f. Subject to dollar reverse repurchase agreements % 0.00% g. Placed under option contracts % 0.00% h. Letter stock or securities restricted as to sale - excluding FHLB capital stock % 0.00% i. FHLB capital stock % 0.00% j. On deposit w ith states 4,, ,, 4,7,67 (5,55) - 4,, 0.0% 0.0% k. On deposit w ith other regulatory bodies % 0.00% l. Pledged as collateral to FHLB (including assets backing funding agreements) % 0.00% m. Pledged as collateral not captured in other categories % 0.00% n. Other restricted assets ,04, % 0.00% o. Total Restricted Assets $ 4,, $ - $ - $ - $ 4,, $ 5,5,87 $ (5,55) $ - $ 4,, 0.0% 0.0% (a) Subset of column (b) Subset of column (c) Column 5 divided by Asset Page, Column, Line 8 (d) Column 9 divided by Asset Page, Column, Line 8 () Detail of assets pledged as collateral not captured in other categories (reported on line K above) Not Applicable () Detail of other restricted assets (reported on line N above) Gross Restricted Current Year 4 5 Total General Account (G/A) G/A Supporting Account Activity (a) Total Account Restricted Assets Account Assets Supporting G/A Activity (b) Total ( plus ) 8 Percentage Total Current Year Admitted Gross Restricted to Total Admitted Restricted to Total Adm itted Assets Increase/ Description of Asset Total From Prior Year (Decrease) (5 minus 6) Restricted Assets Puerto Rico Hw y Auth Rev ,04,00 (,04,00) % 0.00% % 0.00% m. Total Restricted Assets $ - $ - $ - $ - $ - $,04,00 $ (,04,00) $ % 0.00% (a) Subset of column (b) Subset of column (4) Collateral Received and Reflected as Assets within the Reporting Entity s Financial Statements Not Applicable I. Working Capital Finance Investments - Not Applicable J. Offsetting and Netting of Assets and Liabilities - Not Applicable K. Structured Notes - Not Applicable L. 5* Securities Investment Number of 5* Securities Aggregated BACV Aggregated Fair Value Current Year Prior Year Current Year Prior Year Current Year Prior Year () Bonds AC - $ - $ 48,59 $ - $ 48,859 () Bonds FV , ,405 () LB&SS AC (4) LB&SS FV (5) Preferred Stock AC (6) Preferred Stock FV (7) Total ( ) $ - $ 98,996 $ - $ 99,64 6. Joint Ventures, Partnerships and Limited Liability Companies - Not Applicable 7. Investment Income A. Accrued Investment Income The Company does not admit investment income due and accrued if amounts are over 90 days past due. B. Amounts Nonadmitted Not applicable 8. Derivative Instruments - Not Applicable 4.