SAMPLE 7 – Original
Potential problem bonds are fully current but judged by management to have certain characteristics that increase the likelihood of problem classification. ABC Insurance had $69 million of potential problem bonds, including amounts attributable to policyholder contracts as of December 31, 2004, compared with $63 million as of December 31, 2003. These amounts are net of $14 million and $10 million of cumulative write-downs, respectively. Potential problem bonds attributable to policyholder contracts represented 35% and 45% of total potential problem bonds at December 31, 2004 and 2003, respectively.
ABC Insurance considers bonds that are delinquent or restructured as to terms, typically interest rate and, in certain cases, maturity date, problem bonds. As of December 31, 2004 and 2003, ABC Insurance had problem bonds, including amounts attributable to policyholder contracts of $119 million and $137 million, net of related cumulative write-downs of $19 million and $30 million, respectively. Problem bonds attributable to policyholder contracts represented 29% and 24% of total problem bonds at December 31, 2004 and 2003, respectively.
