SAMPLE 7 – My revisions
A “problem bond” is either delinquent or restructured-typically to reduce the interest rate or extend the maturity date.
“Potential problem bonds” are fully current, but management believes they have certain characteristics that make them likely to become “problem bonds.”
The table below provides information about the potential problem bonds and problem bonds in ABC Insurance’s investment portfolio as of December 31:
| Type of bond | Year | Amount (in millions) … | … net of cumulative write-downs of … (in millions) | Portion of total attributable to policyholder contracts |
| Potential problem | 2004 | $69 | $14 | 35% |
| 2003 | $63 | $10 | 45% | |
| Problem | 2004 | $119 | $19 | 29% |
| 2003 | $137 | $30 | 24% |
