NYM Nymagic, Inc.

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to                

Commission file number: 1-11238

NYMAGIC, INC.

(Exact name of registrant as specified in its charter)

New York (State or other jurisdiction of incorporation or organization)		13-3534162 (I.R.S. Employer Identification No.)

919 Third Avenue (Address of principal executive offices)		10022 (Zip Code)

212 551-0600
(Registrant’s telephone number, including area code)

None
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  o    No  þ

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  o

Accelerated filer  þ

Non-accelerated filer  o (Do not check if a smaller reporting company)

Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No  þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at July 1, 2009
Common Stock, $1.00 par value per share		8,428,088 shares

 

 

FORWARD—LOOKING STATEMENTS

This report contains certain forward-looking statements concerning the Company’s operations, economic performance and financial condition, including, in particular, the likelihood of the Company’s success in developing and expanding its business. Any forward-looking statements concerning the Company’s operations, economic performance and financial condition contained herein, including statements related to the outlook for the Company’s performance in 2009 and beyond, are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based upon a number of assumptions and estimates which inherently are subject to uncertainties and contingencies, many of which are beyond the control of the Company. Some of these assumptions may not materialize and unanticipated events may occur which could cause actual results to differ materially from such statements. These include, but are not limited to, the cyclical nature of the insurance and reinsurance industry, premium rates, investment results, hedge fund results, the estimation of loss reserves and loss reserve development, uncertainties associated with asbestos and environmental claims, including difficulties with assessing latent injuries and the impact of litigation settlements, bankruptcies and potential legislation, the uncertainty surrounding the loss amounts related to the attacks of September 11, 2001, and hurricanes Katrina, Rita and Ike, the occurrence and effects of wars and acts of terrorism, net loss retention, the effect of competition, the ability to collect reinsurance receivables and the timing of such collections, the availability and cost of reinsurance, the possibility that the outcome of any litigation or arbitration proceeding is unfavorable, the ability to pay dividends, regulatory changes, changes in the ratings assigned to the Company by rating agencies, failure to retain key personnel, the possibility that our relationship with Mariner Partners, Inc. could terminate or change, and the fact that ownership of our common stock is concentrated among a few major stockholders and is subject to the voting agreement, as well as assumptions underlying any of the foregoing and are generally expressed with words such as “intends,” “intend,” “intended,” “believes,” “estimates,” “expects,” “anticipates,” “plans,” “projects,” “forecasts,” “goals,” “could have,” “may have” and similar expressions. These risks could cause actual results for the 2009 year and beyond to differ materially from those expressed in any forward-looking statements. The Company undertakes no obligation to update publicly or revise any forward-looking statements.

NYMAGIC, INC.
INDEX

		Page No.
Part I. Financial Information
Item 1. Financial Statements			2
Consolidated Balance Sheets — June 30, 2009 and December 31, 2008			2
Consolidated Statements of Operations — Six months ended June 30, 2009 and June 30, 2008			3
Consolidated Statements of Operations — Three months ended June 30, 2009 and June 30, 2008			4
Consolidated Statements of Cash Flows — Six months ended June 30, 2009 and June 30, 2008			5
Notes to Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			23
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			34
Part II. Other Information
Item 1. Legal Proceedings			35
Item 1A. Risk Factors			35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			35
Item 3. Defaults Upon Senior Securities			35
Item 4. Submission of Matters to a Vote of Security Holders			36
Item 5. Other Information			36
Item 6. Exhibits			37
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

Item 1. Financial Statements

NYMAGIC, INC.
CONSOLIDATED BALANCE SHEETS

		June 30,				December 31,
		2009				2008
		(unaudited)
ASSETS
Investments:
Fixed maturities:
Held to maturity at amortized cost (fair value $41,056,787 and $42,329,432)		$	58,896,440			$	61,246,212
Available for sale at fair value (amortized cost $218,672,781 and $149,402,001)			221,838,086				144,978,426
Trading at fair value (amortized cost $15,047,246 and $22,203,883)			13,748,400				17,399,090
Equity securities — trading at fair value (cost $0 and $15,159,200)			—				11,822,620
Commercial loans at fair value (amortized cost $6,774,284 and $6,907,368)			4,287,759				2,690,317
Limited partnerships at equity (cost $84,673,577 and $98,101,553)			120,239,483				122,927,697
Short-term investments			135,291,909				110,249,779
Cash and cash equivalents			57,855,935				75,672,102
Total cash and investments			612,158,012				546,986,243
Accrued investment income			4,088,367				4,978,920
Premiums and other receivables, net			35,973,124				23,426,525
Receivable for investments disposed			5,743,266				25,415,261
Reinsurance receivables on unpaid losses, net			212,618,035				213,906,569
Reinsurance receivables on paid losses, net			20,887,292				28,429,945
Deferred policy acquisition costs			17,181,351				14,663,710
Prepaid reinsurance premiums			24,785,151				19,225,185
Deferred income taxes			29,888,952				35,514,597
Property, improvements and equipment, net			12,699,326				10,033,489
Other assets			23,744,591				23,895,902
Total assets		$	999,767,467			$	946,476,346
LIABILITIES
Unpaid losses and loss adjustment expenses		$	552,684,010			$	548,749,589
Reserve for unearned premiums			98,056,805				83,364,396
Ceded reinsurance payable			25,768,390				23,809,871
Notes payable			100,000,000				100,000,000
Dividends payable			567,813				671,059
Other liabilities			35,118,585				25,808,669
Total liabilities			812,195,603				782,403,584
SHAREHOLDERS’ EQUITY
Common stock			15,762,065				15,742,215
Paid-in capital			50,438,264				49,539,886
Accumulated other comprehensive loss			(23,384,082	)			(2,875,317	)
Retained earnings			232,792,208				189,702,569
			275,608,455				252,109,353
Treasury stock, at cost, 7,333,977 shares			(88,036,591	)			(88,036,591	)
Total shareholders’ equity			187,571,864				164,072,762
Total liabilities and shareholders’ equity		$	999,767,467			$	946,476,346

The accompanying notes are an integral part of these consolidated financial statements.

NYMAGIC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

		Six months ended June 30,
		2009				2008
Revenues:
Net premiums earned		$	79,170,667			$	87,996,517
Net investment income (loss)			19,742,704				(8,104,991	)
Total other-than-temporary impairments			(478,407	)			—
Portion of loss recognized in OCI (before taxes)			—				—
Net impairment loss recognized in earnings			(478,407	)			—
Net realized investment gains (losses)			1,774,543				(31,350,260	)
Commission and other income			127,470				139,438
Total revenues			100,336,977				48,680,704
Expenses:
Net losses and loss adjustment expenses incurred			38,011,691				62,890,950
Policy acquisition expenses			17,826,390				19,345,145
General and administrative expenses			20,478,159				18,437,651
Interest expense			3,364,031				3,356,311
Total expenses			79,680,271				104,030,057
Income (loss) before income taxes			20,656,706				(55,349,353	)
Income tax provision:
Current			358,790				(1,433,144	)
Deferred			2,615,676				(19,421,936	)
Total income tax expense (benefit)			2,974,466				(20,855,080	)
Net income (loss)		$	17,682,240			$	(34,494,273	)
Weighted average number of shares of common stock outstanding-basic			8,417,700				8,672,315
Basic earnings (loss) per share		$	2.10			$	(3.98	)
Weighted average number of shares of common stock outstanding-diluted			8,607,700				8,672,315
Diluted earnings (loss) per share		$	2.05			$	(3.98	)
Dividends declared per share		$	.08			$	.16

The accompanying notes are an integral part of these consolidated financial statements.

NYMAGIC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

		Three months ended June 30,
		2009				2008
Revenues:
Net premiums earned		$	39,041,070			$	43,091,539
Net investment income			13,190,792				4,911,631
Total other-than-temporary impairments			(478,407	)			—
Portion of loss recognized in OCI (before taxes)			—				—
Net impairment loss recognized in earnings			(478,407	)			—
Net realized investment gains			2,191,241				897,629
Commission and other income			122,272				80,277
Total revenues			54,066,968				48,981,076
Expenses:
Net losses and loss adjustment expenses incurred			17,329,363				36,870,336
Policy acquisition expenses			8,529,910				9,509,916
General and administrative expenses			10,433,910				9,671,197
Interest expense			1,683,818				1,679,573
Total expenses			37,977,001				57,731,022
Income (loss) before income taxes			16,089,967				(8,749,946	)
Income tax provision:
Current			1,145,505				(1,222,826	)
Deferred			740,226				(2,780,654	)
Total income tax expense (benefit)			1,885,731				(4,003,480	)
Net income (loss)		$	14,204,236			$	(4,746,466	)
Weighted average number of shares of common stock outstanding-basic			8,424,206				8,638,048
Basic earnings (loss) per share		$	1.69			$	(.55	)
Weighted average number of shares of common stock outstanding-diluted			8,625,087				8,638,048
Diluted earnings (loss) per share		$	1.65			$	(.55	)
Dividends declared per share		$	.04			$	.08

The accompanying notes are an integral part of these consolidated financial statements.

NYMAGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

		Six months ended June 30,
		2009				2008
Cash flows provided by (used in) operating activities:
Net income (loss)		$	17,682,240			$	(34,494,273	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Provision for deferred taxes			2,615,676				(19,421,936	)
Net realized investment (gain) loss			(1,774,543	)			31,350,260
Net impairment loss recognized in earnings			478,407				—
Equity in earnings of limited partnerships			(9,190,282	)			(792,141	)
Net amortization from bonds and commercial loans			265,796				88,243
Depreciation and other, net			654,111				530,723
Trading portfolio activities			15,470,658				(106,001,351	)
Commercial loan activities			(1,612,331	)			(7,601,131	)
Changes in:
Premiums and other receivables			(12,546,599	)			(13,613,507	)
Reinsurance receivables paid and unpaid, net			8,831,187				31,727,593
Ceded reinsurance payable			1,958,519				1,137,239
Accrued investment income			890,553				(1,645,570	)
Deferred policy acquisition costs			(2,517,641	)			(2,120,256	)
Prepaid reinsurance premiums			(5,559,966	)			(1,644,679	)
Other assets			151,311				(2,033,574	)
Unpaid losses and loss adjustment expenses			3,934,421				(14,415,870	)
Reserve for unearned premiums			14,692,409				7,853,094
Other liabilities			9,309,916				(5,035,890	)
Total adjustments			26,051,602				(101,638,753	)
Net cash provided by (used in) operating activities			43,733,842				(136,133,026	)
Cash flows (used in ) provided by investing activities:
Held to maturity fixed maturities matured, repaid and redeemed			3,931,388				—
Available for sale fixed maturities acquired			(273,469,418	)			(2,139,375	)
Available for sale fixed maturities sold			204,813,774				13,045,433
Available for sale fixed maturities matured, repaid and redeemed			—				4,076,245
Capital contributed to limited partnerships			—				(20,484,990	)
Distributions and redemptions from limited partnerships			11,878,489				38,464,502
Net (purchase) sale of short-term investments			(25,179,966	)			—
Receivable for investments disposed and not yet settled			19,671,995				11,125,685
Acquisition of property & equipment, net			(3,319,948	)			(3,212,846	)
Net cash (used in) provided by investing activities			(61,673,686	)			40,874,654
Cash flows provided by (used in) from financing activities:
Proceeds from stock issuance and other			918,228				871,054
Cash dividends paid to stockholders			(794,551	)			(1,413,314	)
Net purchase of treasury stock			—				(4,938,563	)
Payable for treasury stock purchased and not yet settled			—				(823,618	)
Net cash provided by (used in) financing activities			123,677				(6,304,441	)
Net decrease in cash			(17,816,167	)			(101,562,813	)
Cash and cash equivalents at beginning of period			75,672,102				204,913,343
Cash and cash equivalents at end of period		$	57,855,935			$	103,350,530
Supplemental disclosures:
Interest paid		$	3,251,388			$	3,250,055
Federal income tax paid		$	—			$	—

The accompanying notes are an integral part of these consolidated financial statements.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

(1) Basis of Presentation and Accounting Policies

Basis of presentation

The interim consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (GAAP) and are unaudited. In the opinion of management, all material adjustments necessary for a fair presentation of results have been reflected for such periods. Adjustments to financial statements consist of normal recurring items. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and claims and expenses during the reporting period. Actual results could differ from those estimates.

Adoption of new accounting pronouncements

On April 9, 2009, the FASB issued FSP FAS 157-4, Determining the Fair Value When the Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“SFAS 157-4”). SFAS 157-4 provides additional guidance for estimating fair value in accordance with FASB 157, Fair Value Measurements , when prices in markets have become less active and require adjustments to fair value. SFAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009. The adoption of SFAS 157-4 did not have a material impact on the Company’s financial condition, results of operations or liquidity.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.” (FSP 115-2) which is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP FAS 115-2 modifies the requirements for recognizing other-than-temporarily impaired debt securities, the presentation of other-than-temporary impairment losses and increases the frequency of and expands the required disclosures about other-than-temporary impairment for debt and equity securities. The Company adopted FSP FAS 115-2 and FAS 124-2 effective April 1, 2009. The adoption of FSP 115-2 required a cumulative effect adjustment as of April 1, 2009, which increased retained earnings by $26.1 million with an offsetting decrease to accumulated other comprehensive income (loss). The adoption of FSP 115-2 had no material impact on the Company’s financial condition, results of operations or liquidity.

In April 2009, the FASB issued FSP FAS 107-1 and ABP 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” The FSP is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP FAS 107-1 and APB 28-1 requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. The adoption of FSP FAS 107-1 and ABP 28-1 had no material impact on the Company’s financial condition, results of operations or liquidity.

In May 2009, the FASB issued SFAS No. 165, “ Subsequent Events ” (“SFAS 165”). SFAS 165 establishes principles and disclosure requirements for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, the Statement sets forth (a) the period after the balance sheet date during which management of a reporting entity shall evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (b) the circumstances under which an entity shall recognize events or transactions occurring after the balance sheet date in its financial statements, and (c) the disclosures that an entity shall make about events or transactions that occurred after the balance sheet date. An entity shall disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. The Company adopted SFAS 165 for its interim reporting period ending on June 30, 2009. The adoption of SFAS No. 165 had no material impact on the Company’s financial condition, results of operations or liquidity.

Future adoption of new accounting pronouncements

In December 2008, the FASB issued FSP FAS 132(R)-1, Employers’ Disclosures about Postretirement Benefit Plan Assets . The FSP requires an employer to provide certain disclosures about plan assets of its defined benefit pension or other postretirement plans. The disclosures required include the investment policies and strategies of the plans, the fair value of the major categories of plan assets, the inputs and valuation techniques used to develop fair value measurements and a description of significant concentrations of risk in plan assets. The FSP is effective for fiscal years ending after December 15, 2009. The adoption of FSP FAS 132(R)-1 will not have an impact on the Company’s operations, financial position or liquidity.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets (“SFAS 166”). SFAS 166 amends the derecognition guidance in Statement 140 and eliminates the concept of a qualifying special-purpose entities (“QSPEs”). SFAS 166 is effective for fiscal years and interim periods beginning after November 15, 2009. Early adoption of SFAS 166 is prohibited. The Company will adopt of SFAS No. 166 during the first quarter of 2010 and has not yet determined the impact adoption will have on its results of operations, financial position or liquidity.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46 (“SFAS 167”), which amends the consolidation guidance applicable to variable interest entities (“VIE“s). An entity would consolidate a VIE, as the primary beneficiary, when the entity has both of the following characteristics: (a) The power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (b) The obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Ongoing reassessment of whether an enterprise is the primary beneficiary of a VIE is required. SFAS 167 amends interpretation 46(R) to eliminate the quantitative approach previously required for determining the primary beneficiary of a VIE. This Statement is effective for fiscal years and interim periods beginning after November 15, 2009. The Company will adopt of SFAS No. 167 during the first quarter of 2010 and has not yet determined the impact adoption will have on its results of operations, financial position or liquidity.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168”). This standard identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements that are presented in conformity with U.S. GAAP. The Statement establishes the FASB Accounting Standards Codification (“Codification”) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. GAAP. Codification does not create new accounting and reporting guidance; rather, it reorganizes U.S. GAAP pronouncements into approximately 90 topics within a consistent structure. All guidance contained in the Codification carries an equal level of authority. Relevant portions of authoritative content, issued by the SEC, for SEC registrants, have been included in the Codification. After the effective date of this Statement, all nongrandfathered, non-SEC accounting literature not included in the Codification is superseded and deemed nonauthoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company will adopt SFAS 168 on September 30, 2009 and will update all disclosures to reference Codification in its September 30, 2009 quarterly report.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

(2) Investments:

A summary of the Company’s investment portfolio components at June 30, 2009 and December 31, 2008 is presented below:

		June 30, 2009				Percent				December 31, 2008				Percent
Fixed maturities held to maturity (amortized cost):
Residential mortgage-backed securities		$	58,896,440				9.62	%		$	61,246,212				11.20	%
Total fixed maturities held to maturity		$	58,896,440				9.62	%		$	61,246,212				11.20	%
Fixed maturities available for sale (fair value):
U.S. Treasury securities		$	11,632,377				1.9	%		$	40,783,969				7.46	%
Municipal obligations			113,803,665				18.59	%			90,483,461				16.54	%
Corporate securities			96,402,044				15.75	%			13,710,996				2.51	%
Total fixed maturities available for sale		$	221,838,086				36.24	%		$	144,978,426				26.51	%
Fixed maturities trading (fair value):
Municipal obligations		$	13,748,400				2.25	%		$	17,399,090				3.18	%
Total fixed maturities trading		$	13,748,400				2.25	%		$	17,399,090				3.18	%
Total fixed maturities		$	294,482,926				48.11	%		$	223,623,728				40.89	%
Equity securities trading (fair value):
Preferred stock		$	—				0.00	%		$	11,822,620				2.16	%
Total equity securities		$	—				0.00	%		$	11,822,620				2.16	%
Cash and short-term investments			193,147,844				31.55	%			185,921,881				33.99	%
Total fixed maturities, equity securities, cash and short-term investments		$	487,630,770				79.66	%		$	421,368,229				77.04	%
Commercial loans (fair value)			4,287,759				0.70	%			2,690,317				0.49	%
Limited partnership hedge funds (equity)			120,239,483				19.64	%			122,927,697				22.47	%
Total investment portfolio		$	612,158,012				100.00	%		$	546,986,243				100.00	%

As of June 30, 2009, 94.0% of the carrying value of the Company’s fixed income and short-term investment portfolios were considered investment grade by S&P.

Short-term investments, which have maturity of one year or less from the date of purchase, are carried at amortized cost, which approximates fair value. The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

Details of the residential mortgage-backed securities portfolio as of June 30, 2009, including publicly available qualitative information, are presented below:

														Weighted				Average
														Average				FICO								Credit
														Loan to				Credit				Delinquency				Support
														Value %				Score				Rate				Level				S&P				Moody's
Security description		Issue date				Amortized cost				Fair value				(1)				(2)				(3)				(4)				Rating				Rating
AHMA 2006-3			7/2006			$	11,913,974			$	7,670,198				86.0				705				38.9				44.3			AAA				Caa1
CWALT 2005-69			11/2005				7,530,934				6,165,483				81.9				698				44.9				48.8			BB				Ba3
CWALT 2005-76			12/2005				7,433,263				5,476,249				82.7				700				47.2				49.7			B				B2
RALI 2005-QO3			10/2005				7,512,854				4,783,564				81.7				705				36.6				46.4			AAA				B1
WaMu 2005-AR17			12/2005				6,396,945				5,565,519				75.0				714				25.4				51.2			AAA				A1
WaMu 2006-AR9			7/2006				8,901,194				5,600,806				75.5				730				25.3				26.2			B				Ba1
WaMu 2006-AR13			9/2006				9,207,276				5,794,968				76.3				728				26.8				26.9			AA				B3
						$	58,896,440			$	41,056,787

The Company has investments in residential mortgage-backed securities (“RMBS”) amounting to $58.9 million at June 30, 2009. These securities are classified as held to maturity after the Company transferred these holdings from the available for sale portfolio effective October 1, 2008. Upon acquisition of the RMBS portfolio and prior to October 1, 2008, the Company was uncertain as to the duration for which it would hold the RMBS portfolio and appropriately classified such securities as available for sale. As a result of the increasing market uncertainty involved in the projected cash flows on these securities, as well as the widely disparate estimated prices of such securities among brokers depending on facts and assumptions utilized, we developed a process to perform an extensive analysis of the underlying structure of each RMBS in order to assure ourselves of its collectability. Accordingly, we constructed cash models to estimate the potential for impairment to these securities based upon default rates, severity rates and prepayment speeds consistent with reasonable expectations of their underlying cash flows. These assumptions were further stressed to provide a range of potential outcomes allowing us to assess any impairment. After reviewing the results of the analytical evaluation of the RMBS portfolio, we concluded that the economic or intrinsic value of these securities was not impaired. Additionally, we concluded, on the basis of this analysis, that there were no other-than-temporary impairments to these securities required to be recorded. Accordingly, the Company transferred such securities to the held to maturity classification as we had the intent and the ability to hold such securities to maturity. The Company’s decision was additionally influenced by the relatively low broker quotes reported when compared to the actual cash received on repayments and interest. The Company had never previously transferred securities to held to maturity, but considered this an unprecedented situation brought upon by the financial crisis in the markets. The adjusted cost basis of these securities is based on a determination of the fair value of these securities on the date they were transferred.

The fair value of each RMBS investment is determined under SFAS 157. Fair value is determined by estimating the price at which an asset might be sold on the measurement date. There has been a considerable amount of turmoil in the U.S. housing market since 2007, which has led to market declines in such securities. Because the pricing of these investments is complex and has many variables affecting price including, projected delinquency rates, projected severity rates, estimated loan to value ratios, vintage year, subordination levels, projected prepayment speeds and expected rates of return required by prospective purchasers, the estimated price of such securities will differ among brokers depending on these facts and assumptions. While many of the inputs utilized in pricing are observable, many other inputs are unobservable and will vary depending upon the broker. During periods of market dislocation, such as the current market conditions, it is increasingly difficult to value such investments because trading becomes less frequent and/or market data becomes less observable. As a result, valuations may include inputs and assumptions that are less observable or require greater estimation and judgment as well as valuation methods that are more complex. For example, assumptions regarding projected delinquency and severity rates have become increasingly pessimistic due to uncertainties associated with the residential real estate markets. Additionally, there are only a limited number of prospective purchasers of such securities and they demand high expected returns in the current market. This has resulted in lower quotes from securities dealers, who are, themselves, reluctant to position such securities because of financing uncertainties. Accordingly, the dealer quotes used to establish fair value may not be reflective of the expected future cash flows from a security and, therefore, not reflective of its intrinsic value. Additionally, there are government sponsored programs that may affect the performance of the Company’s residential mortgage-backed securities. The Company is uncertain as to the impact these programs will have on fair value on its residential mortgage backed securities. The fair value of such securities at June 30, 2009 was approximately $41.1 million.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

The Company performs a cash flow analysis for each of these securities, which attempts to estimate the likelihood of any future impairment. While the Company does not believe there are any other-than-temporary impairments (“OTTI”) currently, future estimates may change depending upon the actual performance statistics reported for each security to the Company. This may result in future charges based upon revised estimates for delinquency rates, severity or prepayment patterns. These changes in estimates may be material. These securities are collateralized by pools of “Alt-A” mortgages, and receive priority payments from these pools. The Company’s securities rank senior to subordinated tranches of debt collateralized by each respective pool of mortgages. The Company has collected all applicable interest and principal repayments on such securities to date. As of July 25, 2009, the levels of subordination ranged from 26% to 51% of the total debt outstanding for each pool. As of July 25, 2009, delinquencies within the underlying mortgage pools ranged from 25% to 47% of total amounts outstanding. In June 2008, delinquencies ranged from 8.5% to 28.4%. Delinquency rates are not the same as severity rates, or actual loss, but are an indication of the potential for losses of some degree in future periods. In each case, pool subordination levels by individual security remain in excess of pool delinquency rates as of July 25, 2009.

It is not the Company’s intention nor is it more-likely-than-not to sell the security prior to recovery. Prior to the transfer to the held to maturity classification, the Company incurred cumulative write-downs from OTTI declines in the fair value of these securities, amounting to $40.7 million in 2008. The collection of principal repayments on these securities through March 31, 2009 resulted in approximately $573,000 in realized investment gains. Under FSP FAS 115-2, effective April 1, 2009, the Company will record any future principal payments received on its residential mortgage backed securities in excess of its carrying amount as credits to other comprehensive income instead of recording the excess in the Company’s income statement. For the three months ended June 30, 2009, the Company recorded $1.0 million of principal payments received on its residential mortgage backed securities in excess of its carrying amount as a credit before income taxes to other comprehensive income.

These RMBS investments, as of December 31, 2008 were rated AAA/Aaa by S&P/Moody’s. As of June 30, 2009, these securities are rated B to AAA by S&P and Caa1 to A1 by Moody’s.

The gross unrealized gains and losses on fixed maturities held to maturity and available for sale at June 30, 2009 and December 31, 2008 are as follows:

		June 30, 2009
						OTTI				Amortized				Gross				Gross
		Amortized				Recognized				Cost after				Unrealized				Unrealized				Fair
		Cost				In OCI (a)				OTTI				Gains				Losses				Value
Residential mortgage-backed securities held to maturity		$	98,037,255			$	(39,140,815	)		$	58,896,440			$	—			$	(17,839,654	)		$	41,056,786
U.S. Treasury securities available for sale			11,193,195				—				11,193,195				439,182				—				11,632,377
Municipal obligations available for sale			113,588,298				—				113,588,298				697,576				(482,209	)			113,803,665
Corporate securities available for sale			93,891,288				—				93,891,288				2,737,415				(226,659	)			96,402,044
Totals		$	316,710,036			$	(39,140,815	)		$	277,569,221			$	3,874,173			$	(18,548,522	)		$	262,894,872

		December 31, 2008
						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair				Carrying
		Cost				Gains				Losses				Value				Value
Residential mortgage-backed securities held to maturity		$	61,246,212			$	—			$	(18,916,780	)		$	42,329,432			$	61,246,212
U.S. Treasury securities available for sale			38,917,878				1,866,091				—				40,783,969				40,783,969
Municipal obligations available for sale			97,166,677				220,718				(6,903,934	)			90,483,461				90,483,461
Corporate securities available for sale			13,317,446				395,344				(1,794	)			13,710,996				13,710,996
Totals		$	210,648,213			$	2,482,153			$	(25,822,508	)		$	187,307,858			$	206,224,638

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

(a) Effective April 1, 2009, the Company adopted a new accounting standard promulgated by the FASB (FSP FAS 115-2), which applies to the Company’s investment portfolio. The Company’s total stockholders’ equity was unchanged by adopting this new accounting standard. However, retained earnings were increased by an after tax amount of $26.1 million and accumulated comprehensive income was reduced by the same amount. These changes are attributable to a reclassification in the amount of $40.1 million of non-credit investment impairment losses previously recognized on the Company’s residential mortgage backed securities holdings that are currently being held to maturity. These securities are categorized as non-credit based on the Company’s impairment analysis. The Company will accrete from OCI to the amortized cost of the residential mortgage-backed securities over the remaining life of the residential mortgage-backed securities in a prospective manner on the basis of the amount and timing of future cash flows. The amount of the accretion for the three months ending June 30, 2009 is $1.0 million.

Net investment income (loss) from each major category of investments for the periods indicated is as follows:

		Six months ended								Three months ended
		June 30,								June 30,
		2009				2008				2009				2008
		(in millions)
Fixed maturities held to maturity		$	1.1			$	—			$	0.5			$	—
Fixed maturities available for sale			4.7				3.7				2.7				1.7
Trading securities			3.7				(11.4	)			0.7				(0.7	)
Commercial loans			1.9				(0.3	)			1.8				0.8
Equity in earnings of limited partnerships			9.2				0.6				8.0				3.7
Short-term investments			0.3				1.5				0.1				0.5
Total investment (loss) income			20.9				(5.9	)			13.8				6.0
Investment expenses			(1.2	)			(2.2	)			(0.6	)			(1.1	)
Net investment (loss) income		$	19.7			$	(8.1	)		$	13.2			$	4.9

Details related to investment income (loss) from commercial loans and trading activities presented in the preceding table are as follows:

		Six months ended								Three months ended
		June 30,								June 30,
		2009				2008				2009				2008
		(in millions)
Interest and dividends earned		$	0.7			$	6.9			$	0.3			$	4.2
Net realized losses			(0.3	)			(1.2	)			—				1.7
Net unrealized appreciation (depreciation)			5.2				(17.4	)			2.2				(5.8	)
Total investment income (loss) from commercial loans and trading activities		$	5.6			$	(11.7	)		$	2.5			$	0.1

The following tables summarize all fixed maturity securities in an unrealized loss position at June 30, 2009 and December 31, 2008, disclosing the aggregate fair value and gross unrealized loss for less than as well as more than 12 months:

		June 30, 2009
		Less than 12 months								12 months or longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Loss				Value				Loss				Value				Loss
Residential mortgage-backed securities held to maturity		$	—			$	—			$	41,056,787			$	(17,839,654	)		$	41,056,787				(17,839,654	)
Municipal obligations available for sale			61,381,937				(482,209	)			—				—				61,381,937				(482,209	)
Corporate securities available for sale			8,063,420				(226,659	)			—				—				8,063,420				(226,659	)
Total temporarily impaired securities		$	69,445,357			$	(708,868	)		$	41,056,787			$	(17,839,654	)		$	110,502,144			$	(18,548,522	)

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

		December 31, 2008
		Less than 12 months								12 months or longer								Total
		Fair				Unrealized				Fair				Unrealized				Fair				Unrealized
		Value				Loss				Value				Loss				Value				Loss
Residential mortgage-backed securities held to maturity		$	42,329,432			$	(18,916,780	)		$	—			$	—			$	42,329,432			$	(18,916,780	)
Municipal obligations available for sale			79,343,141				(6,903,934	)			—				—				79,343,141				(6,903,934	)
Corporate securities available for sale			100,068				(1,794	)			—				—				100,068				(1,794	)
Total temporarily impaired securities		$	121,772,641			$	(25,822,508	)		$	—			$	—			$	121,772,641			$	(25,822,508	)

At June 30, 2009, the Company was holding ten fixed maturity securities that were in an unrealized loss position. The Company believes these unrealized losses are temporary, as they resulted from changes in market conditions, including interest rates or sector spreads, and are not considered to be credit risk related. The Company does not intend to sell nor does it expect to be required to sell the securities outlined above.

The gross unrealized losses and fair value of debt securities that are not included in the Company’s trading portfolio at June 30, 2009 are shown below by contractual maturity. Expected maturities will differ from contractual maturities, because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Gross
		Unrealized				Fair
		Losses				Value
Due in one year or less		$	—			$	—
Due after one year through five years			(91,772	)			78,012,886
Due after five years through ten years			(503,228	)			85,937,942
Due after ten years			(113,868	)			57,887,258
			(708,868	)			221,838,086
Residential mortgage-backed securities			(17,839,654	)			41,056,787
Totals		$	(18,548,522	)		$	262,894,873

The components for net realized gains (losses) for the six months and second quarter ended June 30, 2009 and 2008 are as follows:

		Six months ended								Three months ended
		June 30,								June 30,
		2009				2008				2009				2008
		(in millions)
Realized gains (losses) on investments:
Fixed maturities gains		$	3.8			$	1.0			$	2.5			$	0.9
Fixed maturities losses			(1.9	)			—				(0.3	)			—
Fixed maturities impairments			(0.5	)			(32.4	)			(0.5	)			—
Short-term investments			(0.1	)			—				0.0				—
Net realized investment gains (losses)		$	1.3			$	(31.4	)		$	1.7			$	0.9

Proceeds from redemptions in investments held to maturity or disposals of investments available for sale for the six months ended June 30, 2009 and 2008 were $206,231,325 and $14,396,678, respectively. Gross gains of $545,363 were realized on repayments of held to maturity investments for the six months ended June 30, 2009. Gross gains of $3,794,847 and $70,458 and gross losses of $2,360,875 and $40,752 were realized on sales, maturities, repayments and/or redemptions of available for sale investments for the six months ended June 30, 2009 and 2008, respectively.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

The Company recorded declines in values of investments considered to be other-than-temporary impairment (OTTI) of $478,407 and $32,396,436 for the six months ended June 30, 2009 and 2008, respectively. The Company recorded declines in values of investments considered to be OTTI of $478,407 and $0 for the three months ended June 30, 2009 and 2008, respectively. Under FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments.” (FSP 115-2), impairment is considered to be other than temporary if an entity (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its amortized cost basis, or (3) does not expect to recover the security’s entire amortized cost basis. The OTTI of $478,407 recognized for the three months ended June 30, 2009 resulted from the Company’s intention to sell certain municipal securities whereby those securities are not expected to recover their entire amortized cost prior to sale. Credit impairment occurs under FSP 115-2 if the present value of cash flows expected to be collected from the debt security is less than the amortized cost basis of the security. There were no credit impairments recorded during the three months ended June 30, 2009. Substantially all of the other-than-temporary declines recorded during the six months ended June 30, 2008 were from the residential mortgage-backed securities portfolio. The decision to write down such securities was based upon the Company’s uncertainty at June 30, 2008 that such securities would be held until the fair value decline recovered.

The Company maintains a portfolio of municipal bonds that has an average S&P rating of AA-. The average S&P rating includes certain municipal bonds that carry the benefit of insurance that provides credit enhancement. Excluding the benefit of this credit enhancement, the portfolio of municipal bonds has an average underlying S&P rating of A+. The Company purchases municipal bonds with the intent to rely upon the underlying credit rating of the security exclusive of the credit enhancement provided by any financial guarantor.

The following table lists the financial guarantors, as well as the average S&P ratings and the average underlying S&P ratings, excluding the impact of credit enhancement, of the guaranteed municipal bonds in our investment portfolio in which there are a total of 22 municipal securities with a fair value of $108.2 million containing credit enhancements. The Company does not have any investments directly in the following financial guarantors.

Fair

Average

Average

Value

S&P

Underlying

Financial Guarantors

(in millions)

Rating

Rating

Assured Guaranty

$

12.3

AA

BBB

FGIC

0.3

AAA

AAA

FSA & FSA-CR Ambac

37.8

AA-

A

Natl-Re

46.5

AA-

A+

Natl-Re FGIC

11.3

A+

A+

Total

$

108.2

(3) Fair Value Measurements:

The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in SFAS 157. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the SFAS 157 hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The standard describes three levels of inputs that may be used to measure fair value and categorize the assets and liabilities within the hierarchy:

Level 1 —Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. These prices generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following for the measured asset/liability: i) many transactions, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid/ask spreads and v) most information publicly available.

The Company’s Level 1 assets are comprised of U.S. Treasury securities, which are highly liquid and traded in active exchange markets.

The Company uses the quoted market prices as fair value for assets classified as Level 1. The Company receives quoted market prices from a third party, a nationally recognized pricing service. Prices are obtained from available sources for market transactions involving identical assets. For the majority of Level 1 investments, the Company receives quoted market prices from an independent pricing service. The Company validates primary source prices by back testing to trade data to confirm that the pricing service’s significant inputs are observable.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

The Company also compares the prices received from the third party service to other third party sources to validate the consistency of the prices received on securities.

Level 2 —Fair value is based on significant inputs, other than Level 1 inputs, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, non-binding quotes in markets that are not active for identical or similar assets and other market observable inputs (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.).

The Company’s Level 2 assets include municipal debt obligations and corporate debt securities.

The Company generally obtains valuations from third party pricing services and/or security dealers for identical or comparable assets or liabilities by obtaining non-binding broker quotes (when pricing service information is not available) in order to determine an estimate of fair value. The Company bases all of its estimates of fair value for assets on the bid price as it represents what a third party market participant would be willing to pay in an arm’s length transaction. Prices from pricing services are validated by the Company through comparison to prices from corroborating sources and are validated by back testing to trade data to confirm that the pricing service’s significant inputs are observable. Under certain conditions, the Company may conclude the prices received from independent third party pricing services or brokers are not reasonable or reflective of market activity or that significant inputs are not observable, in which case it may choose to over-ride the third-party pricing information or quotes received and apply internally developed values to the related assets or liabilities. In such cases, those valuations would be generally classified as Level 3. Generally, the Company utilizes an independent pricing service to price its municipal debt obligations and corporate debt securities. Currently, these securities are exhibiting low trade volume. The Company considers such investments to be in the Level 2 category.

Level 3 —Fair value is based on at least one or more significant unobservable inputs that are supported by little or no market activity for the asset. These inputs reflect the Company’s understanding about the assumptions market participants would use in pricing the asset or liability.

The Company’s Level 3 assets include its RMBS (which are held to maturity) and commercial loans, as they are illiquid and trade in inactive markets. These markets are considered inactive as a result of the low level of trades of such investments.

All prices provided by primary pricing sources are reviewed for reasonableness, based on the Company’s understanding of the respective market. Prices may then be determined using valuation methodologies such as discounted cash flow models, as well as matrix pricing analyses performed on non-binding quotes from brokers or other market-makers. As of June 30, 2009, the Company utilized cash flow models, matrix pricing and non-binding broker quotes obtained from the primary pricing sources to determine the fair value of its RMBS and commercial loan investments. Because pricing of these investments is complex and has many variables affecting price including, delinquency rate, severity rate, loan to value ratios, vintage year, discount rate, subordination levels and prepayment speeds, the price of such securities will differ by broker depending on the weight given to the various inputs. While many of the inputs utilized in pricing are observable, some inputs are unobservable and the weight given these unobservable inputs will vary depending upon the broker. During periods of market dislocation, such as the current market conditions, it is increasingly difficult to value such investments because trading becomes less frequent and/or market data becomes less observable. As a result, valuations may include inputs and assumptions that are less observable or require greater estimation and judgment as well as valuation methods that are more complex. For example, prepayment speeds, delinquency rates and severity rates have become increasingly stressed by brokers due to market uncertainty connected with these types of investments resulting in lower quoted prices. These inputs are used in pricing models to assist the broker in determining a current price for these investments. After considering all of the relevant information at June 30, 2009, the Company adjusted the price received for two commercial loan investments. As such, because the establishment of fair valuation is significantly reliant upon unobservable inputs, the Company considers such investments to be in the Level 3 category.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

The following are the major categories of assets measured at fair value on a recurring basis for the period ended June 30, 2009, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3):

		Level 1:
		Quoted
		Prices in				Level 2:
		Active				Significant				Level 3:
		Markets for				Other				Significant				Total at
		Identical				Observable				Unobservable				June 30,
		Assets				Inputs				Inputs				2009
Fixed maturities available for sale		$	108,034,421			$	113,803,665			$	—			$	221,838,086
Fixed maturities trading			—				13,748,400				—				13,748,400
Commercial loans			—				—				4,287,759				4,287,759
Total		$	108,034,421			$	127,552,065			$	4,287,759			$	239,874,245

The investments classified as Level 3 in the above table consist of commercial loans, for which the Company has determined that quoted market prices of similar investments are not determinative of fair value. Since the broker quotes do not reflect current market information from actual transactions, the Company has elected to deviate from quoted prices using a matrix pricing analysis. The following table presents a reconciliation of the beginning and ending balances for all investments measured at fair value using Level 3 inputs during the six months and three months ended June 30, 2009.

		Six months ended								Three months ended
		June 30, 2009								June 30, 2009
		Commercial								Commercial
		Loans				Total				Loans				Total
Beginning balance		$	2,690,317			$	2,690,317			$	2,593,554			$	2,593,554
Total unrealized gains or losses:
Included in earnings (or changes in net assets)			1,730,526				1,730,526				1,724,387				1,724,387
Included in other comprehensive income			—				—				—				—
Purchases, sales, maturities, repayments, redemptions and amortization			(133,084	)			(133,084	)			(30,182	)			(30,182	)
Transfers from Level 3			—				—				—				—
Transfers to Level 3
Ending balance		$	4,287,759			$	4,287,759			$	4,287,759			$	4,287,759

There were no investments classified as Level 3 for the six months and three month periods ending June 30, 2008.

The Company elected the fair value option for approximately $8.3 million in commercial loans upon its adoption of SFAS 159 effective January 1, 2008. The SFAS 159 adoption did not have an impact on the Company’s results of operations, financial position or liquidity. The Company utilized the fair value election under SFAS 159 for all of its $10.3 million of commercial loan purchases during the first three months of 2008. Management believes that the use of the SFAS 159 fair value option to record commercial loan purchases was consistent with its trading objective for such investments. As such, the entire commercial loan portfolio of $4.3 million at June 30, 2009 was recorded at fair value. The amortized cost of the commercial loan portfolio at June 30, 2009 was $6.8 million. All loans are current with respect to interest payments. The Company did not utilize the fair value election under SFAS 159 for any investment purchases during the first six months of 2009.

NYMAGIC, INC.
Notes to Consolidated Financial Statements June 30, 2009 and 2008

The changes in the fair value of these debt instruments were recorded in investment income. Investment income for the six months ended June 30, 2009 reflected no realized gains or losses from sales and repayments, unrealized losses from fair value changes of $1,730,525 and interest income earned of $184,111. Investment income for the six months ended June 30, 2008 reflected realized losses from repayments of $0, unrealized losses from fair value changes of $1.1 million and interest income earned of $0.8.

(4) Income Taxes:

The Company files tax returns subject to the tax regulations of federal, state and local tax authorities. A tax benefit taken in the tax return but not in the financial statements is known as an “unrecognized tax benefit.” The Company had no unrecognized tax benefits at either June 30, 2009 or June 30, 2008. The Company’s policy is to record interest and penalties related to unrecognized tax benefits to income tax expense. The Company did not incur any interest or penalties related to unrecognized tax benefits for each of the six month periods ended June 30, 2009 and 2008.

The Company is subject to federal, state and local examinations by tax authorities for tax year 2005 and subsequent. The Company had federal, state and local deferred tax assets amounting to potential future tax benefits of approximately $29.9 million and $35.5 million at June 30, 2009 and December 31, 2008, respectively. As of June 30, 2009, the Company has recorded a valuation allowance of $14.3 million with respect to the uncertainty in the realization of capital loss carryforwards. The Company recorded tax benefits of $3.3 million as a result of the partial reversal of the deferred tax valuation allowance previously provided for capital losses. This resulted from capital gains achieved within the investment portfolio during the first six months of 2009. The Company considered various tax planning strategies to support the recoverability of existing deferred income taxes for capital loss carryforwards. This included an analysis of the timing and availability of unrealized positions in the fixed income maturity portfolio. Management believes the deferred tax asset, net of the recorded valuation allowance account, as of June 30, 2009 will more-likely-than-not be fully realized.

(5) Comprehensive Income

The Company’s comparative comprehensive income is as follows:

		Six months ended June 30,								Three months ended June 30,
		2009				2008				2009				2008
		(in thousands)
Net income (loss)		$	17,682			$	(34,494	)		$	14,204			$	(4,746	)
Other comprehensive (loss) income, net of deferred taxes:
Unrealized holding (losses) gains on securities, net of deferred tax expense (benefit) of $1,376, $(8,992), $(12,323) and $2,228			5,775				(16,699	)			2,556				4,137
Noncredit component of other than temporarily impaired securities (a):
Held-to-maturity, net of deferred tax (benefit) of $(14,053), $0, $(14,053) and $0			(26,099	)			—				(26,099	)			—
Accretion of noncredit portion of impairment on held-to-maturity, net of deferred tax expense of $354, $0, $354 and $0			657				—				657				—
Less : reclassification adjustment for gains (losses) realized in net income, net of tax expense (benefit) of 621, $(10,973), $767 and $314			1,153				(20,378	)			1,424				583
Less : reclassification adjustment for impairment (losses) recognized in net income, net of tax (benefit) expense of $(167), $0, $(167) and $0			(311	)			—				(311	)			—
Other comprehensive (loss) income			(20,509	)			3,679				(23,999	)			3,554
Comprehensive (loss) income		$	(2,827	)		$	(30,815	)		$	(9,795	)		$	(1,192	)