Question-and-Answer Session
Thank you sir. [Operator Instructions]. And we will take our first question today from Andrew Kligerman of UBS.
Andrew Kligerman - UBS Securities
Okay. The initial question is with regard to the diskette in front of me. Your $193 million pretax, pre-DAC, gross losses from right down to impairment. I am not a 100% clear on pieces of this, so you designed one piece as financial institution, another as structured products with exposures to financial spreads, I think you were referring something equity related. Could you break out each of those three pieces spread specified in your press release and maybe even give us a sense of the magnitude of the losses there.
Frederick J. Crawford - Chief Financial Officer
Absolutely Andrew. Let me break apart the $193 million as follows. First of all, we did take impairment on what I would call pure financial? exposures to pure financials, meaning direct holdings in financial institutions of about, just shy of $36 million pretax and DAC. Those? that included names like Northern Rock where we had some exposure, Res Cap or Residential Capital Corp., just to name a couple of the more significant in that pool securities.
Andrew Kligerman - UBS Securities
These are equity holdings or?
Frederick J. Crawford - Chief Financial Officer
No, no. no. These are the debt holdings direct to institutions so?
Andrew Kligerman - UBS Securities
Okay. Got it.
Frederick J. Crawford - Chief Financial Officer
So this is just direct debt exposure to financials. The second major category which also was around $35 million pretax would be exposure to subprime and Alt-A related collateral, securities backed by subprime and Alt-A related collateral. And it was a mixture of facilities, no particular piece of it significant and tended to be of the lower rated tranches, where we had holdings and some CDO holdings albeit very, very small. By lower rating, meaning more on that BBB to single A category, that is lower than the AA, AAA type holdings that makes up the predominant amount of our holdings, again about $35 million.
The biggest piece of it and where you may have some level of confusion in understanding what it is? our structured securities that were the underlying collateral is essentially preferred stock issued by financials. That was about $110 million pretax and what these are. This is a conduit that essentially holds preferred stock issued by large and typically highly rated financial institutions that includes for example, names like Freddie and Fannie as well as Goldman, Merrill Lynch and some others. These preferred stock holdings issue certificates out to investors, both A certificates and B certificates. The A certificate are issued into the asset backed commercial paper market, and the B certificates are what we hold as an investor. What has impaired these securities effectively is the liquidity issues involved in the asset backed commercial paper market, because our cash flows on these securities come after payment to the asset backed security holders. Any lack of liquidity and increased pricing of roll over, impacts our coupons, impacts the dividends we receive on these securities, and that has lowered the underlying pricing of these structured products to a point to where we felt it necessary to take impairment. When I talk about there being an opportunity to recover, economically some of these holdings, it is these securities that I am predominantly focused on, because the pricing is a bit more severely impaired and predominantly due to liquidity conditions which we expect to improve over time. And so that is the color if you will Andrew on our realized losses. Hopefully that helps.
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