As of June 30, 2010, the Company's balance sheet included 24 remaining consolidated VIEs with $18.0 billion of assets and $17.8 billion of liabilities.
Net Premiums Earned
Net premiums earned for the second quarter of 2010 were $167.0 million, down 6% from $177.7 million earned in the second quarter of 2009. Net premiums earned include accelerated premiums, which result from calls, terminations and other accelerations recognized during the quarter. Accelerated premiums were $54.3 million in the second quarter of 2010, up 61% from $33.8 million in the second quarter 2009. Normal net premiums earned, which exclude accelerated premiums, were $112.7 million in the second quarter of 2010, down 22% from $143.9 million in the second quarter of 2009. Normal net premiums earned for the period have been negatively impacted by the lack of new business written and the high level of refundings and terminations over the past two and a half years, as well as non-recognition of premiums earned on VIEs that have been consolidated as a result of implementation of ASU 2009-17, effective January 1, 2010.
Net Investment Income
Net investment income for the second quarter of 2010 was $69.0 million, representing a decrease of 45% from $125.5 million in the second quarter of 2009. The decrease was primarily driven by three factors: (i) a decrease in the asset base as commutation settlements on CDO of ABS transactions (including the $2.8 billion payment in the current quarter) and claim payments on insured RMBS and other transactions over the past 12 months were greater than the cash inflows resulting from collections of financial guarantee premiums, fees, tax refunds and coupon receipts on invested assets over the same period; (ii) the average yield on the portfolio decreased as a result of maintaining a large portion of the portfolio in highly liquid short-term securities awaiting the finalization of the CDO of ABS commutation; and (iii) a reduction in interest income related to AAC-insured RMBS held in the financial guarantee investment portfolio that are subject to the payment moratorium ordered by the OCI in connection with the rehabilitation plan for the Segregated Account of AAC.