Finance Assets, net:

In 2003, PMCC ceased making new investments and began focusing exclusively on managing its portfolio of finance assets in order to maximize its operating results and cash flows from its existing lease portfolio activities and asset sales. Accordingly, PMCC’s operating companies income will fluctuate over time as investments mature or are sold.

At June 30, 2015, finance assets, net, of $1,339 million were comprised of investments in finance leases of $1,381 million, reduced by the allowance for losses of $42 million. At December 31, 2014, finance assets, net, of $1,614 million were comprised of investments in finance leases of $1,656 million, reduced by the allowance for losses of $42 million.

During the second quarter of 2015, as a result of the commencement of marketing efforts to sell certain aircraft within PMCC’s portfolio, PMCC determined that the estimated unguaranteed residual values on these aircraft should be reduced by $35 million. This decrease in unguaranteed residual values resulted in a reduction to PMCC’s net revenues of $29 million in the second quarter of 2015. There were no such adjustments for the six months ended June 30, 2014.

PMCC assesses the adequacy of its allowance for losses relative to the credit risk of its leasing portfolio on an ongoing basis. During the six months ended June 30, 2014, PMCC determined that its allowance for losses exceeded the amount required based on management’s assessment of the credit quality and size of PMCC’s leasing portfolio. As a result, for the six months ended June 30, 2014, PMCC reduced its allowance for losses by $10 million. This decrease to the allowance for losses was recorded as a reduction to marketing, administration and research costs on Altria Group, Inc.’s condensed consolidated statement of earnings. PMCC believes that, as of June 30, 2015, the allowance for losses of $42 million was adequate. PMCC continues to monitor economic and credit conditions, and the individual situations of its lessees and their respective industries, and may increase or decrease its allowance for losses if such conditions change in the future.

The activity in the allowance for losses on finance assets for the six months ended June 30, 2015 and 2014 was as follows:



	For the Six Months Ended June 30,
	2015		2014
	(in millions)
Balance at beginning of the year	$	42	$	52
Decrease to allowance	—		(10		)
Balance at June 30	$	42	$	42

All PMCC lessees were current on their lease payment obligations as of June 30, 2015.

The credit quality of PMCC’s investments in finance leases as assigned by Standard & Poor’s Ratings Services (“Standard & Poor’s”) and Moody’s Investors Service, Inc. (“Moody’s”) at June 30, 2015 and December 31, 2014 was as follows:



	June 30, 2015		December 31, 2014
	(in millions)
Credit Rating by Standard & Poor’s/Moody’s:
“AAA/Aaa” to “A-/A3”	$	261	$	417
“BBB+/Baa1” to “BBB-/Baa3”	725		833
“BB+/Ba1” and Lower	395		406
Total	$	1,381	$	1,656