Ambac Financial Group, Inc. (NYSE: AMBC) ("Ambac"), a financial
services holding company whose subsidiaries include Ambac Assurance
Corporation ("AAC") and Ambac Assurance UK Limited ("Ambac UK"),
guarantors of financial obligations in run-off , today reported a
Net Loss attributable to common stockholders of $110 million or a
net loss of $2.40 per diluted share and an Adjusted Loss(1) of $88
million or a net loss of $1.91 per diluted share for the quarter
ended December 31, 2019. This compares to Net Income attributable
to common stockholders of $66 million or $1.41 per diluted share
and Adjusted Earnings of $77 million or $1.63 per diluted share in
the third quarter of 2019.
The results for the fourth quarter of 2019 were impacted by an
increase in loss and loss expense reserves related to Puerto Rico
and RMBS partially offset by derivative contract gains. The results
for the third quarter of 2019 were impacted by a gain recognized in
other income of $142 million received from the Citi-SEC
settlement.
Claude LeBlanc, President and Chief Executive Officer, stated,
“Our 2019 results reflect the steadfast execution of our strategic
priorities including the further stabilization of the insurance
platform through active de-risking and recovery efforts and further
deleveraging through the partial redemption of our secured debt.”
Mr. LeBlanc continued, “We intend to capitalize on this momentum in
2020 and will continue to execute on our priorities and actively
seek to identify opportunities that we believe will further our
goal of increasing long-term value for our shareholders.”
Ambac's Fourth Quarter 2019
Summary Results
Better (Worse)
($ in millions, except per share data)
4Q2019
3Q2019
Amount
Percent
Net premiums earned
$
20
$
10
$
9
88
%
Net investment income
42
45
(3
)
(7
)%
Net realized investment gains (losses)
9
18
(9
)
(49
)%
Net gains (losses) on derivative
contracts
12
(10
)
22
220
%
Other income (expense)
1
141
(140
)
(99
)%
Income (loss) on Variable Interest
Entities ("VIEs")
7
11
(4
)
(37
)%
Losses and loss expenses (benefit)
97
37
(60
)
(161
)%
Operating expenses
23
26
2
10
%
Interest expense
66
67
1
1
%
Insurance intangible amortization
15
17
2
12
%
Provision for income taxes
(1
)
3
4
127
%
Net income (loss) attributable to Common
Stockholders
(110
)
66
(176
)
(267
)%
Net income (loss) per diluted share
$
(2.40
)
$
1.41
$
(3.81
)
(270
)%
Adjusted earnings (loss) 1
(88
)
77
(164
)
(214
)%
Adjusted earnings (loss) per diluted share
1
$
(1.91
)
$
1.63
$
(3.54
)
(217
)%
Total Ambac Financial Group, Inc.
stockholders' equity
1,477
1,569
(92
)
(6
)%
Total Ambac Financial Group, Inc.
stockholders' equity per share
$
32.41
$
34.44
$
(2.03
)
(6
)%
Adjusted book value 1
1,313
1,381
(67
)
(5
)%
Adjusted book value per share 1
$
28.83
$
30.31
$
(1.48
)
(5
)%
Weighted-average diluted shares
outstanding (in millions)
46
47
1
2
%
Ambac's 2019 Summary
Results
Better (Worse)
($ in millions, except per share data)
2019
2018
Amount
Percent
Net premiums earned
$
66
$
111
$
(45
)
(41
)%
Net investment income
227
273
(45
)
(17
)%
Net realized investment gains (losses)
81
112
(31
)
(28
)%
Net gains (losses) on derivative
contracts
(50
)
7
(57
)
(809
)%
Other income (expense)
134
5
129
2,630
%
Income (loss) on Variable Interest
Entities ("VIEs")
38
3
34
993
%
Losses and loss expenses (benefit)
13
(224
)
(236
)
(106
)%
Operating expenses
103
112
9
8
%
Interest expense
269
242
(26
)
(11
)%
Insurance intangible amortization
295
107
(188
)
(175
)%
Provision for income taxes
32
5
(27
)
(532
)%
Net income (loss)
(216
)
267
(483
)
(181
)%
Net income (loss) attributable to Common
Stockholders
(216
)
186
(401
)
(216
)%
Net income (loss) per diluted share
$
(4.69
)
$
3.99
$
(8.68
)
(218
)%
Adjusted earnings (loss) 1
66
301
(235
)
(78
)%
Adjusted earnings (loss) per diluted share
1
$
1.44
$
6.47
$
(5.03
)
(78
)%
Total Ambac Financial Group, Inc.
stockholders' equity
1,477
1,592
(115
)
(7
)%
Total Ambac Financial Group, Inc.
stockholders' equity per share
$
32.41
$
35.12
$
(2.71
)
(8
)%
Adjusted book value 1
1,313
1,251
63
5
%
Adjusted book value per share 1
$
28.83
$
27.58
$
1.25
5
%
Weighted-average diluted shares
outstanding (in millions)
46
47
1
1
%
(1) See Non-GAAP Financial Data
section of this press release for further information
(2) Some financial data in this press
release may not add up due to rounding
Net Premiums Earned
During the fourth quarter of 2019, net premiums earned were $20
million compared to $10 million in the third quarter of 2019,
including accelerated premiums earned of $2 million in both the
fourth and third quarters of 2019. Normal premiums earned increased
$9 million or 109% to $18 million during the fourth quarter of 2019
from $9 million in the third quarter of 2019 primarily due to a
reduction in the allowance for uncollectable premiums partially
offset by a continued reduction of the insured portfolio.
Net Investment Income and Net Realized Investment
Gains
Net investment income for the fourth quarter of 2019 and the
third quarter of 2019 was $42 million and $45 million,
respectively. Net realized investment gains were $9 million for the
fourth quarter, primarily driven by gains from the sale of
restructured COFINA bonds, partially offset by foreign exchange
losses. Net realized investment gains of $18 million for the third
quarter of 2019 were primarily due to foreign exchange gains and
the gains from the sale of restructured COFINA bonds.
Losses and Loss Expenses and Loss Reserves
Losses and loss expenses for the fourth quarter of 2019 were $97
million, compared to $37 million for the third quarter of 2019.
The following table provides losses and loss expenses incurred
(benefit) by bond type for the three-month periods ended December
31, 2019 and September 30, 2019:
Three Months Ended
($ in millions)
December 31, 2019
September 30, 2019
RMBS
$
40
$
(25
)
Domestic public finance
54
77
Student loan
5
(16
)
Ambac UK and other credits
(2
)
—
Total losses and loss expenses
$
97
$
37
RMBS losses and loss expenses were $40 million in the fourth
quarter of 2019, as a result of loss expenses incurred and a
reduction to estimated representation and warranty subrogation
recoveries. RMBS losses and loss expense benefit of $25 million in
the third quarter of 2019 was primarily driven by higher levels of
expected excess spread resulting from lower interest rates.
Domestic public finance losses and loss expenses were an expense
of $54 million in the fourth quarter of 2019 due primarily to an
increase in Puerto Rico reserves and higher related loss expenses,
partially offset by the impact of higher interest rates. In the
third quarter of 2019, domestic public finance losses and loss
expenses were $77 million due primarily to an increase in Puerto
Rico reserves driven mostly by lower discount rates, in addition to
assumption changes and higher loss expenses. During the fourth
quarter of 2019 losses and loss expenses paid (net of reinsurance)
were $19 million which included $44 million of loss and expense
payments, partially offset by $26 million of subrogation received.
During the third quarter of 2019, losses and loss expenses paid
(net of reinsurance) were $105 million which included $133 million
of loss and expense payments, partially offset by $29 million of
subrogation received.
Loss and loss expense reserves (gross of reinsurance) were
$(482) million at December 31, 2019, and $(560) million at
September 30, 2019, which were net of $1.727 billion and $1.755
billion, respectively, of estimated subrogation recoveries related
to AAC's pursuit of legal remedies to seek redress for breaches of
RMBS representations and warranties.
The following table provides loss and loss expense reserves
(gross of reinsurance) by bond type at December 31, 2019, and
September 30, 2019:
($ in millions)
December 31, 2019
September 30, 2019
RMBS
$
(1,392
)
$
(1,419
)
Domestic public finance
627
580
Student loans
208
202
Ambac UK and other credits
3
4
Loss expenses
73
73
Total loss and loss expense reserves
$
(482
)
$
(560
)
Net Gains (Losses) on Derivative Contracts
Net gains on derivative contracts of $12 million for the fourth
quarter of 2019 was driven by the impact of increases in forward
interest rates on interest rate derivatives and fair value gains as
counterparty credit adjustments declined. Net losses on derivative
contracts of $10 million for the third quarter of 2019 were
primarily due to the impact of decreases in forward interest rates
on interest rate derivatives and higher counterparty credit
adjustments. The interest rate derivatives portfolio is positioned
to benefit from rising interest rates as a partial economic hedge
against interest rate exposure in AAC's insured and investment
portfolios.
Expenses
Operating expenses for the fourth quarter of 2019 decreased by
$2 million to $23 million from $26 million in the third quarter of
2019. The decrease in the fourth quarter of 2019 was primarily due
to severance costs related to staff reductions in the third quarter
of 2019 and lower occupancy costs due to the New York headquarter
relocation during the fourth quarter of 2019.
Interest expense for the fourth quarter of 2019 decreased $1
million to $66 million from $67 million in the third quarter of
2019. Interest expense will be reduced in future quarters as
settlement proceeds received of $142 million during the third
quarter of 2019 were used to partially redeem the Ambac Note during
the fourth quarter of 2019.
Taxes
Income tax benefit of $1 million for the fourth quarter of 2019
and Income tax expense of $3 million for the third quarter of 2019,
were primarily driven by foreign taxes for both periods.
Total Ambac Financial Group, Inc. Stockholders'
Equity
Stockholders’ equity at December 31, 2019, decreased 6% to $1.48
billion, or $32.41 per share compared to $1.57 billion or $34.44
per share as of September 30, 2019, primarily driven by the net
loss of $110 million and unrealized losses on securities of $38
million, partially offset by foreign currency translation gains of
$54 million.
Financial Guarantee Insured Portfolio
The financial guarantee insurance portfolio net par amount
outstanding declined 2.4% during the quarter ended December 31,
2019, to $38.0 billion from $39.0 billion at September 30,
2019.
The public finance insured portfolio decreased $1.1 billion
primarily due to natural runoff and active de-risking activities,
the structured finance portfolio decreased $0.3 billion primarily
related to natural runoff and the international insured portfolio
increased $0.5 billion primarily due to a strengthening of the
British Pound, partially offset by natural run-off.
Adversely Classified and Watch List Credits decreased in the
fourth quarter of 2019 by $1.4 billion or 8.9% to $14.3 billion at
December 31, 2019, from $15.7 billion at September 30, 2019, mainly
due to de-risking activity and natural runoff.
Details of financial guarantee insurance portfolio are
highlighted in the below table.
Net Par Outstanding
December 31, 2019
September 30, 2019
By Sector:
Public finance
46
%
48
%
Structured Finance
20
%
20
%
International
34
%
32
%
By Financial Guarantor:
Ambac Assurance
69
%
71
%
Ambac UK
31
%
29
%
Non-GAAP Financial Data
In addition to reporting Ambac’s quarterly financial results in
accordance with GAAP, the Company reports two non-GAAP financial
measures: Adjusted Earnings and Adjusted Book Value. The most
directly comparable GAAP measures are net income attributable to
common stockholders for Adjusted earnings and Total Ambac Financial
Group, Inc. stockholders’ equity for Adjusted Book value. A
non-GAAP financial measure is a numerical measure of financial
performance or financial position that excludes (or includes)
amounts that are included in (or excluded from) the most directly
comparable measure calculated and presented in accordance with
GAAP. We are presenting these non-GAAP financial measures because
they provide greater transparency and enhanced visibility into the
underlying drivers of our business. Adjusted Earnings and Adjusted
Book Value are not substitutes for the Company’s GAAP reporting,
should not be viewed in isolation and may differ from similar
reporting provided by other companies, which may define non-GAAP
measures differently.
Ambac has a significant U.S. tax net operating loss (“NOL”) that
is offset by a full valuation allowance in the GAAP consolidated
financial statements. As a result of this and other considerations,
we utilized a 0% effective tax rate for non-GAAP adjustments; which
is subject to change.
The following paragraphs define each non-GAAP financial measure
and describe why it is useful. A reconciliation of the non-GAAP
financial measure and the most directly comparable GAAP financial
measure is also presented below.
Adjusted Earnings (Loss).
Adjusted Earnings (Loss) is defined as net income (loss)
attributable to common stockholders, as reported under GAAP,
adjusted on an after-tax basis for the following:
- Non-credit impairment fair value (gain) loss on credit
derivatives: Elimination of the non-credit impairment fair value
gains (losses) on credit derivatives, which is the amount in excess
of the present value of the expected estimated credit losses. Such
fair value adjustments are affected by, and in part fluctuate with,
changes in market factors such as interest rates and credit
spreads, including the market’s perception of Ambac’s credit risk
(“Ambac CVA”), and are not expected to result in an economic gain
or loss. These adjustments allow for all financial guarantee
contracts to be accounted for consistent with the Financial
Services – Insurance Topic of ASC, whether or not they are subject
to derivative accounting rules.
- Insurance intangible amortization: Elimination of the
amortization of the financial guarantee insurance intangible asset
that arose as a result of the implementation of Fresh Start
reporting. These adjustments ensure that all financial guarantee
contracts are accounted for consistent with the provisions of the
Financial Services – Insurance Topic of the ASC.
- Foreign exchange (gains) losses: Elimination of the foreign
exchange gains (losses) on the re-measurement of assets,
liabilities and transactions in non-functional currencies. This
adjustment eliminates the foreign exchange gains (losses) on all
assets, liabilities and transactions in non-functional currencies,
which enables users of our financial statements to better view the
business results without the impact of fluctuations in foreign
currency exchange rates and facilitates period-to-period
comparisons of Ambac's operating performance.
Adjusted Loss was $88 million, or $1.91 per diluted share, for
the fourth quarter 2019 as compared to Adjusted Earnings of $77
million or $1.63 per diluted share, for the third quarter of
2019.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Earnings
(Loss), for the three-month periods ended December 31, 2019, and
September 30, 2019, respectively:
Three Months Ended
December 31, 2019
September 30, 2019
($ in millions, other than per share
data)
$ Amount
Per Diluted Share
$ Amount
Per Diluted Share
Net income (loss) attributable to
common stockholders
$
(110
)
$
(2.40
)
$
66
$
1.41
Adjustments:
Non-credit impairment fair value (gain)
loss on credit derivatives
—
—
—
(0.01
)
Insurance intangible amortization
15
0.33
17
0.37
Foreign exchange (gains) losses
7
0.16
(6
)
(0.14
)
Adjusted Earnings (loss)
$
(88
)
$
(1.91
)
$
77
$
1.63
Weighted-average diluted shares
outstanding (in millions)
46.0
47.0
Adjusted Book Value.
Adjusted Book Value is defined as Total Ambac Financial Group, Inc.
stockholders’ equity as reported under GAAP, adjusted for after-tax
impact of the following:
- Non-credit impairment fair value losses on credit derivatives:
Elimination of the non-credit impairment fair value loss on credit
derivatives, which is the amount in excess of the present value of
the expected estimated economic credit loss. GAAP fair values are
affected by, and in part fluctuate with, changes in market factors
such as interest rates, credit spreads, including Ambac’s CVA that
are not expected to result in an economic gain or loss. These
adjustments allow for all financial guarantee contracts to be
accounted for within Adjusted Book Value consistent with the
provisions of the Financial Services—Insurance Topic of the ASC,
whether or not they are subject to derivative accounting
rules.
- Insurance intangible asset: Elimination of the financial
guarantee insurance intangible asset that arose as a result of
Ambac’s emergence from bankruptcy and the implementation of Fresh
Start reporting. This adjustment ensures that all financial
guarantee contracts are accounted for within Adjusted Book Value
consistent with the provisions of the Financial Services—Insurance
Topic of the ASC.
- Net unearned premiums and fees in excess of expected losses:
Addition of the value of the unearned premium revenue ("UPR") on
financial guarantee contracts, in excess of expected losses, net of
reinsurance. This non-GAAP adjustment presents the economics of UPR
and expected losses for financial guarantee contracts on a
consistent basis. In accordance with GAAP, stockholders’ equity
reflects a reduction for expected losses only to the extent they
exceed UPR. However, when expected losses are less than UPR for a
financial guarantee contract, neither expected losses nor UPR have
an impact on stockholders’ equity. This non-GAAP adjustment adds
UPR in excess of expected losses, net of reinsurance, to
stockholders’ equity for financial guarantee contracts where
expected losses are less than UPR.
- Net unrealized investment (gains) losses in Accumulated Other
Comprehensive Income: Elimination of the unrealized gains and
losses on the Company’s investments that are recorded as a
component of accumulated other comprehensive income (“AOCI”). The
AOCI component of the fair value adjustment on the investment
portfolio may differ from realized gains and losses ultimately
recognized by the Company based on the Company’s investment
strategy. This adjustment only allows for such gains and losses in
Adjusted Book Value when realized.
Adjusted Book Value was $1.31 billion, or $28.83 per share, at
December 31, 2019, as compared to $1.38 billion, or $30.31 per
share, at September 30, 2019. The decrease in Adjusted Book Value
for the fourth quarter of 2019 was primarily attributable to the
Adjusted Loss (net of earned premium) and premiums ceded under a
new reinsurance transaction, partially offset by the impact of
changes in foreign exchange rates.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure Adjusted Book Value as
of each date presented:
December 31, 2019
September 30, 2019
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Total AFGI Stockholders' Equity
(Deficit)
$
1,477
$
32.41
$
1,569
$
34.44
Adjustments:
Non-credit impairment fair value losses on
credit derivatives
—
0.01
—
0.01
Insurance intangible asset
(427
)
(9.37
)
(434
)
(9.52
)
Net unearned premiums and fees in excess
of expected losses
414
9.09
434
9.52
Net unrealized investment (gains) losses
in Accumulated Other Comprehensive Income
(151
)
(3.31
)
(189
)
(4.14
)
Adjusted book value
$
1,313
$
28.83
$
1,381
$
30.31
Shares outstanding (in millions)
45.6
45.6
Earnings Call and Webcast
On March 3, 2020 at 8:30am ET, Claude LeBlanc, President and
Chief Executive Officer, and David Trick, Executive Vice President
and Chief Financial Officer, will discuss fourth quarter 2019
results during a conference call. A live audio webcast of the call
will be available through the Investor Relations section of Ambac’s
website, http://ir.ambac.com/events-and-presentations/events.
Participants may also listen via telephone by dialing (877)
407-9716 (Domestic) or (201) 493-6779 (International).
The webcast will be archived on Ambac's website. A replay of the
call will be available through March 17, 2020, and can be accessed
by dialing (Domestic) (844) 512-2921 or (International) (412)
317-6671; and using ID# 13698844
Additional information is included in an operating supplement
and presentations at Ambac's website at www.ambac.com.
About Ambac
Ambac Financial Group, Inc. (“Ambac” or “AFG”), headquartered in
New York City, is a financial services holding company whose
subsidiaries include Ambac Assurance Corporation and Ambac
Assurance UK Limited, guarantors of financial obligations in
run-off. Ambac’s common stock trades on the New York Stock Exchange
under the symbol “AMBC”. The Amended and Restated Certificate of
Incorporation of Ambac contains substantial restrictions on the
ability to transfer Ambac’s common stock. Subject to limited
exceptions, any attempted transfer of common stock shall be
prohibited and void to the extent that, as a result of such
transfer (or any series of transfers of which such transfer is a
part), any person or group of persons shall become a holder of 5%
or more of Ambac’s common stock or a holder of 5% or more of
Ambac’s common stock increases its ownership interest. Ambac is
committed to providing timely and accurate information to the
investing public, consistent with our legal and regulatory
obligations. To that end, we use our website to convey information
about our businesses, including the anticipated release of
quarterly financial results, quarterly financial, statistical and
business-related information, and the posting of updates to the
status of certain residential mortgage backed securities
litigations. For more information, please go to www.ambac.com.
Forward-Looking Statements
In this press release, statements that may constitute
“forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Words such as “estimate,” “project,” “plan,” “believe,”
“anticipate,” “intend,” “planned,” “potential” and similar
expressions, or future or conditional verbs such as “will,”
“should,” “would,” “could,” and “may,” or the negative of those
expressions or verbs, identify forward-looking statements. We
caution readers that these statements are not guarantees of future
performance. Forward-looking statements are not historical facts
but instead represent only our beliefs regarding future events,
which may by their nature be inherently uncertain and some of which
may be outside our control. These statements may relate to plans
and objectives with respect to the future, among other things which
may change. We are alerting you to the possibility that our actual
results may differ, possibly materially, from the expected
objectives or anticipated results that may be suggested, expressed
or implied by these forward-looking statements. Important factors
that could cause our results to differ, possibly materially, from
those indicated in the forward-looking statements include, among
others, those discussed under “Risk Factors” in our most recent SEC
filed quarterly or annual report.
Any or all of management’s forward-looking statements here or in
other publications may turn out to be incorrect and are based on
management’s current belief or opinions. Ambac’s actual results may
vary materially, and there are no guarantees about the performance
of Ambac’s securities. Among events, risks, uncertainties or
factors that could cause actual results to differ materially are:
(1) the highly speculative nature of Ambac’s common stock and
volatility in the price of Ambac’s common stock; (2) uncertainty
concerning the Company’s ability to achieve value for holders of
its securities, whether from Ambac Assurance Corporation ("Ambac
Assurance") and its subsidiaries or from transactions or
opportunities apart from Ambac Assurance and its subsidiaries,
including new business initiatives; (3) changes in Ambac
Assurance’s estimated representation and warranty recoveries or
loss reserves over time; (4) failure to recover claims paid on
Puerto Rico exposures or incurrence of losses in amounts higher
than expected; (5) adverse effects on Ambac’s share price resulting
from future offerings of debt or equity securities that rank senior
to Ambac’s common stock; (6) potential of rehabilitation
proceedings against Ambac Assurance; (7) dilution of current
shareholder value or adverse effects on Ambac’s share price
resulting from the issuance of additional shares of common stock;
(8) inadequacy of reserves established for losses and loss expenses
and possibility that changes in loss reserves may result in further
volatility of earnings or financial results; (9) increased fiscal
stress experienced by issuers of public finance obligations or an
increased incidence of Chapter 9 filings or other restructuring
proceedings by public finance issuers, including an increased risk
of loss on revenue bonds of distressed public finance issuers due
to recent judicial decisions adverse to revenue bond holders; (10)
the Company's inability to realize the expected recoveries included
in its financial statements; (11) insufficiency or unavailability
of collateral to pay secured obligations; (12) credit risk
throughout the Company’s business, including but not limited to
credit risk related to residential mortgage-backed securities,
student loan and other asset securitizations, public finance
obligations (including obligations of the Commonwealth of Puerto
Rico and its instrumentalities and agencies) and exposures to
reinsurers; (13) credit risks related to large single risks, risk
concentrations and correlated risks; (14) the risk that the
Company’s risk management policies and practices do not anticipate
certain risks and/or the magnitude of potential for loss; (15)
risks associated with adverse selection as the Company’s insured
portfolio runs off; (16) adverse effects on operating results or
the Company’s financial position resulting from measures taken to
reduce risks in its insured portfolio; (17) disagreements or
disputes with Ambac Assurance's primary insurance regulator; (18)
our inability to mitigate or remediate losses, commute or reduce
insured exposures or achieve recoveries or investment objectives,
or the failure of any transaction intended to accomplish one or
more of these objectives to deliver anticipated results; (19) the
Company’s substantial indebtedness could adversely affect its
financial condition and operating flexibility; (20) the Company may
not be able to obtain financing or raise capital on acceptable
terms or at all due to its substantial indebtedness and financial
condition; (21) the Company may not be able to generate the
significant amount of cash needed to service its debt and financial
obligations, and may not be able to refinance its indebtedness;
(22) restrictive covenants in agreements and instruments may impair
the Company’s ability to pursue or achieve its business strategies;
(23) loss of control rights in transactions for which we provide
insurance due to a finding that Ambac Assurance has defaulted; (24)
the impact of catastrophic environmental or natural events on
significant portions of our insured portfolio; (25) adverse tax
consequences or other costs resulting from the characterization of
the Company’s surplus notes or other obligations as equity; (26)
risks attendant to the change in composition of securities in the
Company’s investment portfolio; (27) changes in prevailing interest
rates; (28) the expected discontinuance of the London Inter-Bank
Offered Rate; (29) factors that may influence the amount of
installment premiums paid to the Company; (30) default by one or
more of Ambac Assurance's portfolio investments, insured issuers or
counterparties; (31) market risks impacting assets in the Company’s
investment portfolio or the value of our assets posted as
collateral in respect of interest rate swap transactions; (32)
risks relating to determinations of amounts of impairments taken on
investments; (33) the risk of litigation and regulatory inquiries
or investigations, and the risk of adverse outcomes in connection
therewith, which could have a material adverse effect on the
Company’s business, operations, financial position, profitability
or cash flows; (34) actions of stakeholders whose interests are not
aligned with broader interests of the Company's stockholders; (35)
system security risks, data protection breaches and cyber attacks;
(36) changes in accounting principles or practices that may impact
the Company’s reported financial results; (37) the economic impact
of “Brexit”; (38) operational risks, including with respect to
internal processes, risk and investment models, systems and
employees, and failures in services or products provided by third
parties; (39) the Company’s financial position that may prompt
departures of key employees and may impact the Company’s ability to
attract qualified executives and employees; (40) fluctuations in
foreign currency exchange rates could adversely impact the insured
portfolio in the event of loss reserves or claim payments
denominated in a currency other than US dollars and the value of
non-US dollar denominated securities in our investment portfolio;
and (41) other risks and uncertainties that have not been
identified at this time.
AMBAC FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of
Income (Loss) (Unaudited)
Three Months Ended
($ in millions, except share
data)
December 31, 2019
September 30, 2019
Revenues:
Net premiums earned
$
20
$
10
Net investment income:
Securities available-for-sale and
short-term
34
36
Other investments
7
8
Total net investment income
42
45
Net other-than-temporary impairment losses
recognized in earnings
—
—
Net realized investment gains (losses)
9
18
Net gains (losses) on derivative
contracts
12
(10
)
Other income
1
141
Income on variable interest entities
7
11
Total revenues
91
216
Expenses:
Losses and loss expense
97
37
Insurance intangible amortization
15
17
Operating expenses
23
26
Interest expense
66
67
Total expenses
202
147
Pre-tax income (loss)
(111
)
69
Provision for income taxes
(1
)
3
Net income (loss) attributable to
common stockholders
$
(110
)
$
66
Net income (loss) per basic
share
$
(2.40
)
$
1.44
Net income (loss) per diluted
share
$
(2.40
)
$
1.41
Weighted-average number of common
shares outstanding:
Basic
46,001,270
45,997,694
Diluted
46,001,270
47,020,058
AMBAC FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Statements of
Income (Loss) (Unaudited)
Year Ended December
31,
($ in millions, except share
data)
2019
2018
Revenues:
Net premiums earned
$
66
$
111
Net investment income:
Securities available-for-sale and
short-term
196
271
Other investments
32
2
Total net investment income
227
273
Net other-than-temporary impairment losses
recognized in earnings
—
(3
)
Net realized investment gains
81
112
Net gains (losses) on derivative
contracts
(50
)
7
Net realized gains on extinguishment of
debt
—
3
Other income
134
5
Income on variable interest entities
38
3
Total revenues
496
511
Expenses:
Losses and loss expense (benefit)
13
(224
)
Insurance intangible amortization
295
107
Operating expenses
103
112
Interest expense
269
242
Total expenses
680
238
Pre-tax income (loss)
(183
)
273
Provision for income taxes
32
5
Net income (loss)
$
(216
)
$
267
Less: loss on exchange of auction market
preferred shares
—
82
Net income (loss) attributable to
common stockholders
$
(216
)
$
186
Net income (loss) per basic
share
$
(4.69
)
$
4.07
Net income (loss) per diluted
share
$
(4.69
)
$
3.99
Weighted-average number of common
shares outstanding:
Basic
45,954,908
45,665,883
Diluted
45,954,908
46,559,835
AMBAC FINANCIAL GROUP, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in millions, except share
data)
December 31, 2019
September 30, 2019
Assets:
Investments:
Fixed income securities, at fair value
(amortized cost: $2,450 and $2,561)
$
2,577
$
2,727
Fixed income securities pledged as
collateral, at fair value (amortized cost: $85 and $85)
85
85
Short-term investments, at fair value
(amortized cost: $653 and $664)
653
664
Other investments (includes $432 and $418
at fair value)
478
462
Total investments
3,792
3,939
Cash and cash equivalents
24
52
Restricted cash
55
13
Premium receivables
416
415
Reinsurance recoverable on paid and unpaid
losses
26
26
Deferred ceded premium
82
76
Subrogation recoverable
2,029
2,082
Derivative assets
75
82
Current taxes
11
20
Insurance intangible asset
427
434
Other assets
95
113
Variable interest entity assets:
Fixed income securities, at fair value
3,121
3,159
Restricted cash
2
3
Loans, at fair value
3,108
2,966
Derivative assets
52
68
Other assets
3
4
Total assets
$
13,320
$
13,451
Liabilities and Stockholders’
Equity:
Liabilities:
Unearned premiums
$
518
$
528
Loss and loss expense reserves
1,548
1,522
Ceded premiums payable
29
30
Deferred taxes
32
30
Long-term debt
2,822
2,955
Accrued interest payable
441
424
Derivative liabilities
90
103
Other liabilities
93
95
Variable interest entity liabilities:
Accrued interest payable
1
3
Long-term debt (includes $4,351 and $4,151
at fair value)
4,554
4,353
Derivative liabilities
1,657
1,779
Total liabilities
11,783
11,822
Stockholders’ equity:
Preferred stock, par value $0.01 per
share; 20,000,000 shares authorized; issued and outstanding
shares—none
—
—
Common stock, par value $0.01 per share;
130,000,000 shares authorized; issued: 45,571,743 and
45,571,743
—
—
Additional paid-in capital
232
229
Accumulated other comprehensive income
42
26
Retained earnings
1,203
1,313
Treasury stock, shares at cost: 16,343 and
20,483
—
—
Total Ambac Financial Group, Inc.
stockholders’ equity
1,477
1,569
Noncontrolling interest
60
60
Total stockholders’ equity
1,536
1,629
Total liabilities and stockholders’
equity
$
13,320
$
13,451
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200302006014/en/
Lisa A. Kampf Managing Director, Investor Relations (212)
208-3177 lkampf@ambac.com
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