Ambac Financial Group, Inc. (NYSE: AMBC) ("Ambac"), a financial
services holding company, today reported Net Income attributable to
common stockholders of $17 million or $0.08(1) per diluted share
and Adjusted Earnings(2) of $41 million or $0.59 per diluted share
for the quarter ended March 31, 2021. This compares to a Net Loss
attributable to common stockholders of $14 million or $0.31 per
diluted share and Adjusted Earnings of $4 million or $0.08 per
diluted share in the fourth quarter of 2020. Book Value per Share
decreased $0.55 to $23.02 and Adjusted Book Value per Share(2)
decreased $0.39 to $19.66 from December 31, 2020, to March 31,
2021.
The results for the first quarter of 2021 as compared to the
fourth quarter of 2020 were primarily driven by $37 million of
gains from junior surplus note exchanges, higher gains from
interest rate derivatives and the inclusion of Xchange's results,
partially offset by incremental Puerto Rico incurred losses.
Claude LeBlanc, President and Chief Executive Officer, stated,
“Our results for the first quarter of 2021 were positively impacted
by the advancement of our strategic priorities, particularly gains
of $37 million recognized from the junior surplus note exchanges,
which further simplified our capital structure, and the inclusion
of results from Xchange." Mr. LeBlanc continued, "During the first
quarter we also regained significant momentum towards de-risking
the insured portfolio and materially progressed our specialty
property and casualty insurance strategy, all in line with the goal
of increasing long-term value for our shareholders."
Ambac's First Quarter 2021
Summary Results
Better (Worse)
($ in millions, except per share data)
1Q2021
4Q2020
Amount
Percent
Net premiums earned
$
14
$
18
$
(4
)
(21
)
%
Net investment income
49
53
(4
)
(7
)
%
Net realized investment gains (losses)
2
2
1
32
%
Net gains (losses) on derivative
contracts
25
12
14
116
%
Net realized gains (losses) on
extinguishment of debt
33
—
33
—
%
Losses and loss expenses (benefit)
8
9
1
12
%
Operating expenses
33
26
(8
)
(30
)
%
Interest expense
50
50
—
1
%
Intangible amortization
19
16
(3
)
(19
)
%
Provision for income taxes
2
2
—
12
%
Net income (loss) attributable to Common
Stockholders
17
(14
)
31
217
%
Net income (loss) per diluted share1
$
0.08
$
(0.31
)
$
0.39
126
%
Adjusted earnings (loss) 2
41
4
37
936
%
Adjusted earnings (loss) per diluted share
2
$
0.59
$
0.08
$
0.51
638
%
Total Ambac Financial Group, Inc.
stockholders' equity
1,063
1,080
(17
)
(2
)
%
Total Ambac Financial Group, Inc.
stockholders' equity per share
$
23.02
$
23.57
$
(0.55
)
(2
)
%
Adjusted book value 2
908
919
(10
)
(1
)
%
Adjusted book value per share 2
$
19.66
$
20.05
$
(0.39
)
(2
)
%
Weighted-average diluted shares
outstanding (in millions)
47
46
(1
)
(1
)
%
(1) Per Diluted share includes the impact of adjusting the
Xchange related noncontrolling interest to current redemption value
(2) See Non-GAAP Financial Data section of this press release for
further information. (3) Some financial data in this press release
may not add up due to rounding
Net Premiums Earned
During the first quarter of 2021, net premiums earned were $14
million compared to $18 million in the fourth quarter of 2020. The
decrease in earned premium related to accelerated premiums earned
during the fourth quarter of 2020 driven by the proactive
termination of an international credit. The decline in accelerated
premiums was partially offset by an increase in normal earned
premium as a result of a change in the allowance for premiums
receivable.
Net Investment Income and Net Realized Investment
Gains
Net investment income for the first quarter of 2021 was $49
million compared to $53 million for the fourth quarter of 2020. Net
investment income includes interest and net discount accretion on
fixed maturity securities classified as available-for-sale and net
gains on pooled investment funds, including changes in fair value
of the funds' net assets.
Net investment income in the first quarter of 2021 was driven by
gains on pooled investment funds of $27 million compared to gains
of $28 million for the fourth quarter of 2020. Ambac's portfolio of
pooled funds primarily consist of investments in hedge funds,
asset-backed securities, public and private equity, high-yield
bonds, leveraged loans, emerging markets debt and private credit.
First quarter 2021 pooled fund results reflect overall strong
equity and hedge fund returns offset by emerging market debt losses
compared to the fourth quarter of 2020.
Net realized investment gains were $2 million for the first
quarter of 2021 and included a $4 million gain from AFG's exchange
of its equity interest in Corolla Trust for AAC surplus notes.
Losses and Loss Expenses and Loss Reserves
Losses and loss expenses ("Insured Losses") for the first
quarter of 2021 were $8 million, compared to $9 million for the
fourth quarter of 2020.
The following table provides Insured Losses (Benefit) by bond
type for the three-month periods ended March 31, 2021 and December
31, 2020:
Three Months Ended
($ in millions)
March 31, 2021
December 31, 2020
RMBS
$
(8
)
$
15
Domestic public finance
9
(7
)
Student loan
—
—
Ambac UK and other credits
6
1
Total losses and loss expenses
$
8
$
9
First quarter 2021 loss and loss expenses incurred included
domestic public finance insured losses of $9 million, related to an
increase in Puerto Rico reserves due to changes in assumptions that
reflect disclosures, made prior to the date hereof, of an amended
Plan Support Agreement, an Amended Plan of Adjustment, and an
agreement in principle related to certain revenue bond claims
between the Federal Oversight and Management Board and certain
creditors, partially offset by the favorable impact of higher
discount rates. The fourth quarter 2020 domestic public finance
insured benefit of $7 million was largely due to the favorable
impact of higher discount rates and positive credit developments,
partially offset by an increase in Puerto Rico reserves resulting
from assumption changes
During the first quarter of 2021 insured losses paid (net of
reinsurance) were $25 million, including $50 million of loss and
expense payments, partially offset by $25 million of subrogation
received. During the fourth quarter of 2020, insured losses paid
(net of reinsurance) were $11 million including $41 million of loss
and expense payments, partially offset by $30 million of
subrogation received. The increase in losses paid in the first
quarter relative to the fourth quarter related to claim payments on
Puerto Rico insured bonds made in the first quarter of 2021.
Loss and loss expense reserves (gross of reinsurance) were
$(414) million at March 31, 2021, and $(397) million at December
31, 2020, which were net of $1.748 billion and $1.751 billion,
respectively, of estimated subrogation recoveries related to AAC's
pursuit of legal remedies to seek redress for breaches of RMBS
representations and warranties.
The following table provides loss and loss expense reserves
(gross of reinsurance) by bond type at March 31, 2021, and December
31, 2020:
($ in millions)
March 31, 2021
December 31, 2020
RMBS
$
(1,441
)
$
(1,446
)
Domestic public finance
708
724
Student loans
235
234
Ambac UK and other credits
27
23
Loss expenses
57
68
Total loss and loss expense reserves
$
(414
)
$
(397
)
Net Gains (Losses) on Derivative Contracts
Net gains on derivative contracts of $25 million for the first
quarter of 2021 compared to $12 million for the fourth quarter of
2020 were driven by rising forward interest rates in the first
quarter. 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. Both periods also benefited from lower counterparty
credit adjustments on uncollateralized derivative assets.
Realized Gains from Extinguishment of Debt
Transactions whereby AAC acquired all of its outstanding junior
surplus notes below their carrying values, in exchange for surplus
notes, resulted in realized gains from extinguishment of debt of
$33 million recognized in the first quarter of 2021.
Other Income
Other income was $5 million for the first quarter of 2021
compared to $1 million for the fourth quarter of 2020. The increase
was due to the inclusion of commission revenues earned by Xchange
partially offset by foreign exchange losses and certain costs
related to consolidated VIEs.
Expenses
Operating expenses for the first quarter of 2021 were $33
million compared to $26 million in the fourth quarter of 2020. The
increase in operating expenses was due to the inclusion of
Xchange's operating expenses, advisor fees related to the Corolla
exchange and cyclical compensation costs.
Interest expense was $50 million in both the first quarter of
2021 and fourth quarter of 2020.
Total Ambac Financial Group, Inc. Stockholders'
Equity
Stockholders’ equity at March 31, 2021, decreased 2% to $1.06
billion, or $23.02 per share compared to $1.08 billion or $23.57
per share as of December 31, 2020, as a result of unrealized losses
on securities of $24 million and a $13 million adjustment to the
carrying value of the redeemable noncontrolling interest recorded
with an offsetting reduction to retained earnings, partially offset
by net income of $17 million and an increase in foreign exchange
translation gains of $6 million.
Financial Guarantee Insured Portfolio
The financial guarantee insurance portfolio net par amount
outstanding declined 7.2% during the quarter ended March 31, 2021,
to $31.4 billion from $33.9 billion at December 31, 2020.
The public finance insured portfolio decreased $1.6 billion due
to active de-risking and natural runoff. The structured finance
insured portfolio decreased $0.3 billion and the international
insured portfolio decreased $0.6 billion primarily due to natural
runoff.
Adversely Classified and Watch List Credits decreased in the
first quarter of 2021 by $1.0 billion or 7.9% to $12.1 billion at
March 31, 2021, from $13.2 billion at December 31, 2020, due to
de-risking activity and natural runoff.
Details of financial guarantee insurance portfolio are
highlighted in the below table.
Net Par Outstanding
March 31, 2021
December 31, 2020
By Sector:
Public finance
44
%
45
%
Structured Finance
19
%
19
%
International
37
%
36
%
By Financial Guarantor:
Ambac Assurance
66
%
67
%
Ambac UK
34
%
33
%
Non-GAAP Financial Data
In addition to reporting Ambac’s quarterly financial results in
accordance with GAAP, the Company currently 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 Ambac’s emergence from bankruptcy and the
implementation of Fresh Start reporting. This adjustment ensures
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
results without the impact of fluctuations in foreign currency
exchange rates and facilitates period-to-period comparisons of
Ambac's operating performance.
Adjusted Earnings was $41 million, or $0.59 per diluted share,
for the first quarter 2021 as compared to Adjusted Earnings of $4
million or $0.08 per diluted share, for the fourth quarter of
2020.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Earnings
(Loss), for the three-month periods ended March 31, 2021, and
December 31, 2020, respectively:
Three Months Ended
March 31, 2021
December 31, 2020
($ in millions, other than per share
data)
$ Amount
Per Diluted Share (1)
$ Amount
Per Diluted Share
Net income (loss) attributable to
common stockholders
$
17
$
0.08
$
(14
)
$
(0.31
)
Adjustments:
Non-credit impairment fair value (gain)
loss on credit derivatives
—
—
(1
)
(0.01
)
Insurance intangible amortization
19
0.40
16
0.34
Foreign exchange (gains) losses
5
0.11
3
0.06
Adjusted Earnings (loss)
$
41
$
0.59
$
4
$
0.08
Weighted-average diluted shares
outstanding (in millions)
46.9
46.2
1 Per Diluted share includes the impact of adjusting the Xchange
related noncontrolling interest to current redemption value
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.
- 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.
- 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 $0.91 billion, or $19.66 per share, at
March 31, 2021, as compared to $0.92 billion, or $20.05 per share,
at December 31, 2020. The decrease in Adjusted Book Value for the
first quarter of 2021 was primarily attributable to the reduction
to retained earnings resulting from the adjustment to the carrying
value of the redeemable noncontrolling interest in Xchange and the
impact on expected future premiums from reinsurance and de-risking
transactions, partially offset by Adjusted Earnings (net of earned
premium).
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure Adjusted Book Value as
of each date presented:
March 31, 2021
December 31, 2020
($ in millions, other than per share
data)
$ Amount
Per Share
$ Amount
Per Share
Total AFGI Stockholders' Equity
(Deficit)
$
1,063
$
23.02
$
1,080
$
23.57
Adjustments:
Non-credit impairment fair value losses on
credit derivatives
—
0.01
—
0.01
Insurance intangible asset
(356
)
(7.71
)
(373
)
(8.14
)
Net unearned premiums and fees in excess
of expected losses
343
7.42
378
8.24
Net unrealized investment (gains) losses
in Accumulated Other Comprehensive Income
(142
)
(3.08
)
(166
)
(3.63
)
Adjusted book value
$
908
$
19.66
$
919
$
20.05
Shares outstanding (in millions)
46.2
45.8
Earnings Call and Webcast
On May 10, 2021 at 8:30am ET, Claude LeBlanc, President and
Chief Executive Officer, and David Trick, Executive Vice President
and Chief Financial Officer, will discuss Ambac's first quarter
2021 results and provide additional details and updates on Ambac's
three pillar platform diversification strategy during a conference
call. A live audio webcast of the call will be available through
the Investor Relations section of Ambac’s website,
https://ambac.com/investor-relations/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 May 24, 2021, and can be accessed by
dialing (Domestic) (844) 512-2921 or (International) (412)
317-6671; and using ID#13717886
Please note that we will conduct the earnings call from remote
locations. In the event of a technical disruption in
telecommunications, we may need to terminate the call early. Should
that happen, we will provide a complete audio recording of our
prepared remarks on Ambac's website and, as always, accept
questions through our Investor Relations department.
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. Ambac's
subsidiaries include: Ambac Assurance Corporation and Ambac
Assurance UK Limited, financial guarantee insurance companies
currently in runoff; Everspan Indemnity Insurance Company and
Everspan Insurance Company, specialty property & casualty
program insurers; and Xchange Benefits, LLC and Xchange Affinity
Underwriting Agency, LLC, property & casualty Managing General
Underwriters. 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. 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 AFG’s common stock and
volatility in the price of AFG’s common stock; (2) Ambac's
inability to realize the expected recoveries, including RMBS
litigation recoveries, included in its financial statements which
would have a materially adverse effect on Ambac Assurance
Corporation's ("AAC") financial condition and may lead to
regulatory intervention; (3) failure to recover claims paid on
Puerto Rico exposures or realization of losses in amounts higher
than expected; (4) increases to loss and loss expense reserves; (5)
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; (6) uncertainty
concerning the Company’s ability to achieve value for holders of
its securities, whether from AAC and its subsidiaries or from
transactions or opportunities apart from AAC and its subsidiaries,
including new business initiatives relating to the specialty
property and casualty program insurance business, the managing
general agency/underwriting business, or related businesses; (7)
potential of rehabilitation proceedings against AAC; (8) 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 judicial decisions adverse to revenue bond
holders; (9) 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; (10) insufficiency or unavailability of collateral to pay
secured obligations; (11) credit risk throughout Ambac’s business,
including but not limited to credit risk related to residential
mortgage-backed securities, student loan and other asset
securitizations, public finance obligations and exposures to
reinsurers; (12) the impact of catastrophic environmental or
natural events, including catastrophic public health events like
the COVID-19 pandemic, on significant portions of our insured and
investment portfolios; (13) credit risks related to large single
risks, risk concentrations and correlated risks; (14) the risk that
Ambac’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 Ambac’s insured
portfolio runs off; (16) Ambac’s substantial indebtedness could
adversely affect its financial condition and operating flexibility;
(17) Ambac may not be able to obtain financing or raise capital on
acceptable terms or at all due to its substantial indebtedness and
financial condition; (18) Ambac 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;
(19) restrictive covenants in agreements and instruments may impair
Ambac’s ability to pursue or achieve its business strategies; (20)
adverse effects on operating results or the Company’s financial
position resulting from measures taken to reduce risks in its
insured portfolio; (21) disagreements or disputes with Ambac's
insurance regulators; (22) default by one or more of Ambac's
portfolio investments, insured issuers or counterparties; (23) loss
of control rights in transactions for which we provide insurance
due to a finding that Ambac has defaulted; (24) adverse tax
consequences or other costs resulting from the characterization of
the AAC’s surplus notes or other obligations as equity; (25) risks
attendant to the change in composition of securities in the Ambac’s
investment portfolio; (26) adverse impacts from changes in
prevailing interest rates; (27) our results of operation may be
adversely affected by events or circumstances that result in the
impairment of our intangible assets and/or goodwill that was
recorded in connection with Ambac’s acquisition of 80% of the
membership interests of Xchange; (28) risks associated with the
expected discontinuance of the London Inter-Bank Offered Rate; (29)
factors that may negatively influence the amount of installment
premiums paid to the Ambac; (30) market risks impacting assets in
the Ambac’s investment portfolio or the value of our assets posted
as collateral in respect of interest rate swap transactions; (31)
risks relating to determinations of amounts of impairments taken on
investments; (32) 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 Ambac’s
business, operations, financial position, profitability or cash
flows; (33) actions of stakeholders whose interests are not aligned
with broader interests of the Ambac's stockholders; (34) system
security risks, data protection breaches and cyber attacks; (35)
changes in accounting principles or practices that may impact
Ambac’s reported financial results; (36) regulatory oversight of
Ambac Assurance UK Limited ("Ambac UK") and applicable regulatory
restrictions may adversely affect our ability to realize value from
Ambac UK or the amount of value we ultimately realize; (37)
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; (38) Ambac’s
financial position that may prompt departures of key employees and
may impact the its ability to attract qualified executives and
employees; (39) 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; (40) disintermediation within the
insurance industry that negatively impacts our managing general
agency/underwriting business; (41) changes in law or in the
functioning of the healthcare market that impair the business model
of our accident and health managing general underwriter; and (42)
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)
March 31, 2021
December 31, 2020
Revenues:
Net premiums earned
$
14
$
18
Net investment income:
Securities available-for-sale and
short-term
22
23
Other investments
27
31
Total net investment income
49
53
Net realized investment gains
2
2
Net gains (losses) on derivative
contracts
25
12
Net realized gains on extinguishment of
debt
33
—
Other income
5
1
Income on variable interest entities
—
3
Total revenues
129
88
Expenses:
Losses and loss expense
8
9
Intangible amortization
19
16
Operating expenses
33
26
Interest expense
50
50
Total expenses
110
101
Pre-tax income (loss)
19
(12
)
Provision for income taxes
2
2
Net income (loss)
$
17
$
(14
)
Less: net (loss) gain attributable to
noncontrolling interest
—
—
Net income (loss) attributable to
common stockholders
$
17
$
(14
)
Net income (loss) per basic
share
$
0.08
$
(0.31
)
Net income (loss) per diluted
share
$
0.08
$
(0.31
)
Weighted-average number of common
shares outstanding:
Basic
46,314,049
46,181,798
Diluted
46,858,064
46,181,798
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Statements of Income (Loss)
(Unaudited)
Three Months Ended March
31,
($ in millions, except share
data)
2021
2020
Revenues:
Net premiums earned
$
14
$
10
Net investment income (loss):
Securities available-for-sale and
short-term
22
31
Other investments
27
(52
)
Total net investment income (loss)
49
(21
)
Net realized investment gains
2
8
Net gains (losses) on derivative
contracts
25
(70
)
Net realized gains on extinguishment of
debt
33
—
Other income
5
—
Income on variable interest entities
—
3
Total revenues
129
(70
)
Expenses:
Losses and loss expense
8
117
Intangible amortization
19
13
Operating expenses
33
24
Interest expense
50
63
Total expenses
110
217
Pre-tax income (loss)
19
(287
)
Provision for income taxes
2
(7
)
Net income (loss)
$
17
$
(280
)
Less: net (loss) gain attributable to
noncontrolling interest
—
—
Net income (loss) attributable to
common stockholders
$
17
$
(280
)
Net income (loss) per basic
share
$
0.08
$
(6.07
)
Net income (loss) per diluted
share
$
0.08
$
(6.07
)
Weighted-average number of common
shares outstanding:
Basic
46,314,049
46,060,324
Diluted
46,858,064
46,060,324
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
($ in millions, except share
data)
March 31, 2021
December 31, 2020
Assets:
Investments:
Fixed maturity securities, at fair value
(amortized cost: $2,221 and $2,175)
$
2,341
$
2,317
Fixed maturity securities pledged as
collateral, at fair value (amortized cost: $15 and $15)
15
$
15
Short-term investments, at fair value
(amortized cost: $398 and $492)
397
492
Short-term investments pledged as
collateral, at fair value (amortized cost: $105 and $125)
105
125
Other investments (includes $600 and $544
at fair value)
600
595
Total investments (net of allowance for
credit losses of $0 and $0)
3,458
3,544
Cash and cash equivalents
23
20
Restricted cash
16
13
Premiums receivable (net of allowance for
credit losses of $13 and $17)
356
370
Reinsurance recoverable on paid and unpaid
losses (net of allowance for credit losses of $0 and $0)
33
33
Deferred ceded premium
74
70
Subrogation recoverable
2,076
2,156
Derivative assets
74
93
Intangible assets
391
409
Other assets
115
114
Variable interest entity assets:
Fixed maturity securities, at fair
value
3,236
3,354
Restricted cash
2
2
Loans, at fair value
2,948
2,998
Derivative assets
38
41
Other assets
1
2
Total assets
$
12,840
$
13,220
Liabilities and Stockholders’
Equity:
Liabilities:
Unearned premiums
$
438
$
456
Loss and loss expense reserves
1,662
1,759
Ceded premiums payable
24
27
Deferred taxes
20
24
Current taxes
2
6
Long-term debt
2,661
2,739
Accrued interest payable
516
517
Derivative liabilities
86
114
Other liabilities
123
106
Variable interest entity liabilities:
Long-term debt (includes $4,264 and $4,324
at fair value)
4,427
4,493
Derivative liabilities
1,739
1,835
Total liabilities
11,697
12,074
Redeemable noncontrolling interest
20
7
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: 46,477,067 and
45,865,081
—
—
Additional paid-in capital
246
242
Accumulated other comprehensive income
61
79
Retained earnings
761
759
Treasury stock, shares at cost: 279,965
and 55,942
(5
)
(1
)
Total Ambac Financial Group, Inc.
stockholders’ equity
1,063
1,080
Nonredeemable noncontrolling interest
60
60
Total stockholders’ equity
1,123
1,140
Total liabilities, redeemable
noncontrolling interest and stockholders’ equity
$
12,840
$
13,220
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210510005154/en/
Lisa A. Kampf Managing Director, Investor Relations (212)
208-3177 lkampf@ambac.com
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