Ambac Releases Selected Monthly Data for July 2008
02 Septembre 2008 - 10:56PM
Business Wire
Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today released
selected pre-tax financial data for the month of July, 2008.
Ambac�s impairment analysis is performed on a quarterly basis. As
such, the monthly data does not reflect the results of the
quarterly credit derivative impairment, insurance loss reserve and
investment portfolio impairment analysis. Key Financial Highlights:
Ambac discussed the impact of SFAS 157 on the estimate of fair
value relating to its credit derivative transactions during the
Company�s second quarter earnings call on August 6th, 2008 and in
the Company�s most recent 10Q filing. The following seeks to
provide more information on the impact of SFAS 157 during the month
of July, 2008. The Net Change in Fair Value of Credit Derivatives
is impacted by credit spreads on the underlying reference
obligations and by the market�s perception of the risk of Ambac�s
own non-performance. Under SFAS 157, the change in fair value of
our credit derivative liabilities varies inversely with the
market�s perception of Ambac�s own credit risk (increases in the
perceived risk of Ambac�s non-performance results in decreases in
the fair value of our liabilities). Ambac recorded a significant
benefit in the second quarter Net Change in Fair Value of Credit
Derivatives due to a significant widening of Ambac�s credit default
swap (CDS) spreads as of June 30, 2008, following the rating agency
downgrades of the company to AA/Aa3 in early June. Ambac�s CDS
spread levels narrowed considerably in the month of July. As
Ambac�s CDS spreads have tightened, the fair value of our
derivative liabilities has increased. The cost of five-year credit
default protection against Ambac Assurance Corporation (AAC)
default declined from 2,100 basis points at June 30, 2008 to 1,147
basis points at July 31, 2008. The effect of declining AAC CDS
spreads during July on the Net Change in Fair Value of Credit
Derivatives was a negative adjustment of $2.1 billion. The
remainder of the Net Change in Fair Value of Credit Derivatives was
due primarily to lower average quoted prices on the CDO of ABS
reference obligations. � � � � � ($ millions) � � Selected Data
(Unaudited) � Month of July 2008 � Quarter-to-date � Insured
Portfolio � Normal Premiums Earned (1) $ 53.1 $ 53.1 Accelerated
Net Premiums Earned (2) 35.1 35.1 � Net Change in Fair Value of
Credit Derivatives (3) (2,465.5) (2,465.5) � Investment Portfolio
Net Investment Income 43.2 43.2 Change in Fair Value of the
Investment Portfolio (4) - Financial Guarantee Portfolio 23.0 23.0
- Financial Services Portfolio (311.9) (311.9) � Financial
Guarantee Liquidity Installment Premiums Written, net of
reinsurance 34.6 34.6 Investment Portfolio Cash Received (5) 170.4
170.4 Claims Paid, net of reinsurance � (27.6) � (27.6) (1) Defined
as net premiums earned, computed in conformity with U.S. generally
accepted accounting principles, less accelerated net premiums
earned as defined in footnote 2 below. (2) Accelerated net premiums
earned relate to transactions that had been insured by Ambac
Assurance, which have been called or refunded in the periods
presented. When an issue insured by Ambac Assurance has been
refunded or called, any remaining unearned premium is earned at
that time. (3) Estimated changes in fair value of credit
derivatives may not include all adjustments that would be included
in the quarterly results presented in conformity with U.S.
generally accepted accounting principles. Certain surveillance,
valuation and reserving processes are performed on a quarterly
basis, including processes that are considered important inputs to
calculations of fair value (such as internal Ambac ratings on the
underlying reference obligations). Consequently, monthly results
may differ materially from amounts that would be determined in
connection with the quarterly close process. (4) Includes both
realized and unrealized gains and losses. (5) Defined as principal
received on maturing invested assets plus coupon interest received
during the period. � � � ($ millions) Selected Data (Unaudited) �
End of Period Balances (at July 31, 2008) � Financial Guarantee
Investment Portfolio Long Term Investment Portfolio at Fair Value
$10,392.1 Cash & Short Term Investment Balances 1,522.9 Total
11,915.0 � Holding Company Cash & Short Term Investment
Balances Ambac Financial Group, Inc (parent only) � 152.8
Forward-Looking Statements This release contains statements that
may constitute "forward-looking statements" within the meaning of
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Any or all of management�s forward-looking
statements here or in other publications may turn out to be wrong
and are based on Ambac�s management 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)�changes in the economic,
credit, foreign currency or interest rate environment in the United
States and abroad; (2)�the level of activity within the national
and worldwide credit markets; (3)�competitive conditions, pricing
levels and reduction in demand for financial guarantee products;
(4)�legislative and regulatory developments; (5)�changes in tax
laws; (6) changes in our business plan, our decision to discontinue
writing new business in the financial services area, to
significantly reduce new underwriting of structured finance
business and to discontinue all new underwritings of structured
finance business for six months from March 6, 2008; (7)�the
policies and actions of the United States and other governments;
(8)�changes in capital requirements whether resulting from
downgrades in our insured portfolio or changes in rating agencies�
rating criteria or other reasons; (9)�changes in Ambac�s and/or
Ambac Assurance�s credit or financial strength ratings;
(10)�changes in accounting principles or practices relating to the
financial guarantee industry or that may impact Ambac�s reported
financial results; (11)�inadequacy of reserves established for
losses and loss expenses; (12)�default by one or more of Ambac
Assurance�s�portfolio investments, insured issuers, counterparties
or reinsurers; (13)�credit risk throughout our business, including
large single exposures to reinsurers; (14)�market spreads and
pricing on insured collateralized debt obligations (�CDOs�) and
other derivative products insured or issued by Ambac; (15)�credit
risk related to residential mortgage securities and CDOs; (16)�the
risk that holders of debt securities or counterparties on credit
default swaps or other similar agreements seek to declare events of
default or seek judicial relief or bring claims alleging violation
or breach of covenants by Ambac or one of its subsidiaries;
(17)�the risk that our underwriting and risk management policies
and practices do not anticipate certain risks and/or the magnitude
of potential for loss as a result of unforeseen risks; (18)�the
risk of volatility in income and earnings, including volatility due
to the application of fair value accounting, or FAS 133, to the
portion of our credit enhancement business which is executed in
credit derivative form; (19)�operational risks, including with
respect to internal processes, risk models, systems and employees;
(20)�the risk of decline in market position; (21)�the risk that
market risks impact assets in our investment portfolio; (22)�the
risk of credit and liquidity risk due to unscheduled and
unanticipated withdrawals on investment agreements; (23)�changes in
prepayment speeds on insured asset-backed securities; (24) factors
that may influence the amount of installment premiums paid to
Ambac; (25)�the risk that we may be required to raise additional
capital, which could have a dilutive effect on our outstanding
equity capital and/or future earnings; (26)�our ability or
inability to raise additional capital, including the risks that
regulatory or other approvals for any plan to raise capital are not
obtained, or that various conditions to such a plan, either imposed
by third parties or imposed by Ambac or its Board of Directors, are
not satisfied and thus potentially necessary capital raising
transactions do not occur, or the risk that for other reasons the
Company cannot accomplish any potentially necessary capital raising
transactions; (27)�the risk that Ambac�s holding company structure
and certain regulatory and other constraints, including adverse
business performance, affect Ambac�s ability to pay dividends and
make other payments; (28)�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
our business, operations, financial position, profitability or cash
flows; (29)�changes in expectations regarding future realization of
gross deferred tax assets; (30) risks relating to the re-launch of
Connie Lee; (31) other factors described in the Risk Factors
section in Part I, 1A of our Annual Report on Form 10-K for the
fiscal year ended December 31, 2007 and in Part II, Item 1A of our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2008,
and also disclosed from time to time by Ambac in its subsequent
reports on Form 10-Q and Form 8-K, which are or will be available
on the Ambac website at www.ambac.com and at the SEC�s website,
www.sec.gov; and (32)�other risks and uncertainties that have not
been identified at this time. Readers are cautioned that
forward-looking statements speak only as of the date they are made
and that Ambac does not undertake to update forward-looking
statements to reflect circumstances or events that arise after the
date the statements are made. You are therefore advised to consult
any further disclosures we make on related subjects in Ambac�s
reports to the SEC. Ambac Financial Group, Inc., headquartered in
New York City, is a holding company whose affiliates provide
financial guarantees and financial services to clients in both the
public and private sectors around the world. Ambac's principal
operating subsidiary, Ambac Assurance Corporation, a guarantor of
public finance and structured finance obligations, has earned a Aa3
rating from Moody's Investors Service, Inc. and a AA rating from
Standard & Poor's Ratings Services; both Moody�s and Standard
& Poor's maintain a negative outlook. Ambac Financial Group,
Inc. common stock is listed on the New York Stock Exchange (ticker
symbol ABK).
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