Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today
announced a first quarter 2009 net loss of $392.2 million, or a net
loss of $1.36 per share. This compares to the first quarter 2008
net loss of $1,660.3 million, or a net loss of $11.69 on a per
share basis. The first quarter 2009 results reflect pre-tax net
income amounting to $279.7 million resulting primarily from a
positive net change in fair value of credit derivatives. The
unrealized gain in credit derivatives was partially offset by loss
and loss expenses primarily related to the residential
mortgage-backed securities (RMBS) portfolio and
other-than-temporary impairment write downs of RMBS securities in
the investment portfolio. During the quarter Ambac increased its
deferred tax asset valuation allowance by approximately $600
million, causing the after-tax net loss. The first quarter 2008
results reflected a net change in fair value of credit derivatives
amounting to ($1,708.2) million as a result of deterioration in
certain insured CDO of ABS transactions and loss and loss expenses
amounting to $1,042.8 million related to RMBS securities.
Quarter Summary
Net positive change in fair value of credit derivatives amounted
to $1,545.9 million, driven primarily by Ambac Assurance
Corporation (AAC) credit spread widening during the period.
Estimated impairment losses in this portfolio did not change
significantly during the quarter.
Net loss provisioning amounted to $739.8 million for the quarter
primarily relating to the RMBS insurance portfolio.
AAC and the investment agreement business recorded $744.7
million and $85.5 million, respectively, of other-than-temporary
impairment write-downs related to Alt-A RMBS securities held in
their respective investment portfolios.
The deferred tax asset valuation allowance increased by
approximately $600 million during the quarter. For the purposes of
estimating future taxable income available to utilize net operating
losses, management revised its estimate of potential future
investment income and increases in loss reserves to conservatively
reflect the potential impact that further deterioration in Ambac�s
insured portfolio would have on future taxable income. The revised
estimate was primarily driven by continuing deterioration in AAC�s
insured RMBS transactions and the impact of the low interest rate
environment on projected investment income.
FAS 163 was implemented on January 1, 2009. Due to changes in
calculations of certain income statement items such as net premiums
earned and loss and loss expenses, 2009 and 2008 amounts are not
comparable, as described in further detail below.
On April 13, 2009, Moody�s downgraded Ambac Assurance Corp. and
Ambac Assurance UK Limited to Ba3 from Baa1. The rating downgrade
had no material impact on corporate-wide liquidity or collateral
requirements.
Ambac�s President and Chief Executive Officer, David Wallis,
commented, �The credit environment remains adverse, although
perhaps the rate of degradation is slowing. We remain focused upon
our key strategic initiatives of: (i) aggressively managing our
existing book of business; (ii) identifying strategic opportunities
that take advantage of our core competencies and assets; and (iii)
sensibly accessing outside capital to enable the launch of our
public finance-only financial guarantee subsidiary, Everspan.� Mr.
Wallis continued, �Looking forward, I believe that the resilience
of our business model combined with the efforts of our entire staff
positions us well in relation to the ultimate goal of restoring
value for our key stakeholders.�
Financial
Results
Implementation of FAS 163
Effective January 1, 2009, Ambac adopted SFAS No. 163,
�Accounting for Financial Guarantee Insurance Contracts, an
interpretation of SFAS 60, Accounting and Reporting by Insurance
Enterprises� (FAS 163). The new standard clarifies how SFAS No. 60,
�Accounting and Reporting by Insurance Enterprises,� applies to
financial guarantee insurance contracts issued by insurance
enterprises, including the recognition and measurement of premium
revenue and claim liabilities. Accordingly, results for premium
revenue and losses incurred are not comparable from 2008 to 2009.
Under FAS 163:
Ambac is required to record unearned premiums for upfront and
installment paying transactions. Installment unearned premiums are
established in an amount equal to: (i) the present value of future
contractual premiums due or, (ii) if the underlying insured
obligation is a homogenous pool of assets which are contractually
pre-payable (primarily RMBS securities), the present value of
premiums expected to be collected over the life of the transaction.
Prior to implementation of FAS 163, Ambac recorded unearned
premiums only for premiums received in advance.
Ambac is required to recognize premium revenue for both up-front
and installment paying policies by recognizing a fixed percentage
of premium to the amount of exposure outstanding at each reporting
date (referred to as the level-yield approach), rather than being
recognized over the term of each maturity for up-front paying
policies. For installment paying policies, FAS 163 also requires
that the accretion discount, equating to the difference between the
undiscounted installment premiums and the present value of
installment premiums, be recognized through the income
statement.
Ambac is required to recognize a loss reserve for the excess of:
(a) the present value of expected net cash outflows to be paid
under the insurance contract (expected loss), over (b) the unearned
premium revenue for that contract. To the extent (a) is less than
(b), no loss reserve will be recorded. Changes to the loss reserve
estimate in subsequent periods will be recorded as a loss expense
in the income statement.
Net Loss Per Share
Net loss per share is computed in conformity with U.S. generally
accepted accounting principles (GAAP). However, many research
analysts and investors do not limit their analysis of our earnings
to a strictly GAAP basis. In order to assist investors in their
understanding of quarterly results, Ambac provides additional
information.
Earnings measures reported by research analysts exclude the net
impact of net gains and losses from sales of investment securities
and mark-to-market gains and losses on credit, total return and
non-trading derivative contracts that are not impaired
(collectively �net security gains and losses�) and certain other
items. Certain research analysts and investors further exclude the
net income impact of accelerated premiums earned on guaranteed
obligations that have been refunded and other accelerated earnings
(�accelerated earnings�). Table I, below, provides first quarter
comparisons of loss for 2009 and 2008.
Table I Earnings Per Share �
�
First
Quarter
2009
�
2008
Net loss per share ($1.36 ) ($11.69 ) Effect of net security losses
(gains)
($1.86 ) $4.76 �
Operating loss (a)(b) ($3.22 )
($6.93 )
Effect of accelerated earnings
($0.09 )
($0.15 ) Core loss (b)
($3.31 ) ($7.08
)
(a)
�
Consensus earnings that are
reported by earnings estimate services, such as First Call, are on
this basis.
(b)
Operating and core loss are
non-GAAP measures. See footnote 1, below.
Net Premiums Earned
Net premiums earned for the first quarter of 2009 were $196.8
million, up 5% from $186.9 million earned in the first quarter of
2008. Normal earned premiums amounted to $155.8 million and $172.9
million in the first quarter 2009 and 2008, respectively. With the
implementation of FAS 163, as discussed above, normal earned
premium amounts reported in 2009 are not comparable to amounts that
were reported in 2008.
Net premiums earned include accelerated premiums, which result
from refundings, calls and other accelerations recognized during
the quarter. Accelerated premiums were $41.0 million in the first
quarter of 2009, up from $14.0 million in the first quarter 2008.
During the first quarter of 2009 and 2008, approximately 87% and
66%, respectively, of the accelerated premiums related to U.S.
public finance transactions.
A breakout of net premiums earned by market sector�for 2009 and
2008 are included in Table II. Normal net premiums earned exclude
accelerated premiums that result from refundings, calls and other
accelerations.
Table II Net Premiums Earned �
$-millions
2009
�
2008
Public Finance $ 49.6 $ 55.8 Structured Finance 58.8 70.4
International
47.4 46.7 Total Normal
Premiums 155.8 172.9 Accelerated Premiums
41.0
14.0 Total
$ 196.8 $ 186.9
Net Realized (Losses)/Gains
Net realized (losses)/gains in the AAC investment portfolio
amounted to a net loss of ($742.9) million in the first quarter of
2009, down from a gain of $22.2 million in the first quarter 2008.
The first quarter 2009 net loss was driven by other-than-temporary
impairment write-downs of certain Alt-A RMBS securities amounting
to ($744.7) million in the quarter. The Alt-A RMBS securities had
been purchased from the Financial Services investment agreement
business in the fourth quarter 2008 and the first quarter 2009, as
approved by the Wisconsin Office of the Commissioner of Insurance
(OCI) to provide the investment agreement business with liquidity
required for collateral and terminating its agreements.
Net Investment Income
Net investment income excluding variable interest entities for
the first quarter of 2009 was $97.5 million, representing a
decrease of 19% from $120.0 million in the comparable period of
2008. The decrease was primarily due to lower invested assets
driven by reductions in the portfolio to pay commutations on CDO of
ABS transactions and RMBS claim payments, partially offset by $1.3
billion in funds received via the capital raise in March 2008, $800
million from the issuance of AAC preferred stock in December 2008
and January 2009, and cash flow from the collection of financial
guarantee premiums, tax refunds and fees and coupon receipts on
invested assets. Net investment income was also negatively impacted
by the re-balancing of the portfolio to a greater proportion of
short-term securities, and lower yields on invested assets compared
to the first quarter 2008.
Net Change in Fair Value of Credit Derivatives
The net change in fair value of credit derivatives was $1,545.9
million for the first quarter of 2009, compared to ($1,708.2)
million in the comparable period of 2008.
Realized gain/(losses) and other settlements from credit
derivative contracts represents the normal accretion into income of
premiums received for transactions executed in credit derivative
format, offset by loss and settlement payments on such
transactions. Net realized gains/(losses) and other settlements
from credit derivative contracts in the first quarter of 2009
amounted to $6.6 million, representing $13.2 million of net
premiums received partially offset by paid losses of $6.6 million.
In the first quarter 2008, premiums received amounted to $17.0
million while no loss payments were made.
Net unrealized gains/(losses) on credit derivative contracts
were $1,539.2 million in the three months ended March 31, 2009,
compared to ($1,725.2) million in the three months ended March 31,
2008. The net gain during the first quarter of 2009 is primarily
the result of: (i) the effect of incorporating widening AAC credit
default swap spreads into the measurement of fair value of credit
derivative liabilities; and (ii) longer estimates of the weighted
average lives of certain CDO of ABS transactions at March 31, 2009
compared to December 31, 2008. The positive effects were partially
offset by: (i) the adverse effect of higher default probabilities
in our fair value model caused by internal ratings downgrades; and
(ii) declining market values on underlying reference obligations.
The consideration of Ambac�s own credit risk in measuring the
change in fair value of credit derivatives as required under FAS
157 resulted in positive adjustments of $4,489 million and $1,616
million to the reported change in fair value during the three
months ended March 31, 2009 and 2008, respectively.
Ambac reports credit impairments on CDO of ABS transactions
where we believe we may have to pay claims in the future. Ambac�s
estimate of credit impairment did not change significantly from
December 31, 2008 to March 31, 2009.
Financial Guarantee Loss Reserves
Total net loss and loss expenses were $739.8 million in the
first quarter 2009, down 29% from $1,042.8 million in the first
quarter of 2008. Losses and loss expenses in the first quarter 2009
were heavily concentrated in the RMBS insurance portfolio.
Continued deterioration in the performance of the underlying RMBS
loans was observed, most prominently in the Alt-A affordability
product (negative amortization and interest-only loans).
Under the provisions of FAS 163, Ambac changed the discount rate
it uses to estimate the present value of future loss payments from
4.5% in 2008 to the weighted average estimated risk-free rate of
approximately 1.5%. Additionally, Ambac will no longer characterize
loss reserves as active credit reserves and case reserves as FAS
163 does not distinguish between reserves for transactions that
have defaulted and those established for probable and estimable
losses due to credit deterioration on insured transactions that
have not yet defaulted.
A roll forward of loss reserves from December 31, 2008 to March
31, 2009 is shown in Table III.
Table III Insurance Loss Reserves Roll Forward �
$-millions
LossReserves
�
1st Qtr
Lossand LossExpenses
�
RetainedEarningsImpact
Balance at December 31, 2008 $ 2,129.8 $ - $ - FAS 163 adjustment
339.4 � - (339.4 ) Balance at January 1, 2009 2,469.2
- - Additions to reserves 739.8 739.8 ($739.8 ) Less: claims paid
(312.3 ) Balance at March 31, 2009
$ 2,896.7 �
$
739.8 ($1,079.2 )
The FAS 163 adjustment in the table above is an implementation
adjustment and results primarily from lowering the discount rate
applied to future estimated losses, as described above.
Total net claims paid of $312.3 million were primarily related
to second-lien RMBS transactions.
Loss and loss expense reserves for all RMBS insurance exposures
at March 31, 2009 total $2,451.8 million. RMBS reserves are net of
$882.0 million of estimated remediation recoveries. The remediation
benefit is up $21.0 million from $861.0 million at December 31,
2008.
Financial Services
The financial services segment comprises the investment
agreement business and the derivative products business. Gross
interest income less gross interest expense from investment and
payment agreements plus results from the derivative products
business, excluding net realized investment gains and losses and
unrealized gains and losses on total return swaps and non-trading
derivative contracts, was ($6.1) million in the first quarter of
2009, an improvement from ($73.4) million in the first quarter of
2008. Derivative products results improved by $54.9 million
primarily�due to mark-to-market losses and high rate resets
associated with variable rate municipal bond rate swaps in 2008
which have been limited in the three months ended March 31, 2009
through terminations in the book, mitigation strategies and less
volatility in market rates. Net investment income from the
investment agreement business improved primarily as a result of
favorable variable interest rate reset adjustments as compared to
the first quarter of 2008 and the effects of intercompany loans
from AAC.
Financial services net realized investment gains were $31.1
million in the first quarter of 2009 compared to net realized
losses of ($169.8) million in the first quarter 2008. Net realized
gains in the current period included $102.8 million related to
terminations of investment agreements below carrying value combined
with the recognition of deferred gains on associated hedges,
partially offset by other-than-temporary impairment write-downs in
the investment agreement investment portfolio of ($85.5) million
related to Alt-A RMBS securities. First quarter 2008 net realized
investment losses included other-than-temporary impairment charges
of ($177.6) million.
As a result of the Moody�s downgrade of AAC in April, certain
derivative products business counterparties have the option to
exercise termination rights. Ambac continues to honor all of its
financial obligations and has maintained a hedged derivative book.
Further downgrades to AAC will have no material liquidity impact on
the financial services businesses.
The interest rate swap and investment agreement businesses are
being run-off. Since the end of 2008 approximately $300 million of
swap notional, not including the notional of related hedge
positions, has been terminated. The investment and payment
agreement portfolio has been reduced by $634 million during the
first quarter to approximately $2.0 billion at March 31, 2009,
through negotiated terminations, terminations contractually
triggered by rating downgrades of Ambac Assurance, and scheduled
amortization.
Balance Sheet and
Liquidity
The impact of FAS 163 on the consolidated balance sheet of Ambac
is illustrated in Table IV, below.
Table IV Balance Sheet Changes � � �
$-millions
BalanceDec
312008
�
FAS
163Adjustment
�
BalanceJan
12009
Total assets
$ 17,249.6 �
$5,610.2 �
$22,859.8 � Total liabilities
$20,338.7 �
$5,991.3 �
$26,330.0 � Total
stockholders� equity
($3,089.1 )
($381.1 ) ($3,470.2
)
The FAS 163 adjustments reported in the table reflect the
implementation of the statement as of January 1, 2009. The
adjustments to total assets relate primarily to: (i) recording the
present value of future installment premiums to be collected over
the lives of the respective transactions (primarily structured
finance transactions); (ii) recording deferred ceded premiums
related to reinsurance of installment policies; and (iii) increased
estimated reinsurance recoverable on paid and unpaid losses
resulting from the increase in loss and loss adjustment expenses as
discussed below. The adjustments to total liabilities relate
primarily to: (i) recording unearned premiums related to
installment policies; (ii) recording the present value of premium
due to reinsurers related to future installment premiums, net of
ceding commissions; and (iii) recording increased loss and loss
expenses primarily as a result of lowering the discount rate
applied to future loss payments to the estimated risk-free
rate.
Excluding the FAS 163 implementation impact, total assets
declined by approximately $2.7 billion driven by lower invested
securities and deferred tax asset. The fair value of the
consolidated investment portfolio declined from $10.3 billion
(amortized cost of $12.8 billion) at December 31, 2008 to $9.6
billion (amortized cost of $11.3 billion) at March 31, 2009. The
decline in fair value was primarily due to liquidations in the
investment agreement portfolio to pay terminated agreements during
the quarter and declining market values in certain asset classes
within the investment portfolios, primarily focused in the mortgage
and asset-backed securities.�The deferred tax asset declined as a
result of the positive net change in fair value of credit
derivatives and the increase in the deferred tax asset valuation
allowance during the quarter.
At March 31, 2009, Ambac�s total stockholders� equity amounted
to a deficit of ($3.2) billion. On a statutory basis, Ambac has
positive surplus as regards policyholders amounting to $394
million, down from $1,554 million at December 31, 2008. The decline
in statutory surplus was driven primarily by statutory valuation
adjustments totaling approximately $1.3 billion for a majority of
the Alt-A RMBS securities within AAC�s investment portfolio. The
valuation adjustments occurred as Moody�s downgraded a significant
number of Alt-A securities to below investment grade during the
quarter which reduced the carrying value of such securities under
statutory accounting rules.
AAC�s investment portfolio has a fair value of $7.4 billion
(amortized cost of $8.5 billion) at March 31, 2009, and includes
$834.1 million of short-term securities. The portfolio consists of
high quality municipal bonds, Treasuries, U.S. Agencies and Agency
MBS as well as mortgage and asset-backed securities purchased from
the investment agreement (IA) business in late 2008. To date AAC
has purchased approximately $2.9 billion of securities, primarily
Alt-A RMBS, from the IA business. At March 31, 2009, approximately
97% of the difference between fair value and amortized cost in the
financial guarantee investment portfolio is related to mortgage and
asset-backed securities.
Ambac�s total financial guarantee net par exposure has decreased
5% from $434.3 billion at December 31, 2008 to $413.3 billion at
March 31, 2009, driven by amortization and refundings during the
quarter.
Cash and short-term securities at the holding company amounted
to $177.7 million at quarter end. AAC is not permitted to make
dividend payments to the holding company in 2009 without first
receiving permission from OCI. AAC did not request to pay a
dividend in the first quarter. All intercompany receivables held by
the parent company at December 31, 2008 have been settled during
the quarter. Ambac�s claims paying resources at March 31, 2009
amounted to $12.0 billion.
Everspan Update
The process of launching Everspan Financial Guarantee Corp.
(Everspan) has been delayed due to rating agency concerns over
separateness from its parent, AAC. Everspan has been carefully
structured to separate it from Ambac Assurance. Nonetheless, the
rating agencies have indicated that a minority investment from an
independent third party in order to further ensure Everspan�s
separateness would be viewed positively in their ratings decision.
We are currently in discussions with a number of external parties
regarding potential investment in Everspan. Douglas
Renfield-Miller, CEO of Everspan stated, �Everspan, given its
experienced team and clean balance sheet, remains well positioned
to address the existing severe capacity shortage for financial
guarantees in the municipal finance market. The case for bond
insurance remains compelling. We hope that Everspan will be able to
meet market needs in the near future.�
About Ambac
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 a Ba3 rating (developing
outlook) from Moody's Investors Service, Inc. and an A rating
(negative outlook) from Standard & Poor's Ratings Services.
Ambac Financial Group, Inc. common stock is listed on the New York
Stock Exchange (ticker symbol ABK).
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)�difficult economic conditions, which may not
improve in the near future, and adverse changes in the economic,
credit, foreign currency or interest rate environment in the United
States and abroad; (2)�the actions of the U. S. Government, Federal
Reserve and other government and regulatory bodies to stabilize the
financial markets; (3)�the risk that market risks impact assets in
our investment portfolio or the value of our assets posted as
collateral in respect of investment agreements and interest rate
swap and currency swap transactions; (4)�changes in Ambac�s and/or
Ambac Assurance�s credit or financial strength ratings; (5)�risks
relating to the re-launch of Connie Lee as Everspan Financial
Guarantee Corp.; (6)�competitive conditions, pricing levels and
reduction in demand for financial guarantee products; (7)�credit
and liquidity risks due to unscheduled and unanticipated
withdrawals on investment agreements; (8)�inadequacy of reserves
established for losses and loss expenses; (9)�changes in capital
requirements whether resulting from downgrades in our insured
portfolio or changes in rating agencies� rating criteria or other
reasons; (10)�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; (11)�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; (12)�credit risk throughout our business, including
credit risk related to residential mortgage-backed securities and
collateralized debt obligations (�CDOs�) and large single exposures
to reinsurers; (13)�market spreads and pricing on insured CDOs and
other derivative products insured or issued by Ambac; (14)�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;
(15)�default by one or more of Ambac Assurance�s�portfolio
investments, insured issuers, counterparties or reinsurers;
(16)�Ambac�s financial position and lack of financial flexibility,
resulting principally from the uncertainty of Ambac Assurance�s
ability to pay dividends to Ambac without the consent of the office
of the Commissioner of Insurance of the State of Wisconsin;
(17)�legislative and regulatory developments, including the
Troubled Asset Relief Program and other programs under the
Emergency Economic Stabilization Act and other similar programs;
(18)�changes in accounting principles or practices relating to the
financial guarantee industry or that may impact Ambac�s reported
financial results; (19)�changes in expectations regarding future
realization of gross deferred tax assets; (20)�the risk of
volatility in income and earnings, including volatility due to the
application of fair value accounting, required under SFAS 133, to
the portion of our credit enhancement business which is executed in
credit derivative form; (21)�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; (22)�operational risks, including with respect to
internal processes, risk models, systems and employees;
(23)�factors that may influence the amount of installment premiums
paid to Ambac; (24)�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; (25)�changes in tax laws; (26)�other factors described in
the Risk Factors section in Part I, Item�1A of our Annual Report on
Form 10-K for the fiscal year ended December�31, 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
(27)�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.
Footnote
(1) � Operating earnings and core earnings are not substitutes for
net income computed in accordance with GAAP, but are useful
measures of performance used by management, equity analysts and
investors because they allow more consistent period-to-period
comparison of our earnings without the effects of net securities
gains/losses and accelerated earnings. Net securities gains/losses
excluded from operating earnings consists of investment portfolio
realized gains and losses, mark-to-market gains and losses on
credit, total return and non-trading derivative contracts in excess
of estimated impairment amounts, and certain other items. Core
earnings further exclude the impact of refundings, calls and other
accelerations. The definitions of operating earnings and core
earnings used by Ambac may differ from definitions of operating
earnings and core earnings used by other public holding companies
of financial guarantors.
Ambac Financial Group, Inc. and
Subsidiaries Consolidated Statements of Operations
(Unaudited) For the Three Months Ended March 31, 2009 and
2008 (Dollars in Thousands Except Share Data) � � � � �
Three Months Ended March 31, 2009 2008
Revenues: Financial Guarantee: Net premiums
earned $196,812 $186,866 Net investment
income 100,271 123,645 Net realized investment
(losses) gains (742,905 ) 22,212 �
Change in fair value of credit derivatives: Realized
gains and losses and other settlements 6,623
16,973 Unrealized gains (losses) 1,539,227 �
(1,725,172 ) Net change in fair value of credit
derivatives 1,545,850 (1,708,199 ) �
Other income 1,723 8,457 Financial
Services: Investment income 20,884 84,926
Derivative products (14,199 ) (69,331
) Net realized investment gains (losses)
31,056 (169,792 ) Net change in fair value
on total return swaps (10,381 ) (40,417
) Net mark-to-market gains (losses) on non-trading
derivatives 161 (1,833 ) Corporate:
Net investment income 216 827 Net realized
investment gains 33 �
- � �
Total revenues
1,129,521 �
(1,562,639 ) �
Expenses:
Financial Guarantee: Loss and loss expenses
739,830 1,042,761 Underwriting and operating
expenses 56,637 48,903 Interest expense on
variable interest entity notes 2,747 3,557
Financial Services: Interest on investment and payment
agreements 12,789 89,003 Operating
expenses 3,951 3,389 Interest
29,846 24,377 Corporate 4,021 �
16,076 � �
Total expenses 849,821 �
1,228,066 � �
Income (loss) before income taxes
279,700 (2,790,705 ) Provision (benefit)
for income taxes 671,900 �
(1,130,441 ) �
Net loss (392,200 ) (1,660,264 )
�
Less: net (loss) income attributable to noncontrolling
interest (13 ) 79 � �
Net loss
attributable to Ambac Financial Group, Inc. ($392,187
) ($1,660,343 ) � �
Net loss per share
($1.36 ) ($11.69 ) �
Net loss per
diluted share ($1.36 ) ($11.69 ) �
�
Weighted average number of common shares outstanding: �
Basic 287,565,182 �
142,032,462 � �
Diluted 287,565,182 �
142,032,462 �
Ambac
Financial Group, Inc. and Subsidiaries Consolidated Balance
Sheets March 31, 2009 and December 31, 2008 (Dollars
in Thousands Except Share Data) � � �
March 31,
2009 December 31, 2008
(unaudited)
Assets
�
Investments: Fixed income securities, at fair value
(amortized cost of $9,996,120 in 2009 and $11,080,723 in
2008) $8,357,554 $8,537,676 Fixed income
securities pledged as collateral, at fair value (amortized
cost of $237,952 in 2009 and $277,291 in 2008) 246,475
286,853 Short-term investments (approximates fair
value) 1,016,090 1,454,229 Other (cost of
$3,368 in 2009 and $13,956 in 2008) 3,368 �
14,059 �
Total investments 9,623,487
10,292,817 �
Cash 107,866 107,811
Receivable for securities sold 22,877 15,483
Investment income due and accrued 76,248
116,769 Premium Receivables 4,468,130
28,895 Reinsurance recoverable on paid and unpaid
losses 213,891 157,627 Deferred ceded
premium 1,149,690 292,837 Subrogation
recoverable 197,690 10,088 Deferred taxes
1,145,423 2,127,499 Current taxes
191,644 192,669 Deferred acquisition costs
189,263 207,229 Loans 333,051
798,848 Derivative assets 1,847,952
2,187,214 Other assets 622,645 �
723,887 �
Total assets $20,189,857 �
$17,259,673 � �
Liabilities and Stockholders'
Equity
�
Liabilities: Unearned premiums $6,929,790
$2,382,152 Loss and loss expense reserve
3,268,218 2,275,948 Ceded reinsurance balances
payable 672,597 15,597 Obligations under
investment and payment agreements 2,212,054
3,244,098 Obligations under investment repurchase
agreements - 113,737 Long-term debt
1,823,979 1,868,690 Accrued interest payable
27,318 68,806 Derivative liabilities
8,146,454 10,089,895 Other liabilities
291,443 279,616 Payable for securities
purchased 3,471 �
10,256 �
Total
liabilities 23,375,324 �
20,348,795 � �
Stockholders' equity: Ambac Financial Group, Inc.:
Preferred stock - - Common stock
2,944 2,944 Additional paid-in capital
2,035,191 2,030,031 Accumulated other
comprehensive loss (1,092,253 ) (1,670,198
) Retained earnings (4,341,164 )
(3,550,768 ) Common stock held in treasury at
cost (582,829 ) (594,318 ) Total
Ambac Financial Group, Inc. stockholders' equity
(3,978,111 ) (3,782,309 ) �
Non-controlling interest: 792,644 �
693,187 �
Total stockholders' equity (3,185,467 )
(3,089,122 ) Total liabilities and stockholders'
equity $20,189,857 �
$17,259,673 � �
Number of
shares outstanding (net of treasury shares) 287,346,536
�
287,239,482 �
Book value per share ($13.84
) ($13.17 )
AMBAC (NYSE:ABK)
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