Ambac Financial Group, Inc. (Nasdaq: AMBC) ("Ambac"), a holding
company whose subsidiaries, including Ambac Assurance Corporation
("AAC"), provide financial guarantees, today reported a Net Loss
attributable to common stockholders of $20.5 million or $0.45 per
diluted share and Adjusted Earnings2 of $10.8 million or $0.24
per diluted share for the quarter ended December 31,
2018. This compares to a Net Loss attributable to common
stockholders of $103.8 million or $2.27 per diluted share and an
Adjusted Loss of $76.0 million or $1.66 per diluted share in the
third quarter of 2018. The results for the fourth quarter
2018 were impacted by mark to market losses on our macro hedge and
volatility associated with invested assets classified as trading,
partially offset by favorable loss development. The results for the
third quarter of 2018 were primarily driven by the financial
statement impact of the Auction Market Preferred Shares exchange
transaction ("AMPS transaction").
Claude LeBlanc, President and Chief Executive Officer, stated,
“During the fourth quarter of 2018, we achieved significant results
in de-risking our insured portfolio, with Adversely Classified and
Watch List Credits decreasing $1.5 billion or 7% from the third
quarter. Our active de-risking activities included a 50% reduction
of one of our largest single risk exposures, reducing outstanding
par by $856 million, our previously announced one hundred percent
quota share reinsurance transaction on certain public finance
policies totaling $1.5 billion of par exposure and the negotiated
COFINA Plan of Adjustment which became effective on February 12,
2019, and resolved 78% of our total Puerto Rico exposure." Mr.
LeBlanc continued, "I am pleased with our significant achievements
in 2018. We will continue to advance our strategic priorities in
2019 propelled by the momentum from our 2018 success and further
our goal of delivering long-term value to our shareholders."
(1) Net Par exposure adjustments are only
recorded in the period in which they occur. Accordingly, net
par exposure amounts as of December 31, 2018 exclude a reduction of
$602.7 million related to the execution of the COFINA Plan of
Adjustment on February 12, 2019.
| Ambac's Fourth Quarter 2018 Summary
Results |
|
|
|
|
|
|
|
Better (Worse) |
|
($ in millions, except per share data) |
|
4Q2018 |
|
3Q2018 |
|
Amount |
|
Percent |
| Net premiums
earned |
|
$ |
28.7 |
|
|
$ |
25.6 |
|
|
$ |
3.1 |
|
|
12 |
% |
|
Net investment income |
|
37.5 |
|
|
58.3 |
|
|
(20.8 |
) |
|
(36 |
)% |
|
Net realized investment gains (losses) |
|
29.4 |
|
|
30.2 |
|
|
(0.8 |
) |
|
(3 |
)% |
|
Net gains (losses) on derivative contracts |
|
(44.7 |
) |
|
17.6 |
|
|
(62.3 |
) |
|
(354 |
)% |
|
Income (loss) on Variable Interest Entities ("VIEs") |
|
0.5 |
|
|
1.8 |
|
|
(1.3 |
) |
|
(72 |
)% |
|
Losses and loss expenses (benefit) |
|
(42.3 |
) |
|
33.5 |
|
|
75.8 |
|
|
226 |
% |
|
Operating expenses |
|
21.3 |
|
|
28.4 |
|
|
7.1 |
|
|
25 |
% |
|
Interest expense |
|
66.1 |
|
|
65.7 |
|
|
(0.4 |
) |
|
(1 |
)% |
|
Insurance intangible amortization |
|
29.0 |
|
|
26.4 |
|
|
(2.6 |
) |
|
(10 |
)% |
|
Provision for income taxes |
|
(1.7 |
) |
|
2.2 |
|
|
3.9 |
|
|
177 |
% |
|
Net income (loss) |
|
(20.5 |
) |
|
(22.2 |
) |
|
1.7 |
|
|
8 |
% |
|
Net income (loss) attributable to Common Stockholders |
|
(20.5 |
) |
|
(103.8 |
) |
|
83.3 |
|
|
80 |
% |
|
Net income (loss) per diluted share |
|
$ |
(0.45 |
) |
|
$ |
(2.27 |
) |
|
$ |
1.82 |
|
|
80 |
% |
|
Adjusted earnings (loss) 2 |
|
10.8 |
|
|
(76.0 |
) |
|
86.8 |
|
|
114 |
% |
|
Adjusted earnings (loss) per diluted share 2 |
|
$ |
0.24 |
|
|
$ |
(1.66 |
) |
|
$ |
1.90 |
|
|
114 |
% |
|
Total Ambac Financial Group, Inc. stockholders' equity |
|
1,592.0 |
|
|
1,757.7 |
|
|
(165.7 |
) |
|
(9 |
)% |
|
Total Ambac Financial Group, Inc. stockholders' equity per
share |
|
$ |
35.12 |
|
|
$ |
38.77 |
|
|
$ |
(3.65 |
) |
|
(9 |
)% |
|
Adjusted book value 2 |
|
1,250.6 |
|
|
1,291.9 |
|
|
(41.3 |
) |
|
(3 |
)% |
|
Adjusted book value per share 2 |
|
$ |
27.58 |
|
|
$ |
28.50 |
|
|
$ |
(0.92 |
) |
|
(3 |
)% |
|
Weighted-average diluted shares outstanding (in millions) |
|
45.8 |
|
|
45.7 |
|
|
(0.1 |
) |
|
— |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
(2) See Non-GAAP Financial Data section of this press release
for further information
| Ambac's 2018 Summary Results |
|
|
|
|
|
|
|
Better (Worse) |
|
($ in millions, except per share data) |
|
2018 |
|
2017 |
|
Amount |
|
Percent |
| Net premiums
earned |
|
$ |
111.1 |
|
|
$ |
175.3 |
|
|
$ |
(64.2 |
) |
|
(37 |
)% |
|
Net investment income |
|
272.7 |
|
|
361.0 |
|
|
(88.3 |
) |
|
(24 |
)% |
|
Other than temporary impairment losses |
|
(3.2 |
) |
|
(20.2 |
) |
|
17.0 |
|
|
84 |
% |
|
Net realized investment gains (losses) |
|
111.6 |
|
|
5.4 |
|
|
106.2 |
|
|
1,967 |
% |
|
Net gains (losses) on derivative contracts |
|
7.0 |
|
|
75.9 |
|
|
(68.9 |
) |
|
(91 |
)% |
|
Net realized gains (losses) on extinguishment of debt |
|
3.1 |
|
|
4.9 |
|
|
(1.8 |
) |
|
(37 |
)% |
|
Income (loss) on Variable Interest Entities ("VIEs") |
|
3.4 |
|
|
19.7 |
|
|
(16.3 |
) |
|
(83 |
)% |
|
Losses and loss expenses (benefit) |
|
(223.6 |
) |
|
513.2 |
|
|
736.8 |
|
|
144 |
% |
|
Operating expenses |
|
112.2 |
|
|
122.4 |
|
|
10.2 |
|
|
8 |
% |
|
Interest expense |
|
242.3 |
|
|
119.9 |
|
|
(122.4 |
) |
|
(102 |
)% |
|
Insurance intangible amortization |
|
107.3 |
|
|
150.9 |
|
|
43.6 |
|
|
29 |
% |
|
Provision for income taxes |
|
5.1 |
|
|
44.5 |
|
|
39.4 |
|
|
89 |
% |
|
Net income (loss) |
|
267.4 |
|
|
(328.7 |
) |
|
596.1 |
|
|
181 |
% |
|
Net income (loss) attributable to Common Stockholders |
|
185.7 |
|
|
(328.7 |
) |
|
514.4 |
|
|
156 |
% |
|
Net income (loss) per diluted share |
|
$ |
3.99 |
|
|
$ |
(7.25 |
) |
|
$ |
11.24 |
|
|
155 |
% |
|
Adjusted earnings (loss) 2 |
|
301.1 |
|
|
(165.1 |
) |
|
466.2 |
|
|
282 |
% |
|
Adjusted earnings (loss) per diluted share 2 |
|
$ |
6.47 |
|
|
$ |
(3.64 |
) |
|
$ |
10.11 |
|
|
278 |
% |
|
Total Ambac Financial Group, Inc. stockholders' equity |
|
1,592.0 |
|
|
1,381.1 |
|
|
210.9 |
|
|
15 |
% |
|
Total Ambac Financial Group, Inc. stockholders' equity per
share |
|
$ |
35.12 |
|
|
$ |
30.52 |
|
|
$ |
4.60 |
|
|
15 |
% |
|
Adjusted book value 2 |
|
1,250.6 |
|
|
1,101.3 |
|
|
149.3 |
|
|
14 |
% |
|
Adjusted book value per share 2 |
|
$ |
27.58 |
|
|
$ |
24.34 |
|
|
$ |
3.24 |
|
|
13 |
% |
|
Weighted-average diluted shares outstanding (in millions) |
|
46.6 |
|
|
45.4 |
|
|
(1.2 |
) |
|
(3 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
(2) See Non-GAAP Financial Data section of this press release
for further information
Net Premiums EarnedDuring the fourth quarter of
2018, net premiums earned were $28.7 million compared to $25.6
million in the third quarter of 2018, including accelerations of
$12.2 million and $6.7 million, respectively. Normal premiums
earned decreased $2.4 million or 13% primarily due to the continued
runoff of the insured portfolio and the cede of $1.5 billion of par
exposure in November 2018. Accelerated premiums earned
increased $5.5 million or 82% due to the impact of de-risking
initiatives and other refinancing activity.
The following table provides a summary of net premiums earned
for the three-month periods ended December 31, 2018 and
September 30, 2018, respectively:
| |
|
Three Months Ended |
|
($ in millions) |
|
December 31, 2018 |
|
September 30, 2018 |
| Public Finance |
|
$ |
8.0 |
|
|
$ |
9.2 |
|
| Structured Finance |
|
3.4 |
|
|
4.2 |
|
| International Finance |
|
5.1 |
|
|
5.5 |
|
| Total normal premiums
earned |
|
16.5 |
|
|
18.9 |
|
| Accelerated earnings |
|
12.2 |
|
|
6.7 |
|
| Total net premiums
earned |
|
$ |
28.7 |
|
|
$ |
25.6 |
|
| |
|
|
|
|
|
|
|
|
Net Investment Income and Net Realized Investment
GainsNet investment income for the fourth quarter of 2018
and the third quarter of 2018 was $37.5 million and $58.3 million,
respectively. Net investment income decreased due to net losses on
invested assets classified as trading of $12.1 million in the
fourth quarter of 2018 compared to gains of $7.0 million in the
third quarter of 2018 primarily due to declines in the equity and
credit markets. Additionally, fourth quarter 2018 had a lower
allocation to higher-yielding Ambac insured RMBS.
Fourth quarter 2018 net realized investment gains were $29.4
million compared to $30.2 million in the third quarter of
2018. Net realized gains for the fourth quarter included
$26.7 million of proceeds from a class action settlement.
During the fourth quarter of 2018, AAC acquired additional
AAC-insured Puerto Rico securities. As of December 31, 2018, Ambac
owned approximately 58% and 37% of Ambac insured COFINA and PRIFA
bonds, compared to 58% and 30%, respectively, at September 30,
2018.
Losses and Loss Expenses and Loss
ReservesLosses and loss expenses for the fourth quarter of
2018 were a benefit of $42.3 million, as compared to an expense of
$33.5 million for the third quarter of 2018.
The following table provides losses and loss expenses (benefit)
incurred by bond type for the three-month periods ended
December 31, 2018 and September 30, 2018:
| |
|
Three Months Ended |
|
($ in millions) |
|
December 31, 2018 |
|
September 30, 2018 |
| RMBS |
|
$ |
(46.5 |
) |
|
$ |
19.2 |
|
| Domestic public
finance |
|
(5.3 |
) |
|
9.1 |
|
| Student loan |
|
(6.7 |
) |
|
4.0 |
|
| Ambac UK and other
credits |
|
16.2 |
|
|
1.2 |
|
| Total losses and loss
expenses |
|
$ |
(42.3 |
) |
|
$ |
33.5 |
|
| |
|
|
|
|
|
|
|
|
Fourth quarter of 2018 RMBS losses and loss expenses were a
benefit of $46.5 million driven by the positive impact of interest
rates on excess spread and favorable credit performance. Third
quarter of 2018 RMBS losses and loss expenses of $19.2 million were
driven by loss expenses incurred and a reduction to estimated
representation and warranty subrogation recoveries, partially
offset by credit improvements.
Domestic public finance losses and loss expenses in the fourth
quarter of 2018 were a benefit of $5.3 million, primarily related
to positive development on Puerto Rico COFINA reserves partially
offset by reserve strengthening elsewhere and the impact of lower
discount rates. In the third quarter of 2018, domestic public
finance losses and loss expenses were $9.1 million primarily
related to loss expenses.
Student loan losses and loss expenses in the fourth quarter of
2018 were a benefit of $6.7 million, primarily related to the
impact of lower interest rates. In the third quarter of 2018,
student loan losses and loss expenses were $4.0 million primarily
driven by loss expenses incurred.
Loss and loss expenses for Ambac UK and other credits were a
loss of $16.2 million in the fourth quarter of 2018, primarily the
result of foreign exchange losses and lower interest rates.
During the fourth quarter of 2018, claim and loss expenses paid
(net of reinsurance) were $25.8 million which included $56.0
million of losses and loss expenses paid, partially offset by $30.2
million of subrogation received. During the third quarter of 2018,
claim and loss expenses paid (net of reinsurance) were $228.6
million which included $264.0 million of losses and loss expenses
paid related mostly to Puerto Rico and a student loan commutation,
partially offset by $35.4 million of subrogation received.
Loss and loss expense reserves (gross of reinsurance) were
$(107) million at December 31, 2018, and $(30) million at
September 30, 2018, which were net of $1.771 billion and
$1.776 billion, respectively, of estimated subrogation recoveries
related to AAC's pursuit of legal remedies to seek redress for
breaches of representations and warranties.
The following table provides loss and loss expense reserves
(gross of reinsurance) by bond type at December 31, 2018, and
September 30, 2018:
|
($ in millions) |
|
December 31, 2018 |
|
September 30, 2018 |
| RMBS |
|
$ |
(1,313 |
) |
|
$ |
(1,273 |
) |
| Domestic public
finance |
|
639 |
|
|
637 |
|
| Student loans |
|
228 |
|
|
235 |
|
| Ambac UK and other
credits |
|
273 |
|
|
266 |
|
| Loss expenses |
|
66 |
|
|
105 |
|
| Total loss and loss
expense reserves |
|
$ |
(107 |
) |
|
$ |
(30 |
) |
| |
|
|
|
|
|
|
|
|
Net Gains (Losses) on Derivative ContractsNet
losses on derivative contracts of $44.7 million, including
approximately $4 million of counterparty credit adjustments, for
the fourth quarter of 2018 were primarily due to a loss on interest
rate derivatives due to the impact of a decrease in forward
interest rates. Net gains on derivative contracts of $17.6 million
for the third quarter of 2018 were primarily due to a gain on
interest rate derivatives due to the impact of an increase in
forward interest rates. 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.
ExpensesOperating expenses for the fourth
quarter of 2018 decreased by $7.1 million to $21.3 million from
$28.4 million in the third quarter of 2018. The decrease in the
fourth quarter of 2018 was due to lower compensation costs and the
absence of expenses related to the third quarter AMPS transaction.
Third quarter operating expenses included $5.9 million of expenses
associated with the AMPS transaction.
Interest expense for the fourth quarter of 2018 increased $0.4
million to $66.1 million from $65.7 million in the third quarter of
2018 due to the August 2018 re-issuance of surplus notes in
connection with the AMPS transaction, partially offset by lower
interest expense resulting from the partial redemption of the Ambac
Note in the third quarter of 2018.
Taxes and Net Operating Loss Carry-Forwards
("NOLs")Income taxes were a benefit of $1.7 million for
the fourth quarter of 2018, as compared to an expense of $2.2
million for the third quarter of 2018. The fourth quarter provision
included an incremental benefit related to the tax law change
enacted in December 2017. The third quarter provision included $0.4
million of state income taxes and $1.8 million of foreign
taxes.
At December 31, 2018, the Ambac consolidated group had
approximately $3.4 billion of NOLs, including $1.3 billion at Ambac
and $2.1 billion at AAC.
As a result of taxable income at AAC during 2018, AAC utilized
NOLs in an amount that resulted in the accrual of $13.9 million of
tolling payments. AAC's tax positions are subject to review by the
OCI, which may lead to the adoption of positions that reduce the
amount of tolling payments otherwise available to Ambac.
Total Ambac Financial Group, Inc. Stockholders'
EquityStockholders’ equity at December 31, 2018, was
down 9% to $1.59 billion, or $35.12 per share compared to $1.76
billion or $38.77 per share as of September 30, 2018 due to
the net loss of $20.5 million, unrealized investment portfolio
losses, related primarily to credit spread widening, of $128.5
million and translation losses of $18.1 million related to Ambac's
foreign subsidiaries.
Financial Guarantee Insured PortfolioThe
financial guarantee insurance portfolio net par amount outstanding
declined 10.1% during the quarter ended December 31, 2018, to $46.9
billion from $52.2 billion at September 30, 2018. The
reduction in the insured portfolio was primarily related to a
decrease of $3.9 billion in the public finance portfolio related to
the reinsurance of $1.5 billion and other de-risking and
refinancing activity, a decrease of $0.8 billion in the structured
finance portfolio related to active de-risking in utility exposures
and a decrease of $0.6 billion in the international finance sector
due to de-risking activity and natural run-off, coupled with a
decline in the British Pound. Adversely Classified and Watch List
Credits decreased in the fourth quarter of 2018 by a net $1.5
billion or 7.0% to $19.9 billion at December 31, 2018 from $21.4
billion at September 30, 2018.
Details of financial guarantee insurance portfolio are
highlighted in the below table.
|
Net Par Outstanding |
|
December 31, 2018 |
|
September 30, 2018 |
| By
Sector: |
|
|
|
|
| Public finance |
|
50 |
% |
|
52 |
% |
|
Structured Finance |
|
21 |
% |
|
21 |
% |
|
International |
|
29 |
% |
|
27 |
% |
| By Financial
Guarantor: |
|
|
|
|
| Ambac
Assurance |
|
72 |
% |
|
74 |
% |
| Ambac
UK |
|
28 |
% |
|
26 |
% |
|
|
|
|
|
|
|
|
Other Events
Puerto Rico - COFINA Plan of AdjustmentOn
February 4, 2019, the COFINA Plan of Adjustment ("POA") was
confirmed by the United States District Court for the District of
Puerto Rico and became effective on February 12, 2019. The POA and
related commutation transactions resulted in a reduction of AAC's
insured net par exposure to COFINA by $602.7 million, or 75%, to
$202.0 million and a reduction in overall Puerto Rico net par
exposure to $1.3 billion from $1.9 billion at December 31, 2018.
Domestic Public Finance loss and loss expenses for the fourth
quarter of 2018 includes a $42.3 million benefit related to the
closing of these transactions.
Non-GAAP Financial DataIn 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, particularly as assets held in
non-functional currencies have grown, and facilitates
period-to-period comparisons of Ambac's operating performance.
Adjusted Earnings were $10.8 million, or $0.24 per diluted
share, for the fourth quarter 2018 as compared to an Adjusted Loss
of $(76.0) million or $(1.66) per diluted share, for the third
quarter of 2018. Adjusted Loss for the third quarter included the
impact of the AMPS transaction.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Earnings
(Loss), for the three-month periods ended December 31, 2018,
and September 30, 2018, respectively:
| |
|
Three Months Ended |
| |
|
December 31, 2018 |
|
September 30, 2018 |
| ($ in
millions, other than per share data) |
|
$ Amount |
|
Per Diluted Share |
|
$ Amount |
|
Per Diluted Share |
| Net income
(loss) attributable to common stockholders |
|
$ |
(20.5 |
) |
|
$ |
(0.45 |
) |
|
$ |
(103.8 |
) |
|
$ |
(2.27 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
| Non-credit
impairment fair value (gain) loss on credit derivatives |
|
0.3 |
|
|
0.01 |
|
|
(0.2 |
) |
|
— |
|
| Insurance
intangible amortization |
|
29.0 |
|
|
0.63 |
|
|
26.4 |
|
|
0.58 |
|
| Foreign
exchange (gains) losses |
|
2.0 |
|
|
0.05 |
|
|
1.6 |
|
|
0.03 |
|
| Adjusted Earnings (loss) |
|
$ |
10.8 |
|
|
$ |
0.24 |
|
|
$ |
(76.0 |
) |
|
$ |
(1.66 |
) |
| Weighted-average
diluted shares outstanding (in millions) |
|
|
|
45.8 |
|
|
|
|
45.7 |
|
| |
|
|
|
|
|
|
|
|
|
|
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 $1.251 billion, or $27.58 per share, at
December 31, 2018, as compared to $1.292 billion, or $28.50
per share, at September 30, 2018. The decrease in Adjusted
Book Value was primarily attributable to the impact of the
reinsurance of $1.5 billion of exposure and changes to foreign
exchange rates.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure Adjusted Book Value as
of each date presented:
| |
|
December 31, 2018 |
|
September 30, 2018 |
| ($ in
millions, other than per share data) |
|
$ Amount |
|
Per Share |
|
$ Amount |
|
Per Share |
| Total Ambac
Financial Group, Inc. stockholders’ equity |
|
$ |
1,592.0 |
|
|
$ |
35.12 |
|
|
$ |
1,757.7 |
|
|
$ |
38.77 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
| Non-credit
impairment fair value losses on credit derivatives |
|
1.5 |
|
|
0.03 |
|
|
1.2 |
|
|
0.03 |
|
| Insurance
intangible asset |
|
(718.9 |
) |
|
(15.87 |
) |
|
(755.7 |
) |
|
(16.67 |
) |
| Net unearned
premiums and fees in excess of expected losses |
|
461.9 |
|
|
10.19 |
|
|
503.2 |
|
|
11.10 |
|
| Net
unrealized investment (gains) losses in Accumulated Other
Comprehensive Income |
|
(85.9 |
) |
|
(1.89 |
) |
|
(214.4 |
) |
|
(4.73 |
) |
| Adjusted Book
Value |
|
$ |
1,250.6 |
|
|
$ |
27.58 |
|
|
$ |
1,291.9 |
|
|
$ |
28.50 |
|
| Shares outstanding (in
millions) |
|
|
|
45.3 |
|
|
|
|
45.3 |
|
| |
|
|
|
|
|
|
|
|
|
|
Earnings Call and Webcast
On March 1, 2019 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
2018 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.cfm.
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 15, 2019, and can be
accessed by dialing (Domestic) (844) 512-2921 or
(International) (412) 317-6671; and using
ID#13686563.
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 holding company whose subsidiaries, including
its principal operating subsidiaries, Ambac Assurance Corporation
(“Ambac Assurance or AAC”), Everspan Financial Guarantee Corp. and
Ambac Assurance UK Limited (“Ambac UK”), provide financial
guarantees of obligations in both the public and private sectors
globally. AAC is a guarantor of public finance and structured
finance obligations. Ambac’s common stock trades on the NASDAQ
Global Select Market 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.
Contact
Lisa A. KampfManaging Director, Investor Relations(212)
208-3177lkampf@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") or from transactions or opportunities apart
from Ambac Assurance; (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; (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 as well as obligations relating to
privatized military housing projects) 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 Company’s results of operation may be adversely affected by
events or circumstances that result in the accelerated amortization
of the Company’s insurance intangible asset; (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 tax law; (28)
changes in prevailing interest rates; (29) changes on inter-bank
lending rate reporting practices or the method pursuant to which
LIBOR rates are determined; (30) factors that may influence the
amount of installment premiums paid to the Company; (31) default by
one or more of Ambac Assurance's portfolio investments, insured
issuers or counterparties; (32) 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;
(33) risks relating to determinations of amounts of impairments
taken on investments; (34) 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; (35) actions of stakeholders whose
interests are not aligned with broader interests of the Company's
stockholders; (36) the Company’s inability to realize value from
Ambac UK or other subsidiaries of Ambac Assurance; (37) system
security risks; (38) market spreads and pricing on interest rate
derivatives insured or issued by the Company; (39) the risk of
volatility in income and earnings, including volatility due to the
application of fair value accounting; (40) changes in accounting
principles or practices that may impact the Company’s reported
financial results; (41) legislative and regulatory developments,
including intervention by regulatory authorities; (42) the economic
impact of “Brexit”; (43) 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; (44) 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; (45) 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 (46) 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 Thousands, except share data) |
|
December 31, 2018 |
|
September 30, 2018 |
|
Revenues: |
|
|
|
|
| Net premiums earned |
|
$ |
28,730 |
|
|
$ |
25,640 |
|
| Net
investment income: |
|
|
|
|
| Securities
available-for-sale and short-term |
|
48,247 |
|
|
49,985 |
|
| Other
investments |
|
(10,764 |
) |
|
8,347 |
|
| Total net
investment income |
|
37,483 |
|
|
58,332 |
|
|
Other-than-temporary impairment losses: |
|
|
|
|
| Total
other-than-temporary impairment losses |
|
(1,643 |
) |
|
(266 |
) |
| Portion of
other-than-temporary impairment recognized in other comprehensive
income |
|
(16 |
) |
|
— |
|
| Net
other-than-temporary impairment losses recognized in earnings |
|
(1,659 |
) |
|
(266 |
) |
| Net realized
investment gains (losses) |
|
29,413 |
|
|
30,201 |
|
| Net gains
(losses) on derivative contracts |
|
(44,716 |
) |
|
17,583 |
|
| Other
income |
|
2,246 |
|
|
694 |
|
| Income on
variable interest entities |
|
454 |
|
|
1,831 |
|
| Total revenues |
|
51,951 |
|
|
134,015 |
|
|
Expenses: |
|
|
|
|
| Losses and
loss expense (benefit) |
|
(42,298 |
) |
|
33,501 |
|
| Insurance
intangible amortization |
|
28,982 |
|
|
26,421 |
|
| Operating
expenses |
|
21,339 |
|
|
28,368 |
|
| Interest
expense |
|
66,064 |
|
|
65,673 |
|
| Total expenses |
|
74,087 |
|
|
153,963 |
|
| Pre-tax income (loss) |
|
(22,136 |
) |
|
(19,948 |
) |
| Provision for income
taxes |
|
(1,677 |
) |
|
2,211 |
|
| Net income (loss) |
|
$ |
(20,459 |
) |
|
$ |
(22,159 |
) |
| Less: loss on exchange of
auction market preferred shares |
|
— |
|
|
81,686 |
|
| Net income (loss)
attributable to common stockholders |
|
$ |
(20,459 |
) |
|
$ |
(103,845 |
) |
| |
|
|
|
|
| Net income (loss)
per basic share |
|
$ |
(0.45 |
) |
|
$ |
(2.27 |
) |
| Net income (loss)
per diluted share |
|
$ |
(0.45 |
) |
|
$ |
(2.27 |
) |
| |
|
|
|
|
| Weighted-average number of
common shares outstanding: |
|
|
|
|
| Basic |
|
45,756,090 |
|
|
45,749,252 |
|
| Diluted |
|
45,756,090 |
|
|
45,749,252 |
|
| |
|
|
|
|
|
|
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Statements of Income (Loss)
(Unaudited)
| |
|
Year Ended December 31, |
|
($ in Thousands, except share data) |
|
2018 |
|
2017 |
|
Revenues: |
|
|
|
|
| Net premiums earned |
|
$ |
111,089 |
|
|
$ |
175,277 |
|
| Net
investment income: |
|
|
|
|
| Securities
available-for-sale and short-term |
|
270,525 |
|
|
337,774 |
|
| Other
investments |
|
2,192 |
|
|
23,179 |
|
| Total net
investment income |
|
272,717 |
|
|
360,953 |
|
|
Other-than-temporary impairment losses: |
|
|
|
|
| Total
other-than-temporary impairment losses |
|
(3,260 |
) |
|
(54,625 |
) |
| Portion of
other-than-temporary impairment recognized in other comprehensive
income |
|
22 |
|
|
34,454 |
|
| Net
other-than-temporary impairment losses recognized in earnings |
|
(3,238 |
) |
|
(20,171 |
) |
| Net realized
investment gains (losses) |
|
111,624 |
|
|
5,366 |
|
| Net gains
(losses) on derivative contracts |
|
6,990 |
|
|
75,937 |
|
| Net realized
gains on extinguishment of debt |
|
3,121 |
|
|
4,920 |
|
| Other income
(expense) |
|
4,922 |
|
|
214 |
|
| Income
(loss) on variable interest entities |
|
3,436 |
|
|
19,670 |
|
| Total revenues |
|
510,661 |
|
|
622,166 |
|
|
Expenses: |
|
|
|
|
| Losses and
loss expense (benefit) |
|
(223,613 |
) |
|
513,186 |
|
| Insurance
intangible amortization |
|
107,281 |
|
|
150,854 |
|
| Operating
expenses |
|
112,204 |
|
|
122,436 |
|
| Interest
expense |
|
242,256 |
|
|
119,941 |
|
| Total expenses |
|
238,128 |
|
|
906,417 |
|
| Pre-tax income (loss) |
|
272,533 |
|
|
(284,251 |
) |
| Provision for income
taxes |
|
5,134 |
|
|
44,464 |
|
| Net income (loss) |
|
$ |
267,399 |
|
|
$ |
(328,715 |
) |
| Less: loss on exchange of
auction market preferred shares |
|
81,686 |
|
|
— |
|
| Net income (loss)
attributable to common stockholders |
|
$ |
185,713 |
|
|
$ |
(328,715 |
) |
| |
|
|
|
|
| Net income (loss)
per basic share |
|
$ |
4.07 |
|
|
$ |
(7.25 |
) |
| Net income (loss)
per diluted share |
|
$ |
3.99 |
|
|
$ |
(7.25 |
) |
| |
|
|
|
|
| Weighted-average number of
common shares outstanding: |
|
|
|
|
| Basic |
|
45,665,883 |
|
|
45,367,932 |
|
| Diluted |
|
46,559,835 |
|
|
45,367,932 |
|
| |
|
|
|
|
|
|
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
|
($ in Thousands, except share data) |
|
December 31, 2018 |
|
September 30, 2018 |
|
Assets: |
|
|
|
|
| Investments: |
|
|
|
|
| Fixed income securities,
at fair value (amortized cost: $3,020,744 and $3,001,432) |
|
$ |
3,115,675 |
|
|
$ |
3,221,301 |
|
| Fixed
income securities pledged as collateral, at fair value (amortized
cost: $0 and $84,186) |
|
— |
|
|
84,186 |
|
|
Short-term investments, at fair value (amortized cost: $430,405 and
$562,111) |
|
430,331 |
|
|
562,060 |
|
| Other
investments (includes $351,049 and $372,774 at fair value) |
|
391,217 |
|
|
411,604 |
|
| Total
investments |
|
3,937,223 |
|
|
4,279,151 |
|
| Cash and cash
equivalents |
|
63,089 |
|
|
52,505 |
|
| Restricted cash |
|
19,405 |
|
|
— |
|
| Receivable for
securities |
|
3,351 |
|
|
46,376 |
|
| Investment income due
and accrued |
|
11,576 |
|
|
10,709 |
|
| Premium
receivables |
|
495,391 |
|
|
517,197 |
|
| Reinsurance recoverable
on paid and unpaid losses |
|
23,133 |
|
|
25,511 |
|
| Deferred ceded
premium |
|
61,134 |
|
|
45,204 |
|
| Subrogation
recoverable |
|
1,932,960 |
|
|
1,898,611 |
|
| Loans |
|
9,913 |
|
|
10,082 |
|
| Derivative assets |
|
59,468 |
|
|
50,262 |
|
| Current taxes |
|
47,040 |
|
|
32,509 |
|
| Insurance intangible
asset |
|
718,931 |
|
|
755,734 |
|
| Other assets |
|
112,788 |
|
|
22,191 |
|
| Variable interest
entity assets: |
|
|
|
|
| Fixed
income securities, at fair value |
|
2,737,286 |
|
|
2,718,377 |
|
|
Restricted cash |
|
999 |
|
|
1,024 |
|
| Loans, at
fair value |
|
4,287,664 |
|
|
4,563,091 |
|
|
Derivative assets |
|
66,302 |
|
|
61,543 |
|
| Other
assets |
|
1,058 |
|
|
3,387 |
|
| Total
assets |
|
$ |
14,588,711 |
|
|
$ |
15,093,464 |
|
| Liabilities and
Stockholders’ Equity: |
|
|
|
|
|
Liabilities: |
|
|
|
|
| Unearned
premiums |
|
$ |
629,971 |
|
|
$ |
669,820 |
|
| Loss and
loss expense reserves |
|
1,826,078 |
|
|
1,868,484 |
|
| Ceded
premiums payable |
|
32,913 |
|
|
34,306 |
|
| Deferred
taxes |
|
40,130 |
|
|
27,537 |
|
| Long-term
debt |
|
2,928,929 |
|
|
2,937,771 |
|
| Accrued
interest payable |
|
375,808 |
|
|
356,711 |
|
|
Derivative liabilities |
|
76,699 |
|
|
61,331 |
|
| Other
liabilities |
|
62,085 |
|
|
61,533 |
|
| Payable
for securities purchased |
|
1,707 |
|
|
31,292 |
|
| Variable interest
entity liabilities: |
|
|
|
|
| Accrued
interest payable |
|
556 |
|
|
2,817 |
|
| Long-term
debt, at fair value |
|
5,268,596 |
|
|
5,585,860 |
|
|
Derivative liabilities |
|
1,712,062 |
|
|
1,657,173 |
|
| Other
liabilities |
|
30 |
|
|
20 |
|
| Total
liabilities |
|
12,955,564 |
|
|
13,294,655 |
|
| 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: 45,365,170 and 45,365,170 |
|
454 |
|
|
454 |
|
|
Additional paid-in capital |
|
219,429 |
|
|
218,050 |
|
|
Accumulated other comprehensive income |
|
(48,715 |
) |
|
97,825 |
|
| Retained
earnings |
|
1,421,302 |
|
|
1,441,857 |
|
| Treasury
stock, shares at cost: 28,892 and 32,956 |
|
(473 |
) |
|
(527 |
) |
| Total Ambac
Financial Group, Inc. stockholders’ equity |
|
1,591,997 |
|
|
1,757,659 |
|
| Noncontrolling
interest |
|
41,150 |
|
|
41,150 |
|
| Total
stockholders’ equity |
|
1,633,147 |
|
|
1,798,809 |
|
| Total
liabilities and stockholders’ equity |
|
$ |
14,588,711 |
|
|
$ |
15,093,464 |
|
| |
|
|
|
|
|
|
|
|
Ambac Financial (NASDAQ:AMBC)
과거 데이터 주식 차트
부터 11월(11) 2024 으로 12월(12) 2024
Ambac Financial (NASDAQ:AMBC)
과거 데이터 주식 차트
부터 12월(12) 2023 으로 12월(12) 2024
