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 $43.2 million or $0.94 per
diluted share and an Adjusted Loss(1) of $9.2 million or $0.20 per
diluted share for the quarter ended March 31, 2019. This
compares to a Net Loss attributable to common stockholders of $20.5
million or $0.45 per diluted share and Adjusted Earnings of $10.8
million or $0.24 per diluted share in the fourth quarter of
2018. Results for the first quarter of 2019 were impacted by
increasing public finance loss reserves, primarily related to
Puerto Rico, partially offset by higher investment income and the
net positive impact of the COFINA Plan of Adjustment compared to
the fourth quarter of 2018.
Claude LeBlanc, President and Chief Executive Officer, stated,
“The first quarter of 2019, was a record quarter of active
de-risking of Adversely Classified and Watch List Credits, which
was the main driver of the $2.5 billion reduction in our insured
net par outstanding. These significant de-risking results
materially progressed our value focused strategy by improving our
risk profile and enhancing the quality of our book value which, we
believe, will lead to greater financial flexibility." Mr. LeBlanc
continued, "I am pleased with the tremendous progress achieved in
the quarter as we continue to execute on our strategy to deliver
long-term value to our shareholders."
| |
|
Ambac's First Quarter 2019 Summary Results |
|
|
|
|
|
|
|
Better (Worse) |
|
($ in millions, except per share data) |
|
1Q2019 |
|
4Q2018 |
|
Amount |
|
Percent |
| Net
premiums earned |
|
$ |
27.8 |
|
|
$ |
28.7 |
|
|
$ |
(0.9 |
) |
|
(3 |
)% |
| Net
investment income |
|
54.8 |
|
|
37.5 |
|
|
17.3 |
|
|
46 |
% |
| Net
realized investment gains (losses) |
|
17.2 |
|
|
29.4 |
|
|
(12.2 |
) |
|
(41 |
)% |
| Net gains
(losses) on derivative contracts |
|
(16.2 |
) |
|
(44.7 |
) |
|
28.5 |
|
|
64 |
% |
| Income
(loss) on Variable Interest Entities ("VIEs") |
|
15.9 |
|
|
0.5 |
|
|
15.4 |
|
|
3,080 |
% |
| Losses
and loss expenses (benefit) |
|
12.4 |
|
|
(42.3 |
) |
|
(54.7 |
) |
|
(129 |
)% |
| Operating
expenses |
|
24.9 |
|
|
21.3 |
|
|
(3.6 |
) |
|
(17 |
)% |
| Interest
expense |
|
68.0 |
|
|
66.1 |
|
|
(1.9 |
) |
|
(3 |
)% |
| Insurance
intangible amortization |
|
36.3 |
|
|
29.0 |
|
|
(7.3 |
) |
|
(25 |
)% |
| Provision
for income taxes |
|
2.0 |
|
|
(1.7 |
) |
|
(3.7 |
) |
|
(218 |
)% |
| Net
income (loss) attributable to Common Stockholders |
|
(43.2 |
) |
|
(20.5 |
) |
|
(22.7 |
) |
|
(111 |
)% |
| Net
income (loss) per diluted share |
|
$ |
(0.94 |
) |
|
$ |
(0.45 |
) |
|
$ |
(0.49 |
) |
|
(109 |
)% |
| Adjusted
earnings (loss) 1 |
|
(9.2 |
) |
|
10.8 |
|
|
(20.0 |
) |
|
(185 |
)% |
| Adjusted
earnings (loss) per diluted share 1 |
|
$ |
(0.20 |
) |
|
$ |
0.24 |
|
|
$ |
(0.44 |
) |
|
(183 |
)% |
| Total
Ambac Financial Group, Inc. stockholders' equity |
|
1,622.0 |
|
|
1,592.0 |
|
|
30 |
|
|
2 |
% |
| Total
Ambac Financial Group, Inc. stockholders' equity per share |
|
$ |
35.63 |
|
|
$ |
35.12 |
|
|
$ |
0.51 |
|
|
1 |
% |
| Adjusted
book value 1 |
|
1,252.6 |
|
|
1,250.6 |
|
|
2.0 |
|
|
— |
% |
| Adjusted
book value per share 1 |
|
$ |
27.52 |
|
|
$ |
27.58 |
|
|
$ |
(0.06 |
) |
|
— |
% |
|
Weighted-average diluted shares outstanding (in millions) |
|
45.8 |
|
|
45.8 |
|
|
— |
|
|
— |
% |
(1) See Non-GAAP Financial Data section of this press release
for further information
Net Premiums EarnedDuring the first quarter of
2019, net premiums earned were $27.8 million compared to $28.7
million in the fourth quarter of 2018, including accelerated
premiums earned of $12.2 million in both periods. Normal
premiums earned decreased $0.9 million or 5% primarily due to the
continued reductions of the insured portfolio, including the
cede of $1.5 billion of insured par during the fourth quarter of
2018. Accelerated premiums earned were primarily driven by
de-risking initiatives executed during the respective quarters,
including the COFINA Plan of Adjustment which was executed during
the first quarter of 2019.
The following table provides a summary of net premiums earned
for the three-month periods ended March 31, 2019 and
December 31, 2018, respectively:
| |
|
Three Months Ended |
|
($ in millions) |
|
March 31, 2019 |
|
December 31, 2018 |
|
Public Finance |
|
$ |
7.6 |
|
$ |
8.0 |
| Structured Finance |
|
2.9 |
|
3.4 |
| International Finance |
|
5.1 |
|
5.1 |
| Total normal premiums earned |
|
15.6 |
|
16.5 |
| Accelerated earnings |
|
12.2 |
|
12.2 |
| Total net premiums earned |
|
$ |
27.8 |
|
$ |
28.7 |
| |
|
|
|
|
|
|
Net Investment Income and Net Realized Investment
GainsNet investment income for the first quarter of 2019
and the fourth quarter of 2018 was $54.8 million and $37.5 million,
respectively. Net investment income increased due to net gains on
invested assets classified as trading of $6.9 million in the first
quarter of 2019 compared to losses of $12.1 million in the fourth
quarter of 2018 primarily due to gains in the equity and credit
markets. The increase in net investment income was moderated by a
reduced allocation to higher-yielding AAC insured COFINA bonds
resulting from the execution of the COFINA Plan of Adjustment and
the subsequent sale of a majority of the new COFINA bonds
received in the transaction. The impact of the COFINA Plan of
Adjustment and sales were the primary driver of net realized
investment gains of $17.2 million during the first quarter
2019.
Losses and Loss Expenses and Loss
ReservesLosses and loss expenses for the first quarter of
2019 were $12.4 million, as compared to a benefit of $42.3 million
for the fourth quarter of 2018.
The following table provides losses and loss expenses (benefit)
incurred by bond type for the three-month periods ended
March 31, 2019 and December 31, 2018:
| |
|
Three Months Ended |
|
($ in millions) |
|
March 31, 2019 |
|
December 31, 2018 |
|
RMBS |
|
$ |
(38.6 |
) |
|
$ |
(46.5 |
) |
| Domestic public finance |
|
69.3 |
|
|
(5.3 |
) |
| Student loan |
|
(3.6 |
) |
|
(6.7 |
) |
| Ambac UK and other
credits |
|
(14.7 |
) |
|
16.2 |
|
| Total losses and loss
expenses |
|
$ |
12.4 |
|
|
$ |
(42.3 |
) |
First quarter of 2019 RMBS losses and loss expenses were a
benefit of $38.6 million driven by favorable credit performance and
higher levels of expected excess spread due to lower interest
rates, partially offset by an increase in loss expenses. Fourth
quarter of 2018 RMBS losses and loss expenses were a benefit of
$46.5 million and were driven by the positive impact of interest
rates on excess spread and favorable credit performance.
Domestic public finance losses and loss expenses in the first
quarter of 2019 were an expense of $69.3 million, primarily related
to increasing non-COFINA related Puerto Rico reserves. In the
fourth quarter of 2018, domestic public finance losses and loss
expenses 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.
Student loan losses and loss expenses in the first quarter of
2019 and fourth quarter of 2018 were a benefit of $3.6 million and
$6.7 million, respectively, primarily related to the impact of
lower interest rates.
Loss and loss expenses for Ambac UK and other credits were a
benefit of $14.7 million in the first quarter of 2019, primarily
the result of foreign exchange gains and positive credit
development. In the fourth quarter of 2018, loss and loss expenses
for Ambac UK and other credits were a loss of $16.2 million,
primarily as the result of foreign exchange losses and lower
interest rates.
During the first quarter of 2019, claim and loss expenses paid
(net of reinsurance) were $64.4 million which included $132.7
million of losses and loss expenses paid, partially offset by $68.3
million of subrogation received. 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.
Loss and loss expense reserves (gross of reinsurance) were
$(222) million at March 31, 2019, and $(107) million at
December 31, 2018, which were net of $1.766 billion and $1.771
billion, respectively, of estimated subrogation recoveries related
to AAC's pursuit of legal remedies to seek redress for breaches of
representations and warranties.
The following table provides loss and loss expense reserves
(gross of reinsurance) by bond type at March 31, 2019, and
December 31, 2018:
|
($ in millions) |
|
March 31, 2019 |
|
December 31, 2018 |
|
RMBS |
|
$ |
(1,351 |
) |
|
$ |
(1,313 |
) |
| Domestic public finance |
|
562 |
|
|
639 |
|
| Student loans |
|
226 |
|
|
228 |
|
| Ambac UK and other
credits |
|
258 |
|
|
273 |
|
| Loss expenses |
|
83 |
|
|
66 |
|
| Total loss and loss expense
reserves |
|
$ |
(222 |
) |
|
$ |
(107 |
) |
| |
|
|
|
|
|
|
|
|
Net Gains (Losses) on Derivative ContractsNet
losses on derivative contracts of $16.2 million for the first
quarter of 2019 were primarily due to a loss on interest rate
derivatives due to the impact of a decrease in forward interest
rates. Net losses on derivative contracts of $44.7 million for the
fourth quarter of 2018 were also primarily due to a loss on
interest rate derivatives due to the impact of a decrease in
forward interest rates, plus $4.1 million of negative counterparty
credit adjustments. The interest rate derivatives portfolio is
positioned to benefit from rising interest rates as a partial
economic hedge against interest rate exposure in AAC's insured and
investment portfolios.
Impact of Puerto Rico COFINA Plan of Adjustment on
Variable Interest EntitiesIn connection with the Puerto
Rico COFINA Plan of Adjustment, which closed during the first
quarter, holders of AAC-insured COFINA bonds who did not elect to
commute the associated AAC policy deposited their bonds into the
COFINA Class 2 Trust (the "trust") in exchange for units issued by
the trust. The trust also received such holders’ shares of the new
COFINA bonds and cash amounts paid by COFINA. AAC's obligations
under its policy with respect to the AAC-insured COFINA bonds held
in the trust will be reduced by all amounts distributed, or deemed
distributed, from the trust to the holders of the trust units.
Ambac determined that the COFINA Class 2 Trust is a variable
interest entity that must be consolidated in Ambac's GAAP financial
statements. The consolidation of this trust increased VIE
assets by $274.2 million and VIE liabilities by $335.3
million. Income on variable interest entities was $15.9
million for the first quarter of 2019, including a gain of $14.9
million on the consolidation of this trust.
ExpensesOperating expenses for the first
quarter of 2019 increased by $3.6 million to $24.9 million from
$21.3 million in the fourth quarter of 2018. The increase in the
first quarter of 2019 was mostly due to higher cyclical
compensation costs related to annual equity compensation grants and
related payroll taxes.
Interest expense for the first quarter of 2019 increased $1.9
million to $68.0 million from $66.1 million in the fourth quarter
of 2018 due to a higher coupon rate for the Ambac Note and
compounding of interest on other debt partially offset by lower
expense resulting from the partial redemption of the Ambac Note in
the fourth quarter of 2018.
Taxes and Net Operating Loss Carry-Forwards
("NOLs")Income taxes were an expense of $2.0 million for
the first quarter of 2019, as compared to a benefit of $1.7 million
for the fourth quarter of 2018. The expense for the first quarter
of 2019 included a reduction in state and local taxes for AFG,
partially offset by higher foreign taxes, resulting from favorable
Ambac UK results. The benefit for the fourth quarter of 2018
included an incremental benefit related to the tax law change
enacted in December 2017.
Total Ambac Financial Group, Inc. Stockholders'
EquityStockholders’ equity at March 31, 2019, was up
2% to $1.62 billion, or $35.63 per share compared to $1.59 billion
or $35.12 per share as of December 31, 2018, primarily driven
by unrealized investment portfolio gains of $56.2 million and
translation gains of $14.6 million related to Ambac's foreign
subsidiaries, partially offset by the net loss of $43.2
million.
Financial Guarantee Insured PortfolioThe
financial guarantee insurance portfolio net par amount outstanding
declined 5.2% during the quarter ended March 31, 2019, to
$44.5 billion from $46.9 billion at December 31, 2018. The
reduction in the insured portfolio was primarily related to (i) a
decrease of $1.9 billion in the public finance portfolio resulting
mostly from active de-risking, including the Puerto Rico COFINA
Plan of Adjustment of $0.6 billion and two transportation exposures
of $0.4 billion, (ii) a decrease of $0.5 billion in the structured
finance portfolio related to active de-risking and normal runoff in
mortgage-backed exposures, and (iii) a decrease of $0.1 billion in
the international finance portfolio due to de-risking activity and
natural run-off, partially offset by an increase in the British
Pound.
Adversely Classified and Watch List Credits decreased in the
first quarter of 2019 by a net $1.1 billion or 5.8% to $18.8
billion at March 31, 2019 from $19.9 billion at
December 31, 2018 mainly due to the Puerto Rico COFINA Plan of
Adjustment, transportation exposure risk reductions and other
de-risking activity.
Details of financial guarantee insurance portfolio are
highlighted in the below table.
|
Net Par Outstanding |
|
March 31, 2019 |
|
December 31, 2018 |
| By
Sector: |
|
|
|
|
|
Public finance |
|
49% |
|
50% |
|
Structured Finance |
|
21% |
|
21% |
|
International |
|
30% |
|
29% |
| By Financial
Guarantor: |
|
|
|
|
|
Ambac Assurance |
|
70% |
|
72% |
|
Ambac UK |
|
30% |
|
28% |
| |
|
|
|
|
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 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 Loss was $9.2 million, or $0.20 per diluted share, for
the first quarter 2019 as compared to Adjusted Earnings of $10.8
million or $0.24 per diluted share, for the fourth quarter of
2018.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Earnings
(Loss), for the three-month periods ended March 31, 2019, and
December 31, 2018, respectively:
| |
|
Three Months Ended |
| |
|
March 31, 2019 |
|
December 31, 2018 |
| ($ in
millions, other than per share data) |
|
$ Amount |
|
Per Diluted Share |
|
$ Amount |
|
Per Diluted Share |
|
Net income (loss) attributable to common
stockholders |
|
$ |
(43.2 |
) |
|
$ |
(0.94 |
) |
|
$ |
(20.5 |
) |
|
$ |
(0.45 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
Non-credit impairment fair value (gain) loss on credit
derivatives |
|
(0.4 |
) |
|
(0.01 |
) |
|
0.3 |
|
|
0.01 |
|
|
Insurance intangible amortization |
|
36.3 |
|
|
0.79 |
|
|
29.0 |
|
|
0.63 |
|
|
Foreign exchange (gains) losses |
|
(1.9 |
) |
|
(0.04 |
) |
|
2.0 |
|
|
0.05 |
|
| Adjusted Earnings (loss) |
|
$ |
(9.2 |
) |
|
$ |
(0.20 |
) |
|
$ |
10.8 |
|
|
$ |
0.24 |
|
| Weighted-average diluted
shares outstanding (in millions) |
|
|
|
45.8 |
|
|
|
|
45.8 |
|
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 $1.253 billion, or
$27.52 per share, at March 31, 2019, as compared to $1.251
billion, or $27.58 per share, at December 31, 2018. The
increase in Adjusted Book Value was primarily attributable to
changes to foreign exchange rates and the impact of lower interest
rates on the value of expected installment premiums, partially
offset by the Adjusted Loss for the first quarter of 2019.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure Adjusted Book Value as
of each date presented:
| |
|
March 31, 2019 |
|
December 31, 2018 |
| ($ in
millions, other than per share data) |
|
$ Amount |
|
Per Share |
|
$ Amount |
|
Per Share |
|
Total AFGI Stockholders' Equity (Deficit) |
|
$ |
1,622.0 |
|
|
$ |
35.63 |
|
|
$ |
1,592.0 |
|
|
$ |
35.12 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
Non-credit impairment fair value losses on credit derivatives |
|
1.1 |
|
|
0.02 |
|
|
1.5 |
|
|
0.03 |
|
|
Insurance intangible asset |
|
(689.3 |
) |
|
(15.13 |
) |
|
(718.9 |
) |
|
(15.87 |
) |
|
Net unearned premiums and fees in excess of expected losses |
|
460.9 |
|
|
10.12 |
|
|
461.9 |
|
|
10.19 |
|
|
Net unrealized investment (gains) losses in Accumulated Other
Comprehensive Income |
|
(142.1 |
) |
|
(3.12 |
) |
|
(85.9 |
) |
|
(1.89 |
) |
| Adjusted book
value |
|
$ |
1,252.6 |
|
|
$ |
27.52 |
|
|
$ |
1,250.6 |
|
|
$ |
27.58 |
|
| Shares outstanding (in
millions) |
|
|
|
45.5 |
|
|
|
|
45.3 |
|
| |
|
|
|
|
|
|
|
|
|
|
Earnings Call and WebcastOn May 10, 2019
at 8:30am ET, Claude LeBlanc, President and Chief Executive
Officer, and David Trick, Executive Vice President and Chief
Financial Officer, will discuss first quarter 2019 results during a
conference call. A live audio webcast of the call will be
available through the Investor Relations section of Ambac’s
website, http://ir.ambac.com/events.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 May 24, 2019, and can be
accessed by dialing (Domestic) (844) 512-2921 or (International)
(412) 317-6671; and using ID#13689629.
Additional information is included in an operating supplement
and presentations at Ambac's website at www.ambac.com.
About AmbacAmbac 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.
ContactLisa A. KampfManaging Director, Investor
Relations(212) 208-3177lkampf@ambac.com
Forward-Looking StatementsIn 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, including an increased risk
of loss on revenue bonds of distressed public finance issuers due
to a recent judicial decision adverse to revenue bond holders; (10)
the Company's inability to realize the expected recoveries included
in its financial statements; (11) insufficiency or
unavailability of collateral to pay secured obligations; (12)
credit risk throughout the Company’s business, including but not
limited to credit risk related to residential mortgage-backed
securities, student loan and other asset securitizations, public
finance obligations (including obligations of the Commonwealth of
Puerto Rico and its instrumentalities and agencies 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) |
|
March 31, 2019 |
|
December 31, 2018 |
| Revenues: |
|
|
|
|
|
Net premiums earned |
|
$ |
27,758 |
|
|
$ |
28,730 |
|
|
Net investment income: |
|
|
|
|
|
Securities available-for-sale and short-term |
|
46,552 |
|
|
48,247 |
|
|
Other investments |
|
8,290 |
|
|
(10,764 |
) |
|
Total net investment income |
|
54,842 |
|
|
37,483 |
|
|
Other-than-temporary impairment losses: |
|
|
|
|
|
Total other-than-temporary impairment losses |
|
(29 |
) |
|
(1,643 |
) |
|
Portion of other-than-temporary impairment recognized in other
comprehensive income |
|
— |
|
|
(16 |
) |
|
Net other-than-temporary impairment losses recognized in
earnings |
|
(29 |
) |
|
(1,659 |
) |
|
Net realized investment gains (losses) |
|
17,233 |
|
|
29,413 |
|
|
Net gains (losses) on derivative contracts |
|
(16,159 |
) |
|
(44,716 |
) |
|
Other income |
|
802 |
|
|
2,246 |
|
|
Income on variable interest entities |
|
15,921 |
|
|
454 |
|
| Total revenues |
|
100,368 |
|
|
51,951 |
|
| Expenses: |
|
|
|
|
|
Losses and loss expense (benefit) |
|
12,407 |
|
|
(42,298 |
) |
|
Insurance intangible amortization |
|
36,278 |
|
|
28,982 |
|
|
Operating expenses |
|
24,915 |
|
|
21,339 |
|
|
Interest expense |
|
67,978 |
|
|
66,064 |
|
| Total expenses |
|
141,578 |
|
|
74,087 |
|
| Pre-tax income (loss) |
|
(41,210 |
) |
|
(22,136 |
) |
| Provision for income taxes |
|
1,991 |
|
|
(1,677 |
) |
| Net income (loss)
attributable to common stockholders |
|
$ |
(43,201 |
) |
|
$ |
(20,459 |
) |
| |
|
|
|
|
| Net income (loss) per
basic share |
|
$ |
(0.94 |
) |
|
$ |
(0.45 |
) |
| Net income (loss) per
diluted share |
|
$ |
(0.94 |
) |
|
$ |
(0.45 |
) |
| |
|
|
|
|
| Weighted-average number
of common shares outstanding: |
|
|
|
|
|
Basic |
|
45,832,297 |
|
|
45,756,090 |
|
|
Diluted |
|
45,832,297 |
|
|
45,756,090 |
|
| |
|
|
|
|
|
|
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
|
($ in Thousands, except share data) |
|
March 31, 2019 |
|
December 31, 2018 |
| Assets: |
|
|
|
|
| Investments: |
|
|
|
|
|
Fixed income securities, at fair value (amortized cost: $2,480,532
and $3,020,744) |
|
$ |
2,619,811 |
|
|
$ |
3,115,675 |
|
|
Fixed income securities pledged as collateral, at fair value
(amortized cost: $83,901 and $0) |
|
83,901 |
|
|
— |
|
|
Short-term investments, at fair value (amortized cost: $908,209 and
$430,405) |
|
908,235 |
|
|
430,331 |
|
|
Other investments (includes $387,045 and $351,049 at fair
value) |
|
428,556 |
|
|
391,217 |
|
|
Total investments |
|
4,040,503 |
|
|
3,937,223 |
|
| Cash and cash equivalents |
|
21,840 |
|
|
63,089 |
|
| Restricted cash |
|
— |
|
|
19,405 |
|
| Premium receivables |
|
487,397 |
|
|
495,391 |
|
| Reinsurance recoverable on
paid and unpaid losses |
|
26,788 |
|
|
23,133 |
|
| Deferred ceded premium |
|
58,868 |
|
|
61,134 |
|
| Subrogation recoverable |
|
1,916,117 |
|
|
1,932,960 |
|
| Derivative assets |
|
76,400 |
|
|
59,468 |
|
| Current taxes |
|
42,830 |
|
|
47,040 |
|
| Insurance intangible
asset |
|
689,255 |
|
|
718,931 |
|
| Other assets |
|
90,977 |
|
|
137,628 |
|
| Variable interest entity
assets: |
|
|
|
|
|
Fixed income securities, at fair value |
|
3,128,995 |
|
|
2,737,286 |
|
|
Restricted cash |
|
3,254 |
|
|
999 |
|
|
Loans, at fair value |
|
4,375,761 |
|
|
4,287,664 |
|
|
Derivative assets |
|
59,228 |
|
|
66,302 |
|
|
Other assets |
|
4,686 |
|
|
1,058 |
|
| Total
assets |
|
$ |
15,022,899 |
|
|
$ |
14,588,711 |
|
| Liabilities and
Stockholders’ Equity: |
|
|
|
|
|
Liabilities: |
|
|
|
|
| Unearned premiums |
|
$ |
591,397 |
|
|
$ |
629,971 |
|
| Loss and loss expense
reserves |
|
1,694,163 |
|
|
1,826,078 |
|
| Ceded premiums payable |
|
31,745 |
|
|
32,913 |
|
| Deferred taxes |
|
39,201 |
|
|
40,130 |
|
| Long-term debt |
|
2,929,227 |
|
|
2,928,929 |
|
| Accrued interest payable |
|
391,335 |
|
|
375,808 |
|
| Derivative liabilities |
|
86,534 |
|
|
76,699 |
|
| Other liabilities |
|
71,402 |
|
|
63,792 |
|
| Variable interest entity
liabilities: |
|
|
|
|
|
Accrued interest payable |
|
2,785 |
|
|
556 |
|
|
Long-term debt (includes $5,401,992 and $5,268,596 at fair
value) |
|
5,737,263 |
|
|
5,268,596 |
|
|
Derivative liabilities |
|
1,781,903 |
|
|
1,712,062 |
|
|
Other liabilities |
|
56 |
|
|
30 |
|
| Total
liabilities |
|
13,357,011 |
|
|
12,955,564 |
|
| |
|
|
|
|
| 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: 45,560,960 and 45,365,170 |
|
456 |
|
|
454 |
|
|
Additional paid-in capital |
|
223,545 |
|
|
219,429 |
|
|
Accumulated other comprehensive income |
|
22,542 |
|
|
(48,715 |
) |
|
Retained earnings |
|
1,376,244 |
|
|
1,421,302 |
|
|
Treasury stock, shares at cost: 40,419 and 28,892 |
|
(813 |
) |
|
(473 |
) |
| Total Ambac Financial
Group, Inc. stockholders’ equity |
|
1,621,974 |
|
|
1,591,997 |
|
|
Noncontrolling interest |
|
43,914 |
|
|
41,150 |
|
| Total stockholders’
equity |
|
1,665,888 |
|
|
1,633,147 |
|
| Total liabilities and
stockholders’ equity |
|
$ |
15,022,899 |
|
|
$ |
14,588,711 |
|
Ambac Financial (NASDAQ:AMBC)
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부터 11월(11) 2024 으로 12월(12) 2024
Ambac Financial (NASDAQ:AMBC)
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