Ambac Financial Group, Inc. (Nasdaq: AMBC) ("Ambac"), a financial
services holding company whose subsidiaries include Ambac Assurance
Corporation ("AAC") and Ambac Assurance UK Limited ("Ambac UK"),
run-off financial guaranty insurance companies that guarantee
public finance and structured finance obligations, today reported a
Net Loss attributable to common stockholders of $128.4 million or
$2.79 per diluted share and Adjusted Earnings(1) of $86.4 million
or $1.88 per diluted share for the quarter ended June 30,
2019. This compares to a Net Loss attributable to common
stockholders of $43.2 million or $0.94 per diluted share and
Adjusted Loss of $9.2 million or $0.20 per diluted share in the
first quarter of 2019.
Results for the second quarter of 2019 were primarily impacted
by the previously announced Ballantyne restructuring and
commutation ("Ballantyne Restructuring") which eliminated $900
million of Adversely Classified Credit exposure and resulted in a
Net Loss of $83.0 million or $1.80 per diluted share and Adjusted
Earnings of $119.4 million or $2.60 per share.
Claude LeBlanc, President and Chief Executive Officer, stated,
“The results for the second quarter of 2019 reflect our strong
progress on actively de-risking our insured portfolio with a
particular focus on Adversely Classified and Watch List Credits.
The Ballantyne Restructuring, Ambac UK's largest Adversely
Classified Credit, and termination of other key exposures this
quarter, significantly strengthened Ambac's consolidated capital
position and materially improved the quality of our Book Value and
Adjusted Book Value." Mr. LeBlanc continued, "We are also pleased
with the post quarter-end approval today by the Federal Court of
the distribution plan in the SEC-Citigroup settlement which will
result in AAC receiving approximately $142.0 million in proceeds,
which will be recorded in the period received."
|
Ambac's Second Quarter 2019 Summary Results |
|
|
|
|
|
|
|
Better (Worse) |
|
($ in millions, except per share data) |
|
2Q2019 |
|
1Q2019 |
|
Amount |
|
Percent |
| Net
premiums earned |
|
$ |
7.8 |
|
|
$ |
27.8 |
|
|
$ |
(20.0 |
) |
|
(72 |
)% |
| Net
investment income |
|
86.5 |
|
|
54.8 |
|
|
31.7 |
|
|
58 |
% |
| Net
realized investment gains (losses) |
|
35.9 |
|
|
17.2 |
|
|
18.7 |
|
|
109 |
% |
| Net gains
(losses) on derivative contracts |
|
(35.4 |
) |
|
(16.2 |
) |
|
(19.2 |
) |
|
(119 |
)% |
| Income
(loss) on Variable Interest Entities ("VIEs") |
|
3.3 |
|
|
15.9 |
|
|
(12.6 |
) |
|
(79 |
)% |
| Losses
and loss expenses (benefit) |
|
(133.5 |
) |
|
12.4 |
|
|
145.9 |
|
|
1,177 |
% |
| Operating
expenses |
|
29.1 |
|
|
24.9 |
|
|
(4.2 |
) |
|
(17 |
)% |
| Interest
expense |
|
67.4 |
|
|
68.0 |
|
|
0.6 |
|
|
1 |
% |
| Insurance
intangible amortization |
|
226.2 |
|
|
36.3 |
|
|
(189.9 |
) |
|
(523 |
)% |
| Provision
for income taxes |
|
28.3 |
|
|
2.0 |
|
|
(26.3 |
) |
|
(1,315 |
)% |
| Net
income (loss) attributable to Common Stockholders |
|
(128.4 |
) |
|
(43.2 |
) |
|
(85.2 |
) |
|
(197 |
)% |
| Net
income (loss) per diluted share |
|
$ |
(2.79 |
) |
|
$ |
(0.94 |
) |
|
$ |
(1.85 |
) |
|
(197 |
)% |
| Adjusted
earnings (loss) 1 |
|
86.4 |
|
|
(9.2 |
) |
|
95.6 |
|
|
1,039 |
% |
| Adjusted
earnings (loss) per diluted share 1 |
|
$ |
1.88 |
|
|
$ |
(0.20 |
) |
|
$ |
2.08 |
|
|
1,040 |
% |
| Total
Ambac Financial Group, Inc. stockholders' equity |
|
1,492.9 |
|
|
1,622.0 |
|
|
(129.1 |
) |
|
(8 |
)% |
| Total
Ambac Financial Group, Inc. stockholders' equity per share |
|
$ |
32.78 |
|
|
$ |
35.63 |
|
|
$ |
(2.85 |
) |
|
(8 |
)% |
| Adjusted
book value 1 |
|
1,346.8 |
|
|
1,252.6 |
|
|
94.2 |
|
|
8 |
% |
| Adjusted
book value per share 1 |
|
$ |
29.57 |
|
|
$ |
27.52 |
|
|
$ |
2.05 |
|
|
7 |
% |
|
Weighted-average diluted shares outstanding (in millions) |
|
46.0 |
|
|
45.8 |
|
|
(0.2 |
) |
|
— |
% |
(1) See Non-GAAP Financial Data section of this press release
for further information
Net Premiums EarnedDuring the second quarter of
2019, net premiums earned were $7.8 million compared to $27.8
million in the first quarter of 2019, including negative
accelerated premiums earned of $(6.2) million in the second quarter
of 2019 compared to accelerated premiums earned of $12.2 million in
the first quarter of 2019. Normal premiums earned decreased
$1.6 million or 10% to $14.0 million during the second quarter of
2019 from $15.6 million in the first quarter of 2019 primarily due
to continued reductions of the insured portfolio. Negative
accelerated premiums earned in the second quarter of 2019 were
primarily driven by de-risking initiatives, including the
Ballantyne Restructuring and the termination of a commercial
asset-backed exposure. Accelerated premiums earned for the first
quarter of 2019 were primarily driven by the COFINA Plan of
Adjustment.
Net Investment Income and Net Realized Investment
GainsNet investment income for the second quarter of 2019
and the first quarter of 2019 was $86.5 million and $54.8 million,
respectively. The increase in net investment income was primarily
due to accelerated accretion on owned Ballantyne notes resulting
from the June 2019 restructuring, partially offset by a reduced
allocation to higher-yielding AAC-insured COFINA bonds. Foreign
exchange gains related to the Ballantyne Restructuring and, to a
lesser extent, gains from sales of COFINA bonds were the primary
drivers of net realized investment gains of $35.9 million during
the second quarter of 2019.
Losses and Loss Expenses and Loss
ReservesLosses and loss expenses for the second quarter of
2019 were a benefit of $133.5 million, compared to an expense of
$12.4 million for the first quarter of 2019.
The following table provides losses and loss expenses (benefit)
incurred by bond type for the three-month periods ended
June 30, 2019 and March 31, 2019:
| |
|
Three Months Ended |
|
($ in millions) |
|
June 30, 2019 |
|
March 31, 2019 |
| RMBS |
|
$ |
(69.4 |
) |
|
$ |
(38.6 |
) |
| Domestic public finance |
|
50.3 |
|
|
69.3 |
|
| Student loan |
|
(3.6 |
) |
|
(3.6 |
) |
| Ambac UK and other
credits |
|
(110.8 |
) |
|
(14.7 |
) |
| Total losses and loss
expenses |
|
$ |
(133.5 |
) |
|
$ |
12.4 |
|
Second quarter of 2019 RMBS losses and loss expenses were a
benefit of $69.4 million primarily driven by higher levels of
expected excess spread due to lower interest rates and receipt of
$18.7 million as a result of a trustee settlement related to Lehman
sponsored RMBS transactions. First quarter of 2019 RMBS losses and
loss expenses were a benefit of $38.6 million and were 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.
Domestic public finance losses and loss expenses were an expense
of $50.3 million in the second quarter of 2019 driven mostly by
lower discount rates resulting from a decline in interest rates and
an expense of $69.3 million in the first quarter of 2019 primarily
related to a strengthening of non-COFINA related Puerto Rico
reserves and lower discount rates.
Losses and loss expenses for Ambac UK and other credits were a
benefit of $110.8 million in the second quarter of 2019, primarily
as the result of the Ballantyne Restructuring. In the first quarter
of 2019, loss and loss expenses for Ambac UK and other credits were
a benefit of $14.7 million, primarily as the result of foreign
exchange gains and positive credit development.
During the second quarter of 2019 losses and loss expenses paid
(net of reinsurance) were $129.7 million which included $175.3
million of loss and expense payments, partially offset by $45.6
million of subrogation received. During the first quarter of 2019,
losses and loss expenses paid (net of reinsurance) were $64.4
million which included $132.7 million of loss and expense payments,
partially offset by $68.3 million of subrogation received.
Loss and loss expense reserves (gross of reinsurance) were
$(491) million at June 30, 2019, and $(222) million at
March 31, 2019, which were net of $1.762 billion and $1.766
billion, respectively, of estimated subrogation recoveries related
to AAC's pursuit of legal remedies to seek redress for breaches of
representations and warranties.
The following table provides loss and loss expense reserves
(gross of reinsurance) by bond type at June 30, 2019, and
March 31, 2019:
|
($ in millions) |
|
June 30, 2019 |
|
March 31, 2019 |
| RMBS |
|
$ |
(1,404 |
) |
|
$ |
(1,351 |
) |
| Domestic public finance |
|
603 |
|
|
562 |
|
| Student loans |
|
222 |
|
|
226 |
|
| Ambac UK and other
credits |
|
5 |
|
|
258 |
|
| Loss expenses |
|
83 |
|
|
83 |
|
| Total loss and loss expense
reserves |
|
$ |
(491 |
) |
|
$ |
(222 |
) |
Net Gains (Losses) on Derivative ContractsNet
losses on derivative contracts of $35.4 million for the second
quarter of 2019 and $16.2 million for the first quarter of 2019
were primarily due to the impact of decreases in forward interest
rates on interest rate derivatives. 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.
Interest rate derivative losses in the second quarter of 2019
were more than offset by gains recognized in the insured and
investment portfolios driven by forward interest rate
movements.
ExpensesOperating expenses for the second
quarter of 2019 increased by $4.2 million to $29.1 million from
$24.9 million in the first quarter of 2019. The increase in the
second quarter of 2019 was mostly due to higher incentive
compensation related to the closing of the Ballantyne Restructuring
as well as higher consulting and legal fees.
Interest expense for the second quarter of 2019 decreased $0.6
million to $67.4 million from $68.0 million in the first quarter of
2019 due primarily to lower interest rates on the floating rate
Ambac Note.
Insurance intangible amortization for the second quarter of 2019
increased $189.9 million to $226.2 million from $36.3 million in
the first quarter of 2019. The increase was primarily due to
accelerated amortization as a result of the Ballantyne
Restructuring.
TaxesIncome taxes were an expense of $28.3
million for the second quarter of 2019, as compared to $2.0 million
for the first quarter of 2019. The expense increase in the second
quarter was driven by foreign taxes triggered by the Ballantyne
Restructuring. The expense for the first quarter of 2019 included a
reduction in state and local taxes for Ambac, partially offset by
higher foreign taxes, resulting from favorable Ambac UK
results.
Total Ambac Financial Group, Inc. Stockholders'
EquityStockholders’ equity at June 30, 2019,
decreased 8% to $1.49 billion, or $32.78 per share compared to
$1.62 billion or $35.63 per share as of March 31, 2019,
primarily driven by the net loss of $128.4 million.
Financial Guarantee Insured PortfolioThe
financial guarantee insurance portfolio net par amount outstanding
declined 5.1% during the quarter ended June 30, 2019, to $42.2
billion from $44.5 billion at March 31, 2019. The reduction in
the insured portfolio was primarily related to (i) a decrease of
$1.3 billion in the structured finance portfolio related to active
de-risking including the Ballantyne Restructuring and normal runoff
of mortgage-backed exposures, (ii) a decrease of $0.7 billion in
the public finance portfolio resulting mostly from natural runoff
and maturities and (iii) a decrease of $0.3 billion in the
international finance portfolio due to natural run-off and by a
decrease in the British Pound.
Adversely Classified and Watch List Credits decreased in the
second quarter of 2019 by a net $1.6 billion or 8.3% to $17.2
billion at June 30, 2019 from $18.8 billion at March 31,
2019 mainly due to the Ballantyne commutation and other de-risking
activity.
Details of financial guarantee insurance portfolio are
highlighted in the below table.
|
Net Par Outstanding |
|
June 30, 2019 |
|
March 31, 2019 |
| By
Sector: |
|
|
|
|
|
Public finance |
|
49 |
% |
|
49 |
% |
|
Structured Finance |
|
20 |
% |
|
21 |
% |
|
International |
|
31 |
% |
|
30 |
% |
| By Financial
Guarantor: |
|
|
|
|
|
Ambac Assurance |
|
71 |
% |
|
70 |
% |
|
Ambac UK |
|
29 |
% |
|
30 |
% |
Other Event
CDO Settlement
On August 8, 2019 the United States District Court for the
Southern District of New York approved the distribution plan
proposed by RCB Fund Services (the “Distribution Agent”) for
the $285 million settlement reached between the United States
Securities and Exchange Commission (the “SEC”) and Citigroup Global
Markets Inc. (“Citigroup”) in August 2014, which provides for
payment of approximately $142 million to AAC.
The settlement relates to a collateralized debt obligation
transaction arranged by Citigroup where Ambac Credit Products,
LLC provided credit protection through a credit default swap
(insured by AAC) to a bank counterparty that was exposed to the
transaction. In May 2017 a fair fund was established and the
Distribution Agent was appointed to, among other things, develop a
distribution plan for approval by the court.
Ambac will record the amount received in net income in the
period in which the settlement funds are distributed.
Non-GAAP Financial DataIn addition to reporting
Ambac’s quarterly financial results in accordance with GAAP, the
Company currently reports two non-GAAP financial measures: Adjusted
Earnings and Adjusted Book Value. The most directly comparable GAAP
measures are net income attributable to common stockholders for
Adjusted Earnings and Total Ambac Financial Group, Inc.
stockholders’ equity for Adjusted Book Value. A non-GAAP
financial measure is a numerical measure of financial performance
or financial position that excludes (or includes) amounts that are
included in (or excluded from) the most directly comparable measure
calculated and presented in accordance with GAAP. We are presenting
these non-GAAP financial measures because they provide greater
transparency and enhanced visibility into the underlying drivers of
our business. Adjusted Earnings and Adjusted Book Value are
not substitutes for the Company’s GAAP reporting, should not be
viewed in isolation and may differ from similar reporting provided
by other companies, which may define non-GAAP measures
differently.
Ambac has a significant U.S. tax net operating loss (“NOL”) that
is offset by a full valuation allowance in the GAAP consolidated
financial statements. As a result of this and other considerations,
we utilized a 0% effective tax rate for non-GAAP adjustments; which
is subject to change.
The following paragraphs define each non-GAAP financial measure
and describe why it is useful. A reconciliation of the non-GAAP
financial measure and the most directly comparable GAAP financial
measure is also presented below.
Adjusted Earnings (Loss). Adjusted Earnings
(Loss) is defined as net income (loss) attributable to common
stockholders, as reported under GAAP, adjusted on an after-tax
basis for the following:
- Non-credit impairment fair value (gain) loss on credit
derivatives: Elimination of the non-credit impairment fair value
gains (losses) on credit derivatives, which is the amount in excess
of the present value of the expected estimated credit losses. Such
fair value adjustments are affected by, and in part fluctuate with
changes in market factors such as interest rates and credit
spreads, including the market’s perception of Ambac’s credit risk
(“Ambac CVA”), and are not expected to result in an economic gain
or loss. These adjustments allow for all financial guarantee
contracts to be accounted for consistent with the Financial
Services – Insurance Topic of ASC, whether or not they are subject
to derivative accounting rules.
- Insurance intangible amortization: Elimination of the
amortization of the financial guarantee insurance intangible asset
that arose as a result of Ambac’s emergence from bankruptcy and the
implementation of Fresh Start reporting. This adjustment ensures
that all financial guarantee contracts are accounted for consistent
with the provisions of the Financial Services – Insurance Topic of
the ASC.
- Foreign exchange (gains) losses: Elimination of the foreign
exchange gains (losses) on the re-measurement of assets,
liabilities and transactions in non-functional currencies.
This adjustment eliminates the foreign exchange gains (losses) on
all assets, liabilities and transactions in non-functional
currencies, which enables users of our financial statements to
better view the results without the impact of fluctuations in
foreign currency exchange rates and facilitates period-to-period
comparisons of Ambac's operating performance.
Adjusted Earnings was $86.4 million, or $1.88 per diluted share,
for the second quarter 2019 as compared to Adjusted Loss of $9.2
million or $0.20 per diluted share, for the first quarter of
2019.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Earnings
(Loss), for the three-month periods ended June 30, 2019, and
March 31, 2019, respectively:
| |
|
Three Months Ended |
| |
|
June 30, 2019 |
|
March 31, 2019 |
| ($ in
millions, other than per share data) |
|
$ Amount |
|
Per Diluted Share |
|
$ Amount |
|
Per Diluted Share |
| Net income (loss)
attributable to common stockholders |
|
$ |
(128.4 |
) |
|
$ |
(2.79 |
) |
|
$ |
(43.2 |
) |
|
$ |
(0.94 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
Non-credit impairment fair value (gain) loss on credit
derivatives |
|
(0.2 |
) |
|
— |
|
|
(0.4 |
) |
|
(0.01 |
) |
|
Insurance intangible amortization |
|
226.2 |
|
|
4.92 |
|
|
36.3 |
|
|
0.79 |
|
|
Foreign exchange (gains) losses |
|
(11.2 |
) |
|
(0.25 |
) |
|
(1.9 |
) |
|
(0.04 |
) |
| Adjusted Earnings (loss) |
|
$ |
86.4 |
|
|
$ |
1.88 |
|
|
$ |
(9.2 |
) |
|
$ |
(0.20 |
) |
| Weighted-average diluted
shares outstanding (in millions) |
|
|
|
46.0 |
|
|
|
|
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 $1.35 billion, or $29.57
per share, at June 30, 2019, as compared to $1.25 billion, or
$27.52 per share, at March 31, 2019. The increase in Adjusted
Book Value was primarily attributable to Adjusted Earnings for the
second quarter of 2019. Adjusted earnings in the three months
ended June 30, 2019 was positively impacted by the Ballantyne
commutation.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure Adjusted Book Value as
of each date presented:
| |
|
June 30, 2019 |
|
March 31, 2019 |
| ($ in
millions, other than per share data) |
|
$ Amount |
|
Per Share |
|
$ Amount |
|
Per Share |
| Total AFGI Stockholders'
Equity (Deficit) |
|
$ |
1,492.9 |
|
|
$ |
32.78 |
|
|
$ |
1,622.0 |
|
|
$ |
35.63 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
Non-credit impairment fair value losses on credit derivatives |
|
0.9 |
|
|
0.02 |
|
|
1.1 |
|
|
0.02 |
|
|
Insurance intangible asset |
|
(454.8 |
) |
|
(9.99 |
) |
|
(689.3 |
) |
|
(15.13 |
) |
|
Net unearned premiums and fees in excess of expected losses |
|
465.1 |
|
|
10.21 |
|
|
460.9 |
|
|
10.12 |
|
|
Net unrealized investment (gains) losses in Accumulated Other
Comprehensive Income |
|
(157.3 |
) |
|
(3.45 |
) |
|
(142.1 |
) |
|
(3.12 |
) |
| Adjusted book
value |
|
$ |
1,346.8 |
|
|
$ |
29.57 |
|
|
$ |
1,252.6 |
|
|
$ |
27.52 |
|
| Shares outstanding (in
millions) |
|
|
|
45.5 |
|
|
|
|
45.5 |
|
Earnings Call and Webcast
On August 9, 2019 at 8:30am ET, Claude LeBlanc, President
and Chief Executive Officer, and David Trick, Executive Vice
President and Chief Financial Officer, will discuss second 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-and-presentations/events. Participants
may also listen via telephone by dialing (877) 407-9716 (Domestic)
or (201) 493-6779 (International).
The webcast will be archived on Ambac's website. A replay
of the call will be available through August 23, 2019, and can
be accessed by dialing (Domestic) (844) 512-2921 or
(International) (412) 317-6671; and using
ID#13692783.
Additional information is included in an operating supplement
and presentations at Ambac's website at www.ambac.com.
About Ambac
Ambac Financial Group, Inc. (“Ambac” or “AFG”),
headquartered in New York City, is a financial services
holding company whose subsidiaries include Ambac Assurance
Corporation, a guarantor of public finance and structured finance
obligations in run-off. 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, 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) |
|
June 30, 2019 |
|
March 31, 2019 |
| Revenues: |
|
|
|
|
|
Net premiums earned |
|
$ |
7,833 |
|
|
$ |
27,758 |
|
|
Net investment income: |
|
|
|
|
|
Securities available-for-sale and short-term |
|
78,329 |
|
|
46,552 |
|
|
Other investments |
|
8,130 |
|
|
8,290 |
|
|
Total net investment income |
|
86,459 |
|
|
54,842 |
|
|
Net other-than-temporary impairment losses recognized in
earnings |
|
— |
|
|
(29 |
) |
|
Net realized investment gains (losses) |
|
35,860 |
|
|
17,233 |
|
|
Net gains (losses) on derivative contracts |
|
(35,412 |
) |
|
(16,159 |
) |
|
Other income (expense) |
|
(8,908 |
) |
|
802 |
|
|
Income on variable interest entities |
|
3,294 |
|
|
15,921 |
|
| Total revenues |
|
89,126 |
|
|
100,368 |
|
| Expenses: |
|
|
|
|
|
Losses and loss expense (benefit) |
|
(133,480 |
) |
|
12,407 |
|
|
Insurance intangible amortization |
|
226,242 |
|
|
36,278 |
|
|
Operating expenses |
|
29,090 |
|
|
24,915 |
|
|
Interest expense |
|
67,381 |
|
|
67,978 |
|
| Total expenses |
|
189,233 |
|
|
141,578 |
|
| Pre-tax income (loss) |
|
(100,107 |
) |
|
(41,210 |
) |
| Provision for income taxes |
|
28,322 |
|
|
1,991 |
|
| Net income (loss)
attributable to common stockholders |
|
$ |
(128,429 |
) |
|
$ |
(43,201 |
) |
| |
|
|
|
|
| Net income (loss) per
basic share |
|
$ |
(2.79 |
) |
|
$ |
(0.94 |
) |
| Net income (loss) per
diluted share |
|
$ |
(2.79 |
) |
|
$ |
(0.94 |
) |
| |
|
|
|
|
| Weighted-average number
of common shares outstanding: |
|
|
|
|
|
Basic |
|
45,986,043 |
|
|
45,832,297 |
|
|
Diluted |
|
45,986,043 |
|
|
45,832,297 |
|
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Statements of Income (Loss)
(Unaudited)
| |
|
Six Months Ended June 30, |
|
($ in Thousands, except share data) |
|
2019 |
|
2018 |
| Revenues: |
|
|
|
|
|
Net premiums earned |
|
$ |
35,591 |
|
|
$ |
56,719 |
|
|
Net investment income: |
|
|
|
|
|
Securities available-for-sale and short-term |
|
124,881 |
|
|
172,293 |
|
|
Other investments |
|
16,420 |
|
|
4,609 |
|
|
Total net investment income |
|
141,301 |
|
|
176,902 |
|
|
Net other-than-temporary impairment losses recognized in
earnings |
|
(29 |
) |
|
(1,313 |
) |
|
Net realized investment gains (losses) |
|
53,093 |
|
|
52,010 |
|
|
Net gains (losses) on derivative contracts |
|
(51,571 |
) |
|
34,123 |
|
|
Net realized gains on extinguishment of debt |
|
— |
|
|
3,121 |
|
|
Other income (expense) |
|
(8,106 |
) |
|
1,982 |
|
|
Income (loss) on variable interest entities |
|
19,215 |
|
|
1,151 |
|
| Total revenues |
|
189,494 |
|
|
324,695 |
|
| Expenses: |
|
|
|
|
|
Losses and loss expense (benefit) |
|
(121,073 |
) |
|
(214,816 |
) |
|
Insurance intangible amortization |
|
262,520 |
|
|
51,878 |
|
|
Operating expenses |
|
54,005 |
|
|
62,497 |
|
|
Interest expense |
|
135,359 |
|
|
110,519 |
|
| Total expenses |
|
330,811 |
|
|
10,078 |
|
| Pre-tax income (loss) |
|
(141,317 |
) |
|
314,617 |
|
| Provision for income taxes |
|
30,313 |
|
|
4,600 |
|
| Net income (loss)
attributable to common stockholders |
|
$ |
(171,630 |
) |
|
$ |
310,017 |
|
| |
|
|
|
|
| Net income (loss) per
basic share |
|
$ |
(3.74 |
) |
|
$ |
6.80 |
|
| Net income (loss) per
diluted share |
|
$ |
(3.74 |
) |
|
$ |
6.73 |
|
| |
|
|
|
|
| Weighted-average number
of common shares outstanding: |
|
|
|
|
|
Basic |
|
45,909,595 |
|
|
45,577,656 |
|
|
Diluted |
|
45,909,595 |
|
|
46,097,647 |
|
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
|
($ in Thousands, except share data) |
|
June 30, 2019 |
|
March 31, 2019 |
| Assets: |
|
|
|
|
| Investments: |
|
|
|
|
|
Fixed income securities, at fair value (amortized cost: $2,465,967
and $2,480,532) |
|
$ |
2,604,177 |
|
|
$ |
2,619,811 |
|
|
Fixed income securities pledged as collateral, at fair value
(amortized cost: $84,418 and $83,901) |
|
84,418 |
|
|
83,901 |
|
|
Short-term investments, at fair value (amortized cost: $772,214 and
$908,209) |
|
772,299 |
|
|
908,235 |
|
|
Other investments (includes $426,563 and $387,045 at fair
value) |
|
469,438 |
|
|
428,556 |
|
|
Total investments |
|
3,930,332 |
|
|
4,040,503 |
|
| Cash and cash equivalents |
|
17,514 |
|
|
21,840 |
|
| Premium receivables |
|
441,526 |
|
|
487,397 |
|
| Reinsurance recoverable on
paid and unpaid losses |
|
27,215 |
|
|
26,788 |
|
| Deferred ceded premium |
|
56,272 |
|
|
58,868 |
|
| Subrogation recoverable |
|
1,984,826 |
|
|
1,916,117 |
|
| Derivative assets |
|
72,376 |
|
|
76,400 |
|
| Current taxes |
|
14,092 |
|
|
42,830 |
|
| Insurance intangible
asset |
|
454,830 |
|
|
689,255 |
|
| Other assets |
|
190,566 |
|
|
90,977 |
|
| Variable interest entity
assets: |
|
|
|
|
|
Fixed income securities, at fair value |
|
3,138,714 |
|
|
3,128,995 |
|
|
Restricted cash |
|
28,500 |
|
|
3,254 |
|
|
Loans, at fair value |
|
4,288,572 |
|
|
4,375,761 |
|
|
Derivative assets |
|
62,941 |
|
|
59,228 |
|
|
Other assets |
|
4,790 |
|
|
4,686 |
|
| Total
assets |
|
$ |
14,713,066 |
|
|
$ |
15,022,899 |
|
| Liabilities and
Stockholders’ Equity: |
|
|
|
|
|
Liabilities: |
|
|
|
|
| Unearned premiums |
|
$ |
556,908 |
|
|
$ |
591,397 |
|
| Loss and loss expense
reserves |
|
1,494,106 |
|
|
1,694,163 |
|
| Ceded premiums payable |
|
30,795 |
|
|
31,745 |
|
| Deferred taxes |
|
31,716 |
|
|
39,201 |
|
| Long-term debt |
|
2,946,620 |
|
|
2,929,227 |
|
| Accrued interest payable |
|
407,096 |
|
|
391,335 |
|
| Derivative liabilities |
|
88,245 |
|
|
86,534 |
|
| Other liabilities |
|
137,757 |
|
|
71,402 |
|
| Variable interest entity
liabilities: |
|
|
|
|
|
Accrued interest payable |
|
529 |
|
|
2,785 |
|
|
Long-term debt (includes $5,308,724 and $5,401,992 at fair
value) |
|
5,648,083 |
|
|
5,737,263 |
|
|
Derivative liabilities |
|
1,818,273 |
|
|
1,781,903 |
|
|
Other liabilities |
|
22 |
|
|
56 |
|
| Total
liabilities |
|
13,160,150 |
|
|
13,357,011 |
|
| |
|
|
|
|
| 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: 45,571,743 and 45,560,960 |
|
456 |
|
|
456 |
|
|
Additional paid-in capital |
|
226,794 |
|
|
223,545 |
|
|
Accumulated other comprehensive income |
|
19,088 |
|
|
22,542 |
|
|
Retained earnings |
|
1,246,990 |
|
|
1,376,244 |
|
|
Treasury stock, shares at cost: 22,558 and 40,419 |
|
(380 |
) |
|
(813 |
) |
| Total Ambac Financial
Group, Inc. stockholders’ equity |
|
1,492,948 |
|
|
1,621,974 |
|
|
Noncontrolling interest |
|
59,968 |
|
|
43,914 |
|
| Total stockholders’
equity |
|
1,552,916 |
|
|
1,665,888 |
|
| Total liabilities and
stockholders’ equity |
|
$ |
14,713,066 |
|
|
$ |
15,022,899 |
|
Ambac Financial (NASDAQ:AMBC)
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부터 11월(11) 2024 으로 12월(12) 2024
Ambac Financial (NASDAQ:AMBC)
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부터 12월(12) 2023 으로 12월(12) 2024
