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
Net Income attributable to common stockholders of $66.1 million or
$1.41 per diluted share and Adjusted Earnings(1) of $76.8 million
or $1.63 per diluted share for the quarter ended September 30,
2019. This compares to a Net Loss attributable to common
stockholders of $128.4 million or $2.79 per diluted share and
Adjusted Earnings of $86.4 million or $1.88 per diluted share in
the second quarter of 2019.
Results for the third quarter of 2019 benefited from the receipt
of $142.2 million by AAC related to the settlement reached between
the United States Securities and Exchange Commission (the "SEC")
and Citigroup Global Markets ("Citigroup") partially offset by an
increase in loss and loss expense reserves related mostly to Puerto
Rico. The results for the second quarter of 2019 were primarily
driven by the Ballantyne restructuring and commutation.
Claude LeBlanc, President and Chief Executive Officer, stated,
“I am very pleased with our success during the third quarter of
2019. Our active de-risking efforts included the successful
negotiation and execution of a third-party reinsurance agreement,
ceding $1.2 billion of performing par exposure, including $509
million par of Adversely Classified and Watch List Credits and
equating to approximately $2.4 billion of insured debt service.
This transaction, together with other de-risking activities and
natural portfolio run-off, brings our insured net par exposure down
to $39.0 billion at September 30, 2019 from $42.2 billion at June
30, 2019. This quarter, we also benefited from the receipt of
$142.2 million from the favorable outcome of the Citi-SEC
settlement, all of which will be used to pay down our outstanding
secured notes, further de-leveraging our balance sheet and lowering
future interest costs. We also received favorable decisions from
the appellate court related to our outstanding litigation against
Bank of America/Countrywide, further strengthening our case as we
prepare for trial." Mr. LeBlanc continued, "Our accomplishments
during the third quarter of 2019 and year-to-date are solid
evidence of our ongoing commitment to our shareholders to optimize
our platform and position Ambac for the future with the goal of
increasing long-term shareholder value."
| |
|
Ambac's Third Quarter 2019 Summary Results |
|
|
|
|
|
|
|
Better (Worse) |
|
($ in millions, except per share data) |
|
3Q2019 |
|
2Q2019 |
|
Amount |
|
Percent |
|
Net premiums earned |
|
$ |
10.5 |
|
|
$ |
7.8 |
|
|
$ |
2.7 |
|
|
35 |
% |
| Net
investment income |
|
44.5 |
|
|
86.5 |
|
|
(42.0 |
) |
|
(49 |
)% |
| Net
realized investment gains (losses) |
|
18.5 |
|
|
35.9 |
|
|
(17.4 |
) |
|
(48 |
)% |
| Net gains
(losses) on derivative contracts |
|
(9.9 |
) |
|
(35.4 |
) |
|
25.5 |
|
|
72 |
% |
| Other
income (expense) |
|
141.4 |
|
|
(8.9 |
) |
|
150.3 |
|
|
1,689 |
% |
| Income
(loss) on Variable Interest Entities ("VIEs") |
|
11.2 |
|
|
3.3 |
|
|
7.9 |
|
|
239 |
% |
| Losses
and loss expenses (benefit) |
|
37.1 |
|
|
(133.5 |
) |
|
(170.6 |
) |
|
(128 |
)% |
| Operating
expenses |
|
25.6 |
|
|
29.1 |
|
|
3.5 |
|
|
12 |
% |
| Interest
expense |
|
66.9 |
|
|
67.4 |
|
|
0.5 |
|
|
1 |
% |
| Insurance
intangible amortization |
|
17.4 |
|
|
226.2 |
|
|
208.8 |
|
|
92 |
% |
| Provision
for income taxes |
|
2.9 |
|
|
28.3 |
|
|
25.4 |
|
|
90 |
% |
| Net
income (loss) attributable to Common Stockholders |
|
66.1 |
|
|
(128.4 |
) |
|
194.5 |
|
|
151 |
% |
| Net
income (loss) per diluted share |
|
$ |
1.41 |
|
|
$ |
(2.79 |
) |
|
$ |
4.20 |
|
|
151 |
% |
| Adjusted
earnings (loss)1 |
|
76.8 |
|
|
86.4 |
|
|
(9.6 |
) |
|
(11 |
)% |
| Adjusted
earnings (loss) per diluted share1 |
|
$ |
1.63 |
|
|
$ |
1.88 |
|
|
$ |
(0.25 |
) |
|
(13 |
)% |
| Total
Ambac Financial Group, Inc. stockholders' equity |
|
1,568.7 |
|
|
1,492.9 |
|
|
75.8 |
|
|
5 |
% |
| Total
Ambac Financial Group, Inc. stockholders' equity per share |
|
$ |
34.44 |
|
|
$ |
32.78 |
|
|
$ |
1.66 |
|
|
5 |
% |
| Adjusted
book value1 |
|
1,380.6 |
|
|
1,346.8 |
|
|
33.8 |
|
|
3 |
% |
| Adjusted
book value per share1 |
|
$ |
30.31 |
|
|
$ |
29.57 |
|
|
$ |
0.74 |
|
|
3 |
% |
|
Weighted-average diluted shares outstanding (in millions) |
|
47.0 |
|
|
46.0 |
|
|
(1.0 |
) |
|
(2 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
(1) See Non-GAAP Financial Data section of this press release
for further information
Net Premiums EarnedDuring the third quarter of
2019, net premiums earned were $10.5 million compared to $7.8
million in the second quarter of 2019, including accelerated
premiums earned of $2.0 million in the third quarter of 2019
compared to negative accelerated premiums earned of $6.2 million in
the second quarter of 2019. Normal premiums earned decreased
$5.5 million or 39% to $8.5 million during the third quarter of
2019 from $14.0 million in the second quarter of 2019 primarily due
to an increase in uncollectable premiums and continued reduction of
the insured portfolio. Accelerated premiums earned in the
third quarter of 2019 were driven by call activity and in the
second quarter of 2019 were primarily driven by the Ballantyne
restructuring and the termination of a commercial asset-backed
exposure.
Net Investment Income and Net Realized Investment
GainsNet investment income for the third quarter of 2019
and the second quarter of 2019 was $44.5 million and $86.5 million,
respectively. The decrease in net investment income was primarily
due to the inclusion, in the second quarter of 2019, of accelerated
accretion on owned Ballantyne notes associated with the
restructuring. Third quarter 2019 net realized investment gains of
$18.5 million primarily consisted of gains from the sale of
restructured COFINA bonds and foreign exchange gains.
Losses and Loss Expenses and Loss
ReservesLosses and loss expenses for the third quarter of
2019 were $37.1 million, compared to a benefit of $133.5 million
for the second quarter of 2019.
The following table provides losses and loss expenses (benefit)
incurred by bond type for the three-month periods ended
September 30, 2019 and June 30, 2019:
| |
|
Three Months Ended |
|
($ in millions) |
|
September 30, 2019 |
|
June 30, 2019 |
|
RMBS |
|
$ |
(24.5 |
) |
|
$ |
(69.4 |
) |
| Domestic public finance |
|
77.0 |
|
|
50.3 |
|
| Student loan |
|
(15.7 |
) |
|
(3.6 |
) |
| Ambac UK and other
credits |
|
0.3 |
|
|
(110.8 |
) |
| Total losses and loss
expenses |
|
$ |
37.1 |
|
|
$ |
(133.5 |
) |
| |
|
|
|
|
|
|
|
|
RMBS losses and loss expenses were a benefit of $24.5 million in
the third quarter of 2019 and $69.4 million in the second quarter
of 2019, primarily driven in both periods by higher levels of
expected excess spread resulting from lower interest rates. Second
quarter of 2019 RMBS losses and loss expenses also included $18.7
million received from a trustee settlement related to Lehman
sponsored RMBS transactions.
Domestic public finance losses and loss expenses were an expense
of $77.0 million in the third quarter of 2019 due primarily to an
increase in non-COFINA Puerto Rico reserves driven mostly by lower
discount rates in addition to assumption changes and higher loss
expenses. In the second quarter of 2019, domestic public finance
losses and loss expenses were $50.3 million driven mostly by lower
discount rates.
Student loan losses and loss expenses were a benefit of $15.7
million in the third quarter of 2019 largely due to improved
recovery experience.
Losses and loss expenses for Ambac UK and other credits benefit
of $110.8 million in the second quarter of 2019 were driven by the
Ballantyne restructuring.
During the third quarter of 2019 losses and loss expenses paid
(net of reinsurance) were $104.8 million which included $133.3
million of loss and expense payments, partially offset by $28.5
million of subrogation received. 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.
Loss and loss expense reserves (gross of reinsurance) were
$(560) million at September 30, 2019, and $(491) million at
June 30, 2019, which were both net of $1.8 billion of
estimated subrogation recoveries related to AAC's pursuit of legal
remedies to seek redress for breaches of RMBS representations and
warranties.
The following table provides loss and loss expense reserves
(gross of reinsurance) by bond type at September 30, 2019, and
June 30, 2019:
|
($ in millions) |
|
September 30, 2019 |
|
June 30, 2019 |
|
RMBS |
|
$ |
(1,419 |
) |
|
$ |
(1,404 |
) |
| Domestic public finance |
|
580 |
|
|
603 |
|
| Student loans |
|
202 |
|
|
222 |
|
| Ambac UK and other
credits |
|
4 |
|
|
5 |
|
| Loss expenses |
|
73 |
|
|
83 |
|
| Total loss and loss expense
reserves |
|
$ |
(560 |
) |
|
$ |
(491 |
) |
| |
|
|
|
|
|
|
|
|
Net Gains (Losses) on Derivative ContractsNet
losses on derivative contracts of $9.9 million for the third
quarter of 2019 and $35.4 million for the second 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.
Other Income (Expense)Other income for the
third quarter of 2019 was $141.4 million, primarily due to a gain
recognized upon receipt of proceeds of $142.2 million from the
SEC-Citigroup settlement related to a collateralized debt
obligation transaction.
ExpensesOperating expenses for the third
quarter of 2019 decreased by $3.5 million to $25.6 million from
$29.1 million in the second quarter of 2019. The decrease in the
third quarter of 2019 was mostly due to lower incentive
compensation and lower legal and advisory fees, partially offset by
higher rent expense due to the extinguishment of lease reducing
junior surplus notes, which previously lowered rent expense, and
higher severance expenses. Lower incentive compensation in
the third quarter of 2019 is due to the performance impact of the
Ballantyne restructuring recognized in the second quarter of
2019.
Interest expense for the third quarter of 2019 decreased $0.5
million to $66.9 million from $67.4 million in the second quarter
of 2019 primarily due to lower interest on the Ambac Note driven by
lower interest rates and partial redemptions. Future interest
expense will be further reduced as the settlement proceeds received
of $142.2 million during the third quarter of 2019 will be used to
partially redeem the Ambac Note during the fourth quarter of
2019.
TaxesIncome taxes were an expense of $2.9
million for the third quarter of 2019, primarily driven by foreign
taxes, compared to $28.3 million for the second quarter of
2019, driven by foreign taxes triggered by the Ballantyne
restructuring.
Total Ambac Financial Group, Inc. Stockholders'
EquityStockholders’ equity at September 30, 2019,
increased 5% to $1.57 billion, or $34.44 per share compared to
$1.49 billion or $32.78 per share as of June 30, 2019,
primarily driven by net income of $66.1 million.
Financial Guarantee Insured PortfolioThe
financial guarantee insurance portfolio net par amount outstanding
declined 7.6% during the quarter ended September 30, 2019, to
$39.0 billion from $42.2 billion at June 30, 2019. During the
third quarter of 2019, Ambac reinsured $1.2 billion of performing
par exposure (the "reinsurance transaction") for certain public
finance insurance policies to a third party reinsurer, including
$0.5 billion of Adversely Classified and Watch List Credits.
The public finance insured portfolio decreased $2.0 billion
primarily due to the reinsurance transaction and natural runoff,
the structured finance portfolio decreased $0.4 billion primarily
related to de-risking activity and natural runoff and the
international insured portfolio decreased $0.8 billion primarily
due to natural run-off coupled with a decline in the British
Pound.
Adversely Classified and Watch List Credits decreased in the
third quarter of 2019 by $1.5 billion or 8.8% to $15.7 billion at
September 30, 2019 from $17.2 billion at June 30, 2019
mainly due to the reinsurance transaction, other de-risking
activity and natural runoff.
Details of financial guarantee insurance portfolio are
highlighted in the below table.
|
Net Par Outstanding |
|
September 30, 2019 |
|
June 30, 2019 |
| By
Sector: |
|
|
|
|
|
Public finance |
|
48 |
% |
|
49 |
% |
|
Structured Finance |
|
20 |
% |
|
20 |
% |
|
International |
|
32 |
% |
|
31 |
% |
| By Financial
Guarantor: |
|
|
|
|
|
Ambac Assurance |
|
71 |
% |
|
71 |
% |
|
Ambac UK |
|
29 |
% |
|
29 |
% |
| |
|
|
|
|
|
|
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 were $76.8 million, or $1.63 per diluted
share, for the third quarter 2019 as compared to Adjusted Earnings
of $86.4 million or $1.88 per diluted share, for the second quarter
of 2019.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Earnings
(Loss), for the three-month periods ended September 30, 2019,
and June 30, 2019, respectively:
| |
|
Three Months Ended |
| |
|
September 30, 2019 |
|
June 30, 2019 |
| ($ in
millions, other than per share data) |
|
$ Amount |
|
Per DilutedShare |
|
$ Amount |
|
Per DilutedShare |
|
Net income (loss) attributable to common
stockholders |
|
$ |
66.1 |
|
|
$ |
1.41 |
|
|
$ |
(128.4 |
) |
|
$ |
(2.79 |
) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
Non-credit impairment fair value (gain) loss on credit
derivatives |
|
(0.4 |
) |
|
(0.01 |
) |
|
(0.2 |
) |
|
— |
|
|
Insurance intangible amortization |
|
17.4 |
|
|
0.37 |
|
|
226.2 |
|
|
4.92 |
|
|
Foreign exchange (gains) losses |
|
(6.3 |
) |
|
(0.14 |
) |
|
(11.2 |
) |
|
(0.25 |
) |
| Adjusted Earnings (loss) |
|
$ |
76.8 |
|
|
$ |
1.63 |
|
|
$ |
86.4 |
|
|
$ |
1.88 |
|
| Weighted-average diluted
shares outstanding (in millions) |
|
|
|
47.0 |
|
|
|
|
46.0 |
|
| |
|
|
|
|
|
|
|
|
|
|
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 $1.38 billion, or $30.31
per share, at September 30, 2019, as compared to $1.35
billion, or $29.57 per share, at June 30, 2019. The increase
in Adjusted Book Value was primarily attributable to Adjusted
Earnings (net of earned premium) for the third quarter of 2019
partially offset by premiums ceded under the reinsurance
transaction.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure Adjusted Book Value as
of each date presented:
| |
|
September 30, 2019 |
|
June 30, 2019 |
| ($ in
millions, other than per share data) |
|
$ Amount |
|
Per Share |
|
$ Amount |
|
Per Share |
|
Total AFGI Stockholders' Equity (Deficit) |
|
$ |
1,568.7 |
|
|
$ |
34.44 |
|
|
$ |
1,492.9 |
|
|
$ |
32.78 |
|
| Adjustments: |
|
|
|
|
|
|
|
|
|
Non-credit impairment fair value losses on credit derivatives |
|
0.4 |
|
|
0.01 |
|
|
0.9 |
|
|
0.02 |
|
|
Insurance intangible asset |
|
(433.5 |
) |
|
(9.52 |
) |
|
(454.8 |
) |
|
(9.99 |
) |
|
Net unearned premiums and fees in excess of expected losses |
|
433.6 |
|
|
9.52 |
|
|
465.1 |
|
|
10.21 |
|
|
Net unrealized investment (gains) losses in Accumulated Other
Comprehensive Income |
|
(188.6 |
) |
|
(4.14 |
) |
|
(157.3 |
) |
|
(3.45 |
) |
| Adjusted book
value |
|
$ |
1,380.6 |
|
|
$ |
30.31 |
|
|
$ |
1,346.8 |
|
|
$ |
29.57 |
|
| Shares outstanding (in
millions) |
|
|
|
45.6 |
|
|
|
|
45.5 |
|
| |
|
|
|
|
|
|
|
|
|
|
Earnings Call and WebcastOn November 8,
2019 at 8:30am ET, Claude LeBlanc, President and Chief Executive
Officer, and David Trick, Executive Vice President and Chief
Financial Officer, will discuss third 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 November 21, 2019, and
can be accessed by dialing (Domestic) (844) 512-2921 or
(International) (412) 317-6671; and using
ID#13695692.
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 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.
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) the expected discontinuance of the
London Inter-Bank Offered Rate; (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) |
|
September 30, 2019 |
|
June 30, 2019 |
| Revenues: |
|
|
|
|
|
Net premiums earned |
|
$ |
10,466 |
|
|
$ |
7,833 |
|
|
Net investment income: |
|
|
|
|
|
Securities available-for-sale and short-term |
|
36,330 |
|
|
78,329 |
|
|
Other investments |
|
8,207 |
|
|
8,130 |
|
|
Total net investment income |
|
44,537 |
|
|
86,459 |
|
|
Net other-than-temporary impairment losses recognized in
earnings |
|
(42 |
) |
|
— |
|
|
Net realized investment gains (losses) |
|
18,471 |
|
|
35,860 |
|
|
Net gains (losses) on derivative contracts |
|
(9,890 |
) |
|
(35,412 |
) |
|
Other income (expense) |
|
141,376 |
|
|
(8,908 |
) |
|
Income on variable interest entities |
|
11,244 |
|
|
3,294 |
|
| Total revenues |
|
216,162 |
|
|
89,126 |
|
| Expenses: |
|
|
|
|
|
Losses and loss expense (benefit) |
|
37,139 |
|
|
(133,480 |
) |
|
Insurance intangible amortization |
|
17,421 |
|
|
226,242 |
|
|
Operating expenses |
|
25,622 |
|
|
29,090 |
|
|
Interest expense |
|
66,925 |
|
|
67,381 |
|
| Total expenses |
|
147,107 |
|
|
189,233 |
|
| Pre-tax income (loss) |
|
69,055 |
|
|
(100,107 |
) |
| Provision for income taxes |
|
2,939 |
|
|
28,322 |
|
| Net income (loss)
attributable to common stockholders |
|
$ |
66,116 |
|
|
$ |
(128,429 |
) |
| |
|
|
|
|
| Net income (loss) per
basic share |
|
$ |
1.44 |
|
|
$ |
(2.79 |
) |
| Net income (loss) per
diluted share |
|
$ |
1.41 |
|
|
$ |
(2.79 |
) |
| |
|
|
|
|
| Weighted-average number
of common shares outstanding: |
|
|
|
|
|
Basic |
|
45,997,694 |
|
|
45,986,043 |
|
|
Diluted |
|
47,020,058 |
|
|
45,986,043 |
|
|
|
|
|
|
|
|
|
| |
|
AMBAC FINANCIAL GROUP, INC. AND SUBSIDIARIES |
|
|
|
Consolidated Statements of Income (Loss)
(Unaudited) |
| |
|
|
| |
|
Nine Months Ended September 30, |
|
($ in Thousands, except share data) |
|
2019 |
|
2018 |
| Revenues: |
|
|
|
|
|
Net premiums earned |
|
$ |
46,057 |
|
|
$ |
82,359 |
|
|
Net investment income: |
|
|
|
|
|
Securities available-for-sale and short-term |
|
161,211 |
|
|
222,278 |
|
|
Other investments |
|
24,627 |
|
|
12,956 |
|
|
Total net investment income |
|
185,838 |
|
|
235,234 |
|
|
Net other-than-temporary impairment losses recognized in
earnings |
|
(71 |
) |
|
(1,579 |
) |
|
Net realized investment gains (losses) |
|
71,564 |
|
|
82,211 |
|
|
Net gains (losses) on derivative contracts |
|
(61,461 |
) |
|
51,706 |
|
|
Net realized gains on extinguishment of debt |
|
— |
|
|
3,121 |
|
|
Other income (expense) |
|
133,270 |
|
|
2,676 |
|
|
Income (loss) on variable interest entities |
|
30,459 |
|
|
2,982 |
|
| Total revenues |
|
405,656 |
|
|
458,710 |
|
| Expenses: |
|
|
|
|
|
Losses and loss expense (benefit) |
|
(83,934 |
) |
|
(181,315 |
) |
|
Insurance intangible amortization |
|
279,941 |
|
|
78,299 |
|
|
Operating expenses |
|
79,627 |
|
|
90,865 |
|
|
Interest expense |
|
202,284 |
|
|
176,192 |
|
| Total expenses |
|
477,918 |
|
|
164,041 |
|
| Pre-tax income (loss) |
|
(72,262 |
) |
|
294,669 |
|
| Provision for income taxes |
|
33,252 |
|
|
6,811 |
|
| Net income (loss) |
|
$ |
(105,514 |
) |
|
$ |
287,858 |
|
| Less: loss on exchange of auction
market preferred shares |
|
— |
|
|
81,686 |
|
| Net income (loss)
attributable to common stockholders |
|
$ |
(105,514 |
) |
|
$ |
206,172 |
|
| |
|
|
|
|
| Net income (loss) per
basic share |
|
$ |
(2.30 |
) |
|
$ |
4.52 |
|
| Net income (loss) per
diluted share |
|
$ |
(2.30 |
) |
|
$ |
4.43 |
|
| |
|
|
|
|
| Weighted-average number
of common shares outstanding: |
|
|
|
|
|
Basic |
|
45,939,284 |
|
|
45,635,483 |
|
|
Diluted |
|
45,939,284 |
|
|
46,510,795 |
|
|
|
|
|
|
|
|
|
| |
| AMBAC
FINANCIAL GROUP, INC. AND SUBSIDIARIES |
| |
| Consolidated
Balance Sheets (Unaudited) |
| |
|
|
|
|
|
($ in Thousands, except share data) |
|
September 30, 2019 |
|
June 30, 2019 |
| Assets: |
|
|
|
|
| Investments: |
|
|
|
|
|
Fixed income securities, at fair value (amortized cost: $2,561,278
and $2,465,967) |
|
$ |
2,727,305 |
|
|
$ |
2,604,177 |
|
|
Fixed income securities pledged as collateral, at fair value
(amortized cost: $84,948 and $84,418) |
|
84,948 |
|
|
84,418 |
|
|
Short-term investments, at fair value (amortized cost: $664,423 and
$772,214) |
|
664,441 |
|
|
772,299 |
|
|
Other investments (includes $418,140 and $426,563 at fair
value) |
|
462,427 |
|
|
469,438 |
|
|
Total investments |
|
3,939,121 |
|
|
3,930,332 |
|
| Cash and cash equivalents |
|
51,951 |
|
|
17,514 |
|
| Restricted cash |
|
12,561 |
|
|
— |
|
| Premium receivables |
|
414,744 |
|
|
441,526 |
|
| Reinsurance recoverable on
paid and unpaid losses |
|
26,036 |
|
|
27,215 |
|
| Deferred ceded premium |
|
76,495 |
|
|
56,272 |
|
| Subrogation recoverable |
|
2,082,268 |
|
|
1,984,826 |
|
| Derivative assets |
|
82,162 |
|
|
72,376 |
|
| Current taxes |
|
19,663 |
|
|
14,092 |
|
| Insurance intangible
asset |
|
433,524 |
|
|
454,830 |
|
| Other assets |
|
113,189 |
|
|
190,566 |
|
| Variable interest entity
assets: |
|
|
|
|
|
Fixed income securities, at fair value |
|
3,158,608 |
|
|
3,138,714 |
|
|
Restricted cash |
|
3,168 |
|
|
28,500 |
|
|
Loans, at fair value |
|
2,965,539 |
|
|
4,288,572 |
|
|
Derivative assets |
|
67,921 |
|
|
62,941 |
|
|
Other assets |
|
4,154 |
|
|
4,790 |
|
| Total
assets |
|
$ |
13,451,104 |
|
|
$ |
14,713,066 |
|
| Liabilities and
Stockholders’ Equity: |
|
|
|
|
|
Liabilities: |
|
|
|
|
| Unearned premiums |
|
$ |
527,771 |
|
|
$ |
556,908 |
|
| Loss and loss expense
reserves |
|
1,522,304 |
|
|
1,494,106 |
|
| Ceded premiums payable |
|
29,950 |
|
|
30,795 |
|
| Deferred taxes |
|
30,150 |
|
|
31,716 |
|
| Long-term debt |
|
2,954,929 |
|
|
2,946,620 |
|
| Accrued interest payable |
|
423,815 |
|
|
407,096 |
|
| Derivative liabilities |
|
103,314 |
|
|
88,245 |
|
| Other liabilities |
|
95,267 |
|
|
137,757 |
|
| Variable interest entity
liabilities: |
|
|
|
|
|
Accrued interest payable |
|
2,656 |
|
|
529 |
|
|
Long-term debt (includes $4,151,433 and $5,308,724 at fair
value) |
|
4,353,171 |
|
|
5,648,083 |
|
|
Derivative liabilities |
|
1,779,077 |
|
|
1,818,273 |
|
|
Other liabilities |
|
36 |
|
|
22 |
|
| Total
liabilities |
|
11,822,440 |
|
|
13,160,150 |
|
| |
|
|
|
|
| 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 45,571,743 |
|
456 |
|
|
456 |
|
|
Additional paid-in capital |
|
229,128 |
|
|
226,794 |
|
|
Accumulated other comprehensive income |
|
26,407 |
|
|
19,088 |
|
|
Retained earnings |
|
1,313,052 |
|
|
1,246,990 |
|
|
Treasury stock, shares at cost: 20,483 and 22,558 |
|
(347 |
) |
|
(380 |
) |
| Total Ambac Financial
Group, Inc. stockholders’ equity |
|
1,568,696 |
|
|
1,492,948 |
|
|
Noncontrolling interest |
|
59,968 |
|
|
59,968 |
|
| Total stockholders’
equity |
|
1,628,664 |
|
|
1,552,916 |
|
| Total liabilities and
stockholders’ equity |
|
$ |
13,451,104 |
|
|
$ |
14,713,066 |
|
| |
|
|
|
|
|
|
|
|
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
