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 of
$(22.2) million or $(0.48) per diluted share for the third quarter
of 2018. Including the impact of the Auction Market Preferred
Shares ("AMPS") exchange, net loss attributable to common
stockholders was $(103.8) million or $(2.27) per diluted share for
the third quarter of 2018, compared to net income attributable to
common stockholders of $4.3 million or $0.09 per diluted share for
the second quarter of 2018. Adjusted Loss in the third
quarter of 2018 was $(76.0) million or $(1.66) per diluted share
compared to Adjusted Earnings of $36.5 million or $0.78 per diluted
share in the second quarter of 2018.
AMPS Exchange TransactionOn August 3, 2018,
Ambac and AAC successfully completed an offer to exchange
outstanding AMPS issued by AAC. Upon closing, Ambac and AAC
repurchased 22,296 of AMPS with a liquidation preference of $557.4
million representing 84.4% of outstanding shares. In connection
with the transaction, AAC issued $212.7 million in current
principal of surplus notes with accrued interest of $98.4 million,
and Ambac paid $11 million of cash and issued 824,307 of warrants
to purchase stock of Ambac. The fair value of consideration
paid resulted in a total discount of 45% of the liquidation
preference of the AMPS exchanged. Third quarter 2018 results
include a reduction to net income attributable to common
stockholders of approximately $81.7 million reflecting the
difference between the fair value of consideration provided to AMPS
holders and the carrying value of the AMPS.
Claude LeBlanc, President and Chief Executive Officer, stated,
“During the third quarter of 2018 we continued to make measurable
progress across our strategic priorities and execute transactions
that we believe will deliver long term value to our
shareholders. In addition to the AMPS exchange, this quarter
we executed the Puerto Rico Plan Support Agreement for the
restructuring of all COFINA bonds, which, if approved by the court
overseeing Puerto Rico's Title III proceedings, would favorably
resolve one of our largest exposures to Puerto Rico. In November
2018, consistent with our strategy to actively de-risk our insured
portfolio, a strategy that we believe over time will strengthen the
quality of book value, we ceded the full amount of certain public
finance insurance policies equating to $1.5 billion of performing
par exposure, with principal and interest of $3.4 billion,
comprised of primarily non-callable capital appreciation bonds and
including $241 million par of Adversely Classified and Watch List
Credits." Mr. LeBlanc continued, "We believe that our rigor,
persistence, and commitment to progressing our strategic
initiatives has and will continue to deliver tangible results for
our shareholders."
Ambac's Third Quarter
2018 Summary Results |
|
|
|
|
|
|
Better (Worse) |
($ in millions, except per share data) |
|
3Q2018 |
|
2Q2018 |
|
Amount |
|
Percent |
Net premiums earned |
|
$ |
25.6 |
|
|
$ |
25.8 |
|
|
$ |
(0.2 |
) |
|
(1 |
)% |
Net investment income |
|
58.3 |
|
|
66.7 |
|
|
(8.4 |
) |
|
(13 |
)% |
Net realized investment gains (losses) |
|
30.2 |
|
|
47.1 |
|
|
(16.9 |
) |
|
(36 |
)% |
Net gains (losses) on interest rate
derivatives |
|
17.3 |
|
|
9.1 |
|
|
8.2 |
|
|
90 |
% |
Income (loss) on Variable Interest Entities
("VIEs") |
|
1.8 |
|
|
0.6 |
|
|
1.2 |
|
|
200 |
% |
Losses and loss expenses (benefit) |
|
33.5 |
|
|
32.6 |
|
|
(0.9 |
) |
|
(3 |
)% |
Operating expenses |
|
28.4 |
|
|
26.1 |
|
|
(2.3 |
) |
|
(9 |
)% |
Interest expense |
|
65.7 |
|
|
62.4 |
|
|
(3.3 |
) |
|
(5 |
)% |
Insurance intangible amortization |
|
26.4 |
|
|
23.2 |
|
|
(3.2 |
) |
|
(14 |
)% |
Provision for income taxes |
|
2.2 |
|
|
2.0 |
|
|
(0.2 |
) |
|
(10 |
)% |
Net income (loss) |
|
(22.2 |
) |
|
4.3 |
|
|
(26.5 |
) |
|
(616 |
)% |
Net income (loss) attributable to Common
Stockholders |
|
(103.8 |
) |
|
4.3 |
|
|
(108.1 |
) |
|
(2,514 |
)% |
Net income (loss) per diluted share |
|
$ |
(2.27 |
) |
|
$ |
0.09 |
|
|
$ |
(2.36 |
) |
|
(2,622 |
)% |
Adjusted earnings (loss) 1 |
|
(76.0 |
) |
|
36.5 |
|
|
(112.5 |
) |
|
(308 |
)% |
Adjusted earnings (loss) per diluted share
1 |
|
$ |
(1.66 |
) |
|
$ |
0.78 |
|
|
$ |
(2.44 |
) |
|
(313 |
)% |
Total Ambac Financial Group, Inc.
stockholders' equity |
|
1,757.7 |
|
|
1,799.8 |
|
|
(42.1 |
) |
|
(2 |
)% |
Total Ambac Financial Group, Inc.
stockholders' equity per share |
|
$ |
38.77 |
|
|
$ |
39.70 |
|
|
$ |
(0.93 |
) |
|
(2 |
)% |
Adjusted book value 1 |
|
1,291.9 |
|
|
1,398.0 |
|
|
(106.1 |
) |
|
(8 |
)% |
Adjusted book value per share 1 |
|
$ |
28.50 |
|
|
$ |
30.84 |
|
|
$ |
(2.34 |
) |
|
(8 |
)% |
Weighted-average diluted shares outstanding
(in millions) |
|
45.7 |
|
|
46.5 |
|
|
0.8 |
|
|
2 |
% |
1 See Non-GAAP Financial Data section of this press release for
further information
Net Premiums EarnedDuring the third quarter of
2018, net premiums earned were $25.6 million compared to $25.8
million in the second quarter of 2018, including accelerations of
$6.7 million and $6.1 million, respectively. Normal premiums
earned decreased $0.8 million or 4% primarily due to the continued
runoff of the insured portfolio. Accelerated premiums earned
increased $0.6 million or 10% due to executed commutations,
partially offset by lower accelerated premiums in public
finance.
The following table provides a summary of net premiums earned
for the three month periods ended September 30, 2018 and
June 30, 2018, respectively:
|
|
Three Months
Ended |
($ in millions) |
|
September 30,
2018 |
|
June 30, 2018 |
Public Finance |
|
$ |
9.2 |
|
|
$ |
9.7 |
|
Structured Finance |
|
4.2 |
|
|
4.1 |
|
International Finance |
|
5.5 |
|
|
5.9 |
|
Total normal premiums earned |
|
18.9 |
|
|
19.7 |
|
Accelerated earnings |
|
6.7 |
|
|
6.1 |
|
Total net premiums earned |
|
$ |
25.6 |
|
|
$ |
25.8 |
|
Net Investment Income and Net Realized Investment
GainsNet investment income for the third quarter of 2018
and the second quarter of 2018 was $58.3 million and $66.7 million,
respectively. Net investment income for the third quarter of
2018 decreased due to a reduction in the size of the investment
portfolio and a lower allocation to higher-yielding Ambac insured
RMBS, partially offset by an increase in net gains on invested
assets classified as trading. Net gains on invested assets
classified as trading were $7.0 million in the third quarter of
2018 compared to $3.6 million in the second quarter of 2018.
The decrease in the fair value of the consolidated investment
portfolio of approximately $0.1 billion from June 30, 2018, to
$4.3 billion at September 30, 2018, was due primarily to
interest payments and voluntary redemptions of the Ambac Note and
loss and loss adjustment expense payments during the third
quarter.
Third quarter 2018 net realized investment gains were $30.2
million compared to $47.1 million in the second quarter of
2018. Net realized gains in both quarters were primarily from
the sale of AAC-insured RMBS securities in connection with the
re-balancing of the investment portfolio and to facilitate debt
redemptions.
Losses and Loss Expenses and Loss
ReservesLosses and loss expenses for the third quarter of
2018 were $33.5 million, as compared to an expense of $32.6 million
for the second quarter of 2018.
The following table provides losses and loss expenses incurred
by bond type for the three month periods ended September 30,
2018 and June 30, 2018:
|
|
Three Months
Ended |
($ in millions) |
|
September 30,
2018 |
|
June 30, 2018 |
RMBS |
|
$ |
19.2 |
|
|
$ |
(26.1 |
) |
Domestic public finance |
|
9.1 |
|
|
44.1 |
|
Student loan |
|
4.0 |
|
|
(4.3 |
) |
Ambac UK and other credits |
|
1.2 |
|
|
18.9 |
|
Total losses and loss expenses |
|
$ |
33.5 |
|
|
$ |
32.6 |
|
Third quarter of 2018 RMBS losses and loss expenses of $19.2
million were driven by loss expenses incurred and a reduction to
estimated representation and warranty subrogation recoveries,
partially offset by credit improvements. Second quarter of
2018 RMBS losses and loss expenses were a benefit of $26.1 million
driven by a benefit of $10.0 million related to RMBS transactions
proactively terminated during the quarter and credit improvements,
partially offset by loss expenses incurred and a reduction of
estimated representation and warranty subrogation recoveries.
Domestic public finance losses and loss expenses in the third
quarter of 2018 were $9.1 million, primarily related to loss
expenses. In the second quarter of 2018, domestic public finance
losses and loss expenses were $44.1 million primarily related
to Military Housing loss expenses and additions to Puerto Rico loss
reserves.
During the third quarter of 2018, claim and loss expenses paid
(net of reinsurance) were $228.6 million which included $264.0
million of losses and loss expenses paid related mostly to Puerto
Rico and a student loan commutation, partially offset by $35.4
million of subrogation received. During the second quarter of 2018,
claim and loss expenses paid (net of reinsurance) were $77.9
million which included $113.4 million of losses and loss expenses
paid, partially offset by $35.5 million of subrogation
received.
Loss and loss expense reserves (gross of reinsurance) were $(30)
million at September 30, 2018, and $181 million at
June 30, 2018, which were net of $1.776 billion and $1.816
billion, respectively, of estimated subrogation recoveries related
to AAC's pursuit of legal remedies to seek redress for breaches of
representations and warranties.
The following table provides loss and loss expense (gross of
reinsurance) reserves by bond type at September 30, 2018, and
June 30, 2018:
($ in millions) |
|
September 30,
2018 |
|
June 30, 2018 |
RMBS |
|
$ |
(1,273 |
) |
|
$ |
(1,264 |
) |
Domestic public finance |
|
637 |
|
|
773 |
|
Student loans |
|
235 |
|
|
309 |
|
Ambac UK and other credits |
|
266 |
|
|
289 |
|
Loss expenses |
|
105 |
|
|
74 |
|
Total loss and loss expense reserves |
|
$ |
(30 |
) |
|
$ |
181 |
|
Net Gains (Losses) on Interest Rate
DerivativesNet gains on interest rate derivatives were
$17.3 million for the third quarter of 2018 and $9.1 million for
the second quarter of 2018. Gains on interest rate
derivatives were a result of the impact of an increase in forward
interest rates. The interest rate derivatives portfolio is
positioned to benefit from rising interest rates as a partial
economic hedge against interest rate exposure in AAC's insured and
investment portfolios.
ExpensesOperating expenses for the third
quarter of 2018 increased by $2.3 million to $28.4 million from
$26.1 million in the second quarter of 2018. The increase in the
third quarter of 2018 was primarily due to higher expenses related
to the AMPS exchange transaction, partially offset by lower
compensation costs and regulatory expenses associated with the
Office of the Commissioner of Insurance (the “OCI”). Third quarter
operating expenses included $5.9 million of expenses associated
with the AMPS transaction.
Interest expense for the third quarter of 2018 increased $3.3
million to $65.7 million from $62.4 million in the second quarter
of 2018 due to the August 2018 re-issuance of surplus notes in
connection with the AMPS exchange transaction, partially offset by
lower interest expense resulting from the partial redemption of the
Ambac Note and full redemption of the RMBS secured borrowing in the
second quarter of 2018.
Taxes and Net Operating Loss Carry-Forwards
("NOLs")Income taxes were $2.2 million for the third
quarter of 2018, compared to $2.0 million for the second quarter of
2018. The third quarter provision included $0.4 million of state
income taxes and foreign income taxes of $1.8 million. The
second quarter provision included $0.6 million of state income
taxes and foreign taxes of $1.4 million.
At September 30, 2018, the Ambac consolidated group had
approximately $3.55 billion of NOLs, including $1.40 billion at
Ambac and $2.15 billion at AAC.
As a result of taxable income at AAC during 2018, AAC utilized
NOLs in an amount that resulted in the accrual of $11.0 million of
tolling payments. There are no assurances that Ambac
Assurance will be able to generate taxable income for the full year
of 2018 and therefore make future tolling payments to Ambac,
including the accrued amount. Ambac Assurance's tax positions are
subject to review by the OCI, which may lead to the adoption of
positions that reduce the amount of tolling payments otherwise
available to Ambac.
Balance SheetTotal assets decreased by $6.4
billion from June 30, 2018 to $15.1 billion at September 30,
2018, primarily due to the deconsolidation of two VIEs during the
third quarter of 2018 (causing a reduction in assets of $6.0
billion). The deconsolidations were as a result of loss mitigation
activities that eliminated or reduced Ambac's policies or control
rights that previously required Ambac to consolidate these
entities.
Total liabilities decreased by $6.2 billion from June 30, 2018
to $13.3 billion as of September 30, 2018, primarily as a
result of the above noted VIE deconsolidations (causing a reduction
in liabilities of $6.0 billion) and claims payments, partially
offset by the impact of the AMPS Exchange transaction which
increased surplus notes and accrued interest on surplus notes by
$286.0 million.
Total Ambac Financial Group, Inc. Stockholders'
EquityStockholders’ equity at September 30, 2018, was
down 2% to $1.76 billion, or $38.77 per share compared to $1.80
billion or $39.70 per share as of June 30, 2018, due to the
impact of the AMPS exchange transaction of $73.7 million, net loss
of $22.2 million, and translation losses of $8.9 million related to
Ambac's foreign subsidiaries, partially offset by unrealized
investment portfolio gains of $60.8 million.
Financial Guarantee Insured PortfolioThe
financial guarantee insurance portfolio net par amount outstanding
declined 7.5% during the quarter ended September 30, 2018, to $52.2
billion from $56.5 at June 30, 2018. The reduction in
the insured portfolio was primarily related to a decrease of $1.6
billion in the international finance sector related to the
negotiated termination of an asset backed policy (consolidated VIE)
and the maturity of a utility policy; a decrease of $1.5 billion in
the public finance portfolio related to calls and maturities; and a
decrease of $1.1 billion in the structured finance sector due to
active de-risking, via a student loan commutation and reinsurance
of a structured finance exposure, coupled with continued policy
paydowns.
Details of financial guarantee insurance portfolio are
highlighted in the below table.
Net Par Outstanding |
|
September 30,
2018 |
|
June 30,
2018 |
By Sector: |
|
|
|
|
Public finance |
|
52 |
% |
|
51 |
% |
Structured Finance |
|
21 |
% |
|
21 |
% |
International |
|
27 |
% |
|
28 |
% |
By Financial Guarantor: |
|
|
|
|
Ambac Assurance |
|
74 |
% |
|
73 |
% |
Ambac UK |
|
26 |
% |
|
27 |
% |
Adversely Classified Credits decreased by a net $0.8 billion or
6.4% to $11.1 billion in the third quarter of 2018, due to the
student loan commutation and the negotiated termination of an
international utility exposure, coupled with runoff and upgrades to
other transactions.
Subsequent Events
Puerto RicoOn October 19, 2018 a COFINA Plan of
Adjustment and Disclosure Statement was filed by the Puerto Rico
Oversight Board following the execution of a Plan Support Agreement
for the restructuring of all senior and junior COFINA bonds on
August 29, 2018. These agreements represent significant progress
toward a negotiated resolution of the COFINA Title III proceeding
and Ambac's COFINA exposure, however, no assurance can be given
that the Plan of Adjustment will be approved by the court
overseeing COFINA’s Title III restructuring.
Reinsurance AgreementAs part of Ambac's active
risk mitigation efforts, in November 2018, AAC ceded the full
amount of certain public finance insurance policies to a third
party reinsurer, totaling $1.5 billion of performing par
exposure (principal and interest of $3.4 billion), which was mostly
comprised of policies on non-callable capital appreciation bonds
and includes $241 million par of Adversely Classified and Watch
List Credits.
Non-GAAP Financial DataIn addition to reporting
Ambac’s quarterly financial results in accordance with GAAP, Ambac
reports two non-GAAP financial measures: Adjusted Earnings and
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. 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. 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 Ambac’s
GAAP reporting, should not be viewed in isolation, may be subject
to change, and may differ from similar reporting provided by other
companies, which may define these non-GAAP measures
differently.
Ambac has a significant tax NOL that is offset by a full
valuation allowance in the GAAP consolidated financial
statements. As a result of this and other considerations, for
purposes of non-GAAP measures, we utilize a 0% effective tax rate,
which is subject to change in the future.
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 business 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 $76.0 million, or $1.66 per diluted share, for
the third quarter 2018 as compared to Adjusted Earnings of $36.5
million or $0.78 per diluted share, for the second quarter of 2018.
Adjusted Loss for the third quarter 2018 relative to Adjusted
Earnings for the second quarter of 2018 resulted mostly from the
impact of the AMPS exchange transaction in the third quarter
2018.
The following table reconciles net income (loss) attributable to
common stockholders to the non-GAAP measure, Adjusted Earnings
(Loss), for the three month periods ended September 30, 2018,
and June 30, 2018, respectively:
|
|
Three Months
Ended |
|
|
September 30,
2018 |
|
June 30, 2018 |
($ in millions, other than per share
data) |
|
$ Amount |
|
Per Diluted
Share |
|
$ Amount |
|
Per Diluted
Share |
Net income (loss) attributable to common
stockholders |
|
$ |
(103.8 |
) |
|
$ |
(2.27 |
) |
|
$ |
4.3 |
|
|
$ |
0.09 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Non-credit impairment fair value (gain) loss on
credit derivatives |
|
(0.2 |
) |
|
— |
|
|
0.3 |
|
|
0.01 |
|
Insurance intangible amortization |
|
26.4 |
|
|
0.58 |
|
|
23.2 |
|
|
0.50 |
|
Foreign exchange (gains) losses |
|
1.6 |
|
|
0.03 |
|
|
8.6 |
|
|
0.18 |
|
Adjusted Earnings (loss) |
|
$ |
(76.0 |
) |
|
$ |
(1.66 |
) |
|
$ |
36.5 |
|
|
$ |
0.78 |
|
Weighted-average diluted shares outstanding (in millions) |
|
|
|
45.7 |
|
|
|
|
46.5 |
|
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 $1.292 billion, or $28.50 per share, at
September 30, 2018, as compared to $1.398 billion, or $30.84
per share, at June 30, 2018. The decrease in Adjusted
Book Value was primarily attributable to the Adjusted Loss for the
three months ended September 30, 2018.
The following table reconciles Total Ambac Financial Group, Inc.
stockholders’ equity to the non-GAAP measure Adjusted Book Value as
of each date presented:
|
|
September 30,
2018 |
|
June 30, 2018 |
($ in millions, other than per share
data) |
|
$ Amount |
|
Per Share |
|
$ Amount |
|
Per Share |
Total Ambac Financial Group, Inc. stockholders’
equity |
|
$ |
1,757.7 |
|
|
$ |
38.77 |
|
|
$ |
1,799.8 |
|
|
$ |
39.70 |
|
Adjustments: |
|
|
|
|
|
|
|
|
Non-credit impairment fair value losses on credit
derivatives |
|
1.2 |
|
|
0.03 |
|
|
1.3 |
|
|
0.03 |
|
Insurance intangible asset |
|
(755.7 |
) |
|
(16.67 |
) |
|
(786.2 |
) |
|
(17.34 |
) |
Net unearned premiums and fees in excess of expected
losses |
|
503.2 |
|
|
11.10 |
|
|
536.7 |
|
|
11.84 |
|
Net unrealized investment (gains) losses in
Accumulated Other Comprehensive Income |
|
(214.4 |
) |
|
(4.73 |
) |
|
(153.6 |
) |
|
(3.39 |
) |
Adjusted Book Value |
|
$ |
1,291.9 |
|
|
$ |
28.50 |
|
|
$ |
1,398.0 |
|
|
$ |
30.84 |
|
Shares outstanding (in millions) |
|
|
|
45.3 |
|
|
|
|
45.3 |
|
Earnings Call and Webcast
On November 8, 2018 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
2018 results during a conference call. A live audio webcast
of the call will be available through the Investor Relations
section of Ambac’s website, http://ir.ambac.com/events.cfm.
Participants may also listen via telephone by dialing (877)
407-9716 (Domestic) or (201) 493-6779 (International).
The webcast will be archived on Ambac's website. A replay
of the call will be available through November 22, 2018, and can be
accessed by dialing (Domestic) (844) 512-2921 or
(International) (412) 317-6671; and using
ID#13684051.
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.
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) adverse effects on Ambac’s share price
resulting from future offerings of debt or equity securities that
rank senior to Ambac’s common stock; (4) potential of
rehabilitation proceedings against Ambac Assurance; (5) dilution of
current shareholder value or adverse effects on Ambac’s share price
resulting from the issuance of additional shares of common stock;
(6) 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; (7) decisions made by
Ambac Assurance's primary insurance regulator for the benefit of
policyholders that may result in material adverse consequences for
holders of the Company’s securities or holders of securities issued
or insured by Ambac Assurance; (8) 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; (9) failure to recover
claims paid on Puerto Rico exposures or incurrence of losses in
amounts higher than expected; (10) the Company’s inability to
realize the expected recoveries included in its financial
statements; (11) changes in Ambac Assurance’s estimated
representation and warranty recoveries or loss reserves over time;
(12) insufficiency or unavailability of collateral to pay
secured obligations; (13) 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 and exposures to
reinsurers; (14) credit risks related to large single risks, risk
concentrations and correlated risks; (15) concentration and
essentiality risk in connection with Military Housing insured debt;
(16) the risk that the Company’s risk management policies and
practices do not anticipate certain risks and/or the magnitude of
potential for loss; (17) risks associated with adverse selection as
the Company’s insured portfolio runs off; (18) adverse effects on
operating results or the Company’s financial position resulting
from measures taken to reduce risks in its insured portfolio; (19)
intercompany disputes or disputes with Ambac Assurance's primary
insurance regulator; (20) 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; (21) the Company’s substantial indebtedness
could adversely affect its financial condition and operating
flexibility; (22) 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; (23) 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; (24) restrictive covenants in
agreements and instruments may impair the Company’s ability to
pursue or achieve its business strategies; (25) loss of control
rights in transactions for which we provide insurance due to a
finding that Ambac Assurance has defaulted, whether due to the
Segregated Account rehabilitation proceedings or otherwise; (26)
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; (27) adverse tax
consequences or other costs resulting from the Segregated Account
rehabilitation plan, or from the characterization of the Company’s
surplus notes or other obligations as equity; (28) risks attendant
to the change in composition of securities in the Company’s
investment portfolio; (29) changes in tax law; (30) changes in
prevailing interest rates; (31) changes on inter-bank lending rate
reporting practices or the method pursuant to which LIBOR rates are
determined; (32) factors that may influence the amount of
installment premiums paid to the Company, including the Segregated
Account rehabilitation proceedings; (33) default by one or more of
Ambac Assurance's portfolio investments, insured issuers or
counterparties; (34) 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; (35)
risks relating to determinations of amounts of impairments taken on
investments; (36) 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; (37) actions of stakeholders whose interests are not
aligned with broader interests of the Company's stockholders; (38)
the Company’s inability to realize value from Ambac UK or other
subsidiaries of Ambac Assurance; (39) system security risks; (40)
market spreads and pricing on interest rate derivative insured or
issued by the Company; (41) the risk of volatility in income and
earnings, including volatility due to the application of fair value
accounting; (42) changes in accounting principles or practices that
may impact the Company’s reported financial results; (43)
legislative and regulatory developments, including intervention by
regulatory authorities; (44) the economic impact of “Brexit” may
have an adverse effect on the Company’s insured international
portfolio and the value of its foreign investments, both of which
primarily reside with its subsidiary Ambac UK; (45) 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; (46) 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; (47) implementation of new tax legislation signed into
law on December 22, 2017 (commonly known as the “Tax Cuts and Jobs
Act”) may have unexpected consequences for the Company and the
value of its securities, particularly its common shares; (48)
implementation of the Tax Cuts and Jobs Act may negatively impact
the economic recovery of Puerto Rico, which could result in higher
loss severities or an extended moratorium on debt service owed on
Ambac Assurance-insured bonds of Puerto Rico and its
instrumentalities; (49) implementation of the Tax Cuts and Jobs Act
could have a negative impact on municipal issuers of Ambac-insured
bonds; (50) 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 (51) 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, 2018 |
|
June 30, 2018 |
Revenues: |
|
|
|
|
Net premiums earned |
|
$ |
25,640 |
|
|
$ |
25,836 |
|
Net
investment income: |
|
|
|
|
Securities available-for-sale and short-term |
|
49,985 |
|
|
61,742 |
|
Other
investments |
|
8,347 |
|
|
4,920 |
|
Total net
investment income |
|
58,332 |
|
|
66,662 |
|
Other-than-temporary impairment losses: |
|
|
|
|
Total
other-than-temporary impairment losses |
|
(266 |
) |
|
(1,010 |
) |
Portion
of other-than-temporary impairment recognized in other
comprehensive income |
|
— |
|
|
(4 |
) |
Net
other-than-temporary impairment losses recognized in earnings |
|
(266 |
) |
|
(1,014 |
) |
Net
realized investment gains (losses) |
|
30,201 |
|
|
47,148 |
|
Change in
fair value of credit derivatives: |
|
|
|
|
Realized
gains and other settlements |
|
99 |
|
|
91 |
|
Unrealized gains (losses) |
|
151 |
|
|
(308 |
) |
Net
change in fair value of credit derivatives |
|
250 |
|
|
(217 |
) |
Net gains
(losses) on interest rate derivatives |
|
17,333 |
|
|
9,149 |
|
Net
realized gains on extinguishment of debt |
|
— |
|
|
6 |
|
Other
income (expense) |
|
694 |
|
|
2,491 |
|
Income
(loss) on variable interest entities |
|
1,831 |
|
|
577 |
|
Total revenues |
|
134,015 |
|
|
150,638 |
|
Expenses: |
|
|
|
|
Losses
and loss expense (benefit) |
|
33,501 |
|
|
32,579 |
|
Insurance
intangible amortization |
|
26,421 |
|
|
23,242 |
|
Operating
expenses |
|
28,368 |
|
|
26,063 |
|
Interest
expense |
|
65,673 |
|
|
62,446 |
|
Total expenses |
|
153,963 |
|
|
144,330 |
|
Pre-tax income
(loss) |
|
(19,948 |
) |
|
6,308 |
|
Provision for income
taxes |
|
2,211 |
|
|
1,995 |
|
Net income (loss) |
|
$ |
(22,159 |
) |
|
$ |
4,313 |
|
Less: exchange of
auction market preferred shares |
|
81,686 |
|
|
— |
|
Net income
(loss) attributable to common stockholders |
|
$ |
(103,845 |
) |
|
$ |
4,313 |
|
|
|
|
|
|
Net income
(loss) per basic share |
|
$ |
(2.27 |
) |
|
$ |
0.09 |
|
Net income
(loss) per diluted share |
|
$ |
(2.27 |
) |
|
$ |
0.09 |
|
|
|
|
|
|
Weighted-average number
of common shares outstanding: |
|
|
|
|
Basic |
|
45,749,252 |
|
|
45,683,058 |
|
Diluted |
|
45,749,252 |
|
|
46,472,375 |
|
|
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Statements of Income (Loss)
(Unaudited)
|
|
Nine Months Ended September 30, |
($ in Thousands, except share data) |
|
2018 |
|
2017 |
Revenues: |
|
|
|
|
Net premiums earned |
|
$ |
82,359 |
|
|
$ |
143,754 |
|
Net
investment income: |
|
|
|
|
Securities available-for-sale and short-term |
|
222,278 |
|
|
235,092 |
|
Other
investments |
|
12,956 |
|
|
18,804 |
|
Total net
investment income |
|
235,234 |
|
|
253,896 |
|
Other-than-temporary impairment losses: |
|
|
|
|
Total
other-than-temporary impairment losses |
|
(1,617 |
) |
|
(48,581 |
) |
Portion
of other-than-temporary impairment recognized in other
comprehensive income |
|
38 |
|
|
29,366 |
|
Net
other-than-temporary impairment losses recognized in earnings |
|
(1,579 |
) |
|
(19,215 |
) |
Net
realized investment gains (losses) |
|
82,211 |
|
|
5,434 |
|
Change in
fair value of credit derivatives: |
|
|
|
|
Realized
gains and other settlements |
|
296 |
|
|
1,467 |
|
Unrealized gains (losses) |
|
(609 |
) |
|
6,388 |
|
Net
change in fair value of credit derivatives |
|
(313 |
) |
|
7,855 |
|
Net gains
(losses) on interest rate derivatives |
|
52,019 |
|
|
36,538 |
|
Net
realized gains on extinguishment of debt |
|
3,121 |
|
|
4,920 |
|
Other
income (expense) |
|
2,676 |
|
|
1,107 |
|
Income
(loss) on variable interest entities |
|
2,982 |
|
|
(1,567 |
) |
Total revenues |
|
458,710 |
|
|
432,722 |
|
Expenses: |
|
|
|
|
Losses
and loss expense (benefit) |
|
(181,315 |
) |
|
410,917 |
|
Insurance
intangible amortization |
|
78,299 |
|
|
116,686 |
|
Operating
expenses |
|
90,865 |
|
|
93,502 |
|
Interest
expense |
|
176,192 |
|
|
88,951 |
|
Total expenses |
|
164,041 |
|
|
710,056 |
|
Pre-tax income
(loss) |
|
294,669 |
|
|
(277,334 |
) |
Provision for income
taxes |
|
6,811 |
|
|
31,902 |
|
Net income (loss) |
|
$ |
287,858 |
|
|
$ |
(309,236 |
) |
Less: exchange of
auction market preferred shares |
|
81,686 |
|
|
— |
|
Net income
(loss) attributable to common stockholders |
|
$ |
206,172 |
|
|
$ |
(309,236 |
) |
|
|
|
|
|
Net income
(loss) per basic share |
|
$ |
4.52 |
|
|
$ |
(6.82 |
) |
Net income
(loss) per diluted share |
|
$ |
4.43 |
|
|
$ |
(6.82 |
) |
|
|
|
|
|
Weighted-average number
of common shares outstanding: |
|
|
|
|
Basic |
|
45,635,483 |
|
|
45,355,671 |
|
Diluted |
|
46,510,795 |
|
|
45,355,671 |
|
|
AMBAC FINANCIAL GROUP, INC. AND
SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
|
|
|
|
|
$
in Thousands, except share data) |
|
September 30,
2018 |
|
June 30,
2018 |
Assets: |
|
|
|
|
Investments: |
|
|
|
|
Fixed income securities,
at fair value (amortized cost: $3,001,432 and $3,355,223) |
|
$ |
3,221,301 |
|
|
$ |
3,514,927 |
|
Fixed
income securities pledged as collateral, at fair value (amortized
cost: $84,186 and $84,641) |
|
84,186 |
|
|
84,641 |
|
Short-term investments, at fair value (amortized cost: $562,111 and
$393,516) |
|
562,060 |
|
|
393,447 |
|
Other
investments (includes $372,774 and $356,899 at fair value) |
|
411,604 |
|
|
394,396 |
|
Total
investments |
|
4,279,151 |
|
|
4,387,411 |
|
Cash and cash
equivalents |
|
52,505 |
|
|
44,398 |
|
Receivable for
securities |
|
46,376 |
|
|
82,513 |
|
Investment income due
and accrued |
|
10,709 |
|
|
12,157 |
|
Premium
receivables |
|
517,197 |
|
|
553,958 |
|
Reinsurance recoverable
on paid and unpaid losses |
|
25,511 |
|
|
39,071 |
|
Deferred ceded
premium |
|
45,204 |
|
|
47,886 |
|
Subrogation
recoverable |
|
1,898,611 |
|
|
1,876,188 |
|
Loans |
|
10,082 |
|
|
10,007 |
|
Derivative assets |
|
50,262 |
|
|
56,510 |
|
Current taxes |
|
32,509 |
|
|
34,619 |
|
Insurance intangible
asset |
|
755,734 |
|
|
786,208 |
|
Other assets |
|
22,191 |
|
|
33,631 |
|
Variable interest
entity assets: |
|
|
|
|
Fixed
income securities, at fair value |
|
2,718,377 |
|
|
2,756,924 |
|
Restricted cash |
|
1,024 |
|
|
1,052 |
|
Loans, at
fair value |
|
4,563,091 |
|
|
10,751,199 |
|
Derivative assets |
|
61,543 |
|
|
60,403 |
|
Other
assets |
|
3,387 |
|
|
1,088 |
|
Total
assets |
|
$ |
15,093,464 |
|
|
$ |
21,535,223 |
|
Liabilities and
Stockholders’ Equity: |
|
|
|
|
Liabilities: |
|
|
|
|
Unearned
premiums |
|
$ |
669,820 |
|
|
$ |
721,689 |
|
Loss and
loss expense reserves |
|
1,868,484 |
|
|
2,057,334 |
|
Ceded
premiums payable |
|
34,306 |
|
|
35,594 |
|
Deferred
taxes |
|
27,537 |
|
|
32,781 |
|
Long-term
debt |
|
2,937,771 |
|
|
2,796,389 |
|
Accrued
interest payable |
|
356,711 |
|
|
237,558 |
|
Derivative liabilities |
|
61,331 |
|
|
67,648 |
|
Other
liabilities |
|
61,533 |
|
|
58,191 |
|
Payable
for securities purchased |
|
31,292 |
|
|
16,556 |
|
Variable interest
entity liabilities: |
|
|
|
|
Accrued
interest payable |
|
2,817 |
|
|
550 |
|
Long-term
debt, at fair value |
|
5,585,860 |
|
|
11,454,746 |
|
Derivative liabilities |
|
1,657,173 |
|
|
1,992,227 |
|
Other
liabilities |
|
20 |
|
|
39 |
|
Total
liabilities |
|
13,294,655 |
|
|
19,471,302 |
|
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 and outstanding shares: 45,365,170 and 45,365,170 |
|
454 |
|
|
454 |
|
Additional paid-in capital |
|
218,050 |
|
|
208,328 |
|
Accumulated other comprehensive income |
|
97,825 |
|
|
45,854 |
|
Retained
earnings |
|
1,441,857 |
|
|
1,545,702 |
|
Treasury
stock, shares at cost: 32,956 and 32,956 |
|
(527 |
) |
|
(527 |
) |
Total Ambac
Financial Group, Inc. stockholders’ equity |
|
1,757,659 |
|
|
1,799,811 |
|
Noncontrolling
interest |
|
41,150 |
|
|
264,110 |
|
Total
stockholders’ equity |
|
1,798,809 |
|
|
2,063,921 |
|
Total
liabilities and stockholders’ equity |
|
$ |
15,093,464 |
|
|
$ |
21,535,223 |
|
Grafico Azioni Ambac Financial (NASDAQ:AMBC)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni Ambac Financial (NASDAQ:AMBC)
Storico
Da Giu 2023 a Giu 2024