Ambac Misstates Financials to Meet Minimums
NEW YORK (TheStreet) -- Ambac Financial's (ABK) bond-insurance unit fell short of capital requirements in Wisconsin for the second quarter and relied on misstated transactions to meet them, based on filings with the state's insurance regulator.
The subsidiary, Ambac Assurance, counted $520 million from transactions completed in the fourth quarter toward its third-quarter capital and surplus. Excluding that amount, its excess capital would have been $154.4 million as of Sept. 30, barely more than the $99.4 million minimum required by the Wisconsin Insurance Commissioner's Office.
Ambac Financial had raised the possibility that the subsidiary wouldn't meet minimum capital and surplus requirements. The company missed Monday's deadline to file the unit's financial statements and delayed submitting paperwork about its capital levels.
It became clear on Wednesday that Ambac Assurance had only $27.2 million in capital and surplus in June. The difference between the reported $305.6 million and the new figure is a $278.4 million understatement of credit default swap obligations, according to third-quarter filings with the state.Ambac said in an 8-K filing on Wednesday it had reached a $520 million settlement of approximately $5 billion in terminated collateral debt obligations, which it included in its third-quarter results. However, these transactions weren't completed until the fourth quarter, according to regulatory filings. That means the company overstated the $855.6 million of capital and surplus it said it had as of Sept. 30. Calls to Ambac weren't returned Wednesday. Without these transactions, the company would have reported a capital and surplus amount of $336 million, which reflects a one-time $311 million recovery. Still, the insurer expects to receive $440 million in back-dated tax refunds, a measure approved Friday that will increase the capital and surplus.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV