Ambac Financial Group, Inc. Announces Third Quarter 2010 Results
Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced third quarter 2010 net income of $76.0 million, or $0.25 per diluted share. This compares to third quarter 2009 net income of $2,188.3 million, or $7.58 per diluted share. Relative to the third quarter 2009 results, the third quarter 2010 results reflect significantly reduced unrealized mark-to-market gains in the credit derivatives portfolio as the remaining exposure of the CDO of ABS portfolio which drove the unrealized gains in 2009 was commuted in June 2010. Third quarter 2010 results also reflect lower loss and loss expenses.
Third Quarter 2010 Summary
- As previously announced, on November 1, 2010, Ambac did not make a regularly scheduled interest payment on Company debentures due May 1, 2023, and filed for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code on November 8, 2010.
- Net change in fair value of credit derivatives was positive $9.4 million in the current quarter, down from $2,132.9 million in the third quarter 2009.
- Net loss and loss expenses incurred amounted to $165.4 million for the current quarter, down from $459.2 million in the third quarter of 2009.
- During the third quarter 2010, AAC commuted the reinsurance arrangement with its subsidiary, Ambac Assurance UK Ltd (“Ambac UK”) resulting in a net gain of $157.8 million (included in “Other income” in the Consolidated Statements of Operations).
- The financial services segment recorded a $77.4 million operating loss primarily related to the impact of lower interest rates on the derivative products business.
- Statutory surplus of Ambac Assurance Corporation (“AAC”) decreased to approximately $912 million at September 30, 2010 from $1.5 billion at June 30, 2010, driven primarily by statutory loss and loss expenses.
Implementation of New Accounting StandardsEffective January 1, 2010, Ambac adopted Accounting Standards Update No. (“ASU”) 2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities”. See prior quarters’ earnings releases for information on the financial impact of adoption. As of September 30, 2010, the Company's balance sheet included 23 consolidated VIEs with $19.2 billion of assets and $18.9 billion of liabilities.
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