This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Ambac Financial Group, Inc. Announces Third Quarter 2010 Results

Financial Guarantee Interest Expense

Financial guarantee interest expense for the third quarter of 2010 amounted to $27.5 million. This interest charge results from the accrual of interest plus the accretion of discount on all surplus notes issued prior to September 30, 2010. No such surplus notes were outstanding in 2009.

Reinsurance Cancellations

During the third quarter of 2010, AAC commuted its reinsurance arrangement with its subsidiary, Ambac UK. Prior to the termination, AAC had assumed 90% of all financial guarantee policies written by Ambac UK on a quota-share basis and also provided excess of loss protection for the aggregate of all incurred losses in excess of an attachment point of £0.5 million of net paid losses per calendar year. The net income impact of the termination in 2010 was a gain of $157.8 million, included in the Consolidated Statement of Operations as part of Other Income. The gain resulted primarily from the recognition of foreign currency gains that, prior to the termination, had not been reflected in AAC’s assets or liabilities such as unearned premium reserves and deferred acquisition costs, since these assets and liabilities (referred to as “non-monetary assets and liabilities” for foreign exchange accounting purposes) were required to be recorded based on their historical foreign exchange rates. During the third quarter 2009, Ambac cancelled reinsurance contracts with three reinsurers and recaptured approximately $15.3 billion of par outstanding. The net income impact of the cancellations in 2009, included in the Consolidated Statement of Operations as part of Other Income and as a reduction in Operating Expenses, amounted to approximately $285.5 million and ($17.5) million, respectively.

Financial Services

The financial services segment comprises the investment agreement business and the derivative products business, both of which are in run-off. Gross interest income less gross interest expense and operating expenses from investment and payment agreements, plus operating results from the derivative products business was ($77.4) million for the third quarter of 2010, up from ($213.7) million for the third quarter of 2009. Beginning in the second half of 2009, the financial services segment has been positioned to record gains in a rising interest rate environment in order to provide a hedge against certain exposures within the financial guarantee segment. The third quarter 2010 result was impacted by declining interest rates on the financial services derivative portfolio during the period partially offset by the effect of valuation adjustments relating to Ambac’s credit risk on uncollateralized contracts. The third quarter 2009 result was driven by losses resulting from interest rate movements during the quarter, losses realized on transactions that derivative counterparties terminated as a result of the downgrades of AAC as guarantor of the swaps and valuation adjustments on the remaining swap portfolio within the derivative products business.

5 of 8

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs