Ambac Financial Group, Inc. One State Street Plaza New York, NY 10004 212.668.0340 |
News Release
For Immediate Release
Investor/Media Contact: Peter R. Poillon
(212) 208-3333
ppoillon@ambac.com
Web site: www.ambac.com
Ambac
AMBAC FINANCIAL GROUP, INC. ANNOUNCES
THIRD QUARTER NET INCOME OF $159.7 MILLION, UP 21%
Third Quarter Net Income Per Diluted Share of $1.45, up 20%,
Third Quarter Adjusted Gross Premiums Written(1)$282.5 million, down 8%
NEW YORK, October 16, 2003—Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced third quarter 2003 net income of $159.7 million, or $1.45 per diluted share. This represents a 21% increase from third quarter 2002 net income of $131.7 million, and a 20% increase in net income per diluted share from $1.21 per diluted share in the comparable period of 2002.
Net Income Per Diluted Share
Ambac presents net income and net income per diluted share. These measures are computed in accordance with accounting principles generally accepted in the United States of America (GAAP). However, the research analysts have not adjusted their reporting of earnings to a strictly GAAP basis. In order to assist investors in their understanding of quarterly results, Ambac will provide other useful information.
Earnings measures reported by research analysts exclude net gains and losses from sales of investment securities and mark-to-market gains and losses on credit derivative contracts and derivative hedge contracts (“net security gains and losses”) and non-recurring items. Certain research analysts further exclude the impact of accelerated premiums earned on guaranteed obligations that have been refunded (“refundings”). During the third quarter 2003, net security gains and losses had a net income effect of $1.2 million, $0.01 on a per diluted share basis. Refundings had a net income effect of $11.8 million, or $0.11 per diluted share for the third quarter 2003. Table I, below, provides third quarter and nine-month comparisons for the years 2003 and 2002.
Ambac Third Quarter 2003 Earnings/2
Table I
| Third Quarter | Nine Months | |||||||||||||||||||||
| 2003 | 2002 | % Change | 2003 | 2002 | % Change | |||||||||||||||||
Net income per diluted share(a) | $ | 1.45 | $ | 1.21 | +20 | % | $ | 4.21 | $ | 3.38 | +25 | % | ||||||||||
Effect of net security (gains)/losses | $ | (0.01 | ) | $ | 0.00 | n.a. | $ | (0.19 | ) | $ | 0.05 | n.a. | ||||||||||
Non-recurring items | $ | 0.00 | $ | 0.00 | n.a. | $ | 0.04 | $ | 0.00 | n.a. | ||||||||||||
Sub-total excluding effect of net security gains/losses and non-recurring items(b) | $ | 1.44 | $ | 1.21 | +19 | % | $ | 4.06 | $ | 3.43 | +18 | % | ||||||||||
Effect of refundings | $ | (0.11 | ) | $ | (0.08 | ) | n.a. | $ | (0.28 | ) | $ | (0.18 | ) | n.a. | ||||||||
Total excluding items | $ | 1.33 | $ | 1.13 | +18 | % | $ | 3.78 | $ | 3.25 | +16 | % | ||||||||||
| a) | 2003 amounts include stock option expense amounting to approximately $0.01 per diluted share in the third quarter and approximately $0.03 year to date. |
| b) | Consensus earnings that are reported by earnings estimate services, such as First Call, are on this basis, which excludes net security gains and losses and non-recurring items. |
Commenting on the overall results, Ambac Chairman and CEO, Phillip B. Lassiter noted, “Our business climate remains upbeat with strong customer demand and constructive pricing. Deal closings slowed over the summer months in Europe although pipeline growth and activity on the Continent has continued to be robust.”
Revenues
Highlights
Adjusted gross premiums written(1) in the third quarter of 2003 were $282.5 million, down 8% from the third quarter of 2002 of $305.6 million. Premium growth in the public finance market was very strong and structured finance grew steadily. The growth in public and structured finance was more than offset by decline in international finance adjusted gross premiums written.
In public finance, Ambac continues to benefit from the high level of municipal issuance. Transactions guaranteed during the quarter included strong writings in the municipal lease, transportation, and health care sectors of the market. Structured finance growth resulted from strong writings in the commercial asset-backed, consumer asset-backed and investor-owned utilities segments. The international finance segment continues to experience strong activity across several sectors, primarily in Western Europe. Very few large international transactions were closed during the third quarter, however, the transaction pipeline is strong and deal activity remains robust.
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Ambac Third Quarter 2003 Earnings/3
A breakdown of adjusted gross premiums written by market sector is included below as Table II.
Table II
Adjusted Gross Premiums Written
$-millions | Third Quarter | Nine Months | ||||||||||||||||
| 2003 | 2002 | % Change | 2003 | 2002 | Change | |||||||||||||
Public Finance | $ | 159.4 | $ | 126.8 | +26 | % | $ | 471.0 | $ | 335.7 | +40 | % | ||||||
Structured Finance | 95.0 | 85.6 | +11 | % | 346.4 | 266.5 | +30 | % | ||||||||||
International | 28.1 | 93.2 | -70 | % | 242.6 | 192.0 | +26 | % | ||||||||||
Total | $ | 282.5 | $ | 305.6 | -8 | % | $ | 1,060.0 | $ | 794.2 | +33 | % | ||||||
| • | Net premiums written in the third quarter of 2003 of $262.9 million were 47% higher than net premiums written of $178.3 million in the same period of 2002. Although adjusted gross premiums written declined in comparison to the prior period, net premiums written increased primarily due to a greater percentage of the adjusted gross premiums written in the third quarter of 2003 were received up front and less business ceded during the period. Gross premiums written in the third quarter of 2003 were offset by $17.5 million in ceded premiums. In the third quarter of 2002, ceded premiums were $26.9 million. Ceded premiums in the third quarter of 2003 declined, in part, due to $4.2 million received from a buyback of certain public finance reinsurance during the period. |
Net premiums written for the nine months of 2003 of $772.6 million were 61% higher than net premiums written of $479.0 million in the same period of 2002.
| • | Net premiums earnedand other credit enhancement fees for the third quarter of 2003 were $171.6 million, which represented a 32% increase from the $129.7 million earned in the third quarter of 2002. Net premiums earned increased for all market segments. International continues to be our fastest growing market, as net earned premium and other credit enhancement fees grew 44% during the quarter. Earned premium grew 34% in the structured finance segment. Public finance, our most mature market segment, provided earned premium growth in excess of 20% for the first time in years, enhanced by the strong issuance over the past two years, generally wider spreads across the market and the company’s focus on the structured segment of the market. |
Net premiums earned includes accelerated premiums, which result from refundings and calls recognized during the quarter. Accelerated premiums were $20.8 million in the third quarter of 2003 (which had a net income per diluted share effect of $0.11), up 32% from $15.7 million ($0.08 per diluted share) in accelerated premiums in the third quarter of 2002. The current relatively low interest rate environment continues to prompt the high levels of accelerated premiums. When interest rates rise in the future, accelerated premiums should decline.
Net premiums earned and other credit enhancement fees for the nine months of 2003 were $481.0 million, which represented a 34% increase from the $359.9 million earned in the nine months of 2002. Accelerated premiums were $54.0 million for the nine months of 2003 (which had a net income per diluted share effect of $0.28), up 58% from $34.2 million ($0.18 per diluted share) in accelerated premiums for the comparable period of 2002.
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Ambac Third Quarter 2003 Earnings/4
A breakdown of net premiums earned and other credit enhancement fees by market sector are included below as Table III. Normal net premiums earned exclude accelerated premiums that result from refundings and calls.
Table III
Net Premiums Earned and Other Credit Enhancement Fees
$-millions | Third Quarter | Nine Months | ||||||||||||||||
| 2003 | 2002 | Change | 2003 | 2002 | Change | |||||||||||||
Public Finance | $ | 47.4 | $ | 39.0 | +22 | % | $ | 134.8 | $ | 114.3 | +18 | % | ||||||
Structured Finance | 61.2 | 45.6 | +34 | % | 169.9 | 130.3 | +30 | % | ||||||||||
International | 42.2 | 29.4 | +44 | % | 122.3 | 81.1 | +51 | % | ||||||||||
Total Normal Premiums/Fees | 150.8 | 114.0 | +32 | % | 427.0 | 325.7 | +31 | % | ||||||||||
Accelerated Premiums | 20.8 | 15.7 | +32 | % | 54.0 | 34.2 | +58 | % | ||||||||||
Total | $ | 171.6 | $ | 129.7 | +32 | % | $ | 481.0 | $ | 359.9 | +34 | % | ||||||
| • | Net investment income for the third quarter of 2003 was $80.9 million, representing an increase of 7% from $75.9 million in the comparable period of 2002. This increase was due primarily to the growth in the investment portfolio from ongoing collection of financial guarantee premiums. Investment income was also positively impacted by the proceeds from Ambac’s debt offering in February 2003. The growth was partially offset by lower reinvestment rates and the allocation of a larger portion of the portfolio to tax-exempt securities. |
Net investment income for the nine months of 2003 was $237.4 million, representing an increase of 7% from $222.0 million in the comparable period of 2002.
| • | Net financial services revenues, which is composed of gross interest income less gross interest expense from investment and payment agreements plus revenue from derivative products and cash management services and excludes net realized investment gains and losses, were $21.3 million in the third quarter of 2003, up 57% from $13.6 million in revenues for the third quarter of 2002. |
Derivative product revenue was $17.2 million in the third quarter of 2003, up from $3.2 million in the third quarter of 2002. This product was primarily impacted by two factors: a large interest rate swap transaction during the period, and a positive $4.8 million ($0.03 on a per diluted share basis) mark-to-market adjustment. The mark-to-market adjustment was driven by the relationship between tax-exempt and taxable interest rates. This ratio trended down towards its historical average during the quarter, recouping a portion of the $12.0 million negative adjustment recorded last quarter. Net interest income from our guaranteed investment contract
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Ambac Third Quarter 2003 Earnings/5
product in the third quarter of 2003 declined $6.1 million from the third quarter of 2002 due primarily to lower interest spreads. Net interest rate spreads have been adversely impacted by low interest rates. Revenue from our cash management product in the third quarter of 2003 was down slightly compared to the third quarter of 2002.
Financial services revenueswere $34.6 million in the nine months of 2003, down 16% from the $41.1 million of revenues in the nine months of 2002.
Expenses
Highlights
| • | Financial guarantee expensesof $39.7 million for the third quarter of 2003 increased by 61% over the $24.6 million of expenses for the same quarter of 2002. The increase was driven primarily by additions to the general loss provision, as well as higher compensation expense. The general loss provision increased from $6.1 million in the third quarter of 2002, to $15.9 million in the third quarter of 2003, reflecting both the significant increase in new business underwritten over the past several quarters and the expectation that improvement in the current market cycle will be fairly slow and protracted. The higher compensation expense is reflective of the global opportunities as we continue to expand our resources to meet demand for our product. Compensation expense includes stock option expenses amounting to $2.4 million in the third quarter of 2003 with no comparable amount in 2002. |
Financial guarantee expensesof $103.6 million for nine months of 2003 increased by 41% over the $73.3 million of expenses for the same period of 2002.
| • | Financial services other expenses, which represent the actual operating expenses for the segment, amounted to $6.8 million for the third quarter of 2003, up 26% from $5.4 million for the third quarter of 2002 primarily due to increased deal related expenses in the derivative products area. |
Financial services expenses for nine months of 2003 of $19.2 million increased by 19% from $16.2 million in expenses for the nine months of 2002.
Other Items
| • | Total net securities gains/(losses)for the third quarter of 2003 were $1.8 million, or $0.01 per diluted share, consisting of net realized gains on investment securities of $5.9 million and net mark-to-market losses on credit derivatives of ($4.1) million. For the third quarter of 2002 net securities gains/(losses) were ($0.2) million, no per share impact, consisting of net realized gains on investment securities of $6.7 million and net mark-to-market losses on credit derivatives of ($6.9) million. |
Total net securities gains/(losses)for nine months of 2003 were $32.1 million, consisting of net realized gains on investment securities of $37.5 million, mark-to-market losses on credit derivatives of ($6.2) million and net mark-to-market gains on derivative hedge contracts of $0.8
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Ambac Third Quarter 2003 Earnings/6
million. For the nine months of 2002 net losses were ($9.0) million, consisting of net realized gains on investment securities of $9.8 million, mark-to-market losses on credit derivatives of ($19.0) million and net mark-to-market gains on derivative hedge contracts of $0.2 million.
| • | Interest expense for the third quarter of 2003 was $13.8 million, up 28% from $10.8 million for the third quarter of 2002. The increase is primarily attributable to the debt issued in February 2003. |
Balance Sheet
Highlights
| • | Total assets as of September 30, 2003 were $16.34 billion, up 6% from total assets of $15.36 billion at December 31, 2002. This increase was due primarily to funds generated from business written during the period and proceeds from debt issuance. As of September 30, 2003, stockholders’ equity was $4.09 billion, a 13% increase from year-end 2002 stockholders’ equity of $3.63 billion. The increase stemmed primarily from net income generated during the period. |
Cash Dividend Declared
At its October 2003 Board meeting, the Board of Directors of Ambac Financial Group, Inc. approved the regular quarterly cash dividend of $0.11 per share of common stock. The dividend is payable on December 3, 2003 to stockholders of record on November 10, 2003.
Forward-Looking Statements
This release, in particular the Chairman’s remarks, contains statements about our future results that may be considered “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and the current economic environment. We caution you that these statements are not guarantees of future performance. They involve a number of risks and uncertainties that are difficult to predict. Our actual results could differ materially from those expressed or implied in the forward-looking statements. Among the factors that could cause actual results to differ materially are (1) changes in the economic, credit, or interest rate environment in the United States and abroad; (2) the level of activity within the national and worldwide debt markets; (3) competitive conditions and pricing levels; (4) legislative and regulatory developments; (5) changes in tax laws; (6) the policies and actions of the United States and other governments; and (7) other risks and uncertainties that have not been identified at this time. We undertake no obligation to publicly correct or update any forward-looking statement if we later become aware that it is not likely to be achieved, except as required by law.
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Ambac Third Quarter 2003 Earnings/7
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Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac’s principal operating subsidiary, Ambac Assurance Corporation, a leading guarantor of public finance and structured finance obligations, has earned triple-A ratings, the highest ratings available from Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services, Fitch, Inc. and Rating and Investment Information, Inc. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK).
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Footnotes
| (1) | Adjusted gross premiums written, which is not promulgated under GAAP, is used by management, equity analysts and investors to measure Ambac’s financial guarantee business production. Adjusted gross premiums written, which Ambac reports as analytical data, are defined as gross (direct and assumed) up-front premiums written plus the present value of estimated installment premiums written on insurance policies and structured credit derivatives issued in the period. The definition of adjusted gross premiums written used by Ambac may differ from definitions of adjusted gross premiums written used by other public holding companies of financial guarantors. The following table reconciles adjusted gross premiums written to gross premiums written calculated in accordance with GAAP: |
$-millions | Third Quarter | Nine Months | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Adjusted gross premiums written | $ | 282 | $ | 306 | $ | 1,060 | $ | 794 | ||||||||
Present value of estimated installment premiums written on insurance policies and structured credit derivatives issued in the period | (99 | ) | (183 | ) | (491 | ) | (487 | ) | ||||||||
Gross up-front premiums written | $ | 183 | $ | 123 | $ | 569 | $ | 307 | ||||||||
Gross installment premiums written on insurance policies | 97 | 82 | 295 | 243 | ||||||||||||
Gross premiums written | $ | 280 | $ | 205 | $ | 864 | $ | 550 | ||||||||
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Ambac Financial Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Periods Ended September 30, 2003 and 2002
(Dollars in Thousands Except Share Data)
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||
Revenues: | ||||||||||||||||
Financial Guarantee: | ||||||||||||||||
Gross premiums written | $ | 280,330 | $ | 205,110 | $ | 863,554 | $ | 550,154 | ||||||||
Ceded premiums written | (17,451 | ) | (26,854 | ) | (90,932 | ) | (71,108 | ) | ||||||||
Net premiums written | $ | 262,879 | $ | 178,256 | $ | 772,622 | $ | 479,046 | ||||||||
Net premiums earned | $ | 159,626 | $ | 122,396 | $ | 446,370 | $ | 339,680 | ||||||||
Other credit enhancement fees | 11,936 | 7,307 | 34,594 | 20,171 | ||||||||||||
Net premiums earned and other credit enhancement fees | 171,562 | 129,703 | 480,964 | 359,851 | ||||||||||||
Net investment income | 80,890 | 75,895 | 237,377 | 222,035 | ||||||||||||
Net realized investment gains | 7,037 | 5,408 | 33,757 | 8,380 | ||||||||||||
Net mark-to-market losses on credit derivative contracts | (4,053 | ) | (6,908 | ) | (6,227 | ) | (18,961 | ) | ||||||||
Other income | 949 | 472 | 3,705 | 2,586 | ||||||||||||
Financial Services: | ||||||||||||||||
Interest from investment and payment agreements | 47,227 | 65,376 | 161,699 | 192,985 | ||||||||||||
Other revenue | 19,995 | 6,348 | 22,333 | 21,795 | ||||||||||||
Net realized investment (losses) gains | (1,161 | ) | 1,399 | 3,788 | 1,983 | |||||||||||
Net mark-to-market gains on derivative hedge contracts | 11 | 3 | 739 | 185 | ||||||||||||
Corporate: | ||||||||||||||||
Net investment income | 1,977 | 974 | 5,016 | 2,659 | ||||||||||||
Net realized investment losses | — | (127 | ) | — | (571 | ) | ||||||||||
Total revenues | 324,434 | 278,543 | 943,151 | 792,927 | ||||||||||||
Expenses: | ||||||||||||||||
Financial Guarantee: | ||||||||||||||||
Losses and loss adjustment expenses | 15,900 | 6,100 | 36,600 | 17,700 | ||||||||||||
Underwriting and operating expenses | 23,795 | 18,467 | 66,974 | 55,631 | ||||||||||||
Financial Services: | ||||||||||||||||
Interest from investment and payment agreements | 45,890 | 58,142 | 149,482 | 173,641 | ||||||||||||
Other expenses | 6,780 | 5,380 | 19,172 | 16,215 | ||||||||||||
Interest | 13,750 | 10,774 | 40,741 | 32,256 | ||||||||||||
Corporate | 1,938 | 1,884 | 12,438 | 5,365 | ||||||||||||
Total expenses | 108,053 | 100,747 | 325,407 | 300,808 | ||||||||||||
Income before income taxes | 216,381 | 177,796 | 617,744 | 492,119 | ||||||||||||
Provision for income taxes | 56,712 | 46,105 | 157,581 | 123,715 | ||||||||||||
Net income | $ | 159,669 | $ | 131,691 | $ | 460,163 | $ | 368,404 | ||||||||
Net income per share: | ||||||||||||||||
Basic | $ | 1.50 | $ | 1.24 | $ | 4.32 | $ | 3.48 | ||||||||
Diluted | $ | 1.45 | $ | 1.21 | $ | 4.21 | $ | 3.38 | ||||||||
Weighted average number of common shares outstanding: | ||||||||||||||||
Basic | 106,779,009 | 105,865,884 | 106,418,669 | 105,940,661 | ||||||||||||
Diluted | 109,944,141 | 108,959,876 | 109,280,533 | 109,148,469 | ||||||||||||
Ambac Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, 2003 and December 31, 2002
(Dollars in Thousands Except Share Data)
| September 30, 2003 | December 31, 2002 | ||||||
| (Unaudited) | |||||||
Assets | |||||||
Investments: | |||||||
Fixed income securities, at fair value | $ | 12,827,430 | $ | 11,597,623 | |||
Fixed income securities pledged as collateral, at fair value | 594,499 | 543,572 | |||||
Short-term investments, at cost (approximates fair value) | 164,852 | 395,761 | |||||
Other, at fair value (cost of $4,523 in 2003 and $3,518 in 2002) | 3,967 | 2,354 | |||||
Total investments | 13,590,748 | 12,539,310 | |||||
Cash | 37,001 | 25,816 | |||||
Securities purchased under agreements to resell | 105,705 | 260,818 | |||||
Receivable for investment agreements | — | 169 | |||||
Receivable for securities sold | 96,925 | 6,936 | |||||
Investment income due and accrued | 140,456 | 142,406 | |||||
Reinsurance recoverable on paid and unpaid losses | 3,575 | 4,842 | |||||
Prepaid reinsurance | 310,418 | 296,126 | |||||
Deferred acquisition costs | 179,841 | 174,055 | |||||
Loans | 837,226 | 843,809 | |||||
Derivative product assets | 998,562 | 1,010,081 | |||||
Other assets | 43,978 | 51,170 | |||||
Total assets | $ | 16,344,435 | $ | 15,355,538 | |||
Liabilities and Stockholders’ Equity | |||||||
Liabilities: | |||||||
Unearned premiums | $ | 2,470,122 | $ | 2,128,847 | |||
Losses and loss adjustment expense reserve | 187,452 | 172,137 | |||||
Ceded reinsurance balances payable | 8,989 | 16,930 | |||||
Obligations under investment and payment agreements | 6,369,755 | 6,434,497 | |||||
Obligations under investment repurchase agreements | 606,110 | 848,358 | |||||
Securities sold under agreement to repurchase | 144,600 | 132,235 | |||||
Deferred income taxes | 189,079 | 185,641 | |||||
Current income taxes | 40,663 | 44,807 | |||||
Debentures | 791,759 | 616,715 | |||||
Accrued interest payable | 64,547 | 81,252 | |||||
Derivative product liabilities | 839,304 | 836,146 | |||||
Other liabilities | 163,184 | 154,640 | |||||
Payable for securities purchased | 379,584 | 78,154 | |||||
Total liabilities | 12,255,148 | 11,730,359 | |||||
Stockholders’ equity: | |||||||
Preferred stock | — | — | |||||
Common stock | 1,069 | 1,062 | |||||
Additional paid-in capital | 581,083 | 550,289 | |||||
Accumulated other comprehensive income | 271,493 | 265,427 | |||||
Retained earnings | 3,235,642 | 2,820,281 | |||||
Common stock held in treasury at cost | — | (11,880 | ) | ||||
Total stockholders’ equity | 4,089,287 | 3,625,179 | |||||
Total liabilities and stockholders’ equity | $ | 16,344,435 | $ | 15,355,538 | |||
Number of shares outstanding (net of treasury shares) | 106,805,585 | 105,990,591 | |||||
Book value per share | $ | 38.29 | $ | 34.20 | |||
Ambac Financial Group, Inc. and Subsidiaries
Supplemental Analytical Data: Components of Adjusted Book Value Per Share(1)
September 30, 2003 and December 31, 2002
| September 30, 2003 | December 31, 2002 | |||||||
Book value | $ | 38.29 | $ | 34.20 | ||||
After-tax value of: | ||||||||
Net unearned premium reserve less deferred acquisition costs | 12.05 | 10.17 | ||||||
Present value of future installment premiums | 8.55 | 8.23 | ||||||
Unrealized loss on investment agreement liabilities | (0.93 | ) | (2.76 | ) | ||||
Adjusted book value | $ | 57.96 | $ | 49.84 | ||||
| (1) | Adjusted book value (ABV), which is not promulgated in accordance with accounting principles generally accepted in the United States of America (GAAP), is used by management, equity analysts and investors as a measurement of the Company’s intrinsic value with no benefit given for ongoing business activity. Management derives ABV by beginning with stockholders’ equity (book value) and adding or subtracting the after-tax value of: the net unearned premium reserve; deferred acquisition costs; the present value of estimated net future installment premiums; and the unrealized gain or loss on investment agreement liabilities. These adjustments will not be realized until future periods and may differ materially from the amounts used in determining ABV. The definition of ABV used by the Company may differ from definitions of ABV used by other public holding companies of financial guarantee insurers. |
Ambac Assurance Corporation
Statutory Accounting, Financial and Capital Information(1)
September 30, 2003 and December 31, 2002
(Dollars in Thousands, Except Ratios)
September 30, 2003 | December 31, 2002 | |||||
Capital and Claim-Paying Resources: | ||||||
Contingency reserve | $ | 1,723,685 | $ | 1,508,898 | ||
Capital and surplus | 2,506,890 | 2,227,438 | ||||
Qualified statutory capital | 4,230,575 | 3,736,336 | ||||
Unearned premiums | 2,556,270 | 2,209,514 | ||||
Losses and loss adjustment expenses | 53,634 | 48,992 | ||||
Policyholders’ reserves | 6,840,479 | 5,994,842 | ||||
Third party capital support(2) | 800,000 | 800,000 | ||||
Present value of future installment premiums(3) | 1,404,305 | 1,342,246 | ||||
Total claims paying resources | $ | 9,044,784 | $ | 8,137,088 | ||
Net financial guarantees in force | $ | 608,493,952 | $ | 557,422,197 | ||
Capital ratio (4) | 144:1 | 149:1 | ||||
Financial resources ratio(5) | 67:1 | 69:1 | ||||
| (1) | Statutory accounting information for Ambac Assurance Corporation and Connie Lee Insurance Company are combined for purposes of this schedule. Qualified statutory capital for Ambac Assurance, on a stand alone basis, as of September 30, 2003 and December 31, 2002 is $4.194 billion and $3.703 billion, respectively. |
| (2) | Third party capital support at September 30, 2003 represents pre-funded capital which provides for the unconditional ability to issue up to $800 million of preferred stock to high quality asset-backed investment vehicles. |
| (3) | Includes the present value of future credit enhancement fees from structured credit derivatives. |
| (4) | Capital ratio is net financial guarantees in force divided by qualified statutory capital. |
| (5) | Financial resources ratio is net financial guarantees in force divided by total claims paying resources. |
Ambac Assurance Corporation and Subsidiaries
Capitalization Table—GAAP
September 30, 2003 and December 31, 2002
(Dollars in Millions)
The following table sets forth Ambac Assurance’s consolidated capitalization as of September 30, 2003 and December 31, 2002, respectively, on the basis of accounting principles generally accepted in the United States of America.
September 30, 2003 | December 31, 2002 | |||||
| (unaudited) | ||||||
Unearned premiums | $ | 2,479 | $ | 2,137 | ||
Notes payable to affiliate | 37 | 111 | ||||
Other liabilities | 1,935 | 1,865 | ||||
Total liabilities | 4,451 | 4,113 | ||||
Stockholder’s equity: | ||||||
Common stock | 82 | 82 | ||||
Additional paid-in capital | 1,005 | 920 | ||||
Accumulated other comprehensive income | 238 | 231 | ||||
Retained earnings | 3,267 | 2,849 | ||||
Total stockholder’s equity | 4,592 | 4,082 | ||||
Total liabilities and stockholder’s equity | $ | 9,043 | $ | 8,195 | ||
