Exhibit 99.06
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 FINANCIAL GROUP, INC. ANNOUNCES THIRD QUARTER NET LOSS OF ($360.6) MILLION Includes Previously Announced $743 Million Unrealized Mark-to-market Loss on Credit Derivative Portfolio Third Quarter Net Loss Per Diluted Share of ($3.51) Third Quarter Credit Enhancement Production(1)$431.1 million, up 99% |
NEW YORK, October 24, 2007—Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced a third quarter 2007 net loss of ($360.6) million, or ($3.51) per diluted share. This compares to third quarter 2006 net income of $213.5 million, or net income per diluted share of $1.98. The decrease is due to the previously announced unrealized loss on credit derivative exposures amounting to ($743.4) million, or ($5.29) per diluted share in the third quarter 2007. The third quarter 2007 unrealized mark-to-market loss on credit derivative exposures was discussed in a press release dated October 10, 2007, and is primarily the result of unfavorable market pricing of collateralized debt obligations. As further described below, net mark-to-market losses on credit derivatives are excluded from the earnings measures used by research analysts.
Net Income/(Loss) Per Diluted Share
Net income/(loss) and net income/(loss) per diluted share are computed in conformity with U.S. generally accepted accounting principles (GAAP). However, many research analysts and investors do not limit their analysis of our earnings to a strictly GAAP basis. In order to assist investors in their understanding of quarterly results, Ambac provides other information.
Earnings measures reported by research analysts exclude the net income impact of net gains and losses from sales of investment securities and unrealized mark-to-market gains and losses on credit, total return and non-trading derivative contracts (collectively “net security gains and losses”) and certain other items. Certain research analysts and investors further exclude the net income impact of accelerated premiums earned on guaranteed obligations that have been refunded and other accelerated earnings (“accelerated earnings”). During the third quarter 2007, net security gains and
Ambac Third Quarter 2007 Earnings/2
losses had the effect of decreasing net income by ($553.5) million, or ($5.39) on a per diluted share basis. Accelerated earnings had the effect of increasing net income by $9.6 million, or $0.10 per diluted share during the quarter. Table I provides third quarter and nine-month comparisons of earnings for 2007 and 2006.
Table I
Earnings Per Diluted Share
| | | | | | | | | | | | | | | | | | | | | | |
| | | Third Quarter | | | Nine Months | |
| | | 2007 | | | 2006 | | | % Change | | | 2007 | | | 2006 | | | % Change | |
Net (loss)/ income per diluted share | | $ | (3.51 | ) | | $ | 1.98 | | | n.m. | | | $ | 0.25 | | | $ | 6.26 | | | - 96 | % |
Effect of net security losses/(gains) | | $ | 5.39 | | | $ | (0.06 | ) | | | | | $ | 5.63 | | | $ | (0.44 | ) | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Operating earnings (a)(b) | | $ | 1.88 | | | $ | 1.92 | | | - 2 | % | | $ | 5.88 | | | $ | 5.82 | | | +1 | % |
Effect of Accelerated earnings | | $ | (0.10 | ) | | $ | (0.13 | ) | | | | | $ | (0.57 | ) | | $ | (0.46 | ) | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Core earnings(b) | | $ | 1.78 | | | $ | 1.79 | | | - 1 | % | | $ | 5.31 | | | $ | 5.36 | | | - 1 | % |
| | | | | | | | | | | | | | | | | | | | | | |
| | (a) | Consensus earnings that are reported by earnings estimate services, such as First Call, are on this basis. |
| | (b) | Operating and core earnings are non-GAAP measures. See footnote 2, below. |
Commenting on the overall results, Ambac Chairman and Chief Executive Officer, Robert J. Genader, noted, “We have observed improved overall market conditions in most asset classes of our core financial guaranty product, despite the recent turmoil in the structured finance markets. Business production during the quarter was quite robust, reflective of both a strong pipeline and better overall pricing in the current market.” Mr. Genader added, “With regard to the sizable mark-to-market adjustment recorded in the quarter, it is important to note that Ambac’s credit derivative contracts, like our insurance policies, are not exposed to the type of liquidity risk that is typically embedded in standard derivative contracts.”
Revenues
Highlights
• | | Credit enhancement production(1) in the third quarter of 2007 was $431.1 million, up 99% from Ambac’s production of $216.2 million reported in the third quarter of 2006. |
Credit enhancement production for the nine months of 2007 of $1,109.1 million was 13% higher than credit enhancement production of $980.7 million in the same period of 2006.
Table II provides the third quarter and nine-month comparisons of credit enhancement production by market segment for 2007 and 2006.
— MORE—
Ambac Third Quarter 2007 Earnings/3
Table II
Credit Enhancement Production(1)
| | | | | | | | | | | | | | | | | | |
$-millions | | Third Quarter | | | Nine Months | |
| | 2007 | | 2006 | | % Change | | | 2007 | | 2006 | | % Change | |
Public Finance | | $ | 151.3 | | $ | 89.8 | | +68 | % | | $ | 380.5 | | $ | 321.0 | | +19 | % |
| | | | | | |
Structured Finance | | | 108.2 | | | 78.6 | | +38 | % | | | 402.6 | | | 382.2 | | +5 | % |
| | | | | | |
International | | | 171.6 | | | 47.8 | | +259 | % | | | 326.0 | | | 277.5 | | +17 | % |
| | | | | | | | | | | | | | | | | | |
Total | | $ | 431.1 | | $ | 216.2 | | +99 | % | | $ | 1,109.1 | | $ | 980.7 | | +13 | % |
| | | | | | | | | | | | | | | | | | |
In public finance, Ambac’s premium production increased even though overall market issuance was approximately flat, quarter on quarter. The increased production was primarily the result of a large sales tax-backed transaction in Puerto Rico and strong writings of structured real estate during the quarter. Ambac’s market share of the insured market was approximately 28%, up from 23% in the comparable prior year quarter.
U.S. structured finance credit enhancement production increased from the prior year, driven by strong writings of student loan securitizations and utilities deals during the quarter. The structured finance markets experienced lower volumes during the quarter, impacted by the severe disruption caused by concern over subprime mortgages. However, interest in our financial guaranty product has increased, credit spreads have widened substantially across the structured finance arena, and pricing has generally improved. During the third quarter 2007, Ambac did not write any collateralized debt obligations of asset-backed securities (CDOs of ABS) or subprime residential mortgage-backed securities.
International credit enhancement production increased significantly driven by the large Eurotunnel transaction and several other significant transactions across a variety of geographic locations. During the quarter Ambac closed deals in seven different countries including three each in the U.K. and Australia.
| • | | Net premiums written in the third quarter of 2007 of $251.5 million were 35% higher than net premiums written of $186.0 million in the third quarter of 2006. The increase is primarily a result of higher premiums collected up front in the public finance sector. Ceded premiums as a percentage of gross premiums written were 12.2% and 12.4% for the third quarter of 2007 and 2006, respectively. |
Net premiums written for the nine months of 2007 of $704.6 million were 5% higher than net premiums written of $669.6 million in the same period of 2006. Excluding the impact of $37.0 million of return premiums from reinsurance cancellations in the first quarter of 2006, net premiums written are up 11%.
— MORE—
Ambac Third Quarter 2007 Earnings/4
| • | | Net premiums earned and other credit enhancement feesfor the third quarter of 2007 were $214.8 million, flat from the $214.6 million earned in the third quarter of 2006. Higher normal earned premiums and other credit enhancement fees in the third quarter 2007 relative to the comparable prior quarter were offset by lower accelerated premiums from refundings and policy termination fees in the current quarter. |
Net premiums earned include accelerated premiums, which result from refundings, calls and other accelerations recognized during the quarter. Accelerated premiums were $16.4 million in the third quarter of 2007, down 33% from $24.5 million in accelerated premiums in the third quarter of 2006. During the third quarter 2007 and 2006, approximately 88% and 37%, respectively, of the accelerated premiums related to U.S. public finance transactions and the remainder related to U.S. structured finance and international transactions.
Net premiums earned and other credit enhancement fees for the nine months of 2007 were $684.7 million, which represented a 6% increase from the $648.0 million earned in the first nine months of 2006. Accelerated premiums were $99.2 million for the nine month period of 2007, up 14% from $86.8 million in accelerated premiums for the comparable period of 2006. Accelerated premiums in 2006 include $7.7 million related to the impact of reinsurance cancellations occurring in the first quarter of 2006.
A breakdown of net premiums earned and other credit enhancement fees by market sector for 2007 and 2006 are included in Table III. Normal net premiums earned exclude accelerated premiums that result from refundings, calls and other accelerations.
Table III
Net Premiums Earned and Other Credit Enhancement Fees
| | | | | | | | | | | | | | | | | | |
$-millions | | Third Quarter | | | Nine Months | |
| | 2007 | | 2006 | | % Change | | | 2007 | | 2006 | | % Change | |
Public Finance | | $ | 59.0 | | $ | 58.8 | | 0 | % | | $ | 176.5 | | $ | 172.8 | | +2 | % |
| | | | | | |
Structured Finance | | | 86.8 | | | 80.3 | | +8 | % | | | 254.5 | | | 235.1 | | +8 | % |
| | | | | | |
International | | | 52.6 | | | 51.0 | | +3 | % | | | 154.5 | | | 153.3 | | +1 | % |
| | | | | | | | | | | | | | | | | | |
Total Normal Premiums/Fees | | | 198.4 | | | 190.1 | | +4 | % | | | 585.5 | | | 561.2 | | +4 | % |
| | | | | | |
Accelerated Premiums | | | 16.4 | | | 24.5 | | - 33 | % | | | 99.2 | | | 86.8 | | +14 | % |
| | | | | | | | | | | | | | | | | | |
Total | | $ | 214.8 | | $ | 214.6 | | 0 | % | | $ | 684.7 | | $ | 648.0 | | +6 | % |
| | | | | | | | | | | | | | | | | | |
Public finance earned premiums, before accelerations, were flat quarter on quarter. Earned premium growth in this sector has been negatively impacted by competitive pricing, the mix of business underwritten in recent periods, and the recent high level of refunding activity in Ambac’s public finance book.
Structured finance earned premiums and other credit enhancement fees grew 8%. The earned premium growth rate in structured finance has been driven by strong premium production in asset classes such as pooled debt obligations and commercial asset-backed securities over the past several quarters.
International earned premiums and other credit enhancement fees increased 3%. The increase is driven by improving deal flow.
— MORE—
Ambac Third Quarter 2007 Earnings/5
| • | | Net investment income for the third quarter of 2007 was $115.8 million, representing an increase of 8% from $107.2 million in the comparable period of 2006. This increase was due primarily to growth in the investment portfolio driven by the ongoing collection of financial guarantee premiums and fees. |
Net investment income for the nine months of 2007 was $341.1 million, representing an increase of 9% from $313.3 million in the comparable period of 2006, primarily as a result of the reason provided above.
| • | | Financial services revenues.The financial services segment is comprised of the investment agreement business and the derivative products business. Gross interest income less gross interest expense from investment and payment agreements plus results from the derivative products business, excluding net realized investment gains and losses and unrealized gains and losses on total return swaps and non-trading derivative contracts, was $9.8 million in the third quarter of 2007, down 26% from $13.3 million in the third quarter of 2006. The decrease was primarily due to lower revenue from the interest rate swap, total return swap and investment agreement businesses in the third quarter 2007. |
Financial services revenueswere $29.7 million for the first nine months of 2007, down 17% from the $35.8 million of revenues in the first nine months of 2006 primarily due to the reason provided above.
Expenses
Highlights
| • | | Financial guarantee expensesof $53.7 million for the third quarter of 2007 increased 95% from $27.6 million of expenses for the third quarter of 2006. Financial guarantee loss and loss expenses were $19.1 million in the third quarter of 2007, up from ($2.5) million in the third quarter of 2006. See “Loss Reserve Activity,” below, for additional information on losses. Gross underwriting expenses of $50.6 million in the third quarter 2007 increased 11% from $45.7 million in the comparable prior quarter primarily due to increased premium taxes driven by higher premium writings. |
Financial guarantee expensesof $152.0 million for the first nine months of 2007 increased 38% from $110.3 million of expenses for the same period of 2006. The increase results primarily from increased loss and loss expenses which are up $37.2 million, period over period.
Loss Reserve Activity
| • | | Case basis loss reserves (loss reserves for exposures that have defaulted) increased $59.8 million during the third quarter of 2007 from $47.3 million at June 30, 2007 to $107.1 million at September 30, 2007. The increased case reserves relate primarily to two RMBS transactions that are underperforming original expectations. Total net claim receipts during the quarter amounted to $3.7 million. |
— MORE—
Ambac Third Quarter 2007 Earnings/6
| • | | Active credit reserves (“ACR”) are established for probable and estimable losses due to credit deterioration on certain adversely classified insured transactions. The ACR decreased by $37.0 million during the quarter, from $203.7 million at June 30, 2007 to $166.7 million at September 30, 2007. The reserve decline was driven by net favorable credit activity, primarily within the public finance portfolio, partially offset by increased reserves within the RMBS sector of the structured finance portfolio. |
Other Items
| • | | Total net securities gains/(losses)for the third quarter of 2007 were ($757.2) million, consisting of net realized gains on investment securities of $4.2 million, net mark-to-market losses on credit and total return derivatives of ($756.3) million and net mark-to-market losses on non-trading derivative contracts of ($5.1) million. During the quarter a net mark-to-market loss amounting to ($743.4) million was recorded related to contracts executed in credit default format, primarily in our collateralized debt obligation exposures. The negative mark-to-market is driven by dramatically lower prices in certain structured finance asset classes. The lower prices were driven by uncertainty regarding the ultimate outcome of subprime losses. Reduced demand for certain structured asset classes, a lack of liquidity in the markets, forced selling by structured and/or leveraged investment vehicles, all combined to exacerbate pricing declines across the structured debt capital markets. |
For the third quarter of 2006, net securities gains/(losses) were $9.9 million, consisting of net realized gains on investment securities of $7.9 million, net mark-to-market gains on credit and total return derivatives of $2.1 million and net mark-to-market losses on non-trading derivative contracts of ($0.1) million.
Total net securities gains/(losses)for the first nine months of 2007 were ($806.0) million, consisting of net realized gains on investment securities of $12.0 million, net mark-to-market losses on credit and total return derivatives of ($816.0) million and net mark-to-market losses on non-trading derivative contracts of ($2.0) million. For the first nine months of 2006 net securities gains were $74.4 million, consisting of net realized gains on investment securities of $57.5 million, net mark-to-market gains on credit and total return derivatives of $16.5 million and net mark-to-market gains on non-trading derivative contracts of $0.4 million. Approximately $51 million of the 2006 net realized gains on investment securities related to cash recoveries received during the year related to a security in the investment agreement portfolio that had been written down in previous years.
Balance Sheet
Highlights
| • | | Total assets as of September 30, 2007 were $21.97 billion, up 8% from total assets of $20.27 billion at December 31, 2006. The increase was primarily driven by cash generated from operations during the period, partially offset by a decrease in unrealized gains in the investment portfolio due to a rise in long-term interest rates. |
— MORE—
Ambac Third Quarter 2007 Earnings/7
| • | | As of September 30, 2007, stockholders’ equity was $5.65 billion, a 9% decrease from year-end 2006 stockholders’ equity of $6.18 billion. The decrease was primarily the result of the $400 million share buyback earlier in the year and lower Accumulated Other Comprehensive Income driven by higher long-term interest rates. |
Cash Dividend Declared
At its October 2007 Board meeting, the Board of Directors approved the regular quarterly cash dividend of $0.21 per share of common stock. The dividend is payable on December 5, 2007 to stockholders of record on November 12, 2007.
Forward-Looking Statements
This release, in particular the remarks of Mr. Genader, contains statements about our future results that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We caution you that these statements are not guarantees of future performance. There are a variety of factors, many of which are beyond Ambac’s control, which affect the operations, performance, business strategy and results and could cause its actual results to differ materially from the expectations and objectives expressed in any forward-looking statements. These factors include, but are not limited to: (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; (7) changes in capital requirements or other criteria of rating agencies; (8) changes in accounting principles or practices that may impact the Company’s reported financial results; (9) the amount of reserves established for losses and loss expenses; (10) default of one or more of the Company’s reinsurers; (11) market spreads and pricing on insured pooled debt obligations and other derivative products insured or issued by the Company; (12) prepayment speeds on insured asset-backed securities and other factors that may influence the amount of installment premiums paid to the Company; and (13) other additional factors described in the Risk Factors section of Ambac’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and also disclosed from time to time in its subsequent reports on Form 10-Q and Form 8-K, which are available on the Ambac website atwww.ambac.com and at the SEC’s website, www.sec.gov. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements which speak only as of the date they are made. Ambac does not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statements are made. The reader should, however, consult any further disclosures Ambac may make in its future filings of its reports on Form 10-K, Form 10-Q and Form 8-K.
— MORE—
Ambac Third Quarter 2007 Earnings/8
*******************
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 and Fitch, Inc. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK).
********************
Footnotes
| (1) | Credit enhancement production, a non-GAAP measure, is used by management, equity analysts and investors as an indication of new business production in the period. Credit enhancement production, which Ambac reports as analytical data, is defined as gross (direct and assumed) up-front premiums plus the present value of estimated installment premiums on insurance policies and structured credit derivatives issued in the period. The discount rate used to measure the present value of estimated installment premiums was 5.8% and 6.0% during the third quarter of 2007 and 2006, respectively. The definition of credit enhancement production used by Ambac may differ from definitions of credit enhancement production (or similar terms) used by other public holding companies of financial guarantors. The following table reconciles credit enhancement production to gross premiums written calculated in accordance with GAAP: |
| | | | | | | | | | | | | | | | |
$-millions | | Third Quarter | | | Nine Months | |
| | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Credit enhancement production | | $ | 431 | | | $ | 216 | | | $ | 1,109 | | | $ | 981 | |
| | | | |
Present value of estimated installment premiums written on insurance policies and structured credit derivatives issued in the period | | | (282 | ) | | | (149 | ) | | | (722 | ) | | | (643 | ) |
| | | | | | | | | | | | | | | | |
Gross up-front premiums written | | $ | 149 | | | $ | 67 | | | $ | 387 | | | $ | 338 | |
| | | | |
Gross installment premiums written on insurance policies | | | 138 | | | | 145 | | | | 411 | | | | 407 | |
| | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 287 | | | $ | 212 | | | $ | 798 | | | $ | 745 | |
| | | | | | | | | | | | | | | | |
— MORE—
Ambac Third Quarter 2007 Earnings/9
| (2) | Operating earnings and core earnings are not substitutes for net income computed in accordance with GAAP, but are useful measures of performance used by management, equity analysts and investors because they allow more consistent period-to-period comparison of our earnings without the effects of net securities gains/losses and accelerated earnings. Net securities gains/losses excluded from operating earnings consists of investment portfolio realized gains and losses, mark-to-market gains and losses on credit, total return and non-trading derivative contracts and certain other items. Core earnings further exclude the impact of refundings, calls and other accelerations. The definitions of operating earnings and core earnings used by Ambac may differ from definitions of operating earnings and core earnings used by other public holding companies of financial guarantors. |
— MORE—
Ambac Financial Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Three and Nine Months Ended September 30, 2007 and 2006
(Dollars in Thousands Except Share Data)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2007 | | | 2006 | | | 2007 | | | 2006 | |
Revenues: | | | | | | | | | | | | | | | | |
Financial Guarantee: | | | | | | | | | | | | | | | | |
Gross premiums written | | $ | 286,585 | | | $ | 212,335 | | | $ | 797,636 | | | $ | 744,893 | |
Ceded premiums written | | | (35,095 | ) | | | (26,351 | ) | | | (93,016 | ) | | | (75,341 | ) |
| | | | | | | | | | | | | | | | |
Net premiums written | | $ | 251,490 | | | $ | 185,984 | | | $ | 704,620 | | | $ | 669,552 | |
| | | | | | | | | | | | | | | | |
Net premiums earned | | $ | 194,795 | | | $ | 199,312 | | | $ | 631,820 | | | $ | 604,373 | |
Other credit enhancement fees | | | 20,035 | | | | 15,278 | | | | 52,920 | | | | 43,621 | |
| | | | | | | | | | | | | | | | |
Net premiums earned and other credit enhancement fees | | | 214,830 | | | | 214,590 | | | | 684,740 | | | | 647,994 | |
Net investment income | | | 115,825 | | | | 107,156 | | | | 341,079 | | | | 313,345 | |
Net realized investment gains | | | 3,965 | | | | 1,329 | | | | 5,286 | | | | 2,842 | |
Net mark-to-market (losses) gains on credit derivative contracts | | | (743,379 | ) | | | 2,572 | | | | (805,370 | ) | | | 9,906 | |
Other (loss) income | | | (1,291 | ) | | | 2,952 | | | | 7,214 | | | | 35,367 | |
Financial Services: | | | | | | | | | | | | | | | | |
Investment income | | | 120,603 | | | | 107,501 | | | | 334,476 | | | | 287,484 | |
Derivative products | | | 1,216 | | | | 2,942 | | | | 7,286 | | | | 10,949 | |
Net realized investment gains | | | 198 | | | | 6,636 | | | | 6,669 | | | | 53,867 | |
Net mark-to-market (losses) gains on total return swap contracts | | | (12,856 | ) | | | (501 | ) | | | (10,623 | ) | | | 6,540 | |
Net mark-to-market losses on non-trading derivatives | | | (1,320 | ) | | | (1,175 | ) | | | (1,479 | ) | | | (1,237 | ) |
Corporate: | | | | | | | | | | | | | | | | |
Net investment income | | | 1,225 | | | | 3,545 | | | | 4,147 | | | | 9,941 | |
Net realized investment gains | | | — | | | | — | | | | — | | | | 791 | |
| | | | | | | | | | | | | | | | |
Total revenues | | | (300,984 | ) | | | 447,547 | | | | 573,425 | | | | 1,377,789 | |
| | | | | | | | | | | | | | | | |
Expenses: | | | | | | | | | | | | | | | | |
Financial Guarantee: | | | | | | | | | | | | | | | | |
Loss and loss expenses | | | 19,082 | | | | (2,543 | ) | | | 47,600 | | | | 10,406 | |
Underwriting and operating expenses | | | 34,576 | | | | 30,186 | | | | 104,390 | | | | 99,909 | |
Financial Services: | | | | | | | | | | | | | | | | |
Interest on investment and payment agreements | | | 112,000 | | | | 97,126 | | | | 312,082 | | | | 262,624 | |
Operating expenses | | | 3,164 | | | | 3,119 | | | | 9,569 | | | | 9,994 | |
Interest | | | 22,232 | | | | 19,474 | | | | 63,612 | | | | 58,424 | |
Corporate | | | 2,857 | | | | 3,036 | | | | 9,777 | | | | 10,679 | |
| | | | | | | | | | | | | | | | |
Total expenses | | | 193,911 | | | | 150,398 | | | | 547,030 | | | | 452,036 | |
| | | | | | | | | | | | | | | | |
(Loss) income before income taxes | | | (494,895 | ) | | | 297,149 | | | | 26,395 | | | | 925,753 | |
Provision for income taxes | | | (134,282 | ) | | | 83,626 | | | | 628 | | | | 252,520 | |
| | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (360,613 | ) | | $ | 213,523 | | | $ | 25,767 | | | $ | 673,233 | |
| | | | | | | | | | | | | | | | |
Net (loss) income per share | | $ | (3.53 | ) | | $ | 2.00 | | | $ | 0.25 | | | $ | 6.32 | |
| | | | | | | | | | | | | | | | |
Net (loss) income per diluted share | | $ | (3.51 | ) | | $ | 1.98 | | | $ | 0.25 | | | $ | 6.26 | |
| | | | | | | | | | | | | | | | |
Weighted average number of common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 102,297,811 | | | | 106,725,567 | | | | 103,171,675 | | | | 106,549,856 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 102,810,560 | | | | 107,737,122 | | | | 103,937,780 | | | | 107,473,723 | |
| | | | | | | | | | | | | | | | |
Ambac Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, 2007 and December 31, 2006
(Dollars in Thousands Except Share Data)
| | | | | | | | |
| | | September 30, 2007 | | | December 31, 2006 | |
| | | (unaudited) | | | | |
Assets | | | | | | | | |
| | |
Investments: | | | | | | | | |
Fixed income securities, at fair value (amortized cost of $17,899,842 in 2007 and $16,484,257 in 2006) | | $ | 17,984,060 | | | $ | 16,800,338 | |
Fixed income securities pledged as collateral, at fair value (amortized cost of $346,770 in 2007 and $311,546 in 2006) | | | 360,799 | | | | 307,101 | |
Short-term investments, at cost (approximates fair value) | | | 686,133 | | | | 311,759 | |
Other (cost of $13,482 in 2007 and $13,427 in 2006) | | | 14,787 | | | | 14,391 | |
| | | | | | | | |
Total investments | | | 19,045,779 | | | | 17,433,589 | |
| | |
Cash | | | 26,814 | | | | 31,868 | |
Securities purchased under agreements to resell | | | — | | | | 273,000 | |
Receivable for securities sold | | | 97,816 | | | | 12,857 | |
Investment income due and accrued | | | 175,215 | | | | 193,199 | |
Reinsurance recoverable on paid and unpaid losses | | | 4,968 | | | | 3,921 | |
Prepaid reinsurance | | | 332,373 | | | | 315,498 | |
Deferred taxes | | | 21,319 | | | | — | |
Deferred acquisition costs | | | 277,619 | | | | 252,115 | |
Loans | | | 870,637 | | | | 625,422 | |
Derivative assets | | | 1,000,569 | | | | 1,019,339 | |
Other assets | | | 114,702 | | | | 107,005 | |
| | | | | | | | |
Total assets | | $ | 21,967,811 | | | $ | 20,267,813 | |
| | | | | | | | |
| | |
Liabilities and Stockholders' Equity | | | | | | | | |
| | |
Liabilities: | | | | | | | | |
Unearned premiums | | $ | 3,128,278 | | | $ | 3,037,544 | |
Loss and loss expense reserve | | | 278,690 | | | | 220,074 | |
Ceded reinsurance balances payable | | | 24,406 | | | | 20,084 | |
Obligations under investment and payment agreements | | | 9,135,270 | | | | 8,202,590 | |
Obligations under investment repurchase agreements | | | 135,524 | | | | 154,287 | |
Deferred income taxes | | | — | | | | 263,483 | |
Current income taxes | | | 32,312 | | | | 49,920 | |
Long-term debt | | | 1,662,102 | | | | 991,804 | |
Accrued interest payable | | | 116,624 | | | | 105,129 | |
Derivative liabilities | | | 1,451,392 | | | | 667,066 | |
Other liabilities | | | 322,449 | | | | 275,670 | |
Payable for securities purchased | | | 30,852 | | | | 95,973 | |
| | | | | | | | |
Total liabilities | | | 16,317,899 | | | | 14,083,624 | |
| | | | | | | | |
Stockholders' equity: | | | | | | | | |
Preferred stock | | | — | | | | — | |
Common stock | | | 1,092 | | | | 1,092 | |
Additional paid-in capital | | | 836,742 | | | | 790,168 | |
Accumulated other comprehensive income | | | 71,300 | | | | 197,576 | |
Retained earnings | | | 5,387,639 | | | | 5,454,575 | |
Common stock held in treasury at cost | | | (646,861 | ) | | | (259,222 | ) |
| | | | | | | | |
Total stockholders' equity | | | 5,649,912 | | | | 6,184,189 | |
| | | | | | | | |
Total liabilities and stockholders' equity | | $ | 21,967,811 | | | $ | 20,267,813 | |
| | | | | | | | |
Number of shares outstanding (net of treasury shares) | | | 101,549,070 | | | | 105,730,553 | |
| | | | | | | | |
Book value per share | | $ | 55.64 | | | $ | 58.49 | |
| | | | | | | | |
Ambac Assurance Corporation and Subsidiaries
Capitalization Table - GAAP
September 30, 2007 and December 31, 2006
(Dollars in Millions)
The following table sets forth Ambac Assurance's consolidated capitalization as of September 30, 2007 and December 31, 2006, respectively, on the basis of accounting principles generally accepted in the United States of America.
| | | | | | |
| | | September 30,
2007 | | December 31,
2006 |
| | | (unaudited) | | |
Long-term debt(1) | | $ | 0 | | $ | 0 |
| | | | | | |
Stockholder's equity: | | | | | | |
Common stock | | | 82 | | | 82 |
Additional paid-in capital | | | 1,550 | | | 1,509 |
Accumulated other comprehensive income | | | 114 | | | 142 |
Retained earnings | | | 5,195 | | | 5,259 |
| | | | | | |
Total stockholder's equity | | $ | 6,941 | | $ | 6,992 |
| | | | | | |
| | (1) | Long-term debt excludes the $273 and $0 of variable interest notes consolidated under the provisions of FIN 46R "Consolidation of Variable Interest Entities" at September 30, 2007 and December 31, 2006, respectively. |
