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Ambac Financial Group, Inc. Announces Third Quarter Net Income of $2,188.3 Million.

Article Excerpt
Third Quarter Net Income Per Diluted Share of $7.58

NEW YORK -- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced third quarter 2009 net income of $2,188.3 million, or net income of $7.58 per diluted share. This compares to third quarter 2008 net loss of $2,431.2 million, or net loss of $8.45 on a per share basis. The third quarter 2009 results reflect significant unrealized mark-to-market gains in the credit derivatives portfolio and gains resulting from reinsurance cancellations during the quarter. In 2008, Ambac's third quarter results reflected a significant negative net change in fair value of credit derivatives.

Quarter Summary

* Net change in fair value of credit derivatives amounted to positive $2,132.9 million, driven primarily by the ASC Topic 820 (formerly known as FAS 157) adjustment related to Ambac's credit spread widening.

* Net loss and loss expenses incurred amounted to $459.2 million for the quarter, relating to other asset-backed securities transactions and a municipal transportation credit.

* Reinsurance cancellations with three reinsurance counterparties during the quarter resulted in net income improvement of approximately $303.0 million.

* In the financial services segment, the derivative products business results declined by $205.3 million, quarter on quarter.

* ASC Topic 944 (formerly known as FAS 163) was implemented on January 1, 2009. Due to changes in calculations of certain income statement items, such as net premiums earned and loss and loss expenses, 2009 and 2008 amounts are not comparable.

Ambac's President and Chief Executive Officer, David Wallis, commented, "Our GAAP financial results tend to fluctuate based upon risk perception and its impact on mark-to-market changes. However, I remain optimistic about our remediation efforts. We continue to make progress in de-risking the balance sheet via negotiated reinsurance buy-backs, CDO of ABS commutations, settlements related to defaulted RMBS transactions as well as expanded analysis of expected recoveries relating to RMBS representation and warranty breaches."

Financial Results

Net Premiums Earned

Net premiums earned for the third quarter of 2009 were $238.4 million, down 16% from $282.3 million earned in the third quarter of 2008. Normal net premiums earned amounted to $148.1 million and $155.0 million in the third quarter 2009 and 2008, respectively. As a result of the implementation of ASC Topic 944, as discussed above, normal earned premium amounts reported in 2009 are not comparable to amounts that were reported in 2008.

Net premiums earned include accelerated premiums, which result from calls, terminations and other accelerations recognized during the quarter. Accelerated premiums were $90.3 million in the third quarter of 2009, down 29% from $127.3 million in the third quarter 2008. In the third quarter 2009, one terminated international transaction accounted for more than half of the accelerated premiums reported in...

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