AMBAC FINANCIAL GROUP, INC. About Ambac
Ambac Financial Group, Inc. ("Ambac" or "AFG"), headquartered in New York City, is a financial services holding company. Ambac's subsidiaries include: Ambac Assurance Corporation and Ambac Assurance UK Limited, financial guarantee insurance companies currently in runoff; Everspan Indemnity Insurance Company and Everspan Insurance Company, specialty property & casualty program insurers; and Xchange Benefits, LLC and Xchange Affinity Underwriting Agency, LLC, property & casualty Managing General Underwriters. Ambac's common stock trades on the New York Stock Exchange under the symbol "AMBC". The Amended and Restated Certificate of Incorporation of Ambac contains substantial restrictions on the ability to transfer Ambac's common stock. Subject to limited exceptions, any attempted transfer of common stock shall be prohibited and void to the extent that, as a result of such transfer (or any series of transfers of which such transfer is a part), any person or group of persons shall become a holder of 5% or more of Ambac's common stock or a holder of 5% or more of Ambac's common stock increases its ownership interest. Ambac is committed to providing timely and accurate information to the investing public, consistent with our legal and regulatory obligations. To that end, we use our website to convey information about our businesses, including the anticipated release of quarterly financial results, quarterly financial, statistical and business-related information. For more information, please go towww.ambac.com.
Company Information
Corporate headquarters are located at:
Ambac Financial Group, Inc.
One World Trade Center, 41st Floor New York, New York 10007www.ambac.com
Investor Relations Contact:
Lisa A. Kampf
(212) 208-3222ir@ambac.com
To obtain a copy of Ambac Financial Group, Inc.'s latest annual or quarterly report filed with the Securities and Exchange Commission or the most recent Annual Report to Stockholders, please visit our website atwww.ambac.com.
Ambac Financial Group, Inc. Quarterly Operating Supplement
Fourth Quarter 2020
Table of Contents
Key Quarterly Financial Data ........................................................................................................................ 1
Key Yearly Financial Data ............................................................................................................................. 2
Non-GAAP Financial Measures .................................................................................................................... 3
Ambac Assurance - Claims-Paying Resources and Statutory Financial Ratios .......................................... 4
Summary of Insured Exposures With US GAAP Loss and Loss Expense Reserves ................................... 5
Net Insurance Premiums Earned (GAAP) ..................................................................................................... 6
Net Unearned Premium Amortization and Estimated Future Installment Premiums .................................... 6
Investment Portfolio ....................................................................................................................................... 7
Expense Analysis (GAAP) ............................................................................................................................ 8
Historical Net Financial Guarantee Exposures Outstanding ......................................................................... 9
Geographic Distribution of Net Financial Guarantee Exposures Outstanding .............................................. 10
Rating Distribution of Net Financial Guarantee Exposures Outstanding ...................................................... 10
Adversely Classified Credit Exposures Outstanding ..................................................................................... 11
Adversely Classified Distribution of Exposures Outstanding ....................................................................... 11
25 Largest Exposures Outstanding ................................................................................................................ 12
Net Exposure Amortization ........................................................................................................................... 13
Notes:
1) Internal credit ratings contained in this Supplement are provided solely to indicate the underlying credit quality of guaranteed obligations based on the view of Ambac. Ambac credit ratings are subject to revision at any time and do not constitute investment advice.
2) Information contained in this report is unaudited.
3) Numbers may not add due to rounding.
Key Quarterly Financial Data
($ in millions, except share data)
4Q 2020
3Q 2020
2Q 2020
1Q 2020
4Q 2019
Summary GAAP Financial Data:
Statement of Total Comprehensive Income (Loss):
Net premiums earned ......................................................................................
$
18 $
15 $
11 $
10 $ 20
Net investment income (loss) ..........................................................................
53
37
52
(21) 42
Net gains (losses) on derivative contracts .......................................................
12
(70) 12
Income (loss) on variable interest entities (VIEs) ...........................................
3
7 -
2 -
3 7
Losses and loss expenses (benefit) ..................................................................
9
83
16
117 97
Intangible amortization ...................................................................................
16
14
14
13 15
Operating expenses .........................................................................................
26
23
21
24 23
(14)
(108)
(35)
(280) (110)
Interest expense ............................................................................................... Net income (loss) attributable to common stockholders ..................................
50
50
58
63 66
Net income (loss) per diluted share attributable to common stockholders ......
Weighted average number of diluted shares outstanding ................................
$ (0.31) | $ (2.33) | $ (0.77) | $ (6.07) | $ (2.40) |
46,181,798 | 46,178,730 | 46,166,666 | 46,060,324 | 46,001,270 |
Balance Sheets:
Total non-VIE investments .............................................................................
$
3,544
$
3,551
$
3,466
$
3,400
$ 3,792
Premium receivables .......................................................................................
370
372
392
403 416
Intangible assets (1) ..........................................................................................
409
383
392
406 427
Subrogation recoverable .................................................................................
2,156
2,194
2,215
2,192 2,029
Unearned premiums ........................................................................................
456
468
492
507 518
Loss and loss expense reserves .......................................................................
1,759
1,801
1,814
1,797 1,548
Long-term debt (2) ............................................................................................
2,739
2,737
2,749
2,760 2,822
Accrued interest payable .................................................................................
517
499
474
457 441
Ambac stockholders' equity ............................................................................
Number of shares outstanding (net of treasury shares) ...................................
Ambac Financial Group, Inc. book value per share ........................................
$
23.57
$
22.59
$
23.34
$
21.88
$ 32.41
$ 1,080 | $ 1,035 | $ 1,069 | $ 1,002 | $ 1,477 |
45,809,139 | 45,809,139 | 45,808,256 | 45,779,023 | 45,555,400 |
Non-GAAP Measurements:
Adjusted earnings (loss) ..................................................................................
$
(93) $
(265) $ (88)
Adjusted earnings (loss) per diluted share ......................................................
Adjusted book value ........................................................................................
$ 891 $
$ 1,313
Adjusted book value per share ........................................................................
$ $ $ $
4 0.08 919 20.05
$ (2.01) $
$ 19.44 $
(24) (0.52) 965 21.06
$ $ $ $
(5.75) 1,012 22.11
$ (1.91)
$ 28.83
Summary Statutory Data of Ambac Assurance:
Invested assets .................................................................................................
$
2,436
$
2,467
$
2,424
$
2,498
$ 2,757
Loss and loss expense reserves (3) ...................................................................
1,139
1,140
1,140
Policyholders' Surplus .....................................................................................
865
933
987
Qualified statutory capital ...............................................................................
1,413
1,477
1,527
1,143 1,111 930 1,088 1,465 1,618
Total claims-paying resources, including Ambac UK (2) ................................
$
5,215
$
5,246
$
5,274
$
5,219
$ 5,435
(1) Intangible assets at December 31, 2020 includes the estimated fair value of identifiable intangibles of $36 established as part of the acquisition of Xchange. Refer to Ambac's 2020 Form 10-K for further information relating to this acquisition.
(2) Long-term debt includes surplus notes issued and outstanding to third parties, and the Ambac Note and Tier 2 Notes issued on February 12, 2018, in connection with the Rehabilitation Exit Transactions. Long-term debt also includes debt issued by Ambac UK on June 18, 2019, in connection with the Ballantyne commutation. Long-term debt for all periods excludes the portion of long-term debt associated with VIEs consolidated as a result of Ambac's variable interest arising from the financial guarantees of its subsidiaries.
(3) Loss and loss expense reserves and total claims-paying resources present loss and loss expense reserves gross of the recorded statutory benefit for expected subrogation receipts.
Key Yearly Financial Data
($ in millions, except share data) Summary GAAP Financial Data: Statement of Total Comprehensive Income:
2020
2019
2018
2017 2016
$
54 $
66 $
175 $ 197
(50)
(50)
76 (30)
5
38
3 20 (14)
57
295
107 151 175
222
269
242 120 124
(437)
(216)
(329) 75
Net premiums earned .......................................................................................... Net investment income ....................................................................................... Net gains (losses) on derivative contracts .......................................................... Other income (expense) (1) .................................................................................. Income (loss) on variable interest entities (VIEs) .............................................. Losses and loss expenses (benefit) (2) ................................................................. Intangible amortization ...................................................................................... Operating expenses ............................................................................................ Interest expense ................................................................................................. Net income (loss) ................................................................................................. Net income (loss) attributable to common stockholders ..................................... Net income (loss) per diluted share attributable to common stockholders ......... Weighted average number of diluted shares outstanding ....................................
122
227
111 $ 273 7
361 313
3
134
5 - 18
225
13
(224) 513 (11)
92
103
112 122 114
(437)
(216)
267 186
(329) 74
$ (9.47) | $ (4.69) | $ 3.99 | $ (7.25) | $ 1.64 |
46,147,062 | 45,954,908 | 46,559,835 | 45,367,932 | 45,723,524 |
Balance Sheets:
$
3,544 $
3,792 $
3,937 $
5,741 $ 6,500
409
427
719
847 962
456
518
630
783 967
2,739
2,822
2,929
992 1,114
Total non-VIE investments ................................................................................ Premium receivables .......................................................................................... Intangible assets (3) ............................................................................................ Subrogation recoverable ..................................................................................... Unearned premiums ........................................................................................... Loss and loss expense reserves .......................................................................... Long-term debt (4) ............................................................................................... Accrued interest payable .................................................................................... Ambac stockholders' equity ................................................................................ Number of shares outstanding (net of treasury shares) ...................................... Ambac Financial Group, Inc. book value per share ...........................................
370
416
495
586 661
2,156
2,029
1,933
631 685
1,759
1,548
1,826
4,745 4,381
517
441
376
437 422
$ 1,080 | $ 1,477 | $ 1,592 | $ 1,381 | $ 1,714 |
45,809,139 | 45,555,400 | 45,336,278 | 45,251,166 | 45,172,496 |
Non-GAAP Measurements:
Adjusted earnings (loss) ................................................................................... Adjusted earnings (loss) per diluted share ....................................................... Adjusted book value ........................................................................................ Adjusted book value per share ........................................................................
Summary Statutory Data of Ambac Assurance:
Invested assets .................................................................................................... Loss and loss expense reserves (5) ...................................................................... Policyholders' Surplus ........................................................................................ Qualified statutory capital .................................................................................. Total claims-paying resources, including Ambac UK (5) ...................................
$ | 23.57 | $ | 32.41 | $ | 35.12 | $ | 30.52 | $ | 37.94 |
$ | (378) | $ | 66 | $ | 301 | $ | (165) | $ | 315 |
$ | (8.19) | $ | 1.44 | $ | 6.47 | $ | (3.64) | $ | 6.89 |
$ | 919 | $ | 1,313 | $ | 1,251 | $ | 1,101 | $ | 1,332 |
$ | 20.05 | $ | 28.83 | $ | 27.58 | $ | 24.34 | $ | 29.48 |
$ | 2,436 | $ | 2,757 | $ | 3,017 | $ | 5,427 | $ | 5,415 |
1,139 | 1,111 | 1,146 | 5,253 | 4,838 | |||||
865 | 1,088 | 1,152 | 700 | 976 | |||||
1,413 | 1,618 | 1,648 | 1,157 | 1,369 | |||||
$ | 5,215 | $ | 5,435 | $ | 5,793 | $ | 8,868 | $ | 8,813 |
(1) Other income includes proceeds received in 2019, from an SEC action against Citigroup Global Markets Inc. in the amount of $142.
(2) Includes interest expense on Deferred Amounts of $21, $178 and $171, for the years ended December 31, 2018, 2017, and 2016, respectively. On February 12, 2018, the rehabilitation of the Segregated Account was concluded and all Deferred Amounts, including accrued interest, were settled. 2018 includes a benefit of $288 related to the discount on the Rehabilitation Exit Transactions. Refer to Ambac's 2018 Form 10-K for further details.
(3) Intangible assets at December 31, 2020 includes the estimated fair value of identifiable intangibles of $36 established as part of the acquisition of Xchange. Refer to Ambac's 2020 Form 10-K for further information relating to this acquisition.
(4) Long-term debt includes surplus notes issued and outstanding to third parties, notes issued under a secured borrowing transaction (which was fully repaid during the second quarter of 2018), and the Ambac Note and Tier 2 Notes issued on February 12, 2018, in connection with the Rehabilitation Exit Transactions. Long-term debt also includes debt issued by Ambac UK on June 18, 2019, in connection with the Ballantyne commutation. Long-term debt for all years excludes the portion of long-term debt associated with VIEs consolidated as a result of Ambac's variable interest arising from the financial guarantees of its subsidiaries.
(5) Loss and loss expense reserves and total claims-paying resources present loss and loss expense reserves gross of the recorded statutory benefit for expected subrogation receipts.
Non-GAAP Financial Measures (1)
($ in millions, except share amounts)
Adjusted Earnings (Loss):
$
4Q2020 P.D.S. (2)
$
3Q2020 P.D.S. (2)
$
2Q2020 P.D.S. (2)
$
1Q2020 P.D.S. (2)
Net income (loss) attributable to common stockholders .......................................
$
(14) $
(0.31) $
(108) $
(2.33)
$
(35) $
(0.77) $
(280) $ (6.07)
$
Adjustments:
Non-credit impairment fair value (gain) loss on credit derivatives ........................ Insurance intangible amortization ........................................................................... Foreign exchange (gain) losses ..............................................................................
(1) 16 3
(0.01) 0.34 0.06
- 14 1
- 0.29 0.03
(1) 14
(0.01) 2 0.03
0.30 13 0.29
(2)
(0.04)
-
-
Adjusted earnings (loss) ............................................................................................
$
4
$
0.08
$
(93) $
(2.01)
$
(24) $
(0.52)
$
(265) $
(5.75)
$
4Q2019 | |
$ | P.D.S. (2) |
(110) $ | (2.40) |
- | - |
15 | 0.33 |
7 | 0.16 |
(88) $ | (1.91) |
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
December 31, 2019
Adjusted Book Value:
$
P.S. (2)
$
P.S. (2)
$
P.S. (2)
$
P.S. (2)
Total Ambac Financial Group, Inc. stockholders' equity ....................................
$
1,080
$
23.57 $
1,035
$
22.59 $
1,069
$
23.34 $
1,002
$ 21.88
$
Adjustments:
Non-credit impairment fair value losses on credit derivatives ...............................
Insurance intangible asset .......................................................................................
Net unearned premiums and fees in excess of expected losses ..............................
- (373) 378
0.01 (8.14) 8.24
1 (383) 389
0.02 (8.36) 8.50
1 (392) 396
0.03 (8.57) 8.63
2 0.04 (406) (8.87) 420 9.17
Net unrealized investment (gains) losses in Accumulated Other Comprehensive
Income ................................................................................................................
(166)
(3.63)
(152)
(3.31)
(109)
(2.38)
(5) (0.11)
Adjusted book value .................................................................................................
$
919
$
20.05
$
891
$
19.44
$
965
$
21.06
$
1,012
$
22.11
$
$ | P.S. (2) | |
1,477 | $ | 32.41 |
- | 0.01 | |
(427) | (9.37) | |
414 | 9.09 | |
(151) | (3.31) | |
1,313 | $ | 28.83 |
December 31, 2020
December 31, 2019
December 31, 2018
December 31, 2017
December 31, 2016
Adjusted Book Value:
$
P.S. (2)
$
P.S. (2)
$
P.S. (2)
$
P.S. (2)
$
P.S. (2)
Total Ambac Financial Group, Inc. stockholders' equity ....................................
$
1,080
$
23.57 $
1,477
$
32.41 $
1,592
$
35.12 $
1,381
$
30.52 $
1,714 $ 37.94
Adjustments: ...............................................................................................................
Non-credit impairment fair value losses on credit derivatives ...................................
0.01
-
0.01
1
0.01
11 0.25
Insurance intangible asset ...........................................................................................
- (373)
(8.14) (427)
(9.37) (719)
0.03 (15.87)
1 (847)
(18.71) (962) (21.30)
Ambac CVA on interest rate derivative liabilities .....................................................
Net unearned premiums and fees in excess of expected losses ..................................
- 378
- 8.24
- 414
- 9.09
- 462
- 10.19
- 597
- (45) (0.99) 13.20 732 16.21
Net unrealized investment (gains) losses in Accumulated Other Comprehensive Income ........................................................................................................................
(166)
(3.63)
(151)
(3.31)
(86)
(1.89)
(31)
(0.68) (119) (2.63)
Adjusted book value .................................................................................................
$
919
$
20.05
$
1,313
$
28.83
$
1,251
$
27.58
$
1,101
$
24.34
$
1,332
$ 29.48
(1) In addition to reporting Ambac's financial results in accordance with GAAP, Ambac reports two non-GAAP financial measures: Adjusted Earnings and Adjusted Book Value. A non-GAAP financial measure is a numerical measure of financial performance or financial position that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. We are presenting these non-GAAP financial measures because they provide greater transparency and enhanced visibility into the underlying drivers of our business. Adjusted Earnings and Adjusted Book Value are not substitutes for Ambac's GAAP reporting, should not be viewed in isolation and may differ from similar reporting provided by other companies, which may define non-GAAP measures differently.
(2) Per diluted share ("P.D.S.") and per share outstanding at balance sheet date ("P.S.").
Ambac Assurance - Claims-Paying Resources (1) and Statutory Financial Ratios
December 31,December 31,($ in millions, except ratios)
2020 2019
$
865 $ 1,088
Policyholders' surplus (2) ................................................................................................................................................ Contingency reserve ......................................................................................................................................................
548 530
1,413 1,618
1,139 1,111
Qualified statutory capital ........................................................................................................................................ Unearned premiums ...................................................................................................................................................... Loss and loss adjustment expenses (3) ........................................................................................................................... Estimated impairment losses on subsidiary guarantees ................................................................................................
154 175
5
-
2,711 2,904
306 281
Policyholders' reserves ............................................................................................................................................ Ambac Note (4) ............................................................................................................................................................... Tier 2 Notes ................................................................................................................................................................... Present value of future installment premiums (5) ...........................................................................................................
1,174 1,234
171 184
Ambac Assurance claims-paying resources .............................................................................................................
4,362 4,604
Ambac UK claims-paying resources (6) .........................................................................................................................
854 832
Total claims-paying resources ....................................................................................................................................
$
5,215
$ 5,435
Net financial guarantees in force (7)
14,899 16,103
Ambac Assurance .................................................................................................................................................... Ambac UK ...............................................................................................................................................................
$ $
36,704 $ 42,142
Total net financial guarantees in force ...................................................................................................................
$
51,603
$ 58,245
Claims-paying ratio (8)
Ambac Assurance ....................................................................................................................................................
8 : 1
9 : 1
Ambac UK ...............................................................................................................................................................
17 : 1
19 : 1
Total claims-paying ratio ............................................................................................................................................
10 : 1
11 : 1
(1) Total claims-paying resources quantifies total resources available to pay claims, including guarantees on subsidiary obligations.
(2) Surplus notes, including junior surplus notes, with an aggregate par value of $938 and $939 as of December 31, 2020 and December 31, 2019, respectively, are included in policyholders' surplus.
(3) Loss and loss expense reserves are presented gross of the recorded statutory benefit for expected subrogation receipts of $2,279 (R&W subrogation receipts of $1,648 and other subrogation receipts of $631) and $2,240 (R&W subrogation receipts of $1,639 and other subrogation receipts of $601) at December 31, 2020, and December 31, 2019, respectively.
(4) Ambac Note presented as principal and interest outstanding of $1,642 and $1,763, net of Secured Note principal and interest outstanding of $468 and $529 held by Ambac Assurance at December 31, 2020, and December 31, 2019, respectively.
(5) Present value of future installment premiums includes premiums on installment financial guarantee insurance contracts (excluding Ambac UK) and credit derivatives. Present value calculations are discounted at 5.1%.
(6) Ambac UK's claims paying resources will become available to Ambac Assurance to the extent Ambac UK receives approval from its regulator to dividend monies to Ambac Assurance. Components of Ambac UK's claims paying resources are discounted at Ambac UK's projected investment rate of return. Ambac UK's claims-paying resources includes the present value of future installment premiums of approximately $210 at December 31, 2020.
(7) Financial guarantees in force represents the amount of principal and interest outstanding on a guaranteed obligation.
(8) Claims-paying ratio is net financial guarantees in force divided by claims-paying resources.
Summary of Insured Exposures With US GAAP Loss and Loss Expense Reserves (1)
As of December 31, 2020
Total Net Par Outstanding
($ in millions) Public Finance:
Lease & tax backed ....................................................................................................................................................... General obligation ......................................................................................................................................................... Housing ......................................................................................................................................................................... Transportation revenue ................................................................................................................................................. Other ..............................................................................................................................................................................
Total Public Finance .........................................................................................................................................................
Structured Finance:
Mortgage-backed & home equity .................................................................................................................................. Student loans ................................................................................................................................................................. Other ..............................................................................................................................................................................
Total Structured Finance ...................................................................................................................................................
International Finance:
Total ..................................................................................................................................................................................
$
1,129 $ 702
406 (39)
355 23
118 29
363 12
Total Loss and Loss Expense
Reserves (1)
2,371 727
2,503
(1,394)
349 213
137 1
2,989 1,474
$
6,834
(1,180)
$
23 (430)
(1)U.S. GAAP insurance loss and loss expense reserves, net of reinsurance. Mortgage-backed & home equity reserves include estimated representation and warranty subrogation recoverables of $1,725 ($1,751 gross of reinsurance) as of December 31, 2020.
|
Net Insurance Premiums Earned (GAAP)
($ in millions)
1Q
2Q
3Q
4Q Year-To-Date
2020
Public Finance ........................................................................... Structured Finance ..................................................................... International Finance ................................................................ Total Normal Insurance Premiums Earned (1) ........................... Accelerated Premiums Earned ..................................................
$
5 $ 1 4 10 -
5 $ 2 3 10 1
5 $ 2 3 10 5
5 $ 20
3 8
4 13
11 42
7 12
Total Premiums Earned ..........................................................
$
10
$
11
$
15
$
18
$ 54
($ in millions)
1Q
2Q
3Q
4Q
Full Year
2019
Public Finance ........................................................................... Structured Finance ..................................................................... International Finance ................................................................ Total Normal Insurance Premiums Earned (1) ........................... Accelerated Premiums Earned ..................................................
$
8 $
7 $
7 $
6 $ 27
3
3
5
4
2 -
3 10
9 19
16
14
8
18 56
12
(6)
2
2 10
Total Premiums Earned ..........................................................
$
28
$
8
$
10
$
20
$ 66
Net Unearned Premium Amortization and Estimated Future Installment Premiums
Net Unearned
PremiumEstimated
Amortization
($ in millions)
(GAAP) (2)
Net Future Installments (3)Consolidated
VIE (4)
2021 .......................................................................................................................................................
35
34 12
2022 .......................................................................................................................................................
33
32 11
2023 .......................................................................................................................................................
31
30 11
2024 .......................................................................................................................................................
29
29 10
2025 .......................................................................................................................................................
27
28 9
2021-2025 ..............................................................................................................................................
154
152 54
2026-2030 ..............................................................................................................................................
113
120 34
2031-2035 ..............................................................................................................................................
72
81 21
2036-2040 .............................................................................................................................................. After 2040 .............................................................................................................................................
30
38 1
16
23
Total ..................................................................................................................................................
$
386
$
414
$
- 110
(1) Reductions/(increases) to normal insurance premiums earned for changes in allowance for credit losses on premium receivables were $2, $2, $2 and $0 for the first, second, third and fourth quarters of 2020, respectively, and $0, $1, $6 and ($5) for the first, second, third and fourth quarters of 2019, respectively.
(2) Represents unearned premium amounts for both upfront and installment paying policies, net of deferred ceded premiums, which is reported separately as an asset on Ambac's Consolidated Balance Sheet. Depicts amortization of existing guaranteed portfolio, assuming no advance refunding as of December 31, 2020. The unearned premium amortization disclosed in the above table considers the use of contractual lives for many bond types that do not have homogeneous pools of underlying collateral, which may result in different unearned premium balances and earned premiums than if expected lives were considered. Actual future installments, and therefore earned premiums, may differ from estimated because borrowers may have the right to call or terminate a transaction or the guaranteed obligation may be subject to prepayment. If installment paying policies are retired early, premium earnings may be negative in the period of call or refinancing.
(3) Represents management's estimate of fees on credit derivative contracts and future installment premium collections, net of reinsurance. Actual premium collections may differ from estimated because borrowers may have the right to call or terminate a transaction or the guaranteed obligation may be subject to prepayment. Estimated net future installments exclude amounts eliminated as a result of consolidating variable interest entities ("Consolidated VIE") as required under the Consolidations Accounting Standard.
(4) Estimated net future installment amounts eliminated under the U.S. GAAP Consolidations Accounting Standard; not included in Estimated Net Future Installments.
Investment Portfolio As of December 31, 2020
U.S. GAAPU. S. GAAP
Pre-taxINCOME ANALYSIS BY TYPE OF SECURITY Investment category ($ in millions)
Carrying
Value
Book Value
Yield to Maturity (1)
Ambac Assurance and Subsidiaries:
Fixed maturity securities:
U.S. government and agency obligation .........................................................................................
$
88 $
88
1.50 %
Municipal obligations .....................................................................................................................
357
321
4.79 %
Corporate obligations (2) ..................................................................................................................
947
930
4.01 %
Mortgage and asset-backed securities .............................................................................................
677
592
6.08 %
Short-term investments ...................................................................................................................
264
264
0.11 %
Total fixed maturity securities ........................................................................................................
2,334
2,195
4.11
%
Other investments:
Hedge funds ..................................................................................................................................
196 196
Private credit .................................................................................................................................
23 23
Equity market investments ...........................................................................................................
13 13
Private Equity ...............................................................................................................................
8 8
High yield and leveraged loans .....................................................................................................
3 3
Total other investments ................................................................................................................
Total Ambac Assurance and Subsidiaries investments excluding Ambac UK ...........................
243 2,577
243 2,438
4.11
%
Ambac UK:
Fixed maturity securities:
U.S. government and agency obligations ......................................................................................
23
23
Corporate obligations ......................................................................................................................
124
123
Foreign obligations .........................................................................................................................
98
97
1.55 3.35 0.19
% % %
Short-term investments ...................................................................................................................
108
108
Total fixed maturity securities
353
351
(0.12) % 1.29 %
Other investments:
High yield and leveraged loans .....................................................................................................
74 74
Investment grade floating rate income .........................................................................................
73 73
Equity market investments ...........................................................................................................
60 60
Private credit .................................................................................................................................
42 42
Emerging markets .........................................................................................................................
25 25
Real estate properties ....................................................................................................................
16 16
Private Equity ...............................................................................................................................
4 4
Insurance linked securities ............................................................................................................
3 3
Total other investments ................................................................................................................
Total Ambac UK investments ........................................................................................................
Total Ambac Assurance and Subsidiaries investments ................................................................
298 651 3,228
298 649 3,087
1.29 % 3.72 %
Ambac Financial Group, Inc.:
Corporate obligations ......................................................................................................................
6 6
Mortgage and asset-backed securities .............................................................................................
1 1
Short-term investments ...................................................................................................................
229 229
Other ...............................................................................................................................................
54 54
Total Ambac Financial Group investments ...................................................................................
Everspan Indemnity Insurance Company and Subsidiaries investments ...................................
290 26
290 26
Total Investments .............................................................................................................................
$
3,544
$
3,402
Duration of Ambac Assurance and Subsidiaries fixed-income investment portfolio (3) .............................................................
3.9
(1) Yield to maturity refers to the rate of interest to be earned over the remaining life of the fixed maturity investments based on book value. For mortgage and other asset-backed securities remaining life is calculated using estimated future cash flows. For floating rate positions, yield to maturity is based on the current interest rate and not forward rates.
(2) Includes secured notes with a carrying value of $465 and amortized cost of $468 that were issued by Ambac LSNI, an unconsolidated special purpose entity, in connection with the Rehabilitation Exit Transactions.
(3) Excluded from the measure of duration are Ambac insured bonds that have underlying Ambac internal ratings of BIG or NR and Ambac Assurance holdings of the secured notes issued by Ambac LSNI in connection with the Rehabilitation Exit Transactions. These securities represent 40% of the fair value of Ambac Assurance and Subsidiaries' fixed maturity investment portfolio of $2,687 at December 31, 2020.
Expenses Analysis (GAAP)
($ in millions)
2020:
Compensation
Salaries ...................................................................... Incentive Compensation (1) ........................................ Other (2) ......................................................................
Total Compensation .................................................. Non-Compensation
Legal, Consulting & Advisory Services .................... Premises .................................................................... Audit .......................................................................... Regulator Advisory Costs ......................................... Other ..........................................................................
Total Non-Compensation ............................................. Total Gross Operating Expenses ...............................
1Q
$
6 $ 7 1 14
6
1
1 -
Ceding Commissions ...................................................
-
Total Operating Expenses ...........................................
1 9 24 -
$
24
2Q
6 $ 5 - 11
5
1
1
1
2 10 20 -
$
21
3Q
6 $ 6 1 13
5
1
1 -
3 10 23 -
$
23
4QFull Year
6 $ 23
7 25
1 3
14 51
7 23
1 4
1 3
1 2
3 9
12 41
25 92
$
26
$
- 92
($ in millions) 2019: Compensation
Salaries ...................................................................... Incentive Compensation (1) ........................................ Other (2) ......................................................................
Total Compensation ................................................ Non-Compensation
Legal, Consulting & Advisory Services .................... Premises .................................................................... Audit .......................................................................... Regulator Advisory Costs ......................................... Other ..........................................................................
Total Non-Compensation ........................................
1Q
$
6 $ 6 2 14
5
1
1 -
Total Gross Operating Expenses ...............................
23 103
Ceding Commissions ...................................................
3 10 25 -
2Q
6 $ 9 2 17
7
1
1
1
3 12 29 -
3Q
6 $ 5 3 14
5
2
1
1
3 11 26 -
4Q Full Year
6 $ 24
6 27
1 7
12 58
5 22
2 6
1 3
1 2
3 12
11 44
-
Total Operating Expenses ...........................................
$
25
$
29
$
26
$
23
$
- 103
(1) Incentive compensation includes short-term and long-term incentive cash and equity awards
(2) Other compensation includes severance, payroll taxes, medical and other benefits
|
Historical Net Financial Guarantee Exposures Outstanding (1)
($ in millions net par value) Public Finance (2):
2020
2019
2018
December 31, 2017
$
5,855 $
5,991 $
6,159 $ 6,312
2,345
3,011
4,214 6,257
747
885
1,168 1,642
925
1,041
1,404 1,770
Housing revenue ........................................................................ Lease and tax-backed revenue ................................................... General obligation ..................................................................... Transportation revenue .............................................................. Higher education ....................................................................... Utility revenue ........................................................................... Other ..........................................................................................
Total Public Finance .......................................................................
Structured Finance:
1,617
1,675
1,754 3,274
4,179
771
675
5,102
855
768
7,565 11,893
1,754 2,002
1,178 2,212
15,497
17,653
23,442 32,088
Mortgage-backed and home equity ........................................... Investor-owned utilities ............................................................. Student loan ............................................................................... Structured Insurance .................................................................. Asset-backed and other .............................................................
3,635
4,423
5,510 7,267
626
769
934 1,238
311
395
1,365 1,420
148
246
384 617
Total Structured Finance ................................................................
6,337
7,508
9,947 13,816
International Finance (3):
5,270
5,264
5,250 5,664
1,511
1,532
1,613 1,777
Sovereign/sub-sovereign ........................................................... Investor-owned and public utilities ........................................... Transportation ........................................................................... Asset-backed and other .............................................................
3,899
1,374
4,436
1,625
4,499 5,696
2,176 3,675
Total International Finance ............................................................
12,054
12,857
13,538
16,812
Total ...............................................................................................
$
33,888
$
38,018
$
46,927
$
62,716
Percent of Total Net Par Outstanding
Public Finance ............................................................................. Structured Finance ....................................................................... International Finance ................................................................... Total Net Par Outstanding ..............................................................
45 %
19 %
36 %
100 %
46 %
20 %
34 %
100 %
50 %
21 %
29 %
100 %
51 %
22 %
27 %
100
%
(1)Includes net par exposures insured by Ambac UK of $11,186, $11,862, $13,193 and $15,881 at December 31, 2020, December 31, 2019, December 31, 2018 and December 31, 2017, respectively.
(2) Net par exposures within the U.S. public finance market include capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bonds.
(3)International transactions include components of domestic exposure.
|
Geographic Distribution of Net Financial Guarantee Exposures Outstanding
($ millions net par value) Domestic:
2020
%
2019
December 31, 2018 2017
Colorado ....................................................................................... California ...................................................................................... New York ..................................................................................... New Jersey ................................................................................... Texas ............................................................................................ Puerto Rico ................................................................................... Pennsylvania ................................................................................. Washington ................................................................................... Florida .......................................................................................... Oregon .......................................................................................... Mortgage and asset-backed (1) ...................................................... Other domestic .............................................................................
$
2,362
7 % $
2,396 $
2,430 $ 2,537
2,104
6 %
2,556
3,719 6,351
1,816
5 %
2,331
2,577 3,658
1,290
4 %
1,487
2,051 3,237
1,233
4 %
1,289
1,543 1,890
1,070
3 %
1,123
1,880 1,968
896
3 %
916
1,157 1,316
799
2 %
833
879 1,186
656
2 %
754
1,161 1,992
627
2 %
671
708 837
3,646
11 %
4,531
5,747 7,710
5,335
16 %
6,274
9,537 13,222
Total Domestic ................................................................................
International:
803
2 %
767
811 877
21,834
64 %
25,161
33,389 45,904
United Kingdom ........................................................................... Italy ............................................................................................... Austria .......................................................................................... Australia ....................................................................................... France ........................................................................................... Other international (2) ....................................................................
9,711
29 %
10,593
10,965 13,554
707
2 %
674
712 770
420
1 %
382
384 608
277
1 %
303
312 329
136
- %
138
354 674
Total International Finance .............................................................
12,054
36 %
12,857
13,538 16,812
Total ................................................................................................
$
33,888
100 % $
38,018
$
46,927
$ 62,716
Rating Distribution of Net Financial Guarantee Exposures Outstanding (3) (4)
December 31, 2020 BIG: 22% AA: 7% A: 37% BBB: 34% | December 31, 2019 BIG: 20% BBB: 31% AA: 10% A: 39% |
(1) Mortgage and asset-backed obligations includes guarantees with multiple locations of risk within the United States and is primarily comprised of residential mortgage-backed securitizations.
(2) Other international may include components of U.S. exposure.
(3) Based upon internal Ambac ratings. See Note 1 on the Table of Contents page.
(4) AAA is less than 1% in both periods.
|
Adversely Classified Credit Exposures Outstanding (1)(2) | |||||
As of December 31, 2020 | |||||
Net Par | |||||
($ in millions) | Market Type | Outstanding | |||
RMBS Exposures ......................................................................................... | Structured Finance | $ | 2,790 | 8.2 | % |
Puerto Rico & Related Issuers ...................................................................... | Public Finance | 1,070 | 3.2 | % | |
Mitchells & Butlers Finance plc-UK Pub Securitisation (3) .......................... | International Finance | 974 | 2.9 | % | |
Posillipo Finance II S.r.l (3) ........................................................................... | International Finance | 742 | 2.2 | % | |
Ostregion Investmentgesellschaft NR 1 SA (3)(4) .......................................... | International Finance | 707 | 2.1 | % | |
Mets Queens Baseball Stadium Project, NY, Lease Revenue (5) ................................ | Public Finance | 540 | 1.6 | % | |
Student Loans Exposures | Structured Finance | 484 | 1.4 | % | |
Military Housing | Public Finance | 524 | 1.5 | % | |
Houston TX Hotel Occupancy Tax Revenue ............................................... | Public Finance | 101 | 0.3 | % | |
Chicago, IL Board of Education GO ............................................................ | Public Finance | 81 | 0.2 | % | |
445 | 1.3 | % | |||
$ | 8,458 | 25.0 | % |
% of Total
Net Par Outstanding
Other ........................................................................................................................................................
Total ........................................................................................................................................................
(1) Adversely classified credits are assigned a rating of Class IA through Class V. Refer to Ambac's 2020 Form 10-K for descriptions of credit classifications.
(2) Net Par includes capital appreciation bonds, which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bonds.
(3) Guaranteed by Ambac UK.
(4) Ambac Assurance has issued an insurance policy for a portion of this transaction that will only pay in the event that Ambac UK does not pay under its insurance policy.
(5) In February 2021, the net par outstanding for this transaction was reduced to zero through the combination of a refinancing and quota share reinsurance.
Adversely Classified Distribution of Exposures Outstanding(1)
December 31, 2020
December 31, 2019
IV: 40%
IV: 51%
III: 18%
(1) Credit Class V is less than 1% in both periods.
25 Largest Exposures Outstanding (1)
% of Total
Ambac | Net Par | |||||
Rating | Outstanding | |||||
IF | Mitchells & Butlers Finance plc-UK Pub Securitisation ....................................... | BBB | $ | 974 | 2.9 | % |
IF | Capital Hospitals plc (2) .......................................................................................... | A- | 903 | 2.7 | % | |
IF | Aspire Defence Finance plc ................................................................................... | A- | 870 | 2.6 | % | |
IF | Anglian Water ........................................................................................................ | A- | 853 | 2.5 | % | |
IF | National Grid Gas .................................................................................................. | A- | 788 | 2.3 | % | |
PF | New Jersey Transportation Trust Fund Authority - Transportation System .......... | BBB- | 767 | 2.3 | % | |
IF | Posillipo Finance II S.r.l ........................................................................................ | BIG | 742 | 2.2 | % | |
IF | Ostregion Investmentgesellschaft NR 1 SA (2) ...................................................... | BIG | 707 | 2.1 | % | |
IF | RMPA Services plc ................................................................................................ | BBB+ | 575 | 1.7 | % | |
PF | Mets Queens Baseball Stadium Project, NY, Lease Revenue (3) ........................... | BIG | 540 | 1.6 | % | |
IF | Catalyst Healthcare (Manchester) Financing plc (2) | BBB- | 534 | 1.6 | % | |
IF | National Grid Electricity Transmission ................................................................. | A- | 529 | 1.6 | % | |
PF | Hickam Community Housing LLC ........................................................................ | BBB | 460 | 1.4 | % | |
SF | Progress Energy Carolinas, Inc. ............................................................................. | A- | 450 | 1.3 | % | |
PF | Massachusetts Commonwealth - GO ..................................................................... | AA | 431 | 1.3 | % | |
IF | Scottish Power UK plc ........................................................................................... | BBB+ | 410 | 1.2 | % | |
PF | Bragg Communities, LLC ...................................................................................... | A- | 405 | 1.2 | % | |
PF | Puerto Rico Infrastructure Financing Authority, Special Tax Revenue ................ | BIG | 403 | 1.2 | % | |
PF | Puerto Rico Highways & Transportation Authority, Transportation Revenue ...... | BIG | 399 | 1.2 | % | |
SF | Wachovia Asset Securitization Issuance II, LLC 2007-HE2 ................................. | BBB | 318 | 0.9 | % | |
PF | Monterey Bay, CA - Military Housing .................................................................. | BBB+ | 317 | 0.9 | % | |
SF | Timberlake Financial, LLC .................................................................................... | BBB | 311 | 0.9 | % | |
PF | Fort Bliss/White Sand Missile Range Housing LP ................................................ | BBB+ | 303 | 0.9 | % | |
PF | Northeast Housing LLC ......................................................................................... | BBB- | 296 | 0.9 | % | |
PF | Hampton Roads Navy Housing ............................................................................. | A | 280 | 0.8 | % | |
Total ...................................................................................................................... | $ | 13,565 | 40.0 | % | ||
PF = Public Finance, SF = Structured Finance and IF = International Finance | ||||||
(1) | ||||||
(2) | ||||||
(3) |
Net Par Outstanding
($ in millions)
Net par exposures within the U.S. public finance market include capital appreciation bonds which are reported at the par amount at the time of issuance of the insurance policy as opposed to the current accreted value of the bonds.
A portion of this transaction is insured by an insurance policy issued by Ambac Assurance. Ambac Assurance has issued policies for these transactions that will only pay in the event that Ambac UK does not pay under its insurance policy.
In February 2021, the net par outstanding for this transaction was reduced to zero through the combination of a refinancing and quota share reinsurance.
Net Exposure Amortization (1)
($ in millions)
Estimated Net
Debt Service AmortizationTotal
Ending Net
Financial Guarantees in Force
2021 .....................................................................................................................................................
$
4,158 $ 47,445
2022 .....................................................................................................................................................
3,956 43,489
2023 .....................................................................................................................................................
2,851 40,638
2024 .....................................................................................................................................................
3,275 37,363
2025 .....................................................................................................................................................
2,700 34,663
2021-2025 ............................................................................................................................................
$
16,940 $ 34,663
2026-2030 ............................................................................................................................................
12,116 22,547
2031-2035 ............................................................................................................................................
9,707 12,840
2036-2040 ............................................................................................................................................ After 2040 ............................................................................................................................................ Total
7,663 5,177
5,177
$
51,603
-
(1) Depicts amortization of existing guaranteed portfolio (principal and interest), assuming no advance refundings, as of December 31,
2020. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay guaranteed obligations.
|
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Ambac Financial Group Inc. published this content on 01 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 March 2021 09:08:06 UTC.
