Ambac Financial Group, Inc. Announces Second Quarter Net Income Of $119.8 Million, Up 11%.Business Editors Ambac Financial Group Ambac Financial Group (NYSE: ABK) is an American Insurer of bonds, including municipal bonds. Ambac Financial Group, Inc. (NYSE: ABK) is a holding company whose subsidiaries provide financial guarantee products and other financial services to clients in both : Second Quarter Operating Earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before Per Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. Share (1) of $1.12 up 14%, Core Earnings Per Diluted Share (1) Up 15% Second Quarter Adjusted Gross Premiums Written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. (2) Decrease 10% Ambac Financial Group, Inc. (NYSE NYSE See: New York Stock Exchange : ABK ABK Abkuerzung (German: Abbreviation) ABK Anybody Killa (musician) ABK Ahli Bank of Kuwait ABK American Bank of Kosovo ABK Aphakic Bullous Keratopathy (ophthalmology) ) (Ambac) today announced second quarter 2002 net income of $119.8 million or $1.09 per diluted share. This represents an 11% increase from second quarter 2001 net income of $107.6 million and a 10% increase in net income per diluted share from $0.99 per diluted share in the second quarter of 2001. Commenting on the results, Ambac Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Phillip Phillip is a variant of the name Philip. It may refer to: Given name:
 r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). .
The overall outlook for the balance of the year remains decidedly
upbeat."Earnings Per Diluted Share In addition to net income, Ambac currently presents operating earnings and core earnings, as discussed in Footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." 1. These measures are not substitutes for net income computed in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with accounting principles generally accepted in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). They are useful for analysis in that they eliminate certain items, such as realized and unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. and losses, the effect of refundings and calls and certain non-recurring items, to highlight the more consistent elements of earnings. Although these measures are appropriate and useful for the analysis of the business, starting in the third quarter of 2002, Ambac will eliminate the reporting of operating earnings and will change its definition of core earnings in order to establish consistency Consistency can refer to:
fit, meet coordinate - be co-ordinated; "These activities coordinate well" Standard and Poor's Noun 1. Standard and Poor's - a broadly based stock market index Standard and Poor's Index Ratings Services' ("S&P") recommendations to all public companies. See "Changes in Measures of Corporate Earnings" below for more detail. For the second quarter of 2002, operating earnings were $122.3 million, up 15% from $106.8 million in operating earnings for the second quarter of 2001. Core earnings for the second quarter of 2002 were $115.9 million, an increase of 15% from $100.7 million in core earnings for the second quarter of 2001. The following table shows net income, operating earnings and core earnings, all per diluted share:
Table I
Second Quarter Six Months
% %
2002 2001 Change 2002 2001 Change
Net income per diluted $1.09 $0.99 +10% $2.17 $1.88 +15%
share
Operating earnings per $1.12 $0.98 +14% $2.21 $1.90 +16%
diluted share
Core earnings per $1.06 $0.92 +15% $2.12 $1.81 +17%
diluted share
Revenues Total revenues in the second quarter of 2002, excluding net gains and losses on investment securities and structured credit derivatives Credit Derivative Privately held negotiable bilateral contracts that allow users to manage their exposure to credit risk. Credit derivatives are financial assets like forward contracts, swaps, and options for which the price is driven by the credit risk of economic agents (private , were $206.5 million, an increase of 16% from $178.2 million in revenues for the second quarter of 2001.
Highlights
- Adjusted gross premiums written(2) in the second quarter of 2002
were $276.7 million, down 10% from a very strong second quarter of
2001 of $307.8 million. A strong flow of business in public finance
and structured finance was offset by a decline in transactions
closed in international finance.
In public finance, Ambac benefited from the significant increase in
new issuance of municipal bonds. Ambac saw healthy writings of
transportation, tax-backed and student loans transactions and more
complex structured transactions, particularly in the housing sector.
Structured finance growth during the quarter was led by strong
asset-backed, collateralized debt obligations and investor-owned
utilities activity, partially offset by a decline in consumer
mortgage-backed business. In international finance, deal activity
was strong in the asset-backed markets in Japan and the UK but slow
in UK infrastructure transactions. Several international
transactions are in process and expected to close by year end.
A breakdown breakdown /break·down/ (brak´doun) 1. the act or process of ceasing to function. 2. an often sudden collapse in health. 3. loss of self-control. of adjusted gross premiums written by market sector is included below as Table II.
Table II
Adjusted Gross Premiums Written
$-millions Second Quarter Six Months
% %
2002 2001 Change 2002 2001 Change
Public Finance $135.4 $126.2 +7% $209.0 $170.0 +23%
Structured Finance 101.8 98.9 +3% 180.9 161.2 +12%
International 39.5 82.7 -52% 98.7 134.3 -27%
Total $276.7 $307.8 -10% $488.6 $465.5 +5%
- Net premiums written in the second quarter of 2002 of $171.0 million
were 20% lower than net premiums written of $212.9 million in the
same period of 2001. Gross premiums written for the second quarter
of 2002 were offset by $24.7 million in ceded premiums. In the
second quarter of 2001, ceded premiums were $23.8 million.
Net premiums written for the six months of 2002 of $300.8 million
were 3% lower than net premiums written of $309.9 million in the
same period of 2001.
- Net premiums earned and other credit enhancement fees for the second
quarter of 2002 were $120.2 million, which represented a 22%
increase from the $98.4 million earned in the second quarter of
2001. Net premiums earned increased for all market segments. Public
finance earned premium growth resulted from increased activity in
that market over the past several quarters, enhanced by the
company's continued focus on structured municipal obligations - a
growing market that exhibits solid pricing and risk adjusted
returns. Earned premium growth for structured finance continues to
be driven by strong writings in consumer asset backed transactions
and CDO's. The growth was partially offset by the continued high
level of pay-downs of the existing mortgage-backed book.
International net earned premium and other credit enhancement fee
growth also accelerated during the quarter, primarily as a result of
strong activity in Japan and UK asset-backed transactions over the
past few quarters.
Net premiums earned include accelerated premiums, which result from
refundings and calls recognized during the quarter. Accelerated
premiums were $11.2 million in the second quarter of 2002 (which had
a net income per diluted share effect of $0.06), up 6% from $10.6
million ($0.06 per diluted share) in accelerated premiums in the
second quarter of 2001.
Net premiums earned and other credit enhancement fees for the six
months of 2002 were $230.1 million, which represented a 22% increase
from the $188.2 million earned in the first half of 2001.
Accelerated premiums were $18.5 million for the first half 2002
(which had a net income per diluted share effect of $0.09), up 11%
from $16.7 million ($0.09 per diluted share) in accelerated premiums
for the first half of 2001.
A breakdown of net premiums earned and other credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing fees by market sector is included below as Table III. Normal net premiums earned exclude accelerated premiums that result from refundings and calls.
Table III
Net Premiums Earned and Other Credit Enhancement Fees
$-millions Second Quarter Six Months
% %
2002 2001 Change 2002 2001 Change
Public Finance $38.2 $33.7 +13% $75.2 $66.4 +13%
Structured Finance 43.3 36.6 +18% 84.7 71.2 +19%
International 27.5 17.5 +57% 51.7 33.9 +53%
Total Normal 109.0 87.8 +24% 211.6 171.5 +23%
Premiums/Fees
Accelerated 11.2 10.6 +6% 18.5 16.7 +11%
Premiums
Total $120.2 $98.4 +22% $230.1 $188.2 +22%
- Net investment income for the second quarter of 2002 was $73.6
million, representing an increase of 13% from $65.1 million in the
comparable period of 2001. This increase was due primarily to the
growth in the investment portfolio from ongoing operations,
partially offset by a lower reinvestment rate stemming from the
current interest rate environment. Investment income was also
positively impacted by the proceeds from Ambac's $200 million debt
offering in October 2001.
Net investment income for the six months of 2002 was $146.1 million,
representing an increase of 13% from $129.5 million in the
comparable period of 2001.
Financial services revenues, excluding gains and losses, were $11.0
million in the second quarter of 2002, down 7% from $11.8 million in
revenues for the second quarter of 2001. Financial services revenues
include revenues from swaps, investment agreements and money
management. While investment agreement revenue grew on improved
interest spreads and higher volume, money management revenue was
relatively flat during the quarter and swap revenue declined. The
decline in swap revenue during the second quarter resulted primarily
from a revenue adjustment of $3.8 million on a transaction executed
in early 2000 and terminated this quarter. Excluding the swap
revenue adjustment, financial services revenues would have grown
25%, quarter on quarter.
Financial services revenues, excluding gains and losses, were $27.6
million in the first half of 2002, up 5% from the $26.2 million of
revenues in the first half of 2001.
Expenses
Highlights
- Financial guarantee expenses of $24.5 million for the second quarter
of 2002 increased by 10% over the $22.2 million of expenses for the
same quarter of 2001. This increase was primarily due to higher
compensation costs and additions to the general loss provision.
Financial guarantee expenses of $48.8 million for the first six
months of 2002 increased by 12% over the $43.5 million of expenses
for the same period of 2001.
- Financial services expenses for the second quarter of 2002 of $5.7
million declined by 5% from $6.0 million in expenses for the second
quarter of 2001.
Financial services expenses for the first half of 2002 of $10.8
million decreased by 7% from $11.6 million in expenses for the first
half of 2001.
Other Items
- Total net securities gains/(losses) for the second quarter of 2002
were ($4.5) million, consisting of net realized gains on investment
securities of $3.5 million and net mark-to-market losses on credit
derivatives of ($8.0) million. For the second quarter of 2001 net
gains were $1.4 million, consisting of net realized gains on
investment securities of $0.7 million and net mark-to-market gains
on credit derivatives of $0.7 million.
Total net securities gains/(losses) for the first half of 2002 were
($8.8) million, consisting of net realized gains on investment
securities of $3.3 million and mark-to-market losses on credit
derivatives of ($12.1) million. For the first half of 2001 net
losses were ($3.2) million, primarily consisting of net realized
losses on investment securities.
- Interest expense for the second quarter of 2002 was $10.8 million,
up 14% from $9.5 million for the second quarter of 2001. The
increase is attributable to Ambac's issuance of $200 million in
50-year debentures in October 2001.
Balance Sheet
Highlights
- Total assets as of June 30, 2002 were $13.87 billion, up 13% from
total assets of $12.27 billion at December 31, 2001. This increase
was due primarily to cash generated from business written during the
period and increased volume in the guaranteed investment contract
business. As of June 30, 2002, stockholders' equity was $3.36
billion, a 13% increase from year-end 2001 stockholders' equity of
$2.98 billion. The increase stemmed primarily from net income during
the period.
Changes in Measures of Corporate Earnings Ambac also announced today that, starting with the third quarter 2002 earnings release, it will eliminate the reporting of operating earnings and will change its definition of core earnings. The definition of core earnings will comply with the S&P recommendations published in its report titled "Measures of Corporate Earnings" in May of this year. Core earnings will be defined as net income less the estimated effect of stock options if they were expensed, less the effect of certain other non- non- word element [L.]not . non- pref. Not: noninvasive. operating items as defined by S&P ("S&P core earnings"). In all future earnings releases, Ambac will report net income in conformity with GAAP and S&P core earnings. Commenting on Ambac's decision to change reporting measures, Mr. Lassiter stated, "Ambac has a long history of high quality transparent (1) Refers to a change in hardware or software that, after installation, causes no noticeable change in operation. Also known as "feature transparency." Contrast with "seamless integration," which means that an additional component to the system can be added without incurring any financial reporting to the financial community. Although we believe our current pro-forma measures are very useful to investors, we will adopt S&P's proposal for financial reporting because we believe improved consistency in financial reporting measures can serve as the foundation for providing useful comparative information." The following table reconciles net income per diluted share to S&P core earnings per diluted share for the three and six-month periods ended June June: see month. 30, 2002 and 2001:
Second Quarter Six Months
% %
2002 2001 Change 2002 2001 Change
Net Income per $1.09 $0.99 +10% $2.17 $1.88 +15%
diluted share
Est. stock (0.03) (0.03) - (0.06) (0.05) -20%
options expense
S&P core earnings $1.06 $0.96 +10% $2.11 $1.83 +15%
2002 Earnings Guidance Ambac management reconfirms its previous top range of operating earnings guidance of $4.60 for 2002 while raising the bottom range from $4.50 to $4.54. Since Ambac will eliminate the reporting of operating earnings and change its definition of core earnings to conform to S&P's definition of core earnings, Ambac's guidance will change accordingly. This guidance will include year- to-date net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. or losses on investment securities and mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. gains or losses on credit derivatives but will be exclusive of such future gains or losses. Management cannot forecast market factors such as interest rates and credit spreads with sufficient accuracy to make such forecast useful. As such, management currently anticipates S&P core earnings per diluted share for 2002 of $4.36 - $4.42. Increased Cash Dividend Declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. At its July July: see month. 2002 Board meeting, the Board of Directors of Ambac Financial Group, Inc. approved an 11% increase in the regular quarterly cash dividend from $0.09 to $0.10 per share of common stock. The dividend is payable on September September: see month. 4, 2002 to stockholders of record on August 12, 2002. Ambac has declared an increased cash dividend in every year since going public in 1991. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. This release, in particular the Chairman's remarks and the section titled "2002 Earnings Guidance", contains statements about our future results that may be considered "forward-looking statements" under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on current expectations and the current economic environment. We caution you that these statements are not guarantees of future performance. They involve a number of risks and uncertainties that are difficult to predict. Our actual results could differ materially from those expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. in the forward-looking statements. Among the factors that could cause actual results to differ materially are (1) changes in the economic, credit, or interest rate environment in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and abroad; (2) the level of activity within the national and worldwide debt markets; (3) competitive conditions and pricing levels; (4) legislative and regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. developments; (5) changes in tax laws; (6) the policies and actions of the United States and other governments; and (7) other risks and uncertainties that have not been identified at this time. We undertake no obligation to publicly correct or update any forward-looking statement if we later become aware that it is not likely to be achieved. Ambac Financial Group, Inc., headquartered in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , is a holding company whose affiliates provide financial guarantees and financial services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. to clients in both the public and private sectors around the world. Ambac's principal operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. , Ambac Assurance Corporation Ambac Assurance Corporation A subsidiary of publicly traded Ambac Financial Group that provides financial guarantees for municipal borrowers and for asset-backed and structured issues. , a leading guarantor guarantor n. a person or entity that agrees to be responsible for another's debt or performance under a contract, if the other fails to pay or perform. (See: guarantee) GUARANTOR, contracts. He who makes a guaranty. 2. of public finance and structured finance obligations, has earned triple-A ratings, the highest ratings available from Moody's Investors Service Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. , Inc., Standard & Poor's Ratings Services Ratings Service A company, such as Moody's or Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest, or dividends. , Fitch fitch: see polecat. , Inc. and Rating and Investment Information, Inc. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. (ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors ABK).
Footnotes
(1) Core earnings, S&P core earnings (as newly defined above) and
operating earnings are not substitutes for net income computed in
accordance with accounting principles generally accepted in the
United States of America (GAAP), but are important measures used
by management, equity analysts and investors to measure Ambac's
financial results. The Company defines operating earnings as net
income, less the effect of realized and unrealized gains and
losses and certain non- recurring items. Core earnings, as
currently reported, which Ambac provides as analytical data, is
defined as operating earnings less net insurance premiums earned
from refundings and calls. 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.
(2) Adjusted gross premiums written, which is not promulgated under
GAAP, is used by management, equity analysts and investors to
measure Ambac's financial results. Adjusted gross premiums
written, which Ambac reports as analytical data, are defined as
gross (direct and assumed) up-front premiums written plus the
present value of estimated installment premiums written on
insurance policies and structured credit derivatives issued in the
period. The definition of adjusted gross premiums written used by
Ambac may differ from definitions of adjusted gross premiums
written used by other public holding companies of financial
guarantors.
Ambac Financial Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Periods Ended June 30, 2002 and 2001
(Dollars in Thousands Except Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
2002 2001 2002 2001
--------------------- --------------------
Revenues:
Financial Guarantee:
Gross prems. written $195,683 $236,668 $345,044 $346,335
Ceded prems. written (24,705) (23,767) (44,254) (36,468)
-------- -------- -------- --------
Net prems. written $170,978 $212,901 $300,790 $309,867
-----------------------------------------
Net prems. earned $113,630 $93,412 $217,284 $178,528
Other credit
enhancement fees 6,576 4,995 12,864 9,648
-------- -------- -------- --------
Net prems. earned and
other credit
enhancement fees 120,206 98,407 230,148 188,176
Net investment income 73,593 65,058 146,140 129,534
Net sec. (lses) gns.(1) (4,510) 1,350 (9,081) (3,588)
Other income 800 2,284 2,114 3,416
Financial Services:
Revenue 10,966 11,767 27,557 26,226
Net securities gains 408 - 766 438
Other:
Revenue 956 678 1,685 2,307
Net securities losses (444) - (444) -
-------- -------- -------- --------
Total revenues 201,975 179,544 398,885 346,509
-------- -------- -------- --------
Expenses:
Financial Guarantee:
Losses & loss adj. exp. 5,900 4,800 11,600 9,400
Und. & oprtg. exp. 18,603 17,426 37,164 34,069
Financial Services 5,699 5,973 10,835 11,604
Interest 10,816 9,485 21,482 18,968
Other 2,015 1,714 3,481 3,451
-------- -------- -------- --------
Total expenses 43,033 39,398 84,562 77,492
-------- -------- -------- --------
Income before income taxes 158,942 140,146 314,323 269,017
Provision for income taxes 39,181 32,509 77,610 63,865
-------- -------- -------- --------
Net income $119,761 $107,637 $236,713 $205,152
======== ======== ======== ========
Net income per share $1.13 $1.02 $2.23 $1.94
===== ===== ===== =====
Net income per diluted share $1.09 $0.99 $2.17 $1.88
===== ===== ===== =====
Weighted average no. of
shs. outstanding 106,124,220 105,816,151 105,978,049 105,739,608
=========== =========== =========== ===========
Weighted average no. of
diluted shs. outstd. 109,515,722 109,051,506 109,260,209 108,954,037
=========== =========== =========== ===========
(1) Includes net gains (losses) on investment securities sold of
$3,472, $658, $2,972, and ($3,624) for the second quarter of 2002
and 2001 and the six months ended June 30, 2002 and 2001,
respectively, and change in fair value of credit derivatives of
($7,982), $692, ($12,053) and $36 for the second quarter of 2002
and 2001 and the six months ended June 30, 2002 and 2001,
respectively.
Ambac Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, 2002 and December 31, 2001
(Dollars in Thousands Except Share Data)
June 30, December 31,
2002 2001
------------ -----------
(unaudited)
ASSETS
Investments:
Fixed income securities, at fair value
(amortized cost of $10,204,539 in
2002 and $8,355,596 in 2001) $10,456,533 $8,469,157
Fixed income securities pledged as
collateral, at fair value (amortized
cost of $939,509 in 2002 and $1,393,193
in 2001) 948,177 1,401,528
Short-term investments, at cost
(approximates fair value) 220,426 415,002
Other 2,633 2,163
----------- -----------
Total investments 11,627,769 10,287,850
Cash 27,713 76,580
Cash pledged as collateral 9,418 -
Sec. purchased under agreements to resell 14,005 11,200
Receivable for investment agreements 169 4,101
Receivable for securities sold 8,649 8,922
Investment income due and accrued 156,133 144,463
Reinsurance recoverable 1,894 2,259
Prepaid reinsurance 272,946 267,655
Deferred acquisition costs 170,345 163,477
Loans 932,213 901,194
Other assets 648,212 399,994
----------- -----------
Total assets $13,869,466 $12,267,695
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unearned premiums $1,869,659 $1,780,272
Losses and loss adjustment expense reserve 161,497 152,352
Ceded reinsurance balances payable 9,831 10,146
Obligations under investment and
payment agreements 5,220,984 4,089,777
Obligations under investment
repurchase agreements 1,190,564 1,422,151
Securities sold under agreement to repurchase 409,000 425,000
Deferred income taxes 183,214 123,077
Current income taxes 18,750 98,145
Debentures 612,472 619,315
Accrued interest payable 78,630 84,225
Other liabilities 595,637 416,632
Payable for securities purchased 158,027 62,915
----------- -----------
Total liabilities 10,508,265 9,284,007
----------- -----------
Stockholders' equity:
Preferred stock - -
Common stock 1,062 1,060
Additional paid-in capital 602,478 538,135
Accumulated other comprehensive income 158,746 62,476
Retained earnings 2,599,073 2,403,473
Common stock held in treasury at cost (158) (21,456)
----------- -----------
Total stockholders' equity 3,361,201 2,983,688
----------- -----------
Total liabilities and stockholders' equity $13,869,466 $12,267,695
=========== ===========
Number of shares outstanding
(net of treasury shares) 106,203,509 105,584,049
=========== ===========
Book value per share $31.65 $28.26
=========== ===========
Ambac Financial Group, Inc. and Subsidiaries
Supplemental Analytical Data: Components of Core Earnings (1)
(Unaudited)
For The Periods Ended June 30, 2002 and 2001
(Dollars in Thousands)
Three Months Ended Six Months Ended
June 30, June 30
------------------ ------------------
2002 2001 2002 2001
------------------ ------------------
Net income $119,761 $107,637 $236,713 $205,152
Adjustments:
Net securities losses (gns) 2,500 (878) 5,238 2,047
-------- ------- -------- --------
Operating earnings 122,261 106,759 241,951 207,199
Refundings, calls and
other accelerations (6,410) (6,057) (10,569) (9,529)
-------- ------- -------- --------
Core earnings $115,851 $100,702 $231,382 $197,670
======== ======= ======== ========
Ambac Financial Group, Inc. and Subsidiaries
Supplemental Analytical Data: Components of Adjusted Book Value
Per Share (2)
June 30, 2002 and December 31, 2001
June 30, December 31,
2002 2001
------------ ------------
Book value $31.65 $28.26
After-tax value of:
Net unearned premium reserve less
deferred acquisition costs 8.72 8.31
Present value of future installment
premiums 6.37 6.07
Unrealized loss on investment
agreement liabilities (1.09) (0.61)
------ ------
Adjusted book value $45.65 $42.03
====== ======
(1) Core earnings and operating earnings are not substitutes for net
income computed in accordance with accounting principles generally
accepted in the United States of America (GAAP), but are important
measures used by management, equity analysts and investors to
measure Ambac's financial results. The Company defines operating
earnings as net income, less the effect of realized and unrealized
gains and losses and certain non- recurring items. Core earnings,
which Ambac reports as analytical data, is defined as operating
earnings less net insurance premiums earned from refundings and
calls. 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.
(2) Adjusted book value (ABV), which is not promulgated under GAAP, is
used by management, equity analysts and investors as a measurement
of the Company's intrinsic value with no benefit given for ongoing
business activity. Management derives ABV by beginning with
stockholders' equity (book value) and adding or subtracting the
after-tax value of: the net unearned premium reserve; deferred
acquisition costs; the present value of estimated net future
installment premiums; and the unrealized gain or loss on
investment agreement liabilities. These adjustments will not be
realized until future periods and may differ materially from the
amounts used in determining ABV. The definition of ABV used by the
Company may differ from definitions of ABV used by other public
holding companies of financial guarantee insurers.
Ambac Assurance Corporation
Statutory Accounting, Financial and Capital Information (1)
June 30, 2002 and December 31, 2001
(Dollars in Thousands, Except Ratios)
June 30, December 31,
2002 2001
------------ ------------
Capital and Claims-Paying Resources:
Contingency reserve $1,374,533 $1,265,652
Capital and surplus 2,101,092 1,996,284
---------- ----------
Qualified statutory capital 3,475,625 3,261,936
Unearned premiums 1,960,671 1,860,090
Losses and loss adjustment
expenses 38,277 27,835
---------- ----------
Policyholders' reserves 5,474,573 5,149,861
Third party capital support (2) 800,000 800,000
Present value of future install prem. 1,040,799 986,760
---------- ----------
Total claims-paying resources $7,315,372 $6,936,621
========== ==========
Net financial guarantees in force $502,956,334 $476,189,690
Capital ratio (3) 145:1 146:1
Financial resources ratio (4) 69:1 69:1
(1) Statutory accounting information for Ambac Assurance Corporation
and Connie Lee Insurance Company are combined for purposes of
this schedule. Qualified statutory capital for Ambac Assurance,
on a stand alone basis, as of June 30, 2002 and December 31, 2001
are $3.453 billion and $3.240 billion, respectively.
(2) Third party capital support at June 30, 2002 represents pre-
funded capital which provides for the unconditional ability to
issue up to $800 million of preferred stock to high quality
asset-backed trusts.
(3) Capital ratio is net financial guarantees in force divided by
qualified statutory capital.
(4) Financial resources ratio is net financial guarantees in force
divided by total claims-paying resources.
Ambac Assurance Corporation and Subsidiaries
Capitalization Table - GAAP
June 30, 2002 and December 31, 2001
(Dollars in Millions)
The following table sets forth Ambac Assurance's consolidated
capitalization as of June 30, 2002 and December 31, 2001,
respectively, on the basis of accounting principles generally accepted
in the United States of America.
June 30, December 31,
2002 2001
------------ ------------
(unaudited)
Unearned premiums $1,880 $1,790
Other liabilities 1,138 888
------ ------
Total liabilities 3,018 2,678
------ ------
Stockholder's equity:
Common stock 82 82
Additional paid-in capital 922 928
Accumulated other comprehensive income 142 81
Retained earnings 2,592 2,386
------ ------
Total stockholder's equity 3,738 3,477
------ ------
Total liabilities and stockholder's equity $6,756 $6,155
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