Ambac Financial Group, Inc. Announces Third Quarter Net Income of $131.7 Million, Up 19%; Third Quarter Net Income Per Diluted Share of $1.21, up 19%.Business Editors NEW YORK--(BUSINESS WIRE)--Oct. 16, 2002 Third 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. (1) $305.6 million, up 69% 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 , 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 third quarter 2002 net income of $131.7 million, or $1.21 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. This represents a 19% increase from third quarter 2001 net income of $111.0 million, or $1.02 per diluted share. Net Income Per Diluted Share Ambac presents net income and net income per diluted share. These measures are 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). ). However, the earnings research and estimate services have not adjusted their calculations to report strictly GAAP accounting. In order to assist investors in their understanding of quarterly results, Ambac will provide other useful information. Earnings measures reported by earnings research and estimate services typically exclude: (i) net gains and losses from sales of 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 and losses on credit derivative 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 contracts ("net security gains and losses"); and (ii) accelerated premiums earned on guaranteed obligations that have been refunded ("refundings"). During the third quarter 2002, net security gains and losses had a net income effect of ($0.1) million, no impact on per share data. Refundings had a net income effect of $8.9 million, or $0.08 per diluted share for the third quarter 2002. Table I, below, provides third quarter and nine months comparisons for the years 2002 and 2001.
Table I
Third Quarter Nine Months
% %
2002 2001 Change 2002 2001 Change
Net income per diluted $1.21 $1.02 +19% $3.38 $2.90 +17%
share
Effect of net security $0.00 $0.01 n.a. $0.05 $0.03 n.a.
losses
Sub-total excluding $1.21 $1.03 +17% $3.43 $2.93 +17%
item(a)
Effect of refundings ($0.08) ($0.05) n.a. ($0.18) ($0.14) n.a.
Total excluding items $1.13 $0.97 +16% $3.25 $2.79 +16%
(a) Consensus earnings that are reported by earnings research and estimate services are comparable to this line. Commenting on the overall 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:
adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. as I can ever recall." Revenues Total revenues in the third quarter of 2002 were $220.4 million, an increase of 22% from $181.3 million in revenues for the third quarter of 2001. Highlights Adjusted gross premiums written(1) in the third quarter of 2002 were $305.6 million, up 69% from the third quarter of 2001 of $180.6 million. Strong premium growth was achieved in all of Ambac's business lines - public, structured and international finance. In public finance, Ambac continues to benefit from the significant increase in new issuance of municipal bonds. Healthy writings of transportation and healthcare drove the growth. Structured finance growth was spurred by strong demand in many areas of the consumer asset-backed market, primarily mortgage-backed Mortgage-backed may refer to:
A general inclusive term which covers Collateralized Bond Obligations, Collateralized Loan Obligations, and Collateralized Mortgage Obligations, . 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 Third Quarter Nine Months
% %
2002 2001 Change 2002 2001 Change
Public Finance $126.8 $ 79.5 +59% $335.7 $249.5 +35%
Structured Finance $ 85.6 51.4 +67% 266.5 212.6 +25%
International 93.2 49.7 +88% 192.0 184.0 +4%
Total $305.6 $180.6 +69% $794.2 $646.1 +23%
Net premiums written in the third quarter of 2002 of $178.3 million were 52% higher than net premiums written of $117.0 million in the same period of 2001. Gross premiums written for the third quarter of 2002 were offset by $26.9 million in ceded premiums. In the third quarter of 2001, ceded premiums were $35.9 million. Net premiums written for the nine months of 2002 of $479.0 million were 12% higher than net premiums written of $426.9 million in the same period of 2001. 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 for the third quarter of 2002 were $129.7 million, which represented a 25% increase from the $103.9 million earned in the third quarter of 2001. Net premiums earned increased for all market segments. Public finance earned premium Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. 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 other structured transactions. 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 Europe Europe (y  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). , Japan and Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. .Net premiums earned include accelerated premiums, which result from refundings and calls recognized during the quarter. Accelerated premiums were $15.7 million in the third quarter of 2002 (which had a net income per diluted share effect of $0.08), up 50% from $10.5 million ($0.05 per diluted share) in accelerated premiums in the third quarter of 2001. Included in third quarter 2002 accelerated premiums was $4.3 million from international transactions. There were no international accelerated premiums in the comparable prior period. The relatively high level of accelerated earnings has generally been prompted by the current low interest rate environment. When interest rates rise in the future, accelerated earnings will decline. Net premiums earned and other credit enhancement fees for the nine months of 2002 were $359.9 million, representing a 23% increase from the $292.1 million earned during the first nine months of 2001. Accelerated premiums were $34.2 million for the nine months of 2002 ($0.18 per diluted share), up 26% from $27.2 million ($0.14 per diluted share) in accelerated premiums for the nine months of 2001. A breakdown of net premiums earned and other credit enhancement fees by market sector are included below as Table III. Normal net premiums earned exclude accelerated premiums that result from refundings and calls.
Table III
Net Premiums Earned and Other Credit Enhancement Fees
$-millions Third Quarter Nine Months
% %
2002 2001 Change 2002 2001 Change
Public Finance $ 39.0 $ 35.1 +11% $114.3 $101.5 +13%
Structured Finance 45.6 37.8 +21% 130.3 $109.0 +20%
International 29.4 20.5 +43% 81.1 54.4 +49%
Total Normal Premiums/ 114.0 93.4 +22% 325.7 264.9 +23%
Fees
Accelerated Premiums 15.7 10.5 +50% 34.2 27.2 +26%
Total $129.7 $103.9 +25% $359.9 $292.1 +23%
Net investment income for the third quarter of 2002 was $75.9 million, representing an increase of 13% from $67.3 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 Reinvestment Rate The rate at which cash flows from fixed-income securities may be reinvested. Notes: Because of the additional interest income, bondholders can make larger investment returns if they reinvest received coupon payments. stemming stemming - stemmer from the current interest rate environment. Investment income was also positively impacted by the proceeds from Ambac's $200 million debt offering in October October: see month. 2001. Net investment income for the nine months of 2002 was $222.0 million, representing an increase of 13% from $196.9 million in the comparable period of 2001. 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. revenues, excluding net securities gains and losses, were $13.6 million in the third quarter of 2002, up 33% from $10.2 million in revenues for the third quarter of 2001. Financial services revenues include revenues from swaps, investment agreements and cash management. Investment agreement revenue doubled on improved interest spreads and higher volume, while swap and money management revenues were relatively flat during the quarter. Financial services revenues, excluding net securities gains and losses, were $41.1 million in the nine months of 2002, up 13% from the $36.5 million of revenues in the nine months of 2001. Expenses Highlights Financial guarantee expenses of $24.6 million for the third quarter of 2002 increased by 13% over the $21.7 million of expenses for the same quarter of 2001. This increase was primarily due to higher compensation costs and normal additions to the general loss provision. Financial guarantee expenses of $73.3 million for the first nine months of 2002 increased by 12% over the $65.2 million of expenses for the same period of 2001. Financial services expenses for the third quarter of 2002 of $5.4 million increased by 8% from $5.0 million in expenses for the third quarter of 2001. Financial services expenses for the first nine months of 2002 of $16.2 million decreased by 2% from $16.6 million in expenses for the same period of 2001. Other Items Total net securities gains/(losses) for the third quarter of 2002 were ($0.2) million, no per share impact, consisting of 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. on investment securities of $6.7 million and net mark-to-market losses on credit derivatives of ($6.9) million. For the third quarter of 2001 net securities losses were ($1.4) million, or ($0.01) per diluted share, consisting of net realized gains on investment securities of $1.7 million and net mark-to- market losses on credit derivatives of ($3.1) million. Total net securities gains/(losses) for the nine months of 2002 were ($9.0) million, or ($0.05) per diluted share, consisting of net realized gains on investment securities of $10.0 million and mark-to-market losses on credit derivatives of ($19.0) million. For the nine months of 2001 net securities losses were ($4.5) million, or ($0.03) per diluted share, consisting of net realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. on investment securities of ($1.5) million and mark-to-market losses on credit derivatives of ($3.0) million. Interest expense for the third quarter of 2002 was $10.8 million, up 15% from $9.4 million for the third quarter of 2001. The increase is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to Ambac's issuance of $200 million in 50-year debentures in October 2001. Balance Sheet Highlights Total assets as of September September: see month. 30, 2002 were $14.69 billion, up 19% from total assets of $12.35 billion at December December: see month. 31, 2001. This increase was due primarily to cash generated from business written during the period and increased volume in the guaranteed investment contract Guaranteed investment contract (GIC) A pure investment product in which a life company agrees, for a single premium, to pay at a maturity date the principal amount of a predetermined annual crediting (interest) rate over the life of the investment. business. As of September 30, 2002, stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $3.62 billion, a 21% increase from year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2001 stockholders' equity of $2.98 billion. The increase stemmed stemmed adj. 1. Having the stems removed. 2. Provided with a stem or a specific type of stem. Often used in combination: stemmed goblets; long-stemmed roses. primarily from net income during the period and an increase in the fair market value of the investment portfolio due to a decline in interest rates during the period. Stock Options Ambac has decided to voluntarily adopt the fair value based method of accounting for stock-based compensation plans as prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). in Statement of Financial Accounting Standards number 123 "Accounting for Stock-Based Compensation" (FAS 123) beginning in the first quarter of 2003. The fair value based method requires expensing the estimated cost of employee stock options. Currently, Ambac estimates the net income effect of prospectively adopting FAS 123 will be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $0.01 per diluted share on a quarterly basis, for options granted in 2003. 2002 Earnings Guidance Ambac management's guidance on 2002 GAAP net income includes ($0.05) per diluted share year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. net security losses but is 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 net income per diluted share for 2002 of $4.56 - $4.60. 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 October 2002 Board meeting, the Board of Directors of Ambac Financial Group, Inc. approved the regular quarterly cash dividend of $0.10 per share of common stock. The dividend is payable on December 4, 2002 to stockholders of record on November November: see month. 11, 2002. 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, except as required by law. 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 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) Adjusted gross premiums written, which is not promulgated prom·ul·gate tr.v. prom·ul·gat·ed, prom·ul·gat·ing, prom·ul·gates 1. To make known (a decree, for example) by public declaration; announce officially. See Synonyms at announce. 2. 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 analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. data, are defined as gross (direct and assumed) up-front up-front or up·front Informal adj. 1. Straightforward; frank. 2. Paid or due in advance: up-front cash. adv. premiums written plus the present value of estimated installment Regular, partial portion of the same debt, paid at successive periods as agreed by a debtor and creditor. An installment loan is designed to be repaid in certain specified, ordinarily equal amounts over a designated period, such as a year or a number of months. 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 September 30, 2002 and 2001
(Dollars in Thousands Except Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- --------------------
2002 2001 2002 2001
--------------------- --------------------
Revenues:
Financial Guarantee:
Gross prems. written $205,110 $152,918 $550,154 $499,253
Ceded prems. written (26,854) (35,874) (71,108) (72,342)
-------- -------- -------- --------
Net prems. written $178,256 $117,044 $479,046 $426,911
-----------------------------------------
Net prems. earned $122,396 $98,019 $339,680 $276,547
Other credit
enhancement fees 7,307 5,876 20,171 15,524
-------- -------- -------- --------
Net prems. earned and
other credit
enhancement fees 129,703 103,895 359,851 292,071
Net investment income 75,895 67,318 222,035 196,852
Net sec. (lses) gns.(1) (1,500) 3,578 (10,581) (10)
Other income 472 502 2,586 3,918
Financial Services:
Revenue 13,582 10,231 41,139 36,457
Net sec. gns. (lses) 1,402 (3,589) 2,168 (3,151)
Other:
Revenue 974 786 2,659 3,093
Net securities losses (127) (1,383) (571) (1,383)
-------- -------- -------- --------
Total revenues 220,401 181,338 619,286 527,847
-------- -------- -------- --------
Expenses:
Financial Guarantee:
Losses & loss adj. exp. 6,100 5,100 17,700 14,500
Und. & oprtg. exp. 18,467 16,602 55,631 50,671
Financial Services 5,380 5,023 16,215 16,627
Interest 10,774 9,370 32,256 28,338
Other 1,884 921 5,365 4,372
-------- -------- -------- --------
Total expenses 42,605 37,016 127,167 114,508
-------- -------- -------- --------
Income before income taxes 177,796 144,322 492,119 413,339
Provision for income taxes 46,105 33,314 123,715 97,179
-------- -------- -------- --------
Net income $131,691 $111,008 $368,404 $316,160
======== ======== ======== ========
Net income per share $1.24 $1.05 $3.48 $2.99
===== ===== ===== =====
Net income per diluted share $1.21 $1.02 $3.38 $2.90
===== ===== ===== =====
Weighted average no. of
shs. outstanding 105,865,884 105,781,745 105,940,661 105,753,654
=========== =========== =========== ===========
Weighted average no. of
diluted shs. outstd. 108,959,876 109,077,058 109,148,469 108,980,936
=========== =========== =========== ===========
(1) Includes net gains (losses) on investment securities sold of
$5,408, $6,633, $8,380, and $3,009 for the third quarter of
2002 and 2001 and the nine months ended September 30, 2002 and
2001, respectively, and change in fair value of credit
derivatives of ($6,908),($3,055), ($18,961) and ($3,019) for
the third quarter of 2002 and 2001 and the nine months ended
September 30, 2002 and 2001, respectively.
Ambac Financial Group, Inc. and Subsidiaries
Consolidated Balance Sheets
September 30, 2002 and December 31, 2001
(Dollars in Thousands Except Share Data)
September 30, December 31,
2002 2001
------------ -----------
(unaudited)
ASSETS
Investments:
Fixed income securities, at fair value
(amortized cost of $10,163,780 in
2002 and $8,355,596 in 2001) $10,710,694 $8,469,157
Fixed income securities pledged as
collateral, at fair value (amortized
cost of $809,274 in 2002 and $1,393,193
in 2001) 815,742 1,401,528
Short-term investments, at cost
(approximates fair value) 137,369 415,002
Other 2,159 2,163
----------- -----------
Total investments 11,665,964 10,287,850
Cash 32,342 76,580
Sec. purchased under agreements to resell 24,504 11,200
Receivable for investment agreements 21,369 4,101
Receivable for securities sold 508,156 8,922
Investment income due and accrued 127,961 144,463
Reinsurance recoverable 2,195 2,259
Prepaid reinsurance 273,931 267,655
Deferred acquisition costs 172,718 163,477
Loans 848,399 901,194
Derivative product assets 961,250 383,959
Other assets 49,290 100,460
----------- -----------
Total assets $14,688,079 $12,352,120
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unearned premiums $1,926,789 $1,780,272
Losses and loss adjustment expense reserve 167,045 152,352
Ceded reinsurance balances payable 11,248 10,146
Obligations under investment and
payment agreements 5,246,902 4,089,777
Obligations under investment
repurchase agreements 1,085,946 1,422,151
Securities sold under agreement to repurchase 460,495 425,000
Deferred income taxes 270,930 123,077
Current income taxes 36,675 98,145
Debentures 612,717 619,315
Accrued interest payable 70,278 84,225
Derivative product liabilities 799,719 325,922
Other liabilities 138,175 175,135
Payable for securities purchased 241,036 62,915
----------- -----------
Total liabilities 11,067,955 9,368,432
----------- -----------
Stockholders' equity:
Preferred stock - -
Common stock 1,062 1,060
Additional paid-in capital 601,792 538,135
Accumulated other comprehensive income 319,793 62,476
Retained earnings 2,719,540 2,403,473
Common stock held in treasury at cost (22,063) (21,456)
----------- -----------
Total stockholders' equity 3,620,124 2,983,688
----------- -----------
Total liabilities and stockholders' equity $14,688,079 $12,352,120
=========== ===========
Number of shares outstanding
(net of treasury shares) 105,806,172 105,584,049
=========== ===========
Book value per share $34.21 $28.26
=========== ===========
Ambac Financial Group, Inc. and Subsidiaries
Supplemental Analytical Data: Components of Adjusted Book Value
Per Share (1)
September 30, 2002 and December 31, 2001
September 30, December 31,
2002 2001
------------ ------------
Book value $34.21 $28.26
After-tax value of:
Net unearned premium reserve less
deferred acquisition costs 9.09 8.31
Present value of future installment
premiums 6.86 6.07
Unrealized loss on investment
agreement liabilities (2.85) (0.61)
------ ------
Adjusted book value $47.31 $42.03
====== ======
(1) Adjusted book value (ABV), which is not promulgated in
accordance with accounting principles generally accepted in
the United States of America (GAAP), is used by management,
equity analysts and investors as a measurement of the
Company's intrinsic value with no benefit given for ongoing
business activity. Management derives ABV by beginning with
stockholders' equity (book value) and adding or subtracting
the after-tax value of: the net unearned premium reserve;
deferred acquisition costs; the present value of estimated net
future installment premiums; and the unrealized gain or loss
on investment agreement liabilities. These adjustments will
not be realized until future periods and may differ materially
from the amounts used in determining ABV. The definition of
ABV used by the Company may differ from definitions of ABV
used by other public holding companies of financial guarantee
insurers.
Ambac Assurance Corporation
Statutory Accounting, Financial and Capital Information (1)
September 30, 2002 and December 31, 2001
(Dollars in Thousands, Except Ratios)
September 30, December 31,
2002 2001
------------ ------------
Capital and Claim-Paying Resources:
Contingency reserve $1,443,395 $1,265,652
Capital and surplus 2,153,428 1,996,284
---------- ----------
Qualified statutory capital 3,596,823 3,261,936
Unearned premiums 2,020,980 1,860,090
Losses and loss adjustment
expenses 45,003 27,835
---------- ----------
Policyholders' reserves 5,662,806 5,149,861
Third party capital support (2) 800,000 800,000
Pres value of future install prem (3) 1,117,557 986,760
---------- ----------
Total claims paying resources $7,580,363 $6,936,621
========== ==========
Net financial guarantees in force $524,568,718 $476,189,690
Capital ratio (4) 146:1 146:1
Financial resources ratio (5) 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 September 30,
2002 and December 31, 2001 are $3.564 billion and $3.240
billion, respectively.
(2) Third party capital support at September 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) Includes the present value of future credit enhancement fees
from structured credit derivatives.
(4) Capital ratio is net financial guarantees in force divided by
qualified statutory capital.
(5) Financial resources ratio is net financial guarantees in force
divided by total claims paying resources.
Ambac Assurance Corporation and Subsidiaries
Capitalization Table - GAAP
September 30, 2002 and December 31, 2001
(Dollars in Millions)
The following table sets forth Ambac Assurance's consolidated
capitalization as of September 30, 2002 and December 31, 2001,
respectively, on the basis of accounting principles generally accepted
in the United States of America.
September 30, December 31,
2002 2001
------------ ------------
(unaudited)
Unearned premiums $1,936 $1,790
Other liabilities 1,702 973
------ ------
Total liabilities 3,638 2,763
------ ------
Stockholder's equity:
Common stock 82 82
Additional paid-in capital 922 928
Accumulated other comprehensive income 273 81
Retained earnings 2,708 2,386
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Total stockholder's equity 3,985 3,477
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Total liabilities and stockholder's equity $7,623 $6,240
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