Ambac Loses $11.69 / Share in Q1!! - Almost Twice Yesterday's Close!
Sounds bad, right? But there's nothing to worry about... They still have a AAA rating from Moody's so everything with this company must be on sound financial footing. :() Give me a break... if we learn one thing from this whole fiasco, it's to never again rely on the ratings agencies for impartial, honest indicators. The ratings agencies have shown their cards with this crisis... they are a cog in the spin machine, trying to give the appearance of everything being A-OK. S&P, Moody's, etc... as Steve Colbert would say... "you're on notice"! We're on to you. Fitch's downgrade to AA was a joke of an understatement, and only serves to save a little face for them. What do you suppose the REAL ratings on Citibank or Lehman would be of we had impartial oversight of financial stability? I have one word for the whole financial sector right now until the markets suffer their way through systemic de-leveraging: Junk!
LONDON (MarketWatch) -- Bond insurer Ambac Financial Group Inc. said Wednesday that it swung to a first-quarter loss of $1.66 billion, or $11.69 a share, from a profit of $213.3 million, or $2.02 a share, a year earlier. The group attributed the loss to a pretax $1.73 billion mark-to-market loss on its exposure to credit derivatives and a $1.04 billion loss provision on its financial guarantee direct exposure to mortgage-related securities. Ambac said its operating loss per share was $6.93. Analysts polled by Thomson Financial had forecast a loss of $1.51 a share. The group said it continues to believe the capital it raised in the quarter will enable it to get through the credit market crisis. It added credit enhancement production in the quarter fell 87% to $40.5 million as it has written very little business since late 2007. Ambac Posts Loss on CDO Writedowns, New Business Drop (Update2)
By Christine Richard April 23 (Bloomberg) -- Ambac Financial Group Inc., having staved off a credit-rating downgrade, posted a wider loss than analysts estimated after taking $3.1 billion in charges for subprime-mortgage securities.
The first-quarter net loss was $1.66 billion, or $11.69 a share, compared with net income of $213.3 million, or $2.04, a year earlier, New York-based Ambac said today in a statement. The company's operating loss of $6.93 a share was larger than the $1.82 estimated by six analysts surveyed by Bloomberg.
Ambac, the second-largest bond insurer, was ``severely impacted'' by the plunging value of mortgage-related guarantees, interim Chief Executive Officer Michael Callen said in the statement. New business slumped 87 percent as states and municipalities shunned its insurance and the market for mortgage securities dried up. Ambac ratcheted up estimates for claims it will need to pay on home-loan debt by $2 billion.
``Ambac's franchise has been damaged by recent ratings pressure and negative publicity,'' Barclay's Capital analyst Seth Glasser wrote in a research report this week. Ambac raised $1.5 billion in March after credit rating companies threatened to strip the bond insurer of its top rating following record losses on subprime-mortgage securities. The additional capital staved off downgrades by Moody's Investors Service and Standard & Poor's. Fitch Ratings cut Ambac Assurance Corp. to AA in January. All three companies have negative outlooks on the ratings. Ambac, which has lost 93 percent of its market value in the past year, rose 9 cents to $6.03 yesterday in New York Stock Exchange composite trading.
The $1.5 billion sale of shares and convertible units nearly tripled Ambac's outstanding common shares to 285 million. The company this week said it's seeking shareholder approval to increase authorized shares to 650 million from 350 million.
``While we realize that these are disappointing credit results, we continue to believe that the capital raise and strategic business actions taken during the quarter will enable us to get beyond this credit market,'' Callen said in the statement. Ambac, which pioneered municipal bond insurance in 1971, was hobbled by its expansion into collateralized debt obligations, or CDOs, which package pools of debt, including mortgage-backed securities, and slice them into pieces with varying ratings. As defaults on subprime mortgages climbed, the credit ratings of CDOs collapsed, requiring Ambac and other guarantors to hold more capital against their guarantees on the securities.
Ambac insured just 1 percent of municipal bonds sold during the first quarter while its smaller competitor Financial Security Assurance Inc., a unit of Dexia SA of Brussels and Paris, took 65 percent of the market, according to Thomson Financial data. FSA has a stable outlook on its AAA ratings from all three major credit rating companies. City and state officials also have begun to question the value of bond insurance. California Treasurer Bill Lockyer is circulating a petition to require credit rating companies to change how they assess municipalities. The current rating system exaggerates the risk cities and states will default, creating artificial demand for bond insurance, Lockyer said. At hearings in Washington earlier this year, U.S. Representative Barney Frank told Moody's Investors Service it had a month to change the way it rates municipal bonds or face legislative intervention. To contact the reporter on this story: Christine Richard in New York at email@example.com http://bloomberg.com/apps/news?pid=2...ZVE&refer=home