Ambac Financial Group (ABK) posted a $690.1m net Q110 loss, widened from a $392.2m net loss in the year-ago quarter, as write-downs in mortgage securities and the adoption of certain accounting standards weighed on company results. Ambac’s exposure to residential mortgage-backed securities (RMBS) and write-downs of RMBS securities also drove the quarter’s losses. The bond insurer posted $31.3m of other-than-temporary impairment losses in the quarter, narrowed from $744.7m in the year-ago quarter. Write-downs of Ambac-wrapped RMBS securities within its investment portfolio drove the losses. Credit deterioration in the second-lien segment of Ambac’s insured RMBS portfolio drove $89.2m of total net losses in the quarter, while improvement in certain first-lien RMBS transactions kept losses significantly narrowed from $739.8m in the year-ago quarter. Ambac recorded a $495.1m loss related to the adoption of Accounting Standards Update (ASU) 2009-17 in January. The ASU required the firm to consolidate certain enterprises known as variable interest entities (VIEs) when its insurance policies or written credit derivatives give the company a controlling financial interest in those entities. As a result, Ambac consolidated 83 VIEs, which increased shareholders’ equity by $705m. But then, in March, Ambac’s principal operating subsidiary, Ambac Assurance Corp., established a segregated account to hold insurance policies related to RMBS and other structured finance transactions for orderly runoff and settlement. As a result, Ambac no longer held a controlling interest in the 49 VIEs whose insurance policies were allocated to the segregated account. Those VIEs were de-consolidated as of March 24, at a $495.1m charge to Ambac’s consolidated statement of operations. Write to Diana Golobay.
Disclosure: the author holds no relevant investment positions.Diana Golobay was a reporter with HousingWire through mid-2010, providing wide-ranging coverage of the U.S. financial crisis. She has since moved onto other roles as a writer and editor.see full bio
Most Popular Articles
Latest Articles
Test
The story for the housing market over the past three years has been, “Home sales are down, home prices are up.” Because inventory was so restricted after the pandemic, prices pushed higher even as demand weakened. That story may finally be inverting as unsold inventory of homes is now great enough that home prices are […]
-
Freddie Mac’s Donna Spencer on their Servicing Excellence initiative
-
Lower mortgage rates attracting more homebuyers
-
Rocket Pro TPO raises conforming loan limit to $802,650 ahead of FHFA’s decision
-
Show up, don’t show off: Laura O’Connor is redefining success in real estate
-
Between the lines: Understanding the nuances of the NAR settlement
Diana Golobay was a reporter with HousingWire through mid-2010, providing wide-ranging coverage of the U.S. financial crisis. She has since moved onto other roles as a writer and editor.see full bio