Bond insurer Ambac Financial Group Inc. (ABK), Thursday reported a profit for the fourth quarter, compared to a net loss last year, helped by a tax benefit, lower loss and loss expenses, and unrealized mark-to-market gains in the credit derivatives portfolio. Following the news, the Ambac shares gained more than 51% in the after-hours trading.
The New York-based company posted net income of $558.1 million or $1.93 per share for the fourth quarter, compared to a net loss of $2.3 billion or $8.14 per share in the prior year quarter.
The year-ago result reflected a significant negative net change in fair value of credit derivatives, higher loss and loss adjustment expenses and a large increase in the deferred tax asset valuation allowance.
Fourth quarter total revenues were $566.60 million, compared to negative revenues of $202.24 million in the same quarter last year.
Net premiums earned for the fourth quarter decreased 19% to $184.4 million from $228.1 million earned in the year-ago quarter. Accelerated premiums fell 45% to $44.8 million from $81.2 million in the previous year quarter.
Excluding accelerated premiums, normal net premiums earned were $139.6 million, compared to $146.9 million in the fourth quarter of 2008.
Net investment income, excluding variable interest entities, grew 8% to $118.7 million from $109.5 in the prior year quarter, due to an increase in the average yield of the portfolio as the mix of securities shifted from primarily tax-exempt to a greater percentage of taxable securities.
Other-than-temporary impairment losses in the financial guarantee investment portfolio were $118.1 million in the fourth quarter, compared to other-than-temporary impairment losses of $66.0 million a year ago.
The net change in fair value of credit derivatives, which comprises realized gains/(losses) and other settlements from credit derivatives and unrealized gains/(losses) on credit derivatives, was a gain of $133.2 million for the fourth quarter of 2009, compared to a loss of $594.4 million for the fourth quarter of 2008.
Net unrealized gains on credit derivative contracts were $781.7 million in the fourth quarter of 2009, compared to net unrealized gains amounting to $394.1 million in the fourth quarter 2008.
Total net loss and loss expenses eased to $385.4 million in the fourth quarter of 2009 from $916.4 million in the prior year quarter.
Ambac last month delayed filing its annual report due to a regulatory action. Wisconsin insurance regulators came forward to take control of about $63 billion in toxic assets, mostly policies related to residential mortgage-backed securities, held by Ambac's subsidiary.
For fiscal year 2009, Ambac reported a net loss of $14.6 million or $0.05 per share, compared to a loss of $5.6 billion or $22.31 per share in the previous year.
Annual revenues were $3.91 billion, compared to negative revenues of $2.75 billion in the prior year.
Ambac closed Thursday's regular trading at $0.64, up 3 cents or 5.32%. In after-hours, the share further gained 32 cents or 51.21%.
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