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Ambac Financial logs adjusted earnings in Q2 amid de-risking efforts

Ambac Financial Group Inc. reported second-quarter adjusted earnings of $86.4 million, or $1.88 per share, compared with an adjusted loss of $9.2 million, or a loss of 20 cents per share, in the first quarter.

The company posted a net loss attributable to common shareholders of $128.4 million, or a loss of $2.79 per share, for the second quarter, compared with a net loss attributable to common shareholders of $43.2 million, or a loss of 94 cents per share, in the first quarter.

Ambac Financial President and CEO Claude LeBlanc said second-quarter results recognize the company's progress on actively de-risking its insured portfolio. Results for the second quarter were primarily impacted by previously announced Ballantyne Re PLC restructuring and commutation, which eliminated $900 million of adversely classified credit exposure and led to a net loss of $83.0 million, or $1.80 per share, and adjusted earnings of $119.4 million, or $2.60 per share.

The company said its active de-risking efforts reduced its adversely classified and watch list credits during the second quarter by $1.6 billion, or 8.3%, during the second quarter. The CEO noted that the company's de-risking initiatives "significantly strengthened" its consolidated capital position and "materially improved" its adjusted book value.

Net premiums earned for the quarter were $7.8 million, compared with $27.8 million in the first quarter.

Adjusted book value was $1.35 billion, or $29.57 per share, as of June 30, compared with $1.25 billion, or $27.52 per share, as of March 31.

Ambac Financial also announced that the United States District Court for the Southern District of New York approved the distribution plan proposed by RCB Fund Services for the $285 million settlement that the SEC and Citigroup Global Markets Inc. reached in August 2014.

The settlement is related to a collateralized debt obligation transaction arranged by Citigroup Global Markets where Ambac Credit Products LLC provided credit protection through a credit default swap, which was insured by Ambac Financial subsidiary Ambac Assurance Corp., to a bank counterparty exposed to the transaction.

The settlement provides for payment of about $142 million to Ambac Assurance, which will be recorded as part of net income in the period in which the settlement funds are distributed.