NU Online News Service, April 9, 3:42 p.m. EDT
Ambac Financial Group Inc. reported a fourth-quarter net profit compared to a $2 billion loss for the 2008 period, but debt obligations cloud its future and could mean bankruptcy, the bond insurer reported today.
The New York-based firm reported 2009 fourth-quarter net income of $558 million, or $1.93 a share, compared to a net loss of $2.34 billion, or $8.14 a share, for the comparable period of 2008.
Revenues for the period jumped $769 million, from a fourth-quarter loss of $202 million to $567 million.
The company said the results reflect a tax benefit recorded during the period, reduced loss and loss expenses recorded relative to fourth-quarter 2008, and unrealized mark-to-market gains in the company's credit derivatives portfolio.
Under the tax benefit, which allowed the company to carry 2008 and 2009 operating losses as far back as 2003, Ambac's principal operating subsidiary, Ambac Assurance Corp. (AAC), received a tax refund amounting to $444 million in February.
For the year, Ambac reported a net loss of $15 million, or 5 cents a share, compared to net loss of $5.61 billion, or $22.31 a share, in 2008. Total revenues rose $6.66 billion to $3.91 billion.
Ambac said it has insufficient capital to finance its debt service and operating expense requirements past the second quarter of 2011 and may need to seek bankruptcy protection.
In late March, the Wisconsin Office of the Commissioner of Insurance directed AAC to create a segregated account for credit derivatives, residential mortgage-backed securities and other structured finance transactions for the purpose of rehabilitation in order to facilitate runoff and/or settlement of the company's liabilities.
After the announcement, Standard & Poor's changed its "CC" (very weak) rating to "R" (regulatory intervention) for AAC.
AAC is a guarantor of public finance and structured finance obligations and retains a "Caa2″ (very poor) rating from Moody's Investors Services Inc.
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