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Ambac Reduces Counterparty Risk


NEW YORK.- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today confirmed that it has terminated all reinsurance transactions with RAM Reinsurance Company Ltd. (“Ram Re”) effective April 8, 2009. The termination reflects the recapture of approximately $7 billion of par outstanding of which approximately two thirds is classified as public finance exposure. The remainder of the portfolio, approximately $2.4 billion, is comprised of structured finance exposures including approximately $500 million of U.S. RMBS. The economic result will be a settlement payment from Ram Re to Ambac in the amount of approximately $97 million. The estimated present value of future installment premiums associated with this business amounts to approximately $60 million.

Greg Raab, Chief Risk Officer, commented that, “This transaction confirms Ambac’s commitment to reduce outstanding reinsurance exposure. In so doing, we are reducing counterparty risk, enhancing liquidity and earned premiums, and improving our risk-based capital position. In addition, the recapture of reinsurance from lower rated counterparties has a positive overall impact on rating agency capital which applies increasingly onerous haircuts to reinsurance from BBB/Baa or lower rated reinsurers.”


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