| Industries |
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| Diversified Financial Services |
| Investment Banking and Brokerage |
| Exposures |
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| Economic |
| Military |
| Political reform |
| Cooperate |
| Rights |
| Event Codes |
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| Accident |
| Solicit support |
| Consult |
| Adjust |
| Yield |
| Host meeting |
| Agree |
| Demand |
| Military blockade |
| Yield to order |
| Sports contest |
| Release or return |
| Promise policy support |
| Comment |
| Wiki | Wiki Summary |
|---|---|
| Credit risk | A credit risk is risk of default on a debt that may arise from a borrower failing to make required payments. In the first resort, the risk is that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. |
| Financial condition report | In accounting, a financial condition report (FCR) is a report on the solvency condition of an insurance company that takes into account both the current financial status, as reflected in the balance sheet, and an assessment of the ability of the company to survive future risk scenarios. Risk assessment in an FCR involves dynamic solvency testing, a type of dynamic financial analysis that simulates management response to risk scenarios, to test whether a company could remain solvent in the face of deteriorating economic conditions or major disasters. |
| Financial statement | Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity.\nRelevant financial information is presented in a structured manner and in a form which is easy to understand. |
| Financial ratio | A financial ratio or accounting ratio is a relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting, there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization. |
| Form 10-K | A Form 10-K is an annual report required by the U.S. Securities and Exchange Commission (SEC), that gives a comprehensive summary of a company's financial performance. Although similarly named, the annual report on Form 10-K is distinct from the often glossy "annual report to shareholders," which a company must send to its shareholders when it holds an annual meeting to elect directors (though some companies combine the annual report and the 10-K into one document). |
| Arithmetic | Arithmetic (from Ancient Greek ἀριθμός (arithmós) 'number', and τική [τέχνη] (tikḗ [tékhnē]) 'art, craft') is an elementary part of mathematics that consists of the study of the properties of the traditional operations on numbers—addition, subtraction, multiplication, division, exponentiation, and extraction of roots. In the 19th century, Italian mathematician Giuseppe Peano formalized arithmetic with his Peano axioms, which are highly important to the field of mathematical logic today. |
| Operations management | Operations management is an area of management concerned with designing and controlling the process of production and redesigning business operations in the production of goods or services. It involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed and effective in meeting customer requirements. |
| Emergency operations center | An emergency operations center (EOC) is a central command and control facility responsible for carrying out the principles of emergency preparedness and emergency management, or disaster management functions at a strategic level during an emergency, and ensuring the continuity of operation of a company, political subdivision or other organization.\nAn EOC is responsible for strategic direction and operational decisions and does not normally directly control field assets, instead leaving tactical decisions to lower commands. |
| Operations research | Operations research (British English: operational research), often shortened to the initialism OR, is a discipline that deals with the development and application of advanced analytical methods to improve decision-making. It is sometimes considered to be a subfield of mathematical sciences. |
| Operation (mathematics) | In mathematics, an operation is a function which takes zero or more input values (called operands) to a well-defined output value. The number of operands (also known as arguments) is the arity of the operation. |
| Bitwise operation | In computer programming, a bitwise operation operates on a bit string, a bit array or a binary numeral (considered as a bit string) at the level of its individual bits. It is a fast and simple action, basic to the higher-level arithmetic operations and directly supported by the processor. |
| Special operations | Special operations (S.O.) are military activities conducted, according to NATO, by "specially designated, organized, selected, trained, and equipped forces using unconventional techniques and modes of employment". Special operations may include reconnaissance, unconventional warfare, and counter-terrorism actions, and are typically conducted by small groups of highly-trained personnel, emphasizing sufficiency, stealth, speed, and tactical coordination, commonly known as "special forces". |
| Ambac | The Ambac Financial Group, Inc., generally known as Ambac (originally the American Municipal Bond Assurance Corporation), is an American holding company. Its subsidiaries provide financial guarantee products such as bond insurance to clients in both the public and private sectors globally. |
| Berkshire Hathaway Assurance | Berkshire Hathaway Assurance is a bond insurance company created by Berkshire Hathaway, Inc. in December 2007. |
| Film finance | Film finance is an aspect of film production that occurs during the development stage prior to pre-production, and is concerned with determining the potential value of a proposed film. \nIn the United States, the value is typically based on a forecast of revenues (generally 10 years for films and 20 years for television shows), beginning with theatrical release, and including DVD sales, and release to cable broadcast television networks both domestic and international and inflight airline licensing. |
| Indirect economic effects of the subprime mortgage crisis | The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. It was triggered by a large decline in US home prices after the collapse of a housing bubble, leading to mortgage delinquencies, foreclosures, and the devaluation of housing-related securities. |
| Government policies and the subprime mortgage crisis | The U.S. subprime mortgage crisis was a set of events and conditions that led to a financial crisis and subsequent recession that began in 2007. It was characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages. |
| Finance | Finance is the study and discipline of money, currency and capital assets. It is related with, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services. |
| Investment | Investment is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. |
| Investment company | An investment company is a financial institution principally engaged in investing in securities. These companies in the United States are regulated by the U.S. Securities and Exchange Commission and must be registered under the Investment Company Act of 1940. |
| Investment banking | Investment banking denotes certain activities of a financial services company or a corporate division that consist in advisory-based financial transactions on behalf of individuals, corporations, and governments. Traditionally associated with corporate finance, such a bank might assist in raising financial capital by underwriting or acting as the client's agent in the issuance of debt or equity securities. |
| Material adverse change | In the fields of mergers and acquisitions and corporate finance, a material adverse change (abbreviated MAC), material adverse event (MAE), or material adverse effect (also MAE) is a change in circumstances that significantly reduces the value of a company. A contract to acquire, invest in, or lend money to a company often contains a term that allows the acquirer, investor, or lender to cancel the transaction if a material adverse change occurs. |
| Adverse | Adverse or adverse interest, in law, is anything that functions contrary to a party's interest. This word should not be confused with averse. |
| Adverse possession | Adverse possession, sometimes colloquially described as "squatter's rights", is a legal principle in the Anglo-American common law under which a person who does not have legal title to a piece of property—usually land (real property)—may acquire legal ownership based on continuous possession or occupation of the property without the permission (licence) of its legal owner. The possession by a person is not adverse if they are in possession as a tenant or licensee of the legal owner. |
| Adverse food reaction | An adverse food reaction is an adverse response by the body to food or a specific type of food.The most common adverse reaction is a food allergy, which is an adverse immune response to either a specific type or a range of food proteins.\nHowever, other adverse responses to food are not allergies. |
| Adverse party | An adverse party is an opposing party in a lawsuit under an adversary system of law. In general, an adverse party is a party against whom judgment is sought or "a party interested in sustaining a judgment or decree." For example, the adverse party for a defendant is the plaintiff. |
| Adverse (film) | Adverse is a 2020 American crime thriller film written and directed by Brian Metcalf and starring Thomas Nicholas, Lou Diamond Phillips, Sean Astin, Kelly Arjen, Penelope Ann Miller, and Mickey Rourke. It premiered at the Fantasporto Film Festival, Portugal's largest film festival, on February 28, 2020. |
| Hostile witness | A hostile witness, also known as an adverse witness or an unfavorable witness, is a witness at trial whose testimony on direct examination is either openly antagonistic or appears to be contrary to the legal position of the party who called the witness. This concept is used in the legal proceedings in the United States, and analogues of it exist in other legal systems in Western countries. |
| Medallion signature guarantee | In the United States, a medallion signature guarantee is a special signature guarantee used primarily when a client transfers or sells US securities. It is an assurance by the financial institution granting the guarantee that the signature on the transaction is genuine and that the guarantor accepts liability for any forgery. |
| Multilateral Investment Guarantee Agency | The Multilateral Investment Guarantee Agency (MIGA) is an international financial institution which offers political risk insurance and credit enhancement guarantees. These guarantees help investors protect foreign direct investments against political and non-commercial risks in developing countries. |
| Guarantee | Guarantee is a legal term more comprehensive and of higher import than either warranty or "security". It most commonly designates a private transaction by means of which one person, to obtain some trust, confidence or credit for another, engages to be answerable for him. |
| Financial Conduct Authority | The Financial Conduct Authority (FCA) is a financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry. The FCA regulates financial firms providing services to consumers and maintains the integrity of the financial markets in the United Kingdom.It focuses on the regulation of conduct by both retail and wholesale financial services firms. |
| Oslo bid for the 2022 Winter Olympics | Oslo 2022 Winter Olympics was a campaign by the private organization Norwegian Olympic and Paralympic Committee and Confederation of Sports for the right to host the 2022 Winter Olympics in Oslo, although in Norway it was primarily viewed as an application by the Olympic movement for government funding of an Olympic Games that would ultimately be decided by the Norwegian Parliament. The Olympic organisations had already indicated a strong desire that Norway would host the games and provide the necessary funding. |
| Export Credit Guarantee Corporation of India | The ECGC Limited (Formerly Export Credit Guarantee Corporation of India Ltd) is a government owned export credit provider. It is under the ownership of Ministry of Commerce and Industry, Government of India based in Mumbai, Maharashtra. |
| Cascade Investment | Cascade Investment, L.L.C. is an American holding company and private investment firm headquartered in Kirkland, Washington, United States. It is controlled by Bill Gates, and managed by Michael Larson. |
| Risk Factors |
|---|
| AMBAC FINANCIAL GROUP INC Item 1A Risk Factors |
| In addition to the other information contained in this Form 10-K and the exhibits hereto, the following risk factors should be considered carefully in evaluating our business |
| A discussion of the policies and procedures used to identify, assess and manage certain risks is set forth under Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in this Report |
| Our business, financial condition, or results of operations could be materially adversely affected by any of these risks |
| Additional risks not presently known to us or that we currently deem immaterial individually may also adversely affect our business, financial condition, or results of operations |
| A downgrade of the financial strength rating of Ambac Assurance and/or Ambac UK would adversely affect our business and prospects and, consequently, our results of operations and financial condition |
| Our insurance companies currently have triple A financial strength ratings from Moody’s Investors Service, Inc, Standard & Poor’s Rating Services, Fitch Inc |
| and Rating and Investment Information, Inc |
| The objective of these ratings is to provide an opinion on an insurer’s financial strength and its ability and intent to pay under its insurance policies and contracts in accordance with their terms |
| Financial strength ratings do not refer to an insurer’s ability to meet non-insurance obligations and are not a “market rating” or a recommendation to buy, hold or sell any security |
| The ratings assigned by Moody’s, S&P, Fitch and R&I to us are subject to periodic review and may be downgraded by one or more rating agencies as a result of: changes in the views of the rating agencies, adverse developments in our financial condition or results of operations due to underwriting or investment losses |
| Any downgrade in our financial strength rating, or the placement of our financial strength rating on negative credit watch, would have a material adverse effect on our competitive position and our prospects for future business opportunities, particularly if our competitors in the financial guarantee industry were not downgraded or placed on credit watch |
| In addition, a downgrade of our financial strength ratings below specified levels would allow credit derivative counterparties to terminate certain agreements, resulting in a possible payment of a settlement amount or we would have to pledge collateral for the benefit of the counterparty |
| In the event that Ambac Assurance was downgraded, we also may be required to post collateral to our investment agreement and derivative counterparties, introducing liquidity risk |
| In addition, most investment agreements provide certain remedies for the investment agreement purchaser in the event of a downgrade of Ambac Assurance’s credit rating, typically to A1 by Moody’s or A+ by S&P In most cases, we are permitted to post collateral or otherwise enhance our credit, prior to an actual draw on the investment agreement |
| Our results of operations and financial condition would be materially adversely affected by any reduction in its ratings |
| A downgrade of our long term credit ratings would adversely affect our liquidity and increase our borrowing costs |
| Ambac Financial Group’s long term debt is rated “AA” by S&P and Fitch and “Aa” by Moody’s |
| Our access to external sources of financing, as well as the cost of financing, is dependent on various factors and could be adversely affected by a deterioration of our long-term debt ratings |
| Long-term debt ratings are influenced by a number of factors |
| These include, but are not limited to: financial leverage on an absolute basis or relative to peers, the composition of the balance sheet and/or capital 28 ______________________________________________________________________ structure, material changes in earning trends and volatility, inability to dividend monies from Ambac Assurance and our competitive position |
| Material deterioration in any one or a combination of these factors could result in a downgrade of our credit ratings, thus increasing the cost of and/or limiting the availability of unsecured financing |
| Moreover, if our need for capital arises because of significant sudden losses, the occurrence of these losses may make it more difficult for us to raise the necessary capital |
| If we cannot obtain adequate capital on favorable terms or at all, our business, operating results and financial condition would be adversely affected |
| We are subject to credit risk throughout our businesses, including large single risks and correlated risks |
| We are exposed to the risk that issuers of debt which we have insured (or with respect to which we have written credit derivatives), issuers of debt which we hold in our investment portfolio, reinsurers and other contract counterparties (including derivative counterparties) may default in their financial obligations, whether as the result of insolvency, lack of liquidity, operational failure or other reasons |
| These credit risks could cause increased losses and loss reserves and mark-to-market losses with respect to credit derivatives in our financial guarantee business; we could be required by the rating agencies to hold additional capital against insured exposures which have been downgraded by the rating agencies; and we could experience losses and decreases in the value of our investment portfolio and, therefore, our financial strength |
| Such credit risks may be in the form of large single risk exposures to particular issuers, reinsurers or counterparties; losses caused by catastrophic events (including terrorist acts and natural disasters); or losses in respect of different, but correlated, credit exposures |
| General economic conditions can adversely affect our business results and prospects |
| Changes in general economic conditions can impact our business |
| Recessions; increases in corporate, municipal and/or consumer bankruptcies; changes in interest rate levels; changes in domestic and international law, including tax laws; wars; and terrorist acts could adversely affect the performance of our insured portfolio and our investment portfolio, eg leading to increases in losses and loss reserves in our insured portfolio and decreases in the value of our investment portfolio and, therefore, our financial strength |
| Furthermore, reduction in the volume of capital markets transactions; levels of competition; and changes in investor perception of credit risk could adversely impact the volume and pricing of financial guarantee insurance transactions and therefore adversely impact our business prospects |
| Changes in prevailing interest rate levels could adversely impact our business results and prospects |
| Increases in prevailing interest rate levels can adversely affect the value of our investment portfolio and, therefore, our financial strength |
| In the event that investments must be sold in order to pay claims, such investments would likely be sold at discounted prices |
| Additionally, increasing interest rates could lead to increased credit stress on consumer asset-backed transactions in our insured portfolio; (as the securitized assets supporting a portion of these exposures are floating rate consumer obligations); slower prepayment speeds and resulting “extension risk” relative to such consumer asset-backed transactions in our insured portfolio and in our investment portfolio; decreased volume of capital markets activity and, correspondingly, decreased volume of insured transactions |
| Decreases in prevailing interest rate levels can adversely affect the demand for, and pricing of, financial guarantee insurance, since lower absolute interest rates reduce credit spreads and, therefore, 29 ______________________________________________________________________ the savings realized by issuers by using our core product |
| Additionally, decreasing interest rates could result in early terminations of financial guarantee insurance policies in respect of which we are paid on an installment basis, thus reducing premium earned in respect of these transactions |
| Decreases in prevailing interest rates would also reduce investment income |
| The financial guarantee business is highly competitive |
| The financial guarantee business is highly competitive and we expect it to remain so in the near future |
| We face competition from both other financial guarantors and alternatives to third-party credit enhancement |
| Such alternatives include bank financing, senior/subordinated securitization structures, letters of credit, guarantees and credit derivatives provided primarily by foreign and domestic banks |
| See Item 1 “Business—Competition” for further information |
| In addition, our performance is largely dependent on the talents and efforts of highly skilled individuals |
| Over the past few years, there has been increased competition in the financial guarantee business for qualified employees |
| Our business could be adversely affected if we are unable to attract new employees and retain and motivate our existing employees |
| Adequate capital support may not be available |
| Financial guarantee insurers, including Ambac Assurance, typically rely on providers of lines of credit, credit swap facilities and similar support mechanisms (often referred to as “soft capital”) to supplement their “hard capital” |
| The ratings of soft capital providers directly affect the level of capital credit which the rating agencies attribute to the financial guarantee insurer when rating its financial strength |
| We intend to maintain soft capital facilities with providers having ratings adequate to provide the desired capital credit, although no assurance can be given that one or more of the rating agencies will not downgrade or withdraw the applicable ratings of such providers in the future |
| In addition, we cannot assure that an acceptable replacement provider would be available in that event |
| Reductions by the rating agencies in the amount of capital credit that we receive in respect of soft capital facilities would require us to procure additional soft capital |
| Our holding company structure and certain regulatory and other constraints could affect our ability to pay dividends and make other payments |
| We are a holding company and have no substantial operations of our own or assets other than our ownership of Ambac Assurance, our principal operating subsidiary, and certain other smaller subsidiaries |
| As such, we are largely dependent on dividends from Ambac Assurance to pay dividends on our capital stock, to pay principal and interest on our indebtedness, to pay our operating expenses, to purchase our common stock in the open market and to make capital investment in our subsidiaries |
| Wisconsin insurance regulations restrict the declaration and payment of dividends and the making of distributions by Ambac Assurance, unless certain regulatory requirements are met |
| The inability of Ambac Assurance to pay dividends in an amount sufficient to enable us to meet our cash requirements at the holding company level could affect our ability to repay our debt or have a material adverse effect on our operations |
| Our risk management policies and practices may not anticipate unforeseen risks and/or the magnitude of potential for loss as the result of foreseen risks |