Tuesday, September 3, 2013
Ambac : Back from the dead
Even five years after the financial meltdown, investors need a forward view of the bond insurers, especially Ambac. The "new" Ambac earned $58m in premiums this quarter (est. $200m annual) and holds a market valuation of $1b. Ambac also has lawsuits outstanding against the major banks that were settled with competitor MBIA for $1.6b. It is risky to speculate on the legal system, but Ambac lawsuit should yield a larger settlement than the MBIA due to the proportional size of the damages to Ambac. There is deep value in this company, and "somewhat" risky legal event upside also. That makes looking back at the old, dead predecessor distracting from the green shoots that investors should take hold of. The author is long AMBC at $22.50.