AMBAC: Notice from the Rehabilitator
Madison, WI—Wisconsin Commissioner of Insurance Theodore K. Nickel, acting in his capacity as the Rehabilitator of the Segregated Account of Ambac Assurance Corporation (Segregated Account), announced today that he is seeking court approval to make interim policy claim payments to Segregated Account policyholders. If the interim payments are approved by the court, the Segregated Account will begin paying 25% of each policy claim that has arisen since the commencement of the rehabilitation proceedings, and 25% of each policy claim submitted in the future. As of March 31, 2012, approximately $3.2 billion in Segregated Account policy claims have arisen since the commencement of the rehabilitation proceedings.
The Plan of Rehabilitation, which was previously confirmed by the court in early 2011 and contemplates payment of 25% of each policy claim in cash and 75% in surplus notes, has not yet been made effective, pending resolution of certain tax considerations relating to the issuance of surplus notes.
"While the work on implementation of the Plan continues, we are pleased to begin making interim payments to policyholders in the near-term, subject to the approval of the court," said Commissioner Nickel. "The decision to make interim payments at the rate of 25% was guided by balancing the interests of policyholders with current claims with the need to preserve sufficient cash to pay policy claims that are projected to arise in the future."
The Rehabilitator is also seeking court approval of an offer of settlement made to the United States on behalf of the Internal Revenue Service (IRS), with respect to pending disputes over the tax treatment of credit default swap contracts and related matters (Offer). The Offer was jointly made by the Rehabilitator, the Wisconsin Office of the Commissioner of Insurance, Ambac Assurance Corporation (AAC), Ambac Financial Group Inc. (AFGI) and the Official Committee of Unsecured Creditors of AFGI on February 24, 2012. If approved by the court and accepted by the United States, the settlement contemplated by the Offer will resolve all related litigation with the IRS, eliminating uncertainty and avoiding further legal costs.
Finally, the Rehabilitator is seeking court approval of AAC's proposed purchase of approximately $939 million in principal amount of surplus notes issued by AAC on June 7, 2010, for an aggregate cash payment of approximately $278 million. AAC is seeking to purchase the surplus notes pursuant to certain call options held by AAC on the surplus notes. "The purchase of the surplus notes at a substantial discount will increase the projected recovery to Segregated Account policyholders," said Special Deputy Commissioner Roger A. Peterson.
"The filings made with the court today show meaningful progress in furtherance of the rehabilitation of the Segregated Account and demonstrate our concerted effort to maximize recoveries for policy beneficiaries and other creditors," said Commissioner Nickel.
The motions filed with the court and supporting affidavits and exhibits are available at
www.ambacpolicyholders.com.
Please direct additional queries as follows:
Policyholders:
www.ambacpolicyholders.com/ask-a-question
877-301-2046 (from within the U.S.)
212-660-6373 (from outside the U.S.)
Created by the Legislature in 1871, Wisconsin's Office of the Commissioner of Insurance (OCI) was vested with broad powers to ensure that the insurance industry responsibly and adequately met the insurance needs of Wisconsin citizens. Today, OCI's mission is to lead the way in informing and protecting the public and responding to its insurance needs.