Ram sees loss narrow to $1.9m
Bermuda bond reinsurer Ram Holdings Ltd.'s first-quarter loss narrowed to $1.9 million, the company announced on Friday.
Ram suffered huge losses linked to the decline in value of the bonds it reinsures, especially mortgage-backed securities, during the US property market slump and credit crisis.
The company stopped writing new business and voluntarily delisted from the Nasdaq Stock Exchange in the second quarter. It continues to trade on the Bermuda Stock Exchange and on the Pink Sheets, the US over-the-counter system for trading stocks.
The first-quarter net loss breaks down to seven cents per share and compares to a loss of $189.5 million, or $6.95 per share, in the same period last year.
Much of the improvement over last year was down to a change in the fair value of credit derivatives, which was recorded as a gain of $12.9 million in the first quarter of 2009, compared a loss of $163.8 million in the January to March period in 2008.
In April, Ram paid almost $100 million to Ambac to eliminate its reinsurance exposure to a $6.8 billion portfolio assumed from the US bond insurance giant.
The Bermuda company said it expects its net income to benefit by $8.7 million in its second-quarter results as a result of the Ambac commutation.
Friday's earnings announcement revealed that Ram is still feeling the effects of a deterioration in the value of the residential mortgage-backed securities (RMBS) that it reinsures.
Incurred losses in the first quarter totalled $16.7 million, the result of adverse developments on RMBS, particularly related to home equity lines of credit and Alt-A transactions for the 2005 to 2007 vintages, Ram said.
Plunging US property values and soaring foreclosure and delinquency rates have caused the value of RMBS to continue falling, plunging Ram into a vicious circle of spiralling losses and credit rating downgrades.
The company is looking to eliminate as much of its reinsurance exposure as possible through commutations and said it delisted from the Nasdaq in order to cut costs on reporting requirements.
