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ACA Capital Reports Financial and Economic Results for the Third Quarter and Nine Months Ended September 30, 2007
- Net economic income of $5.0 million and $7.5 million for the third quarter and nine months ended September 30,
- ACA Financial Guaranty's qualified statutory capital increases to $425.5 million and claims paying resources exceed $1.1 billion
NEW YORKNovember 7, 2007ACA Capital Holdings, Inc. (NYSE: ACA) today announced a third quarter 2007 net loss of ($1.0) billion, or ($29.42) per diluted share. The net loss was primarily a result of ($1.7) billion, or ($1.1) billion after tax, of net unrealized mark-to-market losses on the Company's portfolio of Structured Credit transactions. These unrealized losses were a direct result of the ongoing turmoil in the residential mortgage-backed securities market and the resulting depressed market valuations. For the nine months ended September 30, 2007, ACA Capital reported a net loss of ($1.1) billion, or ($31.05) per diluted share.
Net income and net income per diluted share are computed in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Additionally, to assist investors in their understanding of the Company's quarterly results and their measurement of the Company's growth and profitability, ACA Capital provides other non-GAAP information, including net economic income (loss) and base economic income (loss).
Net economic income for the third quarter of 2007 was $5.0 million, or $0.14 per diluted share as compared with third quarter 2006 net economic income of $14.8 million or $0.49 per diluted share. Net economic income for the first nine months of 2007 was $7.5 million, or $0.21 per diluted share as compared with $40.8 million or $1.35 per diluted share for the same period in 2006. Net economic income for the third quarter and nine months ended September 30, 2007 decreased as compared to the same periods in 2006 primarily on account of asset impairments in the Company's CDO Asset Management business and unrealized losses in its credit fund.
Base economic income for the third quarter of 2007 was $4.6 million, or $0.13 per diluted share as compared with third quarter 2006 base economic income of $12.9 million or $0.43 per diluted share. The base economic income for the first nine months of 2007 was $4.6 million, or $0.13 per diluted share as compared with base economic income of $35.9 million or $1.19 per diluted share for the same period in 2006.
Alan S. Roseman, ACA Capital's President and Chief Executive Officer, said "ACA returned to profitability on a net economic basis in the third quarter. The extremely large net unrealized mark on our Structured Credit portfolio and the resulting volatility in our GAAP reported results detract from ACA's positive economic performance and the underlying financial strength of our insurance subsidiary, ACA Financial Guaranty. Given that our Structured Credit transactions were underwritten with significant cushions above the initial "AAA" rating and even when taking into account the recent extensive ratings downgrades on mortgage backed securities, we remain comfortable with our risk portfolio and we believe we have adequate capital to maintain our "A" rating, which was confirmed by Standard and Poor's in its October 29, 2007 Industry Report Card. With our rating so confirmed, we are not exposed to liquidity calls based on the mark-to-market positions of our Structured Credit exposures. Further, ACA's net unrealized mark is based entirely on dealer quotes and/or modeled using full quoted market spreads on the underlying assets, which we believe reflects market consensus fair value."
The following information was filed by Aca Capital Holdings Inc on Thursday, November 8, 2007 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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