The board of directors at Ambac Financial Group Inc. voted to eliminate the company's one-cent quarterly dividend earlier this week, in a move that the company says will preserve approximately $11.5 million in cash annually.
Ambac executives last month said during the company's third-quarter earnings conference call that corporate laws prevented it from paying a dividend until it had positive stockholders' equity under generally accepted accounting principles measures.
Ambac had a negative stockholders' equity - which is equal to the difference between total assets and total liabilities - of nearly $887 million as of Sept. 30, after taking a third-quarter net loss of $2.4 billion, according to its quarterly filing.
Ambac said in a press release earlier this week it eliminated the dividend "in order to support the ... goal of preserving parent company liquidity." Ambac has said it will likely need approval from Wisconsin insurance regulators for bond insurer Ambac Assurance Corp. to pay dividends to the parent company in 2009.
Ambac isn't the only bond insurer to have canceled its dividend. MBIA Inc., for instance, eliminated its dividend in February, estimating it would preserve $174 million in cash per year, equal to what it paid out in 2007. At the time, MBIA attributed the move to an effort "to further strengthen the company's financial resources and to increase its operating flexibility."
Ambac stock fell 8.33% yesterday, dropping $0.13 to $1.43. The Standard & Poor's 500 fell 25.52, dropping 2.93 to 845.22.
