The $3.7 billion Corporate One FCU did not record any OTTIs against $35.5 million worth of securities wrapped by monoline insurer Ambac Assurance Corp., according to its March 2010 financials.
"Based on our analysis of the plan of rehabilitation, we continue to place reliance on Ambac for full repayment," management wrote in the notes that accompanied the reports, posted on Corporate One's website (www.corporateone.coop).
Chief Financial Officer Melissa Ashley told Credit Union Times, the Columbus, Ohio-based corporate reviewed court documents filed by Wisconsin's insurance commissioner regarding Ambac, as well as the insurer's 2009 year-end statutory financial statements, in which it reported a statutory surplus of $801.8 million.
"Based on our review of the facts, we believe that [the Ohio Insurance Commissioner] acted in a manner to preserve the surplus for the benefit of all policyholders versus letting the company continue to deteriorate," she said.
On the Wisconsin insurance regulator's website, Ashley said the restructure plan was described as a cash-note split for claims payments, with claimants receiving a specified percentage of their claims in cash and the remainder in the form of interest-bearing notes.
Corporate One's 16 affected securities had an amortized cost of $35.5 million as of March 31. Fifteen are residential mortgage-backed securities that have all been allocated to Ambac's new segregated account, Ashley said. Only nine will require Ambac support for full repayment. The sixteenth security is backed by student loans, and is not expected to require Ambac support.
Had Corporate One placed only 25% reliance on Ambac as U.S. Central did, the resulting OTTI would have been approximately $4.5 million.
"While a write-down of this size would be disappointing, it would in no way affect our members' capital investment with us, as we have more than $25 million in RUDE to protect against impairment of member capital," Ashley said. Corporate One could replace that loss in a little over two quarters at its current earning pace, she added.
March's third-party portfolio analysis turned up additional credit losses on nine MBS for a first-quarter OTTI of $1.56 million. However, strong earnings outpaced the loss, and Corporate One reported a year-to-date $2.167 million net gain.
"This is the first quarter in some time where earnings have outpaced OTTI charges, and is hopefully another sign pointing to a positive trend," she said.