Summary
Bank of America Corporation (BAC) has announced a significant resolution to longstanding litigation with Ambac Assurance Corporation. On October 5, 2022, the company and its subsidiaries entered into a settlement agreement, paying $1.84 billion to Ambac. This agreement aims to resolve all pending lawsuits filed by Ambac against Bank of America and its legacy entities, primarily related to bond insurance policies issued before the 2008 financial crisis. The total damages initially claimed by Ambac in these lawsuits exceeded $3 billion. This settlement provides clarity and finality regarding a material contingent liability that has been disclosed in previous SEC filings. While the settlement payment is substantial, Bank of America had previously accrued for a portion of these potential costs. The company anticipates incurring a pre-tax expense of approximately $354 million in the third quarter of 2022 related to this settlement, which translates to an after-tax impact of roughly $0.03 per share. This resolution removes a significant overhang for investors and allows the company to put these legacy legal issues behind it.
Key Highlights
- 1Bank of America (BAC) settled all pending litigation with Ambac Assurance Corporation for $1.84 billion.
- 2The settlement resolves lawsuits related to bond insurance policies issued by Ambac for legacy entities before the 2008 financial crisis.
- 3Ambac had claimed over $3 billion in damages in the previously disclosed lawsuits.
- 4The company expects to incur a pre-tax expense of approximately $354 million in Q3 2022 related to the settlement.
- 5The after-tax impact of the settlement is estimated to be approximately $0.03 per share.
- 6This agreement provides finality and removes a material contingent liability from the company's disclosures.
- 7The settlement involves the dismissal of all pending litigation with prejudice and a release of claims.