RAM Holdings Ltd. (BSX:RAMR) (Pink Sheets:RAMR) (“RAM”) today reported first quarter 2009 net loss available to common shareholders of $1.9 million, or net loss of $0.07 per diluted share. This compares to a net loss of $189.5 million, or net loss of $6.95 per diluted share, for the first quarter 2008.

Commutation in 2009

On April 7, 2009, RAM Reinsurance Company Ltd. (“RAM Re”) entered into a commutation agreement (the “Ambac Commutation Agreement”) with Ambac Assurance Corporation and its affiliate (“Ambac”). The Ambac Commutation Agreement provided, among other things, for RAM Re to pay a $97.0 million settlement payment and $1.3 million of claims payments, by means of a release to Ambac of securities in Ambac’s trust account valued at $97.8 million and a cash payment of $0.5 million, to commute the entire $6.8 billion insured portfolio (as of March 31, 2009) assumed from Ambac, and for each party thereto to release the other party from all liabilities and obligations under all reinsurance agreements between the parties. The securities in the Ambac trust account and the cash payment were received by Ambac, and the releases set forth in the Ambac Commutation Agreement became effective, on April 8, 2009.

Included in the Company’s March 31, 2009, U.S. GAAP balance sheet, are balances pertaining to our assumed business from Ambac as follows:

• Reinsurance balances receivable of $63.9 million
• Deferred policy acquisition costs of $49.9 million
• Unearned premiums of $155.5 million
• Loss and loss expense reserves of $65.3 million

The effect of the above transaction related to the Ambac Commutation Agreement, which will be recorded by RAM in the quarter ending June 30, 2009, is estimated to be a gain to net income of $8.7 million. There can be no assurance that RAM’s assumptions will not differ materially from the ultimate treatment or impact of the aforementioned transactions.

Summary of Operating Results

Net loss was $1.9 million for the quarter ended March 31, 2009.

Earned premiums in the quarter of $9.2 million were 30% lower than the $13.2 million earned in the first quarter of 2008. By eliminating accelerated premiums from refundings of $2.3 million from total earned premiums, normal earned premiums in the first quarter 2009 were $6.9 million, 46% lower than the comparative 2008 period, which included refundings of $0.5 million. The decline in the first quarter 2009 earned premiums after refundings primarily reflects the reduction in ongoing earnings due to the commutation of treaties with two of our ceding companies during 2008, along with the change in earnings for the adoption of FAS 163 (see as defined below “Adoption of FAS 163”).

Net change in fair value of credit derivatives totaled a gain of $12.9 million in the first quarter 2009, which was $176.7 million more than the $(163.8) million in the first quarter of 2008. Net change in fair value of credit derivatives for the first quarters of 2009 and 2008 was comprised of $12.0 million and $(166.4) million of unrealized gains (losses) on derivatives, respectively, and $0.9 million and $2.6 million of realized gains, respectively. The net unrealized gain in the first quarter 2009 was primarily attributable to the increase in the adjustment for RAM’s own non-performance risk in accordance with Statement of Financial Accounting Standard No. 157 “Fair Value Measurements” (“FAS 157”). Gross unrealized losses on credit derivative policies increased in the first quarter 2009 primarily due to the continuing deterioration of underlying collateral on these policies and the corresponding widening of credit spreads in the market. The increased unrealized losses on credit derivatives were offset by the adjustment for RAM's own non-performance risk in accordance with FAS 157. The effect of the FAS 157 requirement was a reduction in RAM's derivative liability of approximately $318.8 million at March 31, 2009.

Net investment income for the first quarter 2009 was $3.4 million, 59% below the $8.2 million recorded in the first quarter of 2008. The decrease in investment income in the first quarter 2009 is primarily the result of a decrease in cash and invested assets due to payments on commutations in 2008 totaling $250.9 million, along with a decrease in the book yield on the invested assets from 4.8% to 3.9%. Net investment income for the first quarter of 2009 is inclusive of $1.1 million in foreign exchange losses primarily on revaluation of the premiums receivable balance set up under FAS 163 (see “Adoption of FAS 163” below). Realized gains on investments for the first quarter 2009 were $0.5 million compared to the $(0.9) million realized losses for the same period in 2008.

Losses and loss adjustment expenses were $16.7 million in the first quarter 2009, contributing to a loss ratio of 181.9%. This loss ratio is the result of adverse developments on RAM's exposure to insured transactions with residential mortgage-backed security (“RMBS”) exposures, particularly home equity lines of credit and Alt-A transactions for the 2005 – 2007 vintages. This compares to $37.5 million of incurred losses in the comparable 2008 period.

Acquisition expenses were $4.0 million in the first quarter of 2009 compared to $4.6 million for the comparable 2008 period. Acquisition expenses are closely related to earned premiums and the first quarter 2009 ratio of acquisition expenses to earned premium was 43.0% compared to 35.0% for the first quarter 2008. The increase in the ratio of acquisition expenses to earned premiums in the first quarter 2009 as compared to the comparable 2008 period was primarily due to the increase in ceding commissions payable since RAM's rating downgrades during 2008. First quarter 2009 operating expenses of $5.2 million were $0.5 million, or 10.6% above the level in the first quarter of 2008. The increase in operating expenses for 2009 as compared to 2008 is primarily due to RAM no longer deferring any operating expenses because it has ceased writing new business.

Balance Sheet

Total assets of $700.9 million at March 31, 2009, were $15.0 million, or 2.1% below the level at January 1, 2009, after taking effect of FAS 163 (see “Adoption of FAS 163” below). Shareholders' equity of $37.4 million is $52.0 million, or 58.2%, below the level at December 31, 2008, primarily due to the cumulative effect of adopting FAS 163 of $(43.8) million (see “Adoption of FAS 163” below). Book value per share was $1.37, a decrease of 58.2% from year-end 2008. Operating book value and adjusted operating book value per share, non-GAAP measures, were $3.64 and $12.11 at March 31, 2009, a decrease of 19.8% and an increase of 17.8%, respectively, from year-end 2008.

Adoption of FAS 163

On May 23, 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No.163 “Accounting for Financial Guarantee Insurance Contracts” (“FAS 163”). FAS 163 clarifies how FASB Statement No.60 “Accounting and Reporting by Insurance Enterprises” applies to financial guaranty insurance contracts. FAS 163 is focused on the recognition and measurement of premium revenue and claims liabilities, along with additional disclosure requirements for financial guaranty contracts. FAS 163 requires the following:

1. Premium revenue will be recognized as a function of the amount of insurance protection provided over the contract term.

2. Present value of installment premiums due pursuant to the terms of a financial guaranty insurance contract will be recognized at inception of the contract as unearned premiums and premiums receivable.

3. A claim liability will be established on a financial guaranty contract when the probability weighted net present value of an expected claim loss is estimated to exceed the related unearned premium revenue. Provision of unallocated reserves is not permitted under FAS 163.

4. Additional disclosures will be required on financial guaranty contracts, including the accounting and risk management activities used to evaluate credit deterioration in RAM’s insured obligations and surveillance lists.

FAS 163 is effective for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years, with the exception of certain risk management disclosures which were effective for the interim financial statements prepared as of September 30, 2008. FAS 163 does not apply to policies which are credit derivatives under the scope of FASB Statement No FAS 133 “Accounting for Derivative Instruments and Hedging Activities”. The cumulative effect of adopting FAS 163 is recognized as an adjustment to opening retained earnings as of January 1, 2009.

The impact of adopting FAS 163 on RAM’s balance sheet was as follows:

(1) Reinsurance balances receivable and reinsurance balances payable were increased and decreased, respectively, to reflect the net present value of future installment premiums, net of ceding commissions (including the accrual for additional ceding commissions), discounted at a risk-free rate.

(2) Unearned premiums and prepaid reinsurance premiums were increased to reflect the change in premium earning methodology under FAS 163 along with the net present value of installment premiums, on assumed and retroceded policies respectively. Deferred policy acquisition costs increased to reflect the associated acquisition costs on the increased unearned premium balances.

(3) Losses and loss expense reserves were increased for the new reserving methodology under FAS 163. This was offset by a decrease in reserves for the release of the unallocated loss reserves which are not allowed under FAS 163.

(4) Retained deficit was increased for the net effect of the transition adjustments as at January 1, 2009.

Forward-Looking Statements

This release contains statements that may be considered "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and the current views of the economic and operating environment and are not guarantees of future performance. A number of risks and uncertainties, including economic competitive conditions, could cause actual results to differ materially from those projected in forward-looking statements. Our actual results could differ materially from those expressed or implied in the forward-looking statements. Among the factors that could cause actual results to differ materially are: (i) our ability to execute our business strategy; (ii) changes in general economic conditions, including inflation, foreign currency exchange rates, interest rates and other factors; (iii) the loss of significant customers with whom we have a concentration of our reinsurance in force; (iv) legislative and regulatory developments; (v) changes in regulation or tax laws applicable to us or our customers; (vi) a downgrade in financial strength ratings of RAM Re by Standard & Poor's; (vii) more severe losses or more frequent losses associated with our products; (viii) losses on credit derivatives; (ix) changes in our accounting policies and procedures that impact RAM's reported financial results; and (x) other risks and uncertainties that have not been identified at this time. RAM undertakes no obligation to revise or update any forward-looking statement to reflect changes in conditions, events, or expectations, except as required by law.

Explanation of Non-GAAP Financial Measures

RAM believes that the following non-GAAP financial measures included in this release serve to supplement GAAP information and are meaningful to investors.

Operating Book Value per share and Adjusted Operating Book Value per share: RAM believes the presentation of operating (and adjusted operating) book value per share to be useful because it gives a measure of the value of RAM, excluding non-operating items of unrealized gains and losses on: (a) other financial instruments and (b) credit derivatives. We derive operating book value by beginning with GAAP book value and adding back (i) the fair value of other financial instruments; and (ii) the derivative asset or liability excluding the impact of credit impairments and unearned premiums on credit derivatives. Adjusted operating book value per share begins with operating book value as calculated above and then adding or subtracting the value of:

a. GAAP unearned premium reserves (on policies classified as financial guarantee);

b. Deferred acquisition costs;

c. Unearned premiums reserves and the present value of estimated future installment premiums net of ceding commissions on credit derivative policies (discounted at 1.72% at March 31, 2009, and 3.00% at December 31, 2008);

d. Unrealized appreciation or depreciation of investments; and

e. Noncontrolling interest in subsidiary.

Credit Impairments on Insured Credit Default Swap (“CDS”) Contracts: Management measures and monitors credit impairments on RAM's credit derivatives, which are expected to be paid out over the term of the credit default swap policies. The credit impairments are a non-GAAP metric reported as management believes this information to be useful to analysts, rating agencies and investors to review the results of our entire portfolio of policies. Management considers our credit derivative policies as a normal extension of our financial guarantee business and reinsurance in substance.

RAM Holdings Ltd. is a Bermuda-based holding company. Its operating subsidiary, RAM Reinsurance Company Ltd., provides financial guaranty reinsurance for U.S. and international public finance and structured finance transactions. More information can be found at www.ramre.com.

RAM has posted its first quarter 2009 financial results to its website at www.ramre.com under “Investor Information”. If you are a shareholder of RAM Holdings Ltd. and wish to receive a hard copy of the financial statements by mail, please contact:

RAM Holdings Ltd.
Ted Gilpin, 441-298-2107
tgilpin@ramre.bm