Subprime takes heavy toll on Ambac earnings

Ambac Financial Group Inc, the bond insurer that lost 93 percent of its stock market value in the past year, posted a wider loss than analysts estimated after $3.1 billion in charges for subprime-mortgage securities.

The first-quarter net loss of $1.66 billion, or $11.69 a share, compared with net income of $213.3 million, or $2.04, a year earlier, New York-based Ambac said yesterday in a statement. The company's operating loss of $6.93 a share was larger than the $1.82 estimated by six analysts surveyed by Bloomberg.

The second-largest bond insurer fell as much as 18 percent in early New York Stock Exchange trading as new business slumped 87 percent after states and municipalities shunned its insurance and the market for mortgage securities dried up. Ambac increased its estimate of the claims it will need to pay on home-loan debt by $2 billion.

"The housing market crisis continues to disrupt the global credit markets and our credit derivatives and direct mortgage portfolios were severely impacted once again," interim Chief Executive Officer Michael Callen said in the statement.

Ambac staved off the loss of its AAA rating at Moody's Investors Service and Standard & Poor's by raising $1.5 billion in a March stock sale. The company last year had placed its AAA stamp on $524 billion of securities it insurers, its main line of business.

Fitch Ratings cut Ambac Assurance Corp to AA in January. All three companies have negative outlooks on the ratings.

Agencies

(China Daily 04/24/2008 page16)