Unless the company can reach an agreement with its financial counterparties, Syncora said it cannot remain in business and would likely be taken over by the New York State Insurance Department.

Releasing its third quarter results today, the Hamilton, Bermuda-based guaranty insurer said that its combination of significant ongoing exposure to credit default swaps, failure to reach an agreement with the financial counterparties who are holders of the CDS, and possible intervention by the insurance department, make it a possibility the company will not continue.

“As a result of uncertainties associated with the aforementioned factors affecting our ability to continue as a going concern, management has concluded that there is substantial doubt about our ability to continue as a going concern,” the company said in its Securities and Exchange Commission filing.

This is not the first time the company has warned that it might have trouble continuing, but there appeared to be little good news pointing to a turnaround.

Syncora said it sought to extend negotiations with its financial counterparties past Oct. 31, but has yet to do so or reach an agreement.

“The negotiations with the financial counterparties remain ongoing, but there can be no assurance the negotiations will ultimately result in an agreement,” the company said.

It further explained that it had to seek permission from the New York State Insurance Department for a change in accounting treatment in order to tap statutory basis contingency reserves so it could report $83.3 million of policyholder surplus. Without the permission, the company would have been below minimum requirements, reporting reserve of $19.1 million.

If the company fails to reach an agreement to “commute, terminate, amend or restructure” its existing CDS agreements as of Dec. 31, it will below regulatory minimum policyholder surplus. Should this happen, the New York State Superintendent of Insurance could seek a rehabilitator or liquidator of the company.

Adding to its difficulties, the company is in danger of being delisted from the New York Stock Exchange because its closing price has been below $1 for the past 30 days.

Syncora reported third quarter net loss of $1.37 billion compared to $81 million loss the prior year. Revenues dropped from negative $55 million last year to negative $1.03 billion for the third quarter. However, the company reported net premiums increased from $45 million to $59 million.

For the nine months, net loss stood at $1.96 billion compared to net loss of $18 million for the same period last year. Revenues fell from $69 million last year to negative $1.01 billion. Net premium written increased from $129 million to $239 million.

The results were affected by investment losses and ongoing exposure to residential mortgage-based securities.

Syncora also announced that its chief financial officer, Elizabeth A. Keys resigned to pursue other employment opportunities. The company does not plan to name a replacement at this time.

Also, Mary R. Hennessy, a board member since the firm's initial public offering in 2006, resigned, leaving four openings on the board, which it plans to fill at some point. The board currently has five members.

Syncora did not hold an analyst's conference call to discuss the results.

Late today, Standard & Poor's lowered the financial strength rating on Syncora Guarantee Inc. to “B” from “triple-B-minus.” It revised the credit watch implications to developing from negative.

(This story was revised at 4:12 p.m.)

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