NU Online News Service, May 11, 1:40 p.m. EDT

Ambac Financial Group Inc. reports an increase in its first-quarter net loss attributed to a combination of drop in revenues and higher than expected losses in its guaranty business.

The New York-based bond insurer reports a net loss of $819 million, compared to a net loss of $690 million for the same period last year.

The company says the results "reflect an increase in loss and loss expense, lower net premiums earned, and lower net investment income and realized gains."

First-quarter net premiums earned dropped from $125 million last year to $92 million in the quarter. Net investment income declined to $72 million from $118 million from the previous year.

The company says net loss and loss expenses incurred amounted to $920 million for the quarter, up from $89 million from the previous year. The performance was mainly attributed to the deterioration in first-lien residential mortgage-backed securities, certain structured insurance, student loans and transportation transactions.

The company's statutory surplus dropped 20 percent, or $205 million, to $822 million.

The company, which is in Chapter 11 bankruptcy reorganization, says it has more than $1.7 billion in unpaid claims that have been presented to its segregated account, Ambac Assurance Corp.

Ambac Assurance, an Ambac subsidiary domiciled in Wisconsin, is under rehabilitation and stopped paying claims after the department said it was not comfortable with the company's ability to do so.

The company has seen losses since the recession and it has faced a steady stream of claims on mortgage-backed securities.

In its earnings release today, the company gives no hint that it would be successful in its reorganization plan and says that if it is not successful "it is likely it would have to liquidate pursuant to Chapter 7."