New York Insurance Superintendent Eric Dinallo said today that stock market reaction to the $1.66 billion quarterly loss reported by Ambac Financial Group Inc. yesterday showed that the furor over bond insurer stability has subsided.
"The market did not go down. Two months ago it would have gone down 500 points," he said.
Capital-raising activity by the firm, said the superintendent, has paid off and "we've put rationality and calm into the market."
Ambac's loss, according to Mr. Dinallo, was "within potential expectations and that was good news."
Mr. Dinallo said he was perturbed at the stress news outlets had put on remarks he made to Bloomberg Television, where he was asked if the firm might need more capital, and he said it was possible that they "may need" to raise additional funds.
"I'm upset," he said, commenting that he should have been asked whether he was in touch with Ambac management asking them to raise more capital–which, he said, is not the case. At this point he said, he does not know if there will be any need for further capital in the future.
New York-based Ambac, a major player in the municipal bond market, has been under the gun from rating agencies because of losses related to the subprime mortgage market and credit derivatives.
Ambac's reported net loss amounted to $11.69 a share, compared with first quarter net income last year of $213.3 million, or 2.02 a share.
The company said the drop was primarily due to losses on credit derivative exposures driven by "the continued disruption in the global credit markets…"
Losses, Ambac said, were also caused by the company's direct exposures to mortgage-related securities via financial guarantees.
Losses on credit derivative exposures includes estimated credit impairment of $940.4 million related to collateralized debt obligations of asset-backed securities, backed primarily by residential mortgage-backed securities, Ambac reported.
Mark Callen, Ambac's chief executive officer, said in a statement that while the results were disappointing, "we continue to believe that the capital raised and strategic business actions taken during the quarter will enable us to get beyond this credit market."
He added that "the capital that we raised during the quarter in the midst of a very difficult market, plus capital generated from the reduction in net par exposure, helped bring our claims-paying resources to approximately $16 billion as of March 31, 2008."
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.