Ambac Says Moody's Didn't Finish Work

Ambac's chief executive complained today that Moody's failed to finish reviewing the company's financial portfolio before issuing a downgrade of the company insurance financial strength.

Yesterday, Moody's Investors Service downgraded New York-based guaranty insurer Ambac Assurance Corp. and Ambac U.K. Ltd., insurance financial strength from "Aa3" to "Baa1."

Moody's said it did so in light of the carrier's "diminished business and financial profile resulting from its exposure to losses from U.S. mortgage risks and disruption in the financial guaranty business more broadly."

It added the outlook for the rating is developing.

In response, David W. Wallis, president and chief executive officer said in a statement, "It appears that the rating action has been precipitated by our earnings announcement. It is disappointing that Moody's has come to a ratings conclusion without the benefit of completing its own analysis of our portfolio."

Ambac said because of the downgrade it may have to collateralize or terminate market securities held in its financial services business to the tune of approximately $3.2 billion.

Yesterday, Ambac reported third quarter net income loss of $2.43 billion, or loss per share of $8.45, compared to the prior year's net loss of $361 million, or net loss per share of $3.53.

The third quarter results were on net premiums written of $123 million, compared to $251 million for the prior year.

For the nine months, the company reported net loss of $3.27 billion, or net loss per share of $13.66, compared to net income of $26 million, or 25-cents a share, for the prior year.

Net premium written fell from $705 million last year to $383 million.

The results were affected by mortgage risk exposures and investment losses, said Mr. Wallis.

"Housing related data continues to vacillate, having taken a turn for the worse over the past few months after showing positive signs earlier in the year," he commented in a statement accompanying the earnings release. "Our loss provisioning and on a more forward looking basis, our CDO [collateralized debt obligations] impairments, are indicative of this."