Ambac Reports $393.2 Million 1Q Loss

NU Online News Service, May 12, 3:31 p.m. EDT

Ambac Financial Group reported a 2009 first quarter net loss of $393.2 million, narrowing its loss in comparison to the 2008 first quarter net loss of $1.7 billion.

The New York-based bond insurer said the reduced loss resulted primarily from a positive net change in fair value of credit derivatives. Net positive change in fair value of credit derivatives amounted to $1.5 billion for the quarter, versus a 2008 first quarter negative change in fair value of $1.7 billion.

The net positive change was driven primarily by Ambac Assurance Corporation (AAC) credit spread widening during the period, Ambac said.

The net positive change resulted in positive revenues of $1.1 billion in the quarter, compared to negative revenues of $1.6 billion a year ago.

Ambac said the positive net change in fair value of credit derivatives was partially offset by losses related to its residential mortgage-backed securities (RMBS) portfolio and other write downs of RMBS securities in its investment portfolio.

Ambac's 2009 first quarter net realized investment losses totaled $743 million, compared to 2008 first quarter gains of $22 million.

The company's net premiums earned climbed to $197 million in the quarter, from $187 million in 2008's first quarter.

Ambac president and chief executive officer, David Wallis, said in a statement, "The credit environment remains adverse, although perhaps the rate of degradation is slowing. We remain focused upon our key strategic initiatives of aggressively managing our existing book of business, identifying strategic opportunities that take advantage of our core competencies and assets, and sensibly accessing outside capital to enable the launch of Everspan [Financial Guaranty]."

In an earlier statement, Mr. Wallis said Everspan will be a municipal-only financial guarantor and a subsidiary of Ambac Assurance.

Ambac said the process of launching Everspan has been delayed "due to rating agency concerns over separateness from its parent, AAC."

Ambac added, "Everspan has been carefully structured to separate it from Ambac Assurance. Nevertheless, the rating agencies have indicated that a minority investment from an independent third party in order to further ensure Everspan's separateness would be viewed positively in their ratings decision."