Although the insurer was successful recently at staving off a credit-rating downgrade, it was not so fortunate in terms of financials, posting a $1.66 billion first-quarter net loss, in contrast with net income of $213.3 million in the same period a year ago, said the insurer. Ambac’s $6.93 per share operating loss far outstripped the $1.82 estimated by Bloomberg analysts. The insurer has lost 93 percent of its market value in the past year alone.
Ambac’s interim CEO Michael Callen said the company was “severely impacted'” by the plunging value of mortgage-related guarantees. New business was down a whopping 87 percent as states and municipalities took their business elsewhere and the mortgage securities market became stagnant. Ambac increased its estimate for claims it will need to pay on home-loan debt by $2 billion.
“Ambac's franchise has been damaged by recent ratings pressure and negative publicity,'' Barclay's Capital analyst Seth Glasser noted.
Ambac raised $1.5 billion in March after credit rating companies threatened to strip the insurer of its top rating following record losses on subprime-mortgage securities. The additional capital held off downgrades by Moody's Investors Service and Standard & Poor's, although Fitch Ratings reduced Ambac Assurance Corp. to AA in January. All three ratings organizations have placed negative outlooks on the ratings.