Ambac shares off after posting wider-than-expected loss
Ambac Financial Group Inc (ABK.N: Quote, Profile, Research), a bond insurer that struggled to raise capital earlier this year, posted a surprisingly wide first-quarter loss on Wednesday after setting aside $1 billion to cover future payouts on mortgage bonds.
The company’s shares dropped 30 percent in morning trading as Ambac reiterated that it is writing “very little new business,” and said its results wiped out 40 percent of its net worth.
Whether the company now has to raise more capital depends in large part on the judgment of rating agencies, in particular Moody’s Investors Service and Standard & Poor’s.
Both agencies said in March that Ambac has more than enough capital to meet its expected losses, when they affirmed the top ratings of the company’s main insurance unit.
Fears the agencies would strip Ambac Assurance Corp of its top ratings had cratered the U.S. stock market beginning in January, amid fears that investors would be forced to sell billions of dollars of insured bonds online cash advance.
On Wednesday, Ambac posted a first-quarter loss of $1.66 billion, or $11.69 a share, compared with year-earlier net income of $213.3 million, or $2.02 a share.
Excluding mark-to-market losses but including some impairment losses, Ambac’s loss was $6.93 per share, far more than analysts’ average forecast for a loss of $1.82 a share and a sharp reversal from year-earlier earnings of $2 a share.
In a statement, Ambac Chief Executive Michael Callen said, “While we realize these are disappointing credit results, we continue to believe that the capital raise and strategic business actions taken during the quarter will enable us to get beyond this credit market.”
Filed under: news by Fred