Ambac Financial Group posted second quarter earnings of $823.1 million, thanks in large part to mark-to-market gains on credit derivatives, the company announced this morning. Ambac Financial, the parent of bond insurer Ambac Assurance Corp., said it had mark-to-market gains of $961.6 million in the second quarter, helping it record a net income equivalent of $2.80 per diluted share. Net income in the second quarter last year was $173 million, or $1.67 per share.

Excluding these gains and others on the sale of investments, Ambac Financial posted an operating loss of $1.53 per share. Estimated impairment losses in its credit derivative portfolio totaled $1.06 billion in the second quarter, reflecting credit deterioration and internal downgrades on several transactions, the company said.

Ambac also recorded large gains on accelerated premiums due to refundings. Excluding these payments, core earnings fell to a loss of $1.83 per share.

“The tumultuous credit markets continue to negatively impact the estimated impairment value of a few of our CDOs,” Ambac Chairman and Chief Executive Michael Callen said in a statement. “However, I am pleased with the progress we have made with regard to our remediation efforts.”

Last week, Ambac announced it had terminated guarantees on CDO-squared transactions with Citigroup for $850 million. It had already recorded a loss of $1 billion on the guarantee and will record a $150 million gain on the termination in the third quarter. Ambac said it is working on settling other transactions.

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