Ambac Financial Group, parent of bond insurer Ambac Assurance Corp., announced a net loss of $1.66 billion in the first quarter driven by losses on subprime-related securities the monoline guarantees, including nearly a billion dollars in actual payments the company expects to make.

Ambac said the first quarter results include $1.73 billion in mark-to-market losses for credit default swap exposures — used to insured CDOs of ABS — held by the company, as well as a more than $1 billion loss provision related to direct exposure to RMBS.

Of the credit derivatives exposure, a credit impairment of $940.4 million was reported because of the company’s expectation that it will have to pay claims.

The losses come in a quarter in which Ambac raised about $1.5 billion in capital and saved about $100 million more by ceasing to write new business in certain sectors. The efforts were aimed at staving off ratings downgrades, and despite the current losses, the company believes the added capital will be enough.

“While we realize that 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,” said Michael Callen, Ambac’s chief executive officer, in the release.

Standard & Poor’s rates the insurer 'AAA', while Moody’s Investors Service assigns its 'Aaa' rating, and Fitch Ratings gives the financial guarantor a rating of 'AA'.

Ambac stock was down 27%, or $1.63, to $4.40 in trading on the New York Stock Exchange this morning.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.