By Dow Jones

LONDON (Dow Jones) -- Ambac Financial reported a $2.34 billion fourth-quarter net loss on Wednesday as the bond insurer was hit hard by the deepening recession and financial crisis.

Ambac (ABK) said its fourth-quarter net loss came in at $8.14 a share, versus a loss of $3.27 billion, or $32.03 a share a year earlier, when the group had less than half as many shares in circulation.

On an operating basis, which excludes write-downs based on mark-to-market valuations and gains and losses from sales of securities, the company said it lost $6.79 a share in the period. Analysts polled by FactSet were expecting a loss of $2.28 a share.

Ambak said its results included a 594.4 million drop in the fair value of credit derivatives and net loss provisioning of $916.4 million, primarily related to its residential mortgages backed securities insurance portfolio. The group also recorded a $1.53 billion deferred tax asset valuation allowance.

Net premiums earned for the quarter rose 9% to $228.1 million

During the credit and real estate boom earlier this decade, bond insurers like Ambac and MBIA Inc. (MBI) sold derivative-based guarantees on mortgage-backed securities and other more complex housing-related securities known as collateralized debt obligations, or CDOs.

Now that house prices have slumped and foreclosures surged, Ambac and MBIA have been forced to pay up on some of those guarantees, while recording permanent losses on others. They've also been extricating themselves from some of these contracts by offering discounted payments to policyholders.

Most bond insurers lost their crucial AAA ratings last year, making it more difficult to sell new guarantees. In response, MBIA and Ambac have been trying to set up new bond insurance units that focus on the steadier business of guaranteeing municipal bonds.

Despite some setbacks last year, Ambac has been building its new municipal-only bond insurer, which is called Everspan Financial Guarantee Corp.

The group said Wednesday that it expects Everspan to begin doing business in the second quarter.

"Our experienced management team is in place, our board is largely identified and we have an established infrastructure that allows us to start up operations immediately upon receipt of capital and ratings," said Douglas Renfield-Miller, CEO of Everspan.

He added there are no plans for Everspan to assume any of Ambac's legacy public finance or other exposures.