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.