Ambac Financial Sees Big Losses in 3Q

Exposures to problematic second-lien mortgage assets contributed to significant third-quarter net losses at bond insurers Ambac Financial Group Inc., New York. Further, MBIA Inc., Armonk, New York took a big loss as well. Ambac took a $2.4 billion third-quarter net loss that it said was "primarily due to recording net mark-to-market losses on credit derivatives, increased loss provisioning primarily related to second-lien residential mortgage-backed securities insurance transactions and market losses on RMBS" that were "partially offset by increase accelerated premiums from refundings." Moody's Investors Service subsequently downgraded its rating of Ambac Assurance Corp., a move Ambac protested as it has in the past, saying it may set back positive steps it has been taking to improve its liquidity. Separately, MBIA suffered an $806.5 million net loss that it said was "driven primarily by increases to loss reserves on the company's second-lien residential mortgage exposures and net realized and unrealized losses attributable to the company's asset liability management business."