Subprime Issues Still Impacting Ambac

Ambac Financial Group Inc., New York, said it expects to see second-quarter statutory loss and loss expenses that relate primarily to deterioration in second-lien and alternative-A credit securitized mortgage financial guarantee portfolios amount to $800 million. The company said it also expects to see a more than $1 billion increase in its second-quarter statutory impairment losses. Ambac estimates the second quarter statutory impairment losses will increase by about $1.6 billion to roughly $4.9 billion. "The increase in impairment losses, which relate to [Ambac Assurance Corp.'s] insured portfolio of collateralized debt obligations of asset-backed securities transactions, was driven by rising forward LIBOR rates, which increase estimated future cash outflows, and further deterioration of the underlying collateral within the CDO of ABS transactions," Ambac said.