NU Online News Service, Nov. 10, 12:00 p.m. EST
Ambac Financial Group Inc., which filed for bankruptcy protection on Monday, said its third quarter earnings plunged while rival MBIA Inc. said it recorded a $213 million loss during the same period.
Ambac said it earned $76 million during the third quarter compared to net income of $2.19 billion a year ago during the same time.
MBIA posted its third quarter net loss compared to a net loss of $728 million in the 2009 third quarter.
Troubles experienced by the bond insurance companies are hinged on their decision to get into the mortgage-backed securities and collateralized debt obligations businesses.
MBIA said its loss was due primarily to a $492 million loss on the value of insured credit derivatives and Ambac said its results reflect reduced gains in its credit derivatives portfolio. The fair value of Ambac's credit derivatives was $9.4 million in the third quarter, far lower than $2.13 million in the third quarter 2009.
Following Ambac's decision to file for Chapter 11 bankruptcy, Standard & Poor's Ratings Services said it revised its ratings on all of Ambac's senior unsecured and subordinated debt issues to 'D' from 'C'.
MBIA President and Chief Financial Officer Chuck Chaplin said the company's insured losses "continued to moderate in the third quarter compared to those of 2008 and 2009." The liquidity position of the company has improved, he added.
Early last year the New York Insurance Department allowed MBIA to create a separate entity, National Public Finance Guarantee Corp., to handle municipal bond business. However, litigation has held back efforts to do so.
Nevertheless, Mr. Chaplin said the New York department made the right decision, "borne out by the fact that we continue to pay all claims and obligations as they come due."
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