Ambac Financial Group posts profit; shares jump

Ambac Financial Group posts profit of $2.19 billion, reversing year-earlier loss

• On 3:11 pm EST, Wednesday November 4, 2009

NEW YORK (AP) -- Bond insurer Ambac Financial Group Inc. said Wednesday it posted a profit of $2.19 billion in the third quarter, reflecting significant unrealized mark-to-market gains in its credit-derivatives portfolio and gains from reinsurance cancellations.

For the period ended Sept. 30, Ambac earned $7.58 per share, compared with a loss of $2.43 billion, or $8.45 per share, a year earlier. It had a gain of $2.13 billion due to the net change in fair value of credit derivatives, drivenly primarily by a widening of its credit spread.

Net claims paid increased to $315.1 million from $182.4 million, largely related to residential mortgage-backed securities.

Like others in its industry, Ambac was hit hard in the past two years by losses on its coverage of risky financial instruments such as mortgage-backed securities and has been working to reduce its exposure to such debt instruments. It had written down billions of dollars in value last year on its credit-derivatives portfolio.

Ambac said that as of Sept. 30, loss and loss expense reserves for all residential mortgage-backed securities insurance were $2.66 billion, net of $1.90 billion in estimated recoveries.

Shares of Ambac advanced 44 cents, or 39.6 percent, to $1.55 in afternoon trading.