Ambac Financial Group, Inc. (NYSE: ABK) is reminding investors what the real prospects of the company are today.  The earnings were pretty much what anyone should have known, and they were not pretty.  The bond insurer did report a wider loss for its first quarter.  That loss was $690 million, generating a loss of -$2.39 EPS.  The loss a year ago was “only” $392 million or -$1.36 EPS.

Net premiums earned during the quarter were $125.2 million, down a sharp 36% from the $196.8 million from the same period a year ago.

About all you can offer up for ‘good news’ is that it had previously in May said that it may lose as much as $750 million.  This is in part due to the accounting of regulators in Wisconsin taking over part Ambac’s insurance ops in March.  Maybe the second bit of ‘good news’ is that excluding the effect of this non-recurring item, the net loss would have been $195 million or -$0.68 EPS.

Ambac also said that the net change in fair value of credit derivatives was negative $167.1 million, compared to a gain of $1,545.9 million for the first quarter of 2009.  The company also said the net loss and loss expenses came to $89.2 million for the current quarter.

The statutory surplus of Ambac Assurance Corporation fell all the way down to about $160 million as of March 31, down from $801.9 million at December 31, 2009.  Ambac’s net investment income in the quarter was up 17% from a year ago at $117.6 million, which the company attributed as follows: “the average yield of the portfolio as the mix of securities has shifted from primarily tax-exempt to a greater percentage of taxable securities. The rising yields on taxable securities include the impact from accretion of bond discounts on AAC-insured securities and RMBS securities previously written down to fair value as a result of other-than-temporary impairments in earlier periods.”

Total assets increased by about $16,929.3 million during the first quarter of 2010, although its Cash and equivalents at the holding company were $107.3 million versus its annual debt service costs of about $89 million.

Ambac was among our list of brands which may disappear.  If you consider the Wisconsin regulatory issue, part of the company already has disappeared. Now the verdict is out on the rest of Ambac.

Shares are now down 20% at $1.16 on over 47 million shares.  The 52-week range is $0.51 to $3.39 and average volume is just over 50 million shares.

JON C. OGG

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