Ambac Financial Group Inc, one of the world's largest bond insurers, warned on Wednesday it expects to report a third-quarter net loss after taking a $743 million write-down on its credit derivative portfolio.
Ambac expects to report a loss of up to $3.50 a share in the third quarter. The company said a mark-to-market adjustment for credit derivatives amounted to an unrealized pre-tax loss of $743 million.
Ambac said its operating profit should range from $1.85 a share to $1.90 a share when it reports results Oct. 24.
Analysts, on average, expect the company's operating profit to be $1.99 a share, according to Reuters Estimates. The write-down on the credit derivative portfolio is not included in those estimates, Ambac said.
It is important to note that Ambac's credit derivative contracts are similar to our insurance policies in that neither is exposed to the liquidity risks that are typically embedded in standard derivative contracts, Ambac Chairman and Chief Executive Robert J. Genader said in a statement. ... I remain confident in our underwriting abilities, credit standards and the transactions we have insured.
Ambac said its investment portfolios, which total about $19 billion, are expected to have net unrealized gains of about $100 million as of Sept. 30.
The company also expects to set aside $20 million for losses in the third quarter.
Ambac shares are down 24 percent this year.
(Reporting by Tim McLaughlin)