Bond, mortgage insurers mixed after Russell move

Bond insurers Ambac Financial Group Inc. and Guaranty Financial Group, and mortgage insurers PMI Group Inc. and Radian Group Inc. were removed from the large-cap index after the closing bell Friday.

Tacoma, Wash.-based Russell Investments realigns the Russell 3000 index once per year, tracking what it says is 99 percent of the U.S. equity market. That index is then broken down into 26 smaller indexes, including the widely watched Russell 1000 index of large-capitalization stocks.

Mutual funds and large institutional investors whose investments track the indices will have to realign their holdings to account for the new index rosters.

Ambac lost 24 cents, or 14.9 percent, to $1.37 in morning trading. Shares bottomed out at $1.32 earlier in the session. Ambac shares have lost 95 percent year to date.

Guaranty Financial Group shares rose 9 cents to $4.93. Shares have traded between $4.67 and $16.78 in the past 12 months.

Bond insurers have been under pressure since insuring a number of mortgage-backed bonds with troubled underlying assets, risking an increase in claims. That forced the insurers to boost capital reserves and has cost them their top-notch ratings. Ratings agencies are worried that the toll these losses could take on the insurers might also reduce their ability to generate new business, especially amid a weak economy.

PMI shares dropped 33 cents, or 14 percent, to $2.02. Shares hit a new low of $1.88 earlier in the session. PMI shares are down 96 percent from a high of $46.89 last June.

Radian shares added 2 cents to $1.45. Shares have fallen 97 percent from a high of $55.96 last July.

Mortgage insurers have also been facing mounting losses since the middle of 2007 as mortgage defaults have skyrocketed, leading to a spike in claims.