Ambac Financial Group, Inc. (ABK) said Wednesday morning that it lost nearly $1.7 billion during the first quarter -- or $11.69 per share -- as the monoline bond insurer struggled with mounting losses tied its CDO and RMBS exposure. Mark to market activity on so-called CDOs of ABS totalled $1.725 billion, while a loss provision for RMBS exposure totalled nearly $1.1 billion, Ambac said in a press statement. The company also took a $292 million hit on principal losses to a range of investment securities in its investment portfolio. "The housing market crisis continues to disrupt the global credit markets and our credit derivatives and direct mortgage portfolios were severely impacted once again," said CEO Michael Callen. "While we realize that these are disappointing credit results, we continue to believe that the capital raise and strategic business actions taken during the quarter will enable us to get beyond this credit market." Callen said that Ambac exceeds S&P AAA target capital level, and suggested that more capital was in the offing by sugguesting that he expected the company to exceed Moody's Aaa target level of capital during the second quarter. Produiction of new bond insurance fell 87 percent in the first quarter to just $40.5 million, compared to $310.1 million one year earlier; Ambac said it issued just $29.4 million in new credit enhancement for structured investment during the quarter, a drop of 78 percent from year-ago levels. The troubled bond insurer noted that RMBS performance deteriorated significantly during February and March, echoing the remarks made by other market firms during the current earnings season. Disclosure: The author held no positions in ABK when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.