Bond insurer Ambac Financial Group (ABK) lost a net $392.2m, or $1.36 a share, in Q109 as its platform linked to residential mortgage-backed securities (RMBS) continued to deteriorate. A positive net change in fair value of credit derivatives drove $279.7m in pre-tax net income, company executives say in the earnings statement today. Losses, loss expenses and other-than-temporary write-downs in Ambac's RMBS portfolio offset much of the unrealized gain in credit derivatives. "The credit environment remains adverse, although perhaps the rate of degradation is slowing," Ambac CEO David Wallis says in the statement. Certain Alt-A RMBS suffered $744.7 in other-than-temporary impairment write-downs, which drove the quarterly net loss, officials say. "Continued deterioration in the performance of the underlying RMBS loans was observed, most prominently in the Alt-A affordability product" which includes negative amortization and interest-only loans," company executives say in the statement. Such steep losses and performance deterioration led Moody's Investors Service in mid-April to slash the company's Ambac Assurance bond insurance unit to junk. Company officials in the earnings statement said the downgrade of Ambac Assurance and Ambac Assurance UK to Ba3 from Baa1 had no material impact on corporate-wide liquidity or collateral requirements. Write to Diana Golobay. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.