Bond Insurer Quarterly Results Mixed as Ambac Stays Red, MBIA Profits

Stock prices of mortgage bond insurers Ambac Financial Group (ABK) and MBIA (MBI) swung in different directions today in response to mixed quarterly earnings reported after market close on Monday. Ambac reported a $57.6m net Q210 loss, narrowed from a $690.1m net Q110 loss and a $2.37bn net loss in the year-ago quarter. The company recorded significant loss and loss expenses related to insured residential mortgage-backed securities (RMBS). Net realized losses for the quarter relate to the counterparty settlement of the collateralized debt obligations of asset-backed securities (CDOs of ABS) portfolio announced in June. Ambac paid in the aggregate, $2.6bn of cash and $2bn of newly issued surplus notes to several counterparties to settle the $16.4bn of CDO of ABS exposure outstanding at that time. MBIA reported a net income of $1.3bn in Q210, up from a $895m net income in the year-ago quarter. “In the second quarter, we saw both our paid losses and new delinquencies on insured RMBS exposures continue to decline,” said MBIA president and CFO Chuck Chaplin. “In addition, more market participants are recognizing that many of the loans in these securitizations should never have been in them in the first place, and that the seller/servicers must repurchase them.” Ambac stock was trading down more than 20% and MBIA stock was trading up more than 6% earlier today. Write to Diana Golobay.

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