Ambac, MBIA shares dive on ratings fears

Shares of bond insurers Ambac Financial Group Inc. and MBIA Inc. plunged Thursday on renewed concerns that the two companies are on the verge of losing their AAA credit ratings. Moody’s Investors Services late Wednesday said it may cut Ambac’s AAA credit rating and launched a new review of both insurers’ capital reserves. Standard & Poor’s said it would also initiate a review of the two companies, one month after Moody’s, S&P and Fitch Ratings each affirmed their AAA ratings on both Ambac and MBIA. Shares of Manhattan-based Ambac plunged as much as 65.3% to $4.50 Thursday, their lowest level in over a decade. Shares were down 56.2% in afternoon trading. Shares of Armonk, N.Y.-based MBIA fell as much as 38.1% to $8.30 and were down 33.7% in the afternoon. Both companies saw their shares shed more than 70% last year amid rising fears that they could lose their AAA ratings. Ambac called Moody’s decision “surprising” but said it remained confident in its portfolio. On Wednesday, the insurer said it would take a $5.4 billion write-down on its credit derivative portfolio during the fourth quarter, and reserve another $143 million for losses, resulting in a net loss of up to $32.83 per share. Ambac announced plans to issue at least $1 billion of equity and securities, slashed its dividend by two-thirds and ousted Chief Executive Robert Genader. “This is a significant change in Ambac's view of the ultimate losses to be realized from these transactions," said Moody’s senior analyst James Eck in a statement. "This loss significantly reduces the company's capital cushion and heightens concern about potential further volatility within Ambac's mortgage and mortgage-related portfolios." Both Ambac and MBIA have slashed their dividends and announced plans to raise up to $2 billion in capital in recent months. Fitch Ratings this week reaffirmed MBIA’s credit rating and restored its outlook on the company to stable.