Losses at bond insurers MBIA Inc. and Ambac Financial Group Inc. widened in the third quarter from a year ago because of their exposure to the U.S. residential mortgage market.
Results sent shares of both companies tumbling on the New York Stock Exchange. Meanwhile, Moody's Investors Service on Wednesday lowered its rating on Ambac's bond insuance units by four notches to Baa1. The downgrade could force the company to make sizable payments under some of its contracts
Separately, Ambac on Wednesday filed suit against EMC Mortgage Corp., a former mortgage unit of Bear Stearns Cos., claiming the investment bank leveraged its reputation and dominance in mortgage finance to entice companies like Ambac to insure loans plagued by rampant fraud. It seeks unspecified damages to recoup what's projected to be hundreds of millions of dollars in losses.
A telephone message left with a spokesman at J.P. Morgan Chase & Co., which later acquired Bear Stearns, wasn't immediately returned.
MBIA reported a net loss of $806.5 million, or $3.48 a share, compared with a prior-year net loss of $36.6 million, or 30 cents a share. Its operating loss was $2.22 a share. Revenue fell 26% to $319.8 million as net premiums written quadrupled to $928 million amid a reinsurance deal.
Its shares skidded almost 22%, closing at $8.16 in New York Stock Exchange trading.
Ambac reported a net loss of $2.43 billion, or $8.45 a share, compared with a prior-year net loss of $360.6 million, or $3.53 a share. Its shares dropped 41% to $2.01 on the Big Board.
Ambac's latest results included $2.71 billion in realized and unrealized derivatives losses, up from $723.3 million a year earlier, with most of the total due to increased loss projections for its portfolio of collateralized debt obligations.
Write to Kevin Kingsbury at kevin.kingsbury@dowjones.com and Donna Kardos at donna.kardos@dowjones.com
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