Ambac slumps on Moody's downgrade

SAN FRANCISCO (MarketWatch) - Ambac Financial lost more than a fifth of its market value again on Thursday after Moody's Investors Service downgraded the company's main bond insurance subsidiary and hinted that the unit could be cut to junk status if its capital cushion continues to shrink. Ambac shares dropped 23% to $1.55 during afternoon action, adding to a drop of more than 20% on Wednesday. Moody's cut Ambac's (ABK:ABKNews, chart, profile, moreLast: Delayed quote dataAdd to portfolioAnalyst Create alertInsiderDiscussFinancials Sponsored by:, , ) bond insurance unit to Baa1 from Aa3 on concern the business will suffer bigger losses from mortgage-related exposures.

The agency also worries about the company's diminished business prospects and financial flexibility. Ambac reported a $2.43 billion third-quarter net loss on Wednesday as it set aside more money to pay claims on derivative-based guarantees it sold on mortgage-backed securities. The c...
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