Volume Spike Investor

Ambac Financial Group, Inc. (NYSE: ABK) reported net income of $2.188 billion, or $7.58 EPS over last year’s net loss of $2.43 billion or -$8.45 EPS.  Obviously this figure reflect significant unrealized mark-to-market gains.  The gains listed were in the credit derivatives portfolio and from reinsurance cancellations during the quarter.  Net premiums earned for the third quarter of 2009 were $238.4 million, down 16% from $282.3 million earned in the third quarter of 2008. Normal net premiums earned amounted to $148.1 million and $155.0 million in the third quarter 2009 and 2008.  Net investment income excluding variable interest entities for the third quarter of 2009 was $132.3 million, representing an increase of 7% from $123.3 million in the comparable period of 2008.  The big gain was $2.13 billion in the credit derivatives portfolio.  Total net loss and loss expenses were $459.2 million in the third quarter 2009, compared to $607.7 million recorded in the third quarter of 2008.

BALANCE SHEET:  Total assets declined by approximately $1.95 billion and fair value of the consolidated investment portfolio decreased from $9.9 billion at June 30, 2009 to $9.8 billion at September 30, 2009; financial guarantee investment portfolio has a fair value of $8.3 billion at September 30, 2009; total financial guarantee net par exposure has decreased 6% from $434.3 billion at December 31, 2008 to $409.3 billion at September 30, 2009.  The company’s cash short-term securities and bonds was $164.8 million at September 30, 2009.

There are obviously “items” and other considerations here.  The company is still one at risk but the shares are screaming.  Ambac at 8:36 AM EST is up 25% at $1.39 on over 1.2 million shares.  Average volume is 21 million shares or so and the 52-week trading range is $0.35 to $3.58.  Where this trades by the end of the day is anyone’s guess.

JON C. OGG