Ambac may ponder sale after big loss

Ambac Financial Group Inc., the first bond insurer to lose a AAA credit rating because of sub-prime mortgages, said Tuesday that it was considering “strategic alternatives” after posting its biggest loss. Shares jumped 29% on optimism that it might be sold.

The second-largest bond insurer posted a fourth-quarter loss of $3.3 billion, or $31.85 a share, after writing down by $5.2 billion the value of credit derivatives tied to loans made to homeowners with poor credit, the company said.

New York-based Ambac, which replaced its chief executive and scrapped a $1-billion equity sale last week after shares fell 71%, said stockholders and ratings companies were underestimating its ability to weather a decline in the value of mortgage securities.

Fitch Ratings cut Ambac Assurance Corp. to AA from AAA, casting doubt on the company’s guarantees on $556 billion of municipal and structured finance debt.

Michael Callen, who became interim chief executive after Robert Genader left, said the company had no plans to stop writing new insurance.

“There are too many viable alternatives in front of us,” Callen said. Ambac is “talking to credible parties and pools of capital,” he said, without providing more details.

Ambac shares rose $1.77 to $7.97 on Tuesday.