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Shares of bond insurer Ambac Financial Group Inc. (NYSE: ABK) have been plunging in early morning trading after the company announced it would cut its dividend by 67% to 7 cents a share from 21 cents. Ambac also revealed its plans to raise capital by issuing at least $1 billion of equity and securities. The move is designed to maintain its "AAA" financial strength rating.
The second-largest bond insurer said it would replace its chief executive Robert Genader with board member Michael Callen, who will become chairman and interim CEO. The company cited its dissatisfaction with Genader's management, which brought the first-ever loss for the company last quarter.
The bond insurer's concerns came after Fitch Ratings warned it would cut its rating on Ambac if it was unable to increase its capital by at least $1 billion to cover potential future losses. Higher delinquencies and defaults among mortgages over the past few months increased ratings agencies' concerns over a possible surge in bond insurance claims.
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