2nd UPDATE: Ambac CFO Quits To 'Pursue Other Interests'

Ambac Financial Group Inc. (ABK) said Chief Financial Officer Sean Leonard resigned, effective Tuesday, to pursue other interests.

Shares doubled their losses on the news and were recently down 9.8% at 81 cents. The stock has slumped 43% the past year.

Until a replacement is named, the company said, Leonard's department heads will report directly to Chief Executive David Wallis. Leonard joined the struggling bond insurer as financial chief in 2005.

A company spokesman said that Leonard's departure would not affect the insurer's ongoing negotiations with its counterparties over its derivatives and insurance contracts.

Last week, Ambac reported $856 million of surplus as of Sept. 30, easing concerns that it would fall short of statutory minimums. Some Wall Street analysts had speculated the company would come up short of the $2 million in minimum capital needed under rules set up by its regulator, the Wisconsin Office of the Commissioner of Insurance. A spokesman with the Wisconsin regulator did not immediately return a phone call asking for comment.

Ambac was able to boost its regulatory capital just before filing statutory returns last week when it was able to negotiate the cancellation of four credit default swaps contracts worth $5.03 billion for cash payments of about $520 million.

Ambac is in discussions with lenders over about $1.9 billion of claims it has made over residential loans in securities it insures. In its third-quarter earnings call, Leonard said it might take up to three years to complete the process of getting reimbursed for the bad loans in the securities. A spokesman said that Leonard's departure would not affect those talks.

"When it comes to commutation, that is primarily handled in the risk department," which is managed by Gregory Raab, the chief risk officer, said Peter Poillon, a spokesman with Ambac. Raab reports directly to CEO Wallis.

Poillon said that Raab, who took the risk officer role in March, spearheaded those discussions and ongoing negotiations to commute other contracts. The finance department, headed by Leonard, evaluated the deals, but Raab has and will continue to lead the discussions.

He would not comment on any current negotiations, but said that discussions tend to "get hotter" as the end of a quarter approaches. "We are always interested in talking commutations, but it has to be at the right prices," he said. "It goes hot and cold. You think you will get a deal done, and it goes away."

Leonard's departure is the second high-profile resignation in the past several months. In June, Ambac announced that it was putting off the launch of its planned public-finance bond insurance start-up, Everspan, and that Douglas Renfield-Miller, executive vice president of Ambac and chief executive of Everspan, would retire as of the end of the year. Ambac has written little new business in the last few quarters as its difficulties have grown.

Ambac earlier this month posted a third-quarter profit with help from big mark-to-market gains from credit derivatives.

Other bond insurers also traded down recently, with shares of MBIA Inc. (MBI) down 3.7% to $3.41 and Assured Guaranty Ltd. (AGO) down 3.1% to $23.01.

-By Lavonne Kuykendall and Kathy Shwiff, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com

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