Ambac Blames Data-Entry Errors for Misstatements

(Updates to add today's share price.)

NEW YORK (TheStreet) -- Ambac Financial(ABK Quote) acknowledged in a regulatory filing that it misstated financial results for its bond-insurance business, an error that enabled the company to meet capital requirements in Wisconsin.

Ambac Assurance, the company's main operating unit, said data entry errors caused it to understate impairment charges for credit default swaps by $278.4 million in the second quarter. The disclosure was made in a filing on Wednesday to the state's Office of the Insurance Commissioner that detailed its third-quarter results.

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The misstated impairment charges date back to at least June 2008. If the charges had been accurate, Ambac would have failed to meet capital requirements in Wisconsin for the first and second quarters.

If the $278.4 million in cumulative charges had been factored into Ambac's second-quarter capital surplus, the company would have reported a capital deficit of $148.1 million. This means the company was undercapitalized by $262.7 million as of June 30.

As of March, those charges would have totaled $227.3 million. If they had been excluded from Ambac's first-quarter results, the company would have reported a $60 million capital surplus, falling short of the state's minimum of $114.5 million. Companies that fail to meet capital minimums must submit plans to raise capital.

Ambac shares have climbed more than 30% since Wednesday, when the company said in a separate regulatory filing it had tripled its capital surplus in the third quarter. However, the increase came from a fourth-quarter gain of $520 million from settling $5 billion in collateralized default obligations that was somehow included in its third-quarter financial statements. The stock today fell 0.9% to 99 cents.