Ambac ( ABK) sank in late trading after the financial insurer said it expects to lose as much as $3.50 a share in the third quarter, owing to mark-to-market losses on its credit derivative portfolio.The New York-based company said it expects to take an unrealized pretax loss of $743 million on the portfolio. The company also will post a loss provision of $20 million, and estimated accelerated premiums from refundings, calls and other accelerations of $16 million. "While this unrealized loss is disappointing, it is important to note that Ambac's credit derivative contracts are similar to our insurance policies in that neither is exposed to the liquidity risks that are typically embedded in standard derivative contracts," CEO Robert Genader said. "While the turmoil in the structured finance markets has resulted in this unfavorable unrealized mark-to-market for the quarter, we have observed significantly improved market conditions for the industry and I am encouraged by the recent increased interest in our core financial guaranty product," he added. "Moreover, I remain confident in our underwriting abilities, credit standards and the transactions we have insured." Ambak said its operating earnings, excluding various items, should be $1.85 to $1.90 a share. Analysts surveyed by Thomson Financial were looking for $1.99. Shares fell 52 cents to $67.21.