Ambac Financial Group Inc., parent of bond insurer Ambac Assurance Corp., yesterday announced a net loss of $1.66 billion in the first quarter driven by losses on subprime-related securities the monoline guarantees, including nearly $1 billion dollars set aside by the company for claims it is likely to pay.

"The first quarter was indeed another tough one for Ambac," said chief executive officer Michael Callen on the conference call. "Our real disappointment during the quarter has been in segments of our direct [residential mortgage-backed security] book."

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