Ambac Financial Group, the bond insurer that emerged from bankruptcy this year, reported $231 million of profit in the three months ended Sept. 30, up 46% from $158 million last year, even as net premiums earned fell and investment income shrunk.

Ambac, which emerged from bankruptcy on May 1, has applied "Fresh Start Accounting" to incorporate the discharge of debt obligations, issuance of new common stock, and fair value adjustments, since April 30. Reporting of net premiums earned was not affected by the accounting policy.   The financial guarantor reported operating earnings of $193 million in the third quarter, compared with $114 million for the same period in 2012. Ambac reported earnings per diluted share of $4.98.   "We are making good progress on our two strategic priorities — realizing the maximum return on our investment in Ambac Assurance and seeking to diversify and grow our business focus and broaden our revenue base," Diana Adams, president and chief executive officer at Ambac, said in a press release. "We are committed to driving value through the execution of these strategies and to providing transparency regarding our progress and performance."   Net premiums earned in the third quarter declined $42.1 million to $70.9 million from $113 million in the third quarter of 2012.  Premiums earned were $87.7 million in the second quarter, including $29.7 million in the month before emerging from bankruptcy, and $58 million in the two months after. Normal net premiums earned fell to $51.2 million in the third quarter from $78.7 million in 2012.   Net investment income for the third quarter was $52.1 million, down 38% from $84.1 million in the same period last year. The decline was driven primarily by adjustments made in the Fresh Start Accounting policy, which increased the overall amortized cost basis and decreased effective yield of the portfolio, Ambac said in the earnings report.

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