AMBAC Inc., the holding company for AMBAC Indemnity Corp., reported third-quarter net income of $36 million, or $1.02 per share, down 29% from $50.9 million, or $1.44 per share, a year earlier.

For the first nine months, net income fell 22% to $109.2 million, or $3.10 per share, from $140.0 million, or $3.97 per share, in the first three quarters of 1993.

Core earnings, which exclude the effects of refunding activity, rose 7% in the third quarter and 17% in the first nine months, AMBAC said in its earnings statement, which was released late Wednesday afternoon.

AMBAC attributed the gain in core earnings to growth in net premiums earned and net investment income, as well as contributions from newer lines of business in the asset-backed market and elsewhere.

"I am pleased that despite substantially reduced volumes in the municipal marketplace, our core earnings grew," said Phillip B. Lassiter, AMBAC's chairman, president, and chief executive officer.

"The primary issue for the industry this year has not been the lower volume, but rather deterioration in pricing led by those seeking short-term financial and market share gains at the expense of long-term returns on capital and financial strength for policyholders."

Reflecting the lower volume of issuance, AMBAC saw its net premiums written fall 32.7% in the third quarter to $45.9 million from $68.2 million in third quarter of 1993. Net premiums written in the first nine months of the year totaled $125.7 million, a 43.2% drop from $221.2 million a year ago.

AMBAC's statutory capital base grew to $1.2 billion from $1.1 billion at Dec. 31, 1993.

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