AMBAC Inc., the holding company for AMBAC Indemnity Corp., reported Wednesday that net income for the first quarter declined 11% from the previous year.

AMBAC announced profits of $37.9 million, or $1.07 per share, for the first three months of 1994 compared with $42.7 million, or $1.21 per share, a year earlier.

"As anticipated, overall volumes in the municipal marketplace were materially lower than last year's record pace. In addition, the rapid advance in interest rates will further dampen refunding volumes going forward," Phillip B. Lassiter, AMBAC's chairman and chief executive officer, said in a statement. "However, AMBAC's core earnings - which exclude refundings - were up to 21% and continue to exhibit strong growth potential."

The lower overall volume also diluted net premiums written for AMBAC in the first quarter. The measure decline 22%, to $42.6 million from $54.3 million in the first quarter of 1993.

AMBAC attributed the size of the decrease to "the net effect of certain reinsurance transactions during the first quarter of 1993." Discounting those transactions, which resulted in net premiums written of $8.9 million, net premiums written decreased only 6% in the quarter-to-quarter comparison, AMBAC said.

The bond's insurer's statutory capital base did rise in the quarter, however, to $1.15 billion at March 31 from $1.12 billion at year end 1993.

On the New York Stock Exchange yesterday, AMBAC shares closed at 40 3/4, down 1 from Tuesday.

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