NEW YORK (Bloomberg) — Ambac Financial Group Inc. ousted its chief executive officer, slashed the dividend 67 percent and will raise more than $1 billion to preserve its AAA credit rating after announcing the biggest-ever write-downs by a bond insurer.

The New York-based company fell as much as 28 percent on the New York Stock Exchange, extending a 76 percent decline in the past 12 months. Ambac will report a loss after reducing the value of securities it guarantees by $3.5 billion, according to a statement yesterday.

Chairman and CEO Robert Genader, 60, will leave after presiding over the company's first ever losses and a decline in shares that wiped out $7.8 billion in market value. Ambac's write-downs, which exceeded those announced last week by larger rival MBIA Inc., failed to convince investors that the worst is over.

Ambac and MBIA remain under scrutiny by ratings companies and regulators after their guarantees of bonds linked to sub-prime mortgages began plunging in value.

"The perception is that their underwriting standards were insufficient and they weren't on top of their business," Janet Tavakoli, president of Tavakoli Structured Finance in Chicago, said in an interview. "This announcement still just says 'We're a black box. Deal with it'."

Ambac, which put its AAA stamp on $556 billion of securities, probably will end up needing more capital because the credit quality of the debt it guarantees will decline, Tavakoli said. Standard & Poor's yesterday changed the way it reviews sub-prime securities to increase its assumptions for losses, indicating it may further lower credit ratings.

Board member and former Citigroup Inc. executive Michael Callen, 67, will become chairman and interim CEO, Ambac said.