Bermuda-based Ram Holdings Ltd. last night reported a first-quarter net loss of $189.5 million, largely because of a fall in the value of the credit derivatives it reinsures.

Broken down, the financial guaranty reinsurer's loss amounted to $6.95 per diluted share and compares to net income of $14.3 million, or $0.52 per share, for the first quarter of 2007.

In its earnings statement Ram attributed its loss to an increase in mark-to-market losses on credit derivatives of $166.4 million, or minus-$6.11 per basic and diluted share, as result of changes in fair value, inclusive of credit impairments of $12.4 million.

Ram also reinsures collateralised debt obligations (CDOs), securities backed by pools of assets including residential mortgage-backed securities (RMBS).

Ram recorded an increase in case basis loss reserves (for probable and estimable losses) of $20.6 million and a $9.9 million loss in unallocated loss reserves for the first quarter, relating primarily to continuing deterioration in the performance of RMBS.

"Our disappointing loss for the quarter was driven by the well publicised continued severe developments in the US residential mortgage market," Ram chief executive officer Vernon Endo said.

"Additional seasoning of recent RMBS transactions provided better insight into future performance, which caused us to increase loss reserves. In addition, continued credit spread widening contributed significantly to our loss as we recorded an unrealised fair value loss on our credit derivatives of $166.4 million.

"We continue to work on improving our capital position to further stabilise our ratings, while our liquidity over the next 12 months remains sound, barring of course additional, dramatic negative developments."

Ram reported adjusted premiums written, a measure of business production, of $41.2 million for the first quarter of 2008, a 53 percent increase over the comparable quarter in 2007.

Ram said it expected new business production will not be as strong for the remainder of 2008 as the markets continue to adjust to the continued ratings actions and shortage of capital in the financial guaranty industry.