Paul Giordano is to step down as chief executive officer of Syncora Holdings Ltd., after the Bermuda-based bond insurer announced a second-quarter loss of $493 million after the markets closed yesterday.

The company, formerly known as Security Capital Assurance (SCA), said last night that the 45-year-old's resignation would be effective this Friday. General counsel Susan Comparato, 38, will take over as acting chief executive officer and president.

A steep deterioration in the value of the mortgage-linked securities that Syncora insures was the main reason for the loss of $492.9 million, or $7.67 per common share. This compared with net income of $25.9 million, or $0.40 per common share, in the April through June period in 2007.

Like others in the financial guaranty business, Syncora has paid a heavy price for venturing beyond the industry's traditional business of insuring municipal bonds against default. Insuring complex financial instruments, such as collateralised debt obligations, backed by assets including mortgage debt, has led to losses amid the US property slump and sub-prime mortgage crisis.

Consequent downgrades by ratings agencies effectively prevented Syncora from writing new business.

By June 30, policyholders' surplus, the amount above existing liabilities available for meeting policyholders' claims, had reached a deficit of $881.1 million, Syncora revealed last night.

As the threat of insolvency loomed, Syncora struck a deal last month with XL Capital Ltd., which itself suffered heavy losses linked to its reinsurance of Syncora. Last week, XL paid $1.78 billion in cash, plus eight million shares, to eliminate the vast bulk of its exposure to Syncora. In addition, Syncora paid investment bank Merrill Lynch $500 million to walk away from some $3.7 billion of exposure to credit-default swaps.

Since the conclusion of the deals last week, Syncora's policyholders' surplus climbed back into the black, totalling $1 billion, Syncora said. The company is in talks with other counterparties to further reduce its exposure.

In a statement last night, Mr. Giordano said: "With the successful completion of the first phase of the restructuring behind us, I fully understand and agree with the board's decision that now is the right time for new leadership to take the company forward. I wish everyone at Syncora the best of success for the future."

Commenting on the huge second-quarter loss, Mr. Giordano said: "Our results in the second quarter stemmed mainly from significant deterioration in US residential mortgage performance that adversely affected the asset-backed collateralised debt obligations and residential mortgage backed securities we insured.

"Last week, we achieved an important milestone in our restructuring process by completing the previously announced transactions with XL Capital and Merrill Lynch, which strengthened our capital position and removed from our insured portfolio some of the exposures of greatest concern to us.

"To reduce the risk of further adverse loss development, we are continuing to work with our remaining credit default swap counterparties in an effort to commute or restructure the exposures we have to them. We also remain committed to exploring ways to place our public finance business on a more stable footing going forward."

Chairman Michael Esposito said Ms Comparato had "played an instrumental role in helping navigate the company during these challenging times". He added: "Susan brings a deep knowledge of our industry, significant business acumen and, importantly, a steady hand to help guide Syncora and its employees as we work toward completing the next phase of the company's restructuring plan."

Syncora reported an operating loss of $1.288 billion, or $20.05 per share, for the second quarter.