NEW YORK (Bloomberg) — Bermuda-based Assured Guaranty Ltd., the only active insurer of newly issued bonds, fell the most in almost 11 months after reporting first-quarter operating earnings that were lower than analysts forecast, and rival MBIA Inc., the largest insurer of bonds, also declined.

Assured Guaranty's net income more than tripled to $322 million on the acquisition of a competitor last year, the company said after the market closed on Monday, as reported in yesterday's Royal Gazette. Its operating profit of 47 cents a share fell short of analysts' estimates of 65 cents, according to a Bloomberg survey. MBIA reported a $1.5 billion loss, reflecting an accounting rule that required it to revalue some obligations.

Both companies said expected claims rose during the quarter and they would try to reduce losses by forcing mortgage originators to buy back improperly originated loans used to back insured securities.

"More and more people are questioning the viability of business model," Rob Haines, analyst at CreditSights Inc. in New York, said of Assured Guaranty. "There are still lots of question marks about MBIA."

Assured Guaranty fell $1.85 a share, or 9.3 percent, to $18.13 in New York Stock Exchange composite trading. It traded as low as $17.57 a share, a 12 percent drop that was the largest since June 2009. On Monday, it rose 13 percent, the most since November, before reporting its earnings. MBIA fell 58 cents, or 6.2 percent, to $8.75 yesterday, after rising nine percent on Monday.

Assured Guaranty, which is backed by billionaire Wilbur Ross, extended by one quarter the period in which it expects foreclosures to remain elevated and foresees larger losses per each sub-prime default, chief financial officer Robert Mills said on a conference call yesterday.

Chief executive officer Dominic Frederico said on the call he has "every reason to be optimistic" with new mortgage delinquencies falling in recent months, and amid the Hamilton, Bermuda-based company's plan to sue two "smaller" lenders over "defective" loans in the bonds it backs.

Regarding declining mortgage defaults that he said may lead to a peak in foreclosures over the summer, Frederico said that "I will pray and light a few candles at church next Sunday" in the hopes that the trend continues.