NEW YORK (Bloomberg) — Ambac Financial Group Inc. said its bond insurance unit's regulatory capital surplus almost tripled in the third quarter under guidelines in Wisconsin, forestalling the chance of delinquency proceedings.

Ambac Assurance Corp.'s regulatory surplus climbed to $856 million as of September 30 from $305.6 million at the end of June, the New York-based company said yesterday in a filing with the US Securities and Exchange Commission. Wisconsin's Office of the Commissioner of Insurance, which regulates the unit, requires that bond insurers have at least $2 million of surplus capital.

The unit was stripped of its top bond insurance ratings last year as losses on securities backed by sub-prime mortgages surged. Since June 2008, Ambac Assurance has been downgraded 17 levels by Moody's Investors Service to Caa2 from Aaa. JPMorgan Chase & Co. analyst Andrew Wessel said in a report on November 5 that its regulatory capital was likely to have fallen into a deficit.

"Clearly it's more positive than what the market expected," said Rob Haines, an analyst at CreditSights Inc. in New York, who said he still expects the company to run through its capital. "It doesn't change the end game for the company, but it pushes it further out into the future."

Ambac rose 28 cents, or 40 percent, to 98 cents as of 12.33 p.m. in composite trading on the New York Stock Exchange. The increase is the biggest since August 27.

Credit-default swaps on Ambac Assurance fell six percentage points to 73.5 percent upfront, according to Phoenix Partners Group. That means it would cost $7.35 million initially and $500,000 annually to protect $10 million of debt of Ambac for five years.

Ambac increased its surplus in part by tearing up credit-default swap contracts on $5 billion of collateralised debt obligations in exchange for $520 million in payments to counterparties, according to the filing yesterday.

Peter Poillon, a spokesman for Ambac, said the company won't disclose the names of the securities on which it agreed to tear up contracts.

Credit-default swaps pay the buyer face value if a borrower defaults on its debts in exchange for the underlying securities or the cash equivalent. Banks that bought credit swaps from Ambac and other insurers to hedge against losses on mortgage-related securities used swaps on the insurers to protect themselves if the companies fail to make good on the guarantees.