Ambec Bombs in First Quarter; Liberty Mutual to Buy Safeco for $6.2 Billion; Ballmer Ready to Walk on Yahoo Bid; Mortgage Applications Plummet; Rice in Short Supply; Communication Shares Jump on Rosy Outlook.

• Ambec Financial Group Inc. (ABK), the world’s second-largest bond insurer, posted a wider-than-expected loss of $1.66 billion, or $11.69 a share, after more than $3 billion in charges for subprime-mortgage securities, Bloomberg reported. The company has lost 96% of its stock value in the past year.

• Liberty Mutual Group announced that it will buy insurer Safeco Corp. (SAF) for $6.2 billion deal, which would make Liberty the fifth-largest U.S. property and casualty insurer, Reuters reported. Each share of Safeco will be exchanged for $68.25 cash, more than a 50% premium to Safeco’s closing stock price of $45.23 on Tuesday.

• Microsoft Corp. (MSFT) is prepared to walk away from its $43.6 billion bid for Yahoo Inc (YHOO) if the two sides can’t agree on a price, Chief Executive Steve Ballmer said yesterday (Wednesday). “We’re prepared to move forward without a merger with Yahoo,” Ballmer said at a technology conference in Italy. “We think the best way to move forward quickly is to come together with Yahoo. Hopefully that works. But if it doesn’t, we go forward. Time is money,” he said.

• U.S. mortgage applications plunged last week as interest rates soared, the Mortgage Bankers Association said yesterday (Wednesday). The group said its seasonally adjusted index of mortgage applications for the week ended April 18 fell 14.2% to 637.6. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.04%, up 0.3% from the previous week.

• Susquehanna Bancshares Inc. (SUSQ) reported first-quarter net earnings of $28 million (33 cents a share) up 35% from $20.7 million (40 cents a share) last year, Thomson Financial reported. The company posted net interest income of $98.2 million versus $63 million a year ago.

• The warehouse club, Sam’s Club, part of Wal-Mart Stores Inc. (WMT), has had to limit the amount of rice its members can purchase, The Associated Press reported. Customers will be limited to four bags of Jasmine, Basmati and long grain white rice. The price of rice has reached record highs lately due to supply concerns.

• Shares of bond insurer MBIA Inc. (MBI) plunged yesterday (Wednesday) after its chief rival, Ambac Financial Group Inc. (ABK), announced a first quarter loss of $1.66 billion. MBIA shares dropped over 30% with a decline of $4.49 to close at $8.79. MBIA will not release first quarter earnings until May 13.

• Shares of Level 3 Communications Inc. (LVLT) gained over 20% after the company announced first quarter revenue of $1.09 billion, beating analyst expectations. Despite a quarterly loss of 12 cents per share, the stock jumped 54 cents to close at $2.91 on a positive outlook for the remainder of 2008.