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Ambac Responds to Moody’s Rating Action


NEW YORK.- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) expressed surprise and disappointment with Moody’s decision to place the ratings of Ambac and its subsidiaries on review for downgrade. Throughout this difficult market environment and credit cycle, the Company has engaged in constructive dialogue with Moody’s regarding its housing-related exposures, the strengths of its business model and strategies to enhance its standing in a marketplace where many, if not all, financial institutions have experienced diminished franchise value.

Ambac expects to continue to work with Moody’s as the rating agency seeks to apply its most recent mortgage-related assumptions to unique attributes of the individual transactions in Ambac’s portfolio. Ambac believes that the current housing-related situation is unprecedented and should be viewed as an extreme stress scenario against which its financial strength is being assessed.

In its September 18th, 2008 announcement related to loss projections for subprime RMBS, Moody’s acknowledged that “…there continues to be significant uncertainty around the ultimate losses for these loans, which will depend in part on future loss severities and default frequencies, the level of loan modifications and/or government intervention, and the future state of the US economy”. Further, the rating agency recognized that “…the bulk of ultimate losses will be recognized over a longer period of time, as evidenced by cumulative loss levels which are currently averaging 1.5% to 4.2% across the vintages reviewed.” They further confirmed that, “Current losses are still low because loans remain relatively unseasoned in more recent vintages and partly because modifications may also be slowing down loss recognition”.

Michael Callen, Chairman and CEO, commented, “Ambac believes that Moody’s rating actions continue to cause confusion, uncertainty and the risk of material economic damage if their assumptions ultimately prove to be too onerous. We are aggressively managing our mortgage-related exposures and have made demonstrable progress in reducing the risk in our insured portfolio. Ambac’s financial strength will continue to improve as we de-lever and commute and remediate our exposures.”


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