• Financial Reports
  • Annual Reports
  • Quarterly Reports
  • Statutory Filings
  • SEC Documents/Filings
  • Proxy Statement
• Corporate Governance
  • Highlights
  • Board of Directors
  • Committee Composition
  • Guidelines
  • Code of Conduct
  • Insider Transactions
  • Director & Officer
      Ownership
• Charter of Ambac
    Assurance Corporation
  • Restated Articles of Incorporation filed 021304
  • Article of Amendment filed 120408
• Analysts
• News & Events
  • News & Events
  • Calendar
  • Audio Archive
• Stock Data
  "

  • Stock Data
  • Fundamentals
  • Dividend History
  • Investor Calculator
  • Historical Lookup

• Request Materials
• Selected Exposures
  • Airports
  • Assets held in Ambac Sponsored MTN Conduits
  • Consumer Asset-Backed Securities
  • EETC/EPTC
  • International Finance Exposure
  • Investment Schedule for AAC, AUK and Everspan
  • Largest Domestic Public Finance and Healthcare Exposures
  • Single Risk Exposures
  • Structured Finance Exposure
• Ambac Responds to Conclusion of ISDA
    Credit Derivatives
    Determinations
    Committee for the
    Americas

 

Press Release

Ambac Responds to Moody's Comment on Second Lien RMBS

NEW YORK, May 14, 2008 -- Ambac Financial Group, Inc. (NYSE:ABK) (Ambac) today responded to Moody’s May 13, 2008 announcement about the poor performance of certain second lien RMBS and its impact on financial guarantor ratings. In that announcement and in a Special Report titled “U.S. Subprime Second Lien RMBS Rating Actions Update” dated May 12, 2008, Moody’s discussed its rating actions to date related to subprime second lien residential mortgage-backed securities issued between 2005 and 2007. Additionally, it discussed subprime second lien loan performance to date and its cumulative loss projections for the asset class within those vintages.

In response to the reports, Ambac states the following (all amounts as of March 31, 2008):

• As reported on its web site, Ambac has closed end second lien (“CES”) exposure amounting to approximately $0.1 billion, $3.5 billion and $1.0 billion in vintage years 2005, 2006 and 2007, respectively.
• Ambac has home equity line of credit (“HELOC”) exposure amounting to approximately $2.0 billion, $2.7 billion and $4.1 billion in vintage years 2005, 2006 and 2007, respectively (similarly reported on its web site).
• Ambac has no material exposure to subprime borrowers in either asset class. The estimated range of average FICO scores for borrowers within pools we’ve insured in these asset classes is 695 - 745.
• Ambac analyzes these portfolios on a transaction by transaction basis using the most recent actual performance data and projecting future performance using “roll rate” analysis.
• Within the CES portfolio, Ambac has downgraded seven transactions (amounting to $2.1 billion) to below investment grade. The seven transactions are represented by three issuers, all were originated in 2005 to 2007 and all have reserves estimated. While Ambac has not paid claims on any of its CES transactions to date, we have established reserves based on estimates of cumulative losses over the lives of the stressed transactions.
• The vast majority of the remaining CES portfolio from this time period comprises three 2006 Countrywide transactions that are performing satisfactorily, with cumulative losses to date ranging from 0% to 0.5%.  
• Within the HELOC portfolio, Ambac has downgraded seven transactions amounting to $2.2 billion) to below investment grade. The seven transactions are represented by five issuers, all were originated in 2005 to 2007 and all have reserves estimated.
• Ambac has observed clear performance differences within these portfolios, particularly earlier versus later vintages and bank versus non-bank originators. Moody’s commented in its Special Report, “Moody’s expectations on individual transactions can vary significantly around those numbers (Moody’s expected cumulative loss estimates by vintage), based on the quarter of origination as well as deal- and issuer- specific characteristics.” Ambac fully agrees that performance varies greatly and has appropriately reserved for its underperforming transactions. The stress we are experiencing within each of these portfolios is limited to a relatively few transactions. The remaining transactions in both asset classes are performing within expectations and are internally rated investment grade.
• Ambac is in the process of aggressively remediating this portfolio. Several transactions within these two portfolios are the subject of diagnostic, forensic and legal scrutiny. We have begun the process of putting back loans that we believe do not fit the various criteria represented by the originators. While we believe that these remediation efforts may have a material impact on the ultimate losses in these transactions, we have not factored in any potential recovery into our loss estimates at this time.

In summary, we have already taken substantial reserves against our CES and HELOC portfolios (48% and 33%, respectively, against below investment grade exposure). Moreover, we have not assumed any recoveries related to our active remediation efforts. Despite very stressful loss estimates of our portfolio, we believe we have already exceeded Moody’s stressed Aaa target as of April 30th, 2008 and we continue to build excess capital.  Maintaining our Aaa Moody’s rating is an important business objective. As such, we are scheduled to have detailed discussions with Moody’s to present an updated drill down analysis on our second lien exposures. 

 

Forward-Looking Statements
This release contains statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any or all of management’s forward-looking statements here or in other publications may turn out to be wrong and are based on Ambac’s management current belief or opinions. Ambac’s actual results may vary materially, and there are no guarantees about the performance of Ambac’s securities. Among events, risks, uncertainties or factors that could cause actual results to differ materially are: (1) changes in the economic, credit, foreign currency or interest rate environment in the United States and abroad; (2) the level of activity within the national and worldwide credit markets; (3) competitive conditions and pricing levels; (4) legislative and regulatory developments; (5) changes in tax laws; (6) changes in our business plan, including changes resulting from our decision to discontinue writing new business in the financial services area, to significantly reduce new underwriting of structured finance business and to discontinue all new underwritings of structured finance business for six months; (7) the policies and actions of the United States and other governments; (8) changes in capital requirements whether resulting from downgrades in our insured portfolio or changes in rating agencies’ rating criteria or other reasons; (9) changes in Ambac’s and/or Ambac Assurance’s credit or financial strength ratings; (10) changes in accounting principles or practices relating to the financial guarantee industry or that may impact Ambac’s reported financial results; (11) inadequacy of reserves established for losses and loss expenses; (12) default by one or more of Ambac Assurance’s portfolio investments, insured issuers, counterparties or reinsurers; (13) credit risk throughout our business, including large single exposures to reinsurers; (14) market spreads and pricing on insured collateralized debt obligations (“CDOs”) and other derivative products insured or issued by Ambac; (15) credit risk related to residential mortgage securities and CDOs; (16) the risk that holders of debt securities or counterparties on credit default swaps or other similar agreements seek to declare events of default or seek judicial relief or bring claims alleging violation or breach of covenants by Ambac or one of its subsidiaries; (17) the risk that our underwriting and risk management policies and practices do not anticipate certain risks and/or the magnitude of potential for loss as a result of unforeseen risks; (18) the risk of volatility in income and earnings, including volatility due to the application of fair value accounting, or FAS 133, to the portion of our credit enhancement business which is executed in credit derivative form; (19) operational risks, including with respect to internal processes, risk models, systems and employees; (20) the risk of decline in market position; (21) the risk that market risks impact assets in our investment portfolio; (22) the risk of credit and liquidity risk due to unscheduled and unanticipated withdrawals on investment agreements; (23) changes in prepayment speeds on insured asset-backed securities; (24) factors that may influence the amount of installment premiums paid to Ambac; (25) the risk that we may be required to raise additional capital, which could have a dilutive effect on our outstanding equity capital and/or future earnings; (26) our ability or inability to raise additional capital, including the risks that regulatory or other approvals for any plan to raise capital are not obtained, or that various conditions to such a plan, either imposed by third parties or imposed by Ambac or its Board of Directors, are not satisfied and thus potentially necessary capital raising transactions do not occur, or the risk that for other reasons the Company cannot accomplish any potentially necessary capital raising transactions, including the transactions contemplated hereby; (27) the risk that Ambac’s holding company structure and certain regulatory and other constraints, including adverse business performance, affect Ambac’s ability to pay dividends and make other payments; (28) the risk of litigation and regulatory inquiries or investigations, and the risk of adverse outcomes in connection therewith, which could have a material adverse effect on our business, operations, financial position, profitability or cash flows; (29) other factors described in the Risk Factors section in Part I, 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and also disclosed from time to time by Ambac in its subsequent reports on Form 10-Q and Form 8-K, which are or will be available on the Ambac website at www.ambac.com and at the SEC’s website, www.sec.gov; and (30) other risks and uncertainties that have not been identified at this time. Readers are cautioned that forward-looking statements speak only as of the date they are made and that Ambac does not undertake to update forward-looking statements to reflect circumstances or events that arise after the date the statements are made. You are therefore advised to consult any further disclosures we make on related subjects in Ambac’s reports to the SEC.

*******************

Ambac Financial Group, Inc., headquartered in New York City, is a holding company whose affiliates provide financial guarantees and financial services to clients in both the public and private sectors around the world. Ambac's principal operating subsidiary, Ambac Assurance Corporation, a guarantor of public finance and structured finance obligations, has earned triple-A ratings from Moody's Investors Service, Inc. and Standard & Poor's Ratings Services; and a double-A rating from Fitch, Inc. Moody's, Standard & Poor's and Fitch all maintain a “negative outlook”. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK).

 

Contact Information:

Investor/Media Contact: Vandana Sharma	Fixed Income Contact: Peter Poillon
(212)208-3333	(212) 208-3222
vsharma@ambac.com	ppoillon@ambac.com