Ambac Responds to Moody's Comments
04 Juin 2008 - 7:05PM
Business Wire
Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) issued the
following statement in response to the comments made by Moody�s
Investors Service: We are disappointed by the Moody's announcement,
particularly in light of the significant progress we have made to
strengthen our capital position and refocus our business. Since
March, we have raised $1.5 billion of capital bringing our claims
paying resources, as calculated by Moody's, to approximately $15.3
billion; an amount which we believe satisfies Moody's target Aaa
capital requirements as of March 31, 2008. Moreover, we are
anticipating a $500 million capital cushion by the end of the
second quarter. Importantly, our highest priority is to build a
capital cushion that will further solidify our balance sheet and
protect our policyholders. We are committed to continuing our
discussions with Moodys to further explain the details of our
insured portfolio and the results of our active portfolio
remediation efforts. � We have no current plans to raise additional
capital. We will continue to work aggressively to monitor and
manage our portfolio and optimize capital allocation for the
benefit of our shareholders and clients. The Board and management
continue to explore all strategic alternatives and remain confident
of the strong business value embedded within our enterprise. �
Ambac has a solid franchise with a 37-year history of serving
financial markets. We are confident that our governance, management
and improved risk practices will enable Ambac to become a stronger,
more competitive company positioned for long-term success and
profitability. We remain steadfast in our commitment to stable
ratings, and we believe the financial profile and strength of our
businesses will continue to generate financial results consistent
with Aaa rating levels. Michael Callen, Chairman and CEO of Ambac,
commented, �The timing of Moody�s announcement is unfortunate since
we believe that the uncertainty surrounding Ambac is temporary.
Outside the mortgage-related exposures, the remainder of our
portfolio is performing well, and in line with our expectations. We
have presented Moody�s with concrete near-term plans to deploy our
people and expertise in the municipal market via our
already-licensed, Connie Lee vehicle. I remain confident that as
further clarity develops around our portfolio, Ambac�s strong
business prospects will be realized.� 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, 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 from March 6, 2008; (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; (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)�changes in expectations regarding future realization of
gross deferred tax assets; (30) 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 (31)�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 maintain a �negative
outlook� while Moody�s ratings is on review for possible downgrade.
Ambac Financial Group, Inc. common stock is listed on the New York
Stock Exchange (ticker symbol ABK).
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