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Ambac

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Ambac Financial Group, Inc.
Company typePublic (NYSE: ABK)
IndustryFinancial services
FoundedNew York City, U.S. (1971)
HeadquartersOne State Street Plaza, New York City, U.S.
Key people
David Wallis, CEO
RevenueIncrease US$3.91 Billion (FY 2009)[1]
Increase US$725 Million (FY 2009)[1]
Decrease US$-14.6 Million (FY 2009)[1]
Total assetsIncrease US$18.9 Billion (FY 2009)[2]
Total equityIncrease US$-2.29 Billion (FY 2009)[2]
Number of employees
367
Websitewww.ambac.com

The Ambac Financial Group, Inc., generally known as Ambac (originally the American Municipal Bond Assurance Corporation) (NYSE: ABK), is an American holding company whose subsidiaries provide financial guarantee products, such as bond insurance and other financial services to clients in both the public and private sectors around the world. Ambac is regulated by the insurance commission of Wisconsin. Through its financial services subsidiaries, the company provides investment agreements, interest rate swaps, investment advisory and cash management services, primarily to states, municipalities and their authorities. It has its headquarters in Lower Manhattan, New York City.[3]

Credit rating

Ambac and other bond guarantors, such as MBIA, were hit hard by the 2007 subprime mortgage financial crisis, and, on January 18, 2008, its Fitch credit rating was lowered from AAA (the highest) to AA when its plans to raise two billion dollars in new capital failed.[4] Moody's and S&P, however, chose to affirm Ambac's AAA with their agencies after it succeeded in raising $1.5 billion in new capital in March 2008.[5] In early 2008, the spectre of the major bond guarantors failing to be able to pay off insurance claims on a trillion dollars of securities backed by sub-prime mortgages and other securitized debt led to attempts to shore them up with infusions of capital.[6] On June 19, 2008 Moody's downgraded Ambac's credit rating three notches to Aa3.[7]

Ambac's ratings continued to decline during 2008–2010. Currently, Moody's Investors Service has lowered the rating of the senior unsecured debt of Ambac Financial Group Inc. (Ambac Financial) to C from Ca, and placed the Caa2 insurance financial strength ratings (IFSR) of Ambac Assurance Corporation (AAC) on review for possible upgrade on 3/26/2010.[8] On March 25, 2010, Standard & Poor's Ratings Services revised its counterparty credit, financial strength, and financial enhancement ratings on Ambac Assurance Corp. (Ambac) to 'R' from 'CC'.[9] An 'R' rating is a non-investment grade rating.[10] On June 8th, 2010 Ambac announced that it would likely seek a pre-packaged bankruptcy as it was unable to pay dividends from its bond insurance unit to the holding company. Since that time Ambac has dropped appreciably in share price to approximately 0.50 per share as of the end of August 2010. [11]

Maintaining a high credit rating is critical for bond insurance firms. Companies and governments buy insurance to reduce their borrowing costs by assuming the higher rating of the insurer. Keeping up this rating is thus the basis of the insurer's business model.

Ambac missed an interest payment on its debt on November 1, 2010, and filed for bankruptcy on November 8, 2010.[12][13]

See also

References

  1. ^ a b c Ambac Financial Group (ABK) annual SEC income statement filing via Wikinvest
  2. ^ a b Ambac Financial Group (ABK) annual SEC balance sheet filing via Wikinvest
  3. ^ "Contact Us." Ambac Financial Group. Retrieved on December 11, 2009.
  4. ^ "Ambac's Insurance Unit Cut to AA From AAA by Fitch Ratings" article by Christine Richard Jan. 19 (Bloomberg)
  5. ^ "Moody's, S&P confirm Ambac's AAA ratings" article by Alistair Barr March 12, 2008 (MarketWatch)
  6. ^ "Next on the Worry List: Shaky Insurers of Bonds" article by Vikas Bajaj and Jenny Anderson in The New York Times January 24, 2008.
  7. ^ MarketWatch. "Stocks In Focus For Friday". Fox Business.
  8. ^ http://www.ambac.com/pdfs/RA/2010/March/Moody%27s%20downgrades%20Ambac%20debt%20to%20C%20and%20reviews%20Caa2%20rating%20for%20upgrade%20%2803-26-10%29.pdf
  9. ^ http://www.ambac.com/pdfs/RA/2010/March/Ambac%20Assurance%20Corp.%20Ratings%20Revised%20to%20%27R%27%20Following%20Regulatory%20Directive%20%2803-25-2010%29.pdf
  10. ^  United States. "Standard & Poor's - Wikipedia, the free encyclopedia". En.wikipedia.org. Retrieved 2010-07-26.{{cite web}}: CS1 maint: multiple names: authors list (link) CS1 maint: numeric names: authors list (link)
  11. ^ http://www.marksmarketanalysis.com/2010/06/abc-ambac-likely-to-file-bankruptcy.html
  12. ^ Spence, John; Barr, Alistair (November 1, 2010). "Ambac plunges on bankruptcy warning". MarketWatch. Retrieved November 2, 2010.{{cite web}}: CS1 maint: multiple names: authors list (link)
  13. ^ Morath, Eric; Holm, Erik (November 8, 2010). "Ambac Files for Bankruptcy". The Wall Street Journal. Retrieved November 8, 2010.{{cite web}}: CS1 maint: multiple names: authors list (link)
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