ABK Ambac Financial Grp. Common Stock

Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today commented on Moody�s announcement that is has downgraded the rating of Ambac Assurance Corporation (AAC) from Aa3 to Baa1, developing outlook. David W. Wallis, President and Chief Executive Officer commented, �It appears that this rating action has been precipitated by our earnings announcement. It is disappointing that Moody�s has come to a ratings conclusion without the benefit of completing its own analysis of our portfolio.� Moody�s now states that Ambac�s reported losses are broadly in line with their own expectations, and they acknowledge that Ambac has a meaningful capital cushion above expected loss levels. Moody�s further notes various factors that could impact Ambac�s rating in the near to medium term, including remediation and commutation activity and the beneficial impact of TARP and other initiatives. Ambac believes that these factors will have a material and positive effect and that the timing and extent of this rating action is unfortunate. The most important impact of the rating downgrade is its effect on liquidity requirements in our financial services business (which includes the investment agreement and derivative products businesses). Based on Ambac�s most recent analysis, the liquidity gap between the market value of the investment securities held in the financial services businesses and the value of the financial services liabilities that may need to be collateralized or terminated at the Baa1 rating is approximately $3.2 billion. Almost all of the transactions entered into by our financial services businesses are guaranteed by AAC. Ambac has received approval from the Wisconsin Office of the Commissioner of Insurance (OCI) to utilize the resources of AAC to resolve this liquidity gap. Sean Leonard, Chief Financial Officer, commented, �We continue to work collaboratively with the OCI as we seek to reduce balance sheet risk in an orderly fashion. This increased financial flexibility will enable us to maximize the value of financial services assets for the benefit of all of our stakeholders.� About Ambac 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 a Baa1 rating (developing outlook) from Moody's Investors Service, Inc. and a AA rating (negative outlook) from Standard & Poor's Ratings Services. Ambac Financial Group, Inc. common stock is listed on the New York Stock Exchange (ticker symbol ABK). 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 Ambac�s and/or Ambac Assurance�s credit or financial strength ratings; (2)�the risk of credit and liquidity risk due to unscheduled and unanticipated withdrawals on investment agreements; (3)�the risk that market risks impact assets in our investment portfolio; (4)�inadequacy of reserves established for losses and loss expenses; (5)�credit risk throughout our business, including credit risk related to residential mortgage-backed securities and CDOs and large single exposures to reinsurers; (6)�market spreads and pricing on insured collateralized debt obligations (�CDOs�) and other derivative products insured or issued by Ambac; (7)�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; (8)�default by one or more of Ambac Assurance�s�portfolio investments, insured issuers, counterparties or reinsurers; (9)�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; (10)�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; (11)�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; (12)�legislative and regulatory developments, including the Troubled Asset Relief Program and other programs under the Emergency Economic Stabilization Act and other similar programs; (13)�changes in the economic, credit, foreign currency or interest rate environment in the United States and abroad; (14)�changes in capital requirements whether resulting from downgrades in our insured portfolio or changes in rating agencies� rating criteria or other reasons; (15)�changes in accounting principles or practices relating to the financial guarantee industry or that may impact Ambac�s reported financial results; (16)�the level of activity within the national and worldwide credit markets; (17)�competitive conditions, pricing levels and reduction in demand for financial guarantee products; (18) 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; (19)�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; (20)�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; (21)�changes in expectations regarding future realization of gross deferred tax assets; (22) risks relating to the re-launch of Connie Lee as Everspan Financial Guaranty Corp.; (23)�operational risks, including with respect to internal processes, risk models, systems and employees; (24)�the risk of decline in market position; (25)�changes in prepayment speeds on insured asset-backed securities; (26) factors that may influence the amount of installment premiums paid to Ambac; (27)�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; (28)�changes in tax laws; (29)�the policies and actions of the United States and other governments; (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 quarters ended March 31, 2008 and June 30, 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.