The explicit AAA guarantee of Ambac's insurance is no more. S&P has downgraded the insurance unit of Ambac to AA. All of the securities insured by Ambac assumed to be AAA will now be revalued to AA unless the underlying credit is a AAA.
Moody's has announced a review of the company's Aaa rating on the prospects of slowing new business and increases in mortgage-related losses.
The company is being replaced in the index by Loews Corp's pending spinoff, Lorillard Tobacco Company
ABK announced a much larger than expected loss of $1.66 billion. However I think the primary reason for the 43% one day drop in price is the realization that ABK is no longer a going concern. Sure the company has a stream of cash flows from the insurance it has already written, but the question is whether it will write any more. I think the best case scenario is somebody buys the company for these cash flows but I certainly wouldn't buy the stock because all stock prices are is a discount of expected higher earnings.
Ambac cut its dividend and said it would try to raise capital to shore up its credit rating. Some analysts thought the company would have a hard time raising money.
ABK announced a $743 million writedown on some of the credit default obligations on its books and lowered guidance. Afraid of further writedowns, investors punish the stock
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