Ratings Fears Slam Ambac

Updated from 9:13 a.m. EST

Shares of bond insurer Ambac Financial Group (ABK Quote - Cramer on ABK - Stock Picks) were getting taken apart Thursday after Moody's placed the critical triple-A financial strength ratings of two units, Ambac Assurance Corp. and Ambac Assurance UK, on review for possible downgrades.

Moody's also put the ratings of the parent company, Ambac Financial, on review for a potential cut. Ambac Financial's senior debt is currently rated Aa2.

Following the move, Ambac was plunging 55% to $5.84. MBIA (MBI Quote - Cramer on MBI - Stock Picks), another bond insurer, was losing 28% to $9.71. Both were 52-week lows.

The ratings agency attributed its decision to Ambac's announcement of record losses, a plan to raise $1 billion and the departure of its chief executive.

"The market stresses contributing to Ambac's recent financial and organizational announcements are also evident at other financial guarantors, particularly those with significant mortgage and mortgage-related CDO exposures," Jack Dorer, managing director at Moody's, wrote in a ratings report.

Moody's also said Wednesday that securities "wrapped" or guaranteed by Ambac are themselves facing the possibility of a downgrade, except for those with higher underlying ratings.

In a statement, Ambac said that because of "the uncertainty generated by Moody's surprising announcement, Ambac is assessing the impact of this action on the company's previously announced capital plan."

Moody's said it will continue evaluating "the degree to which these issues -- including the extent of customer and investor support -- affect the ratings of other firms in the industry and communicate with the market as appropriate."