Ambac Financial Group, Inc. Announces Third Quarter 2010 Results

Net Premiums Earned

Net premiums earned for the third quarter of 2010 were $143.1 million, down 40% from $238.4 million earned in the third quarter of 2009. Net premiums earned include accelerated premiums, which result from calls, terminations and other accelerations recognized during the quarter. Accelerated premiums were $30.0 million in the third quarter of 2010, down from $90.3 million in the third quarter 2009. Normal net premiums earned, which exclude accelerated premiums, were $113.1 million in the third quarter of 2010, down 24% from $148.1 million in the third quarter of 2009. Normal net premiums earned for the period have been negatively impacted by the lack of new business written and the high level of refundings and terminations over the past several quarters, as well as non-recognition of premiums earned on VIEs that have been consolidated as a result of implementation of ASU 2009-17, effective January 1, 2010.

Net Investment Income

Net investment income for the third quarter of 2010 was $69.8 million, representing a decrease of 49% from $137.6 million in the third quarter of 2009. The decrease was primarily driven by three factors: (i) a decrease in the invested asset base resulting from the second quarter 2010 commutation settlement on CDO of ABS transactions; (ii) the average yield on the portfolio decreased as the asset mix changed period to period; and (iii) a reduction in interest income related to securities in the financial guarantee investment portfolio that have insurance policies from AAC that were allocated to the Segregated Account. These insurance policies are subject to the payment moratorium ordered by the Office of the Commissioner of Insurance of the State of Wisconsin (“OCI”) in connection with the rehabilitation plan for the Segregated Account of AAC.

Other-Than-Temporary Impairment Losses

Other-than-temporary impairment (“OTTI”) losses in the financial guarantee investment portfolio were $6.6 million in the third quarter of 2010, compared to OTTI losses of $32.5 million in the third quarter of 2009. The third quarter 2010 OTTI loss was driven primarily by impairment write downs on AAC-wrapped securities (which had insurance policies allocated to the Segregated Account) within its investment portfolio. The third quarter 2009 OTTI impairment loss was driven by write-downs of certain RMBS securities rated below investment grade within the investment portfolio that management intended to sell in connection with its revised investment strategies.

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