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Friday's Financial Winners & Losers

AIG takes a steep drop after its results.

The financial sector was punished Friday as a host of troubling news about the declining value of debt holdings wreaked havoc on the stocks in the group.

One of the hardest hit was

Dow Jones Industrial Average

member

American International Group

(AIG) - Get American International Group, Inc. Report

, who fell 6.6% to $46.86 after the insurance giant reported a more than $5 billion loss for the most recent quarter.

AIG took more than $11 billion of pretax writedowns on its investments and said the head of its financial products business, the unit that took the hit, was resigning.

Meanwhile,

CNBC

reported that bond insurer

Ambac

(ABK)

may have hit a roadblock in the rescue plan that had been developing. The problems involves a dispute with the ratings agencies whose verdict is crucial to Ambac retaining its triple-A debt rating. The agencies are calling for banks to inject more capital into Ambac, given the structure they are proposing for the business.

Shares of Ambac slid 5.6% to $11.14.

Ambac's cohort in the mortgage meltdown also suffered.

MBIA

(MBI) - Get MBIA Inc. Report

said in a filing that continued deterioration in the credit markets in January will likely lead to further writedowns. The stock sank 7.8% to $12.97.

Also taking a blow was insurance company

National Financial Partners

(NFP)

, which was downgraded by Keefe Bruyette from outperform to marketperform, and the stock spiraled down 15.7% to $23.77.

Futures broker

MF Global

(MF)

was another loser, falling breaking down 17.2% to $17.55, a 52-week low.

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Credit rating agency Standard & Poor's cut its long-term rating to triple-B from BBB+, because of a $141.5 million loss tied to unauthorized trading. It also placed MF Global on negative credit watch, meaning it could be downgraded again. Lehman downgraded MF shares to equal-weight from overweight and cut it price target to $21 from $36.

Investment banks tumbled after estimates were slashed by UBS and Punk Ziegel. UBS cut its fiscal first-quarter earnings estimate on

Bear Stearns

(BSC)

to $1.25 a share from $1.87, helping send the stock down 5.2% to $79.86.

Goldman Sachs'

(GS) - Get Goldman Sachs Group, Inc. (GS) Report

profit estimate was cut to $2.50 a share from $4, causing the stock to drop 4% to $169.63.

Lehman Brothers

(LEH)

shares fell 6.8% to $50.99,

Morgan Stanley

(MS) - Get Morgan Stanley (MS) Report

dropped 5.1% to $42.12, and

Merrill Lynch

(MER)

slid 4.1% to $49.56, all after getting cut.

Punk Ziegel's also took actions on Goldman Sachs, Merrill Lynch and

Citigroup

(C) - Get Citigroup Inc. Report

. Citi dropped 5.2% to $23.71.

Reflecting the overall malaise, the

NYSE

Financial Sector index was down nearly 280 points, or 3.7%, to 7343.

One of the few winners of the day was

Assured Guaranty

(AGO) - Get Assured Guaranty Ltd. Report

which climbed 12.6% to $25.65 after Wilbur Ross agreed to invest as much as $1 billion in the bond insurer. Ross is seeking to capitalize on the strength of Bermuda- based Assured Guaranty, one of two bond insurers whose credit ratings weren't threatened with a downgrade in the past three months.